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December 30, 2011 11:45 pm
An ambitious digital music start-up that won heavy financial backing from News Corp has shut down before even releasing a full version of its flat-price, “all-you-can-eat” service.
The closure of Beyond Oblivion, a New York-based company which had also raised money from the Wellcome Foundation and the media investment bank Allen & Co, was confirmed by Adam Kidron, chief executive. Mr Kidron told the FT on Tuesday that $55m of the $87m it had raised had been contingent on benchmarks that were not achieved, meaning that investors’ losses amounted to $32m.
The company had hoped to win a following among consumers in the increasingly crowded digital media market with a service that did not charge fees for downloading or monthly subscriptions and did not carry advertising. Instead, it planned to make money with a flat fee on new consumer electronic devices and computers that would let customers listen to all the music they wanted for the life of the device.
The collapse of Beyond Oblivion represents another failed digital bet by News Corp and will put pressure on Jonathan Miller, the company’s chief digital officer. In March, he hailed News Corp’s investment in Beyond Oblivion, saying it served “as an endorsement of the progress that Beyond Oblivion has made in bringing this innovative new music product to market”.
Mr Miller was appointed in the aftermath of News Corp’s purchase of MySpace but failed to rescue its investment in the beleaguered social network. MySpace, which News Corp acquired in 2005 for $580m, was offloaded this summer for just $35m after several expensive relaunches failed to reignite waning consumer interest in the site.
Beyond Oblivion faced an uphill battle from the beginning in persuading music labels to license music to its service and in getting consumer electronics makers to act as collection agents for its fees, according to one person who had been close to the company during its early stages. Among the issues that bedevilled the proposed service, this person said, was how to treat customers who wanted to buy new computers or other devices, since they would be forced to pay again for the service, discouraging them from upgrading their hardware.
The company had originally planned to introduce the service in October 2010 but postponed the launch as negotiations with potential partners dragged on. It had said more recently that the launch would come early in 2012, though the growing losses from the continual delays eventually caused it to start reining in its operations around a month ago, according to one person who had dealings with the company.
News Corp has also misfired in other digital investments. The Daily, its iPad-only newspaper, was hailed as a game-changer when the company launched it but has failed to revolutionise the online newspaper market and has added subscribers at a slower rate than the company anticipated. News Corp could not be reached for comment on Friday.
Mr Kidron confirmed that the Beyond Oblivion service would close and, in a statement, blamed the failure on the difficulty of “co-ordinating the diversity of the ecosystem” which included artists, labels, music publishers, device manufacturers and others.
“Beyond was always a tremendously grand ambition as the advances required by the record labels and music publishers were substantial, reflecting the breadth of the rights required to create a true digital music one-stop,” said Mr Kidron, who signed off the statement with the words: “Until victory always.”
News Corp declined to comment on the closure.
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