Napster Group Plc - NAPS - Share Chat

This company offers some cool VR products, mainly MelodyVR (a curated platform for watching 360deg gigs):

https://www.hl.co.uk/shares/shares-search-results/e/evr-holdings-plc-ord-gbp0.01

Things to note:

I’m not connected to this company, I just came across Melody after going to a gig where one of their cameras were there :slight_smile:

@dyl :eyes:

Wow 31% raise today. One good news story at least

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https://vrroom.buzz/vr-news/music/coronavirus-hits-concerts-and-melodyvr

Pardon my ignorance, but how come when I Google the evr share price I get a very different price per share - currently in the range of 4.85 - to the one on Freetrade? Is this a different type of share?

If so, where is this specified within the app?

Freetrade rounds to the nearer penny. Google is saying it’s 4.85p currently so Freetrade will display 5p

Freetrade is showing 0.05 that price is 0.0485. The difference in price tracking systems. I think anyway. The answer above solves it

Ah, so it was just me being stupid. Derp.

Thanks guys!

Looks like a big deal

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Pretty cool. Wonder how this will affect the share price

It looks like there’s quite the wait until the admission document is released and the suspension in trading is lifted!

Still waiting for trading to open again…

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Was thinking the same thing

Any one got any update?

Readmitted to trading today so I had a little look.

Readmitted to trading today so I had a little look.

Peer Valuations

If we look at valuations:

Napster: 1.1m subs / $70m = $63m per million subs
Spotify: 144m subs / $60bn = $187.5m per million subs
Pandora: 6.8m subs / $3.5bn =$514m per million subs (at time of acquisition)

Napster’s revenue and subscribers have wobbled for around five years based on what I could find (more below). Spotify is obviously growing and Pandora’s overall MAU has declined quite drastically, while its paid subscribers have dropped to 6.4m according to SiriusXM’s latest filing.

Trading Summary

This year started positive, Q1 was $26.3m up both YoY and QoQ but the recession hit Q2 pretty bad with revenue down 18% at $23.3m. RealNetworks did not report Napster’s Q3 results due to the disposal so we don’t really know how the recovery is going . MVR’s admission document gives us some very useful information - more below.

Business Summary

Here are the historical financials from the prospectus:

D2C is plain subscriptions, Carrier is marketing to telco customers (remember 5G is launching so that should be interesting) and Platform partners is B2B, which has grown thanks to the Sonos partnership and will probably be the fastest growing segment going forward.

Another important thing to bear in mind is Rhapsody generally pay one of the highest rates to rightsholders in the streaming industry - 67% of revenue according to the prospectus, although they are still profitable ($2.4m EBITDA in 2019). The admission document has given us some very interesting snippets since the announcement in summer:

Over the course of the last three months Napster has secured a two year extension with a key
carrier partner SFR in France. New partnerships with Recochoku and NTT DoCoMo in Japan
underpinned strong PaaS performance with revenues up 41 per cent. quarter on quarter (QE
September 2020) and 88 per cent. year on year. During the last quarter Napster was also able to
conclude an amendment to an agreement with a marquee PaaS partner that will lead to the launch
of a new music service in Q4 and secure a new partnership arrangement which will provide for new
high resolution streaming services.
B2B revenues from both T-Mobile and Aldi showed increases of 19 per cent. and 5 per cent.
respectively year on year, the effect of which underpinned a gross margin improvement of 570 bps
quarter on quarter and 560 bps year on year.
The initiatives to cross promote artist Tom Grennan, a MelodyVR live streamed event from
O2 Academy Brixton drove a 20 per cent. increase in artist streams.

Very likely H2 will see big jumps in Carrier/B2B to offset the decline in current Napster subscribers and see keep yearly runrate stabilise around $100m.

Merger Strategy

The rational behind the reverse takeover is to create a

compelling and differentiated music service which will appeal to the true
music fan, consolidating all of an artist’s repertoire including recorded music, short form video
content (such as music videos), long form video content (such as documentaries), digitally ticketed
live streams, educational videos and immersive AR/VR content, into one premium subscription
product.

Working on this: MVR’s interim gross profit was -£1.1m, with additional OpEx of £10.67m, so its not hard to see turnover doesnt need to grow much for the combined entity to be statutory profitable.

The new app will launch in 33 countries globally compared with MelodyVR’s 15 currently and will expand to smart TV’s, consoles and home audio.

I think even at a lower run rate of c. $100m a year its undervalued. Its average subscription price is lower than its competitors but assuming the differentiated service is appealing and well priced its got to be worth at least $150-200m currently. Personally this is a very interesting combination on the verge of the era of 5G and its not hard to see low single digit profits from next year if executed well.

Other news

Expansion into Japan

Napster expands partnership with Sonos

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I searched for the ticker EVRH as in the title of this thread and couldn’t find it. Then searched with MelodyVR name and voila - so ticker is MVR :slight_smile:

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They changed their ticker this year, some time after April. I’ve updated the thread title to match.

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Interesting comp news from last month, Pandora’s margin getting hit hard. Updating the stats and using Enterprise Value instead of Market Cap (also added more of the big players):

Napster: 1.1m subs / $94m = $85m per million subs
Spotify: 144m subs / $59,720m = $415m per million subs
Pandora: 6.4m subs / $2,500m =$390m per million subs
Tencent music: 51.7m subs / $44,110m = $853m per million subs

I think this massive discount is caused by the long-term declines in subscribers. Back in 2019 RealNetworks acquired a controlling 42% stake in Napster for $40m, which valued the entire business at $95m, and that was with double the subscribers there are now. There’s also the separate execution risk of the new strategy. What investors may be overlooking though is that while subscribers may fall, overall revenue is very likely to stabilise if not rise due to increased “per stream” usage. This is not to be underestimated, if I restate a quote from an RNS above:

The initiatives to cross promote artist Tom Grennan, a MelodyVR live streamed event from
O2 Academy Brixton drove a 20 per cent. increase in artist streams

While a combined differentiated music streaming service may not attract new subscribers, VR concerts will give event-driven boosts to revenue. That to me dramatically reduces the importance of execution failure or the risk of no B2B growth.

Unfortunately we will have to wait until the end of June for the next results, between which the stock could continue sliding. This is a long-term hold for me though, what do people think? Will a VR-focused service be a success, do they have competitive threats?

I think it would be much easier for any of the bigger players to move into the VR space then it is for MelodyVR to compete with the bigger players on the streaming side of things. I like the idea but I’m not convinced they can maintain subs or halt the slide

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