Mark Asdourian, former general counsel for Shopping.com and a career attorney, cringes as his new company’s flagship device belts out the familiar strains of Beethoven’s Fifth Symphony punctuated by audible spurts of passing gas.
“That one’s for the kids,” he apologizes. “For some reason, they seem to love it.”
The performance is one of the two dozen songs loaded for demonstration purposes into the Zap Disc device, his company’s contribution to the digital revolution that some say is mortifying the recording industry. The standalone device, set to launch in about 100 entertainment centers throughout the country next year, allows music fans to create their own CD compilations on the spot from a library of thousands of songs. The company plans to install test units this week at the Irvine Spectrum Center and Ontario Mills mall.
It’s not quite e-commerce, but it’s not old-school bricks-and-mortar, either. In any case, Asdourian is confident that the four-person operation will change the way people buy music.
Despite the suffix, HitDisc.com Inc. is not strictly an Internet company. Instead, it’s a system of physical kiosks that create CDs from a digital music library of about 7,000 songs.
But the Internet plays significantly into the company’s business plan, allowing the ZapDisc units to constantly update their song libraries, keep track of sales and fix any software problems that crop up. The machines hold materials to make about 100 CDs, about an expected week’s worth of supplies.
And ironically, company officials say the Net is probably their biggest potential competitor. The industry has undergone turmoil over the last few years over MP3 file format, which has created a virtual free-for-all in illicit music swapping. With thousands of songs available freely to download legally or not many of the potential customers most likely to appreciate the technology will have enough know-how to get the songs for free over the Internet.
But not surprisingly, Asdourian is confident the legal system will find a way to better enforce copyright law, shutting down many of the rogue music outlets now operating.
And besides, he added, most people don’t have the time to mess with the process themselves, even if the music is free.
The Zap Disc machines are designed to make the process effortless. Customers pick out what tunes they want using a computer system that allows them to sample the music. Then they swipe their credit card or load in cash, and in about 10 minutes receive a custom CD with a case and printed label. Customers can by CDs with a single song, five songs or 10 songs. Pricing has not been finalized, and will vary according to the size of the CD and the songs chosen, marketing director Steve Woo said.
Officials with the company claim their machine can record a CD about twice as fast as similar devices beginning to appear in record stores. Those units typically download the music as needed from a centralized server, adding several minutes to the process.
Though Asdourian concedes that his device could cannibalize sales from traditional music retailers, he says the company really wants to target people who don’t frequent them.
He plans to put the machines in high-traffic areas such as shopping malls, movie theaters and entertainment centers in hopes of catching impulse buyers who wouldn’t normally rifle through CDs at a record store to find their favorite songs among the thousands of albums there.
No major record labels have yet signed onto the system, but officials with the company say they’re negotiating with independent record companies and expect to have a 300,000-song library within the next few months. They expect “heritage” recordings, older music that has nostalgic value but costs little to license, to make up a significant part of sales. And software sales will become available soon.
Because the machines can store frequently updated, custom music, HitDisc could cater the machines to carry favorite local bands and holiday music collections.
“Our Zap Discs in Memphis will probably have a radically different collection than our kiosks in LA,” Asdourian says.
Though he expects music to make up the majority of sales, the machines eventually also will offer software and electronic books, Asdourian says. The company also hopes to generate advertising revenue through a big-screen monitor designed to attract people to the machine.
The company formed about six months ago when Steve Nosrat and Ben Abadi, who owned a CD-replication company, bought the patents for the Zap Disc devices. Asdourian joined the company soon after, saying he jumped at the opportunity to get into a new type of business. So far, Asdourian has raised $500,000 in private funding for the firm and is looking for $8 million to $10 million to fund a national launch.
Asdourian said he expects the company to make $3 million in the first year after its 2001 launch. Woo points out that music fans bought more than $14 billion worth of music last year, a figure that is growing about 5% per year.
“If we can shave off even a fraction of that, we have a good business plan,” he says.
