As Queen lead singer Freddie Mercury once sang: “Radio, someone still loves you.”
In this instance, that someone is Cliff Hunt, co-founder of Yangaroo Inc. — formerly Musicrypt Inc. — a Richmond Hill-based company that has quietly made a name for itself building a digital bridge between radio stations and record labels.
Yangaroo provides encryption technology to music labels, allowing them to distribute their music to radio securely over the Internet, getting it into the metaphorical hands of disc jockeys and onto the airwaves all without the need to print CDs or pay FedEx for shipping costs.
But as the company prepares to announce a new partnership with one of the largest independent music aggregators in the U.S., the real question is, do investors still love Yangaroo?
Although the company has exclusive Canadian distribution agreements with the four major international music labels — EMI, BMG Canada, Universal Music Canada and Warner Music Canada — as well as signed deals with the big players on the Canadian radio landscape such as Corus Entertainment Inc., Astral Media Inc. and Rogers Communications Inc., Yangaroo has remained a relatively small player in the U.S. market since venturing there in 2005.
The company has struggled financially since going public in 2003, losing millions and watching its stock price fall from a high of $1.40 shortly after its IPO, to 14 cents today. Although the company's revenues for the first nine months of 2007 were up 27 per cent over the previous year, to just over $387,000, losses rose by 12 per cent to $1.8-million.
Today, the company announced a partnership with Indie911, an independent music network that helps distribute media for more than 45,000 artists, in a move Mr. Hunt hopes will help Yangaroo tap into a growing trend in the music business toward independent artists.
With top acts such as Radiohead, Oasis and Madonna eschewing major labels, “independent” music has taken on a whole new meaning and is no longer synonymous with small or unknown. Famous artists are looking for new ways to get their music out to fans and have started turning to independent aggregators like Indie911 for distribution.
Although Radiohead, Oasis and Madonna aren't on Indie911 — rising stars such as Apostle of Hustle and Louis XIV are — Mr. Hunt is hoping the exploding popularity of independent music will be a boon for his company. Already more than 80 per cent of the independent records in Canada are sent to radio stations via Yangaroo, Mr. Hunt said.
“The major labels have come under pressure and have been downsizing and cutting back and shaving their rosters to save money, so the independent sector has been growing,” he said. “A lot of big name artists are now choosing not to renew their contracts with the major labels. I think this is a huge opportunity for us to tap into that independent market.”
By adopting Yangaroo's technology, record companies can forego the costs associated with producing and shipping CD singles to radio stations, something that's especially appealing to independent artists looking to spread the word about their music and create a buzz on the cheap.
Yangaroo charges artists $1.95 for each radio station a song is distributed to, but also offers their clients a chance to track which stations actually end up playing their tunes.
The company holds the Canadian patent for its Digital Music Delivery System, which encrypts and transmits the music from the record labels to the radio stations. However, the U.S. patent is still pending, which is a situation the company hopes will be resolved in the next six months, Mr. Hunt said.
Mr. Hunt is confident a change in the company's fortunes is imminent. Yangaroo's system is currently used by about 1,900 radio stations in the U.S. while the company's encoding technology has been distributed to the major labels free of charge for now with monetization just around the corner.
“It's the old drug dealer model, you offer it to them for free until they become hooked on it and you can start charging them,” Mr. Hunt said. “We service all of North America right now, so when the U.S. comes on board entirely, we will not have to increase our overhead.”
He compares the change needed from the industry side to the move from handwritten letters to E-mails.
“What we're doing is changing a culture and human beings are slow to change,” he said.
Yangaroo is currently in “high level” discussions with two multi national record companies in the U.S. to start paying for the service, and Mr. Hunt said the company expects the results to translate into increased revenues in the first and second quarter of 2008.
