I visited Fuzz's office in San Francisco Wednesday afternoon, and talked with founding CEO Jeff Yasuda (pictured). A former VC with Redwood Ventures and investment banker with Lehman Brothers, Yasuda is a self-described music nut who clearly feels most at home surrounded by guitars and stacks of CDs, and Fuzz has become his labor of love. He said the company -- formally Fuzz Artists Inc. -- has subsisted thus far on three angel rounds of funding since 2005, with unidentified Google executives providing a portion of the money. Yasuda wouldn't specify the dollar amount, but when I asked him if it was in the single-digit millions, he said it was "more than a couple."

Yasuda walked me through the company's Web site, pointing out editorial content, social networking features, Web services for bands to connect with fans and promote music, local show calendars, a Muxtape-like song-sharing tool complete with movable graphic art elements, and Blip. (I wrote about a separate Fuzz site targeting older consumers, Sonic Boomers, here.) My first impression is that Blip could quickly become the most popular thing Fuzz has done, partly due to a familiar, easy interface whose visual similarity to Twitter's is unmistakable. It's built on the backs of three other music search engines including Seeqpod, and only streams what its crawlers can turn up elsewhere on the Web or within Fuzz's own archives (no uploads are required, or permitted). Even without a critical mass of users, Blip entertained; I can imagine it becoming addictive.

Yasuda admits that Fuzz is pre-revenue, and has yet to test its money-generating ideas (advertising, brand sponsorship, b-to-b plays for media companies). Surely the company will find itself racing against time as the other popular music services it echoes build their brand names, and it will have to show consumers the benefits of centralizing these services under one umbrella. At the moment, its niche audience remains independent music fans; whether it will aim for a general audience remains to be seen.

Fuzz won't seek additional money from venture investors, according to Yasuda. Instead, it will seek its next outside funding from media companies, and has been offered at least one term sheet. Yasuda said he sees record labels, retailers, print and television media, and other Web companies as potential investors. And although Fuzz at one point aspired to be a record label, signing up artists including Oakland, Calif.'s The Lovemakers, Yasuda says it won't go any farther down that road. -- Paul Bonanos


See May 6 post on Sonic Boomers from Tech Confidential

For more, see TechCrunch

Porter cited several reasons for working with Seattle-based Maveron LLC on the new round. The firm, known for its close connections to Starbucks Coffee Co., is especially consumer-focused and has enjoyed several notable consumer technology IPOs including eBay Inc. and Shutterfly Inc., although Porter said its investments in yogurt and sandwich companies were also influential in Mozes' choice.

Like many companies, ranging from household names such as MySpace Inc. to startups including Sprout, Mozes found its initial audience by exploiting the connections between social networking and music, especially the way music is connected to people's identities. Although it has functioned as a mobile-messaging-based fan club for bands in the past, Porter said Mozes is looking beyond that, and hopes to extend its platform to all areas of mobile marketing. To that end, it has begun signing up sports and retail customers.

Its largest customer base is still music-related, however. Mozes provides free services to independent bands, but it charges fees to labels and management companies, beginning in the "thousands of dollars and up" range, Poerter said. The new round is designed to enable Mozes to reach profitability if it so desires, although Porter said international opportunities may be large enough that it will consider a third round.

The new funding follows a $5.8 million Series A round, which was announced in February 2007 and included a rollup of angel funding, including an early installment from media analyst Paul Kagan. - Paul Bonanos

See May 13 post on Mozes funding from Tech Confidential

Nokia's Trevor Madigan pointed to the company's 2006 acquisition of music aggregator Loudeye and its OD2 distribution unit for $60 million as an example of buying rather than building technology in order to enter a difficult space far from its core competency.

"We're becoming a services business," he said. Similarly, Motorola's Dave Ulmer (pictured) said the company's little-noted January 2008 purchase of Sinagpore-based music store operator Soundbuzz for an undisclosed amount has allowed it to build the largest mobile music retailer in southeast Asia.

For mobile handset companies that will need to incorporate music sales to retain customers in the coming years, the only route to the music market will be via acquisitions. The emergence of handset operators as potential buyers could be good news for venture-backed mobile music startups such as Melodeo Inc., which raised $7.9 million from Ignition Partners and Voyager Capital in September, and Catalyst Mobile Inc., which took $14.5 million in two rounds from Sofinnova Ventures and DCM. -- Paul Bonanos

See August 2006 post on Nokia and Loudeye/OD2 from Tech Confidential
See January 2008 post on Motorola and Soundbuzz from Mashable

After listening to all six engaged in discussion for more than an hour, my conclusions were these:

• Consumer behavior in digital music is still being defined, so companies large and small are continuing to experiment first in the hopes of "figuring out the economics later," as eMusic's David Pakman (pictured) said. Retailers, distributors and disruptive startups will continue to forge short-term deals with each other until they know more about what's going to work.
• The retail price of music remains undefined as well. Pakman called it "an elastic good," while The Orchard's Greg Scholl said flatly that it's priced too high. Scholl added that companies can instead "create value with music" and share the rewards in other areas of the industry. The consumer controls both these things, and more. "If you jerk people around, they'll just turn you off," said Pakman.
• Free, ad-supported services such as Last.fm and Imeem provide "price pressure" toward zero, which makes setting fair terms in any agreement very difficult. (There was no mention of piracy, the "other" free music source.)
• Music has a very long tail, with the vast majority (about 80%) of commercially available recordings selling fewer than 100 copies. Hits still rule the day, but as Scholl put it, the "elbow" of the long tail that lies somewhere between smash hits and deeply obscure artists accounts for a lot of sales, and is becoming increasingly important. As music from less popular genres such as classical and jazz becomes harder to find in stores, more sales will occur online.

Independent labels and distributors, which increasingly control that long tail and "elbow," are more apt to experiment with new ideas than majors are.
Although some of the participants are fierce competitors, there was a glimmer of unity when all concurred that any innovation that makes the pie bigger will be a boon to a struggling industry. Amazon's Bill Carr credited the indie community with driving innovation, and suggested that major labels should experiment more.

"I applaud any rightsholder who can test new models and explore ways to grow total dollars for the business," he said. -- Paul Bonanos

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