Gianlucca Dettori took one look at America in 1999 and decided to stay home.
Since Dettori, of Turin, Italy, was getting ready to start Vitaminic, an Internet music company, it seemed a bit bizarre that he would choose to avoid the home of the well-publicized digital music revolution.
In the United States, two companies -- Napster and MP3.com -- were about to become household names for those who listened to music on their personal computers. Digital music companies were springing up like weeds, thanks to endless streams of venture capital.
Despite the gold rush going on in America, Dettori, Franco Conella, and Adriano Marconetto believed Europe would prove to be a more fertile ground. So the three decided to launch their company in Italy.
"The United States is too big, and you needed a lot of money to compete with any of the new music companies," Dettori said. "Each local market in Europe is really small. Even the big Internet markets like Germany offer about 15 to 20 million Internet users, which is just a fragment of the United States."
With little competition overseas, the company set up local websites in nine countries including the United Kingdom, France, Germany and Spain. Soon, Vitaminic would become the largest portal for independent music in Europe. Think MP3.com for the world with roughly 260,000 songs from 56,000 musicians, although you'd be hard pressed to name many bands or songs on the site.
But competition is coming, and it's not going to come from kids in their garages. Now, the major media conglomerates -- AOL Time Warner, Bertelsmann AG and Vivendi -- have trained their sights on Europe.
AOL Time Warner -? the world's largest media conglomerate -? poses the most serious threat to European companies.
AOL Time Warner made it clear that international expansion is the main priority, according to Standard & Poor's Internet analyst Scott Kessler. In recent weeks, CEO Gerald Levin has preached global expansion while the AOL Time Warner team has struck marketing deals with large, European-based companies such as Philips Electronics and Nestle.
The deal with Philips -- makers of music speakers and stereo equipment -- will likely allow the Warner Music Group, a subsidiary of AOL Time Warner, to create a partnership that could lead to new sales opportunities.
By bundling AOL services and discounted music subscriptions into hardware purchases, the American media company would be able to use its powerful content from Time Warner to entice Europeans to sign up for its Internet access service.
"AOL has a pretty decent foothold in the United Kingdom, and one of the reasons is that Europe is way behind the United States when it comes to Internet access," Kessler said. "The most obvious reason is because of the lack of penetration of personal computers in the home. But Internet access providers also face a stiff regulatory environment in Europe as well."
Germany's Bertelsmann AG has built quite an arsenal of entertainment as well, with operations in over 50 countries pumping out content from the largest book publisher ?- Random House, the BMG Entertainment group, and Europe's leading terrestrial broadcasting company, the RTL Group.
The company has spent a huge chunk of money developing an Internet distribution network. Napster, the online music file-trading service which received a $50 million loan from Bertelsmann, will sit at the center of its online operations if the company manages to successfully launch its secure, subscription service later this summer.
There is little doubt that Bertelsmann executives are targeting Europe after Napster recently named Konrad Hilbers as the company's new CEO. Hilbers helped manage the European operations for AOL, Netscape and CompuServe in the late nineties.
Outgoing Napster CEO Hank Barry said Hilbers would help expand Napster's reach.
"Konrad's extensive experience in the technology sector and the music business, in both the United States and Europe, makes him uniquely qualified to lead Napster into the future," Barry said when the change in leadership was made last week.
The wild card for media powerhouses is France's Vivendi Universal S.A., best known as a utility company before its purchase of Seagram's -- which owed Universal Studios and the Universal Music Group -- along with Europe's leading pay-television channel, CANAL+.
The company partnered with Britain's telecommunications company Vodafone -- which reaches 93 million subscribers worldwide -? to create the Internet entertainment portal Vizzavi. Plans for the online service are still sketchy, but the joint company hopes to create an online and wireless delivery platform for information and entertainment.
The business landscape across the pond certainly is developing differently than it did here in America, and small companies are about to face intense competition from large, international media conglomerates poised to offer compelling services that will attract consumers.
But Dettori believes the increased competition will help grow his business -- not sink it.
"Competition -- as long as it's fair -- is a good thing, even if the competition is big," said Dettori. "These companies are going to come in and develop and grow the market in ways that we could never do it."
Dettori has good reason to believe his company will be fine. The list of successful Internet companies which have been purchased by the major media conglomerates is a Who's Who of digital music. Emusic, Napster, MP3.com, Myplay, and CDNow were all gobbled up.
Vitaminic has also developed services which includes its own subscription service, deals with Vodafone and Nokia to stream music to cell phones, and licensing agreements that cover nine countries. First-quarter sales reached $1.1 million -- a paltry sum when compared to the $40 billion traditional music industry -- but Vitaminic continues to grow.
"We never thought we were going to conquer the world," said Dettori. "We're starting to succeed at building a diverse model so that we can have the future of the company spread out across different types of businesses: syndication, platform licensing, advertising and the consumer market."
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