He's got juice.

Arnold Brown's Mjuice.com is a flagship MP3 music retail store

It's not surprising Arnold Brown is sitting on top of one of the Internet's most popular digital music download sites. He's always blazed his own trails--from his undergraduate days at Harvard University, where he doled out soulful vocals as lead singer in a local band--to founder and CEO of Mjuice.com. The start-up, based in San Francisco's famous Audio Alley, uses the increasingly popular MP3 digital audio compression format that allows end-users to select musical tracks from various artists and download them to their PCs.

MP3 (MPEG Audio Layer 3) compresses audio so that it requires less than 1 MB of disc space per minute to store. That makes MP3 files quick to download--about 10 minutes with a 56 Kbps modem--and easy to store on hard disk. It's that combination of high-quality sound and ease of downloading that has sparked the MP3 explosion, attracting musicians, record labels and fans alike to the Internet.

It was just a few years ago that MP3 was nothing more than one of many audio compression formats. At the time, Brown, who holds a doctor of law degree from the University of California at Berkeley, was enjoying a thriving legal career representing technology start-up companies. But every now and then, says Brown, a new product sprouts while the world isn't watching, and that's what MP3 was doing. He had the foresight to recognize the trend and to capitalize on it in late 1997. "I could see clearly that people were moving in the direction of wanting to get high-quality audio over the Internet," he says.

But while the masses were flocking to the Net for cheap or free downloadable music, other forces were at work trying to stop the growing craze. Internet sites using MP3 drew fire from the Recording Industry Association of America for online piracy. MP3's lack of security infringed on copyright protection and prevented artists and their labels from receiving revenue from pirated and transferable digital files.

Bypassing a potential roadblock, Brown and his crew (which has grown to 30 employees) devised a secure MP3 downloadable technology. Mjuice.com is steadily becoming recognized by industry gurus as one of the Web's most secure MP3 retail sites.

"What was necessary was an evolution of the early stuff that was happening," Brown says. "We wanted to add security to compressed audio files. We wanted to make it so people couldn't pirate copyrighted materials." By adding copyright protection to MP3 files, Mjuice.com curried favor and won acceptance from independent and major record labels, which began distributing their artists' files and doing promotions on Mjuice's site.

One of the first prominent distribution arrangements Mjuice.com brokered was with Sean "Puffy" Combs and his Bad Boy Entertainment. Mjuice.com now has deals with roughly 70 major and independent record labels, including DreamWorks, Atlantic, Elektra and Loud Records. It has acquired a library of 30,000 downloadable songs. Artists range from the Stone Temple Pilots and Third Eye Blind to Mobb Deep and Mos Def, with 100 to 200 new tracks, on average, coming in daily.

Deals with recording artists and their labels helped Mjuice.com advance to the head of its class. According to Media Metrix Inc., a firm that tracks and measures Internet and digital media traffic, Mjuice.com received about 340,000 unique visitors (individuals who are not counted more than once for visits to the site) in December 1999. The company also currently has approximately 160,000 registered subscribers. That number is up 400%, and growing, since last summer.

In addition, tracks downloaded from the site are compatible with AOL's WinAmp (www.winamp.com), which has 10 million registered users, and RealNetworks Inc.'s RealJukebox (www.real.com/jukebox), with 23 million registered users. This broadens Mjuice.com's breadth of reach to listening ears. WinAmp's and RealJukebox's media players are registering new users at a rate of 45,000 and 90,000 per day, respectively, according to Media Metrix.

Mjuice.com's most popular downloads are hip-hop and rock However, Brown is quick to point out that the site is well stocked in other genres. "We aren't focusing squarely on any one type of music. [Mjuice.com] is like the typical retail record store. We have a broad selection. We really want to satisfy all types of users," he adds.

The ability to appeal to diverse musical tastes was something that Brown knew he was capable of pulling off, but he had a hard time convincing venture capitalists. Brown says that venture capitalists often tend to think that a minority-led Internet company will only appeal to urban crowds or other minorities. Sometimes, this makes them hesitant to fund certain start-ups.

Brown's tenacity paid off to the tune of $5 million in seed money. He is anticipating a second round of financing in the neighborhood of $10 million this year. As with other Net businesses, the road to Mjuice.com turning a profit must be navigated systematically. Says Brown, "The first step for any of these companies is to prove an ability to attain and satisfy consumers; step two is to generate revenue; and the third and final step is to try to make the thing profitable."

Despite the fact that the site provides free music or charges only $1 for some songs, Brown is confident that the site will bring in money. "We're still working through some of the business models as to how we're going to get people to pay for certain music, and what music they'll pay for and what music will be free." As long as Mjuice continues to make its visitors happy by providing a quality product, Brown believes its business model will evolve and become profitable.

Prosperity in the online music business may be on the horizon for MP3 sites such as Mjuice.com. The market for downloadable music is predicted to take off in another three to four years. Today, the industry generates approximately $1 million annually but that figure could jump to about $1.1 billion by 2004, according to Forrester Research. Those figures are music to Brown's ears.