Myspace faithful, rejoice. It seems that the team running the former social media powerhouse has a plan to make the service profitable again — and it involves a push into the subscription music space already filled by services like Spotify and Pandora. Oh, and it only needs another US$50-million in funding to get started.
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According to a confidential leaked presentation posted by Business Insider, Interactive Media Holdings (the rebranded company that bought Myspace from News Corp for US$35-million last year) is looking for investors to finance the marketing, renewed licensing fees and operation costs it needs to expand its services by next year. It’s currently making most of its money from advertising and sponsorship deals, but is looking to branch out into music downloads, desktop and mobile subscriptions, merchandise and gig tickets.
In the (largely optimistic) presentation, Interactive suggests that while it doesn’t expect Myspace to make a profit until 2014, it can turn the business around. It expects Myspace will make a US$42-million loss in 2012 (up from US$20-million last year) and a US$25-million loss in 2013. By the next year, it projects it will make US$10-million in earnings before interest, taxes, depreciation and amortization (EBITDA) on US$102-million in revenue.
Interactive’s mission to pivot Myspace is not going to be easy, but interest in the site seems to be growing again — it has seen a 36% increase in traffic since December last year, and its recent redesign has attracted a fair amount of positive attention (as has the high-profile investment by Justin Timberlake). The figures included in the leaked presentation suggest the site could potentially reach some 60-million consumers worldwide.
Although the online music industry is already quite competitive, Myspace thinks it has an advantage because of its existing global licenses, which it aims to renew if it can attract the US$50-million it needs in this round of funding. The site already holds a substantial amount of music, especially songs from unsigned talent, which account for 27-million songs in its 42-million strong library and are responsible for roughly half of all song plays. And because they’re unsigned artists, it’s all royalty free, which means it won’t cost Myspace anything to sell their music. The presentation also claims Myspace has existing global licensing agreements with four major music labels, 20 000 independent labels and more than 5-million unsigned artists.
Then again, the streaming music and online radio business isn’t the place to quickly turn over huge profits — as TechCrunch points out, Pandora made a loss of US$20 million in the first three months of 2012, while Spotify is expected to lose some $40 million by the end of the year, as a large portion of revenue has to go towards expensive licensing fees.