I have a hard time imagining it, but the folks that have reanimated the zombie social network, MySpace, are hoping for yet another pivot. Last summer, News Corp sold MySpace to a group of investors for $35M after buying it for $580M a few years earlier and pouring who knows how much into it along the way. MySpace’s owners want to pivot into a Pandora/Spotify music service.
LEAKED: MySpace’s Master Plan To Raise $50 Million And Relaunch As A Spotify Killer - Nicholas Carlson via Business Insider
Since December 2011, MySpace traffic is up 36 percent.
But MySpace continues to flounder commercially. Documents show that it will generate revenues of just $15 million this year, up from a miserable $9 million in 2011. MySpace lost more than $40 million in 2012. Interactive Media expects it to lose another $25 million next year.
Meanwhile, Interactive’s other big property, Specific Media, took a hit as ad buyers turned to real-time bidding solutions over traditional ad networks. Revenues declined from $42 million in 2011 to a projected $35 million in 2012 — both down from a high of $60 million in 2010.
Now, Interactive Media holdings is out looking for another $50 million in funding.
In pitch materials dated from November 16, 2012, Interactive says it plans to use most of the money to re-launch MySpace as an alternative to Pandora and Spotify. Of the $50 million, $10 million will go to marketing, $15–$25 million will go to licensing deals with the music labels, and another $15 to $25 million will be reserved for “general working capital.”
Interactive says it plans to launch a music subscription business for mobile in the second quarter of 2013.
Somehow, despite all the losses, I have the feeling these folks will get the cash to make this latest effort. There is a lot of dumb money out there.
Where’s the tipping point in the transition from owned to rented music? Is Spotify the fulcrum in this change?
Robert Andrews via paidContent
Globally, digital music subscriptions rose 64 percent to 13.4 million through 2011 (source: IFPI) - but that is just three percent of UK industry revenue. Downloads, dominated by iTunes Store, shipped 1.1 billion singles in the U.S. alone in 2010 (source: Nielsen SoundScan).
“For streaming to go mainstream, we need to hit somewhere like 10 times that,” MusicWeek editor Tim Ingham told a MusicTank industry seminar on the topic last week.
And industry analyst Mark Mulligan said: “We need to get to the next level of scale before ARPU (average revenue per user) actually matters to artists as well as labels.”
Spotify, which currently leads the sub-sector with three million subscribers amongst 10 million active users, has stated its aim to reach 100 million users all by itself. On its current free/premium conversion ratio (20 percent of active users), Spotify could bring labels some 20 million paying subscribers by the time it hits its target.
“A hundred million subscribers would change the game completely for artists and managers,” Ingham said.
But how will Spotify and its peers, like Rdio, Mog, Rara and WiMP, get there?
Each has had growing but relatively little success selling direct to customers. Many are revelling in the extra exposure brought by their recent Facebook connection. Mobile has been the thing to drive the business for everyone so far. But each ultimately wants to be offered through bundling deals with telcos and ISPs.
Time and again, online economics show one way to achieve scale is to become part of the fabric of the internet. Many talk about Spotify’s API, the technology rules which allow developers to make new products from Spotify’s platform - but, right now, the offering is notably limited for such a high-profile service and has gained few adopters.
“If Spotify goes to scale in the way Tim was talking about and gets hundreds of millions of people using it, Spotify could end up becoming effectively an API for music,” industry analyst Mark Mulligan told MusicTank’s seminar.