Hi Jim and All,
I think the street thought they were going to compete in the home market; however, because the business models were different (hardware v. content), NTN was always in a better position. I'll have to retrieve my old PR's, 10Q's and K's from storage to go into more detail on the history.
There was another post commenting that the Downi (plural for Downs :-) decision to concentrate on content was their only good decision (paraphrased). I think this is like saying that it was a "good decision" for MS to concentrate on operating systems for IBM style PCs. Downi were tossing around this "content" idea when most everyone else was stuck talking about "software". It was Berners-Li (sp?) kind of vision. This company is still around because of that vision. Most other businesses would have folded shortly after the 1:20 split. In addition, the Sale-Leaseback agreements have been criticized. I must admit that even though I've read extensively NTNs unfolding story, I never got a clear picture of how these agreements were financed, and who actually owned the leased systems. I guess I just assumed that this is a trivial arrangement to do properly and ignored it. Perhaps it's like the bar owner who refills kegs with 12 oz. bottles and can't understand why he's losing money. I never would have thought that the frothy mug in front of me actually came from a few bottles. If anyone knows the details of these agreements (or where to find them) I'd be interested.
I think the leasing option helped sell the systems. We looked into getting a setup for our local rec. center and at that time buying the system was about 5k in capital, while leasing added about $100 to the monthly fee. If we'd pulled out after 1 year, we'd only be out $1200, instead of $5k, and this was a strong consideration for an unproven customer service. (As it turned out, Congress was in a slash and burn mode toward science that year and we dropped the inquiry.) I think that other customers had similar things on their mind. The salesman I talked to said almost all of the new systems he was selling at that time (early 1993?) were leased because of the prohibitive initial investment. There now is ample evidence that this service will increase business and per capita sales and eventually pay for itself, and the sales staff should emphasize this with hard numbers and anecdotal evidence (they may be doing this now, I haven't checked). So in short, I think that some type of leasing option is essential for full market penetration, but from what I'm hearing here, it can be done much better than it has been.
I'll check out the CC, thanks for the number.
cheers,
Rich |
