Imeem Deal Vindicates Music Industry

Cayocosta

Ironically, last month's Shmoo turns out to be this week's shark, as Doug Morris (having held out until Universal was the last in line) reportedly negotiated a royalty for each stream originating from imeem, in addition to a standard share of advertising revenue.

Correction: WSJ got it wrong, UMG will receive streaming payments only in the event that ad revenue falls short of the contractual amount.

This move also goes a long way towards silencing industry critics who after having had a field day two weeks ago chastising the majors for being technology ignorant on the heels of the Morris interview, find themselves with much less basis to do so today; as well, proponents of file-sharing are now short one "obstinate industry" justification.

So far, bloggers have indeed had little to say about this new development, yet the few that have spoken up are attempting to spin the deal as equivalent to the legalization of file-sharing - even though downloading is not facilitated by the service (of course, there are ways to capture streams, but there's little incentive for anyone to do so in this case) and the content owners and artists are actually paid under this system.

Looking back at the series of events that took place over the last two weeks: Morris appears to have played possum in the Wired interview, UMG then truncated streaming on MySpace, and today imeem gets the last piece of the content puzzle. Imeem now has industry-wide unrestricted content to compete directly with MySpace - and four powerful partners.

However, the question remains: how well can imeem monetize music? YouTube, if any indication, has been criticized for not adequately monetizing video; yet on the other hand, from Barron's:

"Greenfield writes that MySpace is now generating “in excess of $30 million” a month in revenue, with about $24 million in domestic revenue and $6 million internationally. He adds that monthly revenues should more than double over the next 12 months, and “at very high incremental revenue margins.” So in 12 months, he’s saying, MySpace should be doing more than $60 million a month in revenue, for an annual run rate in the neighborhood of $750 million a year. Not too shabby."

(Unfortunately, parent company News Corp. has not disclosed bottom-line revenue.)

For streaming to really take off, it must be accessible from any location and device (that's going to take a while) and for this reason, the advertising model may not become standardized, for phones and players won't accommodate the delivery of ads very well - if at all; unless the ads are in audio, which would ruin the experience. Therefore, it doesn't appear a stretch to imagine a subscription platform eventually emerging - perhaps on several services.

In any event, at least this is the first streaming service that appears to offer complete catalogs from all 4 majors - which is of course, a prerequisite to any comprehensive solution - and this alone should suffice to sign up a ton of folks. Moreover, moving beyond the download to pure streams potentially solves the problems of DRM, RIAA lawsuits, and piracy.

It's indeterminable at this time how artists might be compensated by labels; however imeem entered an agreement with SNOCAP earlier this year indicating that at least some royalties will be paid to artists by the service itself.

In closing; Universal Music Group, Sony BMG, Warner Music Group, EMI, and imeem have taken a big collective step today.