After several years of hot money pouring into streaming and Internet radio, the reality is finally sinking in.
First, MOG is in play. Rumor has it that Beats Audio, a division of smartphone maker HTC, has either bought MOG or is in the late stages of buying the service.
Venture capitalists have already invested more than $33 million into the service. MOG claims a half million users, of which perhaps no more than 100,000 actually pay to use the service. (That compares to Spotify’s 3 million paying customers.)
The fact that MOG’s investors are looking to get out isn’t a positive sign.
VC companies invest in a start-up hoping to hit pay-dirt when the company goes public. They only unload a company after they’ve made a tidy profit, or when they realize that there will be no profit.
Ironically, MOG still has a lot of fans. Forbes recently declared: MOG blows Spotify away, but obviously its investors have a different view of the company.
HTC may see value in MOG as the handset’s “in-house” music service, the same way Microsoft packages Zune with its smartphones.
And while Spotify, streaming’s 2011 glamour-boy, is well ahead of MOG in subscriptions and revenue, there are growing questions of even its financial viability.
Michael Robertson, the man behind DAR.fm recently made this point:
I think Spotify is a tremendous service. Their technology is outstanding, their speed to stream is terrific, and users love it. It's just a math problem. Under the math (royalty payments to labels) they're forced to agree to, they will never generate a profit.
Remember this isn't the first wave. Go look at the archive from 3 years ago, 6 years ago, 9 years ago, you will find the iLikes, MySpace Music, Napster. They all paid up front and did the same deals, and they've all gone to heaven.
Pandora is another tremendous service that people love and yet may never make a profit.
The company’s stock got hammered after Pandora announced another losing year and predicted future losses.
The service’s loss widened to $16.1 million from a previous loss of $1.8 million despite nearly doubling revenue.
You’d think that doubling revenue would be good news, but Wall Street was expecting even higher revenue.
More troubling was the similar trajectory of expenses. Expenses increased at an even faster rate than revenues. On top of that, Pandora admitted to a 23% drop in active user growth.
Now analysts are questioning whether Pandora can even get its stock back up to its IPO price, let alone beyond.
Despite rosy predictions for the future of Internet radio and streaming services, the inevitability of pure-play success over local radio seems less certain than ever.
It is becoming even more obvious that broadcast radio is far from dead. Quite the opposite.
Radio groups continue to attract the majority of listeners and consequently the majority of radio dollars.
It is this continuing flow of advertising dollars that will enable broadcast to prevail over pure-plays on the Internet. Broadcast radio simply has much deeper pockets.
And all the hot money chasing radio dreams can't beat that.