As this is being written, negotiations between MySpace Music and social music startup Imeem are still underway with issues including how much staff would make the move (possibly engineering and sales), whether cofounder and CEO Dalton Caldwell would come along a la iLike’s Partovi brothers — now execs with MySpace, possible earnouts and more. Any urgency would be on Imeem side. Investors include Warner Music Group (NYSE: WMG) and Mogenthaler; WMG is also part of the MySpace Music partnership.
Why would MySpace Music even bother? One sale advocate listed a few ways that Imeem could complement or aid the larger service:
Imeem has iPhone and Android apps for music streaming; music sharing via Twitter; it’s fully embeddable, including on Facebook (although how long the Facebook part would last is a question given the social network’s content changes); like recent MySpace acquisition iLike, it’s part of Google (NSDQ: GOOG) Music Search; intellectual property; the engineers. Then again, even at bargain-basement prices, Imeem would be one more thing for MySpace and MySpace Music to integrate, one more set of pieces to mix into to an already complicated puzzle.
Imeem recapitalized earlier this year at a valuation of about $10 million after an earlier sale effort failed, losing Sequioa and other investors when they opted not to invest again. The company raised another $6 million on top of the tens of millions that had already disappeared to licensing fees and expenses as black ink remained a mirage, in the hopes that it could make it past the advertising meltdown. A softer-than-expected Q4 and the unwillingness of investors to put in more money has Imeem up against the wall — or at least very close to it. An October lawsuit by The Orchard (NSDQ: ORCD) claiming copyright infringement at $150,000 a pop adds to the pressure. (Om Malik, who already has the company sold, says Imeem and the others “cut bad deals and had painted themselves into a corner.”)
If Imeem had been as good at making money as it was at raising it until now, the struggling startup might have avoided the fire sale now underway. The actual amount of funds raised is hard to pin down because Imeem has disclosed very little over the years; we reported late last year that it was at least $50 million and one person familiar with the situation tells me it went as high as $75 million. Warner wrote off its original $16 million investment, then dipped in the pool again with another investment and lower licensing fees for more equity. Warner also wrote off $4 million in expected income from Imeem earlier this year. How much did it make from licensing fees before and after? Unclear.