Troubles At Imeem, But Company Says No Shutdown Imminent

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Imeem, the free streaming music site backed by Sequoia Capital, Warner Music and other prominent investors, is rumored to be in serious trouble.

Music insiders are saying a shutdown of the company is imminent after a failed attempt to sell the company or raise more cash. A spokesperson flatly denied the shutdown rumors today, but confirmed that the company layed off staff last week (six people from a staff of around 70). He wouldn’t comment on funding or sale rumors, although plenty of potential buyers tell us they’ve been pitched to buy the company over the last year.

The “problem” with Imeem, like all streaming music services, is that they have to pay a flat rate per stream to the music labels that’s hard to cover with advertising alone. Some companies pay as much as $0.01 per stream, which doesn’t seem like a lot – but at volume it’s crushing, particularly in a down advertising market.

One source tells us that Imeem owes the labels as much as $30 million to date with no hope of paying any of it. Imeem says that is “extremely innacurate,” but confirms that they are playing “in excess of a billion songs and videos per month.”

Online music is a tricky business, where rabid users can actually quickly put you out of business simply by listening to too much music. Imeem says they’re refocusing their efforts on additional revenue streams, such as paid downloads, tickets and ring tones. One new feature allows users to download entire playlists for a fee with the click of the button, which is sure to be popular. The big question is whether that will be enough to make the business even remotely profitable.

This is one tough company that has reinvented itself more than once to find a way to profitability and success. I wouldn’t necessarily bet against them. But the clock is ticking on this startup.

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