Jan 25 (Reuters) - Beyond Oblivion, a digital music
start-up backed by Rupert Murdoch's News Corp and investment
bank Allen & Co Director Stanley Shuman has filed for bankruptcy
protection after spending millions of dollars building a service
that never saw the light of day.
Journalists were given a preview of the New York start-up
service that aimed to give away a limitless library of digital
music with devices that had the Beyond Oblivion software
pre-installed.
Such a plan would have had music licensing costs running at
tens of millions dollars even before it achieved any scale.
Beyond Oblivion owed creditors between $100 million and $500
million, with estimated assets of less than $10 million,
according to a Chapter 11 filing at the U.S. Bankruptcy Court,
Southern District of New York.
Its two largest unsecured creditors were major music
companies Sony Music Entertainment and Warner Music Group who
are each owed $50 million, for what is described as "trade
debt."
The board of directors, which includes Shuman and News
Corp's digital chief Jon Miller, agreed to wind down operations
earlier this month.
Beyond Oblivion, which was founded in 2008 by British
entrepreneur and music producer Adam Kidron, raised nearly $90
million in venture funding in its last two years.
News Corp originally paid $9.2 million for a 23 percent
stake in Beyond Oblivion in April 2010, according to company
regulatory filings. At that time Shuman, a News Corp director
emeritus, had an 18 percent stake. News Corp said in the filing
that Shuman did not receive compensation for his Beyond Oblivion
board service.
In the News Corp's fiscal year through June 30, 2011, the
company pumped an additional $2 million into the digital music
company. As of June 30, News Corp and Shuman owned around 20
percent and 14 percent respectively.
While relatively small in the context of News Corp's $45
billion market capitalization, the collapse of Beyond Oblivion
is the latest misstep with digital start-ups for Murdoch's
company.
Murdoch, who has flirted with Internet businesses since the
first dot-com boom in the late 1990s, famously bought social
network leader MySpace for $580 million in 2005, only to see it
lose its stature to Facebook. MySpace was sold last year for
just $35 million.
Earlier this month on Twitter, Murdoch said about his
company's role with MySpace: "We screwed up in every way
possible, learned lots of valuable expensive lessons."
Last year, Murdoch launched a tablet-only news magazine
called The Daily, which has so far been slow to make a major
impact with consumers.
News Corp Chief Operating Officer Chase Carey has said he
expects the company to focus more on building the digital
monetization of the major media brands it already owns such as
Fox, the Wall Street Journal and its various TV shows and movies
rather than try to start new digital businesses.
The Ch. 11 filing is in the U.S. Bankruptcy Court, Southern
District of New York, no. 12-10282-alg
For Beyond Oblivion: Gerard Catalanello of Duane Morris
(Reporting by Yinka Adegoke)
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