P | Register Response = Non Event (Web IV)

11/25/15 10:14AM EST

KEY POINTS

  1. REGISTER PUNTS QUESTION 2: The CRJs had asked the Register whether it was allowed to distinguish royalty rates by the type of copyright owner.  This was really a question of the major labels vs. independents, which can't command the same pricing as the majors.  The Register replied suggesting that this isn't a question that it should be addressing , but also stated that CRJs should adopt a single rate structure since no party involved argued for one that distiguished between licensors during the proceeding.
  2. ISN'T THIS A WIN FOR P? Not really.  While the majors may get dinged since a single rate could capture the independent's lack of pricing power, this is really a non-event for P.  The majors control roughly 70-80% of all music that is streamed.  So the difference would have been P paying a higher rate on ~75% of its tracks and a lower rate on the independent tracks, or likely weighted average blended rate that essentially capture this dynamic.  
  3. DEC 15th: The legal deadline for the CRB's decision.  We've laid out all the reasons why we believe P has the weakest position (i.e. Merlin) in this proceeding in the links below.  Whether you agree with our Web IV analysis or not, it's important to understand what's embedded in the current street assumption of down to flat rates.  The CRJs would not only have to bless the Merlin deal, they would have to overweight it.  Given that P has essentially blown up its business model prior to the decision (first link below),  we'd be careful to assume as much.

See charts and notes below for supporting detail/analysis on P's model and Web IV.  Let's us know if you have any questions or would like to discuss further.

Hesham Shaaban, CFA


@HedgeyeInternet 

P | Register Response = Non Event (Web IV) - P Cash Commitments 2

P | Register Response = Non Event (Web IV) - P pre 1972 

P | Register Response = Non Event (Web IV) - P Web IV fallout 1

P | Register Response = Non Event (Web IV) - P Web IV fallout 2

P | Register Response = Non Event (Web IV) - P Leverage Slide

P | Register Response = Non Event (Web IV) - P Cost structure slide 2

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11/17/15 08:35 AM EST

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