Interview: Omnifone CEO Eyes Investments As Music Access Takes Off

Veteran music access vendor Omnifone may not own a stake in Rara, the fledgling Spotify rival it span off last year – but CEO Jeff Hughes tells paidContent it will invest in other music companies over the next year.

“We’re going to make a profit this year,” Hughes told me. “And we’ll start to invest in companies over the next 12 to 18 months; in some of the smaller companies we think will make larger steps in digital music.

“We’re not huge and would be very disciplined (about acquisitions). There will be two types of companies – some that provide B2B services and some of the direct-t-consumer companies out there that need help to get started).”

Focus on B2B

Omnifone was founded in 2003 but rebooted in 2007, when it launched its flagship MusicStation software, offering all-you-can-eat downloads within its mobile apps for £1.99 a week. MusicStation did bundled mobile music before Spotify existed, offered through clients like Vodafone (NYSE: VOD), Telenor and Sony (NYSE: SNE) Ericsson’s PlayNowPlus service.

But, as a variety of players around the world vies to launch and relaunch new access services, Omnifone has since lost some of those names and has discontinued MusicStation as a direct consumer brand, choosing instead to spin out its customers to a new streaming access service launched in December, Rara.

Rara spun out

“Omnifone is a B2B company – we need it to remain so,” Hughes told me. “We span it out to remain B2B and not have any conflicts we may otherwise have.

“Omnifone doesn’t currently a stake in Rara. My guess is there will be a fundraising round (for Rara).

“There were some good reasons to get it out quickly. We’re working with the team at Rara to polish it. We now talk to them as much as we do with our other partners.”

From ownership to access

A Rara marketing campaign is due to launch by this summer. So far, the company believes its opportunity is in ease of use for mainstream users. But, while Spotify gobbles up consumer mindshare in unlimited-access music and a host of rivals like Rhapsody, Rdio, Mog and We7 joins it in international expansion, Rara will have its work cut out.

“Access services are the way of the future,” Hughes said. “We believe the access model has the most momentum and will be where most people end up.

“Subscriptions are not held hostage by one dominant player or the advertising market. Streaming is going to explode in growth.”

New market entrants

Though it lost Vodafone, Omnifone has since become the supplier to RIM’s BBM Music and to Sony’s own Music Unlimited service, which runs across all Sony devices but, unusually for the Japanese company, is also open to subscribers who use other device brands like Apple (NSDQ: AAPL) and Android.

Hughes says Omnifone will announce a couple more white-label deals soon, and he is obviously now courting new clients in what is becoming a celestial jukebox gold rush. As a back-end vendor, Omnifone is to the unlimited-access model what 7digital, the leading a la carte vendor, is to its white-labeled download stores like HMV (LSE: HMV) Digital, Samsung MusicHub and Pure Music – entities that want to launch subscription music services but which don’t themselves have the capabilities.

“We’re the Switzerland of music,” Hughes told paidContent. “We’ll provide to anyone who wants one.

“Some direct-to-consumer brands are trying to go global, we hope they’re successful. Some may need help.

“If a large consumer electronics vendor or another type of company wants to launch one and go global quickly, in less than year, they either have to do it themselves or come to us.”