Gracenote has quietly become one of the most powerful companies in digital music -- but many of its users have probably never heard of it.
Its music-identification technology powers media players like AOL and the ever-popular iPod. For recording labels, Gracenote's technology is a key part of making the digital music business hassle-free and fan-friendly.
"They are an intimate part of the digital music infrastructure," said Cary Sherman, head of the Recording Industry Association of America. "They've managed to embed themselves in lots of consumer electronics devices and other equipment and really just penetrate the market in a steady and consistent way."
But Gracenote's position today as a dominant player in music recognition is a far cry from its beginnings. Launched as a public effort to catalog the content of compact discs, Gracenote has morphed over the past several years into a venture-backed company with ties to most of the biggest players in the music business.
Gracenote's rise resembles a pattern seen in many industries, in which one company evolves into an information clearinghouse that holds extraordinary power over its rivals. In the airline industry it was American Airlines' Sabre reservation system, and on Wall Street it was Bloomberg, the purveyor of powerful financial data terminals. In the same vein, Gracenote is emerging as the information gatekeeper of the burgeoning digital media industry. AOL, Apple, Philips and Sony depend on the company to make their music players and gadgets easier to use.
Founded in 1998, Gracenote, a privately held Emeryville, California, startup, declined to disclose details of its finances, save that revenues are growing sharply. Between 2002 and 2003, the company said its revenue increased 90 percent. It projects another 90 percent jump in revenue this year.
At the heart of Gracenote's technology is its CDDB (compact disc database) music-recognition service. Anyone who pops a CD into a computer to play music or rip MP3s has likely benefited from Gracenote's technology. Instead of typing in artists' names and song titles in a media player, the networked CDDB automatically pulls the information from its server. AOL, Apple and Napster are among the companies that license Gracenote's technology so music fans can spend time listening to tunes instead of monkeying with the player screen.
"If every user of an iPod had to take their CD collection and hand-type everything in, how many iPods would really get sold?" said Gracenote CEO Craig Palmer. "If they couldn't do that, then how big would this market actually be?"
As the digital entertainment industry grows, Gracenote has built new products on top of its music-recognition foundation. In addition to its networked CDDB database, the company embeds a version of the CDDB into consumer electronics devices. Its services are included in PCs, software, digital stores, car navigation units, portable media products, home media servers and cell phones.
Last year, the company launched its MusicID product, a file-recognition technology that analyzes the audio characteristics of a digital file like an MP3 or Windows Media Audio file. The service uses audio waveform technology to match music without any identifiable tags to Gracenote's database.
New this year, Gracenote's Mobile MusicID can identify snippets of songs through a cell phone. Music fans can dial a number and hold up their mobile phone near a radio, for instance, and Gracenote's service will send a message to the phone, identifying the tune being played. Listeners then have the option to buy it as a ring tone or digital download. Mobile MusicID has launched with carriers in Europe; the company has also closed deals in Asia and the United States that will be announced later this year. Gracenote also sells an automatic playlisting technology and provides a DVD-recognition service that will ship in some products this year.
"Gracenote, in my opinion, is the leader for metadata," said Daniel Graf, a senior director of new business for Philips Consumer Electronics, which has been working with the company for several years. "It's truly added value. You don't have to go look at the CD and say, which song was Track 5 again?"
Graf said all of the Philips broadband-connected devices that support CDs use Gracenote technology.