UBC Media’s revenue slumped by a quarter last year due to reduced production work for the BBC and BSkyB, forcing the strategic need to move into digital with the reverse takeover of music firm 7digital.
The company, which supplies multimedia content to the BBC and 250 commercial radio stations, reported a 24% fall in revenue to £2.86m in the year to the end of March.
UBC, which saw its annual loss widen from £1.08m to £1.8m, blamed BBC “budget cutting” and BSkyB’s decision to stop covering the Cambridge Folk Festival for the revenue slump.
Simon Cole, the chief executive of 7digital, said UBC’s final standalone results show the “driving logic” behind why the company needed to move into digital.
“The reverse acquisition of 7digital has been transformational in changing the make-up of the group,” he said. “Although financially not reflective of the new group, these historical results do show the driving logic behind the deal for UBC.”
UBC’s final results highlight the depth of the problem as traditional content revenues slumped 29% to £2.19m.
Just under £1.6m of the content production revenue comes from a single customer, thought to be the BBC.
“UBC’s core production businesses are dependent on the BBC as a key client and, as such, are vulnerable to the retendering process and BBC budget cuts,” the company said.
UBC identified the need to move into digital, but its own interactive revenues were just £620,000 in the year to the end of March, and shrank by 2%.
“Our interactive division needed greater scale to compete effectively within the space,” said Cole. “Specifically, how we could lower our reliance on traditional low-growth content production and increase our focus on our interactive and digital skills and patents that have evolved in the last few years and which represent the future of our business.”
UBC made a £16.5m reverse takeover of 7digital, which provides music services for brands including Samsung and BlackBerry, and the combined company launched on the stockmarket on 10 June, retaining the name 7digital.
This move has allowed the company to compete in the music download and streaming market, dominated by services such as Apple iTunes and Pandora, and move with the traditional radio market to a digital world.
“The markets for online music and streamed radio have therefore moved together significantly,” said Cole. “In turn, broadcasters are integrating their services with online music streaming – the BBC’s Playlister service being perhaps the most high-profile example.”
In addition, UBC reduced its stake in audio-sharing service Audioboo from 34% – the largest investor – to 18.7% as the business was spun off as a separate company listed as Audioboom on the stockmarket.
Cole described the business as a “bleeding edge” start-up that was “cash hungry” and was becoming a dangerous burden on UBC’s financial performance.
“What started as a small investment was beginning to threaten to over-balance the group, as can be seen from these accounts,” he said. “Within the period, we invested a further £783,000 in Audioboo and recorded an associated accounting loss of £542,000.”
The company said that since Audioboom listed in May, its £1.8m investment has risen worth £6m.
“We are still exposed to the upside of this emerging entity, but are protected from the continuing need to fund that growth,” said Cole.
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