Insights

Let the Good Times Roll!

2020 has proven to be a very active year in digital audio with tremendous value creation – DSPs up 42% and Publishers up 32% — with an
acceleration in M&A-led consolidation continuing into 2021 (as of this writing SONY has acquired AWAL for $430MM)

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Sector Report: Audio Q4 2020

Contact: John F Lambros

EXECUTIVE SUMMARY

Q4 2020 Music Sector Wrap-Up

Let the Good Times Roll!

  • 2020 has proven to be a very active year in digital audio with tremendous value creation –DSPs up 42% and Publishers up 32% –with an acceleration in M&A-led consolidation continuing into 2021 (as of this writing SONY has acquired AWAL for $430MM)
  • In this report we focus on some of the activity in the creator services market:
    • Summit Partner’s investment in Output; Beatport’sacquisition of Loopmasters; Francisco Partner’s majority investment in Native Instruments(GCA was the exclusive advisor to Native Instruments in this pending transaction set to close in Q1 ‘21)
    • We like this part of the value chain and believe it will draw further investment interest and consolidation in 2021
    • Our thesis rests on a simple point of view: the digital re-platforming of the music sector has highlighted the importance and value of the “picks and shovels” in the value chain –the software, hardware, devices, essential to streamlining the process from music creation to digital distribution
  • And nothing has slowed down the “song as asset class” investment thesis either –led and defined by the bold moves of Hipgnosis Songs Funds Ltd. in both buying catalogues, accumulating 129 catalogues and 60,000+ songs as of 12/31, and raising capital
    • With Shamrock, Providence Equity and KKR also committed to catalogue investing, some of the smartest money in the entertainment market today, it is safe to say that we really are only at the start of a solid 10-year investment cycle
  • Lastly, in this report we take a look at the continuing evolution of the live streaming market –a pandemic-accelerated growth segment of the market with enormous potential, longevity and global potential
    • Tencent Music, YouTube, LiveNation, Bandsintownall invested in streaming capabilities and partnerships during Q4 ’20, eager to capitalize on the momentum in this part of the market
    • We expect to see multiple new partnerships and entrants to continue to emerge, as the potential opportunity has been measured by some analysts to be at a near $2Bn market size
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