How bad are things getting for music streaming startups? We knew that imeem was on the verge of shutting down before getting a last-minute cash infusion from some of its investors, but an SEC filing from Warner Music adds some more details about exactly how dire imeem’s situation is, as well as that of another music startup, Lala.
Warner Music Group, an investor in both imeem and Lala, thinks they are no longer worth much, if anything at all. It wrote down its entire investment in imeem and half of its investment in Lala in the most recent quarter. As detailed in its 10Q report filed with the SEC, it took a $16 million charge to write down its investment in imeem, and an $11 million charge to write down part of its investment in Lala, plus it took another $4 million charge to write down a bad debt from imeem which it never expects to collect. That comes to a total of $33 million down the digital music drain.
But the reason imeem is in such dire financial straits is because of the crushing payments to music labels it has to dole out for every song streamed from its site. It has renegotiated its deals with the labels to pay on a revenue-per-user basis instead of per stream, and Warner’s filing hints at why it had to do so. It appears that imeem had simply stopped paying those per-stream fees, which would explain the $4 million in bad debt. And that was just for one quarter for one label. No wonder imeem nearly ran out of cash. It had to stop paying its bills.
According to comScore, imeem’s U.S. traffic has come down about 25 percent off its peak last July. As of March, 2009 it was at 5.3 million unique visitors in the U.S. and 24 million worldwide. In the perverse world of music streaming licensing, the bigger your audience, the more money you lose.
Update: When imeem raised rescue money from investors, it had to recapitalize. If Warner pitched in, which presumably it did, then it would have had to write down its old investment anyway. If that is the case, then maybe it doesn’t think that imeem is completely worthless, it is just marking its investment to market. With a recap that means marking it down to zero. But any additional investment after the recap wouldn’t be reflected in that write-down. And since you can still stream Warner artists on imeem, it stands to reason that Warner has not entirely abandoned the startup. Where there is music, there is hope.
Most people use YouTube for streaming music. The labels need to get a clue.
Like who, can you name them? I certainly don’t.
Most folks i know use youtube for music too.
The same here
Totally agree with YouTube for streaming music. I love it.
Here’s my Playlist
http://www.yout...7445ED0AFC1B0E9
Their primary banner ad(s) is bubblegum.
There is no joke here.
This is a telling example of decisions being made without spending enough time projecting best case and worse case scenarios. Taking a little more time to develop contingency plans for the potential scenarios and negotiating language into agreements that allows adjutments is critical to mitigating risks.
If you make quick decisions, be ready to make quick adjutments. Racking up $4 million, demonstrates they were caught off-guard without a back up plan they could execute quickly.
In reference to:
“It has renegotiated its deals with the labels to pay on a revenue-per-user basis instead of per stream, and Warner’s filing hints at why it had to do so. It appears that imeem had simply stopped paying those per-stream fees, which would explain the $4 million in bad debt. And that was just for one quarter for one label. No wonder imeem nearly ran out of cash. It had to stop paying its bills.”
i can tell you’ve never really done nothing except dream; the pros — get rich, the cons, go broke. there is no other.
lemon is right.
the only model which will work, is our model, umakeitcool.com
oh yeah, what you see on the web is only half of our product.
Ok… Loser! your plug is wack!!
So imeem is starting fresh with a model that makes sense
no dey broke. you must work there to post that.
…and you must work at the site you posted… which is, quite frankly, and embarrassment to yourself. I’d remove that ASAP.
I think you have that backwards…. your plug is embarrassing… you need to take that down!!!!
Dog eat dog world … yet his site is getting more attention then yours is now
Adoption only works when a critical mass is met. Every idea is exactly as good as its user base.
Really interesting especially since imeem has been working with partners like Hype Machine since those #s last July.
I’m curious how imeem raises new cash at the same time its creditors are writing off bad debt. Shouldn’t the cash go straight to Warner and any other jilted creditors?
I’m sure the terms of the new investment included renegotiation of the debt as a precondition. With new money and extended runway, the creditors at least have a hope to collect someday. Imeem goes under and there is no chance.
And people wonder why the economy is doing so poorly? They needn’t wonder any longer after reading this article.
RIAA should move to a lump sum model and stop per stream royalties. Lump sum would make the music startups viable by giving them fixed costs.
Royalty models have severe problems with large volume, low value uses of music. For example I have last.fm on right now simply to cover up the construction noise next door. This noise has been going on for weeks. Or my wife, she can’t figure out how to turn the streams off, she just uses the mute button on the keyboard.
Pandora’s “are you listening” popup once every hour made me quit using the service. It is incredibly annoying to be interrupted while working on something to click on that unwanted popup.
Radio’s revenue is insufficient to support $0.005 per listener stream. Why should web radio be different? Satellite simply agreed to pay too much and now they are going under too.
What makes you thing the industry want’s these startups to be successful?
Because their alternative model is to kill all of the streaming services and make their money from millions of lawsuits?
http://www.piratesprisons.com/
Killing all of the legal options is a great way to maximize piracy.
the majors do not want these companies to succeed; they simply want as much up-front cash as possible and then they await their demise. far too many companies have fallen for this. because folks from the majors take you out for a nice meal doesn’t mean they’ve got your backs.
“The reason imeem is in such dire financial straits is because of the crushing payments to music labels it has to dole out for every song streamed from its site.”
I know we all love to blame the labels for anyone else’s pain, but don’t you think imeem’s spending has played a role? They’ve acquired at least two other startups (anywhere.fm and snocap).
You are right and I agree,
It is not WMG fault that Imeem did not want to build a way to make revenue from their visitors.
I am going to enjoy embarrassing the hell out of all these streaming ventures getting $30 million in venture.
Remember I said it, every other streaming model is about to become worthless
Every other streaming model becoming worthless? How? Why?
WMG is gambling with money they can afford to lose. no pain, no gain?
ArtistLocator.com – promote yourself
One word: Pandora
@Nono and @William: Yep. There was no point in buying SNOCAP. Imeem bought them primarily for their fingerprinting technology which sucked anyway. Apparently, from what I hear, the two companies shared a board member.
Isn’t imeem going to use Snocap to sell downloads directly to their users? That is something.
You are mistaken. Imeem bought snocap because they use it to identify uploaded content and determine whether the rights holder has allowed it to be streamed. Also, to do the rev share, they need to count streams to calculate each rights holder’s share. The fingerprinting system snocap uses was licensed from Phillips, and is the best there is for this purpose.
imeem bot snocap because they shared an investor and it was easier than closing it down. It was a piece of crap, and so is imeem.
I really love lala.com, really surprised to find out that they aren’t doing well.
Lala is weak: “Each web song is only 10 cents, and your first 50 web songs are free!”. No thanks. That won’t last long.
imeem suffers from poor management.
the fact that they’re unable to pay warner and were so close to shutting down was a complete shock to their employees, outside of a few people in their total joke of a management team. their ceo misled employees and fooled everyone into believing the company was healthy. everyone drank the kool aid, but now employees feel betrayed and are in a state of panic… imeem is the titanic of streaming music.
time to use pandora.