Apple To Introduce Dividend and Share Repurchase Program
So much for the idea that Apple could buy a music company. The company announced Monday a dividend and share repurchase program to put to use its $98 billion stockpile of cash and securities. The dividends -- $2.65 per share - will begin on July 1 and the share repurchases will commence on September 30.
The odd notion that Apple could buy a record label and music publisher has been floating around for years. The $10 billion share repurchase program alone would cover acquisitions of both Warner Music Group and EMI Music - recorded music and publishing divisions of both - with enough left over for some historical blues, jazz and rock catalogs.
But Apple is not in the content business. Profit margins - when there is actually a profit - in the music content business should be of little interest to Apple shareholders. Apple had un-music-like gross margin of 44.7% and profit margin of 28.2% in the fourth quarter of 2011. Shareholders shouldn't want to own companies in an industry in transition, either. And don't forget about the cultural chasms that would need to be spanned to integrate a music company into a technology company. Simply put, owning record labels and music publishers would be too much of a headache for Apple even if they were acquired on the cheap.
A massive, innovative and still-growing consumer technology company like Apple could put its money in far more worthwhile places. It would be better off buying a few thousand McDonald's franchises (where it could heavily promote its products), the real estate where its Apple stores are located (so it wouldn't have to pay rent) or United Parcel Services (to better control the value chain for shipped products). Those alternatives may seem a bit ridiculous, but they're no less ridiculous than Apple buying record labels and publishers simply because it sells music at iTunes.
Instead of buying assets with poor returns (which would anger shareholders), and rather than snap up a mobile carrier or competing computer company (which would be fraught with regulatory and other hurdles), Apple chose to return value to shareholders. Apple shares still don't pay much - the dividend represents a yield of 1.8%, lower than Intel (3%), Microsoft (2.5%) and the S&P 500 (1.88%) - but anything is more than what Amazon and Google currently pay out: nothing. ( Apple press release)
Pandora's Market Rating Neutral
Credit Suisse opened coverage of Pandora (NYSE:P) Monday with a $12 price target and a neutral rating. The analyst is particularly worried about content costs, which he forecasts will rise 37% annually through fiscal 2017, the result of a 27% annual increase in listening hours and a 7-8% increase in sound recording royalties. Pandora's stock was down 0.57% to $10.55 in Tuesday afternoon trading. It is up 5.8% in 2012 but down about $4 from its 2012 high in early March. ( Barrons.com)
Rumblefish Simplifies Track Editing
Online music licensing company Rumblefish has launched its mobile software development kit (SDK) and announced a major update to Friendly Music (originally launched for YouTube). The SDK makes it easy for developers to enable users of their mobile apps to edit any of Rumblefish's copyright-cleared catalog of 750,000 songs (with "millions" more on the way, the company says) into their videos or photo slideshows. Friendly Music helps people find suitable music through its soundtrack recommendation tools (such as a mood map that allows the user to choose a mood that matches the video or pictures). You won't find well known songs by top artists, but you will find music from the catalogs of Rumblefish, CD Baby, Indaba and APM Music. ( Rumblefish press release)
Indie Developers Dominate Mobile Game Market
In what market are independent creators faring better than majors? Mobile gaming. According to mobile analytics firm Flurry, independent game developers accounted for 68% of the worldwide game sessions tracked in the first two months of 2012. That dominant share is actually up from 60% and 56% in the first quarters of 2010 and 2011, respectively.
Video games are usually dominated by major developers who have high production and marketing costs as well as strengths in distribution - all barriers to entry that have kept out smaller developers. But the iOS and Android platforms have opened up gaming to independent developers just as digital distribution has opened up the music market to small labels and independent artists.
Flurry was taken aback by its own figures. "While we would have expected indie game developers to fare better early on in the history of iOS and Android mobile app platforms, it's remarkable that their dominance has grown over the last several years, with no signs of slowing. Even when traditional, established game companies have attempted to buy a stronger position on iOS and Android through acquisition, the reduced importance of brand power in mobile app gaming allows indie developers to continue to innovate and capture increasing consumer mind share." ( Flurry blog)