As the dust settles on Apple’s acquisition of Lala  and MySpace’s acquisition of imeem and iLike it is clear that 2009 is shaping up as the year that the social music marketplace consolidated.  The trend was started back in 2007 when CBS snapped up Last.FM for $280 million (though you could make an argument that News Corp inadvertently kicked things off with its $580 million purchase of MySpace in 2005).


So the fact that there is a lot of money pouring into social music shows us this is a prosperous segment right?  Wrong.  Last.FM’s purchase price contrasts sharply with the reported $1 million that MySpace paid for imeem.  imeem was no small fry (it has approximately 30 million users in the US).  Instead imeem found itself straddled with the burden of insurmountable debts and a fundamental inability to make its business model work.  And therein lies the rub: social music may have audience momentum but the business model is currently broken.


All of which might make it appear strange that Apple and MySpace would want to invest in this space.  They are doing so because of two key reasons:


  • The inescapable fact that social music is a crucially important facet of the digital music landscape and will be a central pillar of future music business.  Social music enables music fans to develop deep relationships with music, artists and audiences that were previously impossible.  This creates immense opportunities for product managers developing new music products (see my Music Product Manifesto post for more on this).
  • MySpace and Apple can afford to make social music work. The business models may be broken for start ups but large corporate entities such as Apple and News Corp have the deep pockets to both negotiate more financially viable terms with content owners (cf MySpace) and to offset investments with resultant stronger sales of their core products (cf Apple).


It is to be hoped that Apple and MySpace ‘don’t do a CBS’ and shackle the innovative momentum of their acquisitions (Last.FM currently has the dubious honour of programming HD2 radio in US).  It is also to be hoped that record labels recognize the importance of leveling the playing field for smaller players, else they’ll skew the market towards large corporations which history shows lack the disruptive innovate force of success hungry start ups.  This all matters to the music fans themselves, because less innovation and competition ultimately means poorer choice.


(I've posted more detail about MySpace's music strategy here.)