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HQ: Emeryville, CA

Founded: 1995 (previously named CDDB)

Management: President and CEO Craig Palmer was previously chairman and CEO of eWanted. That company had raised $33 million, before going bankrupt in 2001. Prior to that adventure, Palmer was a vice president at Aspect Development, which had an IPO, and was later acquired by i2. 

Investors: In August 2005, Gracenote raised a $10.9 million series E round, yielding a post-money valuation of about $121 million. Gracenote Founder Scott Jones and Sequoia Capital are the two principal investors, together owning about half of the company. Bessemer Ventures owns around 10%, and the latest investor is Philips Electronic.

Business Model: Gracenote licenses a suite of products to consumer software and hardware makers that helps users identify and label multimedia content. If you’ve used Apple’s iTunes, AOL’s Winamp, or another digital music manager, you’ve probably seen the “CDDB” icon searching for CD information – that’s Gracenote’s flagship database at work. CDDB provides CD information via the Internet when users are burning CDs or storing music on their hard drives. The company provides text-based information, such as the song title, length of play, and artist’s name. It can recognize about 3.5 million CDs. Since most commercial music CDs do not contain any such information, CDDB is accessed by the millions of users. The service is free to consumers and licensed by developers of consumer electronic devices and applications.

In August 2005, Gracenote also acquired the rights to technology from Philips Electronics that can identify song files by their audio “fingerprints.” Although Gracenote has hinted at some products this acquisition might lead to, it has not yet launched any that marry CDDB with it. (Note: Philips’ fingerprinting technology is currently also at the heart of new legal peer-to-peer services, such as Snocap – the new legal music file-sharing service founded by Shawn Fawning, who had previously founded Napster. Fingerprinting recognizes in five seconds or less what song is playing by matching audio waves against a database of music. By identifying songs as they are downloaded, the fingerprinting tool blocks unauthorized trades. This is a critical requirement in legal file sharing, as Snocap and others are vouching that only legal file-sharing takes place with their software – and if they don’t know which songs are being swapped between computers, they cannot permit or block sharing.)

The Philips fingerprinting technology is also the foundation of Gracenote’s service that allows users in Europe and Japan to identify music by simply holding a cell phone up to the radio; they can then order the song through their phones. Gracenote has also gained access to Philips technology that identifies video files from DVDs. This service may become valuable, as consumer electronics companies roll out devices that store DVDs on hard drives, letting users search for, say, “all Bill Murray movies from the 1970s.”

Competitors: Allmusic, as well as several open-source music-identification services: MusicBrainz, freedb, and ThreeTix

Dirt: Gracenote had a sullied reputation early on: it converted an open-source business, which had grown as volunteers around the world built its database, into a commercial service that profited from that all-volunteer work. The company now has a clear lead over all its competitors…but open-sourcers are nipping at its heels.

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Tagged: Communications

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