One Media playing old tunes on new instruments

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Take That! One Media IP Group PLC (LON:OMIP) certainly did last month when it bought up the producer royalties to some songs from Take That’s debut album.

It was a reminder that Hipgnosis Songs Fund is not the only listed company in the business of buying the rights to cherished songs from our youth.

If you have any interest in pop music you will have noticed a lot of big stars are selling off the rights to their back catalogues. David Bowie was one of the first to do it, Neil Young did it recently, Bob Dylan’s done it, as have members of Fleetwood Mac.

One Media’s chief executive officer (CEO), Michael Infante, is happy to admit that unlike Hipgnosis, it does not have the firepower to land those sorts of blockbuster deals. It deals with smaller but still well-known artists, such as Mungo Jerry, plus it also has a big catalogue of classical music.

“Hipgnosis is this huge fund, we’re more like a boutique. We’ve got to be more nimble,” Infante said. “We’re fishing in a pool that the others are not.”

Stocking up the war-chest

Having said that, the company did raise £6mln back in August to stock up its war-chest.

“Now is the time to scale-up,” Infante said, adding that we’ve all become a lot more streaming-literate during lockdown.

“At the start of the pandemic, everyone was a bit nervous. We thought revenues could go up or down by as much as 20% and they did go down initially, what with people commuting less and not listening to their morning podcast and so on.

“We’ve had a pretty good year, though, with revenue [in the year to the end of October] up 14% year-on-year,” Infante said.

Underlying earnings, or EBITDA, meanwhile, were up 30% at around £1.4mln of revenues of around £4.0mln.

The growth in streaming revenue (both paid for and advertising supported) in 2019 was 22.9% (to US$11.4bn) and Goldman Sachs predicts it increased by 18% in 2020.

The company has a strong pipeline of acquisitions and although lockdown restrictions initially prevented it from closing deals that normally would have been completed face to face, people have adapted and the deals are starting to be rolled out.

Late last month, for instance, the company announced it would be re-launching the Men & Motors channel in an on-demand format “to engage the next generation of car enthusiasts” (from which you can deduce it is targeting a younger audience than the phenomenally successful Top Gear).

The great thing about the company’s business model, according to Infante, is that it can take on a lot more business without particularly bumping up the overheads.

Low overheads and recurring revenues

Founded in 2005, staff numbers have remained fairly stable at around a dozen, although the skill-sets have changed.

“If we suddenly doubled our revenue to £8mln, I wouldn’t then need 24 people to run the business; maybe one or two more, that’s it,” Infante explained.

Since the technology companies stole the music business’s lunch, first through the download model and then through streaming services such as Spotify, Deezer, Pandora and YouTube, a lot of artists have seen their income from record sales dive, as a result of which they have become increasingly reliant on revenue from live appearances.

COVID-19 put paid to live gigs for most of 2020 and possibly for much of 2021, which means a lot of artists – particularly those in the vintage category that One Media tends to work with – will be looking to cash in on their back catalogue.

The artists get cash upfront and One Media gets a reliable recurring revenue stream that will continue years after each artist’s death.

“The great thing about our business is that on January 1st, I don’t have to rely on a salesman picking up the phone to persuade some retail chain to take a batch of records,” Infante said.

“We’re making sales while I am talking to you,” he quipped.

Avast potential in anti-piracy

The core intellectual property business has been consistently profitable, allowing the company to pay dividends, while in 2016 it added another string to its bow with its Technical Copyright Analysis Tool (TCAT), which is a software as a service (SaaS) platform that detects copyright infringement within legitimate digital music stores.

TCAT currently provides a range of services to two major record labels and the world’s largest media distributor, and its services are also used by organisations that represent the interests of the recording industry worldwide.

“We’re both a record content buying business and have an anti-piracy tool, so we’re into tech. As a little business, we’re punching way above our weight,” Infante concluded.

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