America Online has become the latest to get into the online music business,
with acquisitions today of Net radio firm Spinner.com and music technology
The stock-for-stock transactions are valued at about $400 million and will
be accounted for as pooling of interests, according to AOL.
AOL's moves are designed
to give it a leg up in the
online music space, which has seen tremendous activity of late. The acquisitions will make "next-generation music features available to consumers of all its brands, providing a wide range of new audio and other applications and functionality to its partners, and [will help] to develop key music capabilities for AOL Anywhere devices and broadband initiatives in the future," AOL said in a statement.
In addition, AOL said it is planning to build custom branded music features for its proprietary service as well as for AOL.com, CompuServe, Netcenter, and ICQ. It also will add live events, Net radio, and music downloading to its services, the company said.
"Both [companies] are solid acquisitions," said Mark Mooradian, analyst with Jupiter Communications. "If you look at AOL's acquisitions, first and foremost they look at them as a customer acquisition play. In the big picture, AOL is acquiring Internet radio and online audio listeners.
"Spinner has been a leader in Internet radio," he added, noting that with Nullsoft and other acquisitions, "you see AOL moving aggressively into the technology space. It remains to be seen what they'll do with that technology."
The acquisitions come as the online music space is undergoing tremendous changes on a number of fronts. Along with gaining popularity among Internet
users, Net radio has become a must-have feature on portals and music hub sites.
Moreover, with Nullsoft, AOL is getting entrenched in the music download space in terms of adopting a technology. Although the MP3 (MPEG
1, Audio Layer 3) format is controversial among mainstream record companies because of its use by music pirates, its ease of use has made it a de facto standard for music downloads by early adopters. According to Nullsoft, 1.2 million of its Winamp MP3 players are downloaded monthly.
San Francisco-based Spinner.com offers more than 100 different music channels online via streaming technology. It also offers downloads of some songs via the MP3
format. The company will remain in its new San Francisco location, AOL said.
Spinner chief executive Dave Samuel last month said the company planned an initial public offering by the end of September. The company earlier this year was a potential acquisition target for MTV, but the two companies couldn't agree on a price. Spinner competitor Imagine Radio was later bought by MTV's parent, Viacom. Spinner executives said at the time that the company was waiting for the right moment to go public.
Spinner also received $12 million in financing from Sony Music Entertainment, Intel, and Amerindo Investment Advisors earlier this year.
Nullsoft, based in Sedona, Arizona, will move to San Francisco, AOL said. Nullsoft developed the Winamp MP3 player as well as the Shoutcast MP3 streaming audio system. It also is the subject of a $20 million lawsuit filed in March
by PlayMedia, which develops digital content distribution and management
software and hardware including the AMP MP3 playback engine. PlayMedia
accuses Nullsoft of infringing on its copyright-protected AMP code.
"Combining these leading Internet music brands with the audience reach of our brands will lift music online to the next level of popularity. We plan to build downloadable music, Internet radio, and overall music features into each of our brands, as well as customize them for the audience and partners of each of our brands," Bob Pittman, president of AOL, said in a statement.
Ted Leonsis, president of AOL Interactive Properties, added in a statement: "These acquisitions establish our leadership in Internet music, and we expect to extend this leadership through additional partnerships in the future. As faster speeds through broadband emerge, high-quality music will become an increasingly attractive application that will help drive the further growth of broadband.
"We believe that Internet music will grow new communities and help consumers fully embrace the convenience of buying music online as we move into a more connected society," he added.