By 
“After nearly two decades of disruption, the music industry is undergoing a massive revival. Artists, labels and publishers are cashing in on the growing popularity of streaming platforms like Spotify and Apple Music — and consumers are signing up for subscriptions like never before.” Goldman Sachs, May 2020
A 2020 report from the Wall Street bank, entitled Music in the Air, forecasts net/wholesale revenues for the music industry will double over the next decade to almost US$47bn.
Given the sector outlook it is hard to understand then the rather miserly valuation of One Media IP Group PLC (LON:OMIP) – one of the smaller players, but nonetheless ambitious and growing.
The half-year to April 30, 2020 was a period of consolidation after spending £5.6mln (US$6.9mln) adding to its music library the previous year.
One Media’s share price has started to factor in what’s been happening at the company and what, according to the Goldman analysis, should be an appreciating set of assets.
Sweet Harmony
Chief executive Michael Infante has this year also set about changing the way the company goes about buying music catalogues.
One Media’s new Harmony iP business borrows an idea that is employed by property equity release plans – so, rather than acquiring a whole music catalogue, Harmony has set itself up buy between 10% and 30% valued on a multiple of the income it generates.
The group adds value to the content by maximising its availability in over 600 digital stores globally, including Apple Music, YouTube, Amazon and Spotify.
It also has a powerful piece of proprietary technology called the Technical Copyright Analysis Tool, or TCAT for short, to clamp down on piracy.
One Media will also have the right to match any competing offer for the rump of the collection if or when it goes up for sale.
Harmony has been “very well received” by the industry, Infante reveals. “The main driver for a lot of musicians is their income for live performance has been washed away.”
“The City like the model too … it is a proper initiative that scales out.
“As soon as we are past this summer and we can travel about for meetings, we are going to start ramping up publicity for Harmony and we’ll probably look for a fundraise at some stage to beef up the acquisition in the new Harmony style.”
TCAT: To catch a thief?
Alongside Harmony, Infanta hopes the TCAT software will also kick-start interest in the business.
Initially developed as an in-house asset to detect copyright infringement within legitimate stores, the plan is to roll it out across the record business as a software as a service platform.
The infringements captured by this sophisticated algorithm may be honest mistakes, equally they could be a deliberate attempt to siphon off revenues. In either case, the technology provides record labels with another means of policing their IP and maximising income.
TCAT also has functionality that aggregates real-time data, which has several applications: current and historical industry chart information, global music track data for legal disputes, territorial music trends and publisher reporting. It’s informational that might be monetised at a later date.
Performance like music
Being a pure-play digital B2B delivery business, with its team working remotely, and with global streaming revenues proving robust during lockdown, underlying revenues for the half-year to April increased 28% to just over £2mln and pre-tax profits were up 177% to £399,236.
“This ‘new normal’ lends itself to our continuing operations and we have successfully proven our robust business model in the first six months of 2020,” Infante said.
In August, the group raised £6mln in what was said to be a heavily oversubscribed share placing to fund more rights acquisitions to create and expand its digital asset holdings.
In October, One Media hailed the performance of the music catalogue of American composer and solo piano artist Philip Wesley after a final US$100,000 payment was made for last year’s acquisition.
Infante said the company was evaluating further acquisition opportunities, primarily through Harmony IP, as well as looking at possibilities to scale TCAT for wider use across the music industry.
What the broker says
The company’s broker Cenkos expects the existing content library to continue to grow its revenue base at around 10%, aided by a strong pipeline of potential acquisitions.
Analysts said that the share price had become “detached” from its fair value, estimating a fair value market cap of £17.8m, equivalent to 12.7p per share.
“It has an easily scalable business model allowing it to expand its geographical footprint, exploit its new product offerings and capitalise on the growth in streaming globally.
“This combined with One Media’s strong pipeline of catalogue acquisitions and its track record of acquiring assets, which are underpinned by low risk content with robust annuity like revenues…bodes well for future financial performance.”
Comments