MySpace's online music venture with recording labels completed its purchase of song streaming site imeem on Tuesday, according to Associated Press.
The move will give MySpace up to 16 million users and mobile phone applications for less than $1 million.
In a blog post, MySpace Chief Executive Owen Van Natta said the deal would allow the MySpace Music venture to integrate imeem's offerings over time.
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One of imeem's functions that MySpace lacks is a mobile phone application that streams songs on Apple Inc. (NASDAQ: AAPL)'s iPhones and devices using Google Inc. (NASDAQ: GOOG)'s Android operating system, such as the new Droid phone.
The music industry continues to experience falling sales of CDs, while digital revenues have not yet made up the difference, in part because consumers tend to buy singles rather than full albums when they do pay for music.
Efforts such as MySpace Music and imeem are meant to allow people to listen and share music freely online, with revenue generated from advertising.
San Francisco-based imeem launched its free music business in 2007, but advertising revenues were unable to support debt and music royalty payments, and the company was running out of money.
The price tag of less than $1 million represents a bargain for MySpace and is an indication of how difficult the free music business remains.
In May, Warner Music Group Corp. (NYSE: WMG) wrote off its entire $16 million investment in imeem and also forgave $4 million it was owed by imeem in song royalties in exchange for a small, minority equity stake. Warner, EMI Group PLC, Vivendi SA (NYSE: VIV)'s Universal Music and Sony Corp. (NYSE: SNY)'s Sony Music Entertainment are all part of the joint venture with MySpace, a unit of News Corp.
Imeem visitors are now being directed to MySpace Music, and imeem users who have set up profiles and song playlists will have them migrated over to the MySpace Music platform soon.
Imeem Chief Executive Dalton Caldwell, Chief Technology Officer Brian Berg, Chief Operating Officer Ali Aydar and Vice President of Sales David Wade are staying on as consultants during the transition. It is not clear whether they will become permanent employees.
Imeem was majority owned by private equity firm Morgenthaler Ventures, but none of the equity investors got their money back.
MySpace is revamping its music service under Van Natta, who took over in April as CEO from co-founder Chris DeWolfe.
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