On Command is the largest hotel pay-per-view company in the world. It has long term contracts with 3,276 top hotels which total 934,000 rooms. This amounts to over 200 million sets of eyeballs in these rooms that ONCO has its hardware installed. ONCO currently only offers a movie to the guest at an average price of $8.95 per show. On the movies alone, this amounts to over $250 million in revenues, with some $80 million in cash flow.
What ONCO has is essentially a huge private network whose audience is locked up, and represents one of the most desirable demographics known - premium hotel guests.
The opportunities to offer additional products and services to this private network are astonishing - especially with the advent of the Internet. ONCO has been a visionary in the Internet space starting over two years ago developing its Internet product. It is now installing its highly acclaimed Internet package, and it is generating revenues, and has been very well received. This opportunity alone will have an explosive impact on ONCO's revenues and cash flows, because each incremental piece of revenue from the Internet will flow mostly to the bottom line since there is little additional direct cost attached to it. The cash flow margins could move from the current 30% into the low 40% range - not far from cable companies margins.
ONCO is currently only being valued off trailing cash flows, which is composed only from movie revenue. The huge upside in ONCO from its ability to generate incremental revenues from the Internet is not something on the drawing board - it is being rolled out NOW. Even cable companies are not this close to generating Internet revenues from their customer base, and cable companies frequently trade at 15 to 20 times cash flow, and $4,000 to $5,000 per subscriber.
If ONCO could one day achieve a valuation similar to the cable companies on a per subscriber basis, at $4,000 per room this would translate into a $118.00 share price for ONCO. |
