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MusicMagpie
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=== E-waste === E-waste is discarded electronic products with a battery or plug, such as mobile phones, tablets or computers. The failure to recycle e-waste means precious materials, such as gold, silver and platinum, cannot be reused, and there are environmental issues when the products go in landfill or are incinerated. According to MMAG’s FY21 results presentation, 53 million tonnes of e-waste is generated globally each year, and this figure is expected to double by 2050 as it is the fastest-growing stream of waste. The fact that only c 17% of global 2019’s e-waste was documented as formally collected and recycled shows there is much more that can be done to reduce and recycle e-waste. Turning to how MMAG’s activities have benefitted the environment, management estimates that in FY21 its UK media and tech customers and trade partners helped to save over 50k tonnes of CO2 by selling to and buying from the company, the equivalent of heating c 18.2k homes for a year. The markets for pre-owned products in its core categories in the UK and US were worth £9bn in FY20, of which the UK was £1.6bn and the US was £7.1bn (source: Admission Document). Therefore, with FY21 UK revenue of c £115m and US revenues of c £30m, MMAG’s revenue share was c 7% in the UK, and c 0.4% in the US, subject to rounding. At the IPO, management quoted UK market shares of 7% in smartphones and 5% in media and books, and US shares of 0.5% and 0.3% respectively. The low market shares suggest significant potential to grow in both countries. In descending order, according to independent third-party research commissioned by management (source: Admission Document), medium-term annual market growth rates for the product categories are forecast to be Technology 15%, Books stable/low growth and Media negative 5–10%. Using FY20’s revenue mix, that is, pre the inclusion of rental income, this range of category growth rates would translate to total addressable market growth rates of c 4–6%. As Technology’s relative contribution increases in future, the weighted average growth rate would be expected to grow. As highlighted earlier, growing rental income will likely dampen MMAG’s outright revenue growth while the active subscriber and revenue base builds. The same independent third-party research provided estimated growth rates for the pre-owned technology markets in the UK and United States from 2020–24 of 14–16%, versus growth rates of 20–22% from 2017–20. {| class="wikitable" |+Exhibit 10: Pre-owned technology markets<ref>Source: musicMagpie. Note: Other consumer technology is games consoles, smartwatches, tablets and laptops.</ref> !£m !2017 !2020 !2024 !CAGR 2017–20 !CAGR 2020–24 |- |UK pre-owned technology |500 |900 |1,500 |22% |14% |- |o/w smartphones | |700 |1,100 | |12% |- |o/w other consumer technology | |200 |400 | |19% |- |US pre-owned technology |2,100 |3,600 |6,500 |20% |16% |- |o/w smartphones | |2,500 |4,400 | |15% |- |o/w other consumer technology | |1,100 |2,100 | |18% |- |Total pre-owned technology |2,600 |4,500 |8,000 |20% |15% |- |o/w smartphones | |3,200 |5,500 | |14% |- |o/w other consumer technology | |1,300 |2,500 | |18% |} The pre-owned markets for all consumer technology products enjoy common structural drivers, which are replacement cycles and increasing price, the latter reinforcing the attractions of pre-owned products. Smartphones are also benefiting from an increasing trend of decoupling of handsets from carrier contracts. The above estimates do not include estimates for MMAG’s potential category expansion into new product types, for example wireless headphones. Management expects the markets for pre-owned and new disc media will continue to decline given the disruption to physical media from the move to digital, as in recent years (see below), albeit the former has been more resilient due to lower absolute prices. There will continue to be a market for disc media so long as the playing technology (CD players, consoles, PCs, DVDs, used cars) to read them is useable and users do not substitute across to other media. So long as the new disc market continues to exist, the available inventory for the pre-owned disc media will continue to grow, therefore the size of the pre-owned market depends on the extent to which new/existing consumers engage. Management believes there is still good money to be made in books and media well into the future whilst recognising the structural challenges. The research estimates (source: Admission Document) that from 2017–20, the combined new disc media markets in the UK and United States declined at an average rate of c 12% (from £9.6bn to £6.5bn), while the pre-owned media markets declined at average rates of c 13% in the UK (from £300m to £200m) and c 10% in the US (from £1.1bn to £800m). Therefore, MMAG’s Media revenue appears to have outperformed the estimated market growth rates in recent years, with revenue decline of c 6% in FY20, before growing by c 8% in FY21 and a further c 3% in H121, helped by new demand during the COVID-19 pandemic (more time to clear houses, more time to commit to media and the closure of alternate physical distribution such as libraries and charity shops). Management expects the UK and US markets for pre-owned books to be relatively flat over the medium term, despite competing digital formats and the increasing attractions of alternate media and entertainment. This expectation is supported by historical data. '''Exhibit 11: UK book sales<ref>Source: Statista.</ref>''' [[File:UK book sales.png|600x600px]] From 2009–19, the UK book market grew at a CAGR of c 2% (from £3.2bn to £3.7bn), within which physical book revenue was broadly stable and digital has provided all of the absolute growth. MMAG has consistently outperformed wider market growth in recent years, helped more recently by the COVID-19 pandemic, as was the case for disc media. Following revenue growth of c 11% in FY19, the COVID-19 pandemic helped to boost MMAG’s Books revenue by c 74% in FY20 and a further c 10% in H121. As expected by management, the revenue run-rate returned to more normalised, that is pre-COVID-19, levels in H222, declining by c 43% to £3.6m, taking the year-on-year decline for FY21 to c 21%.
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