Destiny Media Technologies Inc. (PNK:DSNY) Q3 2023 Earnings Call Transcript July 17, 2023
Rebecca Collins: Good afternoon, everyone. Thank you for joining us today — on today’s webinar. Before we begin, I’d love to announce that we will be referring to today’s earnings release, which was sent to the wires — the newswires earlier this afternoon. I’d also like to remind everyone that this conference call could contain forward-looking statements about Destiny Media Technologies within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements are based upon current beliefs and expectations of management, and are subject to risks and uncertainties which could cause actual results to differ materially from those forward-looking statements. Such risks are fully discussed in the company’s filings with the SEC and SEDAR, and the company does not assume any obligation to update information contained in this call.
During the webinar, we will discuss certain non-GAAP financial measures. The non-GAAP financial measures are presented in the supplemental disclosures and should not be considered in isolation of or as a substitute of or superior to the financial information prepared in accordance with GAAP and should be read in conjunction with the company’s financial statements filed with the SEC and SEDAR. The non-GAAP financial measures used in the company’s presentation may differ from similarly titled measures presented by other companies. A reconciliation of the non-GAAP financial measures to the most comparable GAAP financial measures can be found in the earnings press release. Also, I’d like to mention that following the presentation, there will be a question-and-answer session during which you can submit questions by selecting the Raise Hand icon at the bottom of your screen.
Your question will be pulled in the order that they are received, and at which point, you’ll be prompted to unmute your microphone before speaking. With that, I’d like to turn the call over to your host, Fred Vandenberg, Chief Executive Officer.
Fred Vandenberg: Thanks, Rebecca. Today, we have myself, Fred Vandenberg, I’m the CEO here, and Allan Benedict, who leads our Business Development and Marketing teams. I will take you briefly through some financial results very briefly, and then I’ll turn it over to Allan to talk about business development, and then I’ll come back on and talk about where we’re going and what we’re trying to do. Before I get into the financial results, I think it’s probably a little bit — it’s worth a little bit of time to talk about what we’re trying to do. Our overarching goal is to grow, to grow revenue. That’s probably an obvious statement. But we’re still a small company, and I think in context, we have a lot of really great upside potential.
And I’m hoping that I can communicate that on this call and why we are going to be successful. As it stands, we have a lot of really great things that are working for us. We’re the backbone of distribution for the largest record label in the world globally. We have a very strong distribution platform. Although we’re still a small company, we believe we have the largest platform of its kind in the world. We’re the largest revenue generator for this type of business. And as a result, I think we’ve built really good platform that has capabilities that others just don’t, and that’s why we form the backbone for the world’s largest record label. Also, there’s some significant barriers to entry for that core business that we have, Play MPE. So, we want to grow.
And so, when it comes to product development, which is the bulk of our spending, we want to do a couple of different things. We want to grow that core Play MPE platform use. And we do that through couple of different things. We want to add features and things that are subscribable, so that it is a true SaaS-based platform. And then also to help facilitate sales, whether it’s in existing markets or to expand globally. And then, the second major thing is to add entirely new businesses. Now, our first protocol there is to do things that complement Play MPE that we can build on that has some synergies. I’ll get into more specifics when we talk about looking forward. But it’s a good time to talk about that here because of the way our financial reports are laid out.
As far as revenue goes, Q3 revenue grew by 6.9%, and this was really on the strength of an almost 14% growth in independent record labels sales. Recall that there’s two major segments here: the major labels, which is the big labels like Universal, Warner and Sony; and then basically everybody else. But on the expense side, this is where I think providing this little background provides a little bit more context for our P&L. You’ll see — if you’re looking at the 10-Q, you’ll see that we’ve capitalized a lot of costs. And so this might reduce the ease with which you can see how much cash we’re using. And we’ve prepared this table to sort of show where the cash is being generated and used. Now, looking at this table, if you look at Q3 to date, year-to-date, we’ve generated $508,000 in cash from operations for an average of about just under $170,000 per quarter.
We’ve capitalized $690,000 or an average of $230,000. So you can see that we are using a bit more cash in developing — in product development than we are generating. And you’ll see that both of those numbers compared to the two years prior to 2023, both of those numbers are going up. So, cash generated from operations, now that’s an analog for EBITDA, over time they should be — they should go to the same number. But what you see here is that we’re essentially selling more and doing it more efficiently on our core business, but we’re also spending more on items that are capitalized and we do that because we see an opportunity. And I’ll get into that a little bit later. The other here is just minor things like FX and computers and also included is the share buyback.
But, essentially, when Allan talks about biz dev, he’s selling the existing platform. His efforts are primarily on working with the platform that we have. To paraphrase Donald Rumsfeld, Allan’s going to war with the platform that he has. So when he talks about it, keep in mind that it’s with the current platform, and we’re doing a lot of things that we think that will make his job easier in the short term. With that, I’ll turn it over to Allan.
Allan Benedict: Thank you, Fred, and good afternoon, everyone. So, I wanted to start by addressing our independent revenue again. I know, last quarter, we spoke about independent revenue rebounding and that we expected that trend to continue, and now for the second consecutive quarter, the revenue we’ve generated from those independent clients has grown, and as Fred mentioned, was up roughly 14% in the third quarter. In the past, I’ve talked about independents trying to navigate the music industry coming out of COVID, while touring has started back up, but it was kind of overly competitive where the smaller artists were essentially blocked out from a lot of tour outings, and some of the public funding that they had access to during the pandemic was starting to dry up.
This trend of indies finding their footing post pandemic is even more pronounced looking within the quarter. For instance, in May, specifically, independent revenue grew by nearly 50% over the previous year. That growth was fueled mostly by clients in the US and Australia. And Australia’s indie growth is even more exciting due to the recent announcement that the government will be putting together a new arts funding program there that will allocate quite a bit more grant money to musicians and artists, especially those looking to tour outside of Australia. We’re still in the early stages of seeing what that process will be and kind of how those funds will come into play. But we believe this trend within Australia will continue grow. Not only are returning independent clients sending to a larger group of recipients, many are utilizing our new international bundles, which I’ll elaborate on more in just a moment.
But we’re seeing a steady increase in new independent clients that are finding Play MPE for the first time as well. Over the past few months, we’ve put a big effort behind optimizing our digital marketing strategies and some of the SEO within our website, and search ads and things like that. And we’ve seen a steady increase in lead generation over previous years. Overall, this was the third highest quarter for independent revenue in the history of Play MPE. Speaking of those international distributions, last quarter, we launched our, we refer to them as, international bundles and made them available to clients. As a quick refresher, we wanted to give clients an easier way to distribute their releases globally and package together a different list to make that happen.
For instance, if you want to send your country song around the world, you can select a bundle that covers every country recipient we have within the platform. Right now, we have international bundles available for 10 genres, and we’re hoping to expand this moving forward. Ideally, clients will eventually be able to target recipient globally based on the genre of music, the language that they speak, the size of the outlet, things like that, kind of more customization within the packages and within the platform. These international lists were pretty quickly a hit with mainly our independent clients, and we’ve only heard positive feedback from them now that they’ve used them for a few months. The third quarter itself saw more than double the number of releases being delivered to these bundles.
And our latest international offering, we created an international non-commercial bundle, it’s already our second most popular of those bundles. So the reception of that one specifically has been really overwhelmingly positive from the indies who are looking to get kind of as much exposure as they can for a — still a reasonable price. And as mentioned, eventually, we want these international bundles to one day be language specific as well, and an obvious language there would be to create a Spanish-speaking list. I’ve talked in the past about us focusing on Mexico, and we remain focused there on growing our recipient base and roster of clients, kind of like a home base, if you will, for the Latin market. And slowly but surely, we’re seeing more progress here.
A major obstacle that we ran into was the simple fact that a solution like Play MPE hasn’t really existed in Mexico for radio stations, and it took longer than anticipated to educate radio and really give them an understanding of what we provide and as archaic as it might sound, the simple fact that we’re not coming to them to try to build them for something, that they’re more the product itself. Through a series of sit downs, we were able to onboard all of the major radio conglomerates in Mexico, and their users are slowly beginning to adopt Play MPE and put it in their workflow more and more. Growing the list does take time, but we’re seeing a consistent increase in active users, and they’re remaining active in the system, which is a really key thing, especially when we start growing out territories like this.
Sometimes we’ll have a bunch of users jump on the platform all at once. But if there isn’t enough content there to keep them engaged, they’ll kind of quickly go dormant, and then it’s sometimes difficult to get them to reengage back with the platform. But Mexico, it seems like recipients are sticking around rather consistently. We’re also breaking through with larger clients. I know we’ve spoken in the past of our pilot agreement with [J&N] (ph) Music Group this quarter after they found success over the course of the last year with Play MPE. They renewed that agreement for a higher fee. And then in addition to J&N and our independent clients, this quarter, we saw the first Latin releases from some global distributors such as the Orchard, which is a Sony subsidiary, Symphonic Distribution and one of the largest Mexican management firms, a company called [Two Streams] (ph).
Speaking of the Orchard, seeing the Orchard pickup use in Mexico is really encouraging not just for that territory, but Sony as a whole. We’ve talked a lot in the past about Warner Music’s increasing Play MPE usage, but Sony has always proved more difficult. They have an internal system that a lot of their teams utilize and breaking through that wall has been a challenge. But along with the Orchard growing, we have seen a consistent increase from RCA Records pretty much month to month. They’ve grown over the last five or six months dating back to the fall, and we’re hoping these gains continue and, obviously, lead opportunities with other Sony-affiliated labels that maybe there is a need there that we can fill that we just haven’t identified in the past.
And then, I know Fred spoke earlier about improvements being made to the platform and how we go about that. Before I pass back over to him, I just wanted to touch on a couple practical implications for those improvements. In the past, we’ve spoken about Quick Share and how its functionality essentially allows users to quickly send an individual link to someone without going through the whole process of setting up a release within Play MPE. And on the surface, this may not seem like a major advancement or a huge new feature, but it’s already become a large part of the workflow in both Warner New Zealand and Warner Nordic offices. With Quick Share now, for the first time, they’re able to utilize Play MPE to share early listens with a very small, very select group of their contacts without having to send a link through another platform.
So they’re both spending more time within Caster and treating it more like a home or a one-stop shop for some of their promotion efforts. And this — the same logic kind of applies for the independent side as well. Recently, we improved the presentation of our package list to make it easier for users to see which lists are available and learn a little more about them. And while this update was very recent, so we have limited data on only a month or so of data, we’ve already seen a slight increase in the average number of lists selected per release. And that’s just from allowing users to browse what you could essentially call a catalog of list right within the platform without having to go search for PDF or ask more questions about who’s on a list or anything like that.
So it’s these small improvements that are really kind of pushing it over the edge. While they may see minor at first, they end up impacting our clients and improving their experience quite a bit. So with that, I’ll pass it back over to Fred, who’s going to talk more about our investments in product and a bit more looking forward.
Fred Vandenberg: Thanks, Allan. Okay. So I hinted at it earlier, the — our investments into product really come into these three sort of groups: sales catalysts, things that are going to help grow Play MPE revenue, the core current vision of the product; the second one is to add salable features, like Quick Share right now is a freemium product, but we think that with added features within Quick Share, we can start to charge a monthly fee; and then the last one, the one that probably has got me quite a bit excited today is new business lines. As far as growth in our current platform, I’ll start with there. Just over a year ago, we finished a year’s long significant investment in — significant investment of time into Universal’s global distribution requirements.
It’s never finished. These things are ongoing. You develop those things, you maintain them. But following this, we were able to start working on things that we think are going to provide a catalyst for sales. And these are the things that are — we’ve been waiting for years to be able to do. We made some progress in 2022 throughout the latter half of the year, calendar year, but we came ultimately to the decision that product development needs to move faster and we needed to adjust some things. There was a little bit of paralysis by analysis. We need more action to accomplish more. And so we made a change in that group. And I’m not the most effusive person, but this is the thing that probably has gotten me the most excited. I really have seen in a short period of time a palpable change in what we’re working on, how quickly we deliver it.
But simply put, it’s not rocket science, to grow Play MPE revenue, you want more releases to more people and provide greater value while you’re doing that. So what are we working on to do that? Allan talked about growing our international list offering. So that’s one of the products. So you have a greater amount of destinations or at least the destination is a broader number of people. We don’t really have competitors that offer that kind of international distribution, or at least the destinations we have competitors in different sections, but nobody does what we do in terms of the international flow. So we’re offering more in terms of that offering. We’ve implemented a couple of technical changes that — they’re trade secrets. I don’t want to get into too much how we do it.
But there’s technical changes that help us acquire more recipients and put them on our list. Those were implemented during the quarter. One of the major areas of focus that we have over the immediate future — currently and the immediate future is to be truly self-serve for our customers. And I think that you make the product easier to sell. You make that product easier to buy more, you will sell more. And one of the major areas of focus is to make the platform fully self-serve. And we do a lot of full-service clients. So it’s our operations team that prepares the release, bills the customer, collects the money. And to automate that, we are doing a full checkout process. So you can sign up by yourself, you can select lists by yourself, and you can pay within the platform.
Those are sort of the major components of a fully self-serve platform. And I think when we finish this, it will be a game changer. It will really help us a lot, I think. Impossible to know exactly what the impact will be, but we’ve been working on that. We essentially built out the list selection part of that. We released that during the quarter. That is you — the customers that are self-serve — we have two different types of customers, self-serve and full-serve, and they both see that we delivered it in two components. The first was full-serve that was done during the quarter. The self-serve version was released just in early June. But essentially, those — that component of the checkout is — it has [marketing] (ph) information with the list.
It allows you to save your favorite. It has — it’s just easier to select. So these things are going to toggle the current sales and then ultimately, the big part of the greater impact of truly self-serve. So that’s really — those are the kinds of things that we’re working on. We’re also working on something that will help our clients market themselves. And then in doing so, they market Play MPE, and then we’re facilitating that change, and that’s going to happen. It’s being worked on now. But it’s all these different things that actually we, I think, will truly make a difference to what the core of Play MPE will be and I’m just really excited about the cadence there of what we’re delivering. The last thing I’ll talk about here is the new product development.
Now one of the things — one of the sort of the natural questions of a Play MPE customer is we deliver through Play MPE. Did it get airplay? Where? When? How often? And we’ve known about this market opportunity for a long time. It’s an underserved market with customers waiting for a solution. On a macro level, one of the things that I should couch the market changes here is, more and more broadcasts are being done digitally. And that’s not a — it didn’t happen 10 years ago. It’s still happening now. And so when you have digital broadcast, they’re becoming more popular, and you — people are listening to those digital broadcast as opposed to, say, radio broadcast. So traditionally, if you wanted to know if your song got any airplay, you would really either have to wait for a royalty check or subscribe to a service that like one that would power the Billboard Top 100 charts.
And those kinds of services are incredibly expensive, capital intensive. They have a finite number of stations that they monitor. They’re called monitored stations. But one of the things we’ve been working on is with a digital broadcast, you can have machines listening. So, in 2021, we started an R&D project that began to show some positive results. And there’s a lot that goes into it, and I won’t go too much into how it all works. But essentially, you have a computer listening to the broadcast and then reporting on the results. Just quite a lot goes into that, but we saw some positive signs about how it works. And then just slightly over a year ago, we hired an entire pod to build this out. And that’s why you’ll see the — quite an increase in investment in product development.
We soft launched that in May, had some technical things we needed to address, and we expect to beta launch this in the current quarter, this Q4. And I really — I know a lot of investors are anxious to hear what we have to say about this. But I don’t want to get too out in front of my skis here, and I really find this extremely exciting. But our first foray here, our beta product will only be available in Canada. We don’t know how quickly customers will adopt. We think we have all the technical hurdles addressed, but you never know. Saying that is just sort of asking for trouble. But we don’t know pricing. So I really don’t want to — I want to manage expectations here. It’s a product that meets a need that isn’t being met. We have a captured audience of customers with Play MPE use, potential customers.
The addressable market is large. It’s significantly larger than Play MPE, we think. Again, we don’t know the pricing, so we have to manage that. And one sort of additional thing that I kind of I like is that it — in contrast to Play MPE, it doesn’t have the same kind of lead time in terms of sales. The thing works already. If you want to see if your song is being played, you subscribe. With Play MPE, Allan talked about it — touched on it with Mexico, where you got to get customers, the recipients to access Play MPE. Before you get to content, you need — people accessing Play MPE before you can get the content. It’s sort of that chicken and egg thing with Play MPE, which takes a lot of time and effort and eventually, you’ll get this captured network of use.
And that’s why there’s a barrier to entry to competing with the core Play MPE, but it’s also why Play MPE can be slow to grow, whereas this monitoring product doesn’t have that kind of thing. Anyway, I just want to manage expectations, but you’ll see a beta launch later this quarter. And with that, I will turn it over to questions.
A – Rebecca Collins: Great. Thank you, Fred and Allan. Yes, so we’ll now begin our question-and-answer session. [Operator Instructions] We don’t have any raised hands, but there is one question in the Q&A chat. The question I can read it out, Fred, is what’s the plan in terms of R&D for fiscal year ’24? Do we plan on increasing/decreasing?
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Fred Vandenberg: It’s a good question. Right now, we have the capacity to work on those things that I think are a catalyst to Play MPE. We’re delivering those. We expect to make really good progress with that during the year. I guess it’s probably good to say that the capitalized costs that we have primarily relate to the monitoring new product that we’re working on as opposed to stuff that is catalyst for Play MPE. So I think for fiscal 2024, we don’t plan any major changes. We think that we — the product evolution for a new business will take some time to build it out to become the full potential. So any kind of costs there will continue, I mean, providing that we see some signs of success, but I believe that we’ll see that.
Rebecca Collins: Okay. Thank you. And then we do have one raised hand. So, [Joe Raymond] (ph), if you’re ready, you can unmute your microphone.
Unidentified Analyst: Fred, can you hear me?
Fred Vandenberg: Yes, we can hear you. I can hear you anyway.
Unidentified Analyst: All right. It’s nice to see the independent revenue grow. I was just curious what happened with the majors or what the rest of the business did, and why?
Fred Vandenberg: Well, major label revenue was flat for the quarter. Allan, do you want to touch on that a little bit?
Allan Benedict: Sure. Yes, absolutely. As I mentioned previously, there has always been a challenge within Sony since they do have an internal product that most of the departments are using. So without them growing their usage quickly, at Warner, almost nearly all, give or take, a couple of territories here or there, of their offices are using Play MPE, whether it be on a firm agreement or they’re just consistently using. And as we talk to more of those major clients, and there’s really only three, there’s Warner, Sony, Universal, a lot of it more has to do with their release flow throughout the year. It seems that major label strategies are shifting a bit where they’re doing fewer large-scale established, put a bunch of budget behind the campaign, and they’re focusing a little more on kind of testing out some social media to act, something that’s bubbling on TikTok, something that’s bubbling back in the catalog.
So we’re seeing a little bit of an adjustment period, but we’re hoping with things like the Orchard expanding into new territories and RCA growing their use, that we’ll see some of that rebound as we get later towards the year once we’re out of kind of the summer touring season.
Unidentified Analyst: Got you. Thank you. And I also — I saw that it looks like a competitor is going out of business in the next month. And I was just curious, Fred, kind of what’s your view on that? And what does it mean for Play MPE?
Fred Vandenberg: That was news to us last week. That’s the All Access. All Access is a competitor in the U.S., and they announced that they’re shutting down last week. They have some penetration in rock and alternative. So certainly, that’s something that Play MPE could pick up. The — to maintain a platform like ours, you need — especially to maintain one as good as Play MPE, it takes a certain amount of investment and you updating it for current user interfaces of expanding what you do, even just the bandwidth and the infrastructure servers and stuff. There’s a certain amount of cost to doing that. And I think — I mean I don’t know what to make of what they’re doing just yet, but I can’t see with his — with their penetration that they could actually really maintain that business profitably, at least it didn’t seem like — their business was different, but a complementary part of their business was the digital delivery that I think we can — I hope we can assume.
And maybe Allan has — and Allan will maybe have some comments on that.
Allan Benedict: Yes. One thing that Fred just mentioned and I really want to stress is that we did just find out pretty much end of the day, Friday, along with from what we can tell, most of the music industry. So we’re still getting a total handle on kind of what it will look like and what the time line will be and what will happen. But yes, as Fred mentioned, they definitely have penetration within the alternative space and the rock space. And even with some of our consistent major label clients like their rock or alternative division or — have still been steering their sense to All Access. So the hope is that with them closing up shop, I believe their last day will be August 15, that business, not only from some labels who may not have used Play MPE in the past, but also other departments within current clients that they will bring those releases over. So we’re hoping for that, and we’re working on making that happen.
Unidentified Analyst: Got you. Thank you. And then lastly, what’s the outlook on the share repurchases? I noticed that you guys only bought back a very small amount of shares this quarter. What’s the outlook on that?
Fred Vandenberg: Yes. We just — we got it approved. I think it was in May, early May, but just the mechanics of getting it set up, it took a little bit of time. So there’s not a lot of run rate with the buyback, plus it can be a challenge when there’s low volume to buyback. So we have a maximum that we can do of 5% over the next year, until next May. I’m hopeful that we can do that with a nice price. But if the price rises a lot, then we’ll back off.
Unidentified Analyst: Okay. Thank you, Fred and Allan. That’s all I have. Thanks.
Rebecca Collins: Okay. Thank you, Joe. So there’s no other raised hands, but we do have a couple of more questions in the Q&A box. If you guys want to touch on them, so I can read out the first one. So are we going to allocate sales and marketing resources to the monitoring service?
Fred Vandenberg: We already have. Yes is a short answer. We’re figuring out. I mean that’s what we’re going to be doing over the next little while is testing different things out. And we have the staffing in place to do that with a focus on doing that.
Rebecca Collins: Okay. The next question, can you elaborate further on the changes in revenue, for example, of flat down from Universal? And which portions of their activity are going up, down, et cetera?
Fred Vandenberg: Sorry, Rebecca, I didn’t hear that whole question. Could you just touch on it again?
Rebecca Collins: Yes, no problem. Can you elaborate further on the changes in revenue from Universal? And which portions of their activity are going up, down, flat, et cetera?
Fred Vandenberg: Okay. So we renewed our agreement with Universal last year in — starting in April, I think it was. And we got a 10% bump in revenue from them. Unfortunately, the euro then subsequently tanked. So you really don’t see that in the revenue certainly over the last year. But the euro is coming back. Universal’s use, generally, is — this gets into where I talk about our platform and how good it is. You can measure that use in a gigantic amount of metrics, distributions and all these things. But they do a lot of different things within the platform. They have a lot of a very powerful platform to work with. So their use is growing sort of holistically. We think we’re going to grow their use in Mexico and other Latin countries. Yes, I don’t know, Allan, do you have anything to add to that?
Allan Benedict: No, I think that’s a great point you brought up of UMG Mexico coming on board. Universal’s set up in a rather unique way compared to a lot of clients where they do have kind of internal centralized hubs that handle a lot of their releases. So with that, like they obviously only have a capacity to send out so many at a time. So the more and more Universal territory offices that are onboarded directly will grow that usage. So Mexico will be a big stepping stone. I know Universal Spain has also kind of come around with more interest since you’re going to have a Latin list. So it’s really about getting those territories involved and keeping that usage growing.
Rebecca Collins: Thank, guys. I got another one. It seems like cost of revenue dropped quite a bit this quarter. Is it a new normal or an odd quarter?
Allan Benedict: Cost of revenue, dropped this quarter? I thought it was up a little bit. I probably have to look at that. That’s not a significant portion of our cost, and it’s — the things that go in there are just really staffing costs with our full distribution clients. Some fees associated with the transactions, I suspect those things fluctuate just depending on the quarterly — just minor things that impact the quarter. I don’t see that those — that margin will change for the better or for worse significantly.
Rebecca Collins: There is a follow-up question about buybacks, which says I know that there are some restrictions on what you can do like when the purchases can be done? And would you please summarize the restrictions? I’m guessing that purchasing at the bid versus ask and good to cancel order might be issues.
Fred Vandenberg: Well, generally, there’s — you don’t do buybacks during the first half hour of the day or the last half hour of the day. There’s a restriction of 5% for the full year. There’s a restriction of 2% in any one month. There is a restriction in the sense that you cannot push the stock price up. So if the ask is above the last trading price, you can’t buy that. That’s the general restrictions.
Rebecca Collins: And we’ve got a question from [Jim Bauch] (ph), which says, so how many paying customers do you have? Can we get the other majors to use/pay for [indiscernible]?
Fred Vandenberg: How many paying customers do we have? Thousands. Ours is a platform. When you talk about churn within the platform, it’s a very difficult thing to do for us. Like some SaaS-based companies have just a regular fee every month. We’re a pay-per-use. So if you have a release to send out, you use us. And if you don’t, you don’t. So figuring out how many customers are actively using us at any one point in time is a little bit challenging, but we have thousands of record labels that use and come back to Play MPE. As far as getting other majors to use us, well, they do. So Warner’s — Warner would be our second largest client. But like Allan said — as Allan said, Universal uses us a little bit differently. They have one contract that covers the globe, and they have a distribution center in London and a distribution center in L.A. that then, in turn, share these releases with different territories around the world.
This is one of the things where I think Universal really approaches this in a really smart way. But Play MPE provides them with a bunch of tools that allow them to do this. And it saves a gigantic amount of time in repurposing the releases so they can put restrictions on what the releases have, when they are distributed, they put in a metadata so that your ISRC codes — the codes that essentially make sure you get your royalties, they’re correct. Once they’re in, then they’re disseminated around the world. There’s efficiencies of not having to upload it. These are all — like I’m just talking very briefly about an incredibly detailed platform that would be — provides them with really good competitive advantages around the world. Now a company like Sony or Warner or any actually major independent label that has use around the world could benefit from these kinds of things.
They’re just generally not set up to do that. And I think, hopefully, we can grow that use by marketing those competitive advantages that Universal currently enjoys by using Play MPE. And this is one of those things where you talk about Play MPE being the best platform. That’s — nobody has these capabilities. And so you would have to ever get a global distribution agreement with Universal, you would have to build those things out. And that would cost a lot of money. So anyway, Warner would be our second largest client if you were to collect all their use around the world. To use this in New Zealand, in South Africa and Europe, the United States, I’m sure I’m missing some places. But if we — they don’t use the parts of the platform, at least not that I’m aware of, that really would provide them with competitive advantages.
But there’s other clients that maybe we could sell. Sorry, I was rambling there, but maybe that answers the question.
Rebecca Collins: Thank you, Fred. So the last question in our Q&A box today. [Operator Instructions] But the last question is, have you made significant progress in penetrating the U.K. and Germany markets?
Fred Vandenberg: We’ve made some progress with the U.K. I think the U.K. distributions tend to be from the U.K. to outside the U.K. But again, Universal uses us everywhere. So it’s a little bit hard to say that we don’t have penetration in the U.K. It’s getting the other majors and a lot of the big — like the indie scene in the U.K. is huge. And we — it’s untapped for us largely. As far as Germany goes, we’re — again, with Universal, we’re pretty big in the media distribution in Germany. When it comes to things like radio, there’s an entrenched competitor in Germany that would have the market. It’s not as good a platform again, but then you have those same questions about, well, if your platform is better, why can’t you get the market?
Well, you have that network effect where radio is using it and sort of the majors to displace that takes some time. And we just haven’t put the efforts into doing that yet. We are doing that in Canada. It’s taking some time, but we’ve shown some — we’ve shown a lot of success there.
Rebecca Collins: Great. Thank you. That seems to be the last question for today.
Fred Vandenberg: Okay. Thanks, everyone. Hopefully, that was informative.
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