Digital Legal Top Stories

Beyond Oblivion files for bankruptcy protection

By | Published on Thursday 26 January 2012


Beyond Oblivion, the failed digital music start-up that shut up shop over Christmas, has applied for bankruptcy protection in the US, saying it has debts in the $100 million to $500 million bracket.

The company’s Chapter 11 filing with the New York bankruptcy courts estimates that the firm’s assets – presumably including the intellectual property in its never-to-be-launched digital content platform, which it seems to think it can sell – are worth somewhere between $1 million and $10 million.

As previously reported, Beyond Oblivion – which began trading as Boinc towards the end of its life – was an ambitious plan led by British entrepreneur Adam Kidron to provide an all-you-can-eat music download and sharing service which would appear free to the user. Revenue would be generated by selling the software that was required for the free downloads to work, preferably to mobile networks, and phone and PC manufacturers, who would bundle the fee in with their products, masking the real cost to the consumer.

The venture, which secured in the region of $87 million in financing, including backing from News Corp, the Wellcome Trust and US bank Allen & Co, relied on convincing both the music companies and tech industries about the value of the product.

While the former would get 70-90% of the revenue, there were risks, given the per-play royalty would vary depending on how often a user used the service during the lifetime of their Boinc-ified device, and the labels remain nervous that any unproven new business model may have a detrimental impact on the now maturing iTunes-style download market. Nevertheless, last October it was reported that both Sony and Warner had signed up, though rumour had it only after Boinc committed to multi-million dollar guarantees.

But, of course, that was only two of the four majors, and there was no word on Merlin, representing the bigger independents. Plus, while we were told a tech partner was close to being announced, no announcement came, and there was speculation that mobile handset and tablet computer manufacturers were concerned about the cost of bundling Boinc into their devices (thought to be around $60 per device), especially in a market where many companies are competing on price.

Whatever, over the Christmas break it was announced that Beyond Oblivion, whose launch had been pushed back more than once, would never go live, with projected costs making the venture unviable. It’s not clear how much of the $87 million start-up capital was used, at least half of it was conditional on meeting certain targets, which may or may not have been met. Though it seems debts exceed that total investment by some margin.

According to Reuters, the two biggest creditors to the defunct Boinc are the aforementioned Sony and Warner who, it seems, had indeed agreed to licence the service. Reports suggest both are owed in the region of $50 million each, which were presumably advances the labels had demanded before providing their music to the company. Quite why, given the service never went live, these advances are seemingly still payable isn’t clear, though it seems unlikely the majors will ever see their money.

Among the other reported creditors is Vice magazine, which was seemingly hired to help market the Boinc brand, certainly the still-to-launch digital music service had been associated with at least one party staged by the media company.

It’s thought Rupert Murdoch’s News Corp pumped over $10 million into the failed venture, which by the multi-billion dollar conglom’s standards is small money, although involvement in another failed digital business is embarrassing for the media firm, following the high profile crash of its biggest digital investment to date – MySpace – and the very slow uptake to its biggest in-house digital creation, iPad-only magazine The Daily. It seems likely News Corp will now focus on building digital subscription services around its existing content and entertainment brands.

Whether Boinc’s creditors will see any return from the sale of the company’s assets, remains to be seen.