Imeem has had a good run the last several weeks, landing some new funding and winning better licensing terms from record labels. But how much will this change the music-streaming site’s near-term prospects? Probably not as much as you may think. Even with lower payments per stream, imeem may well not turn profitable by the time the latest funding dries up, which, according to some reports, will be before the end of the year. Many digital-media companies have resigned themselves to the idea that the ad market won’t start growing meaningfully again until 2010 — and in the meantime, imeem will still have to make the payments to the labels. A look at imeem’s site indicates that the current ad mix likely isn’t enough to support even more favorable licensing terms. Here’s why: (Plus, see imeem’s response below.)
—A lot of video ad inventory on the site is unsold: Video advertising commands the highest rates from advertisers, and thus is important to a site with high licensing and streaming costs like imeem. However, a sampling of imeem’s streams indicate well less than half of its videos are accompanied by advertising. Sprint (NYSE: S) appears to be the biggest video advertiser on the site.
—Banner ads are likely getting low CPMs: T-Mobile is a large buyer of banner ads currently on the site, and Adidas appears to have made a small buy, but most of the banner ads on the site are from advertisers like Lincoln College, Stop & Shop, Vonage and Colgate, which typically do not pay premium ad rates for banners, usually placing buys in the low-single-digit CPM range.
—Dearth of custom sponsorships: The real money maker for music sites are custom sponsorships that advertisers pay premium rates for, but Imeem currently doesn’t appear to have many on its site (few sites do these days, but not everyone is at risk of running out of money by the end of the year). AT&T (NYSE: T) sponsors a section of the site that lists tour dates, but sections like exclusive album releases and “New Music Tuesdays” — prime products for sponsorship deals — don’t have any advertising at all. A Marilyn Manson exclusive stream does have sponsorship from Vitamin Water.
—Selling music may not be the answer: The company recently said it would develop its own store to sell MP3s. With the average profit per song being about $0.20, that would be a nice incremental revenue stream, but not the boost the company needs to become profitable soon enough.
Here is the response from Matt Graves, VP of marketing for imeem:
“Even during the current economic climate, imeem