Record Label Shake Ups, Sales Make For A Tumultuous Year In The Music Industry
Record Label Shake Ups, Sales Make For A Tumultuous Year In The Music Industry

Warner Bidder Looking For New Way to Sell CDs and DVDs
-- Private equity firm Gores Group's Alec Gores said he would like to merge Alliance Entertainment Corp. with a Hollywood studio. "There are some great assets and great opportunities that I think we could put together and add some value to them," he said in an interview with Bloomberg Television. "But I don't want to be viewed as a guy coming in to Hollywood to rescue Hollywood."

Along with Platinum, Gores bid on Miramax Films in early 2010. Later last year, through a joint venture the two companies acquired Alliance, the country's largest wholesale distributor of CDs, DVDs and videogames. In March, Alliance acquired wholesale distributor EDGE Entertainment Distribution.

But should Gores be viewed as a guy coming to save the music business? Along with Platinum Equity, Gores is currently one of the final three bidders for Warner Music Group. "The end game is to take that business and take all the things that they have, this asset, and try to evolve that business into the new way of DVDs and music," he told Bloomberg.

These are only two brief statements, but much can be gained from them. Gores sees value in physical product, perhaps untapped value that will allow CDs and DVDs to continue profitability into their long, happy retirement years. Note that he didn't mention a combination of companies would result in cost savings. Instead, he said combining Alliance and a Hollywood studio could "add some value" to the merged company. He sees value where most people see a dying business model.

These statements are sure to disappoint some people. Gores is not talking about new digital business models, reshaping entertainment companies for the digital era or partnering with digital companies to build new digital sales channels. He's not talking about subscription or ad-supported services. He didn't mention Apple, Facebook or Netflix. Instead, he's talking about keeping the cash cow out to pasture a little longer.

But it's clear Gores sees value in physical product. Or, at the least he sees what he believes are undervalued assets. And while consumers are still willing to buy them and retailers still willing to stock them, physical entertainment products and their distribution infrastructure still have some value left in them -- at the right purchase price, of course.
(Bloomberg)

Buongiorno Acquires Dada.net
-- Italian mobile services provider Buongiorno has acquired Dada.net for 28.5 million euros. Dada Entertainment, Data.net's U.S. subsidiary, has the mobile streaming service Play.me, mobile content store Motime and ringtone store Music Box. It operates in Italy, the United States, Canada, Germany, France, Brazil and 10 other markets.
(Press release)

Sacramento Bee Op-ed Examines Amazon's Biz Model
-- The Sacramento Bee's op-ed page has strong language for Amazon. While the newspaper occasionally exaggerates for effect -- the ecommerce giant's business model is actually based more on customer service and supply than "a refusal to collect sales tax" -- it sums up the situation pretty well. The short version: As states look for more revenue, taxing Internet sales is not as taboo an idea as it was a few years ago.

From the Bee:

"The company bases its business model on a refusal to collect sales taxes. By acting as a scofflaw, Amazon is able to save individual customers a few bucks. Overall, the amount of uncollected sales taxes on Amazon's sales is huge -- $83 million a year in California alone. All the while, honest retailers follow the law, collect sales taxes, and for their good deeds are losing sales.

Three bills are pending in the California Legislature, carried by Assemblywoman Nancy Skinner, D-Berkeley; Assemblyman Charles Calderon, D-Whittier; and Sen. Loni Hancock, D-Berkeley. Skinner's bill is pending in the Assembly Appropriations Committee. Hancock's bill could come up for a Senate floor vote this week. Calderon's bill is set for a hearing later this month."

After the state of Illinois passed an Internet tax bill, Amazon immediately closed all affiliate accounts in the state. (Affiliates advertise and link to Amazon products and earn a commission on the resulting sales.) The company has threatened to do the same in California if a similar lax is passed. Sales tax would add to the consumer's final purchase price of everything from consumer electronics to digital downloads -- even Cloud Drive.
(Sacramento Bee)

ReDigi Raises $535,000
-- ReDigi has raised $535,000, according to an SEC filing. The company claims it has a legal method for facilitating the sale of used MP3 files. This argument has been made in the past, but perhaps no other company has proceeded with the certainty of ReDigi. At its website, the company says it has "spent many hours with well respected law firms" to ensure its "used music marketplace" passes legal muster.

While most people believe the first sale doctrine does not apply to digital downloads, ReDigi argues otherwise. And its argument is so convincing that investors have come on board on company that seems all but certain to become the recipient of one or more lawsuits from record labels. Consumers are paying attention, too. The company's Twitter account already has over 13,000 followers and the site has not even launched yet.
(Digital Media Wire)

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