BELLEVUE, Wash.—Shares of InfoSpace Inc. plunged after the company said it expects its revenues to take a hit due to a plan by an unnamed carrier partner to develop direct licensing relationships with major record labels starting next year.
InfoSpace said it generated nearly $90 million in mobile revenue during the first six months of this year, $55 million of which came from label tone sales. The company said it plans to cut costs to account for the changes in expected future revenues.
“While we are disappointed in this decision and we will realign costs to reflect the revenue reduction, we maintain a strong presence in mobile infrastructure and search services,” said Jim Voelker, chairman and chief executive officer of InfoSpace.
Cingular Wireless L.L.C.—InfoSpace’s largest mobile customer—is rumored to be the carrier in question. InfoSpace declined to reveal the operator.
The move underscores the increasing pressure felt by aggregators as operators begin to strike deals directly with record labels, movie studios and other owners of original intellectual property. InfoSpace’s content aggregator businesses have been criticized by financial analysts in recent months, but the company is looking to its new, direct-to-consumer business to offset decreasing revenues from its on-deck operations. And the Seattle-area developer still hopes to leverage its online search engines, including DogPile and Switchboard, to gain traction in the potentially lucrative mobile search space.
InfoSpace stock plummeted on the news in after-hours trading Wednesday and continued to slide Thursday morning. Shares were down $4.52, or 20 percent, to $18.09, by mid-day, well below the previous 52-week low of $19.85 set in August.
