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Great analysis. Thanks for putting In the effort to crunch the numbers. The big take away for me is that the revenue for the streaming business continues to shrink every 6 months. Hard to see that if you just look at the hype on the first page of the interim update RNS.
just keeps sinking, it doesnt even stay still it just drops
Re home fitness we need to see a Schwinn or a NordicTrack on board, a large multinational home fitness manufacturer. That would give us so much faith, it would change everything.
Objectively looking at 7Dig, one needs to ask themselves if the following substantiates hold in this company:
- will the exercise from home gig pro vale; will Apex gran market share, what revenue will that generate and over what period, and is that the only player in town for 7Dig?
- live music gigs; has the potential to be massive - can anyone point to any marketing/advertising of such events (incl ticket sales, or attracting artists) whereby 7Dig benefit? Are Mandolin, Twitch and others doing a better job here? are 7Dig (or the perform artists marketing team) going out to the major ticket providers and there mass databases to market?
- Triller / TikTok - has it all gone quiet on TikTok now that larger topics are at play in the U.S. such as stimulus package, presidential elections? Where does Biden sit on TikTok and China threat... to be seen (but we likely know not as combative as Trump)
- Triller - potential SPAC / listing; will it help? How is there market share / growth progressing?
- Secret company'X' - its massive but we can't tell you; how much do we really believe this, and could the company provide indication when it is likely to say who and when potential revenues from 'secret company x' will flow?
Many posters here seem to be expected the continued success story and easy money flow.
Unless we believe there is a home run here there are better places to be invested in my view. For disclosure I am invested at around 1.5
Interested for informed views on the above.
GLTAH
Thanks for your posting Maximumvalue, good to hear the balanced views from a long term shareholder and not a hype man dreamer.
Unfortunately I bought in to this hype a few months back and have watched my investment dwindle to around 40 per cent. Still not sold as I a hope there is a glimmer of hope in all that Paul says however am continually disappointed as the share price plummets daily.
The CEO is clever that's for sure, could well be turning a failing business that holds huge potential around or could be a merciless liar draining our hard earned, praying it's not the latter but my gut screams otherwise.
7dig appears to be a golden business opportunity and now is the time to be making an impact, and shouting about this to investors, the reality so far however makes one wonder what is happening behind the scenes.
What happened to the covid enforced live concerts behind closed doors and streamed to ticket buyers? Touted by 7dig as a lifeline for all concerned!
It's happening, Paul Weller.has a big gig date soon and the 1D guy Niall Horan has another live from the Albert Hall. Missed the boat or still lining up a Superstar?
Triller does have some big name artists on their books.
Seems the musicians/bands are sorting themselves out independently.
I sold my holding at 2p to invest in Vela. I look back in daily to see whether its worth reinvesting as the sp has dropped so low. Nothing I see encourages me to do so yet.
Max, your post was brutal yet unreservedly honest. I feel your pain.
Hope it turns around, but the continued silence from Paul is deafening.
In addition, in terms of us having some kind of hard bounce on the share price, that'd come down to either the name of the global company (which I think we'll get in due course), a ban on TikTok in the USA or another really large global contract win.
It wouldn't shock me that much if any of those things happened, so there's that hope to cling on to.
Great analysis Maximumvalue, I suspect you've only had two people recommend the post as nobody likes to read uncomfortable truths... I agree with a lot of what you've said, lots of it's factual.
To counter a little bit briefly... Paul said that they have 'productized' their offering and have moved away from being a music services business, it's like they're trying to become a saas company. Revenues have gone down as they've moved away from old business lines because they weren't profitable. You doubt the high profit margins Paul mentions but I doubt he's fibbing and I suspect doing away with the services element of the business and moving away from downloads will increase margins.
They have contracts of "10s of thousands per month" after an initial set up fee but then do make money from usage, so if Triller grows, so do 7dig revenues, hence TikTok being big news as you're talking 100s of millions of users potentially.
Basically, we need to see really regular contact wins, not necessarily global players, just frequent deals. That'll show appetite for the product and show they have their house in order. The fact that Apex rides is exciting is worrying to me... a company not even fully functioning in their market yet is seen as an exciting contract win... it's pretty small stuff.
Paul is clearly bright and he seems genuinely excited and positive about opportunities in home fitness and social media... As I've said before, I'd really love to know who their targets are, that would tell us everything. How many ideal target customers are there for their sales team to approach. I don't know the answer and that worries me a little.
They raised £6 million in cash in early September and in their interim report showed this was already down to £4.3 million by 20 September 2020 a few weeks later. Looking at their recent balance sheet, their trade payables are £8.1M and receivables are only £1.2M. This is even worse than the 2019 end of year balance of £7M and $1.6M respectively. If they paid their bills they would be out of cash again!
7Dig remains a very risky prospect, in a market that has never proven itself to be of any great size. Even if Triller becomes huge, it is difficult to see how that will generate much revenue for 7Dig. With downward pressure on their download and creative revenues, it is hard to see how the revenues will start growing again any time soon. I bought in very high so I am stuck, so can only hope for a miracle.
Paul Langworthy recently did an interview for LSE in which he stated that 7Dig help facilitate their customers to reach a licencing deal with the labels. This implies that the music deals are direct between the enterprises and the labels. This is important because it seems to mean 7digital does not participate in a share of the music revenue. In which case, 7dig is only paid a delivery fee for the streamed music which is going to be much, much less interesting. Maybe the company could clarify this point? Streaming, by all accounts, is a technically simple process to implement and hence the value it generates is limited. This is very different to a Spotify who make money from sharing in the value of the music itself. Paul Langworthy also talked about moving to the cloud. Storing and accessing 85M files in Amazon, or wherever, is costly and eats into the margins of the service. I would question his claim on that call that margins are at 95%.
7Dig never disclose deal sizes and hide behind customer confidentiality clauses. I believe AIM rules dictate that information that could materially impact the share price must be disclosed and that trumps confidentiality clauses. A large deal would be materially impacting on the share price and needs to be disclosed. So, one can only conclude that these are all small deals, which is further evidenced by the low average deal size calculations above.
In my opinion, they hyped up the share price last month by making a big deal about Triller, the unnamed global tech company, and a pending fitness company in the lead up to the fund raise. They are good at this, but sometimes you have to look behind the curtains to see the reality. From the interim report, it appears they had run out of cash again and cleverly timed it to suck more out of the investment community before this was disclosed. As a long term 7dig investor, I am used to these kinds of sucker punches.
What they have done well is to cut back their costs aggressively. This started with the turnaround CEO and CFO that came in briefly last year to save the company or put it into administration (they offloaded loss-making assets and then found and sold the business to new investors). The cost saving work has been continued by Paul Langworthy. I think he has done a good job with this. They have gotten their costs in good shape and that is important, but the problem is on the revenue side. They have not arrested the continuing drop in revenues yet (in all three parts of the business and most worryingly the Streaming business). They are winning some small deals but they must still be losing other customers also or their revenue would be increasing, and of course they will not put that in a press release.
They raised £6 million in cash in early September and in their interim report showed this was already down to £4.3 million by 20 September 2020 a few weeks later. Looking at their recent balance sheet, their trade payables are £8.1M and receivables ar
As a long term investor in 7 Digital, who has suffered a lot of pain with this company, I wanted to do an in depth analysis to see if it has really turned the corner. I share it with you here. These are my opinions after digging deep into the numbers and these are my conclusions. DYOR
7digital was or very almost was bankrupt last year after years of mismanagement (stock market suspensions, wind-up orders, company numbers restated) under Simon Cole, the long-standing CEO, when it was saved last year by an investment by the current majority owners. Let’s face it, when you are near bankrupt you are only likely to attract bottom feeders to invest. So, I was sceptical. At the time that they invested, I thought any money is good money, but I was not really confident.
As for 7Dig, looking at the recent interim report, in H1 2020, about 50% of their revenue came from their download store and radio content creation (listed as Content and Creative respectively on the P&L). The other 50% is the much discussed B2B music streaming.
The download store is the only part of the business that is retail where they sell tracks directly to consumers. From the recent interim report £1.1 million of the £3.1 million revenue for the 2020 first half year comes from downloads. This is surely a dying part of the business as consumers move away from downloads to streaming. When these consumers move to streaming they are moving to Spotify or Apple or others given 7dig does not offer a streaming service direct to consumers. This part of the business will likely eventually drop to near zero over time. The numbers reflect that decline.
The radio content creation business represented £790 thousand in H1 2019, £782 thousand in H2 2019 and only £408 thousand in H1 2020. Also a declining business that probably suffered from the cost cutting.
As for the B2B streaming business, which is what everybody has been hoping is the growth market, 7Dig claim their customer base has risen from 34 to 45 customers and yet their revenues continue to drop in their B2B streaming business, from £3.5 million in H1 2019 to £1.8 million in H2 2019 and dropped again to £1.6 million in H1 2020. That means that these streaming customers (45 of them) are only worth about £35 thousand per half year each on average. At that rate, they will need to win a very large number of customers to have an interesting business.
That also includes Triller, which, I think I read somewhere a couple of years ago was an existing customer (not 100% sure) and the recent deal they bigged up was portrayed as a new customer win. That seems a bit misleading.
While researching my analysis, I also noticed that 7Digital listed Tik Tok as a customer in 2019 (See “about 7digital” section of RNS dated 1 August 2019). These days, they make no mention of them, so one can only assume that they have lost them as a customer because they are still a bigger name than Triller and would certainly be touting them if they