Ad-Supported Music Service SpiralFrog’s Financials: Losses; Financing Needed; Plans

Ad-supported online music service SpiralFrog, one of 2006’s candidate’s for most-hyped new product, and still half-vaporware (it has launched a closed beta), has filed its detailed financial with SEC.

On the financial side, the company has already shelled millions to license materials from Universal Music Group, according insider reports. In the filing, the company warned that buy-in from other majors is hardly guaranteed. "In the event that we are unable to enter into agreements with most of the other major and independent record labels, it is unlikely that we will be able to attract and keep users to our site," the company stated. SpiralFrog did not mention heavy, upfront licensing costs frequently demanded by majors, though financial aspects remain daunting.

In the filing, the company disclosed losses of near $12 million over the two and one-half years, as well as significant costs ahead. "We anticipate that we will require up to approximately $18 million to fund our continued operations for the next twelve months," the group disclosed.

SEC Filing

Bi-Weekly wrap up, 16-31 August

This summary is not available. Please click here to view the post.

Deezer: free and legal music on demand

Deezer (formerly BlogMusik) is a service born in France that lets you search for mp3 files on the web and listen to them in streaming mode for free. Dezeer announced that they came to an agreement with the SACEM, clearing the service of copyright infrigement accusations. The details of this agreement are not are not being disclosed, but other deals suggest it is based on a revenue sharing mode. Deezer’s business model is relying on advertising and affiliate revenue coming from the sales of songs on iTunes and Amazon.

RadioBlogClub, another popular french service was forced a few months ago to change hosting provider following a complaint sent by the same SACEM. The service was interupted a few days and opened again as fresh as new.

Activated Content Licenses Microsoft Technology to Enhance Audio Watermarking Efforts

REDMOND, Wash., and SEATTLE — Aug. 15, 2007 — Microsoft Corp. today announced that it is licensing the audio watermarking technology developed by its Redmond, Wash., research lab to Activated Content Corp., a leading digital technology and application services company in the audio watermarking market, based in Seattle.
Microsoft® audio watermarking technology consists of digital audio software tools that will allow Activated Content to insert nonsecure data into and extract it from audio files, tools that the company can use to offer additional services to the users of the audio file.
Activated Content is a leader in digital audio watermarking with its patented technology it has developed over the years. It launched the industry’s first comprehensive and practical watermarking solution for encoding identifiable, robust, inaudible and unique codes into digital audio.
Activated Content’s technology has already been deployed by major and independent record labels, recording studios, mastering studios, duplication houses, cable television channels and online content distribution services worldwide.
The agreement enables Activated Content to increase its value proposition to customers by offering interoperability. It will also now be available to both traditional content owners and those creating UGC.

Mediadefender Moves into P2P Marketing

You’re trying to download the latest Madonna album, only to find the pop queen calling you…a thief? Welcome to the odd and oftentimes annoying war against piracy. The entertainment industry has been hiring companies to pollute P2P networks with phony files for years, and now some of these very same companies are going into marketing. Instead of sabotaging file transfers, they offer their own media for download, and instead of corrupted files, suddenly it’s all about branding.
Santa Monica, Calif.-based Mediadefender has been at the center of this shift. The subsidiary of ARTISTdirect is known and hated in the file-sharing world for its anti-piracy work, but has recently gotten a lot of press for an upcoming campaign involving ad-supported MP3 downloads. Mediadefender has been experimenting with P2P marketing for a number of years now, and they’ve learned a few lessons along the way. VP Jonathan Lee agreed to share some of them with me.
Mediadefender has thousands servers in co-location facilities around the globe; the decision to put them to use for marketing has been brewing for some time, Lee tells me. With such an abundance of resources, he notes, “What else can you do with it?”
Distributing actual content was an obvious idea, but for the longest time the entertainment industry wasn’t ready to utilize P2P. Companies felt they would undermine their position in legal conflicts if they distributed their own files through these networks. But all of this changed when the Supreme Court ruled against Grokster in the summer of 2005. “After the ruling those gloves came off,” says Lee.
And with that, the learning curve began. “We’re throwing things at the wall and see what sticks,” he explains. Early attempts to do advertising on P2P networks involved what Lee describes as a “bait and switch”. Files were mislabeled in order to get people to watch ads or load Web pages. “Obviously there are tremendous problems with that,” he acknowledges. Most brands just don’t like to frustrate their customers –- except, of course, porn companies, which still use this technique heavily to spam P2P networks.
Another strategy involved sending people to iTunes and similar download stores to make them buy legitimate copies of the content they were looking for with Limewire and other clients. “That really hasn’t worked so well,” admits Lee. Same goes for the idea of mixing ads with search results in order to get people to buy concert tickets and ring tones. He believes that people are just too suspicious to click on anything that remotely looks like an ad in a P2P network, which is why they tend to ignore them.
So what does work? “Things you can’t buy online,” says Lee. It turns out that P2P is actually really good for branding. Mediadefender had a lot of success with a campaign for a soft drink maker that offered people videos they actually wanted to watch. Music works well, and so does goofy stuff. Funny commercials –- the stuff that people re-post on YouTube and then forward to their friends — are a big hit on P2P networks as well.
Does this mean people should just abandon their annoying anti-piracy tactics and instead post some goofy clips on P2P networks? “You are already dealing with your anti-piracy issues if you are doing promotion,” admits Lee. He doesn’t think that the anti-piracy part of his work will go away anytime soon, though.
In fact, Mediadefender is still making most of its money by polluting P2P networks with spoof files, which is why the company will remain be one of the most hated enterprises in the file-sharing world for the foreseeable future. Jonathan Lee doesn’t seem to mind, and he doesn’t think it impacts their marketing business at all. Successful P2P marketing campaigns always looks very viral, he tells me, and the focus really isn’t on his company. “If it is good content, then it’s gonna carry itself.“

Bi-Weekly wrap up, 1-15 August

* Veoh Seeks Court Protection From Universal Music Copyright Suits
San Diego - Video-sharing site Veoh Networks announced on Thursday that it has filed a pre-emptive legal action against Universal Music Group, asking a judge to declare that its service does not violate copyrights.
* NBCU/News Corp. Web Video Venture Gets $100 Million From Equity Firm
San Francisco - The online video distribution joint venture between News Corp. and NBC Universal ("New Site," for now) has received a $100 million investment from private equity firm Providence Equity Partners, in exchange for a 10% stake, The New York Times reported, citing people with knowledge of the deal.
* File-Sharing Firm Lime Wire Debuts Digital Music Store
New York - Lime Wire, the company that distributes the LimeWire peer-to-peer file-sharing application, has announced plans to open a digital music store.
* Video Transcoding Firm RipCode Raises $10.5 Million
Dallas - RipCode, a developer of video transcoding technology, announced on Tuesday that it has raised $10.5 million in its second round of financing, led by ATA Ventures.
* SpiralFrog Debuts Beta of Ad-Supported, Free Music Download Service
New York - SpiralFrog, an ad-supported free music download service, has quietly launched an invite-only beta test of its service, CNET News.com reported.
* German Prosecutors Stop Identifying File Sharers on Behalf of RIAA
Offenburg, Germany - The Local Court (AG) in Offenburg has prohibited a local public prosecutor's office from obtaining the personal data from an ISP that match the IP addresses of alleged P2P network users citing citing "obvious disproportionateness”.
* Japanese Firms Demand YouTube Remove Copyrighted Videos
Tokyo - After a second meeting with executives in Tokyo with YouTube and Google this week, a group of Japanese rights holders again demanded that their copyrighted material be removed from YouTube, the Associated Press reported.
* HandHeld Entertainment Acquires eBaum's World for $17.5 Million
San Francisco - HandHeld Entertainment, a maker of portable media players and operator of entertainment websites, announced on Thursday that it will acquire eBaum's World, an entertainment site that offers user-generated videos, games, jokes, photos and other content, for $17.5 million. The site generated $5.2 million in revenue and $1.6 in net income before taxes in 2006, and has an average of 10 million unique visitors per month. HandHeld had already bought another video site, Putfile.
* Video-Sharing Site GoFish Terminates Acquisition of Bolt Media (details in the previous post)
New York, N.Y. - GoFish, a San Francisco-based video sharing site, on Thursday called off its planned $30 million acquisition of New York-based Bolt Media, after Bolt was unable to finalize a settlement in a copyright infringement lawsuit.
* EMI Shareholders Accept $4.8 Billion Buyout Offer from Terra Firma
London - Major record label EMI Group announced that its shareholders have approved a $4.8 billion buyout offer from private equity group Terra Firma.
* Apple's Wozniak Among Backers of Internet Video Start-up Hotswap
New York - Hotswap.com, an Internet video start-up founded by three former University of California grad students, has raised an undisclosed sum of funding from backers including Apple co-founder Steve Wozniak and Clear Channel co-founder Red McCombs, Reuters reported.

EMI Licenses Snocap

EMI Music has now licensed its catalog DRM-free to Snocap, a move that quickly shuttles the label onto the pages of MySpace. Snocap carries a critical partnership with MySpace that enables artists to position downloads on their profile pages, and offers a revenue between all parties. The latest deal follows an earlier arrangement involving Warner Music Group, though EMI is the first major to lend DRM-free content to the alliance.

The Snocap deal follows an earlier DRM-free deal involving the iTunes Store. Like that arrangement, Snocap MyStores will sell EMI tracks at an elevated price point of $1.30. The tracks will also be encoded as higher-quality files, according to information supplied by the companies. That is part of a larger EMI philosophy that consumers are willing to pay more for higher-quality MP3s, though it remains unclear if the proposition is resonating. After positioning its DRM-free catalog on iTunes in late May, EMI has not offered substantive data on the collaboration.

GooTube strikes deal with EMI, after label shuns DRM with Apple

EMI Music, the world’s third largest music label company, said it has reached a deal with Google and its YouTube property to allow YouTube users to exploit EMI music while creating videos.

The move follows Apple’s move yesterday to start selling EMI songs without copy protection (digital rights management, or DRM) through its iTunes store.

Warner to put ad-supported video archive online

Warner Music, the world's fourth-largest music group, is putting its archive of music video online and making it available for free to fans.

Revenue will be driven by advertising but music fans will be able to download the videos for an additional fee and Warner will also examine syndicating the content to a third party. The deal includes plans to develop subscription-based services and a version to be used on mobile platforms.

World's largest MP3 store launches

PayPlay has just launched "the world's largest MP3 download store" -- a store selling more than 1.3 million indie music tracks, with a search engine that allows you to search for your fave artists and get similar indie artists in the catalog. Previous to this PayPlay sold only DRM-crippled WMAs for $0.77, the MP3s sell for $0.88.

CBS Acquires Social Music Network Last.fm for $280 Million

CBS Corporation announced on Wednesday that it has acquired U.K.-based social music network Last.fm, for $280 million in cash.

Last.fm, which was founded in 2002 and now counts more than 15 million users in over 200 countries, monitors what songs a user is listening to in iTunes or other applications, and then automatically creates a personalized streaming radio station based on recommendations from fellow users with similar tastes.

Sony/ATV Acquires Viacom's Famous Music for $370 Million

Sony/ATV Music Publishing announced on Wednesday that it has agreed to acquire Viacom's music publishing arm, Famous Music, for about $370 million.

EMI to Release Entire Catalog DRM-free on Amazon.com

Building on last month's news, EMI has announced today a new partnership with Amazon.com, where again the music label's entire catalog will be released DRM-free (to be launched "later this year".)

Similar to the proposed availability on iTunes, the tracks will be of higher quality than the typical $0.99 track. And unlike iTunes, the tracks will be sold in MP3 format, assuring the files are playable and transportable to just about any device imaginable.

EMI recommends $6.3 bln offer from Terra Firma

LONDON (Reuters) - EMI announced on Monday terms of a recommended cash offer for the company from Maltby, a newly incorporated company from Terra Firma, for 265 pence per share, giving it an enterprise value of 3.2 billion pounds ($6.30 billion).

100 Million iPods Sold

It took just over five years, but Apple has sold its 100 millionth iPod.
iTunes is keeping up its share of the bargain, too. 2.5 billion songs, 50 million TV shows and over 1.3 million movies have been purchased through the service.
(The iTunes Store features over five million songs, 350 television shows and over 400 movies.)

MySpace Makes Nice With Music Widget-Makers

Eliot Van Buskirk 04.05.07

Full article here

...
MySpace is asking developers to register their music catalogs with Audible Magic, the company that provides copyright authorization (aka fingerprints) songs for MySpace, GoFish, Microsoft and MTVN. By doing this, MySpace execs say they're hoping to protect their company from copyright-infringement lawsuits.

...
"By using a third-party provider's database," explains Kevorkian, "MySpace can save the time and resources that would otherwise be required to build one from scratch. Monitoring posted content with a database helps to keep MySpace in the good graces of content providers and head off copyright infringement lawsuits in the process."

...
But registering a music catalog with Audible Magic isn't a simple matter: Only an artist, label or other copyright holder can submit a song for addition to Audible Magic's database of verified songs.
Vance Ikezoye, president and CEO of Audible Magic, says, "There's a very good chance that the content in question (from smaller artists on Indie911) is not registered in the database. The indie artist can contact Audible Magic through the website to register their content and establish their business rules (how they want their content treated)."

Audible Magic claims to have more than 6 million sound recordings in its database. By comparison, Apple's iTunes store contains about 3.5 million songs.

Currently, Audio Magic is the only company MySpace endorses for cataloging music. This makes Audible Magic's rapidly expanding song database increasingly valuable, as MySpace and other big online social networks rely on it (as well as databases from Advestigo, Auditude, Gracenote, Relatable and Vobile) for protection from charges of copyright infringement.

Napster, MusicNet: Numbers

Napster says it will announce financial results May 16 that show it had more than $28 million in revenue during Q1 this year.
Paid subscribers totaled more than 830K during the quarter, which makes it the biggest subscription music provider, the company says. This includes the 225,000 AOL Music Now subscribers that it bought in from AOL. It added another 40,000 net paid subscribers during the quarter.

MusicNet, the B2B digital music service provider, though not public, has reported some relative subscriber numbers for the first time. It powers the music service for Yahoo, MTV, HMV, Virgin, Samsung Electronics, iMesh, BearShare, Synacor and it’s affiliates which include Time Warner Cable and Charter, among others.
There were 400 million plays in January and February, with an average of 6.8 million plays per day; exceeded 200 million plays in March. The breakdown of subscription plays is about 35 percent streams, 55 percent PC downloads, 10 percent portable downloads – interesting this: streaming usage is down, while subscription and portable downloads are more utilized.

Jobs Unlikely to Push for Lift of Video DRM

Full article

Apple Inc. CEO Steve Jobs may be pushing for music labels to lift copyright protection on digital music but he doesn't appear so eager to do the same for video content, despite his position as the largest shareholder in Walt Disney Co.

When asked during the EMI conference call about the potential of lifting DRM from video, Jobs said: "Video is pretty different from music right now because the video industry does not distribute 90 percent of their content DRM free. Never has. So I think they are in a pretty different situation and I wouldn't hold it to a parallel at all."

Jobs was referring to CSS (Content Scramble System), technology that comes on DVDs that prevents users from copying the videos. He is arguing that CSS makes the video market different than the music industry because music CDs don't come with copy protection. As a result, Jobs' argument has been that digital music should be sold in an equivalent manner as CDs-- without copy protection.

Anti-DRM activists and analysts don't buy that explanation.

The reason that Jobs can negotiate with the music industry and encourage announcements like the one with EMI is because the iTunes store represents about 10 percent of music sales in the U.S., said McQuivey, a principal analyst at Forrester Research. By contrast, the iTunes store has only recently begun selling video and the store has yet to prove itself as a money-maker for video content producers. That means that even if Jobs did want to push for DRM-free video, he wouldn't have the same negotiating position with the movie studios as he does with the music labels.

Apple to release EMI music without anti-piracy technology

In agreement with music label EMI, Apple is making EMI songs available without digital rights management (DRM) through its iTunes music store. The music will be higher quality (Songs will be encoded at 256kbps AAC (current is 128kbps)), and tracks will cost $1.29(EUR1.29/GBP0.99), or 30 cents more than the standard 99 cents (EUR0.99/GBP0.79).

Entire album purchases will stay at the same price, but have the higher audio quality and will be DRM free.
EMI music videos will be available DRM free with no change in price.

Slides From Press Call:

France’s Ipercast raises $3.3 million for Internet Video Distribution

Paris-based video and IPTV service Ipercast has raised $3.3 million from OTC Asset Management and Siparex. The five-year-old company manages a variety of IP multimedia services, from DRM to electronic programming guides, security, and content distribution network services.