Yes, yes more on the bubbilicious series. Last week Digital Music Group went public with an IPO. As part of the plan three companies are merging all of which share a management team and distrbution arm. With 12 employees the companies combined had a net loss of $1.19 million on revenue of $225,535. The newly formed Digital Music Group is less than a year old, beginning in April 2005. iTunes currently accounts for 83% of their revenue. Yet they manage to raise $38 million through their IPO.
Items acquired directly from their SEC Filing:
We have a limited operating history and have experienced net losses to date and we may not be able to become profitable or generate positive cash flow in the future.
We are substantially dependent on a limited number of online music stores, in particular Apple iTunes Music Store, for the sale of our music recordings.
New investors in our common stock will experience immediate and substantial dilution of approximately $5.53 per share.
What do they do? The firm intends to be a digital music wholesaler. DMG intends to use most of the raised capital to purchase digital rights to music which it can then sell to digital retailers like iTunes. It seems they have adopted an odd business model: intermediation (which is the opposite of disintermediation). In essence it is adding a step in the flow of digital music from source to market (time to market).
Techdirt has an interesting analysis. I totally agree with you Mike.
Also, DMG definitely needs a website redesign.
the bubbilicious series:
get in line for the next bubble, before it bursts | read | july 2005
more bubble talk | read | january 2006
gym = new vc’s | read | january 2006
bubbilicious | read | january 2006
this is bubbly | read | january 2006
technorati tags: bubble 2.0, internet, business, technology
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