OPINIONS ANYONE.......America Online Brings Music to
Shareholder's Ears
Tell us what you think in AOL's Board.
TODAY
I. I. A N A L Y S I S
America Online
Brings Music to
Shareholder's Ears
Why Lennar and
Other Homebuilders
Look Cheap
UPDATE: Anesta Has
Right Rx for Investors
Cyclicals: Sorry You
Missed the Rally
Gilat: A Star of the
Satellite Wars
UPDATE: IDT Gears
Up for Net2Phone
IPO
Merrill Takes Plunge
into Online Trading
MCI WorldCom: A
Preview of
Wednesday's Analyst
Meeting
JOHN
REKENTHALER: How
to Find a Future
All-Star Mutual Fund
Manager
C O M M E N T A R Y
MARIA BARTIROMO:
Bullish on Kansas City
Southern Lines
DID YOU MISS A DAY?
Last 7 Days Archived
iionline.com
Eliot Walsh (6/3/99)
On Tuesday, America Online (NYSE: AOL - Quotes,
News, Boards) doled out $400 million worth of its shares
to acquire a pair of closely-held Internet music
companies--Spinner Networks Inc. and Nullsoft Inc. The
logic behind the move: AOL gains access to technology for
playing and recording music over the Internet.
Neither acquisition in and of itself is expected to add to
AOL's $5.5 billion CY 1999 estimated revenue stream. But
the deals, worth $400 million in stock, are even more
significant in that they portend the aggressive expansion of
AOL's broadband initiatives.
Like this Article?
The deal also intrigues in light of the background of AOL's
President, Bob Pittman. Prior to joining AOL, Pittman was
head of MTV Networks. Presumably, he has spent a lot of
time divining the interests of music fans.
Spinner.com, an Internet radio service with 1.5 million
monthly users, offers consumers more than 175,000 songs
from 350 labels, which they can listen to online, in real-time.
Nullsoft is an MP3 technology developer whose products
include the Winamp MP3 player and the SHOUTcast MP3
streaming audio program. AOL intends to capitalize on the
companies' products as it moves towards high-speed
Internet and Internet television.
The acquisitions represent an important step in the
development of AOL's broadband strategy because they
'[lay] the framework for a broader music platform,'
according to BT Alex. Brown analyst Shaun
Andrikopoulos. This platform, he contends, includes 'a
multitude of devices such as smart phones, set-top (cable
and satellite), mobile computers, PDA's, on-line household
appliances and, of course, the PCs.'
In anticipation of an industry-wide shift toward high-speed
Internet connections, the major online services and portals
are working furiously to add attractive broadband content to
their arsenals. And among the choicest of 'weapons' is
music.
Yahoo (NASDAQ: YHOO - Quotes, News, Boards),
for example, recently said it plans to buy streaming media
programmer Broadcast.com (NASDAQ: BCST -
Quotes, News, Boards), and Lycos Inc. (NASDAQ:
LCOS - Quotes, News, Boards) is reportedly developing
its own online music services.
The popularity of the MP3 format (which offers consumers
easily downloadable CD-quality music) is skyrocketing, as
is Internet radio. In fact, CNET news recently reported that
the number of U.S. Net users listening to online radio more
than doubled over a six month period.
While neither technology requires particular computer
knowledge to access, consumers' unfamiliarity with them,
as well as the relative scarcity of high-speed Internet
connections has kept the brakes on their popularity.
AOL intends to change all that, of course.
'We believe AOL is uniquely positioned to leverage
Spinner.com's distribution relationships. . .and Nullsoft's
MP3 technology across its multi-brand platform (AOL,
AOL.com, CompuServe, Netcenter, and ICQ),' says
Andrikopoulos in a report released today. 'With over 17
million members we feel the AOL audience will bring the
mass market reach needed for on-line music to gain
significant traction.'
Andrikopoulos sees a number of additional advantages in
the deals. Nullsoft's technology, for example, 'should enable
significantly enhanced rich media interactive
advertisements, longer term,' he says.
Then there's the e-tail factor. 'In our opinion AOL has
established the leading e-commerce platform on the
Internet with over $1.8 billion of goods sold over the
Company's shopping service during FQ3 (March),' he
explains. 'We believe that a broadened on-line music
offering will enable the company to further monetize its
traffic through potential adver-commerce bounties and
Shop@AOL merchant relationships.'
Bottom Line:
With each passing deal, AOL is moving closer to solidifying
its stranglehold on the web community.
|
