Mobile music comes calling: Seattle's Melodeo a challenge to iPod

Encouraged by a fresh round of capital, Seattle-based Melodeo is creating a music service on cellphones that it hopes will surpass even the fast-growing Apple iPod in popularity.

Melodeo said yesterday that it has raised $9.5 million in venture capital to help develop and market the music player. Investors in the second round include GF Capital, Ignition Partners, Intel Capital and Voyager Capital.

The company has raised $11.7 million to date.

The attraction of Melodeo is that it allows a user to search, buy and listen to music from a cellphone, rather than having to download the music on a computer and transfer it to another device. It does this quickly by loading a list of available tracks and artists on the user's cellphone. The user can then browse and connect to the wireless carrier's server only when a track is purchased.

"The device is one-stop shopping," said Bill McAleer, managing director of Voyager Capital. "Otherwise you have a device for music, a home computer and a phone — music might be in three or four places."

The service, not yet available commercially, is taking advantage of a number of technology trends coming together, said Don Davidge, Melodeo's co-founder and senior vice president for sales and marketing.

He said cellphones are advanced enough to have the memory and processing capacity to store and play music; music can be compressed in small enough packets to be sent effectively over the air; and music has become widely available digitally.

1.5 billion cellphone users

The advantage of Melodeo over an iPod, Davidge said, is that 1.5 billion people in the world already use a cellphone. He said this year alone 550 million phones are expected to be purchased. That compares with the 2 million iPods shipped during Apple Computer's fourth quarter.

"The ability to store and play back music is coming to cellphones," said Iain Gillott, president of iGilliottResearch, a wireless marketing company. "It is a natural evolution for a device that is always with you."

Still, there are limitations with a phone. A typical phone with 64 megabytes of memory has enough space for 75 to 125 songs, using advanced compression technology, Davidge said. Battery life can also be a consideration if a user downloads a lot of songs. Listening to the music, however, isn't as taxing on the battery.

Melodeo plans to sell its product through carriers. To do so, it will also have to create relationships with them, as well as handset manufacturers and the recording industry. No partnerships have been announced so far.

Third invention

The company's top executives' experiences may give Melodeo an advantage, Davidge said. Both he and Chief Executive Bill Valenti were part of the management team at Seattle-based Tegic Communications, which developed two mobile-phone products before being acquired by America Online for $350 million in 1999.

The first allowed the keypads of cellphones to be used for writing text. The second is the technology that underlies America Online's Instant Messenger on mobile phones.

While at Tegic, Valenti and Davidge thought creating a music player for cellphones was a good idea, but didn't pursue it until October 2003, years after both had left AOL.

"We've always had a belief media and entertainment will be big on cellphones," Davidge said. "A cellphone is nothing but a computer taken with you everywhere and put in your pocket."

Today, about half of Melodeo's 25 employees worked at Tegic. Melodeo expects to double its headcount in the next year, mainly by adding engineers.

Davidge said he knows of two other companies — Chaoticom in Andover, Mass., and another abroad — that are doing something similar. He also suspects ring-tone providers could expand into selling full-length music tracks.

"It's a hot space. We are having a lot of fun," he said. "But everything we've done, we've done before — in mobile and in software."

Tricia Duryee: 206-464-3283 or tduryee@seattletimes.com