Streaming service Quickflix has requested that the ASX allow it to remain in a trading halt until Wednesday as it continues negotiations with an unnamed “international” player about a potential “acquisition”.
The trading halt comes as the company’s latest quarterly report (ASX: QFX), put out late on Friday afternoon, shows the number of Quickflix subscribers declining on both a quarterly and year-on-year basis despite the recent explosion in consumer awareness and sign up to rival services.
Quickflix blamed “pent-up demand for Netflix in particular” for causing a sharp decline in customers early in the quarter, but more concerning for the company is its cash on hand which as of June 30 was $913,000, following its recent capital raising which brought in $775,000.
That suggests the company will require another financial investment to remain viable as the statement shows Quickflix had an operating loss of $1.096m this quarter, up from the $850,000 it lost last quarter, as revenue receipts declined 15 per cent to $4.2m.
On the subscriber front Quickflix reported it had 107,969 paying subscribers down from 122,862 a year ago, a decline of 12 per cent.
More troubling for the SVOD and DVD rental company will be that the number of people trialling the service has fallen quarter on quarter from 17,348 in March to 13,158 in June, despite having spent $408,000 on marketing efforts.
Subscriber churn is also increasing with the monthly average of customers dropping the service rising to 11.3 per cent up from 7.1 per cent a year ago, a 59 per cent rise.
The quarterly report touts its recent deal to become a reseller for Foxtel and Seven West Media’s Presto service, while it has recently moved to wind back its distribution deals with studios as it continues to cut costs. However, the statement to the ASX also notes that “the deal remains conditional and Quickflix has requested an extension to address outstanding conditions”.
The change in rhetoric to one where the company is blaming Netflix and other streaming services for the decline in subscribers marks a change in Quickflix management’s view on the competitive landscape.
Quickflix CEO Stephen Langsford has previously declared, on multiple occasions, that the explosion SVOD services was good for the segment and all players including the Perth-based company.
“We have said that (marketing) will boost awareness amongst the category,” said Langsford, back in January. “Our game plan is to move the business to sustainability.
“The advantage Quickflix has is that we do have an existing customer base which is generating revenue and we do have a strong point of difference to the incoming SVOD players, in that our business is complemented by DVD rentals – not only SVOD revenue but transactional.”
Many of the major players will be watching Quickflix’s discussions including Nine Entertainment Co and Fairfax’s joint venture Stan, which has a strategic stake in the company entitling it to a $10.5m payment in the event of “a disposal of substantially all of the Company’s assets, a merger or takeover, a person other than the shareholder acquiring a voting power of more than 51 per cent in the company.”
The mention of an “international” party in the release appears to rule out a move by one of the local players while it is unclear what value a company like Netflix would take from a deal, given recent figures show it has a commanding lead in the local market.
Speculation has been rife a niche player could enter the market to target certain demographics, such as the Asian market, with content.