Prior to Bankruptcy, Rdio was Losing $2 Million Monthly

by San Antonio Attorney

Rdio declared Chapter 11 bankruptcy last Monday, ensuing the period when an announcement was made that the on-demand service will sell some assets to Pandora for $75 million.

This bankruptcy filing revealed more about the real financial state of the company, according to the court papers in U.S.  Bankruptcy Court in San Francisco.

Rdio has more than $190 million in secured debt and about $30 million of unsecured debt, prior to its bankruptcy filing.

Pulser Media is one of Rdio’s secured creditors.  Pulser provided the bulk of the company’s financing and became a shareholder.

Rdio spent more on its advertisements in social media such as Facebook, with nearly $500,000 in expense as compared to independent record label giants such as Universal Music Group with an expense of $294,000.

This did not mean that Rdio’s revenue is less.  It was just not enough to sustain operational costs.  Majority of its assets came from its $9.99 per month subscriptions and the company made $1.5 million per month.

However, advertising only accounted for $100,000-$150,000 per month.  This is a far value from the target income.

The company was also plagued with $4 million in monthly operating expenses.  This expense includes the payroll for 140 employees and another set of expenses that includes royalty payments to rights owners and service maintenance costs.

Rdio’s expenses, which include steep operation costs, fell into a range of $1.85 to $2.4 million each month.

In an attempt to get fresh equity capital, Rdio hired investment bank Moelis & Company in 2014.  However, the plan did not work out.  It was also reported that the company was finding a merger partner or buyer, and Pandora gave the best offer.

The company already secured $3 million debtor-in-possession financing to supplement a $2.5 million payment from the purchaser.

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