Quickflix secures $A5 million lifeline

Company often seen as the poster child for new media, and its ability to take on Sky TV. UPDATED: Soaring cost of customer acquistion revealed.

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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