DiscJockey.com turns the tables

By DAVE GERSHMAN

Essex County Newspapers

SALEM _ Richard Chadwick leaned forward in his chair in a spacious office at Shetland Park and began describing how his company, DiscJockey.com, was on target to meet its goals and stay alive in the turbulent Internet economy.

Outside his window, a late summer breeze kicked up small ripples in the South River. The window also offered a glimpse of the wide expanse of Salem Harbor. The view suited a company made up of optimists, who were then busy expanding their company's horizons as fast as they could.

But that was then. In six short months, everything changed for DiscJockey.com, which allows computer users to listen to 140 channels of music over the Internet.

It seemed the company had earned respect among its listeners. Its audience grew to 1.7 million listeners per month, 60 percent of whom are between the ages of 18 and 34, which is a group advertisers love to target.

And in the summer, company staffers said record labels had begun to give DiscJockey.com respect as well, realizing the company could be a tremendous resource, simply because of the huge volume of music it can broadcast.

In a major milestone for the company, DiscJockey.com broadcast the latest Bare Naked Ladies album as soon as it was released this summer. It got 3,500 hits in just over six days.

Yet, this newfound respect did not translate into profits. For some time, that did not appear to be a worry. Then the dot-com landscape changed rapidly during the fall. By that time, previous sources of investment had dried up, and fewer companies were willing to spend money on the banner advertisements or promotions DiscJockey.com needed to stay afloat.

"We saw a depression in the amount of dot-com advertising that really started out in March or April," Chadwick explained this winter. "We saw some tight times in terms of cash actually coming in the door."

By December, the company faced $3.5 million in debt, and Chadwick could not attract additional investment.

Chadwick had a choice. He could pull the plug on the company he founded in 1995, or he could retract some of the company's wildest dreams and try to turn a profit. Perhaps the company would become attractive to a buyer. At any rate, Chadwick decided he was not ready to work for somebody else.

As a result, Chadwick filed for Chapter 11 bankruptcy protection. He began to reorganize the company. It essentially moved out of its offices in Shetland Park. Seventeen out of 20 full-time employees were fired.

Chadwick now runs the company from where it started _ out of his home. The two other full-timers also work from their homes, as do several people who work on a contract basis. Two-way Nextel radios allow them to communicate easily.

Chadwick is still optimistic. The Web site is still up. And throughout the changes, the company has kept its listener base steady.

"Because we came from nothing," he observed, "it's very easy for us to return to slim pickings."

His new business strategy is all about low overhead. Instead of a room full of sales staff, DiscJockey.com contracted with three sales firms. In December, those contractors had sold $500,000 worth of advertising for January and February. DiscJockey.com expected to turn a profit for the first time.

"They've been able to do that by out-sourcing their advertising," said Chadwick's bankruptcy attorney, Jeffrey Schreiber, "instead of having a full-time expensive staff."

The company also took advantage of new technologies that could make a large office unnecessary. Instead of running a room full of expensive computer servers to broadcast its music, DiscJockey.com has a contract with Akamai Technologies of Cambridge. Akamai essentially copies DiscJockey.com's content and sends it to a network of servers across the world.

"It sounds almost as good as it used to," Chadwick said.

More than 16,000 songs are posted on the Web site. Chadwick said his prior staff did a great job, and laid a foundation the company can build on.

"Those folks, when they were with us, laid a tremendous foundation for us, getting all those songs coded, "Chadwick said. "Now it's basically daily maintenance."

The idea behind DiscJockey.com was to set up a Web music provider that sounded familiar to radio listeners. That meant inserting all of the things people like about radio _ from advertisements to jingles to the commentary of deejays on several channels. A days worth of music can be programmed in only a few hours. It then gets stored, and played out "live" 24 hours a day.

More recently, the company rolled out a new subscription service, called DiscJockey.com Gold. The introductory offer costs $30 a year. Some surveys show people are sick of advertisements, and will pay to get rid of them. Subscribers also have access to the company's song library, and can even record their own commentary between songs and play it back. Essentially, they can become their own deejays.

Company officials say other music sites offer disjointed listening experiences, or they don't offer the same wide range of music. DiscJockey.com's music channels range from Fabulous Forties to Metal X-Treme to Brazilian Beat.

Even with the big changes, the deejays are still in the mix, though now they work from home. "Folks are working on a contract basis from home," Chadwick said. "Pretty much everybody else left in the organization is doing it on a freelance basis."

Chadwick acknowledged the risk involved in transforming a home-based business into a corporation. He started the company with a handful of oldies channels. Then he did special holiday programming.

In 1999, Chadwick took on private funding. The company grew by leaps and bounds. Looking back on the decision, however, Chadwick acknowledged there was a considerable risk.

"I had to think long and hard in early 1999, turning it into a corporation and taking outside investors," Chadwick said. "I wanted it to grow to the appropriate size."

In a year, the company's listeners grew from 100,000 to well more than a million.

"Unfortunately, if I had to put my finger on one thing that happened, the response was too good," Chadwick said.

Seventy-percent of the hits to the Web site come during the work day in the United States and Canada, when listeners can take advantage of their companies' Internet services.

"I think that their growth was extremely quick and they couldn't keep up with the amount of revenues necessary to support the overhead," Schreiber said.

In a tour of the company in the summer, employees foresaw a time when Internet music would replace listeners' CD collections. Why shell out $15 for a CD, if the same songs could be available on the Internet at any time, they asked.

Perhaps they'll still be right. First, more cable and telephone companies have to upgrade their lines to offer high-speed Internet services. For example, in Salem not every household can get high-speed Internet services. And the price of high-speed modems is still high.

For now, it's likely DiscJockey.com isn't thinking about taking on the world. Chadwick admits the company had set some goals that were not helpful.

"We had some management that really led us in a direction that was not very focused for the company," Chadwick said. "Time and funds were wasted."

The company went so far as to invest in its own recording studio. The idea was to record live, in-studio performances. New, unsigned bands could be followed as they became more successful.

"They were great ideas, but not for today," he said.

While some still doubt Internet advertising will take off, Chadwick is still excited about it. The company can allow advertisers to post their messages on selected channels to target listeners by gender, demographics and lifestyle. And the company can do something many cannot: It can tell its clients how many people saw or heard specific advertisements.

"Because everything is so logged, so precise, the accountability is huge," Chadwick said.

Filing for bankruptcy protection could be the best thing to happen to the company.

"When most companies file Chapter 11, they continue to lose money," Schreiber said. "This company won't. And secondly, most companies when they file Chapter 11 have huge tax obligations. This company does not. And thirdly, many companies file Chapter 11 as banks hold liens. This has no secured lender involved, so they really do have a lot of positive aspects."

Chadwick looks back on a year, musing that he never thought he'd have to file for bankruptcy protection. But he hasn't lost faith in his business.

"It all seems to be pulling for us at a time when a lot of dot-coms are saying `Lock the door'," Chadwick said. "We're not doing it."