One Media iP Group Plc (AIM: OMIP), which specialises in acquiring and monetising digital music rights and other intellectual property, has released its interim results for the six months ending 30 Apr 2024, showing stable revenues, but delivering only modest growth.
Net revenue was flat at £1.8 million which was, according to the company, due to the cash drag of anti-piracy subsidiary TCAT, which “diverted revenues from the core business” and has “restricted management’s ability to invest in new catalogues” to further expand the company’s portfolio of rights.
One Media’s most recent catalogue acquisition - which completed in November 2023 - was the licensor’s income share of the Entertain Me catalogue of rights on an in-perpetuity basis. This saw One Media acquire an income stream derived from a substantial catalogue comprising over 15,000 tracks recorded from the 1940s to 1970s from a range of artists including Dean Martin, Gloria Gaynor and Louis Armstrong, and which spanned genres from classical to disco.
Commenting on that deal back in late 2023, CEO Michael Infante said, “This acquisition not only gives us income exposure to new songs in our sweet spot of music nostalgia, it also allows us to strategically consolidate certain income streams where we also have a portfolio exposure to some of the tracks in the Entertain Me catalogue”.
The Entertain Me deal completed at what the company describes as an “advantageous earnings multiple”, and was facilitated via One Media’s ‘Harmony IP asset release programme’, which “allows music rightsholders advanced access to the future earnings of their intellectual property by purchasing a portion of their rights upfront”.
Focusing in on the latest numbers, the company’s revenues were up very slightly year-on-year, at £2.8 million, compared to £2.7 million for H1 2023. The majority of that revenue - £2.6 million - came from intellectual property royalties.
Despite no significant additions to its music catalogue, One Media’s core business delivered a robust EBITDA of £1.1 million. Overall group EBITDA saw a 14% increase to £0.9 million (H1 2023: £0.8 million), largely due to cost efficiencies within its technology subsidiary.
Infante commented, “One Media’s principal expertise is in managing and investing in music copyrights and this core part of our business continues to perform well and in line with expectations. Our capacity to grow our Group profits, however, is somewhat constrained by the continued strategic allocation of resources, including management time, towards establishing and growing our music anti-piracy technology tool, TCAT”.
The challenges around technology
TCAT is the company's 'Technical Copyright Analysis Tool', proprietary software developed to audit digital music and help detect copyright infringement.
TCAT was incorporated as a subsidiary of One Media in late 2020, and has received significant investment from One Media since then.
In May 2023 that company launched TCAT Insight, a product designed to “combat loss of income from music copyright infringement”, which uses “metadata, keywords and artificial intelligence to scan for copyright infringing tracks, including AI generated music”, which would help rights owners “identify potential pirated tracks and unauthorised covers”.
That launch, said Infante at the time, was “the result of One Media’s multimillion pound investment into TCAT”.
However, the development and promotion of TCAT have absorbed considerable resources that might otherwise have been directed towards expanding One Media’s music catalogue. This strategic decision has created a tension between maintaining the company’s traditional strengths and investing in future-focused technology.
Chairman Claire Blunt elaborated on this challenge: “The technology landscape is moving at a rapid pace, particularly now with the acceleration in AI capabilities and corresponding growth in specialist music technology companies, whose singular mission is often well funded. The rapid growth of this change is making the development of TCAT more challenging, given the current restrictions in funding”.
The vinyl opportunity
Meanwhile, One Media is jumping on the vinyl bandwagon, taking advantage of the resurgence in physical music sales, a market which has seen sustained growth in recent years, and which - per ERA’s stats - grew significantly in 2023.
To capitalise on this, the company has launched a new vinyl imprint, The Carolean, tapping into the enthusiasm for vinyl releases.
“We're excited about the opportunities presented by the vinyl resurgence”, said Infante. "Our extensive catalogue of over 250,000 tracks puts us in a unique position to capitalise on this trend”. The Carolean’s initial releases include reissues from iconic artists such as Mungo Jerry, The Troggs, disco legend George McCrae, and soul-reggae star Judy Boucher.
Impacts of AI
As for so many music rights businesses, the long-term impacts of AI on the music industry remains an unknown quantity, presenting both potential threats in terms of copyright infringement and opportunities for increased discoverability of One Media's catalogues. TCAT's development is, in part, a response to these emerging challenges and opportunities. However, whether TCAT has a continued future within One Media seems less certain.
Infante noted, “We ultimately see TCAT's future lying outside of the core music group”. This may mean a future sale, spin-off or merger with another business, or a partnership or JV with an existing solutions provider in the same space.
However, with an increasingly crowded marketplace populated by specialist, well-funded music technology companies, it remains to be seen whether One Media will be able to realise a decent return on the investment it has pumped into TCAT. However, it’s clear that the company’s ability to balance investment in TCAT with its core business of acquiring and monetising music rights will be a key driver for its future success.
Blunt expressed confidence in the company's positioning, stating that “the quality of our portfolio” and the “ability of the experts we have within the One Media team” mean the company is “very well positioned to benefit from these structural tailwinds and the growing popularity and longevity of artists and music with an older vintage”.
For now, One Media’s stable performance in its core business provides a solid foundation as it grapples with these strategic challenges. But as the music industry continues to be reshaped by technological advances, consumption shifts, and evolving consumer behaviour, the company’s ability to adapt and innovate will be key to its long-term growth.