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IUMA Suspends Operations - Is It Really All That Surprising?
By Sounni de Fontenay
(more articles from this author)
2001-02-13
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Talk about a bad start to the year for music. First Songs.com shuts down, followed by reorganizations of Emusic and ArtistDIRECT, and now IUMA is teetering on the edge (not to mention ending 2000 with the disappearance of SpinRecords & Riffage). What happened? Everything looked so promising this time last year! Yeah, we know... it's that darn Internet bubble. Yes, but it goes much deeper. First, lets take a look at IUMA.

In a January 7th email, Jeff Patterson, Founder of IUMA, announced that IUMA was suspending operations and laying off all of its staff. What? It can't be, not IUMA. As most already know, IUMA (or Internet Underground Music Archive), was a stalwart of the online music community - going all the way back to 1993. Yes, but even the "venerable" can pass away.

Jeff Patterson notes in his email, "As most of you know, this is both an amazing and painful time for the music industry. As the Internet revolutionizes the way music is distributed, independent artists have gained unprecedented access to fans throughout the world. Unfortunately, it hasn't come without costs. This has been a hard time for Internet music companies as the rules that govern what we do change on a daily basis. Many of our competitors and peers are either going out of business or dealing with myriads of lawsuits waged against them. No one seems to be making it through this tough time unscathed, IUMA included."

Maybe the whole problem started when it was acquired by Emusic in June of 1999 in a $7.6 million stock swap (now worth less than $200,000). The deal Emusic offered IUMA was to fund their growth through the end of 2000 - Not bad! And with Emusic awash with cash, it was clear sailing for IUMA to spend cash on promotions. But there lies the problem... continued expansion without the accountability of becoming profitable. Through the second half of 1999 and all of 2000, Emusic basically funded its "indie division" without an expectation of making a profit from it. Obviously, advertising and CD sales were not enough for IUMA to allow it to survive under its own weight.

Well on January 12th, Emusic announced extensive corporate restructuring in an effort to squeeze savings of $16 million and increase its chances for getting acquired - before it gets delisted from the NASDAQ. Emusic decided to focus on its core revenue sources: download & subscription sales as well as advertising through RollingStone.com. IUMA became the dangling branch that needed to be trimmed.

"It's pretty clear that sites for unsigned artists, where the ultimate goal is to get them signed... (don't make) a whole lot of sense anymore in this economic climate,'' said Steve Curry, a spokesman for Emusic, to the Los Angeles Times.

Now the Internet's first Online Music Distributor (OMD) has laid off all eight employees, closed their community to new artists and halted many services, including CD sales, customer support, and artist ad revenue sharing. While IUMA remains online, with artist pages remaining functional, in hope of a financial savior, the future looks bleak - as experience with previous Net closings indicate.

Jeff Paterson apologizing for the situation, "It pains us to have to resort to these drastic measures, but it seems we have no other choice. If, by doing this we can live to fight another day, the decision will be worthwhile."

Vernon Neilly, President of Boosweet Records and an artist with an IUMA site comments, "It is truly sad to see one of the founders of the digital music age in serious trouble. Icast bit the dust, then Riffage, but it is much more significant that IUMA is in trouble because they started years back with the model that has been copied by so many companies. I think that this is really a tell tale sign of where the whole digital distribution of music on the web is at for independent companies. The financial aspect as in all businesses dictate whether that company will sink or float over a long period of time, and with the wave of recent crashes by dot-com music sites, it surely puts the longevity of the companies into question.

"What is the bottom line? if IUMA, Riffage, Icast, and the many others were making money to support their respective companies, they would all be thriving. I truly believe that for these independent companies to survive, they are going to have to become more service oriented toward independent artists, fees for certain services are going to have to be collected. I think that MP3.com is on the right track - this will separate the serious artists from the hobbyist, and clear up the game board."

Von Cello, a classical/rock crossover artist, adds, "IUMA is just the latest casualty in the ongoing internet music retreat. The internet spawned a new generation of greedy businessmen who thought they could profit off of exploiting hungry musicians. They have discovered the obvious: there isn't much money in giving away music for free! I think for most musicians the internet has proved a good PR machine, but not a way to make a living. In a way, it's pretty cool that we have to go back to good old live music. Personally, I'm looking to play everywhere!"

Indie focused OMDs are quickly falling by the wayside. The only traditional "large" OMD left is MP3.com, and they have thus far survived by being aggressive in expanding their business model from being based purely on advertising to becoming a music service provider, leveraging their content to provide a complete experience for the consumer. Does this mean that all online companies that serve indies will fall? Not at all, there are many that are both still standing and even thriving. The question should be: will companies that employ faulty business models and have unrealistic expectation survive? There, the answer is resoundingly no!

No matter what happens to IUMA, at least we will have the IUMA babies to remeber the company by.

Linkography

ArtistDIRECT
Boosweet Records - www.boosweet.com
Emusic - www.emusic.com
IUMA - www.iuma.com
LA Times - www.latimes.com
MP3.com - www.mp3.com
RollingStone.com - www.rollingstone.com
Vernon Neilly - http://vernonneilly.iuma.com
Von Cello - www.voncello.com

Related MusicDish e-Journal Articles:
» Corporate Restructuring & Layoffs at Emusic? Will it Work? - A look at the history of Emusic, 1998 forward... (2001-01-15)
» MusicDish Speaks to Paul Schatzkin, aka The Perfesser, on the Shut Down of Songs.com (2001-01-04)
» Make Room in the Dot-Com Graveyard - Riffage.com Joins the Pack! - Is Serving the Independent Music Market Profitable? CD Baby Continues to Think So. (2000-12-12)
» Spinning Out of Control, the Death of Another Dot Com - Solutions Media, Inc. and SpinRecords.com Shut Their Doors (2000-10-12)
» IUMA Expands Its Advertising Revenue Sharing Program (2000-07-25)


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