$781,846 USD awarded by Nashville Court USA in favour of the Group against Henry Hadaway, HHO Licensing Ltd and Henry Hadaway Organisation Ltd for the wilful infringement of 1,466 recordings from the Point Classics Catalogue of Recordings. The award has not been recognised in the financial statements for the financial year ending 31 October 2015 as there is uncertainty as to when the monies will be received. Our American lawyers continue to seek collection of this judgement via the Courts.
The acquisition from AJP Records of hours of popular classical music performed by the Royal Philharmonic Orchestra, traditional Christmas music from St. Paul's Cathedral, military marching music performed by H.M. Coldstream Guards and musical renditions of the Scottish Pipes & Drums.
TCAT (Technical Copyright Analysis Tool) our in-house developed copyright discovery tool is now being trialled as a service by the Group with several of the Major record labels.
Men and Motors acquired from Granada/ITV in 2012 is gathering traction. The YouTube channel is receiving over 450,000 views a week and new clips are being added weekly.
One Media’s You Tube channels achieved 1.3 billion viewing minutes to date.
New collaboration with The London Children's Ballet to host a YouTube Channel for the 15 London show productions and create for the first time balletic moves edited into a move by move instructional episodes.
Exclusive digital and physical releases of the Dr. Who spin off drama ‘DownTime’.
Increase in the placing of music in high profile films, TV shows and commercials.
CEO & Chairman’s Statement
I have read with interest that using words like “challenging” and “new opportunities” seems to be every Chairman’s mantra when faced with change in a downward direction. Rarely do they ‘bang the drum’ when reporting negative growth. Investors in One Media will know that I have a significant shareholding and that I am completely motivated to keep One Media a viable investment concern. Reporting, as I must, a drop in our revenues and profit is not taken lightly by me.
So what is going on?
Jargon aside, our content is not meeting its market potential for two reasons. The first I spoke about at length in my 2014 Chairman’s Statement outlining the history of the music industry including the shift from downloading to streaming. Let me clarify this situation. When a consumer purchases a track on a ‘download’ basis they keep the track. It is held on their device and can be played anytime anywhere. The track is effectively theirs for all time. When a consumer ‘streams’ a track it is only available for as long as the consumer subscribes to their chosen streaming site. Stop subscribing and the music is no longer available to them. A ‘download’ site charges anything from thirty-five pence to over a pound per track. A streaming store provides access to all music available from ‘free with adverts’ to over ten pounds per month for unlimited access of music access and no adverts.
For the first eight years of One Media’s business ‘downloading’ was the dominant format for music consumption. That model (downloading) is changing and shifting to ‘streaming’. We are not alone in feeling this shift, the whole industry must face this change. The financial ramifications during the shift are beginning to be felt as revenues decreased by 13% this year. Currency exchange rates have affected operating profits, with a £95,000 charge adding to this years decline in profitability by 30%.
Long term, as I have stated, ‘streaming’ will benefit our style of content as more users join the streaming system of music listening and explore further nostalgic music. They will add legacy content to their ‘playlists’, which ordinarily they would have not necessarily chosen to buy as a download. It’s about destination shopping versus impulse purchase. I see streaming as impulse and downloading as destination. Most consumers who have made the switch widen their musical libraries as their monthly subscription allows an almost unlimited stream of tracks. Now the eventual benefit of streaming is that content holders receive money every time the track is played on a device. So over time content holders are receiving a continual royalty. You could liken this to a lifetime annuity policy as opposed to an upfront lump-sum.
The second reason for a downturn in our revenue is the approach by some of the digital stores to ‘artist & repertoire’ selection, which favours front line chart and major back-catalogue with little room for certain ‘indies’ style of content. Previously content owners had carte blanche to upload their entire content offerings. Now many digital stores make selections from their content owners instead. This is limiting selection in-line with their new marketing initiatives. Currently leading digital stores want to be cool. After all when was the last time you saw a TV commercial for Apple or Spotify that was aimed at the SAGA set. Music is music, there are no new hits from the 50s 60s, 70s or the 80s, it’s a definitive collection. The first green shoots of an increase in streaming income to the Group comes in the form of YouTube and Google Play. Growth with these stores accounted for very little in the past but is set to lead the march.
The Group continues to examine its content acquisition strategy but only in line with the changing market requirements. We are expanding our ‘neighbouring rights’ exploitation with an increase in the Group’s presence in this sector. Neighbouring rights are the rights related to the public performance of master recordings. In order for a recording to be legally performed in public, a licence must be obtained from the owner of the sound recording. This is typically handled through a neighbouring rights organisation such as Phonographic Performance Limited (PPL) in the UK. Our content has been increasingly used within the film industry and as background music on radio. The acquisition of the Point Classics library is beginning to get traction here with our classical music being used in shows and films such as ‘The Good Wife’, ‘Orange Is The New Black’ and ‘Minions’.
YouTube is continuing to grow for the Group as we create multiple YouTube Channels for ‘licensed in’ and Group owned content. Current viewings to date exceed 1.6 billion hits to the Group’s video content. This is purely monetised via the Advertiser Funded Programming (ad-funded) method. The monetisation to the Group is achieved from YouTube’s algorithmic data programs, matching viewer’s particular interests on content with their Google searches on services or products. So if you search Holidays in Caribbean, chances are you will get Caribbean holiday adverts targeted at you whilst watching your chosen content on YouTube. Our in-house trained Creative Technicians have all undergone the YouTube annual accreditation process and the Group is confirmed as an official YouTube Certified Partner.
I have mentioned previously our in-house developed software for content discovery, known as TCAT (Technical Copyright Analysis Tool) which is now a registered trademark. The software searches legitimate digital stores and reports back on where globally and by whom our content is being exploited. The system has greatly assisted our in-house copyright team find the Group’s content being offered for sale by unlicensed vendors. This has led to your Group enforcing its rights with Digital Stores and the removal from sale of unauthorised content and a call for accounting where appropriate. This tool is now being trialled as a service by the Group with several of the major record labels. If successful, this will become a regular service, on offer to the industry at large. TCAT’s first success was providing the information that led to the successful judgement in the USA against copyright infringers resulting in the award of $781,846 in favour of the Group in September 2015. The award has not been recognised in the financial statements for the financial year ending 31 October 2015 as there is uncertainty as to when the monies will be received. Our American lawyers continue to seek collection of this judgement via the Courts.
As our route to market matures and we expand our expertise into technical services we remain strong in our conviction that content and digital delivery and discovery services will combine to see the Group expand and get ahead of the digital curve. We are cash resourced and are cautious investors that remain profitable albeit challenged by the changes in the market. We are in transition, which will continue with disruptive results whilst the market realigns.
Content and Rights Acquisition
Our content acquisition program has slowed in the last year as values of catalogues have, in our opinion, been overvalued given the current market shifts. I believe greater opportunities in value will be achieved moving forward as the market settles. Our own share price has reflected this downturn but value will ‘out’ and bargains will be had. We have, however, made two strategic acquisitions. The first being more classical content from AJP Records. The acquisition includes hours of popular classical music performed by the Royal Philharmonic Orchestra, traditional Christmas music from St. Paul's Cathedral, military marching music performed by H.M. Coldstream Guards and musical renditions of the Scottish Pipes & Drums.
The second deal with Tropicana Holdings which allows collection of the PPL income to over 3,000 music performances held within the catalogues and master rights affiliated to the Motor City, Northern Soul and High Energy Catalogues of music already owned by the Group. This deal further strengthens this catalogue's revenue bearing income stream. This acquisition of Neighbouring Rights income is likened to ground rents. The income stream is usually modest but is collected under statute in most territories worldwide. Every time a track is played anywhere in the world via a broadcast service or used to enhance a service or product, it triggers a payment which is ultimately reported to the label controlling such rights.
In May 2015 the Group announced it had filed proceedings in the USA pursuant to its belief that its music rights had been exploited without authorisation. The Nashville Court ruled in the Group’s favour with regard to the actions by HHO Licensing Ltd, Henry Hadaway Organisation Ltd and Henry Hadaway personally. One Media was pleased to announce that this litigation was concluded. On 17 September 2015 the Federal Court in Nashville Tennessee issued a judgment in the sum of $781,846 USD against Henry Hadaway, HHO Licensing Ltd and Henry Hadaway Organisation Ltd (which includes costs of $9,929 USD) for the wilful infringement of 1,466 recordings from the Point Classics catalogue owned exclusively by One Media. The award has not been recognised in the financial statements for the financial year ending 31 October 2015 as there is uncertainty as to when the monies will be received.
The Group is currently engaged in lawful pursuit of the monies granted it by the Nashville Court within the USA.
We were delighted to announce a new collaboration with The London Children's Ballet (LCB) which will see, for the first time, the digital release of their entire music and video library made available to over 600 digital stores such as Google Play, iTunes, Spotify & Deezer. Additionally, a dedicated commercial video channel has been established on YouTube. One Media is working with ballet experts to edit the shows and for the first time will show the LCB productions on a move by move basis from a 'demi-plie’ to a ‘pas de deux’. Carrie Reiners, Executive Director of The London Children’s Ballet commented, “We are thrilled to work with One Media iP to help us promote our vast creative output to a larger audience. For 21 years LCB has been a leader in creating new narrative ballets with original scores. This music is typically only heard in live performances and on DVD recordings, but now it will be accessible to all fans of classical and ballet music allowing us to grow our national and international footprint. LCB chose One Media iP for their expertise in the digital music industry, their talented and dedicated staff and for their strong commitment to the arts.”
We acquired the Doctor Who spin off drama ‘DownTime’, directed by Christopher Barry the longest serving director on the original series of Doctor Who. Downtime was originally released in 1995 direct-to-video by Reeltime Pictures Ltd and features many of the original characters of Doctor Who. The show is yet to make a digital debut as a distribution deal was struck between the Group and Koch Distribution to make the film available exclusively on DVD over the Christmas period.
Synchronisation, the placing of music in films, TV shows and video, has seen an increasing number of ‘tune placing’ over the last year. We have been successful in placing music from our own library, and that of our strategic partners, in some high profile broadcast opportunities, including adverts for BMW and Toyota. From the world of TV and Film, we have had placings in the Minions Movie, a track in the American series ‘Nashville’ ‘The Messengers’, ‘The Originals’, ‘Flash’, ‘Stereotypically You’, ‘Anitra's Dance’, ‘Looking’ and a show on Fox/FX Networkscalled ‘Wayward Pines’ among many others. Monetising music through Film & TV is a strong way to get our content noticed and it assists in our digital exploitation opportunities via music stores, especially if the tracks are relatively unknown.
The Group released Mungo Jerry’s exclusive new album ‘Good Times, Some Hits & More Stuff’ in June 2015, celebrating 45 years of ‘In The Summertime’. Ivor Novello winner, Mungo Jerry (Ray Dorset) is famed for the global hit ‘In the Summertime’, which is estimated to have sold a staggering thirty million recordings and is now ‘officially recognised as the most played summer song of all time.
One Media became exclusive distributor for Juliette Ashby, a singer-songwriter from London, Juliette has a beautifully soulful voice, which is put to great use with an irresistible mix of R&B, Reggae and Neo-Soul. Juliette was Amy Winehouse’s best friend and is one of the co-narrators of the Oscar Nominated film ‘Amy’. Currently both of her albums are distributed by the Group with a new album being released in 2016.
Men and Motors acquired from Granada/ITV in 2012 is gathering traction. The YouTube channel is receiving over 450,000 views a week and new clips are being added weekly. Additionally M&M attended the Geneva Motor Show and the Classic and Sports Car London Show at Alexandra Palace to both film new content and meet motor manufacturers in its initiative to establish closer links with the trade with a view to creating new content for its growing YouTube Channel. We are also pleased to announce that Men and Motors has signed a distribution deal with Haymarket Publishing to distribute its content via AOL for monetisation to the major news agencies. In addition we are actively seeking new terrestrial television opportunities with broadcasters with a view to get Men and Motors back on the small screen.
The music market is experiencing considerable change once again. Apple Music gained 6.5 million paid subscribers after the initial free trial, with the latest data suggesting that there could now be over 10 million subscribers. This has clearly been enough to disrupt the iTunes model of downloading as few will pay for both. Spotify have reported 75 million users of which 20 million are paying subscribers, the balance on ad-funded monetisation. But what of YouTube with its impressive 1 billion users. The launch of its new subscription only music site YouTube Red will no doubt be a boost to our industry as it gains traction. And what of the new territories coming on line for all stores as they race for a larger digital footprint. Colombia became something of a buzzword for the international music industry. It is thanks to the country’s booming domestic music market, with revenue from recorded music growing 44.5% in 2014, the second highest growth rate in the world behind Venezuela and Colombia’s third successive year of double-digit growth. This is largely due to the new music services opening their doors for business as the globalisation of streaming takes effect. Deezer, Spotify and Google Play all have active services across many territories now. The same is happening in Africa, Asia and China as consumers legitimise their music consumption from ‘shaky pirate sites’ to ‘ad-funded’ legitimate sites. The Recording Industry in Numbers, a new report by IFPI, revealed that last year, global recorded music sales totalled $16.5 billion - an increase of 0.2% on 2014. It marked the first year of growth since 1999. Nine of the world’s top 20 markets posted growth, although some major markets, including the UK, continued to decline.
Meeting the new demands of the Group, under the pressures of the changing industry, will be undertaken with a strategy that is being carefully crafted. We know we can expect further disruption to our revenues as we realign with the emerging digital streaming industry. We have both the reactive and proactive skills to deal with the content requirements and the technical skills developed in-house without the need for further funding. We are cautious investors and rapid responders and anticipate more challenges over the coming period as the market settles into its new monetisation regime. Our team is actively promoting our content with initiatives in broadcast and technical content discovery that will deliver value in the future. All of these opportunities require a strong commitment from the Group’s team in the further exploitation within the new markets for our intellectual property. I am confident that we are equipped and experienced enough to make the tough decisions required, keeping the group profitable and getting ahead of the digital curve.
The report of the auditor in the Report and Financial Statements for the year ended 31 October 2015 is unqualified and the results announcement can be viewed on the company’s website,www.onemediaip.com, with effect from Monday 7 March 2016. Notice of the Annual General Meeting, to be held at 11.00 a.m. on Friday 29 April 2016 will be posted to shareholders along with audited financial statements on or by Monday 4 April 2016.
Chairman and CEO
7 March 2016