The parent company of MP3.com, a Web site that grew out of the grassroots online music community, said Thursday it has raised US$11 million in venture-capital financing, putting it one step closer to an initial public offering.
Michael Robertson, president of Z Company, which operates MP3.com, said big-time VC firm Sequoia Capital was the lead financier, but he declined to name other backers. The company also will change its name to MP3.com Inc. to reflect its new focus.
MP3.com is the epicenter of the burgeoning online music business. It distributes MP3 software, which lets a PC user download music files from the Internet and play them from the desktop. It's also a portal for young bands to distribute their music directly to fans worldwide -- bypassing mainstream record companies.
"This should send shock waves through the music industry who still think of MP3 as a hobby movement," Robertson said in an email. "Of course, IBM thought the PC movement was just a hobby thing, too."
MP3 -- for motion picture experts group, audio layer 3 -- is a file format that lets users compress music files at near CD-quality sound for easy distribution over the Net. Users love its convenience and its nonproprietary format.
But the Recording Industry Association of America, a powerful coalition of big record labels, hates it. The RIAA claims MP3 is the favored tool of music pirates and robs the industry of legitimate sales.
Even though the Net is a natural for transmitting music, record companies have been reluctant to sell songs and albums online, partly because it would show artists how easy it is to effectively distribute music on their own over the Net. Some big labels have tried using competing technologies -- such as Liquid Audio or a2b music -- to offer music on a limited basis. Both of those technologies belong to companies sympathetic to the music industry.
MP3 is the No. 2 search term entered into search engines, just below "sex," according to searchterms.com, a resource tool for webmasters.
