What ever happened to Kazaa/Atrinsic?

by Kris_Tuttle on April 19, 2012

We met with Atrin­sic $ATRN in 2011 after they attracted atten­tion by acquir­ing music prop­erty Kazaa late in 2010. Back then the shares were trad­ing in the $3-range ver­sus the cur­rent $0.08.

At the time com­pany was work­ing on adding to the senior man­age­ment team and board at the same time they were hop­ing to secure agree­ments with music con­tent providers (the “labels”) to grow the service.

Pick­ing through all the fil­ings it kind of looks like the com­pany got what it wished for. The only prob­lem is that the con­tent costs are high so that the Kazaa sub­scrip­tion rev­enue gen­er­ates losses instead of profits.

Our old friend Michael Robert­son (of MP3.com fame) men­tioned this prob­lem in no uncer­tain terms when we pub­lished a note on Pan­dora $P.

It appears that Atrin­sic is run­ning out of cash and lacks enough run­way to get their music sub­scrip­tion busi­ness in the air. They have recently sold a few none-core mobile and online prop­er­ties but that only raised a lit­tle over $600K.

The com­pany seems to be painted into a box. The cur­rent CEO, Nathan Fong, needs to work with the board and map out some kind of strat­egy. Since con­tent costs are unavoid­able it makes it hard to fathom what they might do.

We think the endgame for some of these dis­tri­b­u­tion com­pa­nies is acqui­si­tion by the con­tent own­ers since the busi­nesses would be instantly prof­itable if you didn’t have to pay the con­tent fees. In that case $ATRN would be worth much more than the cur­rent share price.

Prob­lem is you don’t have any power to bar­gain with. You’re sit­ting at the power table with noth­ing and every­one can see your cards.

Any ideas?

{ 2 comments }

HeadShaker April 21, 2012 at 2:21 PM

You are aware that Atrinsic divested themselves of Kazaa at the end of 2011 to focus strictly on their transactional business, aren’t you?

admin April 23, 2012 at 10:17 AM

I’m aware of it but why?

It seemed to result in a hopeless situation for the company.

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