Entrepreneurship
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Music to Their Ears

By Eileen McCluskey

Wherever he goes, Richard Resnick builds businesses. In his latest venture, the serial entrepreneur hopes to make beautiful music—or, more specifically, cell phone ringtones—with the 13- to 18-year-old set.

Richard Resnick ’98(MS) is president and CEO of Harmony Line—the parent company of H-Lounge.com, a new Web site where teenagers can chat, play games, and compose and upload their own ringtones.

“It’s hard for most middle-aged people to ‘get’ the attraction of ringtones,” Resnick says with an easy laugh. “But what kids want, we discovered through many focus groups, is portable music on the smallest, most personal devices possible, to impress their friends.” Focus groups also revealed that kids enjoy composing their own ringtones, then earning money and gaining prestige by selling their creations.

Harmony Line got its start in 2004 to sell Hyperscore, software designed by famous musician, composer, and Harmony Line chairman Tod Machover. Created for children with no musical education, Hyperscore allows anyone to compose complex scores by drawing colorful lines and using intuitive harmonization tools.

Not so intuitive, Resnick found, was the issue of turning cool software into cold cash. “The software works really well, but how do you make money with it? That was, and is, our challenge,” he says. Harmony Line tried and discarded strategies such as selling Hyperscore directly to schools and parents. Both approaches yielded disappointing revenues.

Then came the “Eureka!” moment. Rather than develop a company around a piece of software, Resnick and partners decided to build around consumer trends. “We found two major trends related to Hyperscore,” he notes. “The enormous ringtone market, and online social networks.” The cell phone ringtone market—composed of $1 and $2 downloadable purchases—is burgeoning from a $4 billion worldwide market in 2004 to an estimated $6 billion behemoth in 2007.

Heeding their target market’s feedback, Harmony Line launched H-Lounge.com in December 2005. Like Resnick’s other enterprises—life sciences–related Mosaic Bioinformatics and Biological Energy Corp.—cutting-edge technology forms the heart of Harmony Line and H-Lounge.com. But unlike the other start-ups, H-Lounge focuses almost exclusively on fun. Modeled after such hits as Neopets.com, H-Lounge lets 13- to 18-year-olds chat and play games. Kids can also pursue their dreams of becoming rich ringtone composers by downloading Hyperscore, then creating and uploading their compositions, all for free. Money starts changing hands when the users buy and sell ringtones. Anyone can sell their ringtones via a revenue-sharing deal that earns the seller 30­ cents on the dollar. H-Lounge mails checks to the musician through another Internet denizen, PayPal.

Most kids don’t have credit cards, but H-Lounge found a way around that barrier: through charges on the parents’ mobile phone bills. Not surprisingly, “the legal end of this business is the most expensive part,” reports Resnick. Parental consent and child labor laws presented two pricey issues.

To garner advice from other entrepreneurs as he climbs his self-described “steep learning curve,” Resnick recently returned to WPI as a Venture Forum case presenter. “When you present your ideas in front of 50 smart people, you get great feedback,” he says. “It forces you to think about whether what you’re saying makes sense.”

So far, H-Lounge does. “We expect revenues to hit seven figures in the next 12 to 18 months,” Resnick says. H-Lounge so far boasts 10,000 active users who have uploaded 20,000 original ringtones.

Any wealthy kid composers? Not yet. Says Resnick, “some kids have made $100. I figure we’ll make the front page of the New York Times when one of them earns $1,000.”

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Last modified: Sep 28, 2006, 11:45 EDT
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