In a span of six months, startup social networking music site Imeem has soared to the top of the charts…
“The beleaguered music industry is beginning to show more enthusiasm for free, advertising-supported business models. The latest sign: Universal Music Group has agreed to provide its songs to online social network Imeem…”
New York — Universal Music Group (UMG) on Monday said it signed an agreement with music-based social networking Web site Imeem Inc. that will provide the Imeem community with free, on-demand, interactive streaming of Universal’s extensive digital music and videos that will be supported by advertising.
Universal, which is owned by French media giant Vivendi, is the largest record label worldwide, and is home to artists such as Eminem, Elton John and Gwen Stefani, is the fourth major music company to strike a deal with Imeem, following similar deals with Warner Music Group Corp, EMI Music and Sony BMG Music Entertainment, a joint venture between Sony Corp and Bertelsmann AG.
With this announcement, the music-oriented site is the first social networking company to offer its members free access to full-length, streaming music and video catalogs of all four major music companies on an advertising-supported basis.
Beginning today, Imeem’s audience of over 19 million users can listen to and express themselves with music and video from UMG’s digital catalog, which includes many of the world’s top-selling artists such as Kanye West, Amy Winehouse, Fall Out Boy, 50 Cent, Black Eyed Peas, The Pussycat Dolls, Gwen Stefani, The Killers, Snow Patrol, Maroon 5 and Nelly, among many others.
Imeem allows people to stream, but not download, an unlimited number of songs and videos and makes money by selling advertising. It shares ad revenues with its label partners.
Launched just 18 months ago, Imeem has brought a level of harmony to the online music marketplace that few would have imagined possible. It has not been an easy process. To paraphrase J.R.R. Tolkien, music publishers are subtle and quick to anger. But the marketplace has not been kind to the music industry, and economic factors might be contributing to a new flexibility.
The music industry has been wary of advertising-supported business models because labels cannot make nearly as much per song from advertising as they can through selling digital downloads.
“The labels are suffering from double-digit declines in their CD businesses,” IDC analyst Susan Kevorkian said in a statement, “and they are actively cultivating new options to drive revenue, with ad-based music services being one of those options. We also believe that Imeem is offering up-front payments for content usage as well as sharing ad revenue.”
It is a sharp turnaround from earlier this year, when none of the majors were willing to sign on to Imeem’s new ad-supported interactive service. In fact, Warner sued Imeem, arguing that by allowing its members to upload and share MP3s of Warner music, it was infringing on its copyrights.
Warner Music filed suit against the site in May 2007 for copyright infringement, alleging that it had used content without permission, and seeking up to $150,000 per song or video in violation.
But in July, Warner dropped its suit and struck a partnership with Imeem under which the major label allowed free, full-song streaming of its music in exchange for a cut of Imeem’s advertising revenue.
“We really worked to show the labels that they can benefit from an ad-supported music world combined with social networking,” said Steve Jang, Imeem’s chief marketing officer. “Their marketing people have worked with us to promote artists, so they were already excited about how we present their content.”
Sony-BMG Music reached a similar deal with Imeem in September, followed by EMI in October and now Universal. A source familiar with the Universal pact said the label is also receiving a small payment each time one of its songs is streamed.
“Universal Music Group is committed to exploring new ways for consumers to discover and enjoy our artists’ music online,” stated Doug Morris, Chairman and Chief Executive Officer of UMG.
“Imeem has developed an innovative way to make our artists’ music a central part of the social networking experience. More importantly, they have done so the right way — by working with UMG to provide an exciting musical experience for consumers, while ensuring that our artists are fairly compensated for the use of their works.”
“This is a significant step forward for Imeem and a defining moment for social networking and ad-supported music,” commented Dalton Caldwell, founder and CEO of Imeem. “Imeem has pioneered a way to bring fans, bands and brands together in a way that is good for everyone. Our agreement with UMG will make Imeem’s media-centric experience even more compelling and firmly establishes our position as the leading social media network.”
Imeem is not the first ad-supported music service to gain the support of all four major labels. Universal, Sony BMG, Warner and EMI have also been making their music available to ad-supported music downloading service Ruckus. Ruckus had an early advantage over other services in securing the majors’ cooperation because it targeted colleges and universities, where illegal music downloading is a particularly serious problem.
“Universal has been experimenting with many different ways of spreading its music in the digital world, said Forrester analyst James McQuivey.”
Universal’s Morris said in a press release that the key to the deal was the site’s good user experience combined with the way that it fairly paid the label’s artists.
Today’s news is a milestone for Imeem’s ad-supported social music and media model, which enables artists, labels, studios, and media companies to make their music and video freely available for interactive streaming to the Imeem community and share in the advertising revenue.
Imeem’s ad-supported model also gives brands and businesses new ways to connect and interact with a highly-engaged audience of millions of consumers in the 24-and-under youth demographic.
Imeem’s Caldwell has argued that the record industry needs to let go of the notion that music should be the main revenue driver and instead focus on an advertising-based model like radio and television do.
“Look at the media industry, especially newspapers. Many publishers are opening up their sites to get more traffic. You have to think of music labels as another kind of Media Company. They need more openness and an ad-supported business model,” Caldwell told CNNMoney.com in October.
Imeem’s most direct competitors offer limited free access to music. Ad-supported SpiralFrog lets users download free tracks from two major labels – Universal and EMI – but songs cannot be played on iPods or Microsoft’s Zune.
Rhapsody, from RealNetworks, has content from all four major labels and offers a free, ad-supported version, which lets users’ stream only 25 songs per month. Subscribers have to pay for unlimited music. Other services, like Napster, also offer flat-rate subscription models.
In the meantime, Imeem says it has signed advertising deals with major marketers such as Apple, Nike, Microsoft and Toyota. Imeem’s label partners are also beginning to explore promotional opportunities on the site. For instance, Warner Music has created an Imeem page to promote the release of Mothership, a new Led Zeppelin greatest hits collection. Warner has posted a selection of live concert videos on the page and is holding a Zeppelin trivia poll contest.
When Imeem members upload songs and videos by partner-label recording artists, other users can stream them in full. For the moment, Imeem has an advantage over News Corp. social-networking giant MySpace, where Universal has restricted its song and video clips to 90 seconds, citing the absence of a licensing deal. Universal also filed a copyright infringement suit against MySpace in 2006.
“Major record companies, including Universal, have been trying to strike a balance between curbing online piracy and forming partnerships with industry newcomers as they look for new ways to promote and distribute music to fans.”
Imeem is the fourth most popular multimedia entertainment site in the United States after Google Inc’s YouTube, Google Video and News Corp’s MySpace Videos, according to tracking firm Hitwise.
The Web site, based in Palo Alto, California, is backed by Morgenthaler Ventures and Sequoia Capital, which also backed YouTube before it was bought by Google for $1.65 billion.