Recovering Lost Revenue: Vindicia CEO Gene Hoffman (Part 3)

Sramana: What was going on with Napster when you started eMusic?

Gene Hoffman: Napster did not exist yet. It was written in early 1999. Originally we called the company GoodNoise because finding a domain name at that time was not trivial. At first we thought we were going to have to go sign artists which would have been a huge uphill battle. We thought labels were going to be completely unwilling to embrace the future.

What we found was the independent sector was willing to embrace eMusic. We were able to use stock and equity to go out and license really valuable music. The independent sector was where a lot of the new music comes from. We felt we could get a credible offering and latch on to artists who were on their way to becoming very well known. We felt this would enable us to appeal to serious music lovers .

We stumbled across the eMusic name when we met a business that was thinking about how to be a licensing competitor. We took the opportunity to buy them and changed the name of the company. We really started to scale the business in 1998 and 1999. We hit the Napster trade wind. Napster was a blessing and a curse. In 1998 and 1999 investors did not believe that music could be offered on a platform other than CDs. I worked hard explaining to them that they were missing the boat. In the past people’s consumption of music tailed off after they left college. Napster illustrated people’s willingness to move past CDs better than I could. That is also the time that the first MP3 players started entering the market.

Sramana: Would it be fair to say that you were positioning eMusic to be a digital music label?

Gene Hoffman: We started off in that direction but it quickly became obvious that we did not have to be a label. We found that we would be able to be the large distribution point that we wanted to be as well. The goal from our perspective was to solve the enjoyment of music. It was always clear to us that there would be a short to midterm problem getting the people who create great music comfortable with the idea of digital music, which is half of the problem.

The other half of that problem is from the consumer perspective. A consumer can load all of their music on their MP3 player, but then what? We positioned eMusic to be the service to help you find what you should be listening to that you were not currently listening too. In some ways I still don’t think that vision has been completed. Pandora has an interesting approach and iTunes Genius helps some. eMusic itself is not making some of those advances. There is still a huge opportunity for someone to solve that problem set.

Sramana: So in your opinion the ultimate recommendation engine for music has not been done?

Gene Hoffman: Correct. I will compare it to Netflix. They have focused a lot on helping you find new shows and movies that you would not have otherwise have found, yet that remains an open question with them. We always felt that if we could solve those problems we would have solved a big problem. Those opportunities are still there. If you have a 15 minute commute every morning why can’t your device throw together a news playlist for you? I still think there is fertile ground there.

This segment is part 3 in the series : Recovering Lost Revenue: Vindicia CEO Gene Hoffman
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