Psonar is an on-demand music streaming service which lets mobile phone users play the music they want on a Pay As You Go basis, without committing to expensive streaming or the annoying intrusion of ads. Psonar currently has 2,500,000 tracks in the service including Universal Music’s popular music catalogue. Partnerships are also in place with EE and Blackberry.
Hundreds of millions of people worldwide have mobile phones and a rapidly increasing proportion have smartphones. Many of these want to enjoy rich media on their phones, including music. Subscription streaming services are expensive, £120 or $120 per year on mobile, and we believe unaffordable for many people in developed economies and most people in developing ones.
Pay As You Go Streaming Music
Psonar is an on-demand streaming music service (a virtual jukebox in the Cloud) which lets mobile phone users worldwide play the music they want on a Pay As You Go (PAYG) basis, without committing to expensive streaming or the annoying intrusion of ads.
Users pay from 1c/1p per track, buying credit in micro amounts (as little as 50c/50p) via their mobile phone (PAYG or contract) or PayPal.
Key features of the service:
- Play a track once from just 1c / 1p / 1€c
- Play albums and playlists with one click
- Gifting – gift music to other people having paid for them to listen
- Pay by phone (PAYG or contract)
- Android, iPhone & adaptive web apps
- Live in UK and Ireland with over 3M tracks including from Universal Music and the major independent distributors.
Psonar is live in beta in the UK and Ireland with over 2,508,394 tracks in the service including Universal Music’s popular music catalogue and those of the major independent distributors. Licensing negotiations are advanced with Sony Music Entertainment and Warner Music.
Psonar is developing partnerships with mobile operators, device makers and other digital services that want to offer their users Pay As You Go streaming music. Agreements are in place with EE, BlackBerry and others are in negotiation or active development.
Psonar has a deep user engagement programme running – designed to keep its user experience compelling by anticipating what consumers want to do with music both in a social context as well as for personal entertainment. User feedback to date has been positive and engaged.
Psonar is a business with global potential – we understand hundreds of millions of music fans worldwide have smartphones but don’t have credit cards or bank accounts. Psonar offers them access to on-demand streaming music on a PAYG basis, which is affordable, flexible and gives them complete control over how much they spend. Psonar’s global roll-out plan includes launching the service in other European territories in late 2015 or early 2016 as well as the USA. Target territories for expansion in 2016-17 include sub-Saharan Africa, south-east Asia and Latin America with India and China as ultimate targets, although likely to be by joint-venture.
Current and Future Funding
Psonar has raised over £1,000,000 from its founders and other private investors to date. Currently, the business is seeking to raise up to £1,000,000 to accelerate the roll-out of Psonar in key territories though partnerships with mobile operators, device makers and retailers. The funds raised will be spent on technology development – implementing offline play, curated branded partner Channels and localization – as well as on business development – mobile operator partnership development, local content acquisition and promotional partnerships.
£305,000 was raised as part of a first close of the current round on 9 November 2014. The pre-money valuation of the business is £3.66M.
The directors anticipate raising an A round of not less than £3M ($5M) in the latter part of 2015 or first part of 2016. This should be a significantly increased capitalisation based on progress in developing the business during 2015. They would only consider raising additional equity funding to accelerate growth, future profitability and the exit valuation of the business.
In the last two years there has been a major shift in consumption of digital music – from downloading to streaming (where the consumer does not retain a permanent copy of the recording but receives a transient stream at the time of listening). In 2013 the number of single track downloads decreased from 2012 and album downloads increased. In contrast, streaming consumption has grown 32 percent since 2012. In the first half of 2014 the decline in downloads accelerated.
To date streaming growth has been through variations of a single payment model – subscription of $9.99/£9.99/€9.99 per month on mobile (with some services offering a desktop PC-only variant for $4.99 etc). Services offering this model include Beats Music, Deezer, Google Music, Napster/Rhapsody, Rara, Rdio and Spotify. We believe the major limitation with all these models is that they are unaffordable for many consumers in developed economies and the vast majority of consumers in developing economies.
Taking pre-pay (or pay-as-you-go) phone penetration as a proxy for affordability – 47% of mobile users in the UK were on pre-pay in 2012. In 2011, 82% and 96% respectively of Latin American and African mobile users were on pre-pay. Moreover, many mobile users on contract in developed economies fall into the ‘careful contract’ category, where they are subscribing for a fixed price bundle of services each month, displaying many of the characteristics of pre-pay mobile users. We feel for these, as well as consumers on PAYG mobiles, subscription streaming is simply unaffordable, especially for younger users.
Scott Cohen, non-executive Chairman, London
Scott Cohen is the co-founder and VP International of The Orchard, one of the world’s largest independent music distribution businesses with offices on 27 countries.
Martin Rigby, CEO & co-founder, Cambridge & London
Martin Rigby has over twenty five years experience as an early stage technology investor in Cambridge, first with 3i plc and then as founder of ET Capital. He is a non-executive director of, Bango plc, the AIM quoted mobile payments provider.
Richard Urwin, CTO & co-founder, Berlin
Richard Urwin has over twenty years software development experience with high-growth technology businesses including Autonomy plc (acquired by HP) and Evi Limited (acquired by Amazon).
Simon Lait, SVP Content & Licensing, Cambridge
Simon Lait has over thirty years music industry experience in artist management, label management and content licensing and business affairs, most recently at The Orchard where he was content adviser.
Jacqueline Biggs, CMO, London
Jacqueling Biggs has nearly twenty years’ marketing strategy experience, including with M&C Saatchi and EuroRSCG (now Havas) and has worked with over 30 high growth early-stage businesses.
Jason Binks, SVP Business Development, London
Jason Binks has had over twenty years experience in the content, mobile and music industries. Most recently he was Director Digital of BBC Worldwide and, previous to that, VP Digital at ITV.
Ray Anderson, NED & co-founder, Cambridge
Ray Anderson is co-founder and CEO of Bango plc, the AIM quoted mobile payments provider which powers in-app payments for most of the world’s major app stores
Anil Malhotra, NED, Cambridge
Anil Malhotra is SVP Strategic Alliances and co-founder of Bango plc.
David Ryan, NED, Windsor
David Ryan has financial and general management experience in UK and US technology businesses as well as five years as a private equity general partner.
Sally Davies, NED, London
Sally Davies has over twenty five years’ experience in the television industry latterly as a senior executive in the Walt Disney Corporation. Previously she was in business affairs roles at Granada Television and Film 4.
David Gill, NED & secretary, Cambridge
David Gill is managing director of the St John’s Innovation Centre in Cambridge having previously been a director of ET Capital Limited and, prior to that, head of technology and innovation at HSBC Bank.
- Key sales drivers: Mobile operator relationships in key territories – starting in the UK, then southern & eastern Europe, then US/Canada/Australia & NZ, then LatAm, Sub-Saharan Africa, SE Asia, Middle East and finally India & China.
- Other sales drivers: Data to show adoption by PAYG smartphone users
USE OF FUNDS:
- Further product development (offline & ‘true’ streaming, Psonar Channels, further operator and payment integration & simplification, localisation for international markets)
- Business development (people to develop MNO & other key partnerships, strengthen consumer engagement including targeted digital advertising)
EXPENSES AND PROFITABILITY:
- Gross margins remain unchanged through the period, 13% after revenue split with master rights holder and the business remains loss-making in period financed by this funding round.
EXISTING DEBT OR EQUITY INVESTMENTS:
- The business has raised £1.2M of equity to date in a series of seed rounds.
- The business has no borrowing but has an overdraft facility of £3K.
- At the planned level of overheads and current burn-rate, the business will be cash out by Q2 2016.
- Next round: We’re planning an A round of £4M to close at the end of 2015.
The Exit Strategy
Sale to a major digital services, telecommunications or entertainment business. The sector has seen significant activity in recent years, including the sale of UK based last.fm to CBS in 2007 for £140M, Beats Music acquired by Apple for $3B. Psonar is a service with global potential addressing a very large consumer market – we believe successful execution is likely to generate early interest in acquiring the business from international corporations that value compelling engagement with users on mobile.
Invest £500 and get
2,500 Psonar credits, entitling you to between 800 and 2,500 plays from Psonar’s catalogue of over 3,000,000 chart and other tracks.
Invest £1,000 and get
6,250 Psonar credits
Invest £5,000 and get
37,500 Psonar credits
Invest £10,000 and get
100,000 Psonar credits
Invest £25,000 and get
300,000 Psonar credits
Invest £50,000 and get
750,000 Psonar credits
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