Some developments for 7digital, the UK-based music platform that powers download and streaming services for the likes of Samsung, HTC, T-Mobile and Pure: it has entered into acquisition talks and a “reverse merger” with UBC Media, a radio program producer, developer of interactive audio technology, and software investor (it's the largest shareholder in Audioboo, a platform where you can make and share audio recordings). As part of the deal, UBC is providing 7digital with a £1 million ($1.6 million) loan that can be converted into shares in UBC - which is publicly traded in London on the AIM exchange.
On top of that, 7digital is announcing a couple of expansions of its service - confirmation that it is powering a new streaming service from HMV in the UK and Ireland; and a deal with Apple/Intel-backed Imagination Technologies‘ Pure to power a streaming service in the U.S. to complement its Jongo wireless speakers.
The news comes amidst a lot of other shifts in the digital music marketplace: among them, Spotify securing a $250 million investment; Rdio laying off employees; Deezer apparently making a stronger move to tackle the U.S.; AOL shutting down more of its own music services; and Turntable pivoting into live events. Taken together, these are all signs of consolidation in the market, with the big fish vying to become stronger, and the smaller among them falling by the wayside.
In that context, 7digital has been something of a minnow. Although it has its own consumer-facing service, it has perhaps more importantly played a role in how other, bigger-name companies have been able to build out digital music plays to compete against the likes of iTunes from Apple. By way of an API, 7digital takes on all the infrastructure management, licensing and reporting for these third parties, which include Samsung's MusicHub, BlackBerry's music store, and the Pure Music service. Former partners include Spotify (which used it to power a download service, which it then took in-house and then axed altogether). In total, 7digital says that these wholesale-style services and its own consumer-facing product are growing, with traffic up 225% in the last six months to pass 1 billion requests per month.
Still, given that part of this deal involved a £1 million loan, it's unclear whether that existing business was providing lucrative enough returns, or at least enough to help the company fuel its next stage of growth. UBC notes that in 2012 7digital's revenues were £11 million ($18 million), compared to £3 million ($4.9 million) in 2009. 7digital had raised some $18.5 million in venture funding, with backers including Balderton Capital (formerly Benchmark in Europe) and Sutton Place Managers.
“Our platform and partnership roster has been growing steadily over time and we see continued interest in music globally, across online radio, subscription streaming, and downloads. We will continue to develop and scale the platform, and to innovate with new products and features,” Ben Drury, CEO of 7digital, noted in a statement. “Radio, in particular, is an area where we see a lot of future opportunities, and we are thrilled that our new strategic investor and partner, UBC, shares this vision.”
UBC says that the deal will play into a wider strategy that it has to develop more digital services around audio content, with the interactive media market offering “the best opportunity for growth as so-called 'connected' devices became more important for the consumption of content.”
UBC and 7digital's non-legally binding Letter Of Intent says that the two will outline terms of a potential acquisition of 7digital by UBC by no later than December 16, 2013, “with a view to entering into a definitive sale and purchase agreement by 30 April 2014.”
UBC says the new publicly-listed company would combine its existing UBC assets, its investment in Audioboo, and 7digital, with 7digital's Drury and UBC's CEO Simon Cole taking on the role of co-chairmen. Customers would include the BBC and Yahoo (two of UBC's current clients) and Samsung and HTC (two of 7digital's), with business operations in 42 countries and covering 5 million registered users and services pre-loaded on 60 million mobile devices. “In content terms, the new company will have an archive of thousands of hours of entertainment programming, producing 1,200 hours of new material a year and have a licensed catalogue of 25 million music tracks and audiobooks,” UBC notes.
I'm now talking to 7digital's Drury and will update the post when I am finished.
