Business Matters: Trans World's Music Sales Get a Boost From Healthy Catalog Performance
Business Matters: Trans World's Music Sales Get a Boost From Healthy Catalog Performance

Trans World's Music Sales Get a Boost From Healthy Catalog Performance
-- Trans World's first-quarter results were a good reflection of overall music sales: same-store revenue was down slightly, catalog sales were good -- they were great if you consider historical trends. Here's chairman and CEO Bob Higgins speaking about music sales during last week's earnings call:

"Music comp sales declined 3%. Comp sales in our top 50 [stock keeping units] decreased 13% in the quarter. Similar to our comp sales in video, our comp sales excluding the top 50 increased 3%, demonstrating the strength of our core catalog business. The music category represented 37% of our business for the quarter, compared to 36% last year. For the quarter on an industry-wide basis, physical CD sales were down 6%."

The health of catalog sales can be seen elsewhere. Through May 15, U.S. catalog album unit sales are up 7% while current releases are down 5%, according to Nielsen SoundScan.

The company reported an improved net loss of $2.5 million for the quarter ended April 30, 2011 from a net loss of $11.4 million in the prior-year period. Sales dropped 16% to $131.5 million - mainly because the company operated nearly 18% fewer stores (451 to 548). Its $36,000 in earnings before taxes, depreciation and amortization (EBITDA) was the company's best first quarter EBITDA since 2005. Gross profit margin - which measures the cost of the company's sales - decreased to 63.3% from 67.1%.

Same-store video sales were down 5% as sales of its top 50 SKUs were down 39% (this year's titles were being compared to "Avatar" and "New Moon" last year). Same-store video game sales dropped 10% while electronics rose 15% and the "trends" category increased 8%.

As has long been the case, Trans World is aided by its cash position and lack of debt. The company finished the quarter with cash of $29.7 million (up from $21.3 million last year) and did not borrow from its line of credit last quarter. ( SEC filing)

Slacker Gets ESPN
-- Slacker will "soon" add ESPN audio content to its personalized radio station. No word was given on the specific roll-out date. (Press release)

Sony's Sales Devastated by Natural Disasters (Cyberattack Will Hit Next Quarter)
-- Sony pegs the impact of the earthquake and tsunami on its sales at 22 billion yen (U.S. $268 million). About 17 billion yen (U.S. $207 million) will hit the company's bottom line in the quarter ended March 31. The cyberattack on its PlayStation and Qriocity networks happened after March 31 and will not impact Wednesday's earnings release. Similarly, any impact from last week's hacker attack the website of Sony Music in Greece - although a material impact would have to be considered remote - would not have any bearing on Wednesday's release. ( SEC filing)

McCarthy Joins Eventbrite
-- Former Netflix CFO Barry McCarthy has joined the Eventbrite board of directors. McCarthey was Netflix's CFO for 12 years before leaving in December. He is also a venture partner at Technology Crossover Ventures. Other EventBrite board members include former Ticketmaster CEO Sean Moriarty, who joined in January 2010, and Alan Braverman, co-founder and CTO of genealogy site Geni and enterprise social network Yammer. "Given his operating experience managing fast growing consumer Internet businesses, he will be a great addition to our team," EventBrite CEO Kevin Hartz said in a statement.

Rock Paper Photo Opens for Business
-- Rock Paper Photo was mentioned in a March 7 Billboard.biz post about Live Nation's 2010 acquisitions and investments. The company's acquisition of a 50% non-controlling interest in Rock Paper Photo was detailed in its annual report.

Now open for business, Rock Paper Photo http://www.rockpaperphoto.com is an online store for fine art photography of musicians. The other side of the joint venture is Guy Oseary, Madonna's manager and a collector of music photography who became frustrated searching for photographs to purchase, according to the Rock Paper Photo site. Now, with the help of Live Nation, Oseary is putting a lot of high-quality photography in one place.

The store offers hand-signed, limited edition photographs of numerous icons, such as the Beatles, Marvin Gaye, Louis Armstrong and Frank Sinatra. And they're for collectors only. A live shot of Led Zeppelin guitarist Jimmy Page, for example, ranges from $1,500 for an unframed 16" by 16" print to $3,900 for a framed 40" by 40" print. The company goes to great length to describe the quality of the materials and process that go into each print, how to frame fine art and how to best care for the fine art prints. (RockPaperPhoto.com)

The Pricing Game ...

-- What's a young, digital company worth? Sometimes it's a difficult question to answer. Estimating value according to a price/earnings ratio, for example, doesn't work when a company doesn't actually have any earnings. But before companies from Facebook to Spotify can generate positive earnings, they have to receive venture capital. And those investors need to arrive upon some value of the company.

One way is to look at how much value a company - such as a social media company - is getting out of each user. And when you look at, say, Facebook in that context, recent valuations of $50 billion or $80 billion make more sense, says PriceWaterhouseCoopers in its new Valuation Index. PwC has Facebook's value/user at £80 (U.S. $129), just above that of commercial TV broadcaster ITV and well ahead of LinkedIn (£34, US. $55) and Twitter (£31, U.S. $50).

This excerpt helps explains PwC's line of thinking: "[L]ooking at the reach and pervasiveness of Facebook, one starts to understand what may be driving investors to want to get a piece of the action. Over half of Facebook's 30 million UK users visit the site every day. Over the past three months, over 40% of global internet users visited facebook.com, a staggering figure, with an average time spent on the site of over 30 minutes. This is still much lower than television viewing, which stood at just under four hours per day in the UK in 2009, but this time is becoming more fragmented in a multichannel world. Furthermore, the Facebook model facilitates highly targeted advertising, which is only in its very nascent stages on television."

For more established - and publicly traded - companies, the price/earnings ratio is still a favorite. And according to PwC, the price/earnings ratio of today's tech companies does not imply the market is in a bubble:

"At the height of the tech boom in 2000, Price/Earnings (PE) ratios for UK listed technology companies peaked at close to 90x, compared to a wider multiple of around 25x for the market as a whole. Today, the PE ratio for listed technology companies of 16x is only slightly higher than for the overall market multiple of 15x, with a similar picture in the US. So a bubble does not seem to be forming for the technology sector as a whole, certainly for quoted businesses." ( paidContent, PwC)