Business Model Focus: Finding the Right Path to Profitability

Though the trend of transformation from a consumer destination site to a B2B or ASP model is still relatively new, some companies have shown measurable success.

Last November, music services company Listen.com acquired WiredPlanet for relative chump change (about $1 million to $2 million). The purchase marked an expansion for Listen, which had been working with the Big 5 music conglomerates to provide legal downloads to consumers. With WiredPlanet, Listen could now build custom-branded radio stations for Web sites, record labels and other content owners. But as far as Sean Ryan, president of Listen, was concerned, the integration of WiredPlanet’s ASP services was part of Listen’s original business plan. "We’ve always had an ultimate middleman role ... and we hope to provide to our distribution partners a one-stop shop for an entire digital media experience," says Ryan.

In April, Listen set up an online radio station for Rounder Records. "RounderRadio" features five channels of audio programming including blues, modern mix, reggae and Americana. A fifth channel features live performances, artist interviews, new releases and news. Rounder artists include Alison Krauss and Cowboy Junkies.

Initially, Rounder intended to build an online radio station in-house. But the potential burden on staff, and unfamiliarity with the back-end technology, led the record label to seek outside help, says Brad Paul, vice president of promotions at Rounder Records. After negotiating with several vendors (including NetRadio, which backed out at the last minute), Rounder went with Listen. "We needed the vendor to fulfill a number of criteria," says Paul. "We were looking for a company that has deep pockets and, hopefully, will stick around for awhile." Listen has also established radio partnerships with ChickClick, EMusic, NetNoir, Interscope Records and Sub Pop Records.

But while a continuous stream of press releases tout new partnerships, a "tightening of focus," and a new "path to profitability" — thinly veiled euphemisms for jobs cuts and slowing fast cash-burn rates — only a few companies are guaranteed to survive.

For those that do survive, the rewards will be steep, evangelizes Yankee Group’s Vonder Haar. "We’re on the cusp of something big. Broadband networks may not be ubiquitous, but they’re certainly not novel. And any company delivering video with a purpose – to B2C or enterprise clients – is in the right place, at the right time."