news Ailing IPTV and online DVD rental business Quickflix has revealed plans to sack one third of its workforce and initiate a plethora of other restructuring moves as it struggles to keep its trouble-plagued business afloat.
Late last week the company revealed that the President of US cable television giant HBO, which signed a major content licensing deal with Quickflix in January this year, would unexpectedly leave its board.. Subsequently, yesterday Quickfix revealed in a further statement that several other senior executives helping to guide the company would be stepping down. Firstly, Quickflix chief executive Chris Taylor, who only took up the post in July 2011 after leaving Telstra’s Media division to do so, has resigned as the company’s chief executive and will leave in March 2013.
Taylor will be replaced by Quickflix founder and executive chairman Stephen Langsford, but the company will also lose other talent in the form of non-executive director and deputy chairman Justin Milne, who also had a lengthy career at Telstra before joining Quickflix’s board, and non-executive director Susan Hunter, who will step down from Quickflix’s board but remain the company’s secretary.
Yesterday those moves were followed by an extensive series of further changes as part of the company’s ongoing restructuring plans. In a new statement to the Australian Stock Exchange, Quickflix said it would reduce its headcount by one third, resulting in a saving of $2 million per year. The Australian has reported that up to 30 jobs will go under the restructure.
The company also pledged to enhance its revenue-generating opportunities and average revenue per customer by leveraging its content delivery and customer platform, and its existing billing relationship with customers; lower cost of customer acquisition and stop traditional branding advertising (with new promotional campaigns to focus on devices which Quickflix’s IPTV service can stream to); reduce its capital expenditure associated with the deployment of its IPTV platform, consolidate and optimise its DVD rental fulfilment centres; maximise the utilisation of its existing online DVD rental disc library and expand its latest release pay per view streaming offering.
The news comes as Quickflix has recently inked a number of deals to see its streaming media content distributed through popular platforms such as Microsoft’s Xbox 360 console, and its revenue has simultaneously been growing; in the year ending 30 June 2012, Quickflix pulled in almost $17 million in revenue for the year, compared with close to $11 million the year previously. In addition, the company has rapidly been growing its customer numbers, counting some 111,000 at the end of June this year.
However, the company also continues to suffer increasing losses. In that year, Quickflix lost close to $14 million, up dramatically from a loss of close to $3 million the previous year, with most of the increases coming in the form of marketing, content and distribution and staffing costs. At the end of June 2012, Quickflix had just $15.4 million in total assets, including just $6.8 million in current assets. It had $5.7 million in cash at that point.
In its statement this week, Quickflix maintained that its situation was still “fundamentally sound”, despite its problems. “Quickflix is the only online DVD rental provider in Australia of scale and it is the only company in Australia and New Zealand offering “all you can view” monthly subscription to movies and TV to a wide range of popular consumer devices including smartTVs, game consoles, computers and mobile devices,” the company said.
“As the leading player of its kind it has the early mover advantage ahead of would-be competitors and new entrants. Quickflix has developed a state of the art technology platform and has an expert team experienced in entertainment and technology. It has secured subscription and transaction video on demand streaming rights with leading Hollywood studios and secured distribution in the critical global brand name devices. Quickflix has grown its customer base to well over 100,000 customers generating revenues of $20 million per annum (annualised).”
“In contrast to other traditional media and entertainment players in Australia with legacy businesses to protect, Quickflix is a pure-play in the best position to benefit immediately from growing consumer take-up of IPTV streaming. It is still early in the cycle of streaming take-up and mainstream consumers have yet to fully embrace the streaming capabilities of their new smart TV or other devices. Quickflix will benefit as device manufactures, content owners and even competitors educate consumers on the benefits of streaming and help build the category. It will also benefit from the rollout of high speed broadband under NBN and the growing imperative of ISPs to differentiate through bundling of services like Quickflix streaming. Quickflix has a profitable and growing online DVD rental business and is able to leverage this service to transition customers to streaming movies and TV at a fraction of the fulfilment costs.”
I have to say, I would not be surprised if another company – perhaps an Internet service provider? – was to attempt to buy Quickflix or at least take a sizable equity stake in the next little while. The company is exhibiting all the signs of a business which may not be around in the medium-term. But it still does have a great deal of intellectual property and knowledge of the online video delivery market, which many, many organisations would like to expand into. It seems likely that the business we know as Quickflix will eventually become a feature offered as a bundle by another group.
I am honestly not sure, at this point, whether it will be able to survive on its own, or for how long. Its financial position is also made dramatically more complex by the fact that it is a publicly listed company and has to hang out its dirty laundry for all to see on a regular basis. Private investors (such as venture capital firms, for example), will sometimes be prepared to wait poor situations like this out so that the business can recover and grow over the long term. Public investors who buy shares, however, are not always as forgiving.