Just over a year ago, three recent Brown graduates launched Amie Street, an online music store with an innovative business model but a tiny catalog and few users. Now, with a coveted investment from Amazon.com, more than 100,000 songs for sale and 13 employees - eight of them Brown alums - the company is betting it can change the way you buy music.
Amie Street, accessible at AmieStreet.com or Amie.st, has drawn users by offering a variety of features that industry giants don't have. When a song is first offered on the site, it costs nothing. As more and more users download the song, the price goes up until it reaches Amie Street's maximum of 98 cents. Social networking tools allow users to "friend" one another, and friends' purchases or recommendations show up on each user's "news feed."
"The question we always asked ourselves throughout the process is 'What would get us to buy music?' " said company founder Joshua Boltuch '06. "We are our target demographic. So what would get us to buy music? And the answer always ended up being 'Well, if you give me new music, I'm willing to pay for that service.' "
The company's top-selling artists include the rock band State Radio, indie pop trio Au Revoir Simone and rapper The Game. State Radio songs that retail for 99 cents on iTunes can be found on Amie Street for as little as 18 cents. The company keeps 30 percent of the sale price of every song, which Boltuch says is comparable to the margins of other online retailers.
From College Hill to Web 2.0...Amie Street went online in July 2006 and took off after an early
endorsement from well-known blogger Michael Arrington of TechCrunch.com. In October, its founders made BusinessWeek's list of the Best Entrepreneurs Under 25. By March, the company had sold over 100,000 tracks and acquired rights to sell its first big-name band, the Barenaked Ladies.
"We really blew up in March," Boltuch said. "And on the heels of that there was a lot of interest from the financial community."
Amie Street's founders - Boltuch, Elliot Breece '06 and Elias Roman '06 - traveled to California's Silicon Valley seeking venture capital investments for the business' expansion. The three also traveled to Seattle, where they met with Amazon founder and CEO Jeff Bezos.
In August, Amie Street announced the results: A group of investors, led by Amazon, had offered to fund the company's first major round of financing. Amie Street accepted, agreeing to sell part of the company - and its future profits - in exchange for the investment, as is typical of venture capital deals.
Neither firm has disclosed the terms of the agreement, and a spokeswoman for Amazon told The Herald that the company does not comment on investments outside of press releases and legal filings. But Amazon's motives were relatively clear, said Edward Weller, managing director of retail and consumer research at San Francisco-based ThinkEquity Partners.
"I think they have a stake in knowing what's happening in the underbrush all around the Internet," Weller said. Amazon's practice of investing in startup firms "not only gives them intelligence, it also gives them an early line in on buying some of these things if they pan out. And maybe there is an option to buy."
Boltuch believes investors were attracted by his company's customers. "Amie Street certainly has a very coveted, younger demographic that probably doesn't buy music on Amazon," he laughed. "So our demographic I think is what's key" to their interest in the deal, he said.
Though the terms of the investment weren't disclosed, Weller said the deal-making process offers some clues as to its size. "Do you think that the CEO of a big company like that would meet to invest ... $640,000 in a company like this?" he asked. "Often, first-round venture stage financing can be $5 or $10 million." Amazon might fund one-third of that, he added.
With the infusion of capital, Amie Street has hired a group of much-needed software engineers and moved out of its former headquarters in a Long Island house to office space just outside New York City. Yet as the company grows, Boltuch says it won't stray from the basic principles that have brought Amie Street success.
For example, every track sold on Amie Street comes without any Digital Rights Management restrictions, used by sellers like Apple Inc.'s iTunes Music Store to hinder the distribution of downloaded music.
"That was never even a question," Boltuch said. "For 99 percent of artists you can't get your music into too many places." The only way to achieve success "is to have a lot of people hear your music, and DRM is the antithesis of that."
Amie Street's refusal to use DRM has been a stalling point in negotiations with the United States' four major record labels - Universal, Sony BMG, EMI and Warner Music. The company needs at least one of the labels onboard if it wants to compete with major online retailers, but Boltuch remains hopeful that an agreement will be reached. "They want access to people on our site, and our demographic, and we want their music," he said. "We just have to make that deal."
... And back to BrownBrown was a critical part of Amie Street's formation, Boltuch said. He met Breece and Roman when they lived on the same hallway in Keeney Quadrangle during their freshman year. When the three decided to start Amie Street in their senior year, the founders "cherry-picked" from Brown's Computer Science Department, hiring several students as contractors to build the site's code.
Roman, a business economics concentrator, handles the company's finances, while Breece, who concentrated in modern culture and media, focuses on the site's design. Boltuch concentrated in English and now works on marketing and public relations. (The house in which the three lived during their senior year, at 18 Amy St., gave the company its name.)
Of Amie Street's 13 employees, eight are Brown alums. Peter Asbill '06, Amie Street's chief content officer, and Lucas Hrabovsky '06, its Chief Technology Officer, joined the company last year when it was still based in Providence. Since the move, the company has hired three more alums: software engineers Todd Lipcon '07 and Zach Shubert '02 GS, and Systems Administrator Jimmy Kaplowitz '07.
Students who use the promotional code "Brown" when registering for Amie Street get $5 of credit towards music on the site.
