Virtual reality live music firm MelodyVR has raised £8.1 million ($11.2 million) in a share offering and sale of convertible notes, the company announced this week. The funding will help MelodyVR fully integrate with Napster, the veteran music streaming service it acquired in 2020.
On Monday (Feb. 8), MelodyVR sold £6.48 million ($9 million) of convertible notes to Nice & Green S.A to help build and launch a “new, integrated mobile app” that combines the two companies’ audio and virtual reality experiences, the company said. On Tuesday (Feb. 9), MelodyVR raised £1.6 million ($2.2 million) on the London Stock Exchange’s AIM, a sub-exchange for small and medium size companies, through Primary Bid, an online buying platform for retail investors.
Each company can help the other in this unusual merger. MelodyVR lacks name recognition in a business dominated by global brands such as Apple, Spotify, Amazon and Google. In fact, MelodyVR Group PLC is planning to change its name to Napster Group PLC; its shareholders will vote on the name change during a general meeting on Feb. 25. (MelodyVR and Napster will live under the Napster Group umbrella.) MelodyVR also stands to benefit from Napster’s 90-million track catalog, steady — albeit shrinking — subscription revenues and built-in audience for its virtual reality content.
For its part, Napster should benefit from having a motivated owner. In a reverse merger, Napster becomes a wholly owned subsidiary of the much smaller MelodyVR; Napster’s revenue haul of $106 million far exceeded MelodyVR’s $269,000 in 2019, the latest year for which financial data is available for both companies (through three quarters, Napster was on course for an 8-9% revenue decline in 2020).
In spite of having few assets, MelodyVR purchased Napster for $70 million, $12 million of it being cash, with a vision of combining streaming audio with a new music format, virtual reality. The timing couldn’t have been better: MelodyVR’s financials were stagnating before the pandemic created new interest in at-home music experiences. At Napster, “a high level of turnover” jeopardizes its growth objectives, parent company RealNetworks’ 2019 earnings release admitted.
The Napster name got its start in 1999 as an infamous, illegal file-sharing service before transforming into a legal one several years later. When a bankruptcy court blocked Bertelsmann’s acquisition of Napster’s assets in 2002, Roxio bought the notorious brand a year later for a mere $5.3 million and relaunched it. The reborn Napster then went public on the Nasdaq exchange in 2005. After signing up 700,000 subscribers by 2008, Best Buy took Napster private for $121 million but sold it three years later to Rhapsody.
MelodyVR is taking a well-trodden path in pursuit of growth. Napster’s brand name helped get Napster through the earliest days of the subscription model, through Spotify’s rise in the early 2010s and heated competition from tech giants like Apple. Today, Napster may not have the brand equity it had 10 or 15 years ago, but people — consumers and investors — over 40 are likely to remember its heyday at the turn of the century.
That’s not nothing, but will it be enough?