Is the content aggregation and distribution the most vulnerable space in the Digital Content Business?
Hyderabad based Mobile VAS co IMI Mobile has bought London based digital music distibutor dx3, reports ContentSutra. Dx3 provides legal digital downloads, and in 2004-05, added a mobile content delivery component as well. The company will serve as a gateway to the European market. DX3 will be renamed IMI. A couple of months ago VR Vishwanath, Chairman and CEO of IMI Mobile had told MediaNama that the deal size is around $10 million, but we wonder if it’s been revised downwards given recent trends. Neither the report nor the press release mention the size of the deal or the percentage acquired, some reports suggest it’s a 100% acquisition. We’ll confirm and update.
Content or Marketing?
Well, both. dx3 has a content marketing platform, which can be used to deliver promotional premium content that is free to users. IMI Mobile appears to be more keen on dx3 for marketing services. According to Vishwanath, this gives them the opportunity for media campaigns on both Internet and Mobile, given dx3 strength in the web domain. Frankly, apart from the clients and distribution network that dx3 will bring to the table, we’re not sure of what else there is to this deal.
DX3 distributes music for clients like EMI, MTV, Universal, Warner Music Group, Sony BMG, and has tie-ups with Virgin Mobile, Smash Hits, Sony Ericsson, among others.
This appears to be a backwards integration for IMI Mobile – which is more of a platform service provider. As DX3 CEO Anu Shah put it – “It’s very difficult for pure digital music providers to make money in the space“. Aggregators and distributors get squeezed from both sides – by operators and music labels, and this is essentially a means of combining revenue share which was earlier divided between content aggregator and platform service provider.
This appears to be an acquisition that is similar to Motorola’s acquisition of Soundbuzz, though Soundbuzz had branded services as well, not just a white labeled solution. In the past year, we’ve seen other significant moves in this space – when Nokia entered the content services space with Ovi, and OnMobile inked content deals in South India.
So…Is the content aggregation and distribution the most vulnerable space in the Digital Content Business?
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3 Comments until now.
Music distribution has little margin and hence dx3 is lucky to be bailed out at this time. $10M is an exaggeration, nobody can bring this back in 2-3 years. IMI will learn very soon that the white man barrier is not crossed by buying european desi’s.
Source : Spark Annual Report
“at the Balance Sheet date, the net equity of DX3 is negative when the debt owed to SPARK is included. As there are no agreements in place for the minority shareholders to contribute their share of the losses for the year, the accounts presented do not give the minority interests their proportionate share of the losses made in the year but instead show 100% of the losses as being due to SPARK’s shareholders.”
Wonder how a negative networth company is acquired for USD 10 mil unless the deal is mostly share swaps and little cash
Besides in the last financial year DX3 appararently needed close to USD 1.5 million investment from Spark most probability to cover operating costs