Friday, July 26, 2019

What Makes A Good Acquisition? Music Does | Music Think Tank

Companies embark on the acquisition route to grow their businesses and extend their reach. Naturally this happens in every industry, that’s how we get conglomerates. In the record industry the majors only became majors after they’d acquired dozens of smaller successful labels that had ‘vision’, something sometimes lacking in the multi billion corporations. 
One small AIM listed company that has ‘vision’ has embarked on such a mission. It has made four acquisitions since February 2019 investing circa $2,600,000 on music rights, and its mission has only just started. So what does One Media IP Group PLC (OMIP) bring to the party when it buys rights? Who is benefitting? Well, as an AIM listed company, ultimately its shareholders, but along the journey so does the music industry and the rights holders.  You see, OMIP adds real value to its acquired music ‘rights’, this comes in the form of its fifteen years of experience in digital music distribution. In fact digital music was only 1% of the market in 2005 when OMIP was founded, it is now 59% globally. OMIP has no physical manufacturing side, it does not make records or CDs and it has never done so. With a head count of under 14 staff (including directors) it’s personal, efficient and tightly controlled.  It markets its music purely in binary code, through 600 digital stores globally including Apple Music, Spotify, Amazon, YouTube and Google Play. OMIP understands data and the market place, so much so it has developed its own analysis tool TCAT,
In February 2019 OMIP acquired the catalogue of Spanish label Locomotive Records. They driver behind the acquisition was the cult band Mago De Oz, the highly acclaimed Spanish folk metal band. Formed in Begoña, Madrid in 1988 ,Mägo de Oz (Spanish for ‘Wizard of Oz’), are still active and filling stadiums today, as they tour across Europe and Latin America, both key areas of growth for the streaming market. The band has over 1.3m monthly listeners on Spotify and its top performing tracks, including ‘Fiesta Pagana’ has over 100m views YouTube. The deal was finalised this week with the final payment signifying that all was well with the parties and that OMIP has fulfilled its acquisition requirements. 
Initiating OMIP’s acquisition trail in the first half of 2019 is the music Industry’s forecasted projections of growth prepared by the IFPI (International Federation of the Phonographic Industry) which are impressive for the next ten years. With last years (2018) income globally topping USD $19bn, it is targeted to exceed USD$37bn by 2030 that’s just short of a 100% growth rate in the next ten years. In 2018 the Music industry grew by 9.7%. During the first half of 2019, OMIP grew by 31%. 
So why have the Wizards of Spain been instrumental in kick starting OMIP’s drive to a greater future in ‘rights’ ownership? The answer is not a simple one but understood by those in the investing community that are taking time to study what is happening in the music eco system. The answer, music buyers (you and me) have evolved to never stop buying music. It used to be that we bought music during our teens but stopped when other financial burdens were thrust upon us, such as buying a car, house and having kids. It was commonly called growing up! Nowadays we don’t stop buying music, we subscribe to our chosen digital store for circa £7 per month and fill our binary boots. The benefit to OMIP and its contemporaries in the music industry is that every time you stream a music track a royalty is generated and the industry, including artists, composers and labels benefit. Consumers are discouraged from piracy, there is no point taping the radio or ripping from bogus sites, they come with viruses and Google block them where they can. Your chosen digital store is open 24/7 and 365 days a year via your phone, car, voice-activated device and TV. In fact you can’t escape what is going to become the soundtrack to your life, and best of all, everyone is getting paid. 
So Mago De Oz themselves will reap benefit from increased reporting on growing sales. Their songs, recorded in the late 80’s are not confined to the dusty CD shelf, having only earned their masters voices monies from that original decade. The recordings are live and income yielding and still benefitting those who worked hard to create the sound that rocked Spain and now the world, as their transient sound discovers new audiences thanks to global distribution by companies like OMIP.
Since the Mago De Oz Acquisition, OMIP has invested in three more varied music catalogues. With a strong pipeline and a growing market, this is no act of magic, it’s a digital sound investment. 

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