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+--- Thread: PlayMPE opportunities (/showthread.php?tid=4605)
PlayMPE opportunities - admin - 09-11-2013
PlayMPE is the patent protected solution that lets record companies send their pre-release music and music video's to accredited recipients in a safe and cost effective way.
PlayMPE is responsible for nearly all of Destiny's revenues, although this is likely going to change in the quarter when the Clipstream Clould uploader launches next month. We feel Destiny is at an inflection point on both products, so lets start with PlayMPE
There are quite a few opportunities here:
- The addressable market is in the order of $40M, that's a ten-fold increase from today's revenue
- The film and video pre-release market (substantially larger than the pre-release music market)
- End-consumer market
- Network effects: Metcalf law
- Cross-selling/marketing Clipstream
At present, PlayMPE captures only a fraction of the market, which is estimated at roughly $40M. Growth is possible in new geographies and new types of users. For every radio station, there are ten journalist and for every journalist, there are ten d-jays. However, to develop new market is expensive, but Destiny is going to do that on the coattails of the major studios, Universal in particular.
Destiny concluded a worldwide contract with Universal (recently merged with EMI and holding roughly a 45% market share). It will be the studios that that will lead the expansion. Why? Well, basically because PlayMPE offers a lot of benefits to the studios.
- DRM security
- Instant reporting
- Quality
- Cost
The record labels are basically entrusting Destiny with their crown-jewels, their pre-released music and videos, but they only do this because PlayMPE offers unique, patented security features. It can lock the files to the recipient's computer and watermark it. The latter enables it to be traced to the violator on torrent sites or elsewhere (in cooperation with web-crawlers from the IFPI the anti-piracy group).
Using PlayMPE is much cheaper and safer than sending a demo CD by courier and much safer than alternatives like sending MP3s via email. PlayMPE is a lossless format, offering broadcast quality music whilst keeping bandwidth requirements limited. As a result of these advantages, PlayMPE has a near monopoly.
Significant investments in server facilities and changes in the software were required before the record labels were willing to expand. The global contract and guaranteed pricing with the biggest, Universal, set the stage. This is now done.
However, two things will mask the growth that this will unleash:
- The second quarter (Dec-Feb) is seasonally slow as the labels don't send music between December 15 and January 15.
- The contract with Universal has a minimum clause which has to be filled up first, which is expected to happen in this quarter.
This means that growth in usage will show up in the March-May quarter next year, but growth can be fast, due to an accelerator clause in the contract with Universal.
Margins
One should not forget that with the investments made and expensed, more than 90% of the growth will go directly to the bottom line as marginal operating margins are in excess of 90% due to the highly automated nature of the process. It's the labels that do the manual work like upload the music, fill out the receiver list, etc. It's hands off for Destiny.
Network effects
We've already discussed the reasons for the major record labels to use PlayMPE, but in general, the more the system gets used, the more valuable it becomes (a feature known as Metcalf law). Destiny owns the largest network of industry recipients and has an enormous database of pre-released music. Here is CEO Vestergaard (on the Q2 CC):
we are in a position to generate the most accurate real time charts in the industry. We're building the most accurate data base meditated data from music all over the world.. our growing network is creating derivative business opportunities and captive audio so we could sell our Clipstream offering into.
This induces further use of PlayMPE. For instance, independent labels want to use the system simply because they get access to a network of recipient radio stations which improves the chances of their music being played. Others will want to use PlayMPE to make it on the list.
They might very well generate so much valuable data that this in itself becomes a business.
Pre-release film and video
What PlayMPE does for record labels can also be done for the film and video industry, a much bigger market. Send films and videos securely to theaters, critics, personnel, etc. and lock them to the recipient computer. It needs work and investment, but Destiny will embark on this opportunity next year.
Consumer market
Another expansion possibility is the consumer market. Destiny has already released applications for Android and the iPhone, those for Blackberry, tablet and iPad are under development, as is a web-based encoder.
One advantage for consumers is the loss-less quality (much higher than MP3), but the main driver will be the state of the art DRM locking and watermarking features, which would make it quite an attractive proposition for record labels, and independent musicians alike.
Cross-selling and marketing
Record labels can be amongst the first users of Clipstream for secure music video streaming (Clipstream has the same locking and watermark features as PlayMPE). Present solutions like Microsoft Silverlight are being discontinued and HTML videos have no security whatsoever.
if I have a movie trailer for example, or let say a movie that I am developing and movie is only partially done and I send it out to producer or something. I don't want that to show up on the internet anywhere. So we are the only streaming technology where I can lock that, I can secure and protect who has access to that content [CEO Vestergaard Q2CC]