Imeem, Lala investments not paying for Warner

Warner Music takes $33 million write-down, most of it on minority stakes it took in Imeem and Lala. Label is also disappointed with MySpace Music's performance.

Greg Sandoval Former Staff writer
Greg Sandoval covers media and digital entertainment for CNET News. Based in New York, Sandoval is a former reporter for The Washington Post and the Los Angeles Times. E-mail Greg, or follow him on Twitter at @sandoCNET.
Greg Sandoval
2 min read

Investments made in Web music services Lala, Imeem, and MySpace Music haven't paid off for Warner Music Group, at least not yet.

The third largest of the four biggest recording companies said Thursday it would write down $33 million, most of it from investments made in Lala and Imeem. Edgar Bronfman Jr., Warner Music's CEO, also said after the company issued quarterly earnings report that MySpace Music's performance has so far "disappointed."

Warner Music's write down--$16 million in Imeem and about $11 million in Lala--is a reflection of the company's valuations during the economic downturn, Bronfman said.

Ad supported music services are being hit hard by the ailing economy and the hobbled online ad market. As ad revenues disappear, these companies are trying to charge for some of services, but they haven't gained much traction yet. No one in the sector, not even YouTube, has reported profits. Apple, which sells downloads and doesn't rely on advertising, continues to be the only significant music service making money from the sale of music downloads.

The big question is whether Warner Music's recent moves--the write down, the label's acrimonious departure from YouTube, and decision not to invest more money in Imem--is a reflection of a larger pullback from the tech sector by the music industry.

Imeem, a social-networking site, was teetering on collapse recently, but sources told CNET News that it had received new investment that will keep the site operating for much of the year.

Lala has gone through several business models, but the latest iteration has encouraged some of the music labels with the amount of revenue it has reported generating, music industry sources said several months ago.

MySpace Music is the joint venture founded by News Corp., and the music labels. On Wednesday, CNET reported that some of the labels were dissatisfied with the revenue generated by the 8-month-old music service.

In a conference call with reporters to discuss Warner Music's financial performance, Bronfman said of MySpace: "We continue to hold out a good deal of hope...but, you know, without putting too fine a point on it, (MySpace Music) has disappointed us so far.

"We feel MySpace Music has been slow to create monetization tools," he said, "and to be able to impact in a revenue-generating way, the massive audience that they have been able to attract."

Peter Kafka at All Things Digital was first to report Warner Music's write-down.