`
`Technology, resistance on part of record companies could slow
`efforts to grow business in a market now valued at $116 million
`Br KAREN Kovs'rcs
`sell to record labels, artists and
`others who own the rights to au-
`dio recordings.
`This may not be easy to do.
`Record companies have al-
`ready taken a hard—line stance
`against the online sale of music,
`which they see as potentially si-
`phoning off their profits.
`And consumers may not be
`hip to the'idea that, for now.
`songs downloaded from Sight-
`sound.corn‘s site can only be
`played on the computers they're
`downloaded to.
`
`-. ightsoundcom is ready to
`hit the electronic com—
`merce market with a ser—
`
`
`
`vice that makes it possible
`to distribute and purchase muv
`.- sic (War the Internet. But is the
`
`market ready for the company?
`Founded as Digital Sight!
`Sound in 1995, Sightsoundcom
`holds patents to technology that
`makes it possible to dowuload
`music over the Internet fore fee.
`
`Earlier this year. the company
`took this technology and built
`a World Wide Web-based ser-
`
`Nov. 10 - 16, l993WHorsemen Busmsss TiMES
`
`PhotobyDM. Scott
`Siglltsoundmom is seeking equity financing to help fund its growth strategy. Art Hair, left, is chairman
`Z. and Scott Sander CEO of the Mount Lebanon company that makes recordings available via downloading
`from the Internet
`
`lotemet iirro pioseers downloadshie Hassle soles
`
`ing ahead with its seryice.
`"if you’re going to sell music
`in download fashion, you need
`to format it. do credit card pro-
`cessing online and provide ma-
`terials to market and promote
`it." said Sightsoundcom presi-
`dent and CEO Scott Sander.
`
`Sightsound.com handles all
`these tasks from‘its headquar-
`ters on Washington Road in
`Mount Lebanon. where it em~
`plays 6 people. Working with is-
`bels or individual bands, the ‘
`
`company takes redordings and
`puts them in a computer-code
`forms: so they‘can be played on
`
`Still, company executives be-
`lieve these issues can be overw
`
`
`
`vice around it. which it hopes to
`
`come. So the company is mov—
`
`See DIGITAL page 5i]
`
`
`
`SIGHTSOUND TECHNOLOGIES
`EXHIBIT 2314
`
`CBM2013-00023 (APPLE v. SIGHTSOUND)
`PAGE 000001
`
`
`
`

`

`saohjrntirsosi
`‘ Nov. 211 41,1913
`50
`Pirrssussii 31151111155 T111115
`f Ih‘lfi'fillhtzlocnl musicians Dillai’md Sonsporticipoted 111 11 11111111110111” via internet 111137 811111111191"
`
`From page 3 -
`
`the World Wide .Web. It also scans in pho~
`tos and other promotional materials to sell
`the music so that browsers can learn more
`
`about the bands they hear.
`"in a store. you might have a cardboard
`cutout.“ Mr.» Sander said. “We do packages
`where people can see a video and getsome
`exposure to the'band.”
`The demand for such a service is just be-
`ginning to develop — International Data
`Corp. estimates the market is currently
`worth about $116 million.
`
`But Goldman Sachs, a New York City in-
`vestment banking firm. has expressed con-
`
`
`
`fidence that it will grow‘largex:
`Thefirm is helping-lSi'ghtsoundcom ne- ‘
`gotiate‘ a round enquiry financing to help
`fund its g1owth strategy. Mr. Sander de—
`clined to say howmuchmoney the com-
`pany is planningto raise.
`"They.are trying to line up companies in
`the media and entertainment industries '
`that might wantto invest in us,’Mr. Sander
`said.
`Though the market for Sightsounds tech—
`nology15 still erne1ging. Tom Cossie. pies-
`ident and CEO of DormontTechnologies
`Ltd, a Ross Township—based firm that the
`velops marketing softwarefor the music 111—-
`dustry. thinksISightsoundcom is' hitting it
`
`
`
`at the right time.
`“Downloading music from the Internet
`is becoming'a trend that‘can no longer be
`avoided." he said. "More and more artists
`
`and labels — indies and majors ~ are mak-
`ing their music available over the. Net. There
`is also a rising tideIofNet-only labels and
`artists. as well as technology-to address
`piracy issues."
`Some industry experts say the internal:
`is an ideal medium for, distributing music.
`~ "Alot of bands will utilizeit because they
`have no other way toreach people through
`out the-‘11Porld.u said Andy Morris, manager
`of'AMivl'.Managem eat, a New York City-
`. based recording industry management firm'
`
`that has managed local bands. including
`Dhaima Sons
`-
`M1. Morris andDharma Sons took a shot
`
`,
`
`at: Internet marketng this summer. partic-
`ipating in a "Virtual Tour” organized by
`Sightsoundcom.
`I
`The tour, conducted onlineat Sight-
`soundcom’s Web site, enabled surfers to lis-
`
`ten to the music of Dharma Sons and eight
`other bands and download selections they
`liked for a fee.'lt also allowed them to ex-
`
`perience the cities the tour stopped in
`through digital images.
`
`"It was really quite well done," Mr. Mo r-
`ris said.
`
`To date. Sightsound.com has packaged
`80 songs for distribution on its site. But sell- .
`ing thesis songshas hotbeen easy.
`Part of the prciblem-is that the company
`does not ship‘CDs ortapes that can be
`played anywhere. Thecompany delivers the
`selections consumeis purchase to thei1
`computers _ and these selections cannot
`be played ales-where
`While this may please recording indus—
`try trade groups concerned that music is
`being distributed free to large numbers of
`people via the lnternet. some consumers
`may find it unappealing.
`Also. downloading music from the Sight-
`sound.com site requires technology that
`most‘Consumers do not have yet. such as
`high-speed ISDN lines and cable modems.
`Once thistechnology is widely available.
`Mt Morris thinks consumers will eventu-
`ally use it to download music.
`"It‘s like (digital video diseslj' he said.
`"DVD isnow the hip thing people want to
`buy. but it took awhile for that to happen."
`
`Resistancefrom--recoiding industry trade
`"'Igioupssuch1111111:Recording Industry
`Artists Associationmay be room difficult
`to overcome.
`"Ithink theyve set a tone for the debate I
`on thisissuethat they are doing everything
`they can toprotectthe rights of their mem-
`bers." said Paul Verna p10 audioeditol fin
`Billboaid Magazine a weekly publication
`that covers the music industry. "And that
`means makingsure people cant dong-dead
`music for free—'thatsomehowti1eI1es a
`payment mechanism."
`'
`Because Sightsound.com enciypts mu-
`sic so that it can only be played on the com—
`'puter itis do'vmloaded to and collects a fee
`before delivering the goods. Mr. Sander be-
`iieves the companywill have the support of
`groups like the RIAA. .
`They may not get the support ofrecord
`executives who see download service
`providers like Sightsound.com cutting into
`their profits.
`
`“1 deal with record companiesevery day
`in New York and it's definitely an issue with
`them.” Mr. Morris said. "And it's going to be
`fol awhile?
`'
`.
`Without the supportof record compa-
`nies. which control the rights-to a majori-
`ty ofthe music- distributed Sightsound.com
`willnot have a product to package
`The company has not negotiated rela-
`tionships with any label's yet. But Mr. Mor-
`risI thinks it eventually will.
`“A lot ofthese companies are having to
`address these issues right now because their
`artists are going to want to sell records in
`this format and they want to get their roy-
`alties.” Mr Morris said.
`This15 exactly what Sightsound. com is
`counting on
`"This market will come.”Mr. Sander said.
`"And when it does, someone has to be able
`to service it at scale. We are in a state of
`
`readiness to do that."
`
`
`PAGE 000002
`
`