Launch,com

Launch.com

By Douglas McClure

Since the article on RealNetworks appeared in the last edition of the Cedar Street Journal, RealNetworks has obtained over 50 million registered users of its RealPlayer software. RealPlayer is an audio and video player that uses streaming media which allows people to listen or watch live and pre-recorded audio and video over the Internet, without having to wait for large files to download. Another new company Launch.com went public on the 30th of April this year and has also capitalized on the advent of streaming media by creating a website that allows users to watch on demand practically any music video they choose, over 1,000 are available to choose from. Other features of this website include a feature to allow users to interact with one another to share information about new songs by hot artists, or just chat about their interests.

Streaming media, which is becoming more and more popular as faster connections to the internet become affordable for more internet users, allows people to watch or listen to audio visual media on the internet as it is downloading in real time, so there is only about a 5-second wait between the time someone clicks on a file and the time that it begins to play. In addition to saving time, streaming media also makes live internet broadcasts possible. As connections get faster, audio and video quality improves. There are two standard streaming media formats. The more popular one is RealNetworks’ RealPlayer, while the second is Microsoft’s Netshow, which was incorporated into a new version of Windows Media Player last year, allowing Microsoft to distribute the player with its Windows operating system. Originally, Launch.com only used the Microsoft standard, but has recently expanded to provide files in both formats.

In September, Launch.com attained the 2 million member mark, doubling its number of members in just under 6 months. Also, the third-quarter net revenues for 1999, $5.3 million, were 101% higher than the net revenues for the same quarter in 1998, and 35% higher than in the previous quarter. Together, these figures demonstrate strong growth that is likely to continue exponentially for a while. As with many startup Internet companies, Launch.com, formally known as Launch Media, Inc., gets most of its revenues (84%) by selling advertising on its website. Also typical of most Internet startups Launch.com failed to report a net profit. In fact, Launch.com is headed in the wrong direction with regard to net losses. For the third quarter of 1999, Launch.com posted a net loss of $9.3 million, compared with $6.6 million for the third quarter of 1998, and $8.8 million for the previous quarter.

Launch.com’s IPO price was $29. Unlike most internet stocks, whose prices triple on the first day, fall back a little, and then keep rising, Launch.com’s stock has never closed above its IPO price of $29. In fact, in 5 months it has fallen to about $10. In my opinion, this stock is very undervalued and it should go up to around $60 within the year.

Despite the financial problems Launch.com faces, it seems it will be successful because of many strategic alliances and partnerships it has formed with large, well-established companies such as Microsoft, RealNetworks, Sony, Yahoo, and Intel. In addition, it will gain more members as more people acquire faster connections. Soon, broadband connections, which allow for very high connection speeds, will become available to most Internet users. These superfast connections allow for near-TV quality video transmissions with near-CD quality sound, which should further boost Launch.com’s membership, thus increasing its revenue.