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Quickflix secures $A5 million lifeline

UPDATE Dec 28: Quickflix has received a lifeline in the form of a $A5 million investment from Blueprint Partners, an outfit run by maverick US billionaire Alki David (who will become a Quickflix director).

More lively times could be ahead in the Quickflix board room and further afield. In an October 2012 profile, the Hollywood Reporter calls Mr David a "troublemaker" who has been "sued by every TV network" thanks to his controversial streaming site FilmOn.

The Greek immigrant inherited a family fortune built on owning Coca-Cola bottling factories in 28 countries.

According to the Hollywood Reporter, His antics include offering $US1 million to anyone willing to streak past President Obama and trying to fool news outlets into believing he had provided the first live webcast of an assisted suicide.

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UPDATE Dec 3: Quickflix shares have plunged from 6 cents to 2 cents since shares were relisted Friday, slicing the company's market cap from $A25 million to $A9.5 million.

The company was put in a trading halt on November 13, and suspended from November 15 to November 30 as a cash crunch hit, and CEO Chris Taylor and two directors resigned - reportedly after a fight about future direction.

The company has laid off a third of its 100 staff and decreased advertising under a restructuring plan aimed at reducing cash burn following its FY12 $A13.97 million loss, which pushed cash reserves down to $A2.2 million.

In a statement to the ASX, Quickflix has addressed an AFR article and the latest speculation around HBO's $A10 million investment. It say HBO fully supports the restructure.

However, the support doesn't appear to extend to putting more money into the struggling Quickflix.

Henry McGee, who represented major investor HBO on the Quickflix board, resigned as a Quickflix director on November 16 - the day after Quickflix missed a deadline to update the market on a new strategic investor.

The company's search for new funding continues.

In brighter news Quickflixed announced it would feature on a new ondemand channel Freeview is launching on a yet-to-be-named date early next year.

Quickflix 6-month ASX performance (source: S&P Capital IQ; click to zoom).


Quickflix in crisis - slashes third of staff; still looking for new funds

UPDATE Nov 29: Quickflix missed a self-imposed deadline to resume trading on the ASX today.

In a statement to the market late in the day, Quickflix said it was laying off one-third of its 100 staff in a bid to "substantially eliminate" a $A1 million a month cash burn.

It is also freezing investment in its profitable, Australian-only DVD rental business, but says it will continue to invest in its online streaming service (which operates across Australia and NZ) - although it has yet to find a new investor willing to inject more funds.

The company's shares were put in trading halt on November 13 and have been in voluntary suspension since November 15 amid talk of a cash crunch and the resignation of director Henry McGee, who represented major investor HBO on the Quickflix board.

More pressure came on November 20 when CEO Chris Taylor and deputy chairman Justin Milne quit, reportedly after in-flighting over future direction.

This afternoon, an ASX spokeswoman confirmed to NBR that Quickflix shares remained in suspension. The circumstances surrounding Mr McGee's departure remain mysterious.

Founder and chairman Stephen Langsford, who took over day-to-day running with CEO Chris Taylor's departure, this afternoon told NBR he intended to stay on as chief executive.

The company is still looking for new outside investment.

Part of the new ASX filing details the soaring cost of acquiring new customers. It reads (all $A):

Quickfix' net loss in FY12 increased to $13.97 million up from $2.96 million in the previous year.

Cost of customer acquisition in FY12 increased to $61 per new customer from $30 per new customer in FY11 as a result of increased investment in brand and traditional media [certainly there has been quite heavy TV advertising in NZ - CK].

For an outlay of $4 million in FY11 Quickflix acquired 130,000 trialist signups whereas for an outlay of $9.8 million in FY12 Quickflix acquired only 160,000 trialist signups.

ckeall@nbr.co.nz

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Nov 21 Quickflix, often cited as a so-called "over-the-top" competitor to Sky TV, is in crisis.

Chief executive Chris Taylor and deputy chairman Justin Milne both resigned late yesterday amid talk of reports of infighting over direction.

Chairman and founder Stephen Langsford has taken day-to-day control.

The company's ASX-listed shares, which have lost 75% of their value in the past year were put in a trading holt on November 13 followed by voluntary suspension on November 15.

Last week, Henry McGee, who represents major investor HBO on Quickflix, resigned as a director.  According to an AFR report, Mr McGee clashed with Mr Taylor during a board meeting.

QuickFlix has recently tried to raise capital. In August, Mr Taylor told NBR the money would be spend on expanded content and a new customer push. He would not say how many customers the service had in New Zealand. In a statement to the AFX yesterday, the company said:

Negotiations continue with regard to the future funding of the company.

The directors and management are currently pursuing several options and working through a restructuring plan to reduce costs and capital requirements.

It is likely the company will remain in voluntary suspension until Thursday.

Quickflix operates across Australia (where it listed in 2005) and New Zealand, where it launched in March this year. It says it has around 118,000 customers across the two countries.

Locally, it offers an unlimited number of movies and TV series via internet streaming for $14.99 a month, plus various pay-per-view options. In Australia, it also offers a Fatso-style online DVD rental service.

QuickFlix 6-month ASX performance. Source: S&P Capital IQ. Click to zoom.

Losses mount
In its annual report for the 12 months to June 30, 2012, Quickflix said revenue was $A16.9 million, up from the prior year's $A10.9 million. 

But the company made a $A14 million loss against a $A3 million loss for 2011.

Poster child
Quickflix has been admired for its platform-neutral approach.

Its content can be viewed on a PC, smartphone, tablet, on some TVs made by Samsung and other partners, and any TV via console partners Sony (with its PlayStation 3) and Microsoft (with its Xbox 360). 

The company has become something of a poster child for those looking to boost new media, rebut the argument Sky TV enjoys a near monopoly on pay-TV content.

Quickflix has been repeatedly namechecked by the ministers of broadcasting and ICT and, in recent comments to NBR, new Telecom CEO Simon Moutter.

But Quickflix's appeal has been dimmed by its thin line up of movies, and dated TV content.

QuickFlix complaints about Sky TV content details
A key problem has been that although HBO is a Quickflix investor, the US network's line-up of hit TV series cannot be offered to QuickFlix users on this side of the Tasman, where Sky TV has content rights locked up.

Mr Taylor - best known here for his time as head of Prime TV - has been a vocal critic of Sky TV (whose content agreements and partnerships with ISPs are currently subject to a Commerce Commission investigation, including the question of whether rivals are preventing from gaining a critical mass of content).

The Quickflix boss warned the government that Sky TV's dominant position would hinder fibre uptake under the government-backed Ultrafast Broadband (UFB) project. The incumbent had little incentive to innovate. And with so much key content tied up by Sky TV, it was tricky for startups to gain traction.

Sky TV chief executive John Fellet staunchly rejected the criticism. The company had earned its market position after many years of investment, including heavy losses during its early years. It had a right to recoup the money it had invested in content.

Taylor hypocritical - Sky TV
Mr Fellet also had a barb for Mr Taylor.

"When Quickflix head Chris Taylor was CEO of Prime in New Zealand, he did exclusive deals for shows like Top Gear and Weeds. Would he now surrender those to online start-ups? I very much doubt it. Likewise in Australia he holds exclusive rights for HBO content, I doubt he offered them to channel 7, 9 or 10.”

Last week Telecom CEO Simon Moutter told NBR that while today's content deals tended to be exclusive, technology would cause change. Hollywood studios and other content makers broaden their terms when contracts came up for re-negotiation. He saw a set-top box-free future where the same content was available through multiple online providers such as NetFlix, iTunes, YouTube and QuickFlix, fed to TVs via wi-fi.

NBR agrees. But for Quickflix, that future may not come soon enough.

ckeall@nbr.co.nz

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Comments and questions
30

If ever there was something that showed why regulation of Sky is needed, this is it. quickflix has a great platform, available on loads of devices. Literally the only thing holding them back is content. There is a reason why despite having HBO as an investor, they are totally unable to offer ANY HBO content in NZ, and only older HBO stuff in Australia.
That reason is the incumbent paytv operators locking in exclusive deals with HBO that restrict HBO from selling to anybody else in Australia and NZ, even to companies they own!

Torrent and usenet don't have the same issues with lack of content. So I would suggest that it will be in the copyright holders' interests to stop negotiating exclusive deals.

Most of my TV content is consumed through torrents and usenet ... interestingly the only content that I intend to watch but don't download comes through Four's new "Fast Four" showings.

I would have been very happy to pay for Quickflix if it:
a) had content that was worth watching;
b) had it at the same time as it was available elsewhere; and
c) at the same cost as it is available elsewhere.

Until that is available I see no moral issues with downloading from elsewhere.

What a shame - old media (HBO/Sky) killed new media. Thankfully torrenting is not so fragile. The Quickflix team had so many good people on board too

A modern idea killed by copyright holders from times past? no surprise there...

When I last used QuickFlix (about 8 months ago) they had a massive "lack of content" & the content they did have, was low quality & "Non-HD" - not a good service in my opinion.....

typical story for down under- Historic monopolistic supplier situations, everyone else has no chance...suck it up

I'm trialing quikflix now and the platform is great but lacks content. Furthermore the pay per play service doesn't work on PS3 and other devices - unless you have a panasonic smart tv you have to watch a new feature film on your 18 inch pc monitor! I will not be joining until they at least get the pay per play service sorted.

When I used their service, it played fine on my PS3 (but there was not as much content via this method, for some stupid reason, as opposed to viewing movies on my PC!!).

On my PC, there was more content than what I could watch using my PS3!!

However - an easy work around is: Connect your PC to your TV via HDMI & watch the movies on your TV via this input - it worked fine for me, using my Samsung 40" LCD TV.

The issue isn't watching the free content; but the facility to use the pay on demand isnt available on the PS3

Ohh so sad..long live skytv

I really wanted to like QuickFlix - I could live with the relatively narrow selection of content but liked the range of classics and that I would watch on my PS3 and iPad. But they lost me with the low-res quality, especially on the HD TV... Turned out better to rent old DVDs - $5 for 5 over a week

Content is King. Without that, a recipe for failure.

"today's content deals tended to be exclusive, technology would cause change. Hollywood studios and other content makers broaden their terms when contracts came up for re-negotiation."

Surely you jest? The motion picture industry has time and time again resisted change to its business model.

The rights holders who make their big bucks from the NZ free-to-air and pay operators will not annoy their big customers by selling rights for subscriber video on demand to other players.

Fellett argument that Sky does not have exclusivity is nonsense. It won't let ISPs who want Sky content even approach rights holders for seperate contracts.

Will the Commerce Commission do anything about this? No.

It's not a simple model to crack.
The content owners want to maximise returns from their investment. The legal restrictions they impose can be incredibly difficult to work with (including imposing the right to remove content from directly from your MySky+ box in your home)

Movie threatres are still big revenue earners. There is a six month stand down period between Theatrical and DVD releases, and broadcast rights are usually given to TV after they've squeezed the DVD.

Where this will go is unclear. Warner Bros has changed NZ employment law. The US Free Trade Agreement can influence NZ's Copyright Law. None of the outside the US Digital subscribers offers are being given decent back catalogues (I include Quickflix and Caspa from TiVo in this list)

Underlying this is that the illegal downloads are huge and not going away.

Not an issue for Sky, but a great opportunity to legislate on this corporation. Drive ubiquitious access to reasonable quality subscriber serivces over UFB in NZ

So, in short - the USA is stuffing it up for the rest of World??

Oh - really?? It''s always been like that for years, nothing has changed!!

The USA control everything & New Zealand suffers, as a result of their greed, with little, to no "current content", having to wait AGES for any decent content & lack of HD content - it's BS!

Given the near death state of the Vodafone Sky relationship, it is a shame that these guys couldnt weather the storm for a few more months. Chances are they'd have a really REALLY large telco backing them (given Telecom didn't)

You obviously don't have a clue what your on about - Vodafone/Sky relationship is going very well thanks!

Content is King & HD Content is what people want - Not crappy SD Content, which is what QuickFlix offered.

Does anyone remember when TV3 started in this market and was up against a TVNZ with an open cheque book. The objective was to buy all of the good stuff, even if they didn't play it, to close 3 down.

I have not had SKY since I moved. Tried Quickflix it was cr*p. Getting SKY installed tomorrow.

Quickflix are an Australian company and have been operating there for 10 years. Unlike Netflix in the US who launched their streaming business off the back of a highly profitable and cash producing DVD rental business, Quickflix have never made a profit in their entire history, despite continually promising they would next quarter, next year, next whatever. They've come in to NZ at the 11 hour all guns blazing, laden with a top heavy management structure and all the while under the hood bleeding cash by the millions in both businesses, DVD and streaming.

The NZ environment has very littlle to do with why they are where they're at. HBO are simply the one left without the chair in the musical chair investor game that played out. Past investors include, Destra and Lachlan Murdoch. They moved into streaming boots an all, took a huge gamble but now can't back it up with $$ for decent content. Yes that is why they haven't got good content. It cost $$ an they haven't got it.

I seriously doubt its NZ (and lack of success with its model here) that is driving Quickflix to the wall.

Why isnt it working in Australia - after 7 years? And exclusive agreements?
And a bigger market?
And larger (or no) caps?

How has Netflix fared in the last 12 months?
Eventually a flawed business model (fixed revenue, unconstrained costs) has to meet its demise.

The streaming business has only been going for 1 year in Australia, not 7.
And they don't have exclusive deals there either. Literally the only content difference e between Australia and nz was the hbo content, and none of it was new stuff because all the new stuff was locked up with existing TV businesses.
And the data caps in Australia are pretty similar to over here. You can get 150gb for less than $100 including landline here, which is enough for a huge amount of video watching.

Oh Well....I will just have to head back to my local video store,At least they have a better selection and these days their new releases are a lot cheaper

Any word on Fyx Internet getting their "Global Mode" back so Hulu TV and Netflix can work on Apple TV?

if I cld get Hulu Plus (need a US Credit card for that) and Netflix (which works on a VPN laptop but not Apple TV) , between those services and Apple TV (with a US account , easy to set up) I would drop Sky tomorrow. We are close... but not quite there. Any suggestions ?

no need to us fyx (why tie yourself to an ISP for this service?)

Just use unblock-us.com it does the exact same thing, costs $5USD per month, and is much less likely to be shut down and doesn;t tie you to an ISP.

Fyx's parent company, Maxnet, was bought by Australian company Vocus. Vocus nixed the Global Mode. In an interview with NBR (here: http://www.nbr.co.nz/article/australian-company-buys-maxnet-fyx-mystery-...) Vocus' boss Jamie Spenceley said the service was closed because it complicated the takeover. He was cagey about bringing it back. My sense was there was no chance. Vocus is a network/wholesale/data centre specialist. Spenceley seemed very broadly supportive of the concept behind Fyx, and the evils of old world regional monopolies in the internet age etc etc. But I think he sees Vocus moving Maxnet more toward wholesale/corporate/data centre markets rather than blazing a trial in retail with a reanimated Global Mode.

Just get a VPN that can be run through a dd-wrt-compatible router. It will allow you to access that VPN through any device that is connected to that router.

Defiantly a gig we will share shortly in our hunchbuzz.com/buzz blog