MIDiA Exclusive: 7digital Acquires Leading Competitor 24-7

UK music services provider 7digital today announced they are currently considering the acquisition of longstanding competitor 24-7 from German retail giant MediaMarktSaturn (MMS).  24-7 is one of the longest standing companies in the entire digital music space, founded in 2000 (MMS took a majority holding in 2009). In a marketplace where the average life span of a digital music start up is 5.5 years, 24-7 is a veritable veteran and powers one of the very first telco music services: TDC’s Play. 7digital takes full ownership of 24-7’s business and its existing music service customers, including Play and Saturn’s Media Markt.

Market Consolidation

2016 was a year of consolidation in the white label services space, with Omnifone going into administration and Medianet getting bought by SOCAN. 7digital’s acquisition of 24-7 further concentrates the market. With the growing brand strength of streaming services like Spotify and Tidal, telcos have been increasingly looking to partner with those brands rather than build their own. Which was one of the key drivers of market consolidation. Those companies that have weathered the storm, of which 7digital is clearly one, have done so by diversifying away from telcos. For example, in 2016 7digital powered French retailer Cdiscount’s streaming service Cstream.

Sleeping Giant Retailers

That is not to say that opportunity does not still exist in the telco sector, it does, but a successful white label services provider now has to have a much more diversified client and product portfolio. Retailers will be a big part of that mix going forward. Especially so in markets where CD sales still account for a large portion of music sales. Germany, just and so happens to be the world’s 4th largest recorded music market with 59% of its sales physical in 2015. So powering the music service of the country’s largest CD retailer has clear potential. Add into the mix the fact Media Markt is also the leading consumer electronics retailer with a very large base of online user accounts and the tantalizing prospect of an Amazon Prime / Echo type proposition emerges, should they ever decide to go down that route.

Powering The Next Generation Of Spotifys

Another real area for growth for companies like 7digital is giving pure play services a head start in the streaming race. Bringing a streaming music service to market is no easy task and many a start up finds itself 2 years into its journey wishing it had realised just how complex a business multi-territory music licensing actually is. By bringing licensing, tech knowhow and infrastructure to the table, companies like 7digital should be well placed when a post-Spotify IPO / sale generation of streaming services look to come to market.

7digital is not quite last man standing in the white label services marketplace (there is already a new crop of competitors emerging such as Cylo and General Harmonics) but it is now in the clear position of being the leading player with more than a decade of track record behind it. Do not under estimate the importance of that latter attribute to rights holders and potential partners, both of whom want to have the security of working with a trusted company that is still going to be around next week.

With Spotify, Apple and Amazon all set to follow up their strong 2016 with an ever stronger 2017, there is no doubt that the streaming market is heating up. It will be down to new entrants to ensure that the market does not become too concentrated around too few players. The newly expanded 7digital will be hoping to be a key part of that puzzle.