Uber-portal Yahoo! has snapped up one of the last remaining independent music Netcos, Launch Media, for roughly $12 million, further consolidating the once crowded sector in the hands of a few established media players.
Deal, to be consummated by the end of the third quarter, will combine Launch’s musicvideo library, editorial content and personalized streaming services with Yahoo!’s established music news and Webcasting division. Yahoo! also will extend a $3 million short-term line of credit to Launch, adding to the $2 million lent in May.
Launch co-founders David Goldberg and Bob Roback will stay on in as-yet-undetermined roles, and the company’s offices will remain in Santa Monica. Less clear is the level to which Launch’s services will be integrated with Yahoo!’s existing music offerings, or whether the Launch brand will be kept alive.
Also still to be decided is whether and how severely Launch’s existing staff will be downsized, but co-founder and CEO David Goldberg is hopeful that the cuts, if any, will be limited to a few “redundant positions.”
Yahoo!’s offering price, which amounts to 92¢ per Launch share, reps a 58% premium over the stock’s close Wednesday of 58¢.
Before the dot-com bust, Launch stock hovered in the low $20s. Still, “this is a great deal from a price perspective, given what’s been going on in the marketplace,” Goldberg said.
As part of the deal, Launch will give up its stake in the prosperous Warped Tour to its the holding company set up by the tour’s backers, which include Creative Artists Agency and skatewear maker Vans. In return, the other partners will return roughly 400,000 shares in Launch stock and forgive the Netco’s $20.5 million debt to the partnership. Launch will run the tour through its 2001 season and retain the right to sell sponsorships in 2002 and 2003.
The bid for Launch follows hot on the heels of a buying spree by the big five record labels in the online music arena over the last several months. Former standalones MP3.com and EMusic.com have fallen to Universal Music Group (which also owns GetMusic and Farmclub.com), while BMG Entertainment parent Bertelsmann acquired digital locker service MyPlay and struck a much-publicized deal with Napster last fall.
But David Mandelbrot, Yahoo!’s VP and general manager of entertainment, distanced Thursday’s deal from those done by the record industry.
“It’s strange to be lumped in with all the gobbling up being done by the music players, because we feel like we’re somewhat independent,” he said. “We can offer the best available content from any party; we don’t have the agenda of offering music from a specific label.”
Yahoo! has already taken steps toward securing that content: In April, it teamed with Pressplay, a subscription-based music downloading service backed by UMG and Sony Music.
Coincidentally, Launch also said Thursday that it had settled a separate court dispute with UMG — part of a larger copyright-infringement suit filed by the Recording Industry Assn. of America over the Netco’s personalized streaming service LaunchCast.
Under the terms of the settlement, Launch will pay UMG compensation (said to be less than six figures) for past uses of its content, and Universal will grant a license allowing LaunchCast to use its tracks. Launch has already obtained a license from Warner Music, and is in talks to settle its disputes with the other majors.