In the latest digital-music play by a multinational media conglomerate, a division of Bertelsmann said Wednesday that it will acquire Myplay, a company known for developing technology that allows consumers to upload, store and manage their digitized music collections in a remote "locker."
With the Myplay acquisition, Bertelsmann eCommerce Group CEO Andreas Schmidt says the company has all the pieces in place to fulfill its digital-music distribution strategy. An initiative called BeMusic, a melding of music club BMG Direct and retailer CDnow (which Bertelsmann acquired for $117 million last summer), would incorporate Myplay's locker and subscription technologies with rights-management technology from Bertelsmann subsidiary Digital World Services. The idea is to offer consumers digital access to their entire music collection from anywhere, as well as provide ways to build on that collection through direct online sales and subscription services.
"By bringing this asset base together, we believe we're building the new powerhouse of music distribution," Schmidt said in a conference call announcing the deal.
The news from BeCG – the same division that shocked the music industry last fall when it announced a partnership with Napster, the nemesis of the major music labels – comes a little more than a week after Vivendi Universal announced that it will buy MP3.com for $372 million in cash and stock. The recent moves indicate that media conglomerates are finally stepping up to digital delivery of music, an area that the companies' record-label properties have been reluctant to embrace.
"I think it's kind of funny [that since] six months ago, when we broke up with the rest of the industry [by partnering with Napster], how much movement we got in the music space," Schmidt says. "We want to stay ahead of the pack."
He noted that while Bertelsmann would continue to support Napster, the notorious file-sharing service would coexist as a separate subscription service and would not be integrated into the BeMusic site.
Financial terms of the Myplay deal were not disclosed, but published reports peg the value of the transaction at about $30 million. Schmidt would say only that the price tag is "a fraction of the price another media company paid for a similar service," referring to the Vivendi Universal-MP3.com deal. "It's somewhat funny that the company who litigates most [on piracy issues] is now ending up with an infringer who still has court cases to settle," Schmidt added.
The $30 million price is also a fraction of the $200 million that the Redwood City, Calif.-based Myplay – which has garnered 6.5 million registered users since its launch in October 1999 – reportedly would have fetched a year ago from Yahoo. That proposed deal fell apart amid concerns over Myplay's relationship with Yahoo competitor America Online.
Since then, the dismal market climate and pushback from the recording industry have conspired to slash the valuations of online music ventures, putting several of them out of business and spurring cutbacks and consolidation among those that remain. Myplay, for instance, laid off 40 percent of its workforce in February and announced a change in positioning from a consumer locker service to a business-to-business provider of music-subscription software, citing "the current pace of licensing" by the record labels.
More than a year before its acquisition by Vivendi Universal, MP3.com's locker service, My.MP3.com, sparked a copyright-infringement lawsuit by the so-called Big Five labels – Universal, Sony, BMG, EMI and Warner. Unlike Myplay, however, which requires users to rip their own CDs and upload them to the company's server, MP3.com had built its own library of digitally compressed music, which is streamed to consumers who first must demonstrate that they already own the CD to be downloaded. The company has had to pay the labels upward of $130 million in settlement fees.
Another competitor, Musicbank, managed to secure licenses from all five major labels and from publishing representative Harry Fox Agency without being sued, but it folded in April before its locker service even launched.
Meanwhile, the major labels are inching
