Social media network imeem topped our list of the ten hottest music
sites last summer. Okay, the list was in alphabetical order, but still – the
on-demand music service ranked well into our top ten due to its vast catalog,
playlist embedding, and social features among other factors.
But all may not be rosy for the company, despite its popularity with its users and with us. A recent report on [TechCrunch](http://www.techcrunch.com/2009/03/25/troubles-at-
imeem-but-company-says-no-shutdown-imminent/) echoes chatter we
heard a earlier this year about imeem's financial situation taking a turn for the
worse. TechCrunch calculates that imeem is $30 million in arrears to the labels on licensing payments, which Imeem spokesman and vice-president of marketing Matt Graves says is way off.
"[TechCrunch's]
$30M number is not only wrong, it's preposterous," said Graves. "We don't now owe, nor have we ever owed, that amount of money to the labels. And the shutdown rumor is equally false – we are not shutting down."
Still, if you look at the math, it's clear why people are saying imeem is in trouble. The company has to pay copyright holders high rates in order to play on-demand music, which, in a connected world, can potentially substitute for paid downloads. Between dropping ad rates and these high, static music licensing fees, imeem doesn't have much room to wiggle.
Graves said imeem is indeed hoping to renegotiate its label deals.
"I can confirm that we're negotiating with the major labels to restructure our deals," he wrote via e-mail. "This is a good thing. The economy and world have changed, and just as we've renegotiated our bandwidth bills, ad-serving deals, etc. to take into account the new economic realities, it makes sense to do the same with our content deals."
Some
labels could be charging imeem as much as $0.01 per stream. They negotiated the
rate relatively early (compared to, say, MySpace Music), as part of a in 2007 deal that brought an end to Warner Music Group's lawsuit. Even if that's not the case, and imeem is paying the lowest rate believed to be available today ($0.004), the company could be in trouble considering the state of the economy, unless they can re-negotiate the rate.
An industry insider who asked not to be named put it like this. "Four tenths of a
penny, which is the most aggressive rate you'll see – that's not sustainable [for an on-demand music company].
That means every time someone plays one song, you have to sell an ad at a $4 CPM
[wherein an advertiser pays $4 for every thousand ad impressions] to break
even, and that would presume that you're selling out 100 percent of your
inventory."
Back in August 2008, before a deceptively-simple banking formula wreaked havoc on the world
economy, CNN's sources estimated that imeem was indeed charging a $4 CPM. That was then, this is now.
this audio or video is no longer available Even in a good market, imeem's ad revenue was barely
enough to cover its music licensing payments, assuming it sold all of its ad inventory. And if TechCrunch is right, and
imeem is paying some labels $0.01 per on-demand song stream, it would need a $10 CPM to break even – and that's 250 percent of what CNN estimated it was making in August, before the economy and ad market hit the skids.
Imeem's central problem – and that of any other licensed on-demand music site – is that the revenue it can derive from music fluctuates with market pressures, while the record labels and other stakeholders tend to want the same amount per song regardless of what's
happening in the rest of the world.
The labels have incentive for imeem to survive, to a point. Warner Music Group owns $15 million in imeem equity according to its quarterly report for Q2 '08, and of course all of the major labels stand to benefit from the existance of any licensed online music site (especially because the negotiated payment structures generally net them a higher on-demand rate than indie bands with less negotiating power get).
To that end, the labels could decide to forgive some of whatever the company allegedly owes them (a TechCrunch source said it owes them $30
million – a figure our sources did not corroborate, and which Imeem vehemently denies). But in that case, they might open themselves up to a potential class action lawsuit from the artists, publishers and songwriters on whose behalf they also collect the fees. The labels are more likely to drop their per-song rate, possibly retroactively, down to $0.04 or below.
Warner Music Group would not say whether it would consider dropping the per-song rates it charges imeem. The labels have shown in the past that they don't mind seeing licensed businesses go under – just ask SpiralFrog – in the hope that eventually, one of their licensees will be able to sustain rates high enough that they can restore the music business to its former glory, or something like it.
Imeem has a few options in its quest to bring in enough revenue to pay the proverbial – and literal – piper. The company has focused on paid single-song and playlist downloads, tickets and ringtones, in part by including links to those in its embeddable player, and most likely has an iPhone app in the works too (it already developed one for Android). Another area for further monetization lies in the embedded imeem playlists
that exist all over the web, like the one we put in this post (Cut Copy's top tracks of 2008).
Introducing intrusive ads to those, and elsewhere on the imeem network, could be a dicey proposition because the company doesn't want to offend loyal users who continue to put these playlists all over the web. Yet if the company continues to feel the squeeze, it could be forced to try to monetize all its offerings to the maximum extent.
From the labels' point of view, this would hardly constitute a problem. As for users, their reaction is anyone's guess.
See Also:
- 5 Ways the Cellphone Will Change How You Listen to Music
- Imeem Mobile Streams Your MP3s to Your (Android) Phone
- Interview: Imeem's Plans for Google Android Ads
- Last.fm Radio to Charge Outside U.S., U.K., Germany
- Imeem Signs Deal with Universal, Now Streams All Four Major Labels for Free
- Signal Patterns: A Socially-Networked Music Personality Test
Image from imeem's T-shirt store
