Sound system lets music fans customize CDs

Insight on the News, Oct 20, 1997 by Eric Fisher

Can customized compact discs rejuvenate the music industry, which faces sagging profits and indifferent listeners? Four young entrepreneurs hope so.

Customized compact discs seem like a can't-miss proposition. What music fan wouldn't jump at the chance of putting his or her favorite songs on a single CD?

But the industry is littered with the wreckage of companies that have tried and failed. Personics of Redwood City, Calif., placed kiosks in record stores nationwide to customize cassettes before filing for bankruptcy. Blockbuster Music swiftly aborted its make-your-own-CD project in 1993.

The founders of superSonic BOOM, a year-old company in Arlington, Va., are convinced they won't repeat history, and they have an ally their predecessors did not -- the Internet. Instead of burdening itself with, expensive equipment and real-estate costs, which doomed Personics and scared off Blockbuster, superSonic BOOM lets customers search and order from its 32,000-song inventory on the World Wide Web (http://www.supersonicboom.co m). The cost is $16.99 per disc, plus $3 for shipping.

"There's a lot of people dissatisfied with the experience they've had in record stores, and when they've gone to get a greatest-hits record, it doesn't have all the songs they want on it," says Julie MacKinnon, vice president of superSonic BOOM. "What we're trying to do is give some choice back to the customer."

Started with an investment of $75,000, superSonic BOOM is the brainchild of three Northern Virginians who met far from the world of music. President Ted Hooban, chief technology officer Kris Barth and MacKinnon first talked about customized CDs three years ago while working for a tax-information publisher.

The idea gathered steam when Hooban and Barth moved into Website and CD-ROM development and assisted on the Rolling Stones' Internet site. Once superSonic BOOM was born, MacKinnon's sister, Melissa, left her job selling ads for a local Washington radio network to join the company

Consumers select up to 55 minutes of music. Artists and record companies receive royalties after their songs have been ordered, freeing the company from financial problems retailers and record companies face, from artist advances and shelf fees to return charges for unsold merchandise.

The biggest hurdle facing the company is reaching 15- to 24-year-olds, who last year purchased nearly one-third of all recorded music. And the company's catalog features relatively little in the way of mainstream rock and has none of the current chart toppers. That's because superSonic BOOM has not been able to acquire costly reproduction rights from any of the six record companies that dominate the industry.

SuperSonic BOOM, how ever, did win a major victory last month, acquiring rights to a 30,000-song catalog from the Kruger Organisation, or TKO, in London. The battery of jazz, blues and oldies, now the vast majority of superSonic BOOM's catalog, features Tony Bennett, Nat King Cole, Fats Domino, Louis Armstrong and Ella Fitzgerald. The company is negotiating with several other record companies for access to their catalogs and has not given up on bringing in the major labels.

"In retail, you have a very large number of artists competing for a very limited amount of shelf space," says MacKinnon. "So you have only the absolute hits in the stores, and even then 30 percent of that is being returned to the labels. So there's a lot of independent and developing artists that still need a market, and older albums from established artists. These niches we're also after."

SuperSonic BOOM's concept could mark a turning point in music retailing. On-line music retailing is expected to increase from $47 million in 1996 to $1.6 billion in 2002, according to Jupiter Communications, an Internet consulting firm. "This has the potential to reach millions and millions of people," says Jeffrey Kruger, TKO's chief executive officer. "This is the first time the consumer can truly say, `This is what I want.'"

SuperSonic BOOM declined to give specific sales figures but says business is "moderate." It aims to sell 150,000 discs next year. That number, however, is predicated on an expected tripling of the catalog by next summer, as well as the quadrupling of its disc pressing to more than 400 CDs a day.