Milan, Italy-based online music portal Vitaminic announced Friday that it will buy the Internet Underground Music Archive for just under $1 million in cash and stock.
IUMA, the granddaddy of Web communities for unsigned artists, had been forced to suspend operations in early February after its parent, digital-download retailer EMusic, pulled the site's funding amid mounting losses and a dismal stock performance.
Vitaminic's acquisition of IUMA comes just days before MP3.com (MPPP) — the leading online distributor of music by unsigned artists — will begin charging musicians $19.95 to participate in Payback for Playback, an innovative royalty program that each month divides a pool of as much as $1 million among artists based on the number of people who download their songs. Since MP3.com announced that Payback for Playback would no longer be available for free, MP3.com's message boards have buzzed with debate about the premium version of the service. Numerous bands have pledged to dump MP3.com to protest the backpedaling from a model that promised to democratize the music business and migrate to other Web communities of unsigned artists, such as Ampcast and CDBaby.
IUMA expects to attract many of the artists alienated by MP3.com to its site, which has seen its membership numbers drop since the company went into hibernation last month in the wake of EMusic's withdrawal.
"We're hoping that with the news of our relaunch we can regain [members], especially now in light of the MP3.com situation," said Jeff Patterson, IUMA's founder and director of technology. "About 200 artists have e-mailed saying this is the alternative."
Other sites for unsigned artists continue to struggle. For example, Riffage.com, which had been backed by Big Five label BMG, closed shop in December. SpinRecords stopped spinning in October.
Vitaminic hopes the purchase of well-respected IUMA will raise its profile in the U.S., a strategy similar to that of CenterSpan Communications (CSCC), which won the rights to now-defunct Scour's file-swapping technology in a bankruptcy auction. Although Vitaminic is one of Europe's leading online music distributors and has performed well on the Milan stock exchange (shares closed Friday at $31.32), the site is relatively unknown in the U.S.
"Those guys built an incredible community and an incredible brand," said Gianluca Grechi, managing director for Vitaminic U.S. "It's a great way to build brand [by] using another company's brand."
IUMA's $1 million price tag is a steal compared with the $12 million in stock that EMusic paid for the company in June 1999. Then again, because EMusic's share price has plunged nearly 99 percent since then, that stock would only be worth about $200,000 today.
