Investors are excited about the potential for EVR Holdings’ (EVRH) subsidiary MelodyVR as it secures a new agreement with a subsidiary of Universal. We don't share this excitement.

The share price is up 10% on the announcement as it extends MelodyVR’s exclusive content library.

The subsidiary is developing a way for people to watch live concerts and pre-recorded content using virtual reality headsets, which it will sell through an app that is currently in the beta stage.

WE AREN’T FANS OF EVR HOLDINGS

We retain a cautious view towards EVR for several reasons.

The Universal deal is non-exclusive, so there is nothing to stop the music giant working with other virtual reality groups.

EVR doesn’t have a fully-live version of its app on the market yet.

We also concerned about consumers’ willingness to pay for content, given how much 2D material is available free of charge via the internet.

The world’s biggest concert promoter Live Nation has partnered with a rival virtual reality platform called NextVR, which is already well known in the sports market. We believe that relationship could create a major barrier for EVR to succeed in the live music arena.

EVR is grossly over-valued at £120m, in our view.

WHAT HAS EVR DONE TODAY?

EVR-owned MelodyVR has entered a worldwide, multi-year agreement with Universal Music Group, which covers artists such as Ellie Goulding and the Rolling Stones, to license the creation and distribution of virtual reality content.

Universal Media Group has the right to buy approximately 43 million shares over the next five years in EVR for an exercise price of 12.375p.

This is an important point – Universal isn’t buying the shares today and it isn’t guaranteed to ever become a shareholder. It merely has the rights to buy the shares in the future, should it so wish.

Under the deal announced today, EVR and Universal plan to share revenue generated from the commercialisation of virtual reality content featuring Universal articles through MelodyVR’s app.

In November, MelodyVR struck a deal with Warner Music, which allows it to distribute live and pre-recorded content with its artists via a music platform for an exclusive period.


Issue Date: 20 Mar 2017