Baboom broker tries to distance capital raise from Dotcom

Novus Capital, the lead broker for a planned $A4.5 capital raising for Baboom, is keen to downplay Kim Dotcom’s involvement with the in-development online music service as much as possible.

Ben Yeo, a senior adviser at the firm’s Melbourne office, acknowledges Mr Dotcom “helped create the idea, but that’s basically where his involvement ended. There’s been a lot of misrepresentation in the media about that.”

Mr Dotcom’s family trust does have a stake in Baboom but he is not a director of that vehicle.  Mr Yeo says Mr Dotcom himself "has no equity in the company at all [although his family trust holds 45%] and no day to day involvement”.

Chief executive Grant Edmundson has met Mr Dotcom just twice and spoken to him on three other occasions; Mr Yeo himself has never had any contact with Mr Dotcom, he says.

The reason for wanting as much sunlight between Baboom and the German entrepreneur as possible is “he’s a bit of a double-edged sword,” says Mr Yeo, “people like him or absolutely despise him. And he’s obviously got ongoing legal issues, so basically Grant wanted to remove him as far as possible from the platform, so if something happens to him, he’s got no ties to it. This is going to be a completely clean and separate business.“

The prospectus for Baboom’s capital raising, which Mr Yeo is “supremely confident” will reach its target by week’s end, flags the downside of a Dotcom association under the heading ‘Challenges’, noting that “Owing to Kim Dotcom’s Megaupload heritage, some users and music suppliers may not favour using or engaging with Baboom, and labels may be reluctant to license material.” To overcome this, the company “intends to assure labels and collecting societies they will be appropriately recompensed for all material used”, woo independent artists without existing recording contracts by offering them up to 90% of the revenue generated through the platform via downloads, subscriptions, merchandising and ticketing, and “acquire music from friendly major artists”.

It’s in the latter area that Mr Yeo says Mr Dotcom has ongoing utility. “He’s good friends with people like Alicia Keyes, Robbie Williams and Skrillex, and Baboom will be leveraging those relationships to get exclusive content for the platform. On its hard launch the likes of Alicia Keyes will be releasing an exclusive album available only on Baboom for a period of, say, two-four weeks. “

In addition to such temporarily exclusive content, Mr Yeo says the platform’s points of differentiation include:

• Ability to download and stream in FLAC, a coding format for lossless compression of digital audio that delivers superior quality to MP3
• 50GB of free Cloud storage for music
• Chance to earn 10-15 free albums per annum by watching targeted, visual advertisements.

Mr Yeo says this last is aimed at “the younger audience – we’ve got to shift the mindset of a new generation of music listeners who aren’t used to paying for content ... This is a guilt free way of accessing free music in a completely legitimate way.”

Although the number of ads punters will have to watch in order to qualify for the free music has yet to be determined, Mr Yeo assures NBR the albums they get to choose from will extend well beyond those released by Mr Dotcom.

“At the moment it’s not ideal the only music available on the site is a Kim Dotcom album,” says Mr Yeo. “I would like to wash that out of there and to put some real music and real content from some actual artists on the site. That’s certainly something we’re looking to do as soon as this capital raising is done.”

The money raised will be ploughed into buying content, purchasing the platform’s backend payment system, developing a mobile app, and translating the site into 27 languages, before Baboom has its hard launch in “late December-early January”.

Baboom is a separate initiative to Kim Dotcom's other main post-Megaupload project, the file-sharing service Mega, though Baboom hopes to tap into Mega's 8.4 million-plus users.

The upcoming Baboom float conincides with the controversial reverse listing planned by Mega for August via shell company TRS Investments, in a deal valuing the file-sharing company at $210 million. Mega is in the process of raising $US7 million ahead of the reverse lisiting.

ngrant@nbr.co.nz

POSTSCRIPT: "Nasty spyware"

Dotcom's Baboom faces some obvious challenges. The four major multinational record labels, who launched a civil suit against the alleged pirate's former Megaupload service in April, are not about to sell or license any content for streaming via Baboom. And with iTunes diversifying into streaming (if not in NZ) and services like Pandora and Spotify now firmly entrenched in the mainstream, Baboom is less radical than when Dotcom first conceived it a couple of years ago. And of course some of the Giant Germans fans are never going to pay for content, even if their hero's selling it.

But there's also the issue of Baboom's ad-substitution software, which will serve up Baboom's own ads as you surf other sites - the idea being you watch ads to earn points toward free downloads. Dotcom says it will only take revenue from big websites, but how will he stop it taking revenue from smaller web publishers too?

Potential Baboom investors have to be wary that everyone from the likes of Google to the hundreds of thousands of sites that partner on its Ad Sense software, and other web publishers, won't take kindly to Baboom's ad substitution technology. It could face a popular backlash, too. Read "Dotcom's ad-substitution software is nasty spyware - Christie".

Chris Keall