Ezmo, a music locker service that let users share their collections with friends, bit the dust today. The service alerted users in an email and blog post, saying it couldn't raise the money it needed to keep going. I spoke briefly this afternoon with David Leibowitz, who was Ezmo's chairman, and he still thinks Ezmo had a workable business model: encouraging people to buy music by letting them play for free the songs that friends own. It's much like Lala.com's approach, at least conceptually. I'll confess to being more than a little skeptical about the latter, largely because of the royalty payments it had agreed to make. But at least Lala.com has deals with the labels; Ezmo never got that far.
Leibowitz didn't seem bitter about the record companies' attitude, saying Ezmo had many productive meetings with label reps in Europe (where Ezmo is based). Still, he acknowledged that the labels focus their limited biz-dev resources on services that have proven business models, large user bases and/or the backing of a major company. "They’re showing increasing flexibility, [but] it’s still a very long effort for them to embrace new models." In short -- and this is my spin, not David's -- the labels are paying the least heed to the small start-ups most likely to be truly innovative. Given how Yahoo, AOL, Wal-Mart, Circuit City, MTV and Microsoft have fared in this field, compared to the original Napster, you have to wonder whether the labels are looking in the right place for partners.
The Ezmo blog offered a more pointed summary of the company's demise. Here's an excerpt, with my annotations in red italics:
It has always been clear to us that Ezmo had to be a free service for all users. Let's face it, the market has spoken, and it wants free music online. Our still theoretical revenue model is based on music sales (and promotion), for which one needs at least some sort of cooperation with music labels. Basically, we can't sell downloadable tracks without their permission. We have had repeated meetings and contact with the major labels, but their willingness to cooperate in finding innovative solutions for music sales seems non-existent. Their terms were not compatible with the conditions a small start-up operates under. In other words, they wanted huge advances to protected themselves from risk. We still feel absolutely confident that services like Ezmo will have a major significance in the future, but the lack of cooperation and even threats of lawsuits from the labels and their organisations has made intermediate financing paramount in order to secure a necessary time horizon for the company. Because it might take years to persuade the labels to give us licenses on terms we can afford, and our team can't work that long for free. Without that financing in place, Ezmo has no alternative but to shut the service down and close the company.
Good luck to the Ezmo folks in their next act, whatever that may be. Ezmo was a wholly owned but independent subsidiary of the Norwegian company Fast Search & Transfer, whose fate is a bit brighter; it's in the process of being acquired by Microsoft for about $1.2 billion.