Nexicon, Inc. (NXCO-OTCPK)
January 1, 2010 Issue
The Most Powerful Name In Corporate News and Information
With Music And Movie Companies Looking To Protect Their Property From Piracy As Well As Gain An Edge In Marketing, Nexicon Is In The Right Place At The Right Time With Their DigitalRanger™ And GetAmnesty™ Digital Media Protection And Business Intelligence Solutions
in Los Angeles, CA, Nexicon (PNK: NXCO) delivers next-generation digital
media protection and business intelligence solutions to many industries,
including the motion picture and music industries, software and games,
publishing, ISPs, financial services and government. Its product line
includes: DigitalRanger(TM) to identify those who illegally facilitate,
promote, and profit from hosting or distributing copyrighted or illegal
content; GetAmnesty(TM) that allows copyright holders to fight piracy and
collect revenue lost from illegal downloads; YouScout that helps content
owners store, distribute and manage their content on the most popular
community-driven sites on the Internet, such as YouTube(TM); Envoy(TM) that
helps ISPs manage DMCA notices for their subscribers; and more.
conducted by: Lynn Fosse, Senior Editor, CEOCFOinterviews.com
Mr. Glines: I was an investor in Nexicon in late 2006, and was enamored with their technology. I had an opportunity to meet with the founder and chief technology officer Tommy Stiansen, and started to assist the company just on a limited part-time basis while I was working at Accenture (formerly Andersen Consulting) and over time took on more responsibility. I then became vice president of strategy in June of last year (2008), and then president in January. I thought that I could add tremendous value to help turn Nexicon around the right path and leverage the incredible solution that Tommy had developed.
CEOCFO: What does MARC stand for in your technology platform, and could you explain your technology?
Mr. Glines: MARC stands for Monitor Analyze Report and Collect. Essentially what is happening is we have hardware, Dell Power Edge servers that you can actually buy on Ebay. These servers are strategically placed around the world with a very powerful proprietary operating system and software that run on those servers, and to a location where those servers are placed. Combined with the software we are able to monitor over 50 billion transactions on a single day through various peer-to-peer, IRC type networks. The value that we can provide is to help supply the very best in internet intelligence to clients in the media and entertainment, law enforcement, financial services as there is an incredible amount of illicit activity that happens online, whether it be piracy, cyber crime, financial fraud. Through our platform, we can highlight that activity to our clients and provide them viable information. In addition, when it comes to understanding consumers and what they like to do, we can provide very valuable marketing information for companies that are better able to understand their consumer habits. I should also say that none of what we do is an invasion of privacy. Everything that we monitor for, we do just by communicating with individuals that are online through the packets of information that they are providing. We have had several global international law firms that attest to the fact that there is no deep packet inspection nor privacy violations that occur. We are monitoring on behalf of our clients, so a major motion picture studio or a law enforcement agency, they ask us what it is that we would like to monitor for, and then we can turn around and provide that intelligence back to the client.
CEOCFO: Whom are you contracting with for your global hardware structure, and how do you ensure the safety and security of those locations?
Mr. Glines: We have peer in agreements with various location centers and the software actually evolved from a telephony billing platform where the MARC platform in the past was monitoring phone traffic to assist telephone companies and providing billing information for their clients. As a result our hardware is located very close to the pipes if you will, where traffic is moved in and out of. That would be physically impossible for companies today to garner that same sort of strategic placement. We are in the most secure strategic centers around the world where telephone traffic in most cases comes in and out of, so we are in very good placement.
CEOCFO: What about the industry in general, and what is the competitive landscape?
Mr. Glines: When we talk about inaudible piracy, which is the primary thrust of what we are doing now, it is a very complicated emotional issue. The music industry obviously has been decimated by piracy and the motion picture industry is very concerned not only to see their revenues dropped as a result of it, but not make the same mistakes as the recording industry made when it went on a lawsuit campaign against those that were downloading illegally. So it is complicated, it is emotional, and right now what we are seeing amongst rights holders is the recognition that we have always had that those that are downloading illegally are really the fans of the musicians. Further, we know that those fans outspend those that download legally, such as those that spend through legal means, do not download illegally and just purchase their content on iTunes or what have you. So there is a viable market and it is about providing better alternatives to where they are getting their content illegally today. So the industry is now looking at that and looking at how they can look at our technology to really move those customers in to a better place because we know they are willing to spend money. As far as a competitive landscape, there are in the piracy space a few players that we see out there. However, no one has the capabilities to provide the level of monitoring and the volume of quality inherent in our notices that are sent to those who have infringed on content as can we as a result of our technology, and provide incredible business intelligence. So we are really the one-stop shop for rights holders who want to monitor the activity that is happening and the rights that are being infringed, but also provide extremely viable business intelligence as it relates to the consumption of their media online. We believe that we have a much stronger position in the internet piracy space than do our competitors.
CEOCFO: Do your potential customers realize the need for protection, advanced services and turning the pirates to buyers, and how do you reach them?
Mr. Glines: Eighteen months ago they probably didn’t, but through a lot of education on our part, helping them understand what the market looks like and those that are downloading illegally, they are beginning to realize the vast amount of potential revenue that can be moved toward legal means outside of trying to penalize and make it a punitive situation. The music industry somewhat missed the boat although they are trying to recover and we are assisting with that in a few different ways. In the motion picture industry as well as publishing have learned and are moving toward models that make more sense as we are in the digital age. It is just about providing the right kind of messaging for our clients and although it has gotten easier in the last couple quarters just as a result of people realizing that you can’t really fight piracy, you really have to figure out a way to live with it, but provide better solutions for those that are downloading illegally and capture as much of that market as you can and that is what Nexicon is all about. I would also comment that piracy is increasing, Piracy on peer-to-peer and all various protocols is increasing everyday especially the private networks. There is some confusion in the market place as a result of that; some think that decreasing data evidence to prove that it is actually increasing as the broadband service propagate themselves throughout the world. Therefore, the market is still growing and widening every day.
CEOCFO: Would you give us an example of how you work with a client?
Mr. Glines: We are about ⅔ of the way through a pilot with a new major publishing rights holder; we have an MDA in place. But the feedback we have received throughout the pilot has been extremely positive, and we are absolutely thrilled with the level of quality and detail. It will wrap up in mid September and we look forward with furthering that relationship. We are starting another pilot somewhat similar to what we are doing on a previous example with the motion picture and television operation. In that case, what we are doing is providing through our DataView product raw data on what is being downloaded illegally. We are also providing perk-view, which shows in real-time historically what is being downloaded down to a two-square mile radius of where the infringement occurred. Then finally, we are providing business intelligence reporting which shows in a quantitative and qualitative fashion the spread of a new television series or a new motion picture that is being launched actually today or next Friday. It shows how the piracy spread, where the printers are by country and metro area, and that is very valuable information for potential clients. That will run about thirty days and those are just two examples of the pilots that we have ongoing, but the feedback we have gotten has been extremely positive on this major digital rights published works.
CEOCFO: How has the current economic scenario affected your potential clients?
Mr. Glines: We have not seen at all any impact on the buying behavior of our clients. Some studios, some clients are looking to outsource more and reduce internal costs and that is obviously good for Nexicon. The vast market opportunity that exists, not only reduces cost, but associates it with the internal management of these types of processes, and really adds revenue through our GetAmnesty™ product. In addition, some other initiatives that we will be launching, is really attractive for our clients and future clients. We have not seen any sort of downtick in buying behavior of the clients we are targeting.
CEOCFO: Nexicon has made some inroads in law enforcement and cyber security, what is happening there?
Mr. Glines: We have two big initiatives in law enforcement and cyber security. One we signed a team agreement with a major government contract that works specifically with the intelligence community. That is very important because in a lot of the work that we do or will be doing in that space, Nexicon employees cannot see the data that is being analyzed. Therefore, it requires users and individuals that have specific government clearances in the intelligence community space; we are talking about VHFs, CIA, and NSA. That was critical to get done and they will be helping us to move forward with some of the other intelligence community agencies. We just finished up a very successful conference in Switzerland, presenting to some very high-level, high-ranking officials, Magesta Systems and other agencies in Europe demonstrating how successful we were working with the Jeanda Marie in France. The feedback and response we received in that conference was incredibly positive and there have been quite a few follow up requests for more information about how we can help additional agencies throughout Europe. Things are incredibly busy now for us in those two areas.
CEOCFO: What is the revenue model for you?
Mr. Glines: We make money in various ways. We talk about our GetAmnesty product that is a revenue share with rights holders as infringers are allowed to receive amnesty so to speak, for downloading illegally and understanding that what they downloaded and how they are doing it is not legal as most people or a lot of people don’t realize that what they are doing is wrong. In exchange for a small monetary settlement they are able to release themselves from any legal liability. In the case of our other products DigitalRanger™, BusinessIntellegence, DataView, those are all services that we offer so through license arrangements we can license the MARC platform to our clients and they are able to, depending on what module they have activated, we can realize revenue as a result of fees on a per user or enterprise basis.
CEOCFO: There are so many industries that would benefit from Nexicon’s products; what is ahead?
Mr. Glines: The thrust of our efforts in the latter part of this year and early next year will be going to market with completely revolutionary products in the network security space for the home, for the enterprise and B2B space. We have had some introductory discussions around what we will be delivering and the feedback has been extremely positive on what we can deliver. We are going to see a full new market open up for us. That will include any enterprise concerned about network security, or any home user or consumer concerned about illicit activity that may be moving into their PC through people that they would rather not have communicating with users. It will be available as well to the B2B space for financial fraud, such as individuals attempting to hide their identity while they purchase goods and services online. We are working with a very well-known and successful marketing group in the latter part of this year to finally go to market with a strategy, and get ready to move. We want to hit the market hard in the early part of next year.
CEOCFO: What is the financial picture like at Nexicon today?
Mr. Glines: We are working on and have spent quite a bit of time in the last few months finalizing the required funding to allow Nexicon to be extremely successful as we move forward. The company has never been properly capitalized or funded and that has been the primary focus of what I have been doing since I came onboard. It is a difficult time to do deals like this, but I am very pleased at what we have in front of us and look forward to closing on that. As a result of the funding in place and the strong pipeline we have, we are very optimistic that we will have double digit revenues going into 2010 and couldn’t be more confident about our ability to deliver strong EPS numbers for our shareholders.
CEOCFO: With so much potential opportunity, how do you stay focused? With a security platform and a tracking/marketing platform do you find that potential investors understand Nexicon?
Mr. Glines: The way that we stay focused is we prioritize. The number-one priority for me right now is the government space, because the market is large not just in the United States, but globally. The government pays their bills on time and the contracts at least in my experience have not been as difficult to enter into nor move forward. Second to that we look at the media and entertainment space and finally we are starting to look closely at financial services. Therefore, we prioritize and spend more of our time on those areas that we will deliver the most return for our investment dollars. Do investors get confused with respect to what we are doing? It is not something that you can explain in five minutes, It is either something that if you had a couple of hours with respect to how we go to market and what our offering is. It takes you even a day to kind of process it all and understand the big picture. After that point, and after I have the opportunity or an associate of mine has had the opportunity to explain to investors the end game and how we are getting there, it makes sense and everyone walks away realizing the vast amount of potential that we have. It has just been held back by the lack of funding and that issue will be resolved in the very near term, and I am excited about the inertia that we have built up and leading up to its important milestone.
CEOCFO: In closing, why should potential investors pay attention to Nexicon?
Potential investors should pay attention because we are in an explosive area
with respect to the internet. The number of broadband subscribers increases
everyday, and this is a global solution. The ability for Nexicon to deliver
incredible earnings growth with a very low burn rate is really a result of
the power of the technology that Tommy Stiansen developed that requires very
little in the way of hardware. The gross margins are very exciting. What I
tell people is I could swing and miss and bat 500 to deliver double digit
earnings for our shareholders in the next twelve to twenty-four months and
that is what I am most excited about. We prioritize, we go after those
opportunities that deliver the most return for our investment dollar, and we
are involved in areas that just at the forefront of what people are
concerned about; cyber security, piracy, and understanding where consumers
are spending their time on line and consuming media, that is incredibly
important for that marketplace. The potential is amazing; we have a great
team supporting us. I look forward to the next twelve months.
The value that we can provide is to help supply the very best in internet intelligence to clients in the media and entertainment, law enforcement, financial services as there is an incredible amount of illicit activity that happens online, whether it be piracy, cyber crime, financial fraud. Through our platform we can highlight that activity to our clients and provide them viable information. In addition, when it comes to understanding consumers and what they like to do, we can provide very valuable marketing information for companies that are better able to understand their consumer habits. - Sam Glines
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