It's a case of the cable Goliath courting the new-media David - the one with a nose ring. In a bid to become a next-generation MTV, TCI Music, a subsidiary of the cable-TV giant, today snapped up Paradigm Music Entertainment for US$24 million in stock plus $6.5 million in assumed debt. With Paradigm's two properties - cybercast and chat site SonicNet, and music news resource Addicted to Noise - newly formed TCI Music is hoping to bloom into a full-service music company targeting both grunge groupies and their parents.
"You're looking at SonicNet/The Box becoming what MTV should have been by now," said Paradigm spokesman Wayne Rosso. Though TCI's 14 million subscribers is small-fry compared to MTV's audience of 74 million, Rosso believes that TCI has a strong advantage online, where it can use the community-building and cybercasting experience of its new acquisitions to get into territory MTV has still not successfully conquered. "Frankly, I think we're the 800-pound gorilla [of Web sites], because of all the assets" TCI brings to the equation, he added.
With new-fangled technology - like the video-on-demand service The Box and a 30-channel satellite music delivery system known as DMX - plus a broad network of subscribers, TCI Music clearly has a lot invested in infrastructure, but it needed some cool programming to keep people watching. "Today, [TCI has] got bandwidth and speed, but they'll need more than that," said Yankee Group analyst Bruce Leichtman. "Everybody is looking for content."
TCI may have just found it. By picking up hip music sites like SonicNet and their communities of users, it could expand its core audience substantially. "The Box and DMX are small pieces of the puzzle," said Leichtman. "Like any cable product, it's all about carriage."
But the move can seem like an odd match. With the merger, TCI Music now owns Paradigm's music labels - Archive Recordings, Mutant Sound Systems, and Paradigm Records - plus the company's radio division, which produces syndicated programming.
Still, TCI Music's obvious competitors - MTV and online music retailer N2K - already have a leg up. MTV, nearly overloaded with content, has been experimenting with new technologies as if in preparation for the competition. In April, the company began using Intel's Intercast system to simulcast Web content during the video broadcast.
The Paradigm deal also comes on the heels of last week's announcement that N2K will put up $18 million to have the exclusive right to sell music on AOL's MusicSpace. N2K, with a presense on WebTV, @Home, and Excite's WebCrawler, has been more nimble than Paradigm in terms of distribution. But according to Rosso, N2K is simply a "retailer," dominated by its site Music Boulevard. SonicNet, Rosso says, has worked with retailer CDNow for more than a year, but focuses its efforts on the music and media, and not the commerce.
Paradigm, which filed to go public in July, has established itself as a successful marketer to young music aficionados, with more than 2.8 million visits per month to its two sites. Initially a music label, Paradigm bought SonicNet in January and Addicted to Noise soon thereafter. The company has promoted cybercasts of events like the Tibetan Freedom Concert and branched into syndicated radio shows. Its first series, On Air, which is about college music, was just completed for MSNBC.
