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My Business Failure - AnywhereCD

September 24th, 2007

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My newest business, AnywhereCD, is unfortunately on its last flicker of light before it officially flames out in a few days (my contract expires at midnight on September 30th so check out the close-out sale here where you can get a CD and instant delivery of 192k MP3s for only $7). It's a real shame because I think it was a solid business idea and in an effort to get some value from it, I want to tell you about it so you can learn from my mistakes.

I believe that if you give people real value (music or anything else) they are happy to pay. The AnywhereCD concept was quite simple: create an online store where customers could get the immediacy of digital files along with the permanence and familiarity of a physical CD. For one purchase price they would get the best of both worlds, with no need to take any extra steps just to get a MP3 file to play on their player. Sounds great in theory, but I wasn't able to pull it off.

With CD sales slumping sharply, I thought it would be a good time to approach the record labels with a new idea to spur sales. Obviously $1 song sales on iTunes are ongoing, but losing a $15 CD sale means a $14 net loss for the music business. I thought the labels would be receptive to the proposition of reinventing the CD by making it Internet friendly. In our web-savvy world, people expect everything immediately -- we want to bank, shop and communicate in real time. While we can buy a CD on the web immediately, we can't listen to it immediately -- instead we have to wait for the postman to show up with the plastic. It's no wonder that fewer and fewer people are buying CDs.

But what if anyone could buy a CD and immediately get the corresponding MP3 tracks to play anywhere? I assumed the labels wouldn't be too excited about users getting MP3 tracks, but CDs are perfect digital copies anyway so customers wouldn't be getting anything they couldn't already have. To entice the labels my strategy was to pay the wholesale price for CDs plus give them $2 for the digital tracks.

I met with all of the major labels (Universal, EMI, Sony, and Warner Music) and they seemed open minded to new ideas. One had a cautious 'wait and see' type of attitude. Another wanted millions of dollars up front. One insanely asked me if I would embed the purchaser's credit card number in the song files they bought. (I pointed out as politely as I could that no one would shop at Barnes and Noble if they printed your credit card number on every page of every book you bought. And, um, oh yeah, I'd be breaking a variety of federal and state laws!)

AnywhereCD eventually launched with the inventory from only one major label -- Warner Music. Of course, I wanted to launch with all the labels since most people don't have a clue what label any particular artist is on -- but we decided to open AnywhereCD with just Warner Music titles in the hopes that other labels would see the light.

After signing the contract we invested months of labor and resources into building the technology to amass the digital inventory, creating the web site, constructing the e-commerce system and testing the process. While we were working on this, Apple announced that they had entered into a deal to sell EMI tracks without DRM. That definitely stole some of AnywhereCD's thunder even though Apple's was just a pre-announce and wouldn't have music available for weeks. Days later we launched AnywhereCD.

Sadly, few press outlets covered our grand opening. Looking back I suspect there were probably many contributing factors. Maybe the price for the CD+MP3 bundle was too high? Thanks to iTunes the world thinks albums are worth $9.99 and many of the CDs on AnywhereCD were more expensive. Maybe nobody cares about CDs anymore? Clearly they are becoming less relevant as people adapt to a digital-only world. Maybe having just a fraction of the major label music made for a disappointing consumer experience? Warner Music represents roughly 20% of the major label titles -- so we were missing 80%. Maybe I didn't give the leading off-line publications enough notice to compete with the bloggers? Maybe the press is Apple-fixated? Maybe I didn't do a good job explaining the system to Warner Music who could have helped to educate a confused press? The answer is probably a combination of all these factors.

AnywhereCD will close-up shop shortly and surely be forgotten in digital music history. In spite of its ultimate demise I do think AnywhereCD helped push the world towards MP3. I was able to make a case -- that record labels will make more money if they utilize MP3 as part of their offerings. This is something I did once before when I started MP3.com in 1998, but they nearly threw me out of their offices. This time they listened intently to my proposal and responded promptly. I think record labels are becoming more comfortable with the fact that selling MP3 files can have a positive impact on their business. Since my campaigning, EMI is selling their entire catalog in MP3. Universal just recently kicked off a significant test with several major retailers vending MP3 tracks. This week, Warner Music is selling the new James Blunt CD with digital tracks that you can load into an iPod for $9.99.

Although AnywhereCD was an expensive experience for me and not my proudest business accomplishment, I hope you get some value from my experience. And even if you don't give a rip about the business experience, but you like music, you can benefit right now! In its final week of existence, AnywhereCD will be selling most of its CD inventory for a mere $7. For that 7 bucks you will get a new CD plus high quality 192k MP3 tracks that you can immediately download, stream and sync with your iPod. And hey, I'd rather take a loss, see music fans get great music at great prices and empower their music freedom.

--MR

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