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Non-Tech : Image Entertainment (DISK) -- Ignore unavailable to you. Want to Upgrade?

To: Jim Fraser who wrote (149)	7/16/1998 10:34:00 AM
From: William T. Katz	Read Replies (1) \| Respond to of 379

Speculation continues that they have bought an internet shop and will couple this to their new fully automated distribution warehouse that opens September. Some people like the idea that DISK is catching two waves: internet and DVD. I think there is accumulation going on with the expectation that once news is announced this stock will be $20 at a minimum. "Honda" is also saying there is more news besides just the internet shop acquisition. He had hinted before about an alliance for which I had previously (well before this run-up) speculated on Amazon.com. AMZN is about to open up their video store, as you know. So no verifiable news, just increasing volume + increasing share price.

To: Jim Fraser who wrote (149)	7/16/1998 4:28:00 PM
From: William T. Katz	Read Replies (1) \| Respond to of 379

Investing in the paradigm shifts (long): Although I hate to use that word "paradigm", it seems that in the case of some companies the phrase "paradigm shift" is warranted. I was stupidly short far too early against Amazon.com, and I saw how it went from an online bookseller to the current concept of it being the next Wal-mart on the web. Likewise, Yahoo! went from a search engine to being a true "portal" including Visa cards, mail, financial portfolio tracking, etc. It would really be nice to get in on one of these shifts of thought, and it's possible that DISK might just be one of those future players. If one believes e-commerce will be the multi-trillion gorilla of the 21st century, then why aren't the distributors capitalizing on the trend? After all, there are two hard parts to what Amazon.com does: (1) the front-end of the web + advertising/linking, and (2) the whole back-end which they have previously farmed out to distributors like Ingram. When you look at their business plan more closely, though, you see real opportunities for the distributors if they modernize like Image Entertainment is doing with their new fully automated distribution center right next to Las Vegas airport. Let's put it together: (1) internet e-commerce will boom, (2) e-tailers like Amazon.com want to be the Wal-mart of the 21st century, (3) most people believe business-to-business transactions will really be the meat of the internet e-commerce, and (4) margins can be cut to the bone by automating as much of the whole ordering process as possible. So here's a possible business model: Image Entertainment is a great distributor of optical disc products (Laserdiscs and now DVD). They will have a new fully automated distribution center by a major airport that can handle orders 24 hrs-a-day, 7 days-a-week. So, why not make yourself the back-end of choice for every e-tailer on the net? Why not have the e-tailer concentrate on what they do well (advertising, linkages, good front-end web experience) and then electronically transmit orders to the back-end business that packages and ships orders to the customers? The downside to the e-tailer is that the back-ender takes some of their money. The upside is the e-tailer doesn't have to build a distribution center and handle all the stocking/etc. If the market is small and/or the expected volume through the e-tailer is small, leaving distribution to some central consolidated distributor (who works with numerous e-tailers) makes sense. So what would I do if I were on Image Entertainment's management: 1) Get an online store to do direct laserdisc sales and maybe even DVD sales, and/or 2) Market yourself to all the big e-tailers as the simplest and most cost-effective backend for all their optical video needs. Recruit Amazon.com, borders.com, Barnes and Noble, etc. They can simply electronically relay orders to your distribution center that automatically packages and ships orders out. Amazon.com and B&N currently have an affiliate program where other web sites can point to AMZN or BKS for book ordering. I always thought this was masterful since those affiliates can concentrate on what they do well and get a small slice of the pie. Well the distributors can do the same thing on the back-end. And if Amazon.com really wants to be the Wal-mart of the 21st century, they probably know they're going to have a tough time warehousing every item known to shoppers. That's some mondo infrastructure. -Bill