- The Guardian,
- Monday May 21 2001
The battle for online music services took another twist yesterday when Vivendi Universal, the world's second largest media group, paid $372m (£265m) for digital recording distributor MP3.com.
The move is part of the trend for the global music industry to swallow up the web-based mu sic companies which were once seen as threats to its dominance. It follows a deal between German entertainment company Bertelsmann and Napster, the online music business still facing the threat of closure after rival record companies took legal action against it.
Yesterday's cash and share deal values California-based MP3.com at a 67% premium to its market price, but is less than one fifteenth of its value at the peak of the dot.com boom. Michael Robertson, who launched the business in 1997 after buying the MP3 domain name for $1,000, will collect$145m for his 39% stake.
Vivendi, whose music catalogue ranges from Billie Holiday to the Def Jam rap label, said the MP3.com tie-up would lead to online distribution of its films and interactive games as well as records.
"This strategic acquisition is a big step forward in developing an aggressive, legitimate and attractive offering of our content to consumers," said Vivendi's chairman, Jean-Marie Messier. "MP3.com's expertise will be a tremendous advantage, especially in the digital distribution of all Vivendi Universal content and the creation of common technology platforms."
Mr Robertson called it a "groundbreaking merger".
It is Vivendi's third and most significant move into the digital distribution area. It has already announced a deal with Sony to create Napster rival Duet, and in April announced a separate distribution deal with Yahoo!
But sources close to Vivendi said there were risks involved in this latest deal. MP3.com thought its legal problems were over after it settled a $100m lawsuit with the world's top record labels, but earlier this month found itself the subject of new suits from individual artists.
