Dr. AIX's POSTS — 22 September 2014

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As one of the individuals that expressed interest in the Pono equity offering through Crowdfunder.net, I filled out the forms and requested the documents from the company. I “committed” the minimum of $5000 dollars to the raise in exchange for the information that investors want prior to making any investment. I read the Executive Summary and other PDFs that were made available to me and listened to an hour-long conference call between other investors and the principals at the company. I didn’t realize that the amount shown on the Crowdfunder/Pono site included all of those potential investors like me that wanted to kick the tires prior to forking over $5K. When you see $5,973,000 in commitments and realize that it takes into account money that hasn’t made it through the entire process…you can understand why Pono is pushing hard through the last weeks of the raise. It represents the total of all of the “I might be willing to invest” money. This is fundamentally different than the Kickstarter campaign that totals all of the money committed by supporters.

I was little surprised to receive an email from Rick Cohen, the President and Chief Operating officer of PonoMusic.com and Neil Young’s “long-time attorney” (according to a congratulatory online notice from the law firm of BuchalterNemer). The subject line of the email was, “Neil Young and His PonoMusic Need Your Help NOW!” The gist of the email is a plea to those “hundreds of individuals” that expressed some level of interest in the equity opportunity to complete the process.

The KS campaign raised $6.225 million, the third largest KS campaign in history. However, KS gets 5% of that money and 60-70% of the remaining funds is going to pay for the development and production of the Pono player. And I know for a fact that the licensing deals with the major labels run north of $600,000. Then there’s the cost of employees, offices, other expenses for the infrastructure of the site, the development of the front and back end of the PonoMusic site etc. Getting into this business is a challenge and expensive.

It’s pretty obvious why Neil and his board are seeking additional funds. The Crowdfunder raise was hoping to bring in another $4 million but if a substantial number of “interested” parties don’t complete the process, they may come up short. What sort of options will they have? Of course, they have some pretty rich friends…and some of them got in on the ground floor when the company was valued at $7 million (the Crowdfunder places the value at $50 Million!).

What I found very compelling was the final paragraph of the email in which Rick Cohen offers to provide additional information via email or phone to get potential investors in the game. “If there is ANYTHING I can do to get you in this thing, call or email me.”

So I emailed him. I wanted to know about the some of their strategies for handling new high-resolution content vs. the inclusion of ripped CDs from Omnifone. It’s been 4 days and I have not received a response. Rick may have been clued in that I am disappointed in the overall plan and have posted articles with serious and real questions. Or perhaps he’s been swamped with emails and phone calls about Pono and the upside potential.

Pono lost me when they decided to go mass market. I was excited and very engaged with John Hamm was at the helm and all of their efforts were about better sound. The audiophile community is a relatively small group of serious music listeners. The market is equally small for a dedicated high-resolution audio player. Even 15,000 purchasers/supporters of the KS campaign is very small. If Neil Young had kept his focus on offering new high-resolution albums at 192 kHz/24-bit FLAC, used his artist contacts to prime the pump with more quality transfers, and been more transparent about the inclusion of CD rips, I might still be on board. Getting back to the soul of the music is the right goal…staying on track is the challenging part when money and business take over.

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About Author

Dr. AIX

Mark Waldrep, aka Dr. AIX, has been producing and engineering music for over 40 years. He learned electronics as a teenager from his HAM radio father while learning to play the guitar. Mark received the first doctorate in music composition from UCLA in 1986 for a "binaural" electronic music composition. Other advanced degrees include an MS in computer science, an MFA/MA in music, BM in music and a BA in art. As an engineer and producer, Mark has worked on projects for the Rolling Stones, 311, Tool, KISS, Blink 182, Blues Traveler, Britney Spears, the San Francisco Symphony, The Dover Quartet, Willie Nelson, Paul Williams, The Allman Brothers, Bad Company and many more. Dr. Waldrep has been an innovator when it comes to multimedia and music. He created the first enhanced CDs in the 90s, the first DVD-Videos released in the U.S., the first web-connected DVD, the first DVD-Audio title, the first music Blu-ray disc and the first 3D Music Album. Additionally, he launched the first High Definition Music Download site in 2007 called iTrax.com. A frequency speaker at audio events, author of numerous articles, Dr. Waldrep is currently writing a book on the production and reproduction of high-end music called, "High-End Audio: A Practical Guide to Production and Playback". The book should be completed in the fall of 2013.

(8) Readers Comments

  1. It’s hard to see what Pono’s USP is, other than trading on the fact the Neil Young, an artist famous for his unwillingness to tow the line in terms of record company dictats, was once again seen as a maverick, this time in favor of hi-res audio. In theory, it was an enticing prospect and internet reports of visits to manufacturers like Meridian in England seemed to promise something truly revolutionary was about to happen…

    For me, it all started to go downhill at terminal velocity when it became clear that the Pono player was nothing more than a mobile regurgitation of a hotch potch of existing tech, plus the quick realization that, in essence, my Samsung phone was already kitted out with said technology.

    Then there was the equally instant acknowledgement that the Pono store is nothing new either, with online stores already offering high res files for sale as downloads.

    One is therefore left to wonder if these are the reasons why the equity offering might be hitting the buffers, as it were.

    • They aren’t unique other than they have Neil Young and he can get on Letterman and NPR and make a case for “the soul of music”. But everything that he and Pono are doing has been done before. What makes this worth $50 Million dollars? I don’t see it.

  2. How in a world where the bottom line is all important, and the bottom end is something to be placed firmly in a boardroom chair, can integrity be maintained above all else?

    • Only if you’re willing to sacrifice a quick upside financial gain for a long term paradigm shift.

  3. Seems to me it’s a chicken egg problem, and someone has to step up and be the chicken. People aren’t going to worry about releasing their HD tracks because there’s no / not enough players. Likewise, the player makers will say there’s not enough HD tracks. If they have to start with ripped CDs, that’s fine with me. If you build it, they will come.

    • The labels are releasing HD tracks as fast as they can prepare the new transfers from analog masters. There are around 15,000 albums available and another 10-20 new ones coming online every week. There are millions of players that can play HRA…at home and in our pockets. Moving to CD spec sound is OK with me…but it shouldn’t be the end all be all plan for HRA.

  4. Would love to hear more details of your chat with JH.

    One thing to keep in mind is that while majority of files will be in cd resolution, they will be based from flat masters and if studio releases higher quality neil has said repeatedly you won’t have to buy it again. That has me thinking it may be a nice option for the future and may invent others to buy through pono vs other sources.

    • Not true…all of the rips will be coming from standard CDs, just like you’ve done it yourself. They have said that they will be doing no remastering. They will be selling the same stuff that HDtracks sells.

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