Here`s the transcript of the call:
Today we would like to welcome Chip Gallent, president of GameZnFlix Inc., ticker symbol GZFX, on the over the counter bulletin board.
Welcome Mr. Gallent.
Thanks for having me.
Can you give us a brief overview of GameZnFlix, what you do and markets you serve?
GameZnFlix is in the on-line rental business of both games and DVDs, we are one of very few that do that, and what it allows us to do is really to serve the home in a way that no one else can in the on-line rental business. Our goal is to provide the family with a broad variety of rental choices, taking into account of the game market as well as the movie market and provide that value for the home entertainment dollar.
What do you think is the value proposition for your customers? What do you think separates GameZnFlix from its competitors?
The main thing for us is, like I said, we are the only major company in this market who offers both games and movies. And it really is helping us to establish its own category because traditionally, you had to go in either direction, either to on-line renter of movies or on-line renter of games to get the same thing that you get from us. For example, one of our competitors in the game space, offers two titles out at a time program for \\$21.95. On the DVD side, you can get three titles out at a time program for \\$17.99, that`s \\$39.94 in combined rental expense to the home to get the same thing we offer for \\$16.99, now that`s our three out program.
If you want to look at purely apples to apple, you have to spend almost \\$30 to get with game provider that offer one out plan with a movie provider to get the same thing of \\$16.99 that we offer. The fact that who we serve and who our customers are, the majority of people that we deal with are males. Our age demographic is 24-39, half of them are married. So we are really penetrating the home entertainment value for that home, and it`s allowing us to serve, maybe their son or daughter who`s a gamer, dad might be a gamer, mom might be a gamer. But then again, mom and dad might want to watch movies on the weekend, or kids might want to watch a particular movie. We are giving a lot more choice for their investment in the on-line subscription.
Tell us about the company`s relationship with Circuit City.
We are in a program with Circuit City where by we are testing in stores the sale of our service through a box that we have designed that`s sitting on their shelves and they are selling for us. The pilot program we are running with them right now, and we are hoping that that will lead to further expansion into the rest of their stores, which is going very well right now for us. All we can say at this point is that it`s going well, and we are hoping that it will lead to us being in more of their stores.
When can investors expect the company to see uptake of subscriptions and revenue?
We are, for example, we have historically reported information, we are coming out of fourth quarter, you will be able to see those results in our annual report that will be filed some point in the first quarter. The most encouraging news today is that, just looking at the month of November, we are already up 25% in our membership from where we began on November 1st, and so that`s very encouraging for us right now. A lot of things we`ve been working towards over the last couple of quarters are really beginning to work for us. Our new mailer is working very well for us.
We are striving to have as many titles on release day is as possible. That`s one of the things we, through some of the research, we have identified that our members really like about us. Most of people in this business do not have the inventory from on day one. They wait until the titles are available on the used market, and they bring those titles in 2, 3, 4 weeks after release date.
What our research tells us is that the primary drivers in this industry are new releases, specifically on the DVD side. On the game side, it is very much with the new releases very much in line with genre specific titles be that shooter, role-play any number of genres that the gamer has. Having the day one stock is very critical for us and a key advantage that we have over a lot of people in the industry.
We have seen what happened when we launched our XBOX 360 program in the fact that we had titles on the shelf on day one, shipping to our members, and what that did to the demand for the titles and what that has done for us in helping us increase our membership, by having more variety for people to choose from.
Is the company currently capitalized to achieve strategic objectives through the next 12 months?
Absolutely, through our investment partners, we are very well capitalized and GameZnFlix is now at the point where we are no longer a startup business. We are absolutely in the growth and expansion mode and we are well capitalized to take on that state of the business.
How much growth through acquisitions can the investors expect in the next 12 months?
I think more than anything you will see that this industry is at a point in time where consolidation makes a lot of sense. There has been a lot of people who have been in the business for a number of years. A lot of companies that are privately funded who are not public, and are really at the point, in order to take the next step, they need access to capital and/or partners. What we look for in a company is for any type of acquisition target, is someone who is just that. In order to get to the next step, they need money. They`ve done a good job getting it where it is, but they just haven`t been able to break through ceiling of some sort, whether it be marketing expense, inventory expense, growth expense, infrastructure, so on and so forth.
Another thing that we look for in a company is that is the company on-line rentals of movies or on-line rentals of games? Do they make good fit for us strategically? Are we like minded in the way we approach the business philosophy around the business do they have sound membership base? Do they have good inventory on hand that we can bring into our fold and help us expand the inventory that we have? You are going to see from us, that we are very aggressively looking for acquisitions right now in over the next 12 months, you are going to see us very aggressive in that side of the business.
Tell us about the company`s management team.
Number one, we got a great management team. We got a core group of five individuals that cover the gamut when you are looking at the business, obviously finance, operatins, marketing, technology, human resources and the core people we have, Mr. Flemming, myself, Chris who runs the web operations side of the business, Arthur, CFO everybody has unique experience in and around the on-line business. We obviously been working to get to this point now for two or three years. Mr. Flemming has laid the ground work for us. So, our management team is really one where we got the right people to help us grow. We are looking for additional people to help us grow in other parts of the business. As we keep continuing to grow in member, We are looking for other parts of the business continue to grow in membership, the number of title, the number of distribution centers we have to continue to bring in good people to take us to the next level. We are obviously not done, and we will be adding others as we grow as we see fit and as the need arise. But as far as the core, we are very sound and have a great team to work with to get us where we are looking to go.
What are some milestones over the next 12-18 months the investors should watch for?
Number one, we already hit on, which is acquisition, in finding companies that are good fit companies to help us grow, can bring subscriber number to us as well as inventory as well as good people Probably in the first quarter is going to be the revised website. We were looking to get that out sooner, but we were counseled that releasing a new website during the holiday season was not a good thing for us to do at this point in time because of all the issues that surround releasing new technology out into the market.
The other thing is expanding our advertising and marketing. And really getting to the point where marketing and advertising is more science. And we understand exactly how people come to us, what drives them to us and what drives people to stay with us, for as long we can serve them, as long as they have a need for on-line subscription. We are looking at things like sponsorship and endorsement programs at different levels. Different sales channels we can look at for offering our service. We are looking at things like, is there potential for us to offer a way for groups and organizations to sell our service as a fund raiser, and are those kinds of things possible?
Obviously the other thing is expansion. Where do we go with distribution centers? How do we expand the business in a smart way in line with membership growth so that we are closer to pockets of members; therefore, so that our turn around time is better Another thing that is very strong for us is what is the evolution of rental business?
We are aggressively looking at a download model or paper view model, one that would allow us to offer to our members a title that is electronically delivered, you know that is the next stage of this business. And whether that be through a computer, to a media center PC that is attached to the television, or satellite system of some sort, or an IP based television, that is something we are aggressively looking at because the technology and more importantly, the market for that may not be here right now, we know that some of the things that has happened in and around the business, that it is absolutely coming, and we want to be ready for it in anticipation of what that is.
Another strong thing for us is expansion into Europe and what that may entail, either through organic expansion or through acquisitions. And really the next things that are internal to the business is you got two new game platforms coming on-line in the spring, Playstation 3 [and Revolution]. You also have, probably in the summer or fall time frame, HD DVD, which is whole new world for us in respect to DVD and its technology. So, those products as we see them are going to be strong for us going into, which they are released and we will want to stay on top of those. So, that`s kinda of a laundry list of things we are working on and we are striving for the next 12-18 months.
Do you have any closing comments?
I think the biggest thing is to reiterate that GameZnFlix is no longer a startup business. Everything is in place for us to grow. We are adequately funded. Our internal infrastructure, both from capacity to shipping and receive is in great working order. Our IT infrastructure is at a point in time where we have more bandwidth and more capability especially with things we will be viewing at the website, from que one, is better than we have been with respect to web operatons. Marketing is qued up and ready to go. Our relationship with Circuit City and other relationships we are working on with marketing partners. Website sponsorships and other programs that we are looking at to help grow members, we are very excited about. Everything in essence, is ready for us to take off. We are retaining members better than ever before. We are growing at a rate better than we have ever before.
And it is now time to just " sit back," not necessarily sit back, that`s the wrong term, but to manage the growth of the business. And we have to be very strategic The growth is managed in line with everything. the demand doesn`t get ahead of supply we don`t bring in an exsorbant amount of members that we can serve. Everything has to be done in line so we don`t overextend ourselves. One thing about this business is that you have to be very very careful is we are constantly watching the demand. We are reordering customers are satisfied, our ship time to and from the customer are better than it has ever been. Our day one stock is better than we have ever been. We are serving the customer better than we have been because we are watching those things on a daily basis. And so if there is anything I am completely encouraged with the state of the business is just that, we are in growth mode.
And finally, is there a website where investors can go to find more information?
You can go to our website, in the about section of gameznflix.com.
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