• Turnover of £1,487,132 (2014: £1,492,412);
• Profit before tax of £270,454 (2014: £345,570);
• Cash balances of £1,016,994 at 30 April 2015 (£1,219,466 at 31 October 2014);
• Dividend of 0.071p per ordinary share paid in November in respect of the year ended 31 October 2014; and
• Interim dividend declared of 0.071p per ordinary share declared in respect of the six month period ended 30 April 2015.
Outlook from Chairman and Chief Executive Michael Infante
‘Streaming’, or ‘Screaming‘ as the Music industry seems to be greeting the transformational medium shift, is becoming the emerging method of choice for digital consumers and we welcomed the arrival of Apple’s new streaming initiative at the end of June, ‘Apple Music’. The music market perception is contentious between rights owners and the digital distributors and this has to play out, we are 100% behind their initiative. The list of artists and trade associations alike that have resisted the change has been slightly appeased by the recent U-turn by Apple on its “Free for Three” deal as I call it by a ‘sticking plaster’ token royalty rate, but in my opinion the resisting content owners are just going to be proven as ‘coming late to the party’ and not just ‘fashionably late’. To date, we have successfully navigated the curves, but there is a small price to pay for this in the short term.
The news from Apple Music regarding the 3-month consumer trial with the low royalty rate from inception will seem a mere bagatelle 18-months from now. Increasing understanding of how our business may grow in the future and having the insight that I believe One Media has, has served us well to date. The speed with which the music market is evolving presents exciting prospects for us. Where there's confusion, there's opportunity and it's just about ensuring best value for the business.
Content is the most important element of any music store and without content it can deliver nothing. Apple Music’s only fault is that it is 2 years too late, but it will catch up. The 3-month trial is costly but long-term it will prove good for content owners. I cannot predict how many iTunes users will switch to the new service but in all honesty from a One Media point of view, I hope they all do. Our content has achieved a higher yield of transactions on Spotify than on any other downloading store over the last three years, including Amazon. Our type of content, nostalgic back catalogue, performs well on streaming stores. My view is that consumers are more likely to experiment with tracks for their playlists when it does not cost them £0.99p to add. Last year in America, album downloads fell by 9% whilst on-demand streaming soared by 54% (Source: Sunday Times 14/6/15). Apple are reported to hold details of over 800 million credit cards. I believe that this will greatly add to its power of persuasion to its customer base. My view is that Apple’s target of 100 million subscriptions over the forthcoming period makes them a serious contender to Spotify and will rewrite the music consumption landscape moving forward. Spotify launched in 2008 in Scandinavia with just a few thousand subscribers; it now boasts 75 million users in total with 20 million of them paying a monthly subscription. The use of ‘Freemium Access’ was their most compelling route to market. Apple’s approach is different, initially the 3-month free trial engenders commitment. During that time the consumer will have built new playlists and stopped paying the track download rate. Not every Apple user will convert, but those who do and the new Apple Music adopters, will enjoy access to over 13 million tracks of great music catalogue with a depth that hitherto they have not yet explored through the previous destination downloading method. Who wants to spend money on something you may only play a few times? When paid for subscription on streaming hits ‘critical mass’ it can only benefit the music industry.
One more crucial point in this ever-changing music market place. As Streaming grows, the Group has the opportunity to market its music directly with consumers via playlists. We can better engage with our nostalgic music fan base and better understand its behaviour and habits, as well as identify territories in which our fans are based. This can only assist with our acquisition program to buy more of the content that suits One Media’s market.
The outlook for the music industry is very positive, but there are still adjustments to manage whilst the stores fight it out for supremacy. Our video exploitation is growing at a steady rate with YouTube and we are very encouraged as our eighteen video channels gain further traction. In the last 12 months we have achieved over 276 million minutes of viewing on our YouTube channels, bringing the total since launch in 2013 to circa 1 billion minutes of viewing. Income from our channels continues to grow month by month as more territories switch on to an ‘Ad-Spend’ model. Emerging territories such as Vietnam, Tunisia and Morocco have been added to the monetised list of countries this year, with more set to follow. Whilst the debates and discussions on Apple Music are set to continue, we must mention our excitement about whispers that the best-kept secret within the industry, Google’s YouTube ‘MusicKey’ which is due to launch later this year. This long awaited music site from YouTube is a paid music streaming subscription service. The service is an extension of Google's existing store, Google Play. The All Access ‘Music key’ service, along with the existing audio-only streaming functionality provided as part of All Access, adds integration with YouTube to provide ‘advertising-free’ streaming of music videos hosted by the service. With YouTube’s 1 billion active users each month, they are certainly the dark horse amongst the pack.
We believe that the Group is positioned correctly both technically and from a content perspective to benefit from the changes within the industry moving forward. Margins (due to reduced rate card trials widely reported in the press) will be challenged but we are a stringently run organisation with a focus on our cost centres and exploitation partners. Opportunities for further acquisition of content and development are paramount to our operation and despite some pending industry turbulence we remain positive on the outlook of our business. We value the integrity of our copyrights and the new emerging consumers that will be embracing music and video through the many new digital stores that are yet to launch.