If the devil is in the details then there’s definitely something unholy about the financial statements coming from various digital music service companies. HMV seems to have come too late to the party and is suffering big revenue losses, which resulted in their top man being felled. Napster says it has more than $111 million in the kitty but its losses continue to grow amid an impressive burn rate and now Loudeye, which owns OD2 and subsequently a large proportion of the white label DMS market in the UK, is hinting at “significant losses” and “limited cash reserves”, both of which cry out ‘come and buy us’. However, like Napster, revenues are up to $8.8 million for the latest quarter, compared to $6.5 million for the previous.

Why have the people behind these digial music service got their numbers so wrong? People ae buying digital music in ever growing numbers, margins are slim but that’s not news. So, why can’t they make ends meet? Is it that DMS have to be part of a larger body in order to survive (Napster and Google springs to mind or Apple and iTunes). Smaller independents are making a go of it and are also generally near to the front when it comes to innovations. Are the ‘big’ names in DMS making the mistake of simply basing their business models and salaries on their near relatives the music labels?

Should the great shake-down that has been predicted come through during this year, and I think it will, then it will be the lean and mean operators who will survive as separate companies, all the others it seems will be swallowed by bigger fish.

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