GigaOM » David Hyman

Curtains for MOG: Townsquare buys MOG’s blog & ad business

Om Malik — Fri, 24 Aug 2012 13:23:07 +0000

Townsquare Media of Greenwich, CT, that runs live events and owns radio properties has bought the MOG Music Network business. The news was first reported earlier this morning by Peter Kafka who says the transaction was around $10 million. The terms of the deal weren’t officially announced. These are blogs, reviews sites, concert & event information sites, artist sites and lyrics sites that were part of music subscription service MOG, that was started by David Hyman. MOG’s subscription service was acquired by Beats Audio in July for $14 million.

MOG network has more than 62 million monthly U.S. unique visitors and 170 million monthly global unique visitors, making it the largest music-focused ad network in the United States. GigaOM had heard that MOG was hoping to sell its music service & blog-network business separately. MOG had raised $25 million in venture funding. This concludes our coverage of MOG.

Why MOG sold for only $14M

Janko Roettgers — Tue, 03 Jul 2012 20:39:41 +0000

HTC revealed Tuesday in a note to its shareholders that it spent $14M on music subscription service MOG through its Beats Electronics subsidy this week (hat tip to Unwired View). Of course, the number is not much of a surprise to GigaOM readers, as Om first reported it as the acquisition price more than three months ago. What remains is the question: Why did MOG sell for so little after raising $25 million?

The obvious answer is that MOG simply didn’t have that many users. MOG had never broken out the number of paying subscribers, but the company’s CEO David Hyman said in February that it had a total of 500,000 active users, which included users of its free service tier. To compare, Spotify announced in January that it had reached three million paying users worldwide.

But there’s another reason for MOG’s low valuation, and it has nothing to do with its popularity: MOG’s music licenses are of limited use for any buyer, HTC included. This was pointed out by former MOG employee and web audio pioneer Lucas Gonze when rumors of the sale bubbled up in March. Back then, Gonze wrote on his blog:

“Companies like MOG, Spotify, and Rdio rely on negotiated deals with record labels. Those deals usually contain clauses that make the deal non-transferable in case of a change of ownership.”

I asked Beats about this, and a spokesperson replied via email:

“Mog the music service and the rights they retain will remain the same today as they were last week pre-aqusition.”

That’s decidedly vague, but makes some more sense if you put in in the context of the acquisition announcement itself. Monday, Beats announced that “MOG’s music service will continue to operate as an independent company,” which may just be what it needs to do in order to not lose those precious licenses. Or maybe it’s part of a deal hammered out between the labels and Beats during those long months ever since the first sale rumors surfaced in March. Maybe one day, we will know why selling MOG for so little took so long.

However, one thing is already clear: HTC won’t just be able to take the licenses MOG originally negotiated with the labels and use them to launch its own, Beats Audio-branded music subscription service for HTC handset owners. To do so, it has to go back to the negotiating table. The same would have been true for any other potential suitor, which explains why in the end, MOG was worth so little.

So why did HTC buy anyway? Because it’s one of the few companies that doesn’t actually have to worry much about music licensing. Again, Gonze:

“It happens that one of the major stakeholders in Beats is Jimmy Iovine, who is also a lead at Universal Music. That’s not to say that in this deal UMG is getting ownership of MOG (they already have equity anyway). It is to say that getting Universal’s blessing is pretty much a done deal. And where Universal goes, Sony and Warner go, because Universal is the 600 pound gorilla of labels.”

And of course, it only helps that Universal also has equity in Beats. In other words: HTC is a perfect buyer for MOG – but there aren’t many other companies in its position, which meant it could pick up the subscription service on the cheap.

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Finally! Beats has acquired music service MOG

Om Malik — Mon, 02 Jul 2012 13:22:37 +0000

After months of speculation, it is finally confirmed that headphones maker Beats Electronics is buying online music service MOG. Beats is the company behind the Beats by Dre series of iconic headphones and started by rapper Dr. Dre and Jimmy Iovine, chairman of Interscope Geffen and A&M Records. Handset maker HTC Corp is a majority investor in Beats.

USA Today‘s report on the story lacks any real deal details. The Los Angeles Times reports that MOG CEO David Hyman is expected to stay with the company.

MOG founder and CEO David Hyman

The MOG-Beats sags is pretty long. In early February, just ahead of the big Mobile World Congress show, I had reported that HTC, with Beats, wanted to launch its own music service. A month later further rumors emerged that HTC might have bought MOG. My colleague Janko Roettgers later confirmed that indeed that HTC/Beats had exchanged term sheets with MOG. A few days later, some of my sources told me that the company might have been sold for around $14 million, but others close to the company said that the sale price is significantly higher. MOG had raised $25 million in venture capital funding.

Regardless of the price, the deal is a good indicator that it is insanely hard to build a big, sustainable business as a music startup. Who wants to bet that Rdio is the next one to get snapped up?

Business aside, I am happy for MOG CEO David Hyman for being able to find a home for a startup that he started in 2005. It takes a lot of perseverance to get through the ups and downs of startup life, especially one in the rough-and-tumble world of music.

Related, from GigaOM Pro Research (subscription required): Spotify, MOG demonstrate digital music flux)

Say what? How much did MOG sell for? What is Spotify valued at now?

Om Malik — Fri, 23 Mar 2012 17:31:35 +0000

Updated: For the past week or so, there have been rumors that MOG, the digital music subscription story has been been sold to HTC Corp., the Taiwanese mobile phone maker. Business Insider first reported the rumor and later AllThingsD confirmed that they too had heard similar talk. Our Janko Roettgers confirmed that indeed the two companies had indeed swapped term sheets.

HTC, which had acquired a substantial stake in Jimmy Iovine’s Beats Audio, has been planning to launch its own music service for a while. I had reported earlier this year that the company was in the process of launching its own music operation, likely at Mobile World Congress. Well, it seems building the music platform isn’t that easy, and that explains why it has been interested in MOG. So the big question is how much did MOG get sold for?

Sources close to the company say that MOG was sold for a shade under $12 14 million — peanuts compared to the $25 million it raised in venture capital. The funds came from HTC, but the deal is being funneled through Beats Audio. Another source close to MOG, who got in touch after the story was published, says that the number is significantly higher, but that the deal isn’t done. (updated at 12.19 pm PST)

The really low price also indicates that the company might have lost traction in the market place. MOG founder and CEO David Hyman has recently said that the company had 500,000 active users. However, the US launch of Spotify (with the blessings of Facebook) has acted as quicksand for its rivals including the likes of MOG.

The low price being paid for the company shows that HTC might be interested in buying the software platform more so than the agreements with record labels, which are typically not easily transferable to buyers. Buying a ready made platform only accelerates HTC’s time to market.

In another bit of music industry intrigue, two well-placed sources familiar with Spotify say that the company is raising a big round of funding at a valuation of between $3.5 billion to $4 billion. Spotify has recently launched in Germany and Ireland. It will soon launch in Australia as well as they race to go global. Spotify has more than three million paying users.

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