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7digital raising £3m and in talks to acquire 24-7 Entertainment


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There is more consolidation afoot in the B2B digital-music space, with 7digital announcing this morning that it has agreed heads of terms to acquire European rival 24-7 Entertainment from its current owner MediaMarktSaturn.

The news follows the collapse last year of another rival, Omnifone, while 7digital also snapped up French B2B outfit Snowite early in 2016.

“We would expect to significantly strengthen our licensing revenues if the transaction completes as anticipated,” said CEO Simon Cole in a statement.

News of the 24-7 negotiations came as 7digital announced its preliminary full-year results for 2016, and revealed plans to raise up to £3m from new and existing shareholders.

The results – already trailed in a January trading update – showed the company’s revenues rising 15% to £11.9m ($14.5m) in 2016 –  after currency gains. 7digital says it was profitable on an EBITDA basis in the final quarter of 2016 too.

“The year saw our position in the emerging digital music ecosystem further strengthened, with the industry’s three major record labels becoming customers and our investments in readying our platform for Hi-Res audio delivery beginning to show return through new customer signings,” said Cole.

“Our platform now delivers streams to over 16 million people worldwide – close to the level of Apple Music (20m users) – through an increasingly diverse range of customers across a widening number of geographies. This growth will underpin long-term profitability as the music streaming industry develops to include mainstream listening.”

7digital said that the number of music streams that it delivers reached 228m in December 2016 alone, up from 72.6m for the whole of 2015, as it capitalised on partnerships like its deal with social app Musical.ly.

The results must be put into perspective: Spotify generated more than 7digital’s 2016 revenues every three days in 2015, for example. Meanwhile, despite the EBITA profit in Q4, 7digital still recorded a net loss of £5.2m for the year – down from £7.9m in 2015.

Still, in the world of B2B digital music, 7digital is consolidating its position and building. In January, Cole talked to Music Ally about the company’s progress.

“The City predictions were that we would have a balance of zero at year and and in fact we had £730k in the bank,” he said then.

“Remember also that we have zero bank debt currently. Cash at Half Year (June 16) was £1.1m so we have only burnt through around £300k in a period where we were increasing in profit dramatically. I have to say that the final quarter of last year was – a technical word here – stonking.”

Stuart Dredge

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