Online Music & Web 3.0 (Part 5)

M&A and VC activity

In May 2007, CBS Corp. acquired Last.fm, a UK-based music community site that allows fans with similar tastes to connect, for $280 Million, in a bid to attract young audiences.

Napster acquired AOL Music’s subscription service for $15 million in cash in January 2007. The acquisition gave Napster 350,000 subscribers of AOL.

The success of Apple’s iTunes Store and growing traffic to online music sites have meant increasing activity by entrepreneurs and VCs in the space. In October 2006, Songbird, a San Francisco-based start-up with a smart music player that searches and plays music raised about $1 million in funding, from Sequoia Capital and Atlas Ventures.

MOG, an online music community and recommendation startup, founded by David Hyman raised $1.41 million in first round of funding from a group of angel investors, led by Steve Simon. DRM-free music download site Jamendo has raised an undisclosed amount of first round funding from Mangrove Capital Partners.

In June this year, MyStrands, a music discovery platform and recommendation site, raised $25 million in its second round of venture capital financing, led by Grupo Zeta CEO Antonio Asensio along with Debaeque and Sequal.

In December 2006, Ticketmaster invested $13.3 million in music community site iLike.com. The site is also funded by Khosla Ventures, Bob Pittman and various other private investors.

Conclusion

The online music industry has seen a sea change over the years. Online music sites are headed towards a convergence. Today people not only listen to music online, but also discuss and share it with their friends, which has resulted in the emergence of music community sites. Music Marketing has thus changed immensely, and online buzz has become key to the success of Artists, Songs, and Albums. Also, the deconstruction of the “song” from the “album” has changed the business considerably from the CD/Cassette days, when one had to buy an album to access a song. No more.

The online music industry still suffers from huge losses and stiff competition. We will see a lot of consolidation and power shuffling in the next 3 years and only the innovative players with a robust business model and deep pockets will survive the competition.

Steve Jobs is credited to have revolutionized the music industry, and no doubt, Apple will remain as one of the key players. The Music Labels are under huge threat, although this is certainly also their opportunity to radically reinvent themselves. Those who succeed will survive, and meanwhile, some innovative smaller players will disrupt and get acquired. The movement to watch at this point is the Music Phone adoption, and handset vendors emerging as a new channel for the Labels.

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[Part 2]
[Part 3]
[Part 4]

This segment is part 5 in the series : Online Music & Web 3.0
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