Loudeye Snaps Up Webcasting Firm Activate

Loudeye Technologies Inc.’s, digital content infrastructure and services provisions could get a bit more rounded out. The Seattle firm late Tuesday acquired webcasting provider Activate.net Corp., a majority-owned operating company of struggling incubator CMGI Inc.

The transaction is good to the tune of $1 million, said a Loudeye spokesperson, with the option for Loudeye to pay $3 million in stock or cash within a year. The firms expect Activate, which generated revenues of $7.7 million in 2000, to see revenues of between $8 million and $9 million for the full year 2001, growing to approximately $12 million in 2002. Loudeye believes it will record a special charge related to the consolidation of operations of between approximately $2 million and $2.5 million in the third quarter, most of which will be non-cash.

Activate, a provider of live and on-demand webcasting services for enterprise business communication, should fatten both Loudeye’s digital media service offerings and add new revenue stream sources. Despite a soft market, research firms such as Jupiter Media Metrix have predicted enterprise streaming could top $2.8 billion over the next couple of years. Indeed, Loudeye is hoping to attract the eyes of its existing customers, including AOL,
Bertelsmann, MSN and Amazon.com with the addition of steaming capabilities, but Activate comes with its own armada of customers — about 300 firms, including Microsoft.

Businesses use webcasts to deliver training, product marketing, sales support, corporate communications, customer service, public relations and travel to employees and customers.

The companies will be integrated thus: Loudeye hopes to consolidate its digital media services, music samples and Loudeye Radio business units into Activate Grand Central, Activate’s digital media broadcast facility, which manages and streams thousands of simultaneous audio and video signals. The center was hyped for helping stream a Madonna concert from London that drew 9 million music fans last Nov. 28.

Loudeye also expects Activate’s infrastructure, webcasting technologies, ad insertion expertise and streaming content delivery networks to beef up its hosted music samples business and Internet radio solutions.

In terms of personnel, Activate President and Chief Operating Officer Dennis Shepard would assume the role of president and general manager of the Activate subsidiary under Loudeye and Activate Chief Executive Officer Jeff Schrock would serve as an advisor to Loudeye. Activate’s 85 employees will remain with the entity in production, operations, customer service and support, sales and marketing functions.

The proposed deal should come as no surprise to anyone, really. Andover, Mass.’s CMGI, which announced abysmal double Q2 losses shortly after the Loudeye bid was announced, has been looking to toss off Activate on someone else since March

Loudeye will hold an investor teleconference at 11 a.m. EDT on Wednesday, Sept. 26 to discuss the deal.

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