Not much has been said today about the card deal with the Future Business Leaders of America. I offer this conservative revenue projection.
According to the PR, the FLBA has 240,000 high school members, 10,000 college members, and 8,000 middle school members. I don't remember ever seeing college kids walking around campus selling things to make money, so I am going to disregard the 10,000 college members. Likewise, strike the 8,000 middle schoolers—too young, not likely to be raising significant funds. That leaves us with 240,000 red-blooded American teenagers.
Let's assume that some clubs will not participate although the MusicCard is the fundraising project backed by the national office. Perhaps some clubs have established fund-raisers, or they don't believe their locale is a good market for the MusicCard. So let's assume 60% of the 240,000 high school students' clubs do participate in the fundraiser giving us 144,000 active students.
Performance will vary greatly in a project like this. I define 20 cards as being a good goal for each individual. A few (5%) will overachieve (sell 35 cards), a good chunk will be average (sell 20 cards), many will come in low (15% will sell 10 cards each and 15% will sell 5 cards each), and a big group will not sell any cards (30%). Here are the details.
a) 5%(144,000 kids)=7200 kids x 35 cards/kid = 252,000 cards
b) 35%(144,000 kids)=50,400 kids x 20 cards/kid = 1,008,000 cards
c) 15%(144,000 kids)=21,600 kids x 10 cards/kid = 216,000 cards
d) 15%(144,000 kids)=21,600 kids x 5 cards/kid = 108,000 cards
e) 30%(144,000 kids)=43,200 kids x 0 cards/kid = 0 cards
That gives us a total of 1,584,000 cards sold. At $5 per card, the revenue due to card sales is $7,920,000.
Let's assume 3 CD's per card are purchased resulting in the sale of 4,752,000 CD's. At $1.00 profit per CD, TSIG will make a gross profit of $4,752,000 from the sale of CD's. It's assumed nobody reloads.
This is a total of $12,672,000. Note that I did not subtract any costs that would be unique to this deal, i.e. cost of the card itself, cost of the sales kit. OTOH, the assumptions are pretty conservative. That is $12.5 million of gross profit from this medium-size deal. If we dilute to 125 million shares, that will be 10 cents of profit. Almost $8 million of the revenue will be upfront, probably October and November. Profits from the CD sales will be stretched out, but the bulk will be in the following 6 months (Dec'99-May'00).
This, folks, is why we invested in TSIG. This story is still here.
Regards, Suzanne
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