Business News Digital

Guvera announces IPO

By | Published on Thursday 2 June 2016


You know, sometimes I wonder if it might not be better for everyone if the no-hoper streaming platforms just called it a day and let everyone focus on the ones that might just last the distance. Though maybe they think that about music business news services. Anyway, in totally unrelated news, Guvera is planning an IPO on the Australian Securities Exchange next month. And why not, I say.

Australia-based Guvera, old-timers might remember, began life as an ad-funded download platform, before re-inventing itself as a streaming service. It now operates in various territories, with a particular focus on emerging markets where the big Western streaming brands haven’t necessarily gained so much traction.

Here in the UK, of course, it’s probably best known for buying Tesco’s Blinkbox Music as part of plans for a British launch, only to shut that service down six months later, resulting in a messy legal battle with former Blinkbox staff whose lawyers state “at the point of the acquisition employees received a written assurance from Tesco and Guvera UK that they would receive redundancy payments if cut backs were required. This agreement was not honoured”.

But don’t worry potential Guvera share-buyers, “Guvera’s Directors believe that it will be able to successfully defend itself against these proceedings on the basis that it has acted lawfully at all times, and that in any event the UK Employment Tribunal does not have jurisdiction to hear the case against Guvera on the basis that it was not the employer of those employees”.

And what about monies owing to the currently-in-administration Omnifone, which provided content services for Guvera in some territories? “The joint administrator has requested payment for outstanding amounts owed by Guvera to Omnifone, however Guvera strongly disputes those amounts. In addition, Guvera is seriously contemplating a claim against Omnifone for failure to carry out its contractual obligations in the periods prior to and after it was placed into administration”.

Beyond its commentary about ongoing legal wrangling, Guvera’s IPO prospectus tries its best to put a positive spin on the business, though at the same time sets out in quite some detail just how challenging it is to launch a streaming music platform, with high content procurement costs, some significant very well funded competitors in the market, and the fact that the current streaming business model requires massive global scale to ever have any chance of going into profit.

Guvera is interesting in the streaming music space in that it has remained attached to its original advertising-centric business model throughout, while the likes of Spotify repositioned their ad-funded free set-ups as mere upsell platforms for their core premium subscription businesses. And in its prospectus, the digital firm admits that “Guvera generates most of its revenue from the sale of advertising to consumer brands and marketing agencies. A small proportion of Guvera’s revenue is generated through subscription fees paid by subscribing users”.

Guvera’s management have previously suggested – as most other streaming firms have made premium subscriptions their priority – that the digital music sector just hasn’t tried hard enough to make mass-market ad-funded services work, implying that the problem isn’t a lack of interest amongst brands, but lacklustre advertising propositions from the music side.

Though, while it is true that internet advertising is booming at large, social media and search engines dominate in that space, with pretty much everyone in content provision – even the kings of clickbait with their many millions of users – struggling to make ad-funded models work. And the one standalone music service with sizable advertising income – Pandora – is still looking for other revenue streams to take the business into profit.

Which might make potential investors worry about the Guvera model, while the figures presented in the IPO papers – AU$81.1 million in losses in 2015, when it generated just AU$1.2m in sales revenue – confirm that, even if that model does has potential, this is a risky investment.

Though we should let Guvera chairman Phil Quartararo conclude with a more upbeat assessment. “Guvera’s revenue model replicates that of a major social media platform. The provision of music is a mass-market service, and I believe Guvera is the best positioned music company to take advantage of this mobile advertising explosion”. Good times.

Get your Guvera IPO prospectus here.