Rdio Was Bleeding Cash, Owes Serious Money

The US streaming company filed for Chapter 11 Bankruptcy on Monday (November 16) with the Northern District of California Court.

The details of the filing, obtained by MusicBusinessWorldwide make grim reading for music business rights-holders – especially Sony Music Entertainment.

Rdio had $190 million in secured debt plus around $30 million of unsecured debt before it filed for bankruptcy protection.

The secured debt was mainly owed to Pulser Media, which pumped funds into Rdio since 2008 and was a majority owner.

Yet it’s the $30m in unsecured debt that will most rankle the music business – not least the $2.4m Rdio owed to Sony Music Entertainment before it went under.

Compared to Sony, the other two major music companies get off relatively lightly: Rdio owed Warner Music Group $613,374 and Universal Music Group $294,219.

Rdio’s biggest creditors are partner and set-top box firm Roku Inc ($2.76m owed), Sony Music ($2.4m owed) and AEG-owned ticketing firm AXS Digital LLC ($1.25m owed).

Other creditors of interest to the music industry include Shazam ($1.17m owed), Tunecore ($236k owed) and Merlin BV ($134,960 owed) – the latter representing around 20,000 independent labels including Beggars Group, [PIAS] and Secretly Canadian.

According to Rdio’s General Counsel Elliott Peters, who co-signed the Chapter 11 document with CEO Anthony Bay, the firm was bringing in $1.5m per month from its subscriptions business, plus $100,000 – $150,000 per month from its advertising business.

According to The Hollywood Reporter, Rdio Inc was spending $4 million in monthly operating expenses, including payroll for 140 employees, plus royalty payments to rights owners and service maintenance costs.

The bulk of Rdio's revenue came from its $9.99 per month subscriptions. The company took in $1.5 million per month there. Advertising only accounted for $100,000-$150,000 per month.That was dwarfed by the nearly $4 million in monthly operating expenses, including payroll for 140 employees, royalty payments to rights owners and service maintenance costs.

That meant that Rdio was losing anywhere between $1.85 to $2.4 million each month, and Peters reports Rdio "no longer has the economic means of funding such significant operating cash flow shortfall."

By late 2014, Rdio had hired Moelis & Company, an investment bank, in an attempt to raise new equity capital, but ultimately realized it wouldn't be possible. Rdio also reports looking for a buyer or merger partner, and ultimately decided that Pandora was making the best offer —  $75 million for tech assets, but one that was contingent on a Chapter 11 filing, an auction process where overbids might result, and eventually court approval.