White-label digital music vendor Omnifone has acquired Swedish indie online music distributor Global Media Bank, and looks set to bolt on more companies over the next year.
CEO Jeff Hughes tells paidContent the company – which powers Sony Music Unlimited, Rara and a service for BlackBerry – turned a £3.8 million EBITDA profit in the year to April on revenue that doubled from £13.5 million to £29.5 million.
“Global Media Bank provides one of deepest catalogues of independent music.
“We will continue to look at other opportunities. We’re not the largest company in the world so we will remain very disciplined. We’ve done one (acquisition); we learned from doing it.”
Digital music services are not known for making a profit. But then, Omnifone’s clients are large companies, not consumers.
Omnifone was founded in 2003 by software and internet entrepreneurs Rob Lewis Phil Sant, Mark Knight, newly minted from selling Cromwell Media to InterX for £850 million. Lewis was also founding CEO of Silicon.com, sold to CNET.
Hughes confirms: “We’ve raised $60 million in the last five years to build the platform.” That money is from “mostly high net worth individuals”; Omnifone has never taken any VC or private equity money. So what’s the next financial step?
“We’ve got really patient investors who are not putting pressure on us to do anything,” Hughes says.
“We do have quite a lot of interest from institutions. I don’t have a fundamental problem with venture capital or private equity – we haven’t needed it to date.
“We just turned a (pre-tax) profit, we have access to debt and further capital from our existing shareholder base but, if we see avenues out there, we might explore them. We will be opportunistic and disciplined to scale the company.”
Omnifone is one of several different kinds of operators vying for a piece of a digital music business that is still growing. Direct consumer services like Spotify and Deezer are going direct to consumers, but vendors like Omnifone and, in MP3 downloads, 7digital are offering all manner of brands the opportunity to become their own subscription music service.
The International Federation of the Phonographic Industry says there were 17 million music subscribers in the world by December, but Hughes reckons it is more like 12 or 13 million, once you strip out consumers who get their service as a byproduct of a bundled offering.
ABI forecasts there will be 161 million mobiel music subscribers by 2016.