ROME -- Italian music website, Vitaminic, announced Friday that it is acquiring rival Peoplesound.com, based in London.
The 34 million-euro deal unites two of Europe's most ambitious players in the world of digital downloads. Unlike Napster, both sites have harmonious arrangements with music labels.
The merger is hailed as a good omen for Italian companies, which more often are acquired (as opposed to acquiring others) in the global market. Vitaminic -- one of the nation's brightest Web stars -- recently took over music pioneer Internet Underground Music Archive and is finalizing negotiations with FranceMp3.com.
The Peoplesound deal comes hot on the heels of the May 31 agreement with connectivity company U.S. Robotics. All products will now contain a two-month free subscription to the Vitaminic Music Club.
The need to move quickly is obvious, following the lead of aggressive media giants: Bertelsmann's recent purchase of online music storage site MyPlay.com and Vivendi's acquisition of download site MP3.com.
"The European market is now consolidated," said Gianluca Dettori, managing director of Vitaminic. "Peoplesound has a very strong brand in the U.K., where we were present but not very known."
Vitaminic operates in 10 countries with local websites: Italy, Great Britain, Germany, France, Spain, the Netherlands, Sweden, Denmark, Ireland and the United States.
Since its birth in 1999, the company has worked with about 750 labels, including major labels such as EMI.
"With Sony, BMG and Universal we have agreements for free promotional downloads. But they are not yielding fruits yet, which is not a secret, " Dettori said.
Musicians also work directly with Vitaminic, earning 50 percent of the sale price -- no strings attached. Thanks to IUMA's contributions, it is the second-largest community of unsigned artists, with about 60,000 -- second only to MP3.com.
Vitaminic's international scope is proving especially beneficial to these budding artists.
"We are a small brand in the States, but we have a precise function: a gateway for U.S. artists wanting to enter the European market and vice-versa," Dettori said.
"By being present in the U.S. market we can really monitor what is happening there and predict certain events that will then occur in the European markets."
Peoplesound, also founded in 1999, concentrates on new and emerging artists. Consumers either download MP3 tracks or purchase custom-produced CDs. Recent signings include Maryanne Morgan, who wrote the top-10 hit single "Why" for Mis-teeq, and Del, who wrote the hit "Viva" for Universal/Decca artists Bond.
The deal is bankrolled with cash and 1.3 million new Vitaminic shares issued to Peoplesound shareholders. The definitive agreement will be concluded in about 45 days.
Dettori remains optimistic, though well aware of the industry's limitations.
"It is difficult because 70 million consumers got used to a free service, with Napster and its clones," he said. "But the research we conducted showed us that people are willing to pay for a good service.
"The main problem is the catalog and consumer appeal. Until the big music editors put their catalogs online, what we can offer is going to be limited. Only that will really accelerate the growth of the market in a substantial way. So we have to work hard."
Kasimir Berger contributed to this report.
