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Music Labels Cut Friendlier Deals With Start-Ups
The New York Times | May 28, 2009 | 12:16 PM EDT

With CD sales dropping fast, it is not hard to imagine how the major music labels could benefit from the growth of Web start-ups like Imeem. The company’s service lets people listen to songs, discover new artists and share their favorites with friends. And in return, Imeem owes the labels licensing fees for use of the music.

In Europe, Daniel Ek, left, and Martin Lorentzon founded the music service Spotify, which is free and plastered with ads.

But two months ago, Imeem’s founder, Dalton Caldwell, was ready to pull the plug. While 26 million people a month were using the service, Imeem owed millions of dollars to the music labels, and income from advertising was nowhere close to covering expenses. “It reached a point where it was not even clear it was worth doing any more,” Mr. Caldwell said.

Then the ground shifted. This month, Warner Music Group forgave Imeem’s debt, and both Warner and Universal Music agreed to relax the terms of their licensing deals with the site. That allowed Imeem to raise more money from investors and plan for a profitable future.

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