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The momentum of change is unabated in every corner of the audio landscape as the industry continues its shift toward a digital re-platforming that will unlock tremendous value, driving the anticipated doubling of TAM from $27Bn to $52Bn in the next 10 years

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Sector Report: Audio Q2 2021

Contact: John F Lambros

EXECUTIVE SUMMARY

Q2 2021 Audio Sector Wrap-Up

  • The momentum of change is unabated in every corner of the audio landscape as the industry continues its shift toward a digital re-platforming that will unlock tremendous value, driving the anticipated doubling of TAM from $27Bn to $52Bn in the next 10 years
  • The Believe Digital IPO is a significant industry event as it represents the first pure-play, digitally native, independent label and artist service platform to list
    • Raised $360MM+ in its IPO
    • Complete offering includes distribution, marketing solutions, technology, analytics, and advisory
  • Goldman Sachs’ latest “Music in the Air” industry report highlighted and confirmed a number of important macro trends, including:
    • A faster shift to streaming than anticipated: 443MM paid subscribers (2020) growing to 1.28Bn (2030E)
    • Digital distribution landscape will remain competitive and fragmented: SPOT (33%), TME (19%), AMZN + YouTube (19%)
    • The 3 majors will continue to dominate with a 70% market share, but are losing streaming market share to independents
    • The growing importance of the music catalog, with NPS multiples growing from 12x (2017) to 18x (2020)
  • Financing activity continued across the audio market with the following notable transactions: Tiger Global’s $155MM Series F investment into artist economy-focused membership platform Patreon (valuation $4Bn+); and Argo Investment’s $50MM Series D investment into music licensing platform Songtradr
  • The M&A market remains healthy with several notable deals announcing throughout the quarter. The deal we like the most is Blackstone’s $385MM acquisition of eOne Music from Hasbro
    • One of the best management teams in the business, led by Global President Chris Taylor
    • Excellent collection of assets, including Audio Network, Death Row Records, and Dualtone, offers multiple platform-like expansion paths
    • Don’t mess with Blackstone when it comes to music – they are proving to be one of the most dialed-in investors in the market
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