BUSINESSWEEK ONLINE : JULY 24, 2000 ISSUE
BUSINESS WEEK E.BIZ -- SPECIAL REPORT Sour Notes Sitting in a barely lit loft office in New York's chic Soho neighborhood, Rob Weitzner clearly has a heavy heart. Just nine days earlier, Weitzner, EMusic.com's New York vice-president, had to lay off four of the nine people working in his office. ''I don't think you ever get good at laying people off,'' says Weitzner. These are trying times for EMusic, a Redwood City (Calif.) company that sells downloadable MP3 music files. Its stock is down 90%, to $2.50. It burned through $22 million in the first quarter, leaving it with a modest $47 million in cash. And it must compete against services like Napster that lets fans swap music for free. With little chance of raising more loot, EMusic is slashing expenses: It has handed out 40 pink slips to its 220 employees, closed two offices, and slashed its marketing budget in half. Now, EMusic is being forced to do business differently. Having already acquired the exclusive digital distribution rights from over 600 independent record labels, EMusic is focusing on potential superstars who could one day make buckets of money. And EMusic is turning to less expensive online marketing campaigns in place of pricey commercials on MTV. The combo will whack $15 million out of yearly expenses and allow the company to stay alive until mid-2001, says CEO Gene Hoffman Jr.. The upstart also is finding new ways to make money. One example: EMusic has cut a deal with Hewlett-Packard Inc. in which every person who buys a CD-rewritable drive will receive a two-month prepaid subscription to the EMusic service, which lets users download as much music as they want for a $15 monthly fee. HP will pay EMusic at least $3 million over the next three quarters. EMusic will need more such deals or Weitzner could get more unwanted practice in handing out pink slips. By Spencer E. Ante _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ BACK TO TOP					RELATED ITEMS The Fight for Survival TABLE: Dot-Com Survival Management Guide CHART: Venture Capital Investments Are Tumbling...And Investors Are Leery of New Tech Companies.. Drug Doldrums Sour Notes INTERACT E-Mail to Business Week Online

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