Linspire's Michael Robertson: Why I Love MP3 Music Lockers But Hate DRM

Net entrepreneur Michael Robertson walked away with a reported $100 million when he sold the controversial music-download site MP3.com to Vivendi in 2001.

Robertson subsequently raised the ire of Microsoft, when he started low-cost operating-system vendor Lindows, prompting a lawsuit from Redmond and subsequent settlement resulting in a name-change to Linspire.

While he's been under the radar for the past few years, Robertson is back with a trio of startups: AnywhereCD, MP3tunes.com, and SIPphone.

Lest anyone think Robertson has shyed away from controversy amid the beginnings of a possible second Web bubble, think again. Online music vendor AnywhereCD had a recent legal tussle with Warner Music.

His MP3tunes.com business is intent on breaking what Robertson sees as the proprietary stranglehold of the iTunes of the world. MP3tunes offers a personal online music locker, through which users can access their music files from any location or platform.

Robertson also looks askance at Apple's iPhone, preferring what he sees as the open model followed by the Symbian-based Nokia platform. His third startup, the VoIP venture SIPphone, offers its Gizmo VoIP servces on Nokia devices, among others. Robertson chatted about these threads in our interview:

InformationWeek: Why did Warner Music and AnywhereCD get into litigation? [Warner took issue with AnywhereCD's selling of MP3 copies of its albums.]

Robertson: On the face of it, [we're] selling albums at full price. That was how I pitched it to all the record labels. I said, “Listen, if people have the CDs, they have perfect digital copies." So I’m not giving them anything they don’t already have as soon as they buy the CD.

Understanding Warner’s reaction requires you to understand that the record labels have a real fear that the whole world will go open format, and with it, they will lose enormous control of various channels that they sell through. The fear isn't that a guy who buys a CD through AnywhereCD suddenly has files and is going to go onto a peer-to-peer network. Their fear is, that this tidal wave, with Apple and EMI, and AnywhereCD selling the whole Warner Music library, will create a push where DRM is left behind.

InformationWeek: But hasn’t that horse already left the barn?

Robertson: Not in their minds. They believe that, if the technology companies would get their act together, then they could make all these pieces work together and DRM could be interoperable, but the technology companies just haven’t made it a big enough priority.

InformationWeek: Do you think that’s ever going to happen?

Robertson: I think it’s a pipe dream that you’ll have interoperable DRM. If you look at the last decade, you see countless initiatives--backed by big companies like Microsoft, IBM, Sun, and Toshiba. They’ve dumped, collectively, probably over a billion dollars into this, and really there’s nothing to show for this. There’s not even one mild success, where they took two disparate DRMs and brought them together.

InformationWeek: What's the problem?

Robertson: The problem with DRM is, inherently, it’s controlled by one company. You’re adding a layer of technology that one person’s going to control and have patents on, and they can’t resist using that to block all their competitors. So, inherently, DRM is in-interoperable, if that’s a word. It can’t be made to work together.

InformationWeek: Let’s get beyond DRM. How is the music business going to reconstitute itself? Is it going to be subscription services? Is it going to collapse?

Robertson: I think it’s unavoidable that there’s going to be some pain and some revenue contraction, because [record companies] have a fixation on the CD and it's the singular generator of the vast majority of their revenues.

InformationWeek: They haven't recognized that the CD is finished?

Robertson: It's easy to say that the CD is finished, but the reality is that 85 percent of their revenues still come from the CD.

InformationWeek:. So I'm wrong?

Robertson: Well, it's true that the CD is quickly dying, but it's still a very large piece [of revenues]. This is the dilemma the record companies have, because they don't want to do anything that increases the deterioration of the CD. A decade from now, the music industry is going to be much more diverse than it is today. Today it's CDs, 85 percent of revenue, everything else, 15 percent.

Ten years from now, no one contributor is going to make up more than 20 to 25 percent of their revenue. Whether it's subscription, physical retail, a la carte digital sales, or hybrids like AnywhereCD.com.

InformationWeek:. Do you think Amazon has a chance of becoming the first real potent competitor to iTunes?

Robertson: There's no reason for me to believe that they do, because they really don't have anything. It's vapor right now. They've said they're creating an MP3 store; big deal. What content do they have? For sure, they'll have indie [independent record labels] content, but that's available now from a hundred different sites.

InformationWeek:. Let's talk about Linspire. How's it doing these days?

Robertson: I'm only the chairman now; I don't have any day-to-day operational responsibilities. Kevin Carmony is the president and CEO. I've been spending my time on my voice-over-IP company, SIPhone, and then my digital music venture.

I do believe, in a big picture way, there's a battle going on right now in terms of how Linux is going to live with software patents, if at all. I'm not a fan of software patents. I think that all of them are bunk. But the reality is, we do have laws that have given us a patent system, and so there's this fork in the road that Linux is at. Are they going to be pragmatic and realize that the world we live in has patents? Or are they going to be idealists and say, hey, we're not going to live with patents. And I think that's the battle that's happening right now.

It's easy for [Richard] Stallman and company to say, "We're not going to live with patents," because he doesn't have a commercial business. He's not out there in the real world, fielding technical support calls saying, "My DVD won't run." We are. So as much as I think that paying five dollars in royalties for DVD playback software is ridiculous, that is the world that we currently live in. Until Congress gives relief or something dramatically changes the Patent Office, you have to deal with it.

InformationWeek: Okay, so tell us about those startups you're working on.

Robertson: I split my time fairly evenly between three different ventures. One is the digital music, with AnywhereCD and mp3tunes.com. While AnywhereCD is getting the press, the real opportunity for me is [mp3tunes.com's] music locker. I believe that a decade from now, you're going to have 10 different devices that you listen to your music on: your bike helmet, phone, sunglasses, car, laptop, desktop, whatever. You need to have your music play so that it's accessible to all those different devices.

InformationWeek: What are you doing to evangelize your music-locker business, which you started in 2004?

Robertson: The focus right now is behind the scenes. My belief is that the music-locker business doesn't really take off until non-PC devices start coming to market. There are devices that you turn on, you say, "I'm Alex," and instantly all of your music is there.

We had our first big success a few months ago, with Logitech, which announced a product from a company that they bought, called Squeezebox. Squeezebox is an Internet appliance, which does wire-to-wireless Internet. It talks directly to your music locker. You put it in any room in your house and instantly you have all of your music. Not because you have a PC installed with the right software running with all your music, but because it talks right over the Internet directly to your music locker.

My belief is that the music locker doesn't go mainstream until you have a lot of different devices like that Squeezebox. Because if you're just listening to music on a PC, then iTunes is sufficient for that. Where music locker really shines is when you have a PDA, a phone, a Wi-Fi MP3 player, and you just want to turn them on and have all your music instantly without managing everything.

InformationWeek: I see Rhapsody is promoting Squeezebox as a device for their service. Is this going to be the next generation of MP3 player, a replacement for today's players?

Robertson: The next big hardware innovation is going to be a Wi-Fi player that autosyncs to your locker. There are a couple of Wi-Fi players out there today. Most notable is Sansa Connect, from Sandisk. But they're a little unrealistic, in that they assume that you're full-time connected to Wi-Fi, which is just not the way the world works.

The way this needs to work is, you take this [Squeezebox-like] device out of the box, it has Wi-Fi, and it periodically wakes up and looks around to see if it has a network connection. If it does, it syncs with your music locker. It checks whether there's any new music that you've put into your locker and then automatically suck it down to your device, so that the user doesn't really have to do anything except keep the device charged.

InformationWeek: How to you gain traction for your music-locker model, as opposed to companies like Rhapsody offering complete, turnkey solutions on their site?

Robertson: The limitation that all those devices have is that they're all DRM-based, so they're only going to work on a small subsection of devices people want to use. Take the iPod. My music locker works beautifully on an iPod, and Rhapsody doesn't.

While I think subscription systems are going to appeal to a certain segment of the population, inherently they're limited. My venture says, if a consumer is paying their money, they should be able to listen to their music anywhere. That's something you only get with a music locker like ours, which has an open API, which says that any device in the world can connect to it.

InformationWeek: For the last few years, there have been devices like the Squeezebox, only much bigger. What makes you think that now they'll gain traction, when heretofore they haven't?

Robertson: One, is cost. If you look at historically the cost of these Internet appliances, they were [around] $500--real expensive. Now, you're seeing more devices come into the market, economies of scale, cheaper Taiwanese manufacturing. The price is getting driven down to where it can go mass market. That price point is around $100. At $100, people are going to start buying these things for their bedrooms and their kids.

InformationWeek:Tell us about SIPphone.

Robertson: That's the voice-over-IP company that I do. We're doing some interesting things with Nokia. Nokia's not getting enough credit in the press. There are several reasons. One is that, while Nokia's massive internationally—they have 37 percent market share in handsets in Q1 of this year, and the second place company is Motorola, with 18 percent, which shows you what a big disparity there is there.

Nokia is really committed to open standards, open formats, and we've done tremendous work with them, where they now support SIP calling, as well as Jabber-based instant messaging on all of their high-end phones. That's amazing; no other handset manufacturer is doing that.

InformationWeek: There's a lot of interest in VoIP handsets, but more so overseas than in the United States, no?

Robertson: That's true at a high level, but at a lower level, you have to understand why. The reality is, in the United States, the carriers control the handset business. and they don't want expensive handsets. They want to offer $59 or $99 handsets, with a two-year subscription.

When you go outside the United States, the carriers don't have that kind of influence. Therefore, consumer demand rises up. [Overseas] consumers will say, I'll pay $400 for a handset, if you give me GPS receiver and Wi-Fi.

When you go to Europe and Asia, there are phone stores that just sell phones. In the United States, there are almost no phone stores that just sell phones; they're carrier stores. So consequently, it appears that consumers don't want [advanced features]. That's not true; if they're given a chance to buy it, which is what you're seeing in Europe and in Asia, they are taking action.

Here's an interesting data point: Two-thirds of Nokia's phones are sold without a carrier. That's an amazing number. It don't know what the figure is in the United States, but I bet it's single digits.

There's a lot of hoopla around the iPhone. But if you look at the Nokia N95, it's an amazing piece of machinery, and it's totally open, not like the iPhone. You can use Nokia's Wi-Fi to make calls, you can use the Wi-Fi to download music, and you can add third-party software onto these devices.

These are all things you can't do with the iPhone. I mean, it's absurd. I pay $600, I sign up for a two-year subscription, and you don't let me use Wi-Fi to make a phone call, or you don't let me use Wi-Fi to load my music? That's nuts.

One of the things that I need to do is let the press know that Nokia is a fan of open standards. They're committed to it. Every single one of their phones that does Wi-Fi has open SIP calling. And they're now supporting Jabber-based instant messaging, which will allow them to interoperate with an instant-messaging system out there.

InformationWeek: What's your take on the iPhone?

Robertson: I think it's going to be a flop. It's beautiful, no doubt, but people need the tactile feedback of keys. No one's going to type an email on a glass screen. It's just not going to happen. And when you talk about a smartphone, that's the thing that people do after calling--they want to do email, they want to do text messaging. It's going to be awful for that.

Might it do music okay? Yes, but it's crippled, because you can't even use Wi-Fi to update your music, which is ridiculous. You have to [use] your PC, be able to cable it in. So what's the point of having Wi-Fi then?

So I think it's going to be a bust of a product, but it is going to push the industry forward a lot, and make the carriers--especially in the United States--consider higher-end, more feature-rich phones, which today they're not totally focused on. In fact, they're blocking [them].

I'm talking to you on a Nokia T61i, which has a built-in QWERT keyboard. The beauty of this device is, it has Wi-Fi, so anything I do on the phone--talking, Web browsing, email--I get to choose whether to use to Wi-Fi or to use the carrier's channel.

That's enormous power. If I'm at the office and I want a fast data connection, I don't want to the limitations of the carrier, I can choose to do any of those activities over Wi-Fi. I don't think consumers are going to have that choice with the iPhone. It's going to be, you'll use Wi-Fi when we tell you can use Wi-Fi. That's going to be restricted by the carrier to not include phone calls, and restricted by Apple to not allow you to do music over Wi-Fi, which is just ridiculous.