Media Maverick

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 it began streaming music to users' PCs.

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 have plans to 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 one of the more popular figures from the tech sector because he has typically focused on generating profits as much as whiz-bang technology. That is not always the case, the sources said.

That said, Lala is not believed to be profitable.

If the deal should go 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 the kind of 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. Lala enables users to store songs on the company's servers and access them from Web-enabled devices.

Executives of online music video service Vevo are close to finalizing an agreement that will bring content to the site from EMI, the smallest of the four top recording companies and the label of Coldplay, Katie Perry, and Norah Jones.

EMI's New York headquarters.

(Credit: Greg Sandoval/CNET)

The deal between Vevo and EMI could be announced at any time, sources familiar with talks told CNET.

"EMI is in discussions with Vevo," EMI spokeswoman Jeanne Meyer acknowledged, though she declined to disclose the current stage of the talks.

Scheduled to launch on Tuesday, Vevo will soon be able to offer music videos and other content from three of the four top labels: Universal Music Group, Sony Music Entertainment, and EMI.

The only major record company not partnering with the venture is Warner Music Group. Sources said talks between Warner and Vevo continue.

Universal Music founded the service earlier this year, aiming to cash in more on the popularity of music videos. At YouTube, which is powering back-end operations for Vevo, Universal's videos have accumulated the most views of any YouTube channel.

Universal has long wanted a standalone site to showcase video content, which includes traditional video but may also include other video content produced by artists.

Of YouTube's 25 all-time most watched videos, 14 are music videos. EMI recently signed a video-licensing deal with Hulu.

Alec Baldwin fans needn't worry that Comcast will soon pull "30 Rock" or other NBC Universal shows off the Web.

The entrance of NBC Universal's office building at 30 Rockefeller Center.

(Credit: Greg Sandoval/CNET Networks)

Comcast managers said Thursday, following the company's announcement it had acquired a controlling stake in NBC Universal, that it will be business as usual at Hulu, the joint venture operated by NBC Universal, News Corp., and Disney.

Ever since rumors of the acquisition began to swirl in September, questions were raised about whether Comcast would try to kill Hulu to discourage cable customers from dropping their subscriptions. Some critics of the deal said Comcast could also limit access of NBC Universal's TV shows and films to other popular distributors, such as Netflix and iTunes. It appears that some of this may happen and some of it may not.

During a conference call, Comcast executives said they anticipate that some content will appear online at Hulu, and other shows will appear on TV Everywhere, the Hulu competitor that Comcast, Time Warner, and other cable companies rolled out last summer.

"Comcast is too deep into their Internet-related investments for me to believe that they are hoping to clamp down on consumer enjoyment of NBC content," said James McQuivey, a digital-entertainment analyst for Forrester Research. "They have spent far too much money buying companies and developing infrastructure to suggest they are going to make it a 'my-way-or-the-highway' distribution scheme. It would be absolutely foolish to buy an expensive property like NBC Universal and then cut the legs off of it."

Hulu's freedom
Okay, so Hulu won't disappear once the acquisition--which still needs government approval--is finalized, but Hulu fans are concerned about how the site will develop. Many had long hoped that the service might one day offer a better selection of full-length feature films and past episodes from hot TV shows. Now, Hulu offers only a smattering of films, and to watch episodes of a TV show from a prior season, a fan must plunk down for a DVD.

Most importantly, Hulu fans want to continue watching without paying subscription fees, which has been discussed publicly by some of Hulu's backers, including Jeff Zucker, NBC Universal CEO.

Free content was the promise that made consumers so giddy about Hulu and YouTube not that long ago. Cable subscribers were thrilled by the possibility that they could watch the best shows and films without having to pay fees. The NBC Universal acquisition is just the latest sign that this dream might be in jeopardy.

Paul Gallant, an analyst at Concept Capital's Washington Research Group told The Washington Post that Comcast could "harm consumer welfare by preventing Internet video from becoming a viable cut-the-chord threat."

"It's a little bit Pollyannish to say 'I can cut cable because everything I want is on the Internet,' because it isn't," McQuivey said.

The big knock on Hulu and other legal video sites is their selection of films and TV shows is still pretty poor. Under Comcast ownership, Hulu will unlikely be unable to change that. More probable is that Comcast will use NBC Universal's content to sweeten its offering to paying subscribers.

"The goal of Comcast is not to make it hard for people to get content," McQuivey said. "The goal of Comcast in the future is to make it really easy to get content and that's what people will pay for.

"In the future, Comcast isn't going to say 'Here's 500 channels delivered to one set-top box,'" he continued. "In the future, they'll say 'Hey, you know that subscription you're paying us every month, that buys you red-carpet access to the best content. No matter what you want to watch we have the license to it. We're going to deliver it to you online, to your game console, to your connected television or Blu-ray player.'"

But what about Netflix and iTunes? Doesn't the Comcast-NBC Universal deal put them in a position of competing with a major supplier?

Is Netflix friend or foe?
Netflix looks less like a DVD-rental business and more like the Web's version of a cable company with each passing day. For more than a year now, Netflix has streamed movies over the Web to anyone who pays the company's subscription fees. CEO Reed Hastings raised the stakes in the competition with cable companies by partnering with set-top box makers and TV manufacturers to create systems that enabled Netflix customers to watch streaming films on their flat screens.

Jumping to the TV set was huge for Netflix. No longer latched to the PC, the company was now threatening cable companies on their home turf. But if content is king, then Netflix was offering only a duke.

Just like Hulu, Netflix offered cable subscribers a cheaper alternative. Just like Hulu, Netflix's library lacks new and hot titles. Without the best content, the cable companies still hold an advantage over Netflix. Since Netflix is now a direct competitor to Comcast and other cable companies, it will be interesting to see what kind of terms the Web's No. 1 rental store gets from the new NBC Universal?

As for Apple, it's highly unlikely that Comcast will tinker with NBC Universal's arrangement for digital download sales at iTunes. The very public quarrel between the companies over pricing in 2008 is behind them.

In that case, Apple gave NBC Universal more flexibility over pricing. Apple CEO Steve Jobs has shown respect for Hollywood's lucrative practice of giving exclusive film access to certain distribution platforms over specified periods, called "windows." Jobs is also purveyor of the Web's most successful video-download store, so the relationship will likely remain unchanged.

But McQuivey sees a potential problem for Apple should the company decide to broaden its video business.

Apple could become an over-the-top pay TV provider," McQuivey speculated. "Apple should say 'You buy an Apple TV from us and pay $28 a month and we'll give you access to this number of downloads and all of this TV-network content for free. They are one of the few companies that could really create this amazing little business model of mixing Internet downloads with Internet streaming with over-the-air HD broadcast...Lets be honest, Apple users have fairly shared tastes and as a result it would be easier for Apple to serve its customer base this way than it is for, say, Comcast. Comcast has to offer the world, where as Apple only has to offer what's cool."

It should be noted that in every scenario McQuivey discussed, he mentioned price. In his vision of the digital future, Internet distribution looks a lot like cable.

According to McQuivey, "All of these Internet delivery solutions are going to face some kind of reckoning over the next couple of years. It shouldn't come as a surprise that Hulu is going to evolve to include some kind of pay model."

Another e-tailer criticized by federal lawmakers two weeks ago for profiting from "misleading" and "deceptive" marketing practices appears to be rethinking its position.

VistaPrint, an online printing company, announced Monday it has "terminated its contract" with Vertrue, a so-called post-transaction marketing company that has come under scrutiny along with competitors Affinion and Webloyalty. This summer, the U.S. Senate Commerce committee began looking into scores of consumer complaints about the marketers--some going back years.

VistaPrint said in a statement that the company's contract with Vertrue ends December 20.

The three Connecticut-based marketing firms are accused of helping well-known online stores, including Buy.com, Travelocity, Expedia, Pizza Hut, Hotwire, and Classmates.com, dupe consumers into joining loyalty programs and paying up to $20 in monthly fees. According to a government report released last month and expert testimony, perhaps as many as 30 million people have unwittingly joined these loyalty programs.

Lawmakers allege that the marketing firms presented ads to consumers during the transaction process and not only were the terms of the membership requirements obscured by large blocks of small print but the retailers also allowed the marketers to charge their customers' credit cards without the cardholder first providing the card number and expiration date.

The vast majority of transactions online occur only after a cardholder provides their own card information. Those who study consumer behavior say that many online shoppers are lulled into a false sense of security because they simply don't know retailers can sell access to their credit card information. The arrangement between the e-tailers and the third-party marketers appears to be unprecedented.

Members of the Commerce committee, who held a hearing on the practices last month, called them a "scam" and at least one discussed the possibility of arrests.

John Rockefeller, the committee's chairman, said during the hearing that Continental Airlines had informed him it planned to stop working with the marketers and U.S. Airways had indicated it would do the same.

Look for more merchants involved to wash their hands of Vertrue, Affinion, and Webloyalty. One reason is that the explanations retailers have typically offered: they received only a small percentage of customer complaints and that the marketers "offered value," to customers appear to get blown up by the government's report.

Investigators for the Commerce committee document how many e-tailers were aware that the practices employed by Webloyalty, Vertrue and Affinion misled their customers.

For example, the government presented a copy of an e-mail exchange between employees of 1-800-Flowers.com and Affinion. The worker representing the Web flower shop wrote in November 2007 that there was concern about the amount of customer complaints regarding Affinion's membership program. Did they kill the program?

"I know that our relationship with Affinion is a huge boost to our revenue," wrote the representative of 1-800-Flowers.com. "I wouldn't suggest mothballing the program since it is so lucrative."

Web shoppers are in need of a digital-age Ralph Nader, the kind of firebrand consumer advocate who can focus public scorn on unscrupulous merchants.

Jeffery Boyd, Priceline's CEO, is among the merchants who "betrayed" customers, according to members of the Senate Commerce committee.

(Credit: YouTube)

Last week, the U.S. Senate Commerce committee revealed that some of the Web's best-known retailers, including Barnes & Noble, Hotwire, Yahoo, Pizza Hut, Travelocity, Fandango, and Victoria's Secret, were part of a dubious marketing operation designed to mislead their own customers.

Serious questions about who's policing e-commerce were raised after the Commerce committee issued a report detailing how three marketing firms, Affinion, Webloyalty, and Vertrue, generated $1.4 billion with the help of the e-tailers--largely by deceiving consumers into paying up to $20 a month for loyalty-program memberships. (Note to reader: take a look at the Commerce committee's report (PDF), as it's well written and seems to catch the e-tailers cold).

The lure for millions of consumers typically starts this way: Marketers present ads to them late in the transaction process at a retail site. An often-unwitting consumer is offered cash-back rewards if he or she provides an e-mail address. Tucked into the fine print are the full terms of the deal. By providing an e-mail address, a consumer agrees typically to pay between $10 and $20 a month.

For this number of marquee merchants to be mixed up in such a questionable gimmick seems unprecedented in the brief history of online commerce. Going into a holiday season that is already supposed to see soft spending, the scandal could undermine confidence in Web shopping, which generated $60 billion in sales during the first half of this year, according to the Senate report.

In their report, Senate investigators learned that Webloyalty surveyed 308 past and current users. This was the result.

(Credit: U.S. Senate Commerce committee)

One of the most glaring side issues of this fiasco is that for nearly a decade, consumers complained about these practices but few people in authority seemed to care. What is apparent is that many people in positions to help shoppers didn't, or from the perspective of some consumers, may not have done enough. They include:

Connecticut AG Richard Blumenthal
On paper at least, Connecticut appears to be a haven for controversial marketing companies. All three of the marketing firms under investigation by the Senate--Affinion, Vertrue, and Webloyalty--are based in the state.

In 2006, Blumenthal settled a lawsuit with Trilegiant (PDF), the name Affinion was called then, for $14.5 million. But Affinion continues to operate, and Blumenthal hasn't won anything from the other two firms.

In April, Blumenthal launched an investigation into Webloyalty. That came one month before the Senate Commerce committee launched its probe. The feds have since held a public hearing and shared revealing information about all three marketing firms with the public. Blumenthal, who has been Connecticut's attorney general since 1990, promises more action.

"I will continue to vigorously and aggressively fight membership club scams," Blumenthal announced on the day the Senate Commerce committee held its hearing.

Blumenthal did not respond to multiple interview requests.

The retailers' directors and CEOs
For readers who question whether the CEOs and directors of such companies as Orbitz, Continental Airlines, US Airways, and 1-800-Flowers knew about what the marketing companies were up to on their behalf, this is what the government had to say:

"Committee staff has spoken to more than a dozen e-commerce partners of Affinion, Vertrue, and Webloyalty and has reviewed thousands of pages of e-mail communications," according to the Senate report. "The interviews and the e-mail communications provide abundant evidence that the e-commerce partners are aware that their customers are being misled by the enrollment offers from Affinion, Vertrue, and Webloyalty."

What would make a director or CEO take such risk with their company's reputation? In July, blogger Andrew Left, who specializes in shorting stocks, wrote that VistaPrint, an online printing company and a retail partner of Vertrue's, has generated as much as 44 percent of its quarterly net income by charging Vertrue access to its customers' credit cards.

But for even the most profit-at-all-cost investor, the questionable ploy could risk breaking customer trust and appears to have already battered stock prices.

Last week, the stock price of VistaPrint traded at nearly $56 the day before the Senate hearing on November 17, but it closed Tuesday at $50, a 10.7 percent drop. Shares of United Online, parent company of Classmates.com--which reportedly generated $70 million from the questionable marketing practices--fell from $8.40 before the November 17 hearing to $7.05 on Tuesday, a loss of about 16 percent.

When contacted, VistaPrint referred me to statements the company made earlier in the year in documents filed with the Securities and Exchange Commission. In a 10-K SEC filing, the company said it expected revenue from membership discount programs "will decrease in the future" to possibly zero.

The big question is whether VistaPrint made that disclosure thinking that its payday would end as a result of the Senate investigation or one of the several lawsuits filed against it and Vertrue.

Visa, Mastercard, and American Express
The biggest credit card companies might also want to explain how they continued to process transactions from Webloyalty, Affinion, and Vertrue, when apparently they had received scores of complaints about these companies.

When consumers ask their credit card company to force a retailer to issue a refund, it is called a chargeback. A merchant that sees too many chargebacks is supposed to suffer some penalties. For instance, at Visa, chargeback-prone merchants are supposed to be fined and eventually booted off Visa's network. What happened here?

A Visa spokeswoman said she was unable to comment at this time. Representatives from Mastercard and American Express were not immediately available.

Names of online merchants that "betrayed" their customers according to John Rockefeller, chairman of the U.S. Senate Commerce committee, which is investing alleged deceptive marketing practices.

(Credit: U.S. Senate Commerce committee)

First, the good news for consumers: the U.S. government's investigation into how dozens of well-known online stores worked with controversial marketers to "deceive" customers out of $1.4 billion has prompted some retailers, including Continental Airlines, to sever ties with the marketers.

Mark Goldston, chairman and CEO of United Online, parent company of Classmates.com, which banked $70 million from marketing practices now under investigation by the Senate Commerce committee.

(Credit: United Online)

Now, the bad news: the marketers--Affinion, Vertrue, and Webloyalty--are still in business and judging from the responses of many of the retailers involved, such as Priceline, Classmates.com, FTD, Shutterfly, and Orbitz, it will be business as usual. They see nothing wrong with the marketing practices that millions of angry online shoppers and members of the U.S. Senate have called a "scam," "robbery" and "theft."

While the U.S. Senate Commerce committee produced a staggering amount of documentation during a hearing last week that appears to show consumers are misled into signing up for so-called loyalty programs, the retailers continue to suggest it's their customers who are at fault.

The controversy began last May, when the Commerce committee launched an investigation into the practices employed by Vertrue, Affinion, and Webloyalty. The committee's investigators found thousands of complaints going back years from people who said they discovered "mysterious charges" on their credit cards and struggled to discover how they got there.

The Senate's investigators said they learned that the retailers had made an unholy alliance with the marketers. Under most of the agreements between the marketing firms and retailers, an advertising page is presented to a shopper while they complete a transaction at the retailer's online store. Many shoppers say they entered their e-mail address and pushed a large "Yes" button on the ad because it appears to be a $10 cash-back offer or coupon. Many of those that complain say they thought they were being rewarded by the retailer for making a purchase.

Written in much smaller print within the ad are the full terms of the deal. A customer is notified there that by providing their e-mail address they are joining a membership program and agreeing to pay one of the marketing firms a monthly fee, typically between $10 and $20.

Despite being blasted last week by members of the Commerce committee, most of the retailers involved haven't done much repenting.

Orbitz "does not pass on any personally identifiable customer information to third party vendors without their permission," the travel site said in a statement.

United Online, parent company of FTD and Classmates.com, a company that the government said banked $70 million via the three marketers said: "We believe that our marketing practices provide clear disclosure. We do not transfer our customer's credit or debit card information to third parties without our customer's consent."

Priceline said the terms of the deal have "been clearly and fully explained."

It's all your fault
The inference is clear: The people complaining about this are the ones who screwed up. The terms of the deal were all in the ad so that means anyone who was charged the monthly fee either wanted it at the time or was negligent.

I can start by listing all the information that the government has found that shows that as many as 30 million consumers were unaware that they were signing up for the loyalty programs. But first, let's look at the obvious.

Webloyalty, Affinion and Vertrue all say they do their best to make it clear to consumers what they're signing up for. That's nonsense of course. If their claim was true, they would simply insert the following graph or something like it high up into their ads:

BY ENTERING YOUR CREDIT CARD NUMBER YOU ARE REGISTERING FOR MEMBERSHIP PROGRAM AND YOUR CREDIT CARD WILL BE CHARGED $12 PER MONTH FOR THIS SERVICE UNTIL YOU CANCEL YOUR MEMBERSHIP. ENTER CARD NUMBER HERE:________. EXPIRATION DATE HERE:________.

Voila. End of confusion.

This simple fact was presented in a Jan. 8, 2007, court filing that was part a class-action lawsuit filed against Webloyalty, one of several suits filed against the three marketing companies over the years. In this case, the attorneys representing plaintiff Joe Kuefler sized up why they believed Webloyalty doesn't display its terms in this clear way or ask consumers to input their credit card information themselves.

"The answer is nefarious," the lawyers wrote. "If customers had to retype their credit card numbers, they would know that they were registering for a monthly fee-based service and defendants would not be able to get rich by fooling people into signing up."

Confusion breeds deception
Here's the next obvious fact that readers should know: burying important contractual information deep inside big blocks of text isn't new. Creating confusion around a purchasing experience and then obtaining a consumer's credit card information from someone other than the owner to make charges isn't novel. These ideas have been around in some form or another for decades and are outlawed in many parts of the brick-and-mortar world. These tactics won't fool everyone, but they will mislead enough consumers for the companies to profit.

In the court filing against Webloyalty, Kuefler's lawyers said that if they could get their hands on the company's internal documents they could prove Webloyalty knew that most "members" were duped into signing up. Well, the government did obtain documents.

According to the Senate Commerce committee's report a Vertrue employee once wrote that "cancellation calls represent approximately 98 percent of call volume" to the company's customer service operations. One Webloyalty employee said in an e-mail that "90 percent of our members don't know anything about the membership."

Documents obtained by the government show Affinion estimated that the chances of obtaining money from a consumer would be four times higher if a retailer handed over a customer's credit-card information to the marketing firm than if the firm had to get it from the actual cardholder.

Prentiss Cox, a former assistant attorney general and now a Minnesota law professor, says that in his decade-long experience studying the marketing practices employed by Affinion, Vertrue and Webloyalty, it's clear to him that those who voluntarily sign up for the loyalty memberships run by those companies is less than 5 percent.

Since I began writing about this in July, I've seen a lot of reader feedback from people who don't believe they could ever be misled into signing up for the membership programs. But I've also read thousands of complaints, which can be found here, here, and here. Among those that have claimed to have been duped are lawyers, computer programmers, vice presidents, U.S. Army veterans, and journalists.

The government wrote that more than 35 million people have been enrolled in Affinion, Vertrue, and Webloyalty's clubs.

Cox says the marketing techniques used by Affinion, Webloyalty, and Vertue work because shoppers have been conditioned to believe that on the Web they can't be charged without entering their credit card information. He notes the ads that Affinion, Vertrue and Webloyalty stick in the faces of consumers come late in the transaction process, when a consumer might think they need to click the "yes" button and enter their e-mail address to verify their identities. In addition, the ads "are sold as free offers," Cox said. This lowers a shopper's guard.

Another effective technique employed by the marketing companies is that they know many people will be embarrassed. Many consumers will hear that they entered their e-mail address and will assume they erred. Some won't make a stink because they don't want to admit that they don't check their bank statements well enough.

By saying, "we never release credit card information without the consumers authorization," the marketing companies and their retail partners imply that the money their customers lost was caused by their own negligence.

Affinion, Vertrue, Webloyalty, and their retail partners are all profiting from their customers' shame, when it is they who should be ashamed.

Webloyalty illustrated for potential clients how much easier it is to generate "high revenue" from a consumer when the firm can get their credit card information from a retailer ('card on file') instead of the card owner. Members of a Senate committee have called such practices a 'scam.'

(Credit: U.S. Senate Commerce committee)

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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.

Courtney Holt, MySpace Music's chief, is on a buying spree.

(Credit: MySpace Music)

Om Malik over at GigaOm advanced the story about MySpace's efforts to acquire Imeem on Wednesday.

The news that Rupert Murdoch's MySpace was in talks to buy Imeem, a long struggling social-networking site focused on music, generated a lot of headlines on Tuesday.

Judging from the glut of media coverage but relatively few reader comments at some of the sites covering the story, this is one of those events that journalists care more about than the public (don't know what it's like at other sites, but MySpace stories don't generate big readership numbers).

Be that as it may, Malik reported that the transaction is "essentially a firesale." He summed up the situation this way: "I guess when the company had a choice between locking the doors or teaming up with MySpace, it wasn't a hard decision to make."

Malik reported that Imeem owed money to independent record label, The Orchard following a legal dispute. I reported on Tuesday that Imeem CEO Dalton Caldwell was in New York recently looking for new investment, and that Imeem has burned through the funding raised last spring, according to sources with knowledge of the company's latest fund-raising efforts.

The ad-supported music sector is crumbling and Pandora, Lala, MySpace Music and Spotify appear to be the last of the noteworthy players still standing.

Spotify has received remarkable reviews. MySpace Music has largely disappointed, according to sources close to the company, but parent company News Corp., is putting resources behind the project that could change its fortunes. Lala just launched a partnership with Google and Pandora is growing its audience thanks to the music-discovery service's iPhone application.

Not one of the companies has reported profits yet and faces its own set of challenges. How do you handicap the race?

Hulu, the Web's No. 2 video service attracting viewers by offering full-length films and TV shows, now wants to become a video jukebox.

Singer Norah Jones will be the first EMI artist to appear on Hulu as part of a new agreement between the companies.

(Credit: EMI Music)

EMI Music, one of the four largest recording companies, struck a deal to offer its artists' select concert footage and music videos on Hulu.

Music videos have appeared at Hulu before but this is the site's first wide-ranging agreement with a major label, EMI said in a statement. Exclusive material from singer Norah Jones will help kick off the deal.

The partnership with EMI means Hulu, formed by News Corp. and NBC Universal, will compete more with YouTube for music fans.

This is an important battleground. Music videos are the most popular video fare on YouTube, the Internet's best-watched video site. Already, YouTube has seen Universal Music Group create a standalone site--the video service Vevo.

While YouTube powers Vevo's back end, the site will not be part of YouTube. Universal has already signed Sony Music Entertainment, the second largest label and is in negotiations with EMI and Warner Music Group about joining.

Vevo is due to launch sometime next month.