According to Alex Viega of the Associated Press, Universal Music Group purchased a stake in the social networking and music download site Loud.com. The price paid and size of the stake were undisclosed.
“Record companies have historically relied on developing new artists and making money from the sale of music or from music publishing.
However, investments in other types of businesses are becoming more common as the industry struggles through a protracted CD sales slump.
Record labels are also looking to strike deals with recording artists that give the labels a slice of touring, merchandising and other revenue.” –Source: Forbes.com
This is an important purchase for Universal as it will allow them to tap into a large base of loyal hip-hop music fans. With Universal’s music labels offering downloads of various artists for $.99, this purchase seems to make sense for all parties. The difficulty and expense in developing and growing successful websites reliant on social networking and user generated content leads me to believe we will see more traditional companies buying stakes in successful online communities over the next several months.