The first business plan, 1999

Sean Fenlon wrote the plan after leaving his mortgage-company job in May 1999 (his account is here). The version summarized here is the “ListenSmart.com, LLC Master Document”, the full plan with the LLC cover, which cites news as late as mid-July 1999. Several other drafts survive in the company files, including copies with a “ListenSmart, Inc.” cover, chapter-by-chapter exports and a shorter investor version. They carry the same text.

The bet: music will be free, so earn around it

The plan starts from the view that “the value of anything in the digital domain is plummeting toward zero, including software, words, images, and music.” What remains, it argues, “is the economics of connectivity and delivery or the ability to become a gatekeeper to an audience.” So all the music on the site would be free to download, and the company would earn “peripheral revenues” around it:

1. Advertising
2. Affiliate link advertising (commissions on music products the site reviewed and linked to)
3. SmartCD sales: custom CDs of free songs, burned to order and shipped within 24 hours, in CD audio or MP3
4. Artist merchandise, printed on demand from the artist’s own logo
5. Music publishing, “the greatest potential for long-term revenue, and perhaps the most aggressive element of the new business model”

The music industry’s position is, “You can’t listen to music if you don’t pay.” Michael Robertson (founder of MP3.com) says, “I think music should be free.” We feel as though both positions are wrong. Music should feel free but not be free.

The shorter investor version of the plan (July 1999) put the question every dot-com faced this way: “Yes, they may come, but will they pay?”

Three levels for artists

Every artist would get a customizable home page at listensmart.com/artist-name, automatic search-engine submission, a fan mailing list and a statistics page (downloads, previews, SmartCD sales, rank by genre and region). At sign-up each artist would pick one of three levels:

• Promotion Only. No revenue; the artist posts for exposure. The plan had in mind artists already signed to a label, who could post a home page and low-fidelity streaming previews without breaching their contracts.
• Commerce Participation. ListenSmart.com sells the artist’s music on SmartCDs and their merchandise, splitting the gross revenue 50/50 with the artist. Earnings would be paid by check once they reached $50, or could be spent as credit on the site.
• Profit Sharing. “The most radical element”: the artist signs a standard single-song publishing contract making ListenSmart.com the publisher, entitled to 50% of the song’s royalties (broadcast, synchronization, mechanical, grand rights, foreign). In return the artist gets everything in Commerce Participation plus a share of “50% of all advertising revenue earned by ListenSmart.com,” divided by how much each Profit Sharing artist’s music was downloaded, audited by an outside firm and paid quarterly.

Profit Sharing songs would also go into SyncSmart.com, a database pitched to film and TV producers, ad agencies and music supervisors, with any synchronization fee split 50/50. And as a bonus, the company would post Profit Sharing artists’ songs “on every other MP3 or independent music site available, thus leveraging our own competition to promote our participating artists.”

The community and Learn

The plan calls the site a “virtual community”: artist and member home pages, reviews, chat, instant messaging, bulletin boards for every genre, an artists-only board and an email newsletter. Each genre would have its own home page and look. Listeners would find music by genre, artist, song title, region, similar artists, similar listeners and similar playlists, and Top 100 charts would rank artists, downloads, ratings and playlists.

It also promised pages to teach listeners about musical styles and genres, composers and songwriters, basic music theory, music history, the music industry, music books and musical instruments. That part was built: it became Learn and the Genre Guide.

Eight principles

The plan’s “Competitive Advantage” chapter claims every competitor fell short on at least one of these:

1. Reduce the price of music in digital form to zero, it’s ultimate destination
2. Create “peripheral” revenues surrounding the phenomena of free digital music distribution
3. Adequately compensate artists for providing quality content and material
4. Adequately promote artists and their material outside of the arena of their respective web sites
5. Create a sense of involvement and/or community between listeners, artists, and the music
6. Provide sophisticated methods for listeners to find the music that they are most likely to enjoy
7. Act as both a “portal” and a “destination” type of Internet site
8. Prepare for future digital music formats in the “branding” of the site and/or company

The last is why the company is not called anything-MP3: the plan warns that “eventually MP3 will not be the buzzword that is identified with digital music distribution technology.” The 24 sites it profiles are on The competition, 1999.

Marketing, money and the team

• Marketing: $1.5 million over two years, about $60,000 a month, to recruit artists (banner ads on MP3 sites, newsgroups, independent-music magazines, referral incentives) and listeners.
• The ask: “an equity investment of $5 million.” The plan named an IPO within 12–18 months as the investors’ exit. These were 1999 hopes: the company raised $1 million in all (2001 offering memo) and never went public.
• Management: the plan presents Sean Fenlon, Marc Contract and Brandon Pepelea, with David Seidl as legal counsel and advisor. Their founding-team titles are on the Team page.

Ideas for later

The “Future Services” list included webcasting, free music-video and instructional-video downloads, live concert streams, a ListenSmart.com artists’ tour, a monthly print magazine and, in 1999, “Monthly flat-fee ‘Subscriptions’ for the ‘latest release’ downloads.” The plan also lists domain names under consideration; one of them, SyncSmart.com, is among the domains the company held by 2001.

How the model changed by 2000

By the plan dated March 29, 2000 (summarized here), the three levels had become two publishing options and the advertising share was counted in credits:

Note, 2026: Neither plan’s publishing deal was ever signed. The beta contracts posted in May 2000 were drafts, so ListenSmart.com never collected or paid music publishing royalties.

Sources: “ListenSmart.com, LLC Master Document” (business plan, summer 1999; quotations verbatim); ListenSmart.com Short Business Plan, July 1999 (“Yes, they may come…”); ListenSmart.com business plan, March 29, 2000; ListenSmart.com offering memo, 2001 (funding total, SyncSmart.com domain); Sean P. Fenlon, 2026 (contracts never signed). The plan’s third-party news excerpts and résumés are not reproduced.