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Takeaway: We read this wrong. This is publishing deal, which is a very small part of P's content costs, and not the same rights covered by Web IV.

KEY POINTS

  1. PUBLISHING DEAL, NOT RECORDINGS: We appologize for the confusion.  The Sony Agreement is actually for Music Composition, which is less than 10% of P's content costs, with Sony representing some percentage of that.  The Web IV proceeding is for Music Recordings (92% of P's content costs).  So this agreement is largely a non-event relative to the much bigger Web IV issue.  Point 2 below was mostly historical context, so no updates there outside of removing the last two sentences.  Once again, we appologize for the confusion.  
  2. WAVING THE WHITE FLAG? Very recent development suggest that P is now expecting to lose.  P has committed over 60% of its cash reserves to the Ticketfly acquisition ($191M) + the Pre-1972 settlement ($90M), which is a fairly reckless move without knowing the Web IV outcome.  That is unless it was already planning to blow up its existing model prior to an expected Web IV defeat.  Also note that the pre-1972 settlement also covers the 2016 period, and it is pricing in a considerable rate increase (+40%).  Note that P’s CFO suggested during the 3Q15 call that expected future rates were considered as part of the settlement.  

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Let us know if you have any questions, or would like to discuss further.  See notes below regarding recent developments for P and our Web IV analysis.

Hesham Shaaban, CFA


@HedgeyeInternet 

P: Can We Still Be Friends? (3Q15)
10/23/15 08:14 AM EDT
[click here]

P: Dumb or Defeated? (Ticketfly)
10/07/15 11:02 AM EDT
[click here]

P: It's All About the Benchmarks (Web IV)
10/02/15 12:22 PM EDT
[click here]

P: Fool's Gold (Web IV)
09/21/15 02:05 PM EDT
[click here]