Quickflix drops another 12K customers

Australian streaming company Quickflix has released its results for the quarter ending September 30, announcing the loss of another 12,076 customers, a 10 percent drop from 121,127 customers last quarter down to 109,051.

Despite Quickflix having been registered with 195,000 more devices than it was in 2014 -- from 557,000 devices to 752,000 devices -- the customer base drop signals a 16 percent decrease year on year in its total customer base.

Average monthly receipts per paying customer totalled AU$11.39, a growth of 1 percent from last quarter's AU$11.25, but a decrease of 10 percent from the AU$12.63 this time last year.

Cash receipts from paying customers amounted to AU$3.9 million for the quarter, down 8 percent quarter on quarter and 23 percent year on year.

The streaming company's cash at the end of the financial period plummeted by 69 percent, from AU$2.7 million in September 2014 to just AU$840,000.

"Quickflix is operating in the high-growth yet challenging video-streaming sector," the company pointed out in its results.

"Competitors are expending enormous amounts of money on marketing and content in a bid to secure market share. Quickflix will not seek to compete head-on in this environment; rather, it will focus on developing a niche and differentiated streaming service supported by its profitable online DVD rental service and attracting new customers through low-cost partner and affiliate channels."

Earlier this week, Quickflix 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 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 remains in voluntary suspension until the completion of its restructuring, and is in discussion with investors for future funding. It 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."

The company reported 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.

For the quarter ending June, it 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; however, in August it backflipped on its bid to acquire the company.

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's entertainment bundle sets customers back by AU$14.99, while Netflix costs AU$8.99 a month for non-HD services, or AU$11.99 a month for HD, Nine-Fairfax joint streaming 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.