Now that the dust is settling on the newly launched Google Music (if you don’t yet have it in your normal Google search results, you can use it here) that integrates LaLa and iLike/MySpace streaming music, all I can think of is this: What were Facebook and Ticketmaster thinking when they passed up the opportunity to acquire iLike?
MySpace is the big lottery winner here. They bought iLike for $20 million in August. What they got: a talented (literally) team that is starting to fill the executive ranks at MySpace, the biggest music application on Facebook, and, it turns out, a deal with Google that is now sending massive traffic flow directly to MySpace Music.
Our understanding from sources is that MySpace made an offer to iLike without knowing about the Google deal. Supposedly, since iLike was under NDA, all they knew was that iLike had a big partnership opportunity with some big company, nothing more. In hindsight the iLike deal looks smart even without Google. Add that in and it looks absolutely brilliant. I’m no fan of MySpace CEO Owen Van Natta, but I’ll give the man credit here.
Giving Facebook The Benefit Of The Doubt
Facebook decided not to aggresively pursue iLike. They seem to have firmly moved away from any desire to deal with content directly, so this looks less like a mistake and more like a strategic decision.
But one thing is clear. Facebook utterly failed to execute on their music strategy from last year, even while trying to work via a partner application to avoid direct contact with content. Meanwhile, Google stepped in and quickly brought streaming music directly to users, without paying anything at all for it.
iLike CEO and now MySpace exec Ali Partovi, speaking at the launch event last night, didn’t hold any punches against Facebook. He gave huge credit to Google for pulling off a win-win-win-win (labels, google, users, MySpace/LaLa) in the difficult online music space. And he noted that “others have tried or are still trying and have failed miserably.” He was quite clearly referring to Facebook.
The truth is that we don’t know if Facebook flailed on a huge opportunity to get into the Google search stream, or if they just decided they don’t want the hassle of dealing with music directly. We’ll give them the benefit of the doubt. And they certainly had no idea of the Google deal back when they were trying to buy iLike anyway.
Ticketmaster Flubs It
None of Facebook’s excuses (didn’t know about the Google deal, strategically not what they want, etc.) apply to Ticketmaster. The company was a big shareholder in iLike, had a board seat, and certainly new every detail of the Google deal. They could easily have acquired iLike, probably for not much more cash than the $13.3 million they already had invested. But instead they let the company go to MySpace, knowing full well that they were enabling a huge potential competitor.
If Ticketmaster had acquired iLike all that Google music search traffic would be under their control. Click throughs to the iLike site could be monetized through event ticket sales. It would probably be a matter of months, not years, before they got their investment back in additional ticket sales.
And what’s worse is that MySpace now controls all that traffic. MySpace actually has a much more complete worldwide database of concert events than even Ticketmaster has, and they already flow through a lot of traffic to ticket sales at Ticketmaster and competitors. Now that database is combined with iLike’s impressive concert discovery and alert product. When you plug Google search traffic into all of that, its got to be scary for Ticketmaster:
“MySpace has the world’s largest database of live events, and iLike has already built some of the world’s best concert-discovery features available online,” Courtney Holt, president of MySpace Music, wrote in a blog post. “We’re delighted to have implemented the first structured integration of concert data into Google search, and this is only the beginning of our efforts to innovate in the live event space.”
We frankly can’t see any reason at all for Ticketmaster to let iLike go to a potential competitor, particularly with this Google deal locked up. Ticketmaster CEO Irving Azoff certainly knew what was happening. So why did he make such a huge misstep? Possibly because he’s in the middle of a divestiture of topline assets as part of a merger with Live Nation. Azoff is rumored to be looking for a huge personal payout as part of that deal, and may even be spinning himself off along with assets.
In other words, maybe Azoff couldn’t care less about the future of Ticketmaster.
Screw the article. Where can I get one of those Fool dolls in the pic. That freakin’ rocks!!
dunno. the image is from istockphoto.
I think Zuck is eying Spotify, which could be a much better play.
maybe. btw, is Google obliged by any contract to use iLike if spotify comes with a better deal tomorrow?
No. Google is open to integrating other partners as well. See my interview with JR Pittman here:
http://www.tech...ryone-involved/
hopefully some that have agreements outside of the usa . . . sigh
Did you ever make sense of how iLike could possible be acquired for only 20M after raising a tonne of VC $?
just does not add up. at all.
+1
What can i say. Good move by ILIKE. However, i think Facebook can at times be overrated. Look this deal is a no brainner – MUSIC + SEARCH. Its only filling a gap in the market – pure and simple.
Nice one ILIKE!
MySpace moves one step closer to becoming THE entertainment portal.
A MySpace Youtube battle on the cards?
MySpace already is the leader in new artists hands down. here are some stats taken from http://bit.ly/S2cDM :
Out of 5 million bands on MySpace last year, 105,575 released albums. 110 bands sold 250,000 or more copies of their album. 1,515 bands sold over 10,000 albums and 5,945 bands sold 1000 albums or less.
It would have been nice if they would have integrated to BandCamp, ReverbNation and a few other sites along with some up and comers like MusicXray, MixCloud and SoundCloud who have a bunch of new indie artists.
Most of the artists are pretty upset with MySpace and if you read this article they are trying to start a revolution like you can read here http://bit.ly/3yfNdG
@Michael,
Your article is well thought out and makes many great points. However, Ticketmaster still controls more than 80% of event ticket sales. MySpace may have a larger event ticket database, but it doesn’t seem clear that MySpace can enter the primary ticketing space unless they play nice with Ticketmaster.
Thoughts?
and myspace could become something like a monopsony if they get control of more traffic. what happens if myspace music becomes the primary music experience on facebook? that’ll likely happen at some point. and whoever controls that much traffic can dictate terms
Why would myspace music become the primary music experience on facebook? They’re direct competitors in almost every way. Seems counterintuitive to me.
myspace owns iLike.
However, it is clear facebook can simply add a music app of their own when the rates go down significantly, additionally Google will introduce new partners — and there are plenty.
because we hear it very likely will be.
You’re wrong, Ticketmaster has their deals with the venues which is where the power rests. The consumer seeks out the concert experience and will more than likely have to go through Ticketmaster by virtue of their local venue, not their social network. Only terms MySpace might leverage is a better affiliate deal from a marketing perspective. Irving vs Ali, Irving wins on all fronts.
That is the point. Venues are the clients of Ticketmaster, not the fans. It causes a lot of misunderstanding.
furthermore, TicketMaster still has no friends. MySpace can provide the sales flow for TicketMaster competitors, and with that kind of marketing power, their is likely very little reason for music venues to resign with TicketMaster (sports venues are a bit of a different story).
If the LiveNation merger doesn’t go through, this could be very bad for TicketMaster.
The only thing I know about Van Natta is what you’ve written Michael, though I have to say I am very impressed with MySpace Music since his arrival. Maybe more of the credit goes to Holt, but I have little doubt that MySpace is on a roll now that they’ve figured out where their strenghts are.
Who needs friends when you have 80% market share.
80%. if they get the merger through. in the U.S. only. and just for larger venues. lots more to the world.
There is a difference in how the ticketing world operates in the US and in the rest of the western world. The US is all about the venue but tickets in Europe are done on an allocation basis. The venue gets some (usually the majority) as does the promoter, artist (via fan club allocation / presale) and increasingly brand sponsors such as O2. The allocation method in the US is limited to the artist for up to 10% of the tickets but usually only the established acts take advantage of this as they have the infrastructure to support it.
After receiving these allocations, rights holders such as venues and promoters have historically outsourced their ticketing to the likes of Ticketmaster, See Tickets, CTS etc…but increasingly they are looking to taking a proportion of these tickets in-house and the technology (digital tickets and scanners) is now there for them to do this. The economics of taking ticketing in-house for venues are also compelling with high service charges discouraging online purchases which has a knock on effect to at venue sales of food, beverage and merchandise. These are high margin items that are the lifeblood of venues being able to exist.
Although a combined Live Nation / Ticketmaster will be very powerful, it doesn’t mean that it will be able to control the market the way that most posters will expect. Ticketmaster was seen as all powerful but lost its 2 biggest clients in a short space of time when Live Nation switched to CTS and then took SMG with them though the implementation with CTS was a disaster.
Live Nation need to merge with TM as their 3-5% margin business needs to be cash flowed by Ticketmaster’s 20-25% margin business. The combined entity will have a lot of debt which will become harder to service.
The agency model in ticketing has been negated by customers going direct to consumer. The impact hasn’t been felt yet but it will be. Travel agents were replaced by rights holders such as airlines taking their ticketing in-house to lower costs and get the customer data to up sell others goods and services. Ryanair’s auxiliary revenues are 20% of profit and on an upward trajectory.
The merger will impact secondary agents as this is where Live Nation Entertainment will focus on. The first 5,000 seats will be auction only, premium level, market sets the price and others won’t matter as they will generate their money from these.
Live Nation has huge issues in terms of its high cost structure from its executives all the way down to its unused amphitheatres. Check out the book value write downs it took on the Boston venues and multiply that across its portfolio of other venues and the results are not pretty.
The summary of this longer than expected post is that there are a lot of people that believe that the merger will create many opportunities for new players (big and small) to enter the market. Any of the new Google partners could be the next big live music player but there are many others waiting in the wings.
This is ok, we will see.
Interesting article!
You’re overvaluing these assets in the event supply chain.
You do realize they have a near monopoly on ticket sales for events? You do realize w/ LiveNation they’ll be the largest concert promoter and one of the largest owners of venues in the world?
You do realize that they own the 2 most profitable areas where the money is made in music?
You do realize that the Ticketmaster affiliate commissions (called street team) are pretty small?
If you made widgets and you owned the only store where widgets are sold, would you really care what road your buyers came in from?
And even if one road brought more of your traffic than the other, would you really care if the heavily trafficked road were shut down, given that people would be willing to drive on the other road to get to your store?
i think i agree with this viewpoint….. if ticketmaster owned $13 million of ilike and was around for the sale, they likely had some sort of strategic partnership in mind (plus they get back all the invested cash plus interest).
Well said. Ticketmaster’s near monopoly means it can allow iLike to go make deals and handle the tricky licensing issues, develop partner relationships while it can sit back and focus on its LiveNation acquisition. I’m no fan of Ticketmaster. Musicians are forced to make most of their money through live performances yet only some of their fans can afford to pay the nearly double entry prices that Ticketmaster charges. It’s an outrageous tax on culture and bad for our society.
I guess we’ll know soon how the artists will benefit from all the hype. What happens if they don’t see a significant jump in legitimate sales or revenue from all this?
Music to my ears frankly.
followed the link provided (http://www.goog.../landing/music/). it doesn’t work. i just get normal google search results.
Either way, until Myspace cleans up their act on site speed – I’m not bothering to ‘drop in’ even for music discovery. I’ll go elsewhere.
MySpace is still the most awkward and at all costs to be avoided place to get information on the Internet. Even with every band on the planet posting there show info, I don’t go there because takes 8 hours to navigate anywhere (while it loads all that crap on profiles) and it doesn’t even notify you by your location right? I could be wrong on that because I am not a heavy user.
Last.fm has proven an invaluable resource for finding concerts while I work in Milan for 2 months. I would happily pay for the information, and ease of use here, but it’s free!
I tried which you provide the link google.com/landing/music.
It doesn’t work.it do the normal search
Why did iLike go for so cheap?