Digital Media

Now that the digital equivalent of a super-vac, MySpace CEO Owen Van Natta, has sucked up some decent music start-ups--Imeem and iLike--for a song, to bolster the social-networking site's efforts to expand into an entertainment portal, what's next?

According to several sources, the News Corp. unit has turned its omnivorous attentions on Flixster, the popular social-networking site for movies.

Sources said such a deal is not immediately imminent, but that MySpace has been conducting extensive due diligence on the San Francisco-based Flixster, part of a plan to combine it with Rotten Tomatoes, another News Corp.-owned site run by its IGN Entertainment division.

Rotten Tomatoes features mostly premium content, including professional reviews, trailer videos, and news. It has community feature that is just in beta, so it would be a nice fit with Flixster.

How much MySpace would be willing to pay for Flixster is unclear. A MySpace spokeswoman declined to comment at the moment.

In 2007, the start-up was close to being acquired by IAC/InteractiveCorp for $100 million, several sources said. But the deal went south when CEO Barry Diller changed his mind at the last minute.

Founded in 2006 by CEO Joe Greenstein and CTO Saran Chari, Flixster has raised $7 million in funding from Lightspeed Venture Partners, Pinnacle Ventures, as well as garnering an angel investment from Silicon Valley entrepreneur and LinkedIn founder Reid Hoffman.

It has garnered a huge audience--upwards of 50 million--who trade all kinds of recommendations, ratings, news, and even post user-generated movie reviews on its Web site and via widgets on social-networking sites, most of all on Facebook.

While Amazon unit IMDb is still larger in terms of traffic, the more innovative Flixster has been growing much faster and is more social, which makes it attractive to MySpace, sources said.

More important is the mobile growth. Flixster is the No. 1 movie app on Apple's iPhone and leads on other smartphones too.

Story Copyright (c) 2009 AllThingsD. All rights reserved.

Here's an interesting study in contrasts. When MySpace acquired iLike back in August, MySpace left the site mostly intact. The iLike home page is still there, you can still add iLike's music-finding and sharing application to your Facebook page, and iLike is given prominent placement in Google search results for music-related queries, thanks to an October deal between MySpace and Google. (That deal also included several other companies.)

What else do you need to know?

(Credit: MySpace)

On Tuesday, MySpace completed its acquisition of Imeem, a service that used to let users upload music and videos and share playlists. In the press release announcing the finalization of the deal, MySpace noted that it will be "working as quickly as possible" to migrate "aspects of" Imeem to MySpace Music.

What does that mean? As of Tuesday, it means that Imeem's gone. Imeem.com and my personal Imeem profile both redirect to MySpace Music. The press release promises that MySpace will "be working to offer users the Imeem playlists they've created on MySpace Music," but the phrasing on the FAQ doesn't leave me much hope--"will attempt to transition" leaves a lot of wiggle room.

The free Imeem app for iPhone is still in the iTunes Store, but it's going to be inoperable until MySpace pushes an update out, and there's no telling how close the new app will be to the old one.

I always found Imeem a little confusing--especially in its early days--but I did like its user-contributed content model, which gave it a large selection of music, and I personally used it to post a lot of recordings from long-dead bands I used to play in. But I suspect that user-contributed content is one reason why MySpace is treating Imeem so differently than it treated iLike: some of that content may not have been properly licensed from content owners. In contrast, MySpace boasts that its content is "fully licensed."

Unfortunately, using MySpace Music is still a pain. It's gotten a bit better since the last time I took a close look, but I still can't find the home pages for certain artists using the MySpace search engine (Google works), the advertisements are still annoying and intrusive (text ads above search results; audio ads on a music site), and there are still no playable Led Zeppelin tracks. (Although MySpace does have The Beatles and AC/DC, which most other services don't.)

There's no free lunch, and the recent consolidation among free online music sites is beginning to look like a crackdown.

Update 1:32 p.m. PST to include some of the reasons sources say Apple is interested in Lala.

Apple is close to acquiring digital-music service Lala, according to two sources with knowledge of the discussions.

Talks are very advanced, the sources said Friday. One said that the sides have already agreed on terms and have only to sign a final agreement. (Update 6:21 p.m. PST: The New York Times and Wall Street Journal are reporting that Apple and Lala have struck a deal.)

Steve Dowling, Apple's spokesman, said the company doesn't comment on rumors and speculation. A representative from Lala was not immediately available for comment.

Lala is a streaming-music site that sells songs for 10 cents apiece and enables users to store their music libraries on the company's servers. But it has gone through multiple iterations and was once known as a CD-swapping service before reinventing itself as a streaming site.

Exactly what Apple intends to do with Lala remains unclear. Right now, Apple is the largest music store online or offline and has made more money than any other music service by selling downloads. CEO Steve Jobs could start a streaming service, but my sources told me Friday that Apple managers are very interested in working with Lala's engineers, who have come up with "a payment and fulfillment system that could save Apple millions of dollars a year."

In addition, Apple wants Lala's founder Bill Nguyen to come over as part of the acquisition, another source said.

Nguyen is a well-known and respected Silicon Valley entrepreneur who has tried for years to find a music service that is both popular with users (meaning cheap and easy to use) while also generating profits.

According to music sources, the affable Nguyen is also considered my label insiders as one of the more popular figures from the tech sector. Nguyen has typically focused on generating profits as much as whiz-bang technology, which is not always the case with many of his competitors, the sources said.

That said, Lala is not believed to be profitable.

If the deal goes through, it would be the third acquisition of a digital-music site in recent months. MySpace acquired iLike in August and sources said last month that MySpace purchased Imeem.

If Apple is planning some kind of streaming service, the public has shown an appetite for streams that are free of charge and ad-supported.

Many music fans have also clamored for a better way to store music. Right now, most music libraries can be found on an owner's computer hard drive, which can malfunction and potentially destroy thousands of songs. Lala enables users to store songs on the company's servers and access them from Web-enabled devices.

MySpace on Wednesday acquired social-networking site Imeem for an undisclosed sum, but sources with knowledge of the deal say is worth about $8 million.

The News Corp.-owned MySpace has agreed to pay $1 million in cash, but the total figure also includes money for accounts receivable and employee earn outs. Regardless, the price is a big loss for investors who poured upwards of $30 million into the pioneer ad-supported music service.

(Credit: Imeem)

An Imeem spokesman declined to comment.

Imeem will continue to operate as a standalone site, at least initially, according to the sources. One source said that Imeem's brand will unlikely live on as they expect Imeem's assets will be folded into MySpace Music.

At least half of Imeem's staff will likely lose their jobs, according to the sources.

One interesting note is that Imeem was once backed by all four major music labels, but one of the record companies dissolved its position in Imeem weeks ago, the sources said.

Imeem is the fourth ad-supported site either to go bust or sell for peanuts. The sector is starting to look like a graveyard; Ruckus and SpiralFrog shut their doors earlier this year, and iLike was acquired--also by MySpace--for a song.

Backers launched these risky ventures hoping that if the services could attract large enough audiences, ad-money would follow. It hasn't worked that way.

The ad-supported services couldn't generate ad rates high enough to cover the licensing fees the record companies charged--even as in Imeem's case, the labels reduced their fees. Sure, a soft ad market and ailing economy didn't help, but the information that's surfaced about these sites is that they struggled to convince advertisers that streaming music was a good vehicle for delivering ads. It's not.

Internet users don't want ads and don't look at them when listening to songs. That's the dilemma.

Against this backdrop, all eyes should now be on MySpace Music. The question it must answer is how does acquiring Imeem and iLike help turn the lackluster and underachieving site around?

When MySpace Music launched in September 2008, big promises were made. The site was supposed to sell concert tickets and merchandise and branch out overseas. The site hasn't come close to living up to the hype.

While it's difficult to see what Imeem assets might give MySpace an advantage, It might not be a bad idea to tap into the experience of Dalton Caldwell, Imeem's CEO and his top lieutenants.

Sure, they couldn't make Imeem's iffy model work but they know where all the mines are buried. My music industry sources said the labels were always impressed with Caldwell and guys like Ali Aydar, Imeem's chief operator officer as well as Matt Graves, the company's vice president of communications.

They won kudos for helping to keep keep Imeem going when a a cash crunch threatened the company last spring.

In the wake of acquiring smaller digital music services iLike--and now, it looks like, Imeem--MySpace continues to attempt to align itself as the foremost player in the digital music industry. On Wednesday, the News Corp. division rolled out a music charts page to track the most popular music getting listened to on the social site.

It's fairly self-explanatory. There's a prominent "movers" section featuring artists that have seen an uptick in activity recently, and music can be filtered by genre, country, and label category (indie, unsigned, or major). Then there are links to "friend" an artist, buy songs, and watch music videos on MySpace's recently launched music video portal.

(Credit: MySpace)

The design, regrettably, isn't very user-friendly and requires quite a bit of scrolling. And in a world of finely tuned "music discovery" and personalized recommendations, charts can seem a little bit static. A blog post from MySpace Music head Courtney Holt assures that it's "just the beginning of a product and platform evolution that reinforces the key messaging, vision and direction of the new MySpace Music."

MySpace launched its music service last year as a joint venture with major and independent record labels, and has received a mixed response as the industry continues to grapple with the fact that no non-iTunes digital music service has proven to be a huge moneymaker yet.

Multiple sources are reporting that MySpace is in talks to acquire Imeem, the social-networking music service that has struggled with financial problems for some time.

(Credit: Imeem)

Peter Kafka at All Things Digital is reporting that negotiations are in the late stages and that MySpace is making the deal to acquire some of Imeem's talent and technology. News of the talks was first reported by TechCrunch.

Here's my contribution to the news: two sources with knowledge of Imeem say CEO Dalton Caldwell was in New York recently looking for new investors. Imeem was again running short of cash after coming perilously close to a financial crisis last spring. After Imeem received new funding from some of the music labels, sources told CNET that the money would last only through the end of 2009.

An Imeem representative was unavailable for comment, and a MySpace representative declined to comment.

Nobody has reported the asking price but don't expect it to be very much. One of my sources said that Imeem had been looking for a buyer for a while. Nothing had come of it. But Imeem, which made a name for itself by being among the first to offer ad-supported streaming music and being free to users, is likely to be thrilled by this kind of exit.

A sale is another sign that the ad-supported sector is amid a shakeout.

The truth is the sector is in shambles. Ruckus and SpiralFrog shut down earlier this year. Qtrax, a proposed legal peer-to-peer service hasn't even formally launched yet and has struggled with financial problems.

MySpace purchased iLike in August for a price that was reported to be barely enough for investors to break even.

For a breakdown of the challenges that ad-supported music services face, read "How turf wars and miscues crippled SpiralFrog" and "Plenty of proof that ads don't support Web music."

Update at 9:05 a.m. PST: MySpace representative's statement added.

How far we've come in such a short time. When I began this blog in 2007, finding a particular song online was an exercise in frustration. You could subscribe to an all-you-can-eat service like Rhapsody, but cheapskates and occasional music listeners either had to dig deep, engage with a questionably legal file-trading service, or settle for 30-second previews from iTunes or one of its Web-based competitors.

Search results for "U2 Beautiful Day" earlier today. The box at the upper-right is an embedded version of the Lala player, which let me play the complete song multiple times.

Since then, as readers of this blog know, dozens of sites offering free streaming music have emerged, from the dead-simple like Songerize and its successor Songite (enter a song title to play it now) to the fiendishly complicated Imeem (whose original user interface gave me a headache, although it's since gotten much better).

But, let's face it, most people don't read this blog. Again and again, nontechnical music fans are blown away when I show them a site like Grooveshark, which lets you play any song, any time, and even arrange songs in queues and playlists. "Is that legal?" they often ask. (Answer: it depends.)

Today, that all changes. Google announced the integration of playable songs into its search results yesterday, and is slowly rolling the feature out to U.S. searchers. I finally saw the feature in action this afternoon, when I ran a search on "U2 Beautiful Day." (You can test it here.)

To an experienced online music listener, the feature seems a little bit random because Google is using both iLike (recently acquired by MySpace) and Lala to power playable results, and the two offer different experiences. For my first search, Google randomly chose iLike as the default player, and iLike only let me play the song once, then relegated me to a 30-second sample. When I cleared my cookies and tried again, Google made Lala my default player, and I was able to play the full song as many times as I liked. (The experience will also vary by song and artist, depending on what the copyright holders dictate--Led Zeppelin, for example, is available only in 30-second samples on iLike, and most of its songs are completely missing from Lala.)

Some searches also give you links to Imeem, Rhapsody, and Pandora, each of which offers yet another experience--Rhapsody lets you play up to 25 songs per month for free, Imeem is best for finding unusual versions of popular songs (like live takes), and Pandora requires you to create a virtual radio station based on a particular artist or song, which can be useful for discovering other music you might like, but doesn't give you an instant fix.

Whatever. For the average Internet user, this distinction doesn't matter. What matters: when users go to Google to search for an artist's name, song name, album name, or even a snippet of lyrics, they won't just get random text links or YouTube videos. Instead, the first set of links will be to the audio recording itself--in many cases, the entire song. Everybody knows that there's free music available on the Internet, but most casual listeners don't bother to find it. Now, the most-visited site on the Internet will put it right in front of their faces. As awareness spreads, it'll be another nail in the coffin of traditional music media--why listen to the radio?--and a boon for the five companies who signed this deal with Google. Artists and record labels might also get a shot in the arm, as users discover new music for free and perhaps eventually buy a copy to keep.

As for the rest of the online music start-ups out there? They better be on the phone right now, looking for a benefactor.

LOS ANGELES--Already the far-and-away leader in search, Google wants to be a big player in music discovery, too.

The pop-up MySpace player that will appear when clicking the 'play' button in a Google search.

(Credit: MySpace)

The search giant teamed up with News Corp.'s MySpace and streaming service Lala for the Wednesday debut of the new Google music search feature at the historic Capitol Records building in Hollywood. With the new music search, which had been internally code-named "OneBox" when news of the project broke earlier this month, search queries pertaining to something like a song, artist, lyrics, or album will bring up links to streaming songs from iLike and MySpace, as well as links to artist information on Pandora, Imeem, and Rhapsody. The lyrics search is provided through a partnership with Gracenote.

"It is directly embedded and integrated into Google search. There's no special button to push," R.J. Pittman, director of product management for search properties, said in a phone interview with CNET News. Currently, due to licensing and availability issues, the music search is U.S.-only.

There also won't be direct download links in Google: those will be handled through Lala and MySpace. "We push all the music engagement and commerce down through the partners," Pittman said.

Additionally, if a relevant music video is available, the MySpace window that pops up when someone clicks on the "play" button in search results will display a link to that video through MySpace's new music video portal. That's interesting, considering music videos are some of the most popular content on Google's own YouTube--but YouTube video results will continue to show up independently of the new music results in Google searches.

Financial terms of the partnerships aren't yet clear. "Everyone's keeping their own revenues and we're not messing with anything," Lala founder and Chairman Bill Nguyen told CNET News. But MySpace Music President Courtney Holt was a bit more tight-lipped, saying "we're not discussing the financial details."

The MySpace deal is a little more complicated to begin with, though. Google had been in talks with music start-up iLike about integration into music search, but then iLike was acquired by MySpace in a deal that closed earlier this month. Indeed, a statement from Holt says that "this relationship was secured and implemented by the iLike team." But iLike founder Ali Partovi (who's currently on board MySpace's music team) explained that the partnership now has "MySpace branding, (and) MySpace content licensing." Through the integration of iLike's technology, it'll also have concert notifications if someone searches on Google for a band that's currently on tour.

"I think MySpace, along with (Apple's) iPod, is one of the most trusted brands in music, one of the most resonant to consumers," Partovi said. MySpace is also reported to be in talks with Microsoft to power a music feature on MSN.

Music search is something that Google could really dominate. According to traffic firm Experian Hitwise, 6 percent of Google's top 1,000 search-related terms deal with music, and already 30 percent of traffic to sites that Hitwise classifies under the "music" umbrella comes from Google.

Considering Google's reach, it's a big win for both MySpace, currently struggling to redefine itself as a pop culture powerhouse rather than a social network through its MySpace Music service, a joint venture with major and independent record labels, and Lala, which also has a new song-gifting deal with Facebook. "We think (Google's music search) going to have a thousand percent increase in our sales, an order of magnitude more," Lala's Nguyen told CNET News.

This also means that music-related search results are getting a sheen of legitimacy on Google. With official partnerships, Google's most prominent music search results will be from sites that have licensing deals in place with the major labels, rather than potentially pirated content. Google's history with the music industry is spotty at best: it's had to strike its own deals with the major record labels, and relations haven't always been positive. Music search puts it all into order, partners in the deal say.

"Instead of ending up with a pirate site and a page with a bunch of ads or random lyrics sites, you wind up with a play button," Nguyen said.

Updated 4:30 p.m. Just after Google and Lala made the announcement official (in what was probably not a coincidence) Yahoo released a blog post designed to point out that they've been offering this kind of music search for a while. "We've made it easier to find music videos, artist information, and play full length songs from within the search results page. This is just one of the many ways Yahoo! is enhancing the search experience for music lovers," said Larry Cornett, vice president of consumer products for Yahoo Search.

Microsoft's MSN is in preliminary talks with MySpace about using the social-networking site's music service, MySpace Music, to help power music offerings on the giant portal.

While sources at both companies cautioned that the talks are still early, Microsoft, which has its own music site that it programs with original and partnered content, execs are interested in goosing it.

That's because MSN Music consistently ranks substantially lower than other big online music properties in terms of traffic, while MySpace Music is always near the top.

Sources said Microsoft execs don't think they can do as good a job as MySpace is doing and don't see the point in striking needed but complex deals with music labels, which the News Corp. property already has.

In an April report by comScore, for example, MySpace Music was No. 2, just behind AOL Music, with 27.4 million unique monthly visitors. MSN Music was No. 6 with just 7.4 million.

Nonetheless, music is an area MSN cannot lag so badly in, given that entertainment is one of the key categories it is focusing on as it preps for a major renovation of the portal.

As BoomTown wrote in mid-July about a wide variety of changes coming to MSN:

MSN, Microsoft's online portal, is also preparing a major redo of what U.S. and, possibly, international consumers will see, as it doubles down on five key content verticals, while cutting back on others.

In a new focus that will start to be apparent in the next month, MSN will heavily add to its News, Sports, Finance, Lifestyle and Entertainment offerings, weaving more data from [its search service] Bing into the mix.

"It's a decision to make it so MSN does less better," said one source close to the situation. "So there will be a focus of attention on a smaller number of categories in which we can be either #1 or #2 in, rather than #4 or #5."

It is not clear exactly what the financial terms would be in any tie-up between MSN and MySpace, which could include licensing of content and other services related to music.

But such a deal is not unusual--MSN's sports site is powered by Fox Sports, which is another News Corp. property.

And such a partnership would also key into concepts that MySpace CEO Owen Van Natta outlined in a recent interview onstage at the Web 2.0 conference.

Key among them was boosting music and entertainment overall and making them the prime focus in the site's efforts at reinvigorating itself, as well as expanding distribution of MySpace.

In fact, MySpace recently bought social music service iLike to expand its distribution all over the Web, for example--including on Facebook, the longtime social-networking rival from which MySpace is now trying mightily to differentiate itself.

In his appearance, Van Natta also unveiled a music video hub, the ability by users to buy music using Apple iTunes, and a set of better analytical tools--called MySpace Music Artist Dashboard--to help artists figure out how to best work with fans.

But MySpace needs more than these, and a link with Microsoft would provide it with a traffic gusher, since MSN's main page remains one of the most trafficked sites on the Web.

If such a distribution partnership were struck, it would also raise the question of what will happen regarding MySpace's negotiations with Google over renewal of their search deal, which expires next summer.

Dissatisfaction over the pricey three-year deal has been expressed by both sides; their mutual grumbling is one of the biggest open secrets in Silicon Valley.

Doing a search deal with Bing is the obvious and only alternative, although few expect any agreement to be as rich as the one MySpace did with Google in 2006 for $900 million.

Interestingly, it was recently reported that both Google and Facebook were bolstering music search and sales offerings, and Google's apparently includes the use of the iLike player.

In other words: this could get really complicated.

Execs at both MySpace and Microsoft I reached out to declined to comment.

(Full disclosure: News Corp. owns Dow Jones, which owns AllThingsD, the site where this article originally appeared.)

Story Copyright (c) 2009 AllThingsD. All rights reserved.