Q1 2020 Earnings Call
Ladies and gentlemen, today's conference is scheduled to begin shortly please continue to standby. Thank you for your patience.
[music].
Ladies and gentlemen, today's conference is scheduled to begin shortly please continue to standby. Thank you for your patience.
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We're standing Bonnie and welcome to the chicken soup for the sole entertainment first quarter 2020 earnings call.
This time, all participants are in listen only mode. After the speaker presentation, there won't be a question and answer session to ask a question. During this session. You want me to press Star one on your telephone. Please be advised to today's conference is being supported if you require any further assistance. Please press star zero I would not only thing in the conference over to your speaker.
Mr., Jeff Smith.
So much you guys you may begin.
Thank you and welcome with me on the call today are William J., <unk>, Chairman and Chief Executive Officer, Chris Mitchell, Chief Financial Officer to review the results of the 2021st quarter as well as part of business update.
In his discussion there will be a moderated today's session open to the participants on the call.
During this call management will make forward looking statements forward looking statements include but are not limited to statements regarding expectations intentions or strategies regarding the future.
Included in these risks are forward looking statements based on management's current expectations and assumptions that are subject to known and unknown risks uncertainties and other factors that could cause actual results to differ materially for projected results.
Given these uncertainties listeners are cautioned not to place undue reliance on any forward looking statements contained in this conference call.
Please refer to the cautionary text regarding forward looking statements contained in the earnings release, which also applies to the concept it's cool.
Additional risk disclosures could be side of the company's filings with Securities Exchange Commission.
As a reminder, on May 14, 2019 chicken soup for the sole entertainment created a subsidiary with Sony Pictures television watching Crackle plus.
Today's call management will make comments on certain got staged and non-GAAP financial information to the combined company that includes crackles financial results for the relevant periods. Prior to the closing date as if the acquisition occurred on January 128 cheap.
The non-GAAP financial measure of the company uses its adjusted EBITDA.
Hi, Good believes that adjusted EBITDA provides useful information and that it excludes about what are not indicative of the company's core operating results and ongoing operations and provides a more consistent basis for comparison between periods.
The earnings release contains a reconciliation of adjusted EBITDA, It's nothing covered watch which is the most directly comparable GAAP measure.
For further information regarding the company's historical financial performance, we refer you to our filings with the FCC, including our quarterly report on form 10-Q for the quarter ended March 31, 2020, which was filed for that.
I would now let's turn the call in virtually every part of <unk> Chairman and CEO. Please go ahead.
Thank you, Jeff and good afternoon, everybody. Thank you all for joining us today.
We're pleased to share that during Q1 2020, we were able to maintain the momentum we talked about when we reported our Q4 19 result.
Of course, the early part of the second quarter has posed challenges as expected.
But notwithstanding near term uncertainty our performance over the last two quarters reinforces our confidence in our business model.
And our beliefs that we have a long runway for growth when industry, an economic conditions normalize.
Before I get to the highlights of the first quarter and more about the current environment I'd like to know that today is the one year anniversary of our acquisition of Crackle.
And it's been an eventful year.
Our Q1 highlights or another bit of evidence of just how transformational the crackle acquisition has been for our company.
In the first quarter, we delivered 14.1 million of revenue, which was more than four times the first quarter of 2019.
These results were driven by strength in both our online networks business, which came from stable advertising revenue, increasing viewership and significant year over year growth.
And from distribution in production.
Our online networks generated 9 million in the quarter.
With distribution and production contributing 5.1 million.
That was up 185% from last year.
Adjusted EBITDA for the first quarter exceeded analyst expectations analyst consensus by over 20% totaling 2 million.
Second straight quarter in which we exceeded EBITDA expectations.
We're currently at a solid financial position, because we moved immediately to take protective measures that enhanced our balance sheet and arm and improved our liquidity when the pandemic struck.
These actions should stand us in good stead, assuming that the current environment doesn't materially weaken from here.
On a related note we were pleased to see that the rating group Egan Jones reaffirmed our company's triple B rating.
Chris will discuss the implications of this in a few minutes.
Overall viewing trends on crackle have been healthy with video streams, averaging approximately 50 million per month.
On crackle and popcorn flex.
As we talked about in our last call visits and viewership trends were already solid during the quarter.
Began to spike in markets show in March as shelter in place mandates went into effect.
Also our internal metrics show record visits for crackle impart conflicts in that period.
Increased traffic and viewership enabled us to deliver a month on month growth in AD impressions throughout the quarter and stable cpms.
In fact, we had more advertising demand during Q1 than we did add inventory despite localized advertising beginning to experience some pressure near the end of the core.
One thing is becoming increasingly clear.
About our programming strategy.
Our original an exclusive programming is finding it audience.
New and original exclusive content.
Made up nearly 15% of streaming hours in the quarter.
The best overall quarterly performance, we've seen so far.
For some perspective, when we started tracking this metric in September only 3% of streaming hours were from original and exclusive content.
Coincident with the growth in viewership of our.
Oh and original and exclusive content, we are having to rely less on Sony for content.
Today more than 60% of our programming on Crackle comes from us compared to only 10% just a few quarters ago.
We believe this demonstrates the depth quality and growing volume of content, we were able to bring to air the or our low cost low risk distribution and production business.
Turning to distribution and production our strategy is gaining momentum.
Increased number of titles and their overall quality.
Contributed to strong growth in the first quarter.
You may remember that in our last call I discussed the fact that we had already obtained all the content that we need for 2020 and last year's fourth quarter, which puts us in a good position to continue this momentum throughout the year.
It's worth noting that more than $800000 of the distribution in production revenue. This quarter comes from our online networks business as we deliver more of our own content, including our original exclusive programming to crackle plus.
This is kind of an amazing number when you consider that the total revenue share from the time of the Crackle plus transaction through the end of 2019 was only 900000.
This is a good indication of the value of our content in another sign that our differentiated Avon business model is working.
Moving to the current environment, we along with others in our industry have begun to see impacts from the pandemic.
Advertising activity weakened substantially in April led by brand and local AD brand at local advertising.
This is disappointing, but not unexpected keep in mind, we work with resale partners for local AD sales largely comprised of broadcast and cable station owners.
Our partners began seeing low local lower demand from small businesses as the stay at home mandates went into effect.
Many national advertisers have also cut marketing costs dramatically.
However, some AD categories have seen increases for example, consumer package goods gaming delivery.
Insurance and pharma have been among the stronger contributors.
As parts of the country, partially reopen we are seeing this leads to some revival in local.
And are rekindling of demanded brand advertising.
However, marketers who are used to airing brand ads nationally are struggling with how to better target those ads to markets, where economic activity a stronger.
First as markets in which stay at home orders are still in effect.
No targeting geographically or something we are actually very good at.
Since we've been generally doing that for approximately 40% of all our advertising.
Overall, the environment remains highly uncertain.
We are in a relatively better positioned than some giving our attractive younger and mail skewing demographics.
And we are focused on reinforcing that message with existing add partners, while also being creative and exploring new opportunities such as branded channels.
We also think our audience looks attractive to <unk> to political advertisers.
And we anticipate.
To begin picking up some of that business as the election season swings into gear.
Viewing trends are starting to revert to normalized levels in April trending down from a late March peak.
I have remained fairly stable in may.
My advertising booking.
Showing is currently showing improvement over April.
Whether these trends hold is a function of how the pandemic and economy evolve in the coming weeks.
On the distribution and production side T. Vod has been a bright spot for us across our industry.
Last quarter I asked you to check out our release of last full measure and I guess you did.
So thank you.
We believe that T. Vod will continue to be an important part of our distribution in production business, while theaters remain closed.
Strong lineup of content for T., Vod, which is distributed broadly over digital and cable platforms.
We also have a healthy pipeline of new original content, including cooped up and Crown Vic, which we recently released.
Because we have ours, we have set our full slate of new content through the end of the year. The current film and television production delays should not impact us in 2020.
We are seeing more interest in our screen media Library library as other programmers and networks seek to fill holes in their own schedules.
Summarizing our recent results, we had a solid first quarter pretty much across the board with strong audience growth and viewership trends growth in AD revenue and a revitalized distribution and production business.
All showing continued momentum.
This demonstrates the long term potential we have ahead of us.
Earlier in the early in Q2, we began to see the effects of the challenging in uncertain economic environment.
We all find ourselves and today.
While we hope April will be a floor in terms of AD revenue that remains to be seen.
Regardless, we expect to see a partially offsetting benefit as our distribution and production revenue continues to grow.
At the operating level, our focus is on continuing to execute manage our cost carefully and maintain a flexible balance sheet.
We are taking an opportunistic approach to building our business for the future.
Reviewing potential acquisitions are both companies and film and TV libraries, we.
We believe if we execute well in the near term.
That would be in a good position to come out of the current environment and a stronger position.
As I mentioned on the last call, we continue to cease significant strategic opportunities.
And that has only increased since we last spoke.
We are doing our best to balance these efforts the efforts that it takes to execute our plan.
And ensure that we are in a position to make it through these challenging times, while also exploring opportunities as large media players develop their avon strategies.
We believe the value of our unique business model, which would take years to build or replicate stands out in the industry.
We all know that these times require everyone to pull together and we'd like to thank our employees, our community and our investors for their support and fortitude.
I'd also like to thank our vendors, who have uniformly been supportive of our business.
And in a broader sense. We appreciate the commitment of the people in organizations that have come together to address this global health emergency.
And our thoughts are with all those who have been impacted.
I'll turn this over to Chris.
Thank you Bill.
On today's call I will focus on a review of our financial results and balance sheet.
We reported gross revenue of 14.1 million in the first quarter compared to 2.5 million in the year ago period.
An increase of 464%.
Online networks, where practical plus.
Generated 9 million in gross revenue in Q1, 2020 compared to 735000 in a year ago period.
As a reminder.
We did not have cracker plus in the year ago quarter.
As a transaction closed in mid May 2019.
As mentioned on previous calls, we consolidated distribution and production into one revenue line.
Distribution to production generated gross revenue of 5.1 billion in.
In Q1, compared to 1.8 million in a year ago period.
An increase of 184%.
As Bill noted.
802000 of our distribution in production revenue is attributable to our online networks.
As we supply an increasing amount of new and original content to our networks.
As we scale the business our ability to be a key supplier to our online networks.
Fourth the incremental growth businesses.
Both businesses, while further differentiating our Avon networks from many of our peers.
Gross profit for the quarter ended March 30, Onest, 2000, 23.3 million or 25.2% of that revenue.
Compared to 0.6 million or 25.6% of that revenue for the year ago period.
An increase of 494%.
Without the noncash film library amortization expense.
Deducted gross profit would have been 5.7 million were 43% of total net revenue.
Operating loss for the quarter ended March 30, Onest 2020 was $10 million.
Compared to an operating loss of 2.7 million for the year ago period.
Without the film Library amortization expense included in cost of revenue.
And the amortization expense of acquired intangible assets, resulting from the crackle transaction the operating loss for the quarter ended March 30, Onest 2020.
I would have been 2.3 million.
Compared to 1.9 million in the year ago period.
We had positive operating cash flow in the first quarter of 1.9 million compared to negative operating cash flow of 3.8 million.
Same period last year.
Adjusted EBITDA, the first quarter was 2.1 million compared to an adjusted EBITDA loss of 0.8 million.
Same period last year.
I'd now like to turn to an update on our balance sheet and liquidity position.
As of March 30, Onest 2020, the company had cash cash equivalents of 7.1 million.
Compared to 6.4 million at the end of the fourth quarter 2019.
And 3.8 million at March 30, Onest 2000.
22019 per year.
As of today, we have approximately 6.5 million cash on hand.
As of March 30, Onest 2020, we had outstanding debt of 19.2 million with no significant maturities for several years.
Further to the balance sheet discussion, our triple B corporate rating and Triple B minus preferred stock ready.
Confirmed by Egan Jones.
In April with an ability to increase the preferred stock issuance from 40 million up to 60 million at that meeting.
Well, we would not choose to issue preferred stock at this time.
Under normal circumstances, and we have no immediate plans to do so we plan to file can S. Three shelf registration statement in the near term.
To provide us with further financial flexibility.
Looking ahead to our second quarter results, our distribution and production business is continuing to make strides and we are positioned to drive continued growth in Q2.
Keep in mind that as we execute on our revamped strategy in this segment.
We will see and improving consolidated margin profile as well.
In our online networks business Bill indicated that AD revenue had been pressured in the early part of the second quarter.
But not outlined with what we believe others in the industry are experiencing.
We're seeing some early signs of improvement in recent weeks, but there is very limited visibility currently.
Wrapping up we feel good about Q1 performance and believe the underlying fundamentals in our business validate our strategy.
Near term pressure.
And uncertainty is a factor.
However, and we will see that in our results for the current quarter.
Softer AD revenue somewhat offset by strength and distribution in production.
We're managing through this period with caution.
The strong focus on managing costs in our liquidity.
We believe our long term prospects remain bright.
Thank you for joining.
I'll now turn it over to the operator to begin acuity period.
Thank you as a reminder to ask a question you want me to press Star one on your telephone we ask that you. Please limit yourself to one question and one follow up question. You May then return to the Q to withdraw your question the town key please standby, while we compile the culinary roster.
Our first question comes from Dan Kurnos with benchmark capital. Please go ahead.
Thanks, Good evening Bill just you know understands the environments really messy right now I just want to get a sense and thanks for the color on categories, but just wanted to get a sense you know some of the viewership trends that you saw kind of spike.
Obviously sort of shelter in place benefiting the platform and really he bought in general.
Do you have a view on how long that persist and maybe.
If you're doing.
And what you're doing to sort of incentivize people to remain.
On the platform longer term, what do you think the stickiness of kind of this uptick is.
Okay, So hi, Dan.
There's a bunch of different things of that question.
So we did see a spike I think it kind of peaked at the week of March 20, Threerd and viewership.
And then it came down a bit in April but still remained.
Of.
What we had been seeing before this all started.
The.
The ability to hold people.
For the long term I believe will.
The dependent on the quality of the original and exclusive content that we continue to introduce.
And I think we're starting to show that that.
Thats stuff is sticking and working.
We.
We gave you a little bit of the number on the first quarter, but if I looked at.
At March and April.
The percentage of people, who are watching our original exclusive stuff continues to rise.
And I think that's really the differentiator between us and other Eva it's where other a lots have deep libraries as do we.
They they lack the original an exclusive content that we have.
And when you look at our numbers.
It is absolutely consistent that new stuff that is new to Avon in which we have alone is always the top performer.
In terms of viewership.
We have a very robust lineup coming we didn't give a lot of the details about that because we like to kind of surprise as we get to the next month with the various announcements we make about this programming.
But it is well organized and it is it is very good through the rest of this year at least and there are a couple of big things that are that are coming too. So.
I I really think Dan that's going to be the key.
Continuing to live deliver stuff to people that they enjoy watching but can't find anywhere else.
Doing it with our model, which is keeping our cost down and not taking big risks.
I think that's the that's been the strategy from the beginning it feels to me it looks to me based on the numbers like it's truly working.
Do you have a view on how that we are positioned in the landscape given that most of your competitors have now been acquired fair now part of.
Sort of content provider.
Yeah, you know.
It's very interesting the.
I think what will happen in Avon is what has happened in aside or what is going to happen aside and I think you're going to see a number of walled gardens created where the bonds that have been acquired will only have.
Well, we'll primarily and maybe only exhibit the content of their owners.
The the problem for them is that it takes a couple of years generally to get back the rights to enough of your programming to matter.
So they'll go through a couple of year period, where they'll have a where the rights will be coming back slowly, but surely couple of years from now.
You know.
They will have their own content and they will look a lot like us I.
I don't know how big will be by then but I suggest I suspect substantially bigger.
So, but I do but I do think it a couple of years than our model will be imitated by others without a doubt.
Do you have a view on sort of CPM trends.
We've heard sort of varying impact on programmatic, obviously premium video has taken a bit of a step back.
You know impressions being as strong as they are and it sounds like sort of what we've heard from general online has been stabilization.
If rates and not down as much.
In April and improving it to me I think you kind of echoed that in some of your prepared remarks, but.
Understanding that it's really an advertiser.
Demand supply equation and consumer this consumer impact just curious sort of how you think this kind of plays out and can you continue to.
Outperform.
No I guess broadcast linear.
I think Theres no question, we cannot outperform broadcast linear that I think theres no doubt about it's just a completely different audience I mean, 60, plus year old I happened to be one of those where boring we're not that interesting to advertise too.
But the 18 to 34 year olds, who watch our networks are really interesting fabric to advertisers and can only be reach through networks like ours. So there I don't think that question is really a worry.
As far as Cpms go look we've made a conscious decision I think we might be the only ones in the business right. Now we can make this conscious decision not to break cpms through this period.
Because we rely so little on programmatic revenue.
And I think we're going to be okay with that.
April was a little better actually it was considerably better than I feared but it wasn't as good as I wanted to be.
May I think will be.
Considerably better.
So.
I'm not you know nobody is immune from this this continues depending on what happens now Dan in terms of reopening.
We might be seeing an up and down kind of world for a while where we get a bunch aprils and we've done we get a rebound for a bunch amazed.
I don't know Theres, a trend yet I just know that.
Yes, so far.
It hasn't been as bad as I thought it could be so.
Yes.
And just well if I could sneak just one more in bill I. Obviously, you know you kind of mentioned it you know you think you might be substantially bigger I just in this environment it feels like.
The irony is rather hot at least being sort of from your position and relative to people wanting.
You know he bought or partnerships.
You know there are obviously also a lot of distressed assets out there, but you have to be mindful the balance sheet. So.
You know I don't know, how you get there or how you work a the magic that you do build but just your general thoughts on.
Landscape and how quickly something may or may not happen.
I think I tried to make it pretty clear that when I said, we continue to see street significant strategic opportunities and that has only increased since we last spoke.
And I actually it is true on both looking both ways, both in terms of opportunities to acquire and and opportunities to partner.
We're engaged in a lot of different conversations that I I have.
That I'm I'm, finding very very interesting and I think confirm for me at least the value of our company. So.
With that over say overdoing, it or under doing it. The this is the in the economic environment. The pandemic has not stopped any of these conversations for moving forward.
Yes.
And I agree then.
We do have a unique asset right now.
[laughter].
Got it Super helpful. Thanks, Bill.
Thank you.
Thank you. Our next question will come from Thomas 14, with D.A. Davidson. Please go ahead.
Sure. So one question one follow up and then I'll get back into queue for additional questions. So my first question is Roque, who suggested that the current environment is going to accelerate the disruption including to the upfront.
And accelerate the movement of linear TV AD revenue, Dave I wanted to get your thoughts on that though.
I think it's inevitable Tom.
[music].
The trend was already there right we knew that before they started.
What did people do when they actually were forced to stay at home.
More than anything else they went online to stream.
As filed today Vod.
Services.
There were increases in broadcast or increases in traditional cable, but there was an acceleration of it.
Viewership in the online streaming world, which makes perfect sense, that's where people were going anyway before they started.
So.
Advertisers are as fast as people in the world.
In terms of changing the things they do but they can count.
And they know where audiences are and they will follow audiences.
So I think there's no question that that that's that that is right that this disruption is going to ultimately.
Be a major.
Step up for all of US who stream and all of Us who.
Work with advertisers in this space.
It'll be a step function growth, but that growth was inevitable anyway, it's not like.
It wasn't happening it was clearly happening every single trend is is in our favor in this regard we put ourselves squarely in front of those trends when we decided we were going to be at Avon.
And we've capitalized on those every step of the way.
So I don't see any way that this reverses Tom I think it just helped speed things up and there is one other clear thing.
Cable as expensive.
And if you're one of the 40% of these households that I understand have lost a job.
In the last month.
You are looking to cut costs.
So where are you going.
You are certainly looking at cable as one of the things you could afford to get rid of if you were already thinking about it because you've heard about this cord cutting idea.
From your friends.
Now I have a need to do it.
You guys have seen this and the cable numbers you see the sub.
Losses, and they're going to get worse.
So.
I think that all of this is driving existing trends to accelerate.
And then for my follow up question. Thank you for that though for my follow up question I want to know if you can explain in a way to helps me understand how I can think about pricing do you have placed floors in the event that consumption remains elevated.
And in the event that you didn't get pricing you liked.
Would you scaled back to the AD loads the number of ads that are showing against the content.
That's a funny question coming from you because you are one of the people who as have watched it compared our service to others and know that we have a considerable number of ads compared to some of the other Avon.
On our service.
I get to kick out of your your reports Tom.
The thank you.
I.
Like we have a consultant so thanks for the help.
No I don't know the answer your question is I'm not really sure. So far we haven't had to truly face that question.
We have we have faced at a little bit and made the decision that we're going to try to hold our cpms.
At a premium level, we have a valuable audience, if you're going to get to that audience, you should pay us appropriately.
April did not really represent the kind of downturn that forced the issue.
It was modest.
So.
But I guess you know I don't want to say, we would never do it because we haven't really been confronted with the premise of your question.
And we might.
Choose to change and Ed, let AD rates, but I actually don't see how that's really all that smart.
It doesn't seem to me to really do you a whole lot of good because theres always some other geidel charge less.
So if you're going to be selling on price as compared to quality.
That's a race to zero and we have a quality audience.
We have a great audience, we have quality programming.
And we have quality brands associated with us.
And that distinguishes us from many others and I think that's what advertisers want they want to be associated with premium quality.
And our original exclusive content strategy reinforces that.
And I think we're entitled to that to that kind of CPM because of what we deliver.
So we're going to hold out and I would expect indefinitely, but.
You never say never right you never know for sure.
Well thanks for your answers, they're gonna get back in line for a couple of more follow ups. Okay. Tom.
Thank you as a reminder, ladies and gentlemen, if you would like to ask a question. Please press Star then one my next question will come from Allen Klee with National Securities. Please go ahead.
Yes, Hello from your production and distribution partnerships I know, we're not producing anything new today, but can you.
Just give us some thoughts on how you feel about.
How they're going and your ability to expand and diversify among them and new ones.
Okay, Hi, Alan.
Hope you're well the.
Landmark, which is the key so far.
Is very well positioned to start production.
At least for bright for big projects.
The minute.
The mid at low legislate have limited lot lawmakers allow them to as well as.
The second half talent agrees to.
We've spent the last the last couple of months.
Really.
Finishing off the development of these projects and getting ourselves in a position.
With financial partners in those each of those projects so that we could hit the ground running.
The minute Lockdowns and.
Assuming talent wants to move forward.
So I feel like.
I feel like we're in it okay place there now I've been told that Canada is preparing to open up production in July.
At a couple of European.
Countries are preparing to open up production even sooner than that.
I think this the second question that I raised which is talent willing to do it.
And are you going to be able to.
I get to be able to create a safe environment for people. I mean these are critical questions that I think can still slow down the reopening.
The production activity.
But the minute it's possible we will be on the spot doing it.
In those per day in those co production ventures.
Other co production ventures.
We've really slowed down that process through this pandemics.
With one notable exception that I won't I won't go into.
So I, but I do think.
This co production.
Process works these partnerships will accelerate once we get through.
To a more normal time.
We've got three or four of them that are.
Simmering, but we've not focused on them as the same way we focused on some of the other things we've had to do during this period.
Though.
So thats kind of an overview of where we are.
Thank you very much my other question is is there any update on what so many my two unrelated to any actions related to your joint venture.
Well you know actually tomorrow.
The first day, Sony's option to decide whether or not they would like to retain 49% of crackle plus or convert into our preferred stock or.
Become a common shareholders begin so the period begins tomorrow.
Last through November.
There've been some discussions about this with them, but they really are not.
I really can't.
Talk about the specifics it's not appropriate.
Sufficed to say Sony is heavily motivated.
It has publicly stated many times that they are not interested in.
Staying in businesses that are not generating them a net income contribution.
And it will be awhile before crackle plus because of the way it's organized could do that.
So.
Seems to me the odds are that they will not stay at the 49%, but I'm only.
Speculating based on their their public comments.
Thank you so much.
Thanks Alan.
Thank you. Our next question will come from Mike Grondahl with Northland Capital. Please go ahead.
Thanks, Michael on per month, thanks for taking my questions.
Maybe just so I think you called out a couple of films a series.
For the quarter was there anything else to call out there once in a that surprises.
Your interest there generated.
Yeah, I mean, there is one thing that I think is worth talking about.
Thats the success of Onpoint.
Which was another original series that we.
We got and which has done extraordinarily well.
And I have for a while gave you guys sort of the going from broke scorecard.
And that has returned multiples of what we spent on it.
And.
The onpoint numbers are showing a similar kind of.
Result.
And they are now approaching.
Over seven times, what we spent on between the cost the cost of that and marketing in terms of network revenue. So.
I'm fascinated by how successful.
These these original programming cat originals can be.
They don't all do that of course, they all make us money, because we don't have because of our strategy and having little or no net investment in them when they go on Ari by business, but.
Couple of them going from broken now on point of performed extraordinarily well and I think crown Vic maybe another one that is going to come through.
The big way that seems to be doing extremely well.
Yes, that's something I think thats, just worth, noting I didnt have I didnt really mentioned in the script or.
Accepted that under the generic heading of originals that exclusives, do well and our great part of our business.
But that one in particular has done extremely well.
Basketball series.
Many of you haven't watch that you should go watch it gets pretty good.
That's helpful.
Maybe just longer term once we get to some more normal environment I'm sure you think about.
The allocation instead towards.
Producing content versus marketing.
Seniors and content then platform.
Well you know the content.
Production and distribution side of the business.
For them for the time being it operates on the model that we've always operated under which is.
Lay off risk.
End up with little or no net investment by the time, we go too.
Go to put it on our own Avon network.
And I think that is the model for the foreseeable future.
The marketing side.
We've been.
We have not been aggressively marketing.
Since we took over crackle.
And there's been a variety of different reasons for that.
But it's getting closer and closer to the time, where I feel like we should really.
Focus in on on making noise and being seen.
We recently launched a new public relations campaign.
Which seems to be bearing fruit.
We are having.
Seeing vary a lot of coverage for both crackle, our new releases.
And that I that I'm seeing as that's that's a net positive really helping.
We're going to be doing some interesting testing of.
Direct marketing to certain audiences.
So I think marketing money.
Marketing money is likely to be made available here in the in the near future.
The company's that that grabbed the most market share during downturns of the company's that.
Increase their visibility.
So I would expect us.
To be looking at that the business that way going forward.
Thanks, a lot back.
Thanks.
Thank you and we do have a follow up question from Thomas 14 with D.A. Davidson. Please go ahead.
Great. Thanks, So bill maybe I'll have to more follow ups and get back into queue again. So I wanted to ask you a question that you sort answered, but asking a little differently. So to the extent that Canada isn't hope it now and you're not filming in Korea for tickets Iceland.
If there is an extended period of time, where content creation has disrupted.
Hi, well can you lean into your library.
We are good Tom I'd say until the first the under the first quarter of next year.
Which point, we have to star leaning into the library, if we if we don't have new stuff.
But.
I think that we will if we don't see things open soon.
We will start.
Creating content.
In ways that are that we can create it now.
And I don't I don't know how to how to illustrate that better than to say if you. If you happen to be like me and still watch Saturday night live.
Saturday Night live at home.
Was it was on the last several weeks.
And they created that created a show in a brand new way that was actually possible in the pandemic.
Hi, I'm, not saying that was good bad or different but just a good example of that alternative way that content can be created in the current situation. So we all don't see this situation alleviating itself.
We will be among the first people to quickly start to create content in ways that are possible now.
And why do I say that because were.
Quicker.
And we're going to make decisions faster and were guide us we're going to adjust to reality.
More easily than major companies can.
And we can create a lot of really good stuff.
Without going out and.
Necessarily shooting.
The way way, it's been done traditionally we won't be alone. Obviously, if this continues and people can't start.
Making stuff that will have to be alternative ways to do and.
We're all going to be watching things that you deficit you'd be watching you know more stuff shot with I phones and.
More stuff shot for People's homes, and and more clever ways of integrating people are in two different locations into what appears to be one spot.
But I think that's that's the likely result time, if we don't see it starting to open up soon.
To help alright, so yes, yes, so one more follow up and then I'll get back in line one more time all right. So I want to know what we've learned so far from life without live sports How's that benefited you.
Well you know it's it's.
Sources advertisers to go searching for 18 to 34 year old males. So and we have a lot of those so that's very helpful.
It also probably as why something like on point, which is a basketball series just shoes to the top of the charts and stays there indefinitely, because at least thats sports fix of sort of sorts.
So I'd say those are direct benefits.
And you know it's got it theres another actually funny results the lack of.
I should say funny.
Unexpected results, which is the lack of the Olympics has really been a setback for pecan.
And that would have been a formidable.
Competitor if it was fully.
Developed at bringing the Olympics to it in some way this summer.
It's for them.
Serious below on many levels as I'm sure you know.
But for us it.
Just extended our runway to keep building and growing doing smart things.
With one less.
Serious competitor for eyeballs.
And Tom I'm going to give you a bonus question because youre going to be last person. So.
What else would you thought well that alright, that's got to be a double than ours, because I had two more luck alright. So my my last find my bonus question is.
Do you think they did release is primarily changed.
When theaters reopened and then it seems like you've changed your content strategy and children's content.
Can you explain your current thoughts on your view of children's content on the platform.
So are those are two questions or could you speak to into one question you're going to have trying to ask another one after this no. That's it you gave me a bona Fide merged my two questions into one.
Okay. So let me give you the answers.
I think you think there will be a permanent change in the way.
Seattle releasing occurs.
I do not think.
It will be.
Quite.
All the way to day in day to cross the board, but I do think you're going to see an increasing number of.
Date, releasing creating proved producing number those.
It's the economics of.
Digital distribution of major films.
Our very favorable to the just to the owners of those films.
Theres no 50% to the theater.
A much lower.
A much lower fee.
Net to the distributor.
You can see where your marketing money is generating results because you're in the digital world. All the way you can reduce marketing dollars and generate higher returns because.
That's why it's very easy to see.
If someone is clicking on something and going to two antibody delivery service and.
Buying your movie.
So there is a major major incentives for the major studios to do this with films on the other hand.
The tentpoles have to go out to theaters, they they need that billion dollars of additional revenue to to be able to justify the risk associated with those kind of movies happily we're not in that business.
Guys like us are likely to be able to get more of our stuff out day in day.
And.
And I think consumers will be trained.
To think that things that come out that way are just as good as the things that used to go to the theaters for and that's the most important differentiator I see the different attitude that consumers are likely to come away from this period with as they learned that hey.
Back to something premieres at a digital service as compared to.
The theater doesn't necessarily mean, it's not as good.
So so that's the answer your question one as far as I can tell.
Question too.
Kids.
Like Kids Jama grandfather, So you know I like my grandchildren.
I like kids a general thank God, we don't have any at home, while I'm trying to work I see a lot of bye.
Colleagues, who were try to keep the kids off of their lapse or their dogs offer their lapse, while they talk I've seen that I've seen the weather guys have lot of fund with.
Try to keep their kids out of the Green screen room that they've got so like kids despite all of that.
But what we really were doing when we adjusted our programming was thinking about parents.
Our home school Chattel time is not really designed around.
The kids it was really designed around the parents.
And trying to give them tools to use.
Truly educational programming that they could use with.
Young young children update years old to help create.
You know to help them teach those kids there is.
I look at home schooling and look at the problems that parents have had with this and.
I am gigantically sympathetic with those parents, we felt we could pull together a lot of really high quality educational content and make it available on a free service and promoted a bit.
But it was really about the parents not about the kids.
And so our philosophy that kids programming has remained the same we were not in that business and we're not likely to be in the near term.
But we did want to offer a service now we the service we probably should have offered with sending Ashton kutcher out to teach everybody for those of you haven't seen.
Him on nighttime show.
In recent weeks.
He and his wife Mila have been.
Teaching, they're very very young children about things as arcane as measurements.
And I spoke to Ashley yesterday. They gave me the lesson that he gave is too young children of AD differentiate between but and an inch Oh and also a tanker truck.
Which was another measurement that they use to try to in order to show the kids the difference in measured so this week in the and Ashton's household is is a week about measurements couple of weeks ago. It was about the environment.
You know the fact, the parents have to figure out how to educate their kids.
At home with something we would try to help out with that's why we did the home school channel and that's why it's called the home School channel because it really is about that.
With that operator.
We're going to call it a day and I want to thank everybody for coming today I.
I hope everyone stay safe I.
I hope our country is able to get through this in a smart way.
And.
Look forward to updating you in the future. Thank.
Thank you.
Ladies and gentlemen, this concludes today's conference call. Thank you for your participation you may now disconnect.
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