Facebook Tries to Grow-Up Ahead of Expected 2012 IPO
Facebook Tries to Grow-Up Ahead of Expected 2012 IPO

Facebook's Numbers Normal, But Stock Dips Anyway
Facebook is being punished for being normal. After the company released decent, entirely expected quarterly results Thursday afternoon, investors decided the company doesn't have a strong game plan for the future. Facebook shares fell as much as 17% to $22.28 early Friday before clawing their way back to $24 by midday.

The story behind Facebook's woes should be all too familiar to the music business. Record labels and publishers were caught off guard by consumers' shift to digital devices and the interconnected nature of the Internet. But Facebook's nemesis isn't piracy, the unbundling of the album or regulatory opposition to record industry consolidation. No, its problem is the popularity of mobile devices. Its users are increasingly using Facebook's mobile app and Facebook is far better at monetizing desktop than mobile. Facebook either doesn't have a plan or hasn't convinced investors it has a plan.

We've seen it in music. The shift to mobile has already caused problems for Pandora. The Internet radio company gets about 70% of its listener hours from mobile devices but its mobile advertising is playing catch up to its display advertising. Pandora investors have shown their disapproval by pushing the company's stock as low as $7.83 less than a year after it opened on the New York Stock Exchange at $16.

Other parts of the music business are playing catch up with mobile devices, too. There is a dearth of mobile-first companies in the live music space, for example. Mobile ticketing has made great strides but adoption lags behind overall mobile usage. Mainstream consumers clearly aren't convinced that on-demand, mobile music is viable as a premium product. And anti-piracy campaigns don't even begin to address mobile Internet usage.

"Mobile is a huge opportunity for Facebook," Facebook CEO Mark Zuckerberg said during Thursday's earnings call. "Over the next five years, we expect 4 billion or 5 billion people to have smartphones. That is more than twice as many people that have computers today." Mobile is a big opportunity for music companies, too, but most of them aren't taking any heat from Wall Street for lacking a convincing game plan. ( Wall Street Journal)

Amazon Revenue Outstrips Apple
Apple's is big, but Amazon's is bigger. Amazon's total media revenue grew 13% to $4.12 billion in the second quarter. Media revenue in North America grew 18% to $1.87 billion and grew 8% -- up 12% at constant currency -- to $2.25 billion in the international division. Apple's revenue from the iTunes store was $1.8 billion in its latest quarter, giving it less than half of Amazon's media billing.

Of course, physical media is a large part of Amazon's business. (In fact, the company has opened 18 new fulfillment centers this year and shipping cost per unit dropped 10% last quarter.) But such a large media footprint -- all through e-commerce -- gives it a clear pathway to a bigger future. Just as Amazon used its dominance in bookselling to turn the Kindle into the dominant e-book platform, the company hopes to turn its dominance in ecommerce into further digital leverage. Besides, Apple's success in building an all-in-one ecosystem that merges e-commerce and hardware is too difficult for Amazon to resist. And, frankly, it's Amazon's most sensible growth opportunity. In other words, get ready for Amazon to go hard after the tablet and smartphone markets. ( Seeking Alpha)

Spring Mountain Capital to Purchase Grooveshark?
Grooveshark is the subject of an acquisition bid by Spring Mountain Capital, according to a report at CNET. The report claims Spring Mountain Capital, an investor in Outrigger Media and NXTM, wants to further legitimize the service and to that end has hired entertainment attorney Gary Stiffelman.

This rumor is interesting on a couple levels. First, and as CNET points out, digital music is notoriously unprofitable. (Subscription service Mog was sold for a mere $14 million after raising nearly $25 million in venture capital.) Setting aside legal costs, Grooveshark is probably in better financial shape not having licenses with major labels than paying out the lion's share of revenues to license their catalogs. Thus, a fully licensed Grooveshark becomes less profitable than a Grooveshark that streams unlicensed, user-uploaded content and handles content owners' take down notices.

Second, Spring Mountain must not have noticed that record labels tend to hold grudges for long periods of time. LimeWire, for example, could have used its massive userbase to launch a legal subscription service to go along with its download store. Labels instead gave LimeWire the death penalty and collected a $108 million settlement. I get the feeling that labels and the RIAA would feel licensing their catalogs to Grooveshark would send the wrong message. Expect their lawsuit to continue.

Grooveshark's publicist declined to comment. CNET claims Grooveshark and its owner, Escape Media, have not shown interest in Spring Mountain Capital's overtures. ( CNET)

Balcony TV Gets Almost A Million in Funding
Balcony TV, a music video site that features live recordings from around the world, has raised funding from notable venture capital firms Polaris Venture Partners, Lerer Ventures and Greycroft Partners. Terms were not disclosed but TechCrunch reported the funding was $750,000. Former MTV Networks CEO Judy McGrath has joined the company in an advisory role.

BalconyTV is produced in over 30 cities around the world and has more than 7,000 videos archived that have been viewed over 30 million times. While well known artists such as Mumford and Sons, The Script and Jessie J have performed on the channel, the vast majority of the videos are by artists with limited familiarity outside their home markets. ( BalconyTV press release)