RioPort Pushes Middleman Role for Music on Net

NEW YORK (07/24/2000) - RioPort.com Inc. Monday unveiled enhancements to its Media Device Manager (MDM) family of software and services, a series of contract wins with portable music appliance makers and Internet retailers, and a US$35.1 million, second round of financing. The announcements were timed to coincide with the opening of the Plug.In Internet music conference put on by market research firm Jupiter Communications Inc. here, and are meant to underscore the company's renewed push to position itself as the premier middleman for digital music distribution.

MDM 2.0 Technologies, like earlier versions, consists of a series of modules designed to provide the firmware -- software for basic machine instructions -- as well as digital music management control software for manufacturers to incorporate into portable music players. The software is designed to eliminate the need for developers to write separate drivers and custom interfaces for each music file format, PC or music application. MDM includes support for multiple file formats, security and digital rights management systems and operating systems, according to the company. MDM 2.0 Technologies now works with the recently released Microsoft Corp. Windows Media Player 7 and offers a Device Developers Kit, a Software Developers Kit, and an updated developer support site.

"The new toolkits allow people to use our technology without using our engineers," said Jim Long, chief executive officer for RioPort. In ascending order of importance, RioPort's business model calls for revenue generation from engineering services, software for portable music devices, and software and services for music sites. For the sites, RioPort offers a one-stop shop of software and services for content hosting and supply, and copyright and transaction management.

RioPort has some heavy competition, however, including Liquid Audio Inc., which produces music encoding and digital music download management software, and Amplified Holdings Inc., which specializes in digital rights management as well as physical and digital order fulfillment services. But RioPort hopes to get a leg up on the competition by trying to focus on digital-only, middleman services and technology.

"We're the classic middleman -- but we're taking the physical model and moving it to the Internet," Long explained. "We aggregate content and deliver it ... to retailers -- in our case, e-tailers. We want to be the leading music service provider, helping labels and artists get music to the e-tailers."

With its background in consumer electronics and its MDM technology, however, RioPort also is playing a role as software and services provider for consumer electronics manufacturers.

The company was spun off last from S3 Inc.'s Diamond Multimedia Systems Inc. last October (Diamond itself had been bought by S3 in September). Previously it was part of the Diamond division that brought out the portable Rio player which, along with the MP3 format, fueled the digital music download phenomenon.

As a private company, whose major investor is S3, it has been reinvented as a software and services company, whose aim is to play a back-end role in the digital music distribution revolution.

RioPort has heavy-hitter backers. RioPort's investors originally included S3, Microsoft Corp. co-founder Paul Allen's Vulcan Ventures Inc. and veteran venture capital firm Oak Investment Partners. Monday, the company announced new investors and a second round financing. The new backers are storage company EMC Corp., disk drive maker Quantum Corp. and manufacturing giant Mitsubishi Corp.

When the company was spun off last year, officials said the aim was to go public in 2000. In the current financial climate however, launching an initial public offering (IPO) is more difficult than last year, and Long acknowledges as much, though he said the company should be profitable in 2002.

"We might be aggressive about going public but we're not in a position to do that today," he said. "The bottom line (for an IPO) is that you have to show real business progress and so we're focused on business progress."

The series of contracts announced today is meant to show just that. The announcements include various licensing deals with Korean manufacturers: with Samsung Electronics Co. Ltd. for RioPort's MDM as well as its Audio Manager playback software, for a new version of Samsung's Yepp player; with Sewon Telecom Ltd., for a new line of digital audio players due out next month; and with Human Information technology (HIT) Co. Ltd., for various RioPort software and services to be used in HIT's new cassette-type MP3 player, the C@mp CP-UF64, due out later this month.

Also announced today were a series of deals to supply content and services for online music retailers, including: Japan-based Internet Service Provider (ISP) Nifty Corp. for its @nifty sites; and deals with iTurf Inc. and Bolt Inc., which operate sites for teenagers and young adults.

Rioport's Audio Manager music download and organizer software is one of the last vestiges of the company's consumer background. A version is available for free on its site, and the company will likely keep offering it, at least as part of its one-stop-shop music software arsenal. But RioPort does not want to compete for consumer attention with RealNetworks Inc.'s RealPlayer, for example. Nor does it want to compete for consumer eyeballs on its site -- which up to now has looked fairly consumer-oriented, complete with glitzy graphics and music download offers. That look is being redesigned however, according to Long.

RioPort can be reached in San Jose, California, at +1-408-571-6260 or on the Web at http://www.rioport.com/.

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