7/21/2000: CMGI-backed Magnitude to go off the air
Magnitude Network, a Chicago-based company that has provided streaming audio to about 90 percent of major Internet radio stations, plans to close its doors July 31, according to employees interviewed by i-Street magazine. At press time, it was expected Vancouver-based Global Media would purchase Magnitude Network’s assets for around $5 million, although a Global Media spokesperson could not comment.
Speaking on the condition of anonymity, former and present employees said Internet operating company CMGI invested as much as $23 million in the firm in July 1998 and acquired 88 percent of the firm in January 1999 after Magnitude Network attained important milestones. But because Magnitude Network was all but giving away streaming audio services to stations to gain market share, it burned through the investment quickly, present and former employees explained.
A former manager, who asked not to be identified, said there was a classic revenue problem: Magnitude charged just $500 a month to provide streaming audio services to radio stations. Many of the stations had few Internet listeners and therefore cost very little to serve, but others, such as KPIG in Freedom, Calif., have millions of online listeners and cost Magnitude as much as $10,000 a month for streaming audio bandwidth, one of the former employees said. The company also offered money-losing Web development and other services.
Magnitude’s only moneymaker, according to a former manager, was its Magbox server, a plug-and-play box that allowed traditional radio stations to serve streaming audio easily. That didn’t figure into the hype about Magnitude Network, especially in the April issue of Wired magazine. In a story about the hot new Net medium of streaming audio, Wired reported that the ratings service Arbitron counted “nearly 1 million unique listeners tuned to 240 channels for some 1.3 million hours.” Nine of the 10 top net broadcasters got their streaming audio from Magnitude Network, which reportedly was reaching as many as 200 stations, including broadcast stations going for a Web presence.
Neither Magnitude Network’s or CMGI’s investor relations/public relations departments returned calls from i-Street magazine, however, Magnitude Network disappeared last month from the Web sites of CMGI and CMGI@Ventures, the private venture capital fund of CMGI.
By the middle of July, Magnitude Network was down to around 19 employees from as many as 40 earlier this year, employees said. |
