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Backroom music streamer Omnifone palms first profit

Stuffs wallet with Sony and BlackBerry cash

Top three mobile application threats

Privately owned music services pioneer Omnifone boasted its first ever annual profit this morning. The company provides a platform for streaming services including that of Sony (Music Unlimited) and RIM (BBM Music) and operates in 28 markets. Omnifone was founded in 2003 and launched its first service, MusicStation, in 2007. It has notched up several firsts, including the first cloud streaming service and the first licensed scan-and-match service.

Omnifone says it will book a profit of £3.8m (EBITDA) in the year ending 30 April 2012, on revenue of around £29m – or £2.9m profit after tax. The company has soaked up some heavy losses in recent years. The company employs around 200 people, and CFO Matthew Bagley said the cost base was around £20m per year. Omnifone booked hefty losses over the past two years - around £16m in 2010 and £22m in 2011 - but is starting to see real revenue from its global deals. It now expects the investment in the platform – which totals £60m in five years – will start to pay off.

How so? While Omnifone says it's "98 per cent" ready to handle other media formats including video and books, and may make acquisitions, it expects most of the growth to come from the increasing popularity of music streaming. It's the fastest-growing part of the music market – but that's starting from a very low base. Only around 10 to 12 million people in the world currently subscribe to Spotify or a similar service.

Industry analyst Mark Mulligan is more skeptical. He doesn't think there's a mass market for £9.99 (or $9.99) subscription services.

"Spotify has got this artificial adrenaline shot from Facebook - but it's a market which will be saturated soon," he said. He added that there was more hope for bundling streaming services in with other products or services.

Omnifone CEO Jeff Hughes didn't think it was an insurmountable challenge. "We're saying the market is going to [go] from 12 million to 80 million subscribers globally in five years," Hughes insisted.

Some major areas have been overlooked. Digital streaming services have so far largely ignored car drivers, and digital radio has failed to sweep analogue radio aside. As a result, drivers are still listening to music on FM radio, their CDs, and cached music collections on iPhones and iPods. There's lots of opportunity there, and faster mobile networks can help.

Hughes said that publicity for Spotify gave Omnifone a lift – since Spotify's success validates the market – and others want in. ®

Top three mobile application threats

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