PassAlong finds musical niche

Wednesday, January 5, 2005 at 1:00am

A Franklin company's recent foray into the digital music download market has struck a harmonic chord with two of the biggest Internet players - eBay and Microsoft.

When PassAlong Networks debuted in September its PC-based digital download Web site, Passalong.com, it simultaneously launched on eBay. The online auction site, which had previously prohibited downloads, has begun to experiment with them and gauge acceptance among its 14 million customers.

Today, PassAlong claims the position as eBay's largest digital music store, the only one that offers all the major label songs and the first one to accept electronic payment through Pay Pal.

"Right now, on line there are 300,000 [song] tracks and we have over 1.5 million that we have licensed, so we are ahead of schedule. We will have over 600,000 tracks on line in January," said Dave Jaworski, chief executive officer of PassAlong Networks.

In early December, PassAlong was added to the list of online music stores offered on Windows Media Player 10, the latest version by Microsoft. The software is being used by 20 million to 24 million people a day, Jaworski said.

"That means exposure and a chance for people to discover us," he said.

PassAlong's early success in the digital marketplace is a story of professional associations converging with years of technical know-how.

Until 1993, Jaworski had spent eight years in sales and marketing with Microsoft before founding Provident Ventures, which then contracted with Microsoft for technical development on its Works product.

While at Provident, Jaworski researched the PassAlong concept for five years before incorporating the company in December 2002. The company has amassed six partners with varied backgrounds in finance, technology and the music business.

"This is a dream team for me to be able to work with," Jaworski said.

The partners include music industry veterans Jozef Nuyens, founder of Castle Recording Studios, and Scott Hughes, former senior vice president at record company EMI. Kevin Gorman, who has been a chief operations officer with several software companies, and Skip Franklin, co-founder of the digital media company Amaze Inc., also signed on.

"Skip Franklin has done a lot of work with Microsoft over the years, and so both Skip and I and Scott Hughes, when he was at EMI, built up relationships with Microsoft," Jaworski said.

While working at Gaylord Digital, Gaylord Entertainment Co.'s former Internet business, Jaworski hooked up with two other company executives - Robin Pou and Brad Edmonson - who also became PassAlong partners.

Rounding out the partnership is Scott Lewis, an entrepreneur who has helped raise $400 million in private funding for other companies during the past 10 years. With Lewis' help, the group started raising money in September 2003 for the launch a year later.

Through 2005, PassAlong, now with 50 employees, expects to have spent more than $60 million developing a broad service that will provide Internet distribution for not only music, but also videos and audio books, Jaworski said.

PassAlong has positioned itself as an accessible service that doesn't require a subscription and works on any Windows Media-compliant platform.

As the company name suggests, PassAlong touts the service's promotion of legal song-swapping. Like most services, its songs cost 99 cents per download. Customers can earn free music by passing songs to others for review and purchase. Jaworski is confident that will help the bottom line.

"On 99 cents a song, there is not a lot of margin. But we have worked creatively both with the back-end service providers and with Pay Pal and with other folks to make a financial model that can work so that we can make money on a single song," he said.

PassAlong's offerings are not unique in the crowded digital download space, said Phil Leigh, and analyst and founder of Inside Digital Media Inc. He does give the company credit for its inroads into eBay, but said whether PassAlong survives the future industry shakeout remains to be seen.

"We're still in the gold rush stage, so people are still going out there and exploring different creeks and streams," he said.

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