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.
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.