“Nessun dorma, nessum dorma.” So sang Luciano Pavarotti in Puccini’s classic aria of the same name. Loosely translated this means “no one is sleeping”, and one PLUS company which certainly isn’t sleeping is media rights business One Media Publishing.

Listing on PLUS in September 2006, raising £826,000 in the process, the company is focused on acquiring and exploiting the digital rights to music in the “nostalgic” or “middle of the road” genre. As well as owning the rights to a number of songs by the late, portly Italian maestro, over the past few years the company has acquired a vast portfolio, which currently amounts to over 85,000 tracks. Other artists in the portfolio include the likes of the Sex Pistols and Tina Turner, with the company also owning a number of songs in the children’s and classical genres.

The rationale behind One Media’s strategy is to exploit the rapid growth currently being seen in the digital music download market, and in particular the growth amongst the so called “baby boomer” generation. Latest figures from the International Federation of the Phonographic Industry (IFPI) suggest that global digital trade revenues hit a record $4.2 billion in 2009, up 12% on the previous year, with further growth expected in 2010. The strategy is focused on selling the catalogue to business to business customers rather than the company having its own download website and offering tracks directly to the customer.

The last calendar year was one of significant progress for One Media, which is led by CEO Michael Infante, who has almost 20 years experience in the business of exploiting music copyrights. During 2009 the company signed a number of similar deals with industry heavyweights such as EMI Music Publishing, Sony ATV, and Universal Music Publishing for music catalogue representation deals. With EMI for example the music giant has access to One Media’s catalogue of master rights. The deal, which is based on a royalty sharing basis, offers greater visibility to One Media’s audio library to the many ‘music synchronization buyers’ who regularly licence music for film, TV, and advertising purposes via the EMI model. One Media identifies ‘Synchronization’ as an increasingly important area of music revenues for companies controlling such rights, and therefore considers its master rights to be ideal for this purpose. The company notes that commercial music buyers and agents acting for film makers or advertising agencies procuring music are now proving to be the third largest revenue earners for the music industry.

Recently released results for the twelve months to 31st October 2009 were highly impressive, showing revenues up by 29% to £794,728 and a maiden annual pre and post tax profit of £65,841, compared to a loss of £89,350 in 2008. Interest payments of £1,109 were offset by an inflow of £2,479. Cash at the period end stood at £210,177 – with £5,702 of debt on the balance sheet – leaving a sizeable sum available for further purchases of music catalogues. The net cash inflow from operations was £156,370, more than double operating profits as just over £80,000 of depreciation and amortisation was added back to the accounts and working capital improved.

While the growth prospects on offer are good One Media faces a number of challenges, not least the continuing high levels of illegal music downloading. The IFPI for example estimates that 95% of music downloads are unauthorised. Governments around the world are slowly implementing laws to curb digital piracy – in the UK Deputy Prime Minister (sic) Lord Mandelson has proposed a similar policy to France whereby illegal file sharers could will have download caps imposed, have their bandwidth restricted or even be disconnected from the internet completely. However, the moves are considered by many in the industry to be insufficient to deal with the problem.

Going forward, the beauty of One Media’s business model is that administrative expenses are relatively fixed and as more tracks are acquired the additional revenues pretty much all fall through to the bottom line. On that basis, while the shares trade on a relatively high historic multiple of 18 times, we believe they look good value. As Pavarotti concluded, “Vincerò!, Vincerò!!, Vinceeeeeeeeeeeeeeeeeeeeeeeeeeeerrrroooooooooooooooooooooooò!!!” I shall win, I shall win, I shall win! Buy.

*One Media Publishing is a corporate client of Rivington Street Holdings, the ultimate owner of this website. Worship Street Investments, which is managed by a subsidiary of Rivington Street Holdings, owns shares in One Media Publishing.