Is this the “Spotify of the VR music world”?
ALERT 14th November 2019 |
Originally published under Growth Stock Network on 14th November 2019.
This year marked my thirty-sixth year of existence. To some people, like an 18-year-old for example, I’m “old”. To others, like a 54-year-old, I’m “young”.
To me, I’m not really bothered by it. To say age is just a construct of society is half right and half wrong – it’s also a construct of time.
You can look at it in a myriad of ways. Thinking about time and the longevity or brevity of it can lead you down some interesting philosophical roads.
But I don’t want to blow your mind with those pathways, at least not today. The point is that age and time is all relative.
And for me, 36 has come about with a speed that I’ve rather enjoyed. It’s easy to recall memories from my childhood. It’s easy to recount experiences, influential events, important people and developments in the last 36 years.
Like when my pop (grandfather) got my brother and I interested in stocks and shares before we’d even become teenagers. Or when I went to my first “all ages” concert at Melbourne Festival Hall in 1998 to see Regurgitator, TISM and The Fauves play… at least I think it was all ages, I may have coughed up fake ID…
Anyway, these kinds of experiences are things that sit in the memory bank of an 80s child like it was yesterday. And for me relatively, it was yesterday.
But today I wonder if the sorts of experiences I’ve had over 36 years will be at all similar to those of my son over his next 36 years.
I particularly wonder what his experiences will be like with music and entertainment.
You see music is a big part of our household. It’s a rare day when music isn’t coming from one room in the house. It might be me in my office with one of the many radio channels streaming from TuneIn radio.
It might be from the kitchen or conservatory streaming from my or my wife’s Spotify account through one of the Alexa-enabled speakers.
Or it might be from the TV in the living room off one of the many music channels we’ve got through our Virgin package.
What you don’t see in the house though is a record player, a cassette player or a CD player. There is an old SanDisk MP3 player from 2009 that’s now inactive. Also there’s an even older 20Gb iPod 4th Gen from 2004 that I recently resurrected.
Source: editor’s own photo
And there’s even an older Sharp MD-MS722 portable Minidisc recorder that is 100% dead and in a box in a box in a box somewhere in the garage.
All of these are relics of days gone by. What I find hard to put my finger on however is what comes next.
Think about it like this: in my short 36 years we’ve gone from record players to cassette to CD to Minidisc (albeit that didn’t really catch on outside of Japan) to MP3 players to now just streaming music through smartphones and connected devices.
That’s four-and-a-half (Minidisc is the half) huge revolutions in how we consume music. That’s a breakthrough around every nine years. The question is, what comes next?
It would be naïve to think that’s it. To think that streaming services are now the be-all-and-end-all of music consumption is narrow minded. There will be a new way to consume music and entertainment. The really tricky part is to figure out what that is, where it will come from and the companies that will profit from it the most.
And that’s exactly what we’ve been trying to figure out. And we think we’ve cracked it.
Introducing your latest Growth Stock Network recommendation…
Your Growth Stock Network recommendation for November 2019 is EVR Holdings [LSE:EVRH].
EVR Holdings (EVR) is a UK-based company listed on the AIM sub-section of the London Stock Exchange. It currently has a market cap of around £70 million and currently trades for 4.70GBX (pence) per share.
EVR is a virtual reality (VR) company that owns MelodyVR as a wholly owned subsidiary. MelodyVR is a platform that allows people to consume live music in the “virtual” world.
For example, your favourite musician right now could be Lewis Capaldi. He’s pretty good, got some great songs and is fast becoming a bit of a global phenomenon.
And you might enjoy his music but want to actually see him in a live performance. Whether that’s a small gig or a full-blown stadium concert, it doesn’t matter.
With MelodyVR you can be at a Lewis Capaldi gig without having to leave the house. But you can get an experience that you wouldn’t otherwise get even at the actual gig. You could be on stage watching the whole performance live in full VR capacity.
That means you can look around to see everything that’s going on and get the feeling that Lewis probably gets when playing in front of thousands of people. And you’re there in front of them all too… in virtual reality at least.
It’s sometimes a difficult experience to relate to people who’ve never used VR before. But it really gives you the sensation of being somewhere live even though you’re digitally connected.
To get a close idea of what it looks like you can download the MelodyVR app and set up a free account to check out some of the content on the mobile app. There you can use your phone as your “window” into some of these performances. And if you’ve got a VR headset to use with your phone, like a Samsung Gear VR or a standalone VR headset like Oculus, you can go “full VR” to check it out in even more detail.
Our understanding of technology progression and the consumer devices available leads us to the next evolution of music and entertainment consumption being through VR. In particular, it will be “attending” music concerts live in VR that’s really got explosive growth potential.
A tenner or £900?
We thought about getting tickets to see Elton John in concert recently. For a start, we were too late. Tickets had sold out about as fast as they went online.
But even then the tickets were in a price range from £51 to over £900. Now sure, the more expensive ones get you closer to the action. But you’ve got to admit, that’s pricing a lot of people out of the market.
That’s because in the age of streaming it is harder for musicians to make money. After all, if I pay £10 a month I get access to millions of different songs through Spotify. I don’t go down to HMV and grab a CD any more. I just stream it.
That means musicians tend to make the real moolah from touring. And it’s why you see them now often do these mega-tours spanning months that take them all around the world. Of course touring isn’t anything new, but in the age of streaming it’s vital for a musician to get out and on the road.
However, that also costs major money and it’s not easy for up and coming musicians. But what if there was a way for people to attend concerts they otherwise wouldn’t have been able to?
What if there’s a musician in the US that I particularly like, but there’s no way I can fly out to see them live in concert? The money I would pay to see them in concert goes missing. Lost revenues for the musician.
But what if they could capture my attention and money by giving me virtual access to their concert for a fraction of the price of being there and definitely without the cost of a plane flight to the US?
Well that’s why we see a significant opportunity for the VR concert platform, MelodyVR.
Or what about those legendary concerts you hear about from days gone by. Like the performance of Barry Gibb at Glastonbury in 2017, or Elton John’s debut performance at the Troubadour in 1970. Imagine being able to pull on the VR headset and be there as if you were there in the first instance.
I’d pay for that. And I believe the potential for millions of people to do the same exists with the Melody platform. Now of course, they can’t add content from gigs and concerts that never had footage recorded in the first place. So sadly it’s unlikely we’ll get that Troubadour set anytime soon.
It also allows another level of access to musicians that you would otherwise never get. Imagine being on a balcony overlooking the beachfront and ocean in Barcelona. It’s just you on the balcony, a grand piano and global recording megastar Kygo.
He’s playing the piano, some of his most famous hits, and it’s just you and him on the balcony. That kind of intimate experience you’d likely never be able to get near. Not unless you were absolutely loaded and could afford to hire him out for a night.
That’s exactly the kind of thing you can do with VR. And it’s an example on MelodyVR about the potential to consume music through the VR world. It’s truly quite something else when you experience it first-hand.
As they add performances and concerts and unique experiences to their platform and catalogue the service, it will only get richer with content. And those legendary performances today become the ones you’ll be able to be there live for, or later on come back to them and revisit them.
This is the beauty of MelodyVR. The view is to have an increase in live performances that you can be a part of in real time. But also an increasing catalogue of concerts and gig content that you can tap into at any time.
Or even if there’s just one single song you might want to watch, you’ll be able to do so. Right now that’s how they make money through the app. For a small fee you can buy access to a concert or for a smaller fee, single songs.
And soon you’ll be able to buy VR tickets to the real-time live concerts at a fraction of the cost of a normal ticket if you were to be there in person.
This adds a far larger audience to the shows for the musicians. And it gives people access to concerts they might otherwise have missed. It works for the artists, the consumers… and ultimately the company.
Also, we’ve mentioned a few times the ability to access VR content from music and entertainment. Being able to see concerts and gigs in VR is one thing. But the company is also looking to other avenues for consumers to access.
For example, in June 2019 it set up a strategic partnership with John Gore, a major Broadway theatre producer. This will allow the capture and distribution of Broadway content through the platform as well.
We envisage you’ll be able to access everything from musicals and plays to concerts, gigs, festivals and even operas, symphonies and every other kind of musical experience you can think of.
What’s so exciting about MelodyVR is that it’s only a year old. EVR Holdings only launched it to market in May 2018 as a standalone platform. The technology though has been in development for around six years.
But it’s only in the last year that it’s launched to market, to VR hardware and VR app stores, on to mobile devices and expanded from the US and UK into a total of 14 territories now.
It’s found that targeting the mobile VR market in particular has seen hire growth in user numbers on the MelodyVR app. You can count me as one of those now also.
It’s this shift to mobile VR that’s really going to gain further traction as consumers can now easily access VR headset devices for as little as £20-£30 that work with smartphones.
Also moving forward it’s this focus on the platform and the mobile experience and the partnership with John Gore productions that could bring huge short-term growth.
However, the part I think is really going to set up the MelodyVR platform for explosive growth is a transition to a subscription-based model. And that’s why I think the time to get into the stock is now, before that model rolls out.
This shift to a subscription model is already underway. It’s signed a deal with Telefonica UK (known as O2) to provide subscriptions to O2’s 5G network customers for 12 months. It only just announced this deal on 17 October, which sent the stock spiking over 20% from 5.25 pence to 6.40 pence in just a day.
We see MelodyVR being to live VR music content what Spotify is to music streaming. That’s a big call we know. But right now with its existing proof of development and the release of the platform, we think it’s got a huge future in front of it.
Also the fact it’s already been able to get quality content on to the platform from the likes of KISS, Jamiroquai, Liam Payne, Tyga, Kygo, The Streets, The Kooks, London Symphony Orchestra, UB40, The Who and Cypress Hill is testament to the potential of what the platform can deliver for the company.
Financials and risks
Now the question is what all this potential equates to for the company moving forward financially. Well at this stage, it’s far too early to tell.
Its most recent financial information is from its half year to 30 June 2019 interim results. That’s not really going to give a great indication of the potential here for a few reasons.
Firstly, it didn’t launch its mobile VR applications on iOS and Android until 1 July 2019. And it saw in the first two months of the mobile release more users installing the MelodyVR mobile app than the whole previous year on VR app stores.
Clearly that indicates the growth opportunity but it doesn’t really give us any indication of the monetisation of those mobile users from the most recent results.
Furthermore, with an early-stage company like this, a large chunk of change is spent on platform development, getting content, and pushing out the mobile applications. Hence for the half year the company made a net loss of £7.1 million.
While it’s now got the platform up and running and earning revenues, we don’t expect it to be profitable in the short term due to the increasing need to grow the user base and to bring in more content.
That means there is a financial risk in play here as to whether the company can convert the spend on technology, user acquisition and content into meaningful revenues. If it can, then it will be a significant boost to the stock, and conversely if it can’t, it’s going to be a major strain on it.
In terms of risks there’s another massive risk that will make or break the platform and its growth. And that’s simply access to content. Without quality content that’s in demand from consumers, there is no platform, and no company.
It recognises this as well as a major risk, outlining:
We will continue to rely on the ability to acquire and renew content licenses from a limited number of major and minor content owners and other rights holders in order to provide our service. Our long-term success will depend on our ability to attract and retain users, and to successfully monetise an increasing number of uses who engage with our MelodyVR platform.
Also, competition risk is something to consider here as well. While for the time being, we see MelodyVR as an early and first mover in this space. However, there are competitors such as NextVR that are doing live VR content streaming, although their catch seems to be live sports at the moment.
That doesn’t mean new entrants won’t come to this space. For example, Spotify could decide to launch VR streaming through its platform. Now while we don’t anticipate that and haven’t had any indication that’s happening, it could dedicate the resources to make it happen, particularly due to its existing network effect.
However, that does also raise the possibility of MelodyVR, or EVH Holdings as the parent company, being a potential takeover target from massive tech giants like Spotify or Apple. Again, that’s speculation, but not something we’d dismiss either.
In short, there is risk with this stock. It’s early stage and banking on the next wave on music content being in VR and a combination of existing content and live, real-time access to concerts and gigs.
It’s a speculative play on a company that’s not profitable and making sizeable losses. But it’s a play we think is worthwhile long term that fits into the development and progress of new content platforms of the future.
While I might have gone to see my first live gig at Melbourne Festival Hall, I suspect my son’s first live gig might be anywhere in the world and in full virtual reality. That’s what I see the future looking like and I think it’s MelodyVR and EVR Holdings that will be at the centre of it.
As I say, they might just become the “Spotify of the VR music world”.
Action to take
EVR Holdings [LSE:EVRH] is an AIM-listed company currently trading for 4.70 GBX. 90-day average volumes are 5.1 million shares. That’s a value of around £250,000 per day in trading.
That makes it relatively liquid. However, we do warn that upon our recommendation there could be a spike in the price of the stock, hence it’s important not to get too carried away if the stock does run and let the dust settle by using limit orders when placing your trades.
We also set buy-up-to prices to ensure that you don’t pay over the odds for the stock which has the potential to erode future gains.
I recommend you BUY EVR Holdings [LSE:EVRH] current price is 4.70GBX. Buy-up-to 5.50GBX. Make sure to use limit orders and to stick to the buy-up-to price. We will record the opening of tomorrow’s market for track record purposes.
Action to take: buy EVR Holdings
Ticker: EVRH: LN
Price as of 14.11.19: 4.70 GBX
Market cap: £70.00 million
52 week high/ low: 9.13p/ 2.53p
Buy up to: 5.50 GBX
Regards,
Sam Volkering
Editor, Growth Stock Network
