Wednesday 25th May 2016
News ticker: Chubb today announced the appointment of Joe Fernandez, formerly D&O and Financial Institutions Product Manager for legacy ACE in Continental Europe, to the new role of financial lines product manager for Eurasia and Africa for Chubb, as it continues to invest in building its insurance capabilities in its newest business region. In his new role, Joe will be responsible for the development and implementation of financial lines underwriting strategies in Eurasia and Africa. He will also be responsible for employee financial lines products training. Joe will continue to be based in London, reporting to Grant Cairns, financial lines manager for Chubb in the UK and Ireland. His appointment is effective immediately. Fernandez has 18 years of insurance industry experience. He joined ACE in 2004 as corporate manager for Commercial D&O. Previously he held the position of corporate manager for Commercial D&O at AIG— Commenting on Royal Dutch Shell PLC’s Annual General Meeting, Ashley Hamilton Claxton, corporate governance manager at Royal London Asset Management, said: “The senior executive pay awards last year are not sufficiently justified by the company’s financial performance. We remain disappointed that the chief executive received very close to the maximum possible bonus in a year when overall financial performance was weak. Whilst the board did exercise some discretion in reducing the awards, we believe they could have done more. We also think the peer group of four companies that Shell uses to benchmark its long term incentive plans (LTIPs) is too narrow. However, we do acknowledge that despite a tough operating year, the company has had several successes in 2015, including the completion of the BG Group deal. We also appreciate that Shell has made very positive steps in responding to the concerns raised by its investors and we will be engaging with the company going forward.” Royal London Asset Management holds shares in Royal Dutch Shell worth £936m - UBS AG has opened a stock-index futures brokerage service in China. The brokerage will support clients wanting to trade on futures on the CSI 300, SSE 50 and CSI 500 indexes as well as treasury futures say local press reports - Tuesday, May 24th: Pakistan reportedly plans to sell a 40% stake in its stock exchange according to its managing director Nadeem Naqvi who announced the sale at an investment conference organised by Renaissance Capital in London yesterday. The exchange has approached the London, Shanghai, Istanbul and Qatar stock exchanges he said, explaining that a further 20% share will be sold in the local stock market. The sell-off is part of a government led privatisation program, involving some 70 companies following the disbursement of a $6.7bn IMF rescue package back in 2013. The terms of the loan end in September - Moody's Investors Service (Moody's) has confirmed the Ba3 corporate family rating (CFR) and Ba3-PD probability of default rating (PDR) of Russian vertically integrated steel and mining company Evraz Group S.A. (Evraz), and the B1 (LGD 5) senior unsecured ratings assigned to the notes issued by Evraz and Raspadskaya Securities Ltd. The outlook on all the ratings is negative – According to defence title Janes, The China Nuclear Engineering and Construction Corporation (CNEC) - one of China’s 10 key defence industrial enterprises - has entered an agreement with China's Minsheng Banking Corp to support its impending initial public offering (IPO) of 2.6bn shares on the Shanghai Stock Exchange, which is expected to raise around $250m. China's State Administration of Science, Technology and Industry for National Defense (SASTIND), which oversees the development of the country's aerospace and defence industry, said on 23 May that the agreement with the bank will support CNEC's "leap forward" towards "strategic development" - Thailand-based developer of integrated e-logistics trading and e-business service solutions Netbay says it is planning to offer 40m shares, equivalent to 20% of the registered and paid-up capital, in an initial public offering (IPO) and expects to get listed on the Market for Alternative Investment (MAI) next month. The company has the registered capital of THB200m. The firm has reportedly s appointed Maybank Kim Eng (Thailand) as financial advisor and underwriter. Netbay CEO Pichit Viwatrujira-pong says that the proceeds would be used to expand its business and increase the working capital. It targets the revenue growth of 20% this year, up from THB223m last year – Old Mutual has moved closer to the IPO of Old Mutual Wealth next year as it confirmed in a JSE announcement today that it was close to selling its stake in Old Mutual Asset Management (OMAM) to Affiliated Managers’ Group in a deal valued at $1bn - Zhouheiya Food Co. is expected to file an application for a Hong Kong listing in the next couple of weeks, looking to raise up to $500m, reports the Wall Street Journal today - UK operator Vodafone has announced its Group Chief Commercial Operations and Strategy Officer, Paolo Bertoluzzo, is going to step down after 17 years with the company to take a CEO role at payment and general financial services company Istituto Centrale delle Banche Popolari Italiane (ICBPI). Vodafone says it will announce a successor in ‘due course’ - The number of money laundering convictions and confiscations is relatively low given the size and characteristics of Jersey’s financial sector according to the latest report on the UK’s Crown Dependency of Jersey from the Council of Europe’s Committee of Experts on the Evaluation of Anti-Money Laundering Measures and the Financing of Terrorism (MONEYVAL), adopted in December 2015. Apparently, this is the last in a cycle of MONEYVAL evaluation reports based on methodology set out by the Financial Action Task Force (FATF) in 2004. MONEYVAL is currently evaluating its members according to the FATF’s updated 2013 methodology.

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Download Upswing

Monday, 16 April 2012
Download Upswing The rapid deployment of handheld devices such as tablets and smartphones, combined with the steady growth in emerging online retail models, have helped breath life into a music business hobbled by years of sagging revenues. Has the long-suffering industry finally found its feet as a result of this technological convergence? And if the turnaround is at hand, where do investors go to rock and roll? Dave Simons reports from Boston. http://www.ftseglobalmarkets.com/

The rapid deployment of handheld devices such as tablets and smartphones, combined with the steady growth in emerging online retail models, have helped breath life into a music business hobbled by years of sagging revenues. Has the long-suffering industry finally found its feet as a result of this technological convergence? And if the turnaround is at hand, where do investors go to rock and roll? Dave Simons reports from Boston.

On paper, the ultra-exclusionary business model championed by Apple Inc—keeping competitors at arm’s length while pumping up its vast inventory of proprietary apps—should have given investors and consumers cause to reassess the way they buy music. However, on the day it launched its latest technological marvel, the new iPad third-generation tablet, shares of the Cupertino, California-based company were trading in the vicinity of $600, roughly double last summer’s stock price.

Numerous market watchers maintained a solid ‘buy’ rating, some even calling the stock ‘underpriced’ at current levels. Apple could move more than 65m iPads this year alone, according to some analysts.



In fact, the rapid deployment of handheld devices such as the iPad, combined with the steady growth of emerging digital-music models, have helped breathe life into a record industry hobbled by years of sagging revenues.

While Apple and its league-leading iTunes Music Store continues to dominate (holding down an estimated 70% of digital music sales), “all-you-can-eat” subscription services such as UK-based Spotify and France’s Deezer themselves attracted some 13m paying customers last year. This is a 60% increase over 2010, according to UK’s International Federation of the Phonographic Industry (IFPI).

Music downloading has also been helped in no small part by ‘in-the-cloud’ services; those that use a central network infrastructure, rather than a home-computer application, among them Amazon’s Cloud Drive and Apple’s newly launched iTunes Match.

All told, digital-music revenues rose 8% in 2011, according to IFPI, the first year-over-year growth increase since 2004. Providing music to users wherever and whenever they want appears to be the lynchpin going forward. By 2016, an estimated 161m subscribers worldwide are expected to access music from a mobile device, up from less than 6m in 2011. Frances Moore, chief executive for UK-based International Federation of the Phonographic Industry (IFPI), agrees that consumer choice “has been revolutionised…as new models for consuming and accessing music are rolled out in new and existing markets.”

Has the long-suffering music industry finally found its feet as a result of this technological convergence? And if the turnaround is at hand, where do investors go to rock and roll?

Hear today—gone tomorrow

Back in 1999 the record industry was sitting pretty—that year, 847m CDs were sold, according to the Record Industry Association of America (RIAA). By that time, intense consolidation from the Telecommunications Act of 1996—which enabled a handful of conglomerates to secure majority stakes in numerous media markets—had turned the airwaves into an increasingly exclusive club.

Eventually, listeners began seeking alternative sources online—some of them legit, many of them not. As faster connection speeds accelerated the trend toward peer-to-peer file sharing, recording artists began flocking to upstart venues such as MySpace, YouTube and Facebook (and, more recently, Bandcamp and Soundcloud), bypassing traditional distribution channels in the process. As the online phenomenon reached new heights, sales of physical media were suddenly in free fall; by last year, CDs hit an all-time low of 223.5m units sold.

Of course it is hardly the first time the music establishment has been forced to re-group in response to a major cultural backlash. But despite the potential to attract millions of newcomers, for years record executives have bristled at the idea of unfettered digital access, and have leaned on companies to push premium-pricing plans in an effort to optimize revenue.

However, after years of waging war over no-charge music streaming, record companies are now beginning to see the benefits of ‘freemium’ services—which, say analysts, are used by providers mainly as an acquisition strategy, roughly 15% of Spotify’s paid subscribers for instance consist of former ‘freemium’ users drawn to premium-level benefits such as higher-quality downloads and no intrusive banner advertising. Spotify chief executive officer Daniel Ek argues that his service has helped the music business enter a "golden age," as people who share music online are more likely to buy more tracks and albums.

“Even though labels worried about the impact of free Internet radio, music social networks, and other streaming services like Pandora and Spotify, it looks as if those services are having the same effect that radio did back during the height of its viability,” notes Anthony John Agnello in financial news site InvestorPlace.com. “Free Internet music broadcasts appear to be encouraging digital music sales,” he says.

Looking for a leader

The speed with which the digital-download business has evolved has turned more than a few would-be sure-shots into eventual also-rans. One notable casualty was (former) digital-music provider Napster, which went head-to-head with Apple back in 2005 on the assumption that its Napster To Go portable subscription service—which gave customers access to over a million songs for a mere $15 a month—would help revolutionise the music-listening experience.

In 2008, however, a floundering Napster was acquired by retailer Best Buy on the cheap, and last year its remaining assets were sold to rival subscription service Rhapsody. By then, Rhapsody itself was feeling the heat from new arrivals such as  Pandora. “There are a lot of bodies on the road leading to success with a digital music service,” muses Tim Schaaff, chief executive officer of Sony Network Entertainment.

As such, betting on who will be tomorrow’s music-delivery heroes is no easy task. While up-and-comers such as Spotify are certainly attractive at the moment, it’s tough to argue with the proven track records and 25% profit margins of behemoths Apple and Google. Despite the lure of all-you-can-eat plans such as Rhapsody, Apple’s iTunes ownership model shows no signs of weakening.

During the final quarter of 2011, iTunes users downloaded estimated 16bn songs, good for approximately $1.5bn in revenue. Not to be outdone by the cloud crowd, Apple now offers its ITunes Match, a service that wirelessly syncs users’ iTunes music library between Apple devices using a cloud-based personal storage locker.

The fact that Apple has managed to maintain download supremacy through the creation of must-have proprietary devices (such as the iPad, iPhone and iPod) is obviously not lost on rival Google, which has already announced its intentions to move into the hardware market.

Earlier this year, Google got the green light to acquire Motorola Mobility––part of its ongoing effort to boost production of Android-based smartphones. Currently 40% of smartphones utilise the Android operating system, the Linux-based, Google-owned rival to Apple’s iOS 5 mobile OS. Additionally, the Mountain View, California-based company is said to be developing a proprietary wireless music-streaming system for the home that can be operated from an Android-based handheld device.

In with the in-cloud

While not nearly as competitive on an earnings-per-share basis as Apple or Google, Amazon’s standing as the industry’s overall download sales king makes it a strong contender going forward. Last year, the Seattle-based online retailing giant announced the premier of its Cloud Drive, a music-backup service that allows Amazon customers to store music in the cloud, using a “digital locker” hosted on the company’s servers, with the ability to access personal libraries from any location and on any computer.

Providing a more practical means of accessing users’ personal media libraries appears to be at the heart of Amazon’s cloud-based model, notes Frank Gillett, vice president and principal analyst for Forrester Research, called the move a “first salvo in a series of steps that will lead Amazon to compete directly for the primary computing platform for individuals, as an online platform, as a device operating system, and as a maker of branded tablets,” says Gillett.

In-the-cloud music plans, which typically offer users the choice of a free, advertising-supported plan, or a premium paid-for option, are fast becoming the medium of choice on the increasingly crowded digital-music frontlines. Compared to portable subscription plans of the past that only worked with a limited number of devices, emerging cloud providers have addressed compatibility issues by allowing users to access music through apps on smartphones and other connected devices. “This has vastly improved the quality and level of the consumer experience,” notes IFPI.

Live streaming music

One of the more visible cloud-based proponents of late has been Spotify, which allows users to live-stream music from the vast libraries of companies such as Sony, EMI and Universal. Like rival Rhapsody, Spotify users rent their music on a monthly basis by accessing tracks through an internet connection; premium members may also listen offline by downloading and storing music to a smart phone or similar portable device.

Where iTunes currently charges $1.29 to own a single track, Spotify users who don’t mind viewing the occasional banner ad may stream tracks free of charge (or pay $15 a month for music without any advertising).

Debuting in the states last summer, Spotify has since signed up some 2m US users, more than a quarter of which are paid subscribers. Spotify also became the first subscription service that enabled users to share personal playlists through a Facebook link, thereby turning conventional music streaming into a social experience. “Spotify has always had a keen sense of how to coexist in the broader ecosystem, rather than try to do everything itself,” says digital-media analyst Mark Mulligan. By integrating with Facebook, Spotify has found a way to simply the learning curve for its new users, suggests Mulligan.

Also joining the ranks of the cloud crowd is Sony Corp and its Music Unlimited Powered by Qriocity service, which links content across Sony-manufactured devices such as its Playstation 3 as well as Android-equipped smartphones. Google too has unveiled its own Google Music streaming/storage service that will allow users to access online music from a variety of devices, and share music through a social network (Google’s own Google+).

Equally important in the resurgence of the music trade has been the ramp-up in smartphone and tablet sales. In areas with higher-than-normal handheld uptake, subscription plans have fared unusually well. In Spotify’s native country, Sweden, for instance, subscription services accounted for some 84% of digital revenues through the end of last year.

Manufacturers of connected devices will continue to expand their reach, say experts, with sales of tablet computers expected to set the pace over the next several years. Research firm Gartner estimates that tablet revenue could reach $326m by 2015, led by Apple, which has shipped an estimated 55m iPads since the product’s debut two years ago. Meanwhile, sales of smartphones grew by 47% during Q4 of last year, reaching 149m units sold, according to Gartner. Apple’s iPhone accounts for nearly one-fourth of global smartphone sales, says Gartner, which expects smartphones to eclipse desktop computer sales over the neat term.

Own or access, or both?

As downloads continue to displace tangible media such as CDs and vinyl albums, for many the term digital has become synonymous with “disposable”—and for those users, subscription services that allow access rather than ownership remains the most logical choice. For that matter, it is the model that would appear to give iTunes a real run for its money.

Rather than battle for digital supremacy, however, subscription and ownership plans have managed to achieve profitability independent of one another. “The fact that these two models of consumption can co-exist speaks volumes about the future,” says Rob Wells, president, global digital business, Universal Music Group. “In fact, we have really only scratched the surface of digital music in the last decade—now we are starting the real mining, and on a global scale,” he says.

The bottom line: analysts and music executives alike believe that the current uptick in digital music sales is sustainable, and that the recent numbers reveal an industry on the cusp of a rebound. “We are still seeing healthy growth in the market for digital-music downloads,” observes Russ Crupnick, senior vice president of industry analysis at NPD Group.

Adds Stephen Bryan, executive vice president, digital strategy and business development, Warner Music Group, “There’s a race among the services to go global and plant the flag in new territories, and we’re seeing services that are generating revenues and growth. There is high engagement with these services. Consumers love them and spend hours using them.”

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