Institutions pour $25.2m into digital music firm

Loudeye, US parent of European digital music pioneer OD2, has won itself $25.2m in funding.

The finance will come from unnamed "institutional investors" who will stump up the cash in return for 16.8m Loudeye shares, along with the right to buy 5m more.

Loudeye said it will use the money for "working capital and any other general corporate purposes" - in other words, to maintain its day-to-day operations.

Earlier this month, Loudeye said it had extended its partnership with MTV Europe, which it took on when it bought OD2 in June 2004 for $40.5m in cash and shares. OD2 already runs MTV music download stores in the UK, France, Germany, Italy, and the Netherlands. The new deal will see stores open in Spain and Italy.

Indeed, most of the company's successes this year have come through deals struck in Europe by OD2, so the acquisition seems to have been a sound business move. However, with Q3 revenues of just $5.1m, it may take Loudeye some time to justify the purchase price. Loudeye even said that the 62 per cent increase in quarterly revenue between Q3 and Q2's $3.1m was "primarily due" to the inclusion of OD2's business. It needs to pick up business more quickly than the extra $2m a quarter gained from OD2, particularly since its loss also grew in the same period, from $2.6m to $5m.

With $25m in the bank and the addition of this latest round of funding, Loudeye can continue to cope with that kind of loss for some time to come while the revenue-generation opportunity provided by the digital music market continues to expand. It expects to be operating profitably by the end of 2005.

Loudeye is anticipating Q4 revenue in the region of $5.2-5.7m. It expects to lose $4.8-5.2m. ®

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