Music supplier 7digital takes $10 million to do on-demand, radio

Veteran digital music white-label vendor 7digital has raised $10 million to add more streaming, radio and scan-and-match services, plus to further expand in North America and Europe.

CEO Ben Drury, whose nine-year-old company was half-owned by troubled entertainment retailer HMV before expanding its equity this week, told a Thursday-evening event in London that it recently tapped unnamed “strategic technology investors” for the cash.

The investors are “US and UK neutral strategic technology investors, both public companies”.

At the same time 7digital is effectively folding its own HMVDigital download site in to 7digital itself. From today, becomes a merged, 7digital-branded site. 7digital itself also rebranded today.

Although 7digital operates an own-brand store, its strong suit is its white-label offering to other clients. Doing so through an API has led to growth, which has been accelerated by a blossoming range of new mobile devices, whose manufacturers want to offer buyers music.

At its event, 7digital did not disclose financial metrics but told paidContent it was profitable last year. MusicAlly reports 7digital’s Companies House filing that week that discloses a slimmer annual net loss of £113,000. 7digital would need more money to push ahead on its expansion plans. Its decision to take money is, therefore, interesting…

On-demand and personalised radio music is most commonly practised by own-brand services like Spotify, Rdio and Pandora. Now 7digital, whose platform has long offered music file downloads, wants to offer both of these new models, too.

7digital had already expanded to offer listeners cloud-based locker access to their files. The new additions are perhaps an indicator that downloadable files may indeed come under competitive pressure from the new-wave access models.

That means, just as these segments are joined by competitors like Xbox Music, 7digital wants to ensure a plethora of other players can offer similar services by piggybacking its service. Let a thousand Spotifies bloom.

CEO Drury said:

“Consumers don’t want MP3s or streams or downloads – they want music.”

“When you’re competing in the land of giants with Apple, Google and Amazon, it pays to be friendly. We want to work with everyone.

“We believe in open platforms – we’re not tied to any particular technology or format.

“A lot of companies take money and there’s a lot of hype and then they don’t succeed – we’ll see more of that next year. The big US technology companies also won’t have all the control.”

Offering on-demand streaming and non-on-demand personalised radio requires paying new sets of royalties. That could be one reason new investment is required.

HMV, whose digital downloads 7digital also powers, acquired 50 percent of the outfit in 2009, when some of its investors wanted to exit. Since then, HMV also invested in e-book discovery site eNobii but its fortunes have worsened as physical content’s outlook wanes and, after selling its high street bookseller Waterstones, HMV recently also aborted by selling aNobii to the Sainsbury’s supermarket.

7digital’s new investment means HMV’s stake is diluted below 50 percent. But CEO Drury said HMV is remaining aboard and ties between the companies are strengthening.