Business Matters: Spotify, Napster, PayPal and more

Napster Co-Founder Invests In Spotify
— Sean Parker, former CEO of Facebook and co-founder of Napster, has invested $ €11.6 million ($US 14.9 million) in Spotify at a valuation of €230 million ($300 million), according to Trade Register of Luxembourg documents. The Spotify AB subsidiary in Sweden reported a profit of €1.5 million in 2009 and finished the year with a net book value of €40 million, according to the report.

Parker, a managing partner at venture capital firm Founders Fund, was rumored to be involved in the company’s U.S. operations, but it turned out former EMI Music executive Ken Parks is heading Spotify’s U.S. office.

High valuations are nothing new in digital music services. Imeem was reported to once be valued at $200 million. Lala was reported to be valued at $100 at one point. Vevo was reported to have received its investment from Abu Dhabi Media Company at a valuation of $300 million.

Compared to Imeem and Lala, however, Spotify looks like a bargain at $300 million. It has a better product, a larger infrastructure and the advantage of coming to the bargaining table after the failures of Imeem, Lala and many others. And as the company readies for a U.S. launch it has as much momentum as ever. (MacWorld)


PayPal Readies Micropayments
— PayPal says it will roll out a micropayment product by the end of the year. The goal is to make it easier for people to pay very small amounts for discrete purchases. To date, the most cost-effective micropayment solution is basically a larger credit (say $5) that is purchased and spent in small chunks (say $.25 each) over time. The purchase of a single credit results in a single credit card fee. In fact, Flattr, a new micropayment platform created by a co-founder of The Pirate Bay, uses a similar concept.

But PayPal wants small pay-as-you-go transactions. It plans to make this possible by aggregating a person’s small transactions. So, the article explains, a person could make $10 of transactions before being billed by PayPal. This back-end payment is the opposite of current front-end payments.

The potential for media and entertainment is obvious. A better system for micropayments could help user in a new era of patronage for everything from newspaper articles to music videos. Artists could be more likely to lower prices for single tracks since the current credit card processing fee can devour revenue if the price is set too low. In the end, micropayments will need to be as frictionless as possible to encourage maximum usage. If it’s as easy as clicking a button, PayPal’s micropayments could be a big hit with music fans. (AP)


Dr. Luke On ‘Distinct Sound’
— A profile of producer/songwriter Lukasz Gottwald, a.k.a. Dr. Luke, contains an interesting statement on his need to have different sounds. Luke has produced hits by Ke$ha, Katy Perry Taio Cruz and has written or co-written hits by Kelly Clarkson, Britney Spears, Flo Rida and many more. So what does a guy who is all over the radio and Billboard charts think about having a distinct sound?

“If you have a super-hot producer that’s really, really big, and he’s doing the singles on 11 different artists’ records, what’s going to incentivize people to buy those records, as opposed to just the singles? What’s the reason to buy into an artist when the record is the accumulation of all these different things?… Why else would someone buy an entire record unless it was like, ‘I want that’? If it’s the same as everything else — if it’s the same people — I’d be less inclined to do that.” (Los Angeles Times)

Assorted Links
— G-Unit Records has entered into an exclusive agreement with EMI Label Services in which EMI will distribute and promote releases on the G-Unit roster in North America.