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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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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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Beats buying up music service MOG

Ryan Kim — Tue, 20 Mar 2012 21:54:47 +0000

Beats Electronics, the headset manufacturer founded by rapper Dr. Dre and now majority owned by HTC, has reportedly bought online music service MOG though the deal is not final, according to a new report from AllThingsD. We confirmed yesterday that HTC had swapped term sheets with MOG in the last couple of weeks, after Business Insider first reported the rumored acquisition. Now, it looks like the acquisition is a go, though it is Beats doing the acquiring, not HTC.

The Verge quoted HTC saying it was not buying MOG directly, even though it invested $300 million in Beats last year for a 51-percent stake. It’s unclear exactly how Beats and HTC will use MOG, though Om reported a month ago that HTC was rumored to be in talks to launch its own music subscription service on its handsets. Having MOG and its deals with the music labels could help HTC or Beats quickly create their own music service.

MOG, which has raised $25 million, has struggled to compete against bigger rivals like Spotify and Rdio. The service has about 500,000 subscribers, far behind Spotify and its 3 million paying users. The company has been the subject of persistent acquisition rumors in recent months, but the company’s CEO David Hyman denied any such plans in February.

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Online music is hard: iLike shuts down

Janko Roettgers — Wed, 08 Feb 2012 00:19:13 +0000

Myspace officially pulled the plug on the social music service iLike.com today, putting an end to what once was hailed as the most popular social music service (hat tip to hypebot). iLike was one of the first startups to offer a combination of free music streaming and social networking, which helped it to gather some 55 million registered users by the time it was bought by Myspace in 2009. However, its revenue never added up, and now it is joining Napster, Lala, Imeem and others in digital media heaven, proving once again that making money with music online is really, really hard.

iLike launched as a standalone service in 2006, initially focusing on a combination of a web service and an iTunes sidebar. In early 2007, it debuted as one of the first music apps on Facebook, and soon attracted millions of new users per month. What made iLike so successful? The service not only offered free streaming, but also tracked users’ listening habits and served up social recommendations. The service also attracted bands and labels, who used it to create buzz for new releases.

At one point, it had 10 million monthly active users on Facebook alone, generating some 1.5 billion page views. The company got $17 million in funding, including a $13 million investment by Ticketmaster, and briefly seemed like the next big thing in online music.

However, iLike struggled not only with licenses for its music, but also with its reliance on Facebook as a platform as well as its overall business model: Turns out, serving up free, ad-supported music is really, really hard, and concert ticket referral fees never really made a big difference either. iLike eventually sold to Myspace for a reported $20 million in 2009, and has since been living alongside the more popular Myspace Music service, slowly withering to obscurity.

Of course, iLike isn’t alone with this fate: Imeem, which offered a very similar service, was also absorbed and eventually shuttered by Myspace. Napster’s assets were sold to Rhapsody last fall, and the service eventually shut down in December. And Apple shuttered Lala’s streaming service after it bought the company in late 2009 to power its cloud platform.

All of this should be a warning to music services like Rdio and MOG, which currently are trying to grow their user base with free music. Insiders have long predicted that even Spotify, arguably the biggest of this new crop of streaming services, can’t be profitable with the licenses offered by the labels. And if there’s any lesson to be learned from iLike, it’s that a large user base alone isn’t enough to succeed.

Image courtesy of Flickr user Hitchster.

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Forecast: the future of the digital music industry

Tue, 24 Jan 2012 07:55:33 +0000

The music industry has been in trouble for a long time. But now, aided by smartphone proliferation, new entrants are aggressively pushing alternative business models. This report examines the U.S. digital music market’s key disruption vectors: the areas where large market shifts are occurring and where companies will position themselves to gain share and increase revenues. These vectors will take some time to play out, but the overall industry should finally return to growth within the five-year forecast horizon, as digital music spending, driven by subscriptions, will average double-digit yearly growth to total $4.1 billion in 2015. Disruptive companies include Facebook, MOG and Pandora. For a full list of companies, and to read the full report, sign up for a free trial.

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The 6 ways digital music is being disrupted

David Card — Thu, 10 Nov 2011 17:56:41 +0000

As media and entertainment went digital and online, many looked to the music sector as the canary in the coal mine — a scary harbinger of things to come. Indeed, the transition to digital music has not been enough to restore the industry to growth, let alone to its 1999 glory days of $14.6 billion in recorded music sales. Digital now comprises over 40 percent of consumer sales, but the whole market was worth only $5.9 billion in 2010. Even digital felt stagnant.

But that’s changing.

At GigaOM Pro, we’ve identified six digital music disruption vectors: areas of huge innovation and disruption where big shifts in market share are there for the taking. The companies that can ride these disruption vectors will be the winners in digital music in the years to come:

Smartphones are driving anywhere access, but don’t forget about cars, the place where most listening by Americans occur. Anywhere access will be the most important digital music disruption vector.
Two business model disruptions will be nearly as critical. Subscription services from companies like Spotify, Rhapsody and MOG aim to unseat the traditional music spending mix from purchase to “rental.” At the same time, Pandora is reinventing radio, and using advertising revenues to pay royalties that terrestrial radio station never had to pay to music rights holders. So advertising, and subsidization schemes along the lines of what Deezer is doing with Orange in France, will be highly disruptive.
Social media is changing music and music service discovery. Facebook’s open graph is exposing friends’ listening habits and encouraging sharing. Social media plus personalization and sophisticated recommendation technologies could unseat radio as the most critical means of music discovery.
Two areas will be less disruptive. The newer digital music services mostly replicate listening experiences – on-demand versus programmed. Highly engaging services like Turntable.fm probably require too much participation by casual listeners to have mainstream impact. And someone will have to fund artist development and marketing, even if the role of labels will evolve.

The near-term net result of this disruption will be a shift of dollars to digital services and downloads. Digital will total 65 percent of the overall $6.3 billion U.S. spending we’re forecasting for 2015, finally returning the overall industry to growth.

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Photo by Pinar Ozger.

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Connected world: the consumer technology revolution

Thu, 10 Nov 2011 08:01:08 +0000

Connectivity changes everything. That’s the credo driving just about every corner of our day-to-day lives. As human beings, we are now connected to one another through not just our social networks but also our cars, the books we read, the albums we download and even our own health and wellness habits (to name just a few areas). With that in mind, GigaOM Pro has singled out certain areas in the technology industry where we see this shift to constant connectivity taking place most drastically.

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MOG sees 246% user growth, thanks to Facebook tie-in

Colleen Taylor — Tue, 01 Nov 2011 21:55:48 +0000

It’s been a good month for music streaming service MOG.

The Berkeley, California-based company just released new growth figures, and it turns out that the music platform launched by Facebook in late September has given MOG a major lift.

MOG said Tuesday its monthly average users reached 160,000, representing 264 percent growth for the month of October. And it’s only going to get bigger in the weeks ahead: The company now projects that it could have more than 2 million monthly users by year’s end, based on its current growth rate.

MOG attributes the boom largely to the Facebook integration it rolled out a little over a month ago. At that time, MOG launched a free version of its on-demand music streaming service for Facebook users. “This is the best distribution platform we’ve ever had,” MOG CEO David Hyman said in the release announcing the growth figures.

It’s not just good news for MOG — it’s also good news for Facebook. For months now, Mark Zuckerberg has been talking up the company’s strategy of enabling other companies to attract users and make money by using Facebook’s social network as a platform. At a press event announcing a partnership with Skype this past summer, the Facebook CEO said: “We want to leave as much as possible to independent entrepreneurs and companies who are going to be best in class at doing these things … We build the infrastructure.” Testimonials from happy Facebook partners such as MOG is a testament to the feasibility of this strategy, and it will be interesting to see how it plays out in the longer term.

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A year after shutdown, LimeWire still hugely popular

Janko Roettgers — Thu, 15 Sep 2011 12:00:41 +0000

LimeWire has been shut down for almost a year, but the former file sharing service is still hugely popular with people looking to download free music and other forms of media. An injunction by a U.S. District Court ordered LimeWire to suspend its operations in October 2010, and the company’s website has been replaced with a single splash page informing users about the injunction ever since. However, that page saw more than 1.1 million unique visitors in August alone, according to Google Analytics statistics obtained by GigaOM, which makes one wonder: Was the decision to shut down LimeWire, rather than allowing the company to launch a licensed music service, a mistake?

LimeWire was one of the pioneers of P2P file sharing, and the company attracted millions of users after competitors like KaZaA and Napster were forced to shut their doors. At one point, estimates put LimeWire on every third PC worldwide. The company was eventually sued by the major labels in 2006, which alleged that it knowingly contributed to its users’ copyright infringement.

Company executives tried to deflect the lawsuit with a number of initiatives aimed at monetizing file sharing, which included an MP3 store, an ambitious attempt to monetize contextual advertising within LimeWire and finally a music subscription service. The big labels didn’t want any part of that and insisted that LimeWire instead had to shut down and pay for its sins. They eventually got what they wished for when U.S. District Court judge Kimba M. Wood sided with the music industry in May 2010, only to order a shutdown of the service in October.

LimeWire’s client has since been unusable, and the website links to a PDF of of Kimball’s court order instead of the LimeWire software. That doesn’t stop countless visitors from stopping by every month: Google Analytics clocked 1.1 million visitors in August alone. 85 percent of these were new visitors, which makes sense: The current injunction notice really doesn’t make you want to come back. 47 percent of those visitors came from the United States, and 53 percent were from other countries — a tribute to the fact that LimeWire was available in close to 20 different languages. More than half — 55 percent — of LimeWire.com traffic came from search.

In other words: LimeWire still has excellent Google juice, and it’s still very much on people’s minds despite having been all but dead for close to a year. Granted, converting all these file sharing users into paying customers is not an easy feat. However, services like Spotify have been fairly successful with freemium business models that capture people in need for free music and eventually get them to pay for a premium version. Maybe LimeWire should have been allowed to try the same. After all, chances are that all those folks who Google for LimeWire simply search for The Pirate Bay next.

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