Online music distributor Ecast Inc. has closed its downloadable music operations, saying it couldn't afford to spend the marketing dollars needed to compete with Apple Computer Inc. and other suppliers of songs online.
The move comes two months after Apple launched its much-ballyhooed iTunes Music Store, whose success has spurred Amazon.com Inc., Yahoo Inc., Wal-Mart Stores Inc. and other major players to explore competing offerings.
Many music-industry executives expect more downloadable music stores to open by Christmas. San Francisco-based Ecast's Rioport division, which employed 25 people in San Jose, appeared to have been in a position to supply those stores with music and technology.
But Ecast Chief Executive Robbie Vann-Adibe said the situation wasn't as promising as it seemed.
"There's a lot of conversations going on, there's not a lot of check-writing going on right now," he said.
"We're a relatively small organization, we're a private company with limited resources," he added. "We cannot at this point continue to invest in this part of our business and wait for these organizations to get around to make decisions to go on this stuff."
Instead, the company plans to focus on the other half of its business: supplying restaurants, bars and other gathering places with jukeboxes stocked with music and other digital media from the Internet. That operation is growing significantly, Vann-Adibe said, noting that the number of songs played in the last quarter was more than three times as great as the same period last year.
Even in that division, however, Ecast has cut expenses significantly. Last month the company quietly closed its customer-support offices in San Diego and laid off some workers in its jukebox division.
Rioport was a leading supplier of downloadable music before Apple entered the market, providing the online stores for such retailers as BestBuy and Sam Goody. Ecast bought Rioport in October for an undisclosed price, hoping to combine the companies' technologies into a far-reaching distribution platform for music, video, games and other digital media.
But Vann-Adibe said the downloadable music market is being driven by companies including Apple that control the technology and have a direct relationship with music buyers, giving them an incentive to spend heavily on marketing. Ecast, on the other hand, relied on its retail partners to promote downloadable music and generate sales. "These guns are lining up to fight a war, and big marketing dollars are going to play a role," he said.
Analyst Phil Leigh of Raymond James & Associates, an investment bank, said Ecast was "kind of lost in the crowd" because it didn't have a name that consumers recognized.