Read this article published a few days ago in the New York Times entitled, ‘Apple’s Pursuit of Beats May Foretell a Shift’. According to the article, Apple (AAPL) is about to acquire Beats by Dre for $3.2 billion, which would be AAPL‘s largest acquisition in history. AAPL is looking to acquire Beats by Dre, mainly for their new streaming music service: http://www.nytimes.com/2014/
05/10/technology/beats-talks- may-foretell-apple-shift.html? hpw&rref=business&_r=0
The online music industry is shifting from pay-per-download services like AAPL‘s iTunes, to new streaming services that charge customers a monthly fee for unlimited access to their music. In 2013, AAPL‘s iTunes experienced its first ever revenue decline since the launch of iTunes a decade earlier. However, streaming music services are booming and the two prominent leaders in this space are Spotify and Rhapsody.
Spotify just raised $250 million in venture capital funding, at a valuation exceeding $4 billion. It currently has over 6 million subscribers who pay $9.99 per month. This values Spotify at approximately $650-$700 per paying subscriber.
Rhapsody just announced that they have surpassed 1.7 million subscribers who also pay $9.99 per month, up an amazing 63% year-over-year. A valuation of $650-$700 per paying subscriber would value Rhapsody between $1.105 billion and $1.19 billion!
According to the NY Times, Spotify “has been a subject of frequent speculation about an initial public offering” while Rhapsody “may now find themselves acquisition targets by giants like Google”.
NIA has just made what is probably its biggest technology stock discovery in history. NIA has discovered something that almost nobody on Wall Street is aware of: RealNetworks (RNWK), which is sitting on nearly $210 million in cash with no debt – and is currently trading for only $7.07 per share with an extremely low enterprise value of just $43.75 million, owns 45% of Rhapsody! Viacom/MTV owns the other 55%. NIA estimates that RNWK‘s 45% stake in Rhapsody is now worth between $497.25 million and $535.5 million, which is 11-12X above its current enterprise value!
For RNWK to reach an enterprise value of between $497.25 million and $535.5 million, its share price needs to rise to between $19.72 and $20.79 per share, for a gain of 179%-194% from its current price of $7.07!