THIS WEEK’S Q&A: Jim Long, CEO, Rioport, Inc.

San Jose, Calif.-based Rioport, Inc. is a leading digital media application service provider (ASP), which offers e-tailers & consumer electronics manufacturers industry-standard solutions for selling digital music to consumers in a simple, secure manner. RioPort’s distribution partners include the MTVi Group, House of Blues, Ministry of Sound and others. The company is backed by Oak Investment Partners, Vulcan Ventures, SONICblue, Microsoft Corp., Mitsubishi Corp., EMC Corp., Quantum Corp. and Macrovision Corp.

The latest RioPort news were two announcements late last week of millions of dollars in additional funding: First, an investment from Macrovision Corp., a leading digital rights management technology provider that specializes in copy protection and encryption technologies. The two companies plan to collaborate on future security solutions for commercial delivery of digital music to Internet-connected home appliances and stereo devices; Second, Rioport announced the opening of a Japan subsidiary and additional funding from Japan-based Softbank and JAFCO Company. How do you plan to use your recent funding?

Jim Long: Mainly for operating expenses and that includes content acquisitions. In addition to the investment by Macrovision locally, the big news of last week was the opening of our KK Japan subsidiary based in Tokyo which received funding from JAFCO Company and Softbank. These are local investors who have the right experience and knowledge of the market there.

Obviously you see significant opportunity to enter the online music fray in Japan.

It’s more than Japan. As a provider of music over the Net we need to be global. Our entry into Japan is like adding a power station that helps us reach more of the world. It’s more of a tentacle, than a mirror of what we’re doing in the U.S. It’s the first of several moves. We’ll be in Europe later this year. But the important thing we’re doing in Japan is setting it up to have a very local flavor. Japan is the second largest music market and we need to address its particular interests. Our expansion there is also significant because consumer electronics and portable devices are critical to our success and it’s important for us to have good relationships in Japan where so much of that is happening.

Do you feel like the issue of digital music rights has been solved from a technical point of view?

It’s been solved enough to get the market going. What we see is further security issues that will need to be dealt with down the road. The technology deployed today by Rioport and major record labels is more than legitimate to get the music market going. As more interesting devices come online like Internet-connected stereo systems, we’re going to need more security, and tamper proof technology and that’s where Macrovision is king.

Online music is still very much an emerging market, but you have Napster and the big music labels and media companies starting to flex their muscles. How do you feel about the competition?

The main issue for now is getting legal content available so kids and other folks have real alternatives to Napster and the like. At this point, we want competitors to be successful as well as ourselves to show there is a market. We feel good about our focus and technical prowess going forward.

Microsoft recently announced an investment in What are your plans in this area? Are you worried about them as a competitor?

No, we want to see them successful. That market is even messier than music so it’s great to see them move ball forward. For now we’re laying back because we already have plenty of arrows in our back from leading the way on the music side. But we have the technology to do spoken word very well, we’re just not making it a focus right now. A small company has to know which battle to

fight. We’re very bullish on audio books going forward and expect to be in that market as well as video.

What do you think of Napster’s prospects?

They have a huge user base going for them. Their future is assured if they play cards right, but the Justice Department could put a few speed bumps in there way, though I don’t think it will stop them. I don’t think Napster necessarily has a business model yet that makes sense, but could if they put one in place we’d love to work with them in the future.

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