Stop thinking about MP3.com as the grand home of independent online musicians. Watch it shift towards the more profitable relationships with major label acts.

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Eight months after beating MP3.com in court, Vivendi Universal - the world's largest record company - announced it is acquiring the online music provider in a $372 million cash-and-stock deal.

The deal has been approved unanimously by MP3.com's board of directors. MP3.com shareholders have a choice between $5 per share in cash or $5 in Vivendi Universal's American depository receipts for each MP3.com share.

The MP3.com deal makes Vivendi Universal a major player in the online music space with assets in both MP3 sales and distribution, as well as sites catering to emerging artists.

Previously, Vivendi Universal had agreed to purchase the 50 percent of music site GetMusic that it didn't already own from BMG Entertainment, aiming to combine it with Farmclub.com, Universal Music Group's site for up-and-coming artists.

Universal recently picked up Emusic.com for just over $23 million. The company sold MP3 downloads from more than 150,000 mostly independent labels.

The MP3.com purchase is the most important online inverstment for Vivendi Universal. It plans on using MP3.com's technology to operate 'Duet', the Internet-music-distribution alliance with Sony Corp.

MP3.com also has a massive user base. During the first quarter of 2001, average daily visitor traffic grew to 845,000 compared with 575,000 as reported for the same period a year earlier. Page views also rose during the period, from 393 million to 495 million. In terms of using MP3.com to promote 'Duet', Universal Vivendi has access to millions of potential users.

'Duet', which should be operational this summer, will compete against 'MusicNet', an online music-licensing vehicle set up by AOL Time Warner Inc., Bertelsmann AG and EMI Group PLC. MusicNet uses software from RealNetworks.

This should be a bloody battle. Expect some collateral damage as unprofitable investments get the axe.

The big winner, though, may well be MP3.com CEO Michael Robertson. Robertson only got into the music-space after noticing the term "MP3" had become one of the most popular search terms on sites such as Yahoo and AltaVista. He bought the Net address for $1,000 from a person who had registered it for a personal Web site. With around one-third ownership of MP3.com, the Vivendi Universal deal will make him quite a wealthy man.

Recommended link
MP3.com/Universal deal news links
MP3.com's official announcement

 

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