Launch Media Scraps Together Cash

In an unusually short, two-sentence press release, Launch Media (www.launch.com) this week announced that it has completed a $2 million short-term secured debt financing from a major media company. The company refused comment regarding the identity of this company.

According to Launch, this financing replaces the secured convertible note financing that the company had previously announced pursuant to a non-binding letter of intent. In mid-May the company announced that it had reduced its workforce by 60 people and was negotiating a deal for $5 million in convertible note financing. At the time, the funding was announced, Launch stated that no " definitive assurances" could be given, and pursuant to Tuesday's announcement, it would seem that the amount of financing came up $3 million short.

Last Thursday, 11 record companies including divisions of BMG Music, UMG Recordings, Sony Music Entertainment and EMI, all filed suit against Launch alleging that its personalized Launchcast stations violate copyright laws. Until the matter is resolved, Launch has discontinued all Launchcast stations except those that are pre-programmed.

Launch's CEO, David Goldberg, released a statement indicating that Launch is currently negotiating with the RIAA and the record labels to find a resolution to the matter. "We strongly believe that Launchcast complies with the DMCA (Digital Millennium Copyright Act) and we plan to continue talks with the RIAA to ensure a positive outcome for both music lovers and the music industry," said Goldberg.

With its stock price lingering well below a dollar, Launch's challenge for the near-term is to survive the lawsuit with enough cash in hand to operate. And given the recent trend of large media companies buying up weakened startups for their technology, one can only wonder who the mysterious benefactor is for Launch's latest round of funding. If the speculation is limited to just the five major labels, then it should be noted that AOL Time Warner is the only major label plaintiff missing in the recent lawsuit against Launch.

But given that UMG aggressively sued MP3.com a few months before its parent, Vivendi Universal, acquired it, who knows how this will play out?