Quickflix: “We’ve got to get ourselves to profitability”

Late last year, online movie and DVD rental service, Quickflix, found itself in a sticky financial situation and entered a trading halt, pending an announcement about a capital raising.

A few days later the company was put into further disarray when key board members began leaving. First, HBO executive Henry McGee, who was quickly followed by CEO Chris Taylor and deputy chairman Justin Milne.

The Australian Financial Review said the company was perilously close to being handed over to administrators, and it looked like it was all over for Quickflix.

While revenue has been steadily increasing at the company since 2010, rising 56 per cent in the 2011/12 financial year to $16.9 million, operating profit dropped a massive 443 per cent over the period to $-3.5 million.

However, late last year Quickflix received an early Christmas present – on Christmas Eve, the company announced it was receiving a $5 million investment from BluePrint Partners.

Tim Parsons, chief technology officer at Quickflix, told Computerworld Australia the company is still finding its feet.

“Fundamentally Quickflix is still a start-up business. Yes we’re a publicly listed company, but we’re also a company that is trying to figure out how to make this work,” says Parsons.

“We’re a company that is still pretty small and we have our ups and downs … I would say that the media does like to write a story that’s going to grab attention and get a headline and that’s their right, but I think there was a fair bit of noise and the reality was different – we’re still here.”

Parsons says this negative operating environment is one that media companies typically find themselves in for several years before things turn around.

“Quickflix is no different. We’ve got to get ourselves to profitability. Our plans have changed dramatically in the last few months. We were originally aiming for profitability in 2014. We’re now aiming to get there this year,” Parsons says.

“If we can achieve break-even this year, then that would be a major achievement – that would be a serious milestone for Quickflix. That will also open up a lot of other [opportunities] for us, so I think that’s our principle threat right now – ourselves.”

Established in 2004, Quickflix listed on the Australian Stock Exchange in June 2005 and has recently seen its share price drop from around 8 cents in July 2012 to just 2.5 cents.

The company is now going through a transformation, shedding a third of its workforce at the end of last year and implementing other restructuring activities. This means the company now has a lower cost base and some projects have been put on hold.

However, Quickflix still has grand plans for 2013. In October last year the company struck a deal with Optus Wholesale to offer its online movie and DVD rental services to the telco’s wholesale service providers.

This would allow Optus resellers to provide Quickflix services to their customers on one bill.

So far, Exetel is the only Optus reseller who has confirmed it plans to offer Quickflix services, with the ISP still finalising pricing details.

“We’re trying to make effectively what is the Netflix or the Amazon play … which is a subscription service where people can stream as much as they want for a set fee and also [receive] DVDs and Blu-Ray [titles] by postal service, again where people can pay one fee,” Parsons says.

He says Quickflix would also like to introduce technology that would allow users to pause a program on one device and resume play on another device. The company also wants to collect ratings data from televisions, computers and mobile devices.

Page Break

The Netflix threat

At CeBit in October last year, Parsons said the company was trying to keep US competitor Netflix out of the country by signing agreements with as many companies as it could for exclusive rights to devices.

Quickflix has now signed agreements for exclusive streaming rights on more than 200 devices.

“We’re always concerned and we’ve taken on a particular strategy to roll out to as many devices and [to] as many platforms as we could as fast as we could to try [to] get a first mover advantage,” Parsons says.

“As a business we’re both trying to be super progressive and leading edge and we have one eye over our shoulder [for] players that have more money and larger content stores than we do internationally. It’s something that we’re constantly thinking about.”

While Netflix has been battling it out in the US courts over an alleged “unfair advantage” it received from the US Postal Service, Quickflix is currently in discussions with Australia Post to enable postal delivery of its DVDs up to one day sooner.

Quickflix already has a partnership with the postal service, but Parsons says opportunities have been identified which would enable DVDs to be delivered sooner.

“There’s a huge amount of technology that can go into speeding up how DVDs in Sydney, for example, [that] might land in a post box in Perth or Adelaide and how you can do that even faster than regular mail. That’s where a partnership with Australia Post is critical,” he says.

The NBN to drive future growth

While the National Broadband Network (NBN) is not yet bringing any benefits to Quickflix’s business, Parsons is hoping it will have a significant impact in the future and it will encourage people who were on patchy broadband to sign up to its service.

Quickflix is hoping its business will grow by as much as 10-15 per cent due to the NBN.

“So definitely we’re great supporters of the NBN. We hope it has an impact on us ... we’ve got our fingers crossed,” Parsons says.

However, he concedes the NBN could increase competition in the online streaming environment.

“I think yes, we’ll have more competitors but at the same time the pie will be bigger and anything that educates people and makes it easier for them to take the service [up] quite quickly, we’ll be there and we’ll be there saying ‘bring it on’,” Parsons says.

“We want a piece of that large pie as it grows.”

Follow Stephanie McDonald on Twitter: @stephmcdonald0

Follow Computerworld Australia on Twitter: @ComputerworldAU