Aol Buys Make It Web Music Force

Internet giant America Online (AOL) has instantly become a striking force in the online music business with its purchase of Web radio pioneer Spinner.com and music technology company Nullsoft, the leading developer of Internet MP3 players.
The stock-for-stock transactions, announced June 1, are valued at $400 million by AOL.
The move is designed to give Dulles, Va.-based AOL a leading edge in the rapidly growing online music industry while dramatically trumping its customer base.
AOL president Bob Pittman says that the purchase of San Francisco-based Spinner.com will lift online music purchasing to the next level in the eyes of consumers by exposing them to a barrage of music genres. Spinner.com offers 120 niche formats, serving 1.5 million different users monthly, according to AOL.
AOL will also develop live music coverage and custom-branded music services via its AOL, AOL.com, CompuServe, Netcenter, and ICQ brands.
With its purchase of Nullsoft, AOL will be equipped to develop next-generation downloading equipment, which it will merge with Spinner.com's content and, again, utilize for its own brands. Nullsoft, the developer of the Winamp MP3 music downloading player and Shoutcast MP3 streaming audio system, is now based in Sedona, Ariz., but will relocate to San Francisco. Its products are utilized by 5 million users, AOL says.
The acquisitions, says AOL Interactive Properties president Ted Leonsis, will "help us develop new tools to make our partners' music and other audio offerings even more compelling and build the mass-market audience." He added that additional company buyouts are likely in the future to "establish our leadership in Internet music."
AOL'S PLANS
According to Mark Mooradian, a senior analyst for Jupiter Communications, "It's unclear to me whether AOL is acquiring Nullsoft for its audio-centric products or for its user base, which can be utilized as a kind of grass-roots marketing vehicle for the expansion of programming and aggregation of audience. Everybody has backed MP3 as a [downloading] standard, but I don't know whether AOL wants to push a client that is competitive with RealNetworks and Microsoft."
The purchase of Spinner.com, he says, will also allow AOL to greatly expand its customer roster, while ushering the company into the growing realm of Internet radio: "The technology is absolutely there for Spinner.com. Online radio works really well to date."
In addition, Spinner.com will open AOL to new revenue opportunities, through audio advertising and album sales, Mooradian says. "Audio advertising is probably the most under-exploited advertising vehicle online. People like Spinner.com and Imagineradio.com have been pretty innovative with creating banner ads and interstitials, but what we haven't seen is audio advertising, which has a lot going for it."
Further, "radio is far and away the greatest driver of album sales, and though [traditional] radio stations have built a successful media business around it, they've never actually been able to capitalize on that fact," he says. "This presents the ultimate opportunity to maximize on something that has never truly been accessible to them."
It was unclear at deadline whether Spinner.com and Nullsoft will continue to operate as separate brand entities or be absorbed into the AOL name. Mooradian sees possibilities for either option.
"Neither Spinner.com or Nullsoft are deeply established names," he says. "Spinner is in the early stages of reaching its audience. I wouldn't be surprised to see AOL subsume that brand name."