Death of a Streaming Service

Imeem is still waiting for a signature on the deal selling the all-but-defunct company to Myspace – and the writing is far from on the wall as to how successful the integration of the two company’s software and customer bases could possibly be, especially when you take into account MOG’s recent and Spotify’s impending US launches of their streaming music services. Will anyone go to a band’s myspace page to listen to a few tracks if they can just hear the whole catalogue for free on Spotify? Perhaps not, but Myspace must still consider they’ve got a great deal, considering that Imeem spent at least $25 million on building their brand, technology and user base, and the sale price is rumoured to be as low as $1 million. According to Digital Music News, it was a legal dispute with our digital distribution competitor the Orchard that finally pushed the ailing social network over the edge and forced the negotiation of a sale:

“We held an emergency board meeting to shut everything down,” one executive told Digital Music News.  “The [Orchard] lawsuit was definitely the final nail.”

Subsequently, other executives close to the situation confirmed the decision.  “They just ran out of cash, it was just a cash thing,” one executive shared, also anonymously.  “The potential liabilities – $150,000 per stream – could get astronomical.  [Imeem] thought they had a case, but they couldn’t afford to fight it.”

I think it’s a shame that Imeem has been forced to give up their autonomy, but the fact of their acquisition by Myspace shows who got the model the right way round; Imeem couldn’t stay afloat because they couldn’t afford to pay for the licensing costs of the music they were using from the advertising they sold, and because they were not efficient enough in properly securing the rights to use it, hence the court case threatened by the Orchard, whereas Myspace gets everyone to sign up their music for free – read their sign-up agreement again – and their proposition snowballed, a little free music, and a few million users kept growing until they had every major act and every teenage girl in America signed up. The combination of huge traffic and no licensing costs meant that they were able to pocket all of their ad revenue, but they are not as attractive a proposition to the artists and record labels as there is no revenue coming back to them in the same way that Spotify sends money upstream per play, unless,  like the major labels, you’ve got enough clout to demand a revenue sharing deal. If MOG or Spotify can find a way to include the band info and minor social element that Myspace provided, or perhaps team up with Facebook to provide music streaming and playlist sharing then Myspace will be blown out of the water – regardless of which little social startups they squash into their business in the meantime.

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