Imeem, the free streaming music site backed by Sequoia Capital, Warner Music and other prominent investors, is rumored to be in serious trouble.
Music insiders are saying a shutdown of the company is imminent after a failed attempt to sell the company or raise more cash. A spokesperson flatly denied the shutdown rumors today, but confirmed that the company layed off staff last week (six people from a staff of around 70). He wouldn’t comment on funding or sale rumors, although plenty of potential buyers tell us they’ve been pitched to buy the company over the last year.
The “problem” with Imeem, like all streaming music services, is that they have to pay a flat rate per stream to the music labels that’s hard to cover with advertising alone. Some companies pay as much as $0.01 per stream, which doesn’t seem like a lot – but at volume it’s crushing, particularly in a down advertising market.
One source tells us that Imeem owes the labels as much as $30 million to date with no hope of paying any of it. Imeem says that is “extremely innacurate,” but confirms that they are playing “in excess of a billion songs and videos per month.”
Online music is a tricky business, where rabid users can actually quickly put you out of business simply by listening to too much music. Imeem says they’re refocusing their efforts on additional revenue streams, such as paid downloads, tickets and ring tones. One new feature allows users to download entire playlists for a fee with the click of the button, which is sure to be popular. The big question is whether that will be enough to make the business even remotely profitable.
This is one tough company that has reinvented itself more than once to find a way to profitability and success. I wouldn’t necessarily bet against them. But the clock is ticking on this startup.
Is it just the case of Imeem or other similar companies are facing (or will) the same troubles?
Last.fm will have to charge those outside of the US, UK and Germany for their “radio” service because they can’t sustain the licensing fees by advertising alone.
All companies who have to pay per-stream royalties face this and I wouldn’t be surprised if most of them are dead within the year. It’s just simple math and you can run the numbers yourself.
that 30M is a pretty depressing number…
It is if it’s true. Unnamed sources are hardly ever the most trustworthy. Have to wonder about their motives.
and by they, I mean the source, not TC. Totally believe this is the information they are being fed… It’s a frenzy out there.
As an independent musician, I am used to haveing a tough time making money. But how come Imeem can pay off none of the money to the labels that provided the music?
They article isn’t saying “none” – it states that the fees are much higher than their income, at that it’s possible they cannot make up the $30M difference they’ve accumulated.
If they’re doing billions of plays a month, they’re paying millions of dollars each month to the labels.
Oh crap, but I love imeem at times. imeem is sometimes the only place I find some hard to find songs.
I love it too! even more than you
Imeem?! Never heard of it…
My guess is that the floodgates are about to bust wide open and we will soon see lots of companies go out of business.
The rest aside, I am still pretty impressed with 1,000,000,000,000 streams a month here.
Thats really too bad, I like Imeem a great deal. There’s also a number of services I use which are enhanced by their API, such as Songza and SearchMe. I would be very sad to see them go.
RIAA should have an option where royalties are capped for “extreme” users. What if I forget and leave Rhapsody running over a month long vacation with no one listening? Or my wife who hits the mute button instead of turning the feed off? Most “extreme” users are using the streams for background music and not really listening. The royalties should reflect this.
Jon, that makes total sense, but we’re talking the RIAA here – the organization that sues kids and moms – so sense is unfortunately wasted on them. And if they were to give the websites a break, the radio stations and supermarkets and everyone else who plays background music would come a’beggin’.
You think the RIAA should be making such decisions? The RIAA has no involvement here, none at all. The deals are made between the labels and services like iMeem on an individual basis – and they usually involve huge advances being paid to the labels. If they teamed up to negotiate, they’d be massively in violation of antitrust law, and the consequences would be grief, lawsuits and damages to pay. RIAA is a trade association and, while they can do things on behalf of their members, deal-making isn’t one of them. Now, are the big labels greedy? See if you can guess the answer. Do they pass on any of those advances to the artists? See if you can guess the answer. Will they show iMeem or any other services any mercy once they’ve cashed the advance cheque? See if you can guess the answer.
And commercials should be cheaper if I’m just playing the tv in the background?
Or maybe these companies should, you know, come up with an actual business plan on the back of a napkin or something?
The whole thing is that there should be no effing royalties for streaming.
If anything you get royalties if the stream actually makes any money. If there’s an ad, you get royalties ON THE AD, not on the music.
The music itself doesn’t make any money.
Screw the RIAA
Screw the RIAA? Duh, see above.
Interesting idea – no revenues, no cost for raw materials. Let’s see: if I drive a taxi, but I’m not picking up any fares, the gas comes free, yes? And the computers and office space are all free? Employees work for free?
Wise up. The music comes for free when everybody else works for free. That’s the rule – but likewise it’s no excuse for gouging by record labels, or their demand for excessive advances.
Looks like nobody wants to be reasonable. What a mess.
That’s exactly what imeem offers, 50% of the ad revenue goes to the artists, 50% to imeem, if you sign up as an independent artist through snocap then that’s the deal you’re offered. Now, that may not be much, but you should remember that that’s 50% more than myspace has ever offered and of the millions of indie artists on their site.
Problem is the big labels negotiated sweeter deals under the threat of legal action, and then indie agregator IODA started whining about this special treatment and demanded and equivalent deal for all their artists. Word is imeem raised their offer to 100% of the advertising and IODA still wasn’t happy. (point is, it’s not just the big labels that want ridiculous rates from imeem)
So, imeem has a model that might work if they weren’t forced into doing economicly stupid things by greedy labels.
Pandora does that. After a while the stream just stops and says “Are you still listening?” and only resumes when you click on it.
I dunno, they paid large cash for space at Twiistup a couple months ago.
My bet is that Imeem won’t die. It is simply too big to die. Look at the Imeem numbers: 10M unique visitors + 20M funding. These numbers shows that Imeem does have a solid user value proposition, and there are a lot of people who like it. Imeem might never justify its hefty valuation that VC had hoped couple years ago; however, Imeem probably won’t shut down its site soon. After all, keeping it running is better than shutting it down completely, which yields nothing in return for the investors.
If you lose money by keeping it running but not by shutting it down, how is that better for investors?
Too big to die? Have you seen the Deadpool here? Do you remember Web 1.0?
Even if they have most of that $20M left (which I doubt), their debt is $30M. Who’s going to give them more money? The banks?
It’s 2009. Unless you’re getting a government bailout, there’s no such thing as too big to die.
Like Lehman? Surely the entire industry would seize up should imeem go down.
Here’s the thing… To build that large user base iMeem offered a very comprehensive service to the users (which was technically in violation or RIAA guidelines at times IIRC). The more comprehensive the service the higher the royalties.
If I started a web service where I gave out $100/month to each user, I would also quickly build a huge user base. This would be impossible to sustain though unless I could figure out a way to make more than $100/month from each user.
Add the extremely high royalties (higher than pandora, jango, last fm) to the higher infrastructure costs of having such a huge user base and you have an even bigger problem.
So simply having a large user base is not enough to sustain or protect a business.
Hey I don’t mean to be a spammer but I was actually writing a post about paying for streaming and then I integrated the news from this post into it so instead of rewriting everything in a comment here is a link
http://lostthet...we-have-to-pay/
Someone should invent a way for people to post to their blog and have it referenced on the linked page of the post being talked about. They could call it a “trackback” or something..
Personally, I don’t like Imeem. Rather I would use Project Playlist. However as I mentioned in another post, all of these startups need to recommend music and other media to their users. I want something to be shown to me instead of me searching for something. I would recommend http://www.cruxle.com as the best recommendation engine that I’ve seen so far for music and other media. These music sites should do something similar to it.
spam? that cruxie.com site sucks. did a search for madonna, and got a crappy page that embedded amazon mp3. lame
Speculating about imeem and our future has long been one of the digital music industry’s favorite parlor games.
I want to reiterate what I told Mike when he called me about this post earlier this afternoon: there is no truth to rumors that imeem is shutting down, and the reported $30 million in royalties owed to the labels is outrageously inaccurate. (Reports that we’re buying Apple or that I’m dating Kim Kardashian are also inaccurate.)
Our team is –and has been– focused on building a strong business out of people’s interest in listening to, creating and sharing playlists online. We see an opportunity to make money in a variety of ways from this interest, from selling ringtones, tickets and downloads to offering premium services, and we’re aggressively pursuing that opportunity.
Don’t believe the hype.
Imeem is my favorite music site. It’s the only place where you can find both new and classic songs for your playlist. My only complaint would be the 30 second preview clips for some of the musicians. Does anyone know how much the company might be sold for?
Imeem clips songs to 30 second clips if the artist isn’t signed up to SnoCap. That’s how it was when i was checking it out awhile ago as an artists.
Considering they don’t run audio ads, it’s hard to imagine that they’ve exhausted every revenue-generating avenue. If radio runs 10 mins of ads per hour, I’m not sure why Imeem doesn’t think they can run 2-3 minutes.
However, knowing that Warner sunk $15 mil into Imeem, I have a hard time believing it’s just going to cease operations. The community is too big and valuable for the labels – it is the promotion vehicle for the NO RADIO generation. The labels need to work with Imeem to figure out a model that’s a win for all.
We’ve been running audio ads for over a year on imeem.
Gotcha – my bad.
i was a fan of theirs until they made it harder to embed the music elsewhere
So, you were a fan so long as you could milk the business. That doesn’t sound like a fan I’d want.
Damn Labels and Copyright.
Can’t wait for all artists to start ditching them. Then business like Imeem wouldn’t be bullied by the labels, who should see streaming as free promotion of their crap
That simply won’t happen. If you really want everything to be free, you’ll have to steal it. Oh wait, that’s why they have to charge, because people steal it… I guess your right, they could give it away and make nothing. Oh yeah, that’s brilliant. Sure, they could do concerts, but then the fees for that would have to go up (assuming you are drawing a large enough audience for a concert).
Bottom Line: Someone has to pay. The assumption was that advertising would cover the costs.
iWeep
Suddenly makes the iTunes model look brilliant.
Oh yeah, it always looked brilliant.
Actually, I think it’s looking less brilliant with the tiered fees. $.99 was easy. Now I’ll be making decisions based on price, which is NOT what the labels want. There’s tons of old music to be discovered.
But still, at least Apple can pay their bills, I get to keep my music, and artists get paid.
On a slightly less snarky note, I do hope imeem survives and flourishes. Just for me personally, I want to buy my music. I’m generally sick to death of all the Web subscription models.
I cancelled one credit card this month because the recurring payments had gotten out of hand, and rather than visit each site to cancel, I just got rid of the card.
Now the ones I *really* need will become quickly apparent.
ah, the “iTunes model.” Brilliant.
do you mean the ages-old pay-per-song retail model that Apple simply replicated online?
imagine that, taking commerce and putting it on the internet. Steve Jobs is a frickin’ genius
It is always amazing to me how the RIAA and the corporate stiffs at the major labels seem to mess up and almost completely ruin the emerging of new technologies that could potentially save their butts with a new business model for the music industry.
They did the same thing when radio started streaming music, tried to regulate and shut it down, and it has now turned out to be one of the most important things integral to the success of the artist’s record, and ultimately CD sales/mp3 downloads and profits for the label.
Now we have these emerging web technologies that could reshape the profit model of the industry and make it better for everyone, and once again here come the corporate stiffs trying to shut it all down and continue in the path that will ultimately lead to their destruction.
Let’s just work on getting rid of these organizations, as they make it hard for both music artists as well as music fans.
If they can’t get with the program and realize that the solution to all of their piracy and sinking profit problems could eventually be fixed through these emerging web music companies, then they just need to take a hike and let us figure it out on our own.
I think there can be better ways besides just advertising, as I don’t consider advertising alone to be a strong and creative model, seems more like just a lazy ‘me too’ way of doing business.
But there will come a better way soon, I and many others are brainstorming and working on it.
I think I may have something
Simple economic equation, if imeem pays 1 cts per stream that is a CPM of $10, this means that their advertising revenues should be sold at a higher price to get some profit… let’s say $15 CPM…
That is a lot… Also, they pay on their entire inventory…. That means they should sell their entire inventory at $ 10 CPM at least….
They need to be very creative on their revenue model to get profitable…. Diversification is key…
@Pooxi – While I think the author mentioned that $.01 per stream is on the high end, your math makes a perfectly valid point – a CPM in that neighborhood is extremely difficult to achieve at scale. Especially nowadays.
Would love to see some analysis of the Lala model. Personally I love it and seems like it has a far better chance of profitability. First stream is free, $.10 lets you stream the song for life, $.89 lets you download the song DRM-free. No advertising.
Seems to me that they understand that supporting a legal online music business with advertising isn’t viable, so they’ve offered users lots of flexibility at fair prices.
BTW, I have no relationship to Lala, just a happy user.
Great post!
Thanks,
Ben Fryxell
http://macmaniapodcast.com
Ummm 18.8M in funding??? Try 85-100M.
Can you provide a source for your 85-100m? Until you can, I’ll stick with the crunchbase/techcrunch numbers.
Ask the folks at iMeem.
I hear they paid significantly more than $18m on advances to the 4 majors alone…
Make a program that would track, that if someone buys the song or Album, is that it can be deducted from the company you are streaming from. Like it is putting it towards you bill. Think about that and everyone is happy. I would like to know what you think. Give me a little feed back.
Oh dear. I hope this won’t be the future of Spotify, too. Still, I think the Swedes have the UI cracked in a way that Imeem never managed.
I haven’t used spotify, does it cover itself with ads like imeem has been doing?
If not, how does it hope to pay the labels?
How can spotify integrate pervasive advertising without losing the praise it’s been getting for its interface.
Total investment is nothing near $20MM, but I suspect it’s actually closer to $100MM. Ad supported music streaming sites will suffer this year due to ad budgets getting cut and overall decreasing CPMs. They just need to survive until next year and hope to ride the wave of a rebounding economy. It will be impossible to monetize all their impressions at or above a $10 CPM ($5 CPM is realistic, but at a very low sell through), so it’s unlikely they will break even anytime soon. Also, Imeem users tend to be younger and less affluent, which means they will not convert or spend money. Just look at the site; it’s targeting inner city youth – not a lot of buying power. They also suffer from having a large user base in countries that are difficult to monetize, like friendster. I predict Imeem will die a slow death, but at this point there’s too much invested in this company to let it just die.
Interesting comment about the demographic they’re targetting, I’d actually turn this around and say this is the demographic they’ve settled on. I’m not sure why, but imeem managed to get popular with social groups traditionally found on the other side of the digital divide and was largely ignored by the affluent techie crowd.
This was abundantly evident when muxtape launched and the tech literati wet their pants over it even though imeem was already doing everything that muxtape did, Moreover imeem had already dealt with the record labels that would eventually be cited as a reason for muxtape’s downfall.
When imeem launched they were a client application which implemented a social network on top of a p2p filesharing system. They made big noises about distributed database technology and other fancy technologies. Clearly they were aiming at the ‘educated’ end of the market, but never took off. Somewhere along the line their current audience emerged.
re: original article — i heard this rumor too
Omg! I don’t know what I would do without imeem!
Use Pandora instead.
Now where will I get my free music from? I am surprised the RIAA isn’t suing these guys for every stream people pull out of there web cache. Now I wonder why they are so popular…. Oh yeah free music. And where are all the free music sites? Dead. Another one bites the dust.
Imeem will carry on — it has a history of doing so.
There is too much uninformed speculation and not enough news in the original post, which in turn generates more chatter in the same vein on the comment string.
This is about generating hits at TechCrunch, not excellence in reporting and it brings to the fore the more pressing issue of the declining standards in journalism in this era of transition from print journalism to digital media.
Reporting on business and entrepreneurial activity is a tricky business because the two different breeds of people in the two different camps (those who report vs. those who “entrepreneur”) are so entirely different from one another.
Print journalism seems slightly better suited (if hardly) to the specific task if for no other reason than that the online instant feedback loop of speculative to uninformed chatter tends to pull the standard of online reporting down to the level of a gossip (gossip sells) which in print would be flagged by editorial as yellow.
I just wanted to fix my playlist…could you just bring it back for an hour?!?!?!?…haha..=)