MP3 Web sites and software aren't only popular with teenagers looking for cool music. The legal ones are being courted by venture capitalists and media companies, according to those in the space.
The MP3 sky isn't exactly raining dollars, but last week's New York Music & Internet Expo attracted people from Web sites and technology companies that use the file format. VCs followed, sniffing around for the next big thing. The buzz: Many sites are on the verge of landing investments, partnerships, or buyouts.
"It's probably overkill. Everybody gets talked to. Even the twit companies ... are at least getting initial contacts," said Al-Riaz Adatia, chief executive at Mediascience, which makes the sexy-looking Sonique MP3 player software.
MP3 is a format that compresses sound files for sending over the Internet. It has a ton of users online, but many MP3 files on the Net are pirated copies of songs.
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The big record labels haven't yet chosen a technology to sell music online. The Recording Industry Association of America has formed a group of technology companies and music-industry businesses to develop a specification for selling secure music files online.
A spec for handheld players like Diamond's Rio is due out in June, and the RIAA aims to have a spec for the Net by the end of the year.
Meanwhile, firms using the MP3 format to build a business have sprouted up everywhere. An early mover -- MP3 hub site MP3.com -- landed US$11 million in VC funding in January. Since then, the little file format has gotten a lot of attention.
Adatia said Mediascience is talking to people and looking for strategic investors and partners. "There's definitely a buzz. People are throwing money in this direction."
"This is a very exciting area right now," said Andrew Anker, a venture capitalist at August Capital and a former Wired Digital employee. "VCs like to look where you can get in at an inflection point. But the big question is, 'Where's the value going to be?'"
Anker said VCs are placing bets on whether it will be the content companies, software companies, or other business models using MP3 that will win.
