warner music has been taking stakes in the streaming music companies – which is a smart move. but they have been taking a bath as they exit the companies (both lala and imeem).
the latest sec filing shows that wmg has lost $11Million on the sale of lala. one has to ask how these guys are running their venturing business? to have exits of businesses and make a loss to companies which will take their tech and change the world??
for labels, they have a vested interest to make these businesses succeed as they are the future sales channels for them. the vertical integration would give the labels a lot more revenue points and power in the marketplace? maybe they are perfectly happy just to have more successfull online music plays and thus make more money, but looking at their past behavior it seems unlikely..
an interesting article about the sale from paidcontent.org
Warner Music Group (NYSE: WMG) got at least $9 million back of the $20 million it invested in online music service Lala.com, after the latter’s sale to Apple (NSDQ: AAPL), according to a proxy statement it filed this morning. This after it wrote down $11 million of its $20 million investment earlier last year, after disappointing results. Besides the money invested, WMG also had warrants worth $4 million which were exercisable based on whether Lala.com was able to help sell 25 million CDs in 5 years after the original 2007 agreement. No surprise, that didn’t happen. It had to do an even bigger writeoff with Imeem, the music service that was also sold last year, to MySpace, for a pennies on the dollar.
Some details from the SEC filing about Lala: “In Dec 2009, the Company sold its equity interest in la la and entered into an agreement to terminate a memorandum of terms relating to the formation of an international joint venture for total cash consideration of approximately $9.0 million as part of a sale of la la to Apple Inc. The warrants had an exercise price that was in excess of the total merger consideration paid in respect of the shares for which it could be exercised and, therefore, expired at the time of the closing of the sale of la la to Apple Inc.”
Meanwhile, WMG also has a 2008 deal with mobile music/content aggregator Thumbplay, to provide music for ringtones and full track downloads, and as part of that it earned about $2.8 million of fees from Thumbplay in fiscal 2009.