For the past couple of years, News Corp. amassed considerable real estate online with the acquisitions of Scout, IGN and MySpace. The company’s fortunes grew as a result: MySpace today boasts the most amount of pageviews amongst any site. While the company continues to make specific acquisitions to bolster its portfolio - namely Strategic Data and Photobucket - the company is not spending anywhere near as much as it was last year.
This year’s M&A media leader seems to the CBS, so far at least. This is all that more interesting because CBS was supposed to be the value vehicle in the Viacom spinoff, with Viacom being the growth opportunity. But, ever since CBS CEO Les Moonves lured dealmaker Quincy Smith from Allen & Co., it looks like ’tis CBS - and not Viacom - who’s shopping for growth and strategic fits.
The company has hitherto launched the CBS Interactive Network, made an undisclosed investment in Joost, acquired Wallstrip for a figure in the vicinity of $5M and today will announce that it bought Last.fm, the UK-based social network music site launched five years ago for $280M.
With Last.fm, users tell the website what music they are listening to. The site recommends other music they might like and links to buy the songs. For music it doesn’t have licenses to play, it offers 30-second samples.
Despite Last.fm’s 15 million monthly users (including more than 4 million in the U.S.), the price tag is far less than others in the social network space have fetched, even though multiples are higher today than they have ever been:
The initial payout is well beneath that paid by rivals in the last two years for video-sharing site YouTube Inc., now owned by Google Inc., and for MySpace, the top social destination on the Web, bought by News Corp. The final price for closely held Last.fm could rise substantially if performance targets are met.
Of course, while music is a red hot space online, it’s not an obvious one:
Last.fm offers Internet radio — the steady streaming of songs to computers. But it’s a tough business now because of a recent ruling by the Copyright Royalty Board that would significantly increase the royalties Internet broadcasters pay for streaming digital songs.
And while Last.fm has had minimal advertising thus far, things will change once CBS’ sales machine pumps into high gear:
CBS is also trying to fill out an advertising portfolio that already includes conventional radio, broadcast and cable TV and outdoor services.
(…)
Music sales aren’t a big part of the financial picture so far, and they might not be even when CBS takes control. The minimal advertising on the site, however, will be beefed up. CBS envisions channels for music backed by corporate sponsors that will pay for the privilege every month.
These are small, incremental deals that are beginning to help CBS catch up in the online real estate land grab; don’t get us wrong, CBS can be as strong as they’d like online, but next to their offline prowess, they’ll always have room to grow. Offline, CBS commands the largest billboard and second larget radio network, oh, they also have a rather popular TV network and a couple movie entities you might have heard of…
In other words, while some might wake up and say “what the?” - truth is that as one of the strongest offline players, CBS has a lot to lose by standing still:
The purchase is emblematic of the sharp change in direction at CBS, which owns the oldest U.S. broadcast television network and one of the country’s largest radio networks.
Instead of focusing solely on creating programming, the long-staid company now sees its mission as reaching the broadest possible audience in any medium, including the Internet and cellphones.
That last sentence says it all: old media will never disappear, but there is a massive shift of consumer’s attention, marketers budget and decision-making online, no one knows where the balance will wind up, but CBS - along with other media companies - don’t want to be caught off balance when the music stops.
Related:
:: Who is the king of digital media?
:: What is NBCU worth if it were spun out?
:: CBS Buys Wallstrip Part 3 | Part 2 | Part 1
:: Quincy Smith Hints at M&A Targets at EconSM Panel
:: Irony of CBS Hiring Quincy Smith
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