UPDATED: Serious questions are being asked about the future of content company, Quickflix, after insiders claim Australia Post recently put the movie download company on credit hold due to none payment of their account.
Australia Post claim they are unable to disclose information about their customers.
Chairman of the Quickflix, Stephen Langsford, claims he has no knowledge of Australia Post putting the company on credit hold and he is not aware there was an issue with Australia Post. He catagorically denied that the Company was on hold with Australia Post.
Investigations by ChannelNews have revealed that the bulk of Quicklfix DVD Mail is lodged at Strathfield Bulk Lodgement Post Office Business Centre. Australia Post executives there said that the Company was on credit hold and that no mailings of DVD’s had gone through the Centre since the Company was placed on credit hold.
Insiders claim that Quickflix appears to be “very vunerable” to the continued goodwill of its trade creditors which includes digital studio fees of $4.8m due during the next 12 months. Trade creditors are believed to be over $8M.
The company, which has around 5.8 per cent of the content streaming market, is struggling to attract paying customers after their direct mail disc business started to decline.
Recently the Nine Network Company Stream Co acquired 10 per cent of the WA operation which is set to face tough competition when Netflix launches in Australia next year.
Since 2010, Quickflix’s share value has declined 80 per cent and to date the company has not made a profit.
According to insiders the company is now struggling as questions are raised about their subscription numbers and the use of $1 dollar subscription memberships which are used to report “customer growth”.
ChannelNews understands the company has a high churn rate and last year it paid Telstra $500,000 to acquire the BigPond disc business.
Member churn rate is believed to be between 7 and 8 per cent with Quickflix now having to replace 75 per cent of its customer base each year.
Insiders claim that three streaming customers are needed to replace every lost DVD customer with their DVD customer base, believed to be down by as much as 30 per cent. DVD customers are believed to deliver a significantly higher return than a streaming customer.
According to documents seen by Channel News, revenue is driven by a shrinking member subscription base with the pay per view service revenues failing to meet the gross profit shortfall. Sales are believed to be down 6 per cent while costs have risen 58 per cent. This has not stopped senior executives of the Company handing themselves big pay rises.
Stephen Langsford the Executive Chairman and CEO has been awarded a 44 per cent pay rise to $392,413, while Mr Simon Hodge, Executive Director and CFO has seen his pay packet rise by 38 per cent to $349,597.
ChannelNews understands that the vompany who has seen a major exit of staff during the past 18 months including the fact the Company CFO has lost a staff member every week since August, as the Quickflix struggles to grow paying subscribers. Since 2010, 33 senior executives have come and gone and eight directors have resigned.
A recent report prepared for a group of concerned shareholders states: ” Solvency must be a concern. To date capital raising has propped up cash positions however this relies on an ongoing believable high growth story for investors”.
The report claims: “Underlying assets are not reliable as primary intangible software, content licences would dissolve if the business fails”.
Also contributing is an ageing content library. ChannelNews investigations reveal that trade creditors are being stretched with $8.054M set to be paid by December 14th.
Revenue streams are also in decline with insiders claiming this amount will be impossible to pay from cash flow unless the Company gets a “substantial cash injection”.
Since 2010 the Company has made 329 announcements to the ASX relating to so called growth and capital placements however what appears to be missing is independent assessment of the claims.
Quickflix documentation contains a clause that says: “Due to size and stage of development there is no need for an oversight committee. It appears that the current board acts across audit, risk, nomination remuneration and diversity.”
Currently there are 1.5 billion Quickflix shares in the market and according to financial observers, the company in its current state faces a questionable future and no amount of capital injection will turnaround Quickflix fortunes.
They estimate that at least $9M in new equity funding is required.
The options are the issuing of another 1.5 Billion shares resulting in a 50 per cent dilution in value for existing shareholders which include current staff who have told ChannelNews they do not see a future for the company which is a key partner of Microsoft, LG, Samsung and Panasonic, all companies which have Quickflix services running on their hardware.
According to ChannelNews calculations the Company has spent over $100M in earned revenue, $2.5M in R+D tax incentive grants and all $42 Million that came from investors.
In the same period Quickflix has accumulated losses of $51M. The current value of the company today has been put at between $500K and $1M claim shareholders.