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MP3.com Readies To Reactivate Embattled Online Music Service
Michael Robertson, chairman and chief executive officer of San Diego-based MP3.com, isn't counting his losses until the last card is dealt.

He says the company's embattled online music service MyMP3.com will soon be reactivated, despite copyright infringement accusations.

MP3.com will continue to support and invest in San Diego technology companies.

And MP3.com will continue to make money, estimated at $20 million last quarter.

"It's really not going to have any impact because it's an intermediary ruling," Robertson said Friday on the heels of a disappointing U.S. District Court ruling. "It will have no short-term impact and the long-term impact's to be determined."

A New York federal judge ruled Wednesday that MP3.com violated copyright laws with its MyMP3.com service, and awarded Universal Music Group $25,000 per copied CD. While Universal officials estimate the total damages to be $250 million, MP3.com has put the number of CDs at 4,700, which would make the award closer to $118 million. A November hearing will be held to determine the total damages; after that, MP3.com plans to appeal the U.S. District Court ruling and could eventually take the case to the U.S. Supreme Court.

Robertson is optimistic about the appeals process, and doesn't expect this latest turn of events to affect the company's financial well-being in the meantime.

"It's business as usual at MP3.com. We're still changing the music business," Robertson said. "This is just one step in a very long legal process."

The health of MP3.com is of particular interest for San Diego and its economy; as one of the region's original technology darlings, MP3.com has invested $56 million in new technologies and plays a role in local companies ranging from PacketVideo Corp. to Fun-E Business.

Robertson says despite the negative press coverage MP3.com has received in recent weeks, the company is actually on the upswing. MP3.com plans to turn on its MyMP3.com service again, this time with licensing agreements from four of the five major record labels. What's more, Robertson says his company wouldn't necessarily take a hit if forced to operate without the controversial MyMP3.com link because it's not currently a money-making feature of the Web site.

"The company made $20 million in revenues in the last quarter, and none of it was tied to MyMP3.com," Robertson said.

As to why he would enter into such a lengthy legal battle for a division that hasn't proved profitable, he says, "The difference between a money-making venture today and a money-making venture for tomorrow has to do with the advancement of technology. We have to have the applications that consumers want."

San Diego technology companies affiliated with MP3.com say they're not sweating the recent district court ruling, either. PacketVideo, which transmits video including entertainment clips through wireless devices, gained MP3.com as an investor in March. PacketVideo's Vice President of Corporate Communications Anjeanette Rettig says that while the judgment is disappointing, she doesn't expect it to affect her company's financing -- MP3.com is just one of PacketVideo's many shareholders.

Fun E-Business, a San Diego-based Internet company that offers "e-Jukeboxes" and "e-GameStations" online, counts MP3.com among its content partners. Fun E-Business CEO Edward Bevilacqua says the court decision has few implications on his company because his site deals primarily with MP3.com's independent music, rather than with artists whose work is owned by major record labels.

"But when I put on my attorney hat, I think the judge made a mistake," said Bevilacqua, whose educational background is in law. "We're proud to be associated with MP3.com, and we think they're leaders at the forefront of technology."

Jeff Riffer, a copyright attorney with Los Angeles-based Jeffer, Mangels, Butler & Marmaro LLP, isn't so sure MP3.com and other music-oriented Web sites will slip through this ruling unscathed. Rather, he anticipates repercussions industrywide, with venture capital temporarily drying up.

"Ultimately, the Internet is going to be a new distribution channel, but there will be some bumps along the road," said Riffer, who has handled infringement cases including Playboy Enterprises, Inc. vs. Netscape Communications Corp. and Pelt vs. CBS.

In the meantime, Riffer says Universal Music Group is trying to set an example by going after MP3.com, rather than lesser music "sharing" sites on the Internet.

"I think that Universal didn't settle because Universal wants to send a message that this is illegal," he said. "I think Universal accomplished its business plan."

MP3's Robertson's roots in San Diego run deep. A graduate of University of California, San Diego with a bachelor's degree in cognitive science, he started MP3.com here in November 1997 with two employees and a handful of artists. Since then, his staff has grown to 340, his artists to more than 87,700, his music library to some 562,000 CD-quality songs, and the number of unique daily visitors to the site is estimated at more than a half-million.

Robertson says while he once went hunting for artists, he now can't keep up with the number of artists looking for a venue to sell their music. And while the Internet is constantly upgrading and advancing, he laments that the legal system has yet to follow suit.

The household VCR, he says, was also once referred to as an "illegal device."

"I think that it's common for new technology to have critics," Robertson said.




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