GameZnFlix, Inc. (GZFX)
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GameZnFlix, Inc.s "no late
fees, no due dates" online movie rental model has eliminated the hassle involved in
choosing, renting and returning movies and video games
GameZnFlix.com currently provides approximately 3,000 subscribers with access to a comprehensive library of over 1200 plus Xbox, Playstation 2, Playstation, and Nintendo Gamecube titles and 28,000 DVD titles. Its subscription plans allow subscribers to have 2-6 titles out at the same time with no due dates, shipping charges or late fees for $18.50 to $39.95 per month. Subscribers can enjoy as many titles as they wish during their subscription time. Games are selected on the www.veegeez.com website via the queue system. The games are shipped by first-class mail and can be returned at their convenience. When a game has been returned, the subscriber's next available selection is mailed to them.
After announcing a new relationship on March 2, 2004 with Ingram Entertainment GameZnFlix, Inc will make an attempt to be the largest online movie and game rental company on the web. The companys subscriber base is growing 35% to 40% per month. Gameznflix subscribers will have access to over 28,000 games and movie titles and can rent a combination of both DVD Movies and/or games for playstation2, XBOX and Nintendo.
CEOCFOinterviews: Mr. Fleming, please tell us about how you became the CEO of GameZnFlix, what attracted you and what changes you have made to the company.
Mr. Fleming: In
2002 I took over as CEO of a small venture capital company that I had been managing
partner of for nine years. The company was renamed Point Group Holdings Incorporated and
its purpose was to find projects that could be brought in to focus the company in the
direction of a very viable business that would grow in the future. So in July we took over
a shell company on the Bulletin Board and re-listed it in May of 2003. During that time we
had been reviewing companies, different products and joint ventures. Finally we were given
the opportunity to acquire a company called VeeGeeZ.com LLC, which was an existing online
video game rental company. What they lacked, as many small entrepreneurs did, was
professional management as well as the ability to raise capital to move their project
forward. So we acquired 100% of VeeGeeZ.com. I, and about eight of our other consultants
from our Venture Capital Company, came back into it to bring all of the stages of
management that was needed. We then moved on to bring the capital into the Company. We saw
the little video rental company as just a pure diamond in the rough with a phenomenal
future. The reason I fell in love with it was that I had been a NetFlix user (NetFlix.com)
for many years, so I understood the business model. I said that if I take games and add
DVDs and multiple other things, the future of the Company is phenomenal. Therefore, we
have been preparing ourselves since January of 2003 for our March 27th launch.
CEOCFOinterviews: What is the market penetration?
Mr. Fleming: I read an article in Wall Street Journal a few weeks ago that Blockbuster has four million card-carrying members and NetFlix has over two million active subscribers in their system. It is a huge market. If you add the video games, there is another whole segment of about thirteen million people. Most households of four people have at least one Play Station, Nintendo or XBOX in their home. One of the things I like about this business is providing a service that is reducing stress levels. If you have ever gone off on a Friday night and rented a movie at Blockbuster, the first thing you have to do is drive, park, and walk in, and there are all these titles. Or you set your heart on watching Under the Tucsony Sun, and you walk in and there are not any of that title left and you have to choose another title. You do about twenty minutes of that routine and then you drive home, and your friends call and you go do something else. You might sit by the television for the entire weekend and then it is due to be returned and you did not get a chance to watch it, but if you do not return it you will be charged another three to five dollars. So, you take the video and throw it in your car on Monday morning and drive past the Blockbuster and the cut-off time was noon, and now you have rented that movie again. I know from personal experience. I have a twelve-year-old son, and I do not know how many times I have driven to Blockbuster on a Friday night or Saturday and spent a half hour to forty minutes while he picked out a game and finally said come on Dad, lets go. He has rented them for a week and that is a good thing except during that week, I have forgotten that he has the games. All of the sudden, next week I might wander into his room and see it and say oh no, we forgot to take the games back. Now I have rented it for another week. I have spent many dollars because of that scenario, and it must happen all of the time, all over.
CEOCFOinterviews: Do you think the average consumer gets it or do you think you will need to sell them on the concept?
Mr. Fleming: I think they get it. I think when you see our direct marketing television ad, they will get it very quickly. We have explained that and we have emphasized that there is no late fee, because that is the biggest part of the problem. Blockbuster is being sued right now in a class action suit for over-charging people with late fees. They are suffering because they have the drop-box, and that was supposed to be their answer. I know for a fact that if you drop it in the box but for some reason it does not get scanned, you could be charged a late fee for it and you know you dropped it off before twelve midnight or when it was due to be returned. But because they did not sweep it and process it, you did not get credit for it. With our system, you do not have that problem because there are no late fees and you just simply do not get another movie until you return the one you have to us. The next question is what happens to people who do not return the movies, or movies that get lost or damaged in the mail; we have experienced a small percentage of that problem, but people are basically honest. People return them, they are not usually damaged and the shelf life of a DVD is around sixteen months. Then we have the opportunity to turn around and sell it as a used item and that is a good thing because you can still recover some of your book value on it. It eliminates a lot of stress. There are over two million people that understand this already. NetFlix has never done a direct response television commercial; we will be the first to do that and I think it is going to bring the people to the medium.
CEOCFOinterviews: You said you are ready at your end; what will you do if you get an overwhelming response?
Mr. Fleming: Because it is on an internet service, the ability to expand with a number of people hitting the site is not a problem. We are not going to have lines of people waiting to get in like a store would, because it is off the internet. No one has been turned away from Ebay or QVC. Because of our relationship with Ingram, we have overnight delivery. We are going to open business, but not have all twenty-eight thousand titles readily available, but they are available through Ingram. We are going to be able to take orders, and order directly through the internet with them and we will only be about a half or three quarters of the day behind having that title to ship. We can directly ship it to Ingram or we can bring it to our distribution center, which happens to be thirty-five miles away, and ship it from that point. We have a virtual inventory because of our relationship that we have established with Ingram. We are not concerned with not having Finding Nemo, which is one of the most popular DVDs ever sold or rented; we do not have to have hundreds of those in stock because Ingram does. They are the largest DVD and game supplier in the United States with nine distribution centers.
CEOCFOinterviews: Do you have much overhead with this business model?
Mr. Fleming: We do not have much overhead. My background is thirty plus years as an accountant and I have taken two other businesses public and I have been involved with them as founders. I have spent a lot of money getting everything ready to go, and from March 27th forward, we are in a revenue producing sweep of the curve. We have outsourced our fulfillment, so we did not have to go out and buy or rent huge warehouses. This is a simple matter of making arrangements. We have outsourced our distribution to a company in Nashville, which has shipping points all across the United States. Because of their ability to ship overnight, and our ability to buy overnight, we have the entire inventory we could possibly want with rare exception. We are the true e-commerce. We are building a customer service center where we will have about fifteen to twenty-five customer service reps, however our fulfillment center currently is going to handle our customer service until we get that all established and built up. Having come from the venture capital world and watching too many dotcoms spend too much money, and having lived through some of those, I have seen too much money disappear that way. All of our people work on a profit-share basis, and no one in the company is on a salary. We are only going to make money on our profits and we will share in the profits. We are sales motivated with a huge sales force and everyone is paid on an incentive basis. All the management involved in this understands that we have a huge potential with every opportunity to go up and the only reason we would not is because we are not putting the effort out.
CEOCFOinterviews: Why is NetFlix the only one that has done this and why not with video games?
Mr. Fleming: I cannot answer that, but I have to ask myself that most the time because we have the video game model and it works. I look at it and think that maybe it is easier because maybe there is some complexity to a video game, although I do not see it. I think part of it is because video games stay out longer, so you do not get as many turns but I do not see that to be negative. I am still getting the same amount of subscription revenue every month. I actually wanted to turn less because that means less postage I have to pay.
CEOCFOinterviews: How did you discover this business niche when nobody else did?
Mr. Fleming: How I came upon it when that I was shutting down my venture capital office, and I received a four page executive summary from the Wiseman brothers, and I read it and because I was a NetFlix user I understood the business model. Because they had the proprietary software and an operational business, as small as it was, I could see furture potential and then come up with adding DVD titles. NetFlix works, I mean I think NetFlix is a little out of control but that is the dotcom industry. Maybe some day my company will be the same way but I hope not. I would rather remain small; I firmly believe you have to crawl, walk, and run. It is going to take time, and it is going to build, get bigger and grow but it will grow with financial control. I guess that is the trouble with having a CEO as an accountant.
CEOCFOinterviews: Who are you targeting with the first series of commercials?
Mr. Fleming: The first series of commercials is targeted at the thirty to forty-year-old moms with one or two children. In my opinion it is the women who suffer from mom can we stop at Blockbuster and get a videogame. I believe that stay-at-home moms are by far the most hard-working, underpaid people in the world; they put more hours in than any person that goes out to work. There are those nice single moms who run their home and go to work at the same time and God bless them all for that. I have more respect for a working mom than anyone on the face of the earth. If she is a working mom with several children maybe, then this is just one more source of aggravation. Our commercial with Dennis Cole is directed at that mom, trying to make her life a little bit easier and that is our first market. This summer we are going to be running a second ad, which is going to be directed at our gaming demographic, which is twenty-one years and three months. The person that is going to do that ad is someone everyone will recognize. I would say gee dude, Id buy one of those but I did not say his name. He is going to be doing our summer campaign for us and I think that is going to be phenomenal because we will reach out for the gamers. In the summer when kids are going to be more active in the gaming market, it is one of the most active rental times of the year.
CEOCFOinterviews: Is there a lot of word-of-mouth advertising in the gaming area?
Mr. Fleming: We are known. When I took over VeeGeeZ.com, they were number two in their industry and number one for customer service according to all the ratings of the gaming magazines. They just ran out of capital and in this business it is all about having titles, which requires capital or a connection to get the title. If you do not have the most current titles, the subscribers will migrate to other places to get them.
CEOCFOinterviews: What is your financial condition now?
Mr. Fleming: It is very good and it is has gotten better of over the first quarter. It has been a tight market to raise capital, coming out of the tail end of the dotcom era and also having the right business model put together and proving it to be real. We have been running a private placement on the company and doing it successfully. We have a commitment from a private fund here in the United States for three to five million, and we are finalizing those agreements. It has taken quite awhile, and it took time to put together, although we wanted it done yesterday. We have accumulated capital to carry us into at least the next two years of promotion and advertising, and acquisition of our inventory. Effective the second quarter, we actually be a revenue producing company.
CEOCFOinterviews: Does potential competition concern you or is there enough out there for everyone?
Mr. Fleming: I look at it this way, if you were going to open a restaurant, where would you open a restaurant? The answer is, right across the street from the most successful restaurant. The reason is that this restaurant spent a lot on advertising, built their name up and people know it and like it. The restaurant also has a bit of a problem because they are probably over booked, so if I open a new restaurant diagonally or across the street from that restaurant, I am going to have to do my promotion but I am also going to have those people who are waiting over there, and now they are seeing a new restaurant and they are wondering why they should wait forty-five minutes for that restaurant, and they decide to go across the street and try the new restaurant. If I provide good service, meals and a good product, I will gain their confidence and the next time they want to go out to dinner, they are going to be able to come to that corner and have a choice between two very good restaurants. I look at NetFlix as the other established restaurant and I am trying to open opposite them. I am not out to steal their customers but I believe there is large market availability. I think there is a huge market that is untapped, when I just looked at 24 million Blockbuster cardholders and I say there you go, I want ten percent of NetFlix or Blockbusters customer base, and I will provide good service, therefore, my business will grow. There are probably about ten other competitors in the online movie rental business but they are small. They are people with three to five thousand titles or maybe they specialize in only extreme action movies. I think there is more than enough room in the marketplace.
CEOCFOinterviews: Do you have particular areas of focus nationwide, or is it across the board?
Mr. Fleming: It is across the board. Bravo TV, Court TV, and then the following three weeks we will add channels such as the Food network, Discovery and this summer we will hit primetime.
CEOCFOinterviews: In closing, why should potential investors be interested and what should they know that perhaps they do not realize when they first look at the company?
Mr. Fleming: I believe that currently I am listed on OTC, and it is the last place in Americas stock market where a potential investor can make a small investment and see a chance for relatively good return. The OTCBB has its down side such as market makers manipulating stock, but where could you in 2002 have bought a stock at .005 and today it is worth twelve cents? In the future, you could take an twelve-cent stock today and maybe it would be worth twice that, but I cannot project that, but I believe it will go up. That is the chance that the investor has and you cannot do that on the NYSE or AMEX. You cannot make small investments. Maybe I am a grassroots kind of shareholder but I believe that the bulletin board is an all-right place to be. While last year in January of 2003, I stated to myself that my company is going to be worth five cents by the end of the year. I said I did not know how I was going to do this, other than to continue to follow the business model, but I am going to work on this. We are going to do business and the business is going to bring value to the stock. I can honestly say that on January 2nd when the market opened my price was worth five cents, do not ask me why but it was there. This year when I woke up and asked myself what I wanted this year from the stock market and the investor side of this company I said I have the strongest desire to be on the American Stock Exchange by the end of the year. The company will become a revenue producing company and I hope we will accomplish a move by the end of the year. It is a lofty goal, but you have to set your goals high. As an investor looking at my company, I have some qualified management people working with me and we all have on the average more than thirty years in the business. I have inventory people that have been in fortune five hundred companies; I have advertising people that have handled major campaigns for Ford, Coca Cola, and my all time favorite Oxy Clean. We have a new CFO that is coming on-board that I have known for years who was a senior partner of a SEC CPA firm, who will help us from that standpoint. We have a good team of about eight or nine people that have all worked together for nine years and we come and go and do what we need to do to get the company to move forward.
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