7digital is one of the oldest players in the digital music industry. The London-based company announced today that it has raised $10 million from two public technology companies. Even though the company is already profitable, it plans to expand its open platform strategy to power even more music services. 7digital is the key element behind Samsung’s Music Hub or the upcoming BlackBerry 10 App World’s music section.
Over the years, 7digital’s strategy has shifted a bit. Instead of competing head-to-head against Apple’s iTunes Store, Amazon MP3 or even Spotify, 7digital has become primarily a B2B offering. The company provides an open API that other companies can use to build a completely customized music offering.
“60 percent of our sales are going straight to devices,” Drury told us in an interview. 7digital’s API has been integrated in millions of devices. It represents a big opportunity for 7digital. “Samsung doesn’t want to be just a hardware company. It wants to get more involved with software and services,” he continued.
It has paid off as growth has been consistent, with now tens of millions in revenue a year, according to 7digital co-founder and CEO Ben Drury. The company has a major partnership with Samsung. The Music Hub is powered by 7digital API. For example, it allows Samsung to provide a $9.99 a month unlimited music streaming service in the U.S. and five European countries.
The company charges a license fee to use the platform and technology, and takes a share of the profits made with each sale. “Our business model absolutely works with the two revenue streams,” Drury said. “We don’t see Spotify and Deezer as direct competitors,” he continued.
The key advantage of the platform strategy is content deals. 7digital was founded in 2004 and has signed many deals with music companies. For newcomers, such as Samsung, HTC or RIM, they can opt for a hands-off approach and leave to 7digital the tough tasks of negotiating with the music industry.
7digital still has a traditional music store but is clearly focusing on its API offering. “I don’t believe one model will predominate. I think there is going to be space for free radios, paying for a song and streaming. Our company wants to offer everything on all these areas,” Drury said.
When talking about French music streaming startup Deezer and its recent $130 million funding round, “You certainly need deep pockets and you have to be prepared to write very large checks,” Drury said.
As 7digital’s platform strategy is unique and allows the company to be one of the only profitable startups in the industry, it remains very optimistic for the future. “Our first customers were the record labels themselves and they are still using our technology. We are considered as an independent Switzerland-type player.”