EVR Holdings plc (LON:EVR) Virtual Reality devices provide consumers with access to fully immersive 3D worlds, as well as the ability to interact within a virtual environment as if they are physically present, creating a new consumer proposition for video games, immersive entertainment, social interaction and virtual teleconferencing. Mark Zuckerberg was recently quoted as saying that “Virtual Reality will be the world’s next major computing platform”. VR devices are currently being produced by leading technology companies such as Facebook, Google, HTC, Microsoft, Samsung and Sony PlayStation, and over the last four years, over $15bn has been invested in the development of VR technology, with a further investment of $50bn expected between now and 2025.
EVR Holdings is the world’s only listed pure-play VR company. EVR’s wholly owned subsidiary, MelodyVR, is a global music platform that has created the world’s largest library of original VR music content. It is the only VR music service to be licensed by music rights holders including the world’s three major record labels, Warner Music, Universal Music and Sony Music Entertainment. The agreements with these record labels provide crucial access to the world’s top tier artists, and license the company for the creation and distribution of VR content providing a mutually beneficial structure for the monetisation content that MelodyVR creates.
VR device market is projected to scale significantly, with app launch to be timed to benefit from sales over the forthcoming holiday period. Following 4m VR device sales in 2016, c.12m devices were in circulation by August 2017. Over the next 3 years, the VR market is expected to grow significantly, with c.30m devices in circulation expected by the end of 2017, increasing to c.72m by the end of 2018, and c.350m by the end of 2020. Digi-Capital estimates that VR revenues will reach c.$108bn by 2021. MelodyVR intends to launch the app to benefit from the significant sales of VR devices anticipated over the forthcoming holiday period.
MelodyVR has developed a proprietary virtual reality music platform (app). The platform enables consumers to enjoy unique music-based VR experiences, such as being live on stage at a sold-out concert or in an intimate recording studio with an artist, regardless of the end-user’s geographical location. So far, the company has worked with 565 well-known artists to create thousands of hours of original, high-quality VR content. MelodyVR intends to make its content available to fans on-demand, generating revenue via the in-app monetisation of premium experiences. Alongside recorded content, MelodyVR also intends to live-stream music festivals, concerts and events in VR, enabling an unlimited number of ‘VR tickets’ to be sold for any event. The company intends for the MelodyVR platform to become the go to application for the consumption of VR music entertainment. The app is currently compatible with all leading VR devices and will also be available on Android and iOS smartphones. MelodyVR intends to launch the app to benefit from the significant sales of VR devices anticipated over the forthcoming holiday period.
What could revenues look like? In 2021, our base case scenario suggests that MelodyVR’s gross revenues could be c.$650m, with standard and comparable gross margins within the music industry likely to be c.18-20%. However, it is difficult to quantify or forecast given the early stage nature of the business. Music industry annual revenues (c.$50bn) are expected to double within the next 15 years. Coupled with the projected growth of VR device adoption, should VR music content generate consumer traction, as per music downloads and music streaming (iTunes, Spotify), our bull scenario suggests gross revenues could reach $1bn by 2021.
