Slicethepie's Blog

So MySpace notched up losses of around $500,000,000 over the past year (about the same as it was sold for in 2005).  Quite an achievement for a website that once dominated the social networking world.  Is there a route to profitability?  History suggests not, when users move on from social networks they rarely return – look at Friendster, Friends Reunited, Bebo etc etc.  Social networkers are fickle and they leave in a social swarm as quickly as they arrived.  Compound that with the move to more efficient centralised social networking and MySpace hasn’t a hope.

So if all the users are jumping ship is MySpace left with anything? – and here there could be a glimmer of hope:  it is the world’s biggest repository of unsigned music – I’d estimate at 50-100 million tracks.  The problem is that there is no quality control and no ability to search for music, this means that this catalogue of the world’s music is currently almost worthless.  If it were organised, quality controlled and fully searchable it would offer immense value to consumers and commercial users alike.

Last week we launched SoundOut Search – a unique semantic search technology for music.  At the moment its targeted at catalogue owners – but just imagine what it could do in a consumer environment…check out the demo at www.soundoutsearch.com .  The press release is here.

PS:  Speaking of music company losses, some new Spotify figures are emerging –  in 2009 they raised $53m at a valuation of $250m and in February of 2010 they raised a further $15m at a valuation of $300m.  So why the further raise?… well although they had $25m cash in the bank  in January it seems they also had liabilities of around $23m – meaning that they were effectively out of cash (or would be at some point this year).   Staff costs alone were pushing $1m a month by year end.

Looking at the cash situation, Spotify started 2009 with $10m cash in the bank, add to that the $52m they raised from investors and the $12.7m sales in 2009 and you get to $75m.  By the end of the year this was $25m.  Voila: $50m cash burn last year…about $1m a week…

Extend this into 2010 – $25m in the bank plus $15m raised in February, total of $40m – assume a conservative cash burn of $5m/month and that would suggest they are about to run out of cash again – expect another funding round soon.  It costs a lot to provide free music…