7digital shells out £2.2m for competitor 24-7

Digital music and radio services platform 7digital announced the acquisition of its “significant European competitor” 24-7 Entertainment for £2.2m on Tuesday, from MediaMarktSaturn, through the issue of 23,144,616 new ordinary shares and £0.9m of cash in respect of funds held on the 24-7 balance sheet.

The AIM-traded firm said the transaction was expected to add approximately £5m to 7digital revenues in 2017 and more than £8m in 2018

It said MMS, Europe's largest electronics and entertainment retailer, would become the largest shareholder in 7digital as well as a new customer, with a three year contract for existing ‘Juke’ services totaling £11m, and a new contract for the development of future services worth £6m.

New customer contracts were also arising from the acquisition, other than those with MMS, with contracted revenues of £1m and a total annualised value of £2.7m.

The acquisition was expected to be “significantly earnings enhancing” in 2018, according to 7digital’s board.

“We set out three years ago to create a profitable, globally dominant player in what we believed would be a rapidly expanding market for the technology and content needed to build streaming music services,” said 7digital chief executive Simon Cole.

“This transaction represents the culmination of that strategy, completing our consolidation of European competitors - following the Snowite acquisition last year - and transforming 7digital in terms of size, scale and profitability.”

Cole said MediaMarktSaturn was of “central importance” to the European music industry as it built from a year in which the importance of streaming to future revenues had been confirmed.

“For one of the world's top retailers of music to make the statement MMS is making by committing to this digital strategy sends an important signal about broadening the digital services available to consumers.

“For 7digital, the revenues will nearly double our licensing revenues and confirm 2018 as a year of healthy profit and positive cash flow.”

Wolfgang Kirsch, chief operating officer of MediaMarktSaturn Retail Group and CEO of MediaMarktSaturn Deutschland, said that as the number one music retailer in Europe, music streaming was increasingly important for MMS.

“Being a shareholder of 7digital will enable us to strengthen our digital entertainment service Juke! and develop further business models for the growing music streaming business.”