Here's an overview of the situation in my view:
1. The biggest cost today is fixed content production, but this is quickly changing as the number of streams-per-day increases in our syndicated network.
2. By the end of this year, growing distribution costs will surpass our fixed production costs, with the 2001 percentages swapping sometime in 2002!
3. Bramson is trying to fight DYNAMIC streaming costs by using ITG, which reduces the number of bits transmitted by approx. 50% over others who stream at 300Kbps for the same picture quality; hence, our streams are twice as unlikely to block/buffer, since we are transmitting about half as much data.
4. Bramson is trying to reduce FIXED production costs by getting third-party content producers to bring their content to iNEXTV for distribution, thereby having iNEXTV avoid the vast majority of production costs associated with creating the content!
5. Bramson is trying to reduce FIXED marketing costs by having the syndication portals and partner verticals do all the marketing/advertising for the content at each of respective web site!
I really like King Edward's battle plan, but it does make some assumptions about the future:
1. Demand for Internut video will continue to grow.
2. Madison Avenue will start paying to advertise their products in our video content, and at a rate that covers our costs and then some.
3. iNEXTV can convince more third-party content developers (like those Clever Cleaver Bros.) to share their stuff with us for a cut of the above revenue.
4. iNEXTV can maintain or extend their syndication network.
Of course, all this assumes King Edward can muster another $20 million gold coins to feed the troops throughout 2002; thereafter, I suspect those assumptions noted above which are not true today will finally become reality. If the supply lines are not reinforced by Summer’s end, King Edward will have to start cutting back iNEXTV/AENTV operations (can you say 50% staff reduction?) just like he did at ADS. He only has around ten million remaining in cash, and his royalties only amount to around 10 million a year. Half of those royalties go to debt repayment, so he's only left with about five million a year to cover everything else-- not enough to support current troop levels that's for sure, but enough to stay in business with perhaps 50 segments per month instead of 100. |
