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Quickflix signs 'major' studios to recover AU$2m debt, dumps 20 percent of workforce

The streaming company has made efforts to reduce millions of dollars in debt by signing studio licensors for content, as well as streamlining processes and retrenching more than 20 percent of its workforce.
Written by Corinne Reichert, Contributor

Australian streaming video-on-demand (SVOD) company Quickflix has announced AU$2 million in debt recovery by signing a deal with a "major" studio, as well as AU$4 million per annum in savings through a restructure, with another three studios close to signing deals with the company worth an additional AU$4 million.

"Quickflix has finalised an agreement with a major studio licensor for the release of approximately AU$2 million of debt," the company said in an Australian Securities Exchange (ASX) announcement [PDF].

"The company has also secured in principle agreement with three other major studio licensors for the restructuring and release of a further AU$4 million in commitments, which is pending final documentation."

The restructure program, announced on August 31, has seen the Australian company dump 20 percent of its workforce to attain AU$1.7 million per annum in cost savings.

Another AU$2.3 million per annum in savings has been attained by adjusting the company's content management, tech development and infrastructure, corporate overhead, call centre support, and marketing processes.

"Since the start of the program, the company has reduced headcount by over 20 percent, which has yielded a 33 percent reduction in staff costs, or over AU$1.7 million per year once complete," the company said.

Quickflix, which remains in voluntary suspension until the completion of its restructuring, remains in discussion with investors for future funding, and has also signed deals with streaming services in the APAC region to bring more customers on board.

"Quickflix has reached agreement to enter affiliate arrangements with SVOD operators in Australia and New Zealand, whereby the company will introduce a special SVOD offer to its customers and derive a fee for signups to that offer."

Quickflix has been haemorrhaging customers of late, reporting a 14 percent drop in its customer base to 121,127 for the quarter to June 2015, and a 13 percent quarter-on-quarter decrease in paying customers, down to 107,969.

The streaming service had a net operating and investing cash outflow of AU$1.1 million, a 29 percent quarter-on-quarter drop, but an increase of 24 percent from the same period last year. Revenue receipts from customers were AU$4.23 million, a drop of 19 percent on the same period a year ago.

It attributed its Q2 customer losses to the launch of Netflix in Australia and New Zealand, particularly because of deals with telcos Optus and iiNet to offer unmetered access to Netflix.

In August, the company announced [PDF] that it had entered a voluntary suspension from trading "pending release of an update regarding a potential corporate transaction with an international party which may result in an acquisition".

This was followed by news [PDF] that conditions precedent to an attempted reseller agreement with pay-TV company Foxtel's streaming service Presto had not been met, with the agreement thereby terminated.

Quickflix subsequently announced a non-binding memorandum of understanding with an unnamed Chinese entity, which produces original content in China and internationally, and is also contracted to co-produce content in the United States.

"Beyond Australia and New Zealand, Quickflix is looking at global opportunities to exploit its streaming platform and capability. Quickflix is in advanced discussions with one party in particular, which may result in a corporate transaction," the company said in its Q2 results report.

Quickflix claimed that the Chinese acquisition would "significantly" improve its results into the future, as well as growing its customer base.

"The Shanghai-based company is profitable and generates free cash flow. Consolidation with Quickflix would result in the combined entity having a significantly improved financial outlook and ability to access further capital for growth," it said.

However, in August it backflipped on its bid to acquire the company, stating that based on due diligence and external advice, it had decided not to proceed.

Conversely, the Australian Competition and Consumer Commission (ACCC) and the Australian Communications and Media Authority (ACMA) last week approved an acquisition deal between Ten Network and Foxtel, giving Ten the option to take a 10 percent stake in Quickflix rival Presto.

In approving the deal, the ACCC said it also had consideration of encouraging competition among streaming services.

"The ACCC considers the other free-to-air television networks, pay television providers, and online service providers will continue to have sufficient alternatives to allow them to obtain content that is attractive to their viewers," ACCC chairman Rod Sims said.

"Foxtel and Ten will continue to face competition from the remaining free-to-air networks, and streaming services are also likely to become increasingly important."

Presto was initially launched solely as a movie-streaming service in 2014, but added TV series to its offerings after a deal with Seven Network in March this year.

Presto Movies is priced at AU$9.99 per month, after last year being reduced from AU$19.99 due to increased competition; Presto TV, its joint venture with Seven, costs AU$9.99 per month; and Presto's entertainment bundle combining both TV and movies sets customers back by AU$14.99.

By comparison, Netflix costs AU$8.99 a month for non-HD services, or AU$11.99 a month for HD, Nine-Fairfax joint venture Stan is AU$10 a month, and Quickflix costs AU$9.99 a month.

Netflix's costs could increase, however, thanks to the Australian government's recently unveiled draft exposure legislation that will see GST added to all digital products and services purchased online by Australians from mid-2017.

Streaming services have been gaining popularity in Australia, with Roy Morgan releasing statistics in May stating that 1 million Australians were using the Netflix service just months after launching in Australia and New Zealand; while The Australian reported in the same month that according to Hitwise figures, in one day, Netflix had received 475,000 visits, while Presto and Stan trailed behind at less than 50,000 visitors each.

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