S.D. investors get the licenses for 1.5 million tunes

By Mike Freeman UNION-TRIBUNE STAFF WRITER

January 7, 2004

A group of San Diego investors has acquired the TruSonic business arm of the former MP3.com, which provides Web-based music to businesses. The purchase price was not disclosed.

As part of the transaction, the investors acquired licenses to more than 1.5 million songs by independent artists for distribution to businesses.

Joseph Tebo, a La Jolla resident and the former president of the am/pm International division of Atlantic Richfield, will lead the new company as chief executive and president.

Daniel O'Neill is chief technology officer and executive vice president. O'Neill is the former technology officer and president of engineering of MP3.com and VUNet USA Technologies.

MP3.com, an early pioneer in digital music, ran into trouble when it was sued by the major record labels for copyright infringement.

In 2001, MP3.com was sold to Vivendi-Universal. But Vivendi soon encountered troubles of its own and began selling off its entertainment assets.

Over the past year, Vivendi has disposed of the nearly all of its online music divisions that it held under the VUNet USA umbrella, including its eMusic and MP3.com brands.

TruSonic was rolled out by Vivendi in 2002 using MP3.com technology. The company delivers music via the Internet to businesses, including offices, retailers and restaurants. Unlike traditional systems that use satellite signals or CDs, TruSonic's system allows customers to insert and change advertising or other messages at any time from a central location.

Besides piping music and ads into stores, TruSonic also delivers music for telephone systems when customers are on hold.

Tebo estimates the commercial music business is a $600 million to $1 billion industry. The largest players are Musak and DMX Music. But the penetration into the market is relatively small. For example, only about 20 percent of retailers have a music service, Tebo said.

That's where Tebo and other investors think TruSonic can grow. It has about 4,000 subscribers now. They include Petco Pet Supplies, Comp USA, Rubio's Baja Grill, Great Clips Hair Salons and AMC Theatres, among others.

What the company does with the former MP3.com library of 1.5 million songs remains unclear. Tebo said TruSonic intends to acquire licenses for mainstream music. The company employs 14 people and has offices in La Jolla and Seattle.

Mike Freeman: (619) 293-1515; mike.freeman@uniontrib.com


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