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Liquid Audio: Better off dead?
mgeneral writes "It seems so for the shareholders.
Liquid Audio, had only $150,000 in revenue but managed to lose $5.6 million last quarter. Its main asset: A pile of cash. In fact, so much cash, that if they close the doors, they could pay back the shareholders more per share than the current stockprice...and thats exactly what some investors want them to do." We've run stories on Liquid Audio before...
Seems to me time for Liquid Audio to die. There is no point throwing good money after bad and the shareholders can then invest in something new (if they aren't too scared off the Stockmarket ;-)
But then turkeys don't vote for Christmas and I'm sure that managers won't vote to sack themselves...
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It would be refreshing to see the directors of a company admit that they have no idea how they can make any money and return whatever their investors ponied up. The shareholders own the company, and if there's not even a glimmer of hope of the company ever being profitable (with Liquid I'm not sure that there ever was, but that's a separate issue) then the best thing is to admit defeat, cut your losses while there's still anything to cut, and close your doors.
Now there's a dotcom the other way around!
Now, if they decide to stop and give back the money, will they release the code as GPL?
This is by no means a rare situation for publicly traded companies to be in when they have a nasty burn rate.
If the company stays in business, they will soon be worth less, so having a cheap stock price is completely reasonable.
The problem is the people that paid more for the stock refuse to admit the company has a stupid business model and won't give up till the cash is completely gone - which is also very common (the entire dot-com industry for example).
- Adam L. Beberg - The Cosm Project - http://www.mithral.com/
So, umm... Why did they invest in the company in the first place?
Slashdot gets worse every day... Pipedot: News for nerds, without the corporate slant
There are two extremes to shareholders. Some want to play fair and simply have a stable investment that pays some dividends regularly.
:) another type of investor needs to prevail. One that realises they are a Fucked Company, and that the shareholders are better off getting their money back. (Even if it means they need to then start the investment procedure over again with their regained capital.) Unfortunatly, investors in general arent the best at educating themselves about the tech stocks they own, as history has shown.
Then there are the buy-sell-buy-sell-buy-sell idiots who just want to Make Money Fast and try to get rich quick.
For real sense to prevail (LA's assets are, uh, liquefied
Anyone who considers arithmetical methods of producing random numbers is, of course, in a state of sin.-John von Neumann
Liquid Audio is infamous in Japan - it was one of the first two companies to be listed on the new Tokyo Stock Exchange "Mothers" board for venture companies; unfortunately, the relaxed listing rules allowed Japanese gangsters to get a foot in the door.
Eventually, what happened was one of the company directors was kidnapped by the CEO(?), a rather interesting personage who was missing a chunk off one of his little fingers... for those of you familiar with Japan, that should immediately ring alarm bells
These days, they're called Cyber Music Entertainment. Their stock price peaked at around 1,590,000 yen in September 2000; these days, they trade at around 10,000 yen
Most of the comments I've seen so far have been along the lines of "They should just give the extra money to ..." or "Invest it in...!". Incorrect - the fact of the matter is that many, many businesses have been, and still are in the exact same position. The only way to *keep* shareholders is to show you have enough money to still give them a return on their investment even if the company goes belly up. There are three trains of thought on this: 1) make up fake revenues, a la Enron, WorldCom, etc. 2) go flat broke up forget about the people who trusted you to make then richer, or 3) ensure that the people with a vested interest in your company has a reason to stay on board. Liquid Audio (for all their faults) should be commended for their commitment to the stakeholders, even at a loss to the company - its seems to be such a rare thing with all the business improprieties on CNN. Money is the name of the game, and whether you like it or not, making investors happy is the nature of the beast.
They had $150,000 in revenue?! That's insane. What did they do, rent out part of the office?
Belief is the currency of delusion.
Liquid Audio has never had a big footprint. It needs to either fold or radically reinvent the purpose of the company.
We need to move away from the Dilbertesque model of a company loosing money while it's growing but never having a plan for afterward. Unless Liquid Audio has some magic plan to emerge from its cocoon a beautiful profitable company, it will just burn money indefinitely. This cannot be good for anyone. That money should be invested in a more realistic venture.
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I am an expert in electricity. My father held the chair of applied electricity at the state prision.
Especially they use a proprietary format. When I buy music, I wanna listen to it other than on the computer. Otherwise, might as well buy the real CD or logon Kazaa.
And their selection is narrow. Marketing is not enough. So they're unheard to customers, unwise to computer geeks, and unliked to shareholders. It's time to give up and move on.
Oh yea...and the so called "resurrection" of Napster is as hopeful as the Atari or NeXT.
If a majority of votes (where the needed majority is regulated in the company charter) decides it is better to just throw in the towel than to continue, that's what will happen.
/Janne
Trust the Computer. The Computer is your friend.
would be to change the business concept of this company and turn it into an investment company, which invests in new bubbles, and cashes in time.
They are offering $3.00 per share in the buyout, less than the cash holdings of the company. They are effectively offering to buy a pile of cash for less than 90 cents on the dollar. The investors are saying "We'll just take the full $3.41, thanks." The management supports the buyout perhaps because of a sentimental attachment to the company, or perhaps because of golden parachutes they may (disclamer: I do not know this) be getting out of the 41 cents.
Let's see -
The CEO is making $ 500K per year.
Another co-founder is also making $500K per year.
All of this on revenue of $600 K per year.
And they say that shutting it down would ''...not represent[] the interests of all the shareholders.''
Do the words "bloated" come to mind ?
How about nervey ?
How about stupid ?
In my opinion much of the dot-com money was "value-subtracting," in that they took good money and did stupid things. Enough people did this that it poisoned the ability of real businesses to make real money, because the marketplace was conditioned to assume that things that cost money actually should be free.
I cannot think of a much better example of a value-subtracting business than Liquid Audio.
Shut it down.
From what I can tell, the only thing they had over things like Ogg Vorbis, and even MP3 is that they were there before those formats were as popular (or even existed in the case of vorbis).
Their main competitor was Real, but Real were interested in low bitrate streaming, and Liquid were interested in digital distribution of high quality music.
Then along came MP3, and people got free (if not necesarily legal) distribution of acceptable quality music, and so Liquid became irrelevant.
Real survives because there's still a market for live streaming audio technology.
Advanced users are users too!
The Liquid Audio files are fully Digital Rights Managed, I have one on my harddisk that I can no longer listen to, caues something changed on my computer.
The song sucked anyway, but the ammount of hassle it took to get the player installed (along with some funky sound card drivers (I think they are installed to try to keep listeners from playing to the harddisk instead of speakers) was increadable.
I'll never get another song in that format.
In related news, Microsoft has decided to close its doors, saying that Linux does what it does, for free. The xxx$ billion in the bank will go to its shareholders, who have been dumb enough not to insist on dividends, despite the fact that MS has xxx$ billion in cash.
We wish.
"Sometimes a woman is a kind of religion, she can save your soul & set you free from all your sins" - Bad Examples
..."it seemed like a good idea at the time!"
what are the technical leverages that Liquid Audio claims to offer vs. free competitors such as Ogg Vorbis
Pretty much just DRM, which means the music industry was happy to use it in promos for new releases, etc.
Get off my launchpad!
With all the cash holdings, you don't have to ask why they called themselves "Liquid."
Liquid Audio has USD 81 mn in cash and equivalents as at 30 June 2002. We should see significant financial income in the Income Statement for the period, but there is only USD 318,000 "Interest and Other Income (net)", which is about 0.4% of USD 81 mn, a funny little return on the cash reserves of the company, even at today's interest rates.
So it looks like the boss is not doing a good job even of money management.
On the other hand, it looks like Liquid Audio IS preparing to give back USD 30 mn cash to its shareholders - their merger agreement with Alliance Entertainment has been amended (15 July 2002) to include this cash return. Check out: http://biz.yahoo.com/bw/020814/140345_1.html
As for the board of directors, as I said, they are appointed by the share holders, and can in principle be deposed at any time. The CEO in turn is appointed by the directors, and can (and sometimes will) be fired for pretty much any reason. A partial reason for a high salary for a CEO is exectly this lack of any job security (though that does not cover the sometimes ludicrous salaries you sometimes hear about).
Many company bylaws are designed to facilitate some kind of balance between the actors and the owners. It can include poison pill regulations, differential voting strength, making the directors shareholders, and what have you.
None of this does however change the basic feature that the company ultimately is there for the benefit of its owners and nobody else. Customer relationships may be very important for a company, but then it is so because that will ultimately benefit its owners more than the reverse. Conversely, some (smaller) companies now have far reaching environmental policies that strictly speaking are not profitable for it in the short or medium term, but that have been imposed on it by its shareholders. This is perfectly acceptable.
/Janne
Trust the Computer. The Computer is your friend.
You would think the major labels would take a lesson from this.
They will take a lesson from it. It just won't be the lesson you expect. Instead of saying something like "This restricted format stuff just doesn't work", they'll say something like "Piracy is killing us".
Please mod this post only if you think others should/n't read this. I have enough ego^H^H^Hkarma. Thanks!
My God, people, don't you realize the ace in the hole this company has? 90% of the dotcom's out there would kill for the hard capital this company has. In fact, it's the entire reason the .com bust happened-- All these companmies were venture capitaled to the hilt without any real assets of there own. When they hit the wall, they hurt their investors... Bad. Hell, after umpteen years of existance Amazon.com has only recently posted in the black. And don't think Bezos wasn't sweating bullets every day until that point, because if confindence for one minute faded in his ability, he was so far in the debt hole not even confidence could escape. Not your debt or my debt, but high millions debt. And that's not counting how he had to deal with his workforce (damn near 80% temps-- Hire em, fire em, hire em fire em...) to finally get above water. But for Liquid Audio to actually have assets... Unless the their problems were seriously irrecoverable, that's a major advantage to just piss away. I guess it's all about money now as opposed to long term success. Why not.
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