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There are only a few
companies at the peak of digital imaging and
PhotoChannel Networks is leading the way
Services
Online Digital Media
(TSX – V: PNI; OTCBB: PHCHF)
PhotoChannel Networks Inc.
506 – 425 Carrall St.
Vancouver, B.C. Canada V6B 6E3
Phone: 604-893-8955
Fax: 604-893-8966
Kyle Hall
Executive Vice President
Interview conducted by:
Lynn Fosse, Senior Editor
CEOCFOinterviews.com
January 26, 2006
BIO:
Kyle Hall - Executive Vice President, Sales, Marketing & Business Development
Mr. Hall joined PhotoChannel in September 2000 and has been responsible for the vision and
business development that has positioned PNI as the leader in providing retailers and
wireless carriers with online image printing and messaging services. Mr. Hall has led PNI
in modifying its business model to utilize the systems already implemented with its
multi-national retail customers and carriers to deliver all forms of digital media
content. With over sixteen years' sales and marketing experience leading innovative
imaging companies including Telepix Imaging, MGI Software and Corel Corporation, Mr. Hall
has a proven background in substantially building businesses and increasing sales. Mr.
Hall received his Bachelor of Science degree in Zoology from the University of Western
Ontario. For six years, he played professional football in the Canadian Football League
with the Ottawa Rough Riders and Winnipeg Blue Bombers.
Company Profile:
Founded in 1995, PhotoChannel Networks Inc. operates PNI Digital Media to provide services
for major retailers, wireless carriers, and content providers throughout North America.
Customers include Wal-Mart, Costco, Eckerd Drug, Telus Mobility, Black’s and Brooks
Pharmacy among others. The premise of PNI Digital Media is simple, to provide technology
and utilize telecommunications infrastructure to bridge consumer ordered content with
retailers that have on demand manufacturing capabilities for the production of merchandise
in real time. The technology that delivers this end to end service is generically known as
the PNI Digital Media Platform.
The key to the future of PNI Digital Media is to look at the one hour photo operations in
the retail locations as on-demand, digital manufacturing centers located right in the
heart of the best retailers in the world. With this simple concept, PNI Digital Media is
enabling all forms of content transactions for on- demand production to take place. PNI
Digital Media is currently connected to thousands of retail locations today. There are
many options as to how retailers manufacture the end product. While some retailers choose
to manufacture the end product in a one hour format others opt for a next day service or
offer mail delivery of the final product. In the end, it is about choice. Give the
retailer the choice to offer any of the PNI Digital Media’s services within the
context of the retailer's business model and all parties will be successful.
CEOCFO: Mr. Hall, what
changes have taken place since you have been with the company?
Mr. Hall: “When we took over the company five years ago
we realized we had access to some incredible technology which was built from the dot com
era for handling and moving photos, as well as printing. We saw this as a great
opportunity because photo-finishing retailers were converting their operations from prints
to digital prints and they were going to have a need for orders that were going to be
placed online and to be sent to all of their different stores. If you think of a retailer
that has thousands of stores, you will see how complicated this process becomes. What we
did is we took that technology and rebuilt it for consumers to place orders online and
directly send those orders to the retail store for printing in a one-hour fashion, and
because of that, the company has had success in dealing with these large retailers who
have many locations. Furthermore, we have been able to handle their complete online photo
operations for them.”
CEOCFO: Will you tell us
about the online photo industry, and how it is growing?
Mr. Hall: “The photo industry is a big industry where
billions of pictures are being sent through retailers every day. It all started about ten
years ago, when digital cameras were considered a novelty item or the man’s toy. The
popularity of digital cameras has increased immensely over the last few years; digital
cameras have been one of the hottest selling consumer electronics item. What we see is
people still want a print. Traditionally, the demographic that has taken the most pictures
and produced the most prints, are females, aged 29-49; This demographic, the
quintessential “soccer mom”, who is still taking pictures of family events and
other prime picture-taking events, still wants prints. As much as we thought that digital
in the early days would replace film entirely, in the sense that, people would be able to
view their photos' on a computer, and share them by email, it has not. People still want
prints. What the photofinishing retailers have done is convert their operations so they
can produce prints from digital images. Originally, when digital cameras first came out,
the only place people could get prints were from their home ink-jet printers and
many prints were produced that way. However, over the last year, it has evolved that
almost as many prints are now being produced at retail locations as they are at home. Even
the big printer companies like HP (Hewlett Packard – NYSE: HPQ) admit that in the
future, much of the printing is going to be done at the photofinishing retailers.”
CEOCFO: Why do you see
that trend continuing as opposed to in home processing with new technology?
Mr. Hall: “I feel there are three main factors; first,
it costs less to produce it on traditional photo paper with the traditional chemical
process as compared to buying ink and photo quality inkjet paper for the home printer.
Second, the quality is superior. The picture brilliance is there and the photos are being
produced on quarter-million-dollar equipment, not a $99 dollar piece of equipment at home.
Third, is convenience; it was an easy transaction to take a roll of film and to drop it on
the counter and an hour later walk back and pick it up. The consumer does not have to
worry about anything, and for about $4 or $5.00 they have their prints. Now, the same
thing is happening with digital, with one exception, you do not have to make the first
trip to the store. You can take your images, upload them to the Costco or Wal-Mart site
and go into the store an hour later and pick up your prints.”
CEOCFO: Speaking of
Costco; you recently announced a new agreement with them; will you tell us about
that?
Mr. Hall: “We have had a long history of working with
Costco in the U.S. and Canada. In the Canadian market they wanted to connect all of their
stores so their membership base who wanted their pictures printed digitally could place
their order online, walk into the warehouse and have their digital prints ready for pick
up. In the last few years, retailers have done a good job of putting kiosks into
their stores so the customer, who walks in with a digital memory card, can stick it into
one of these kiosks, pick their pictures, send it to the printer and have them printed;
typically within an hour. The problem is so many people are doing this with digital images
now that the line-ups are getting too long at the kiosks and they are not capable of
handling as much volume as they could with film. By offering the consumer the ability to
place orders online, retailers such as Costco are delivering consumers the convenience of
placing their orders in their own home, and picking them up when they come to the
warehouse for shopping. In essence, a transaction that is as easy as dropping off a
roll of film.”
CEOCFO: Does your
footprint extend beyond photos?
Mr. Hall: “Yes, we looked at the fact that we have all
these great systems set up for retailers to handle photos. Customers go to an online site,
order some photos and we physically move the bits and bites of that photo down a telephone
line to a store. We then route it to the proper printing equipment, whether it is going
for 4 x 6 prints or 8x 10 or being burned into a CD. We looked at the infrastructure we
built and said there is no reason why we could not do more than just photos with this
technology. We are at the point now where we are rolling out music within twelve months.
The idea is not just to offer downloaded music to your home computer, but if you wanted a
CD, you could order it and pick it up in the store in an hour. Retailer’s can carry
every album ever created and produce it on-demand for the customer because of our systems.
They do not have to inventory any product. The option is there for the consumer to
download it to their device at home but we believe, and the retailers believe, that the
convenience of doing these things for their consumer will be a hit and the consumers will
adopt it. Beyond photo and music, we would like to look at games and movies as well.”
CEOCFO: Will you tell us
about the competitive landscape?
Mr. Hall: “Early on the Eastman Kodak Company (NYSE: EK)
and Fuji Photo Film Co. Ltd. dominated the photo industry. These big companies sold all
the paper, chemicals and hardware to the retailers to process photo prints or they
processed the prints for the retailer through one of their processing plants as an
overnight service. As the market has gone to digital we have seen a big change, namely
Kodak has exited this market almost completely, focusing instead on a direct consumer site
called Kodak Picture Gallery. Fuji still is servicing many retailers and selling a lot of
equipment. In the direct business we are in, our biggest competitors now are Fuji and
Hewlett Packard.”
CEOCFO: Why are
retailers choosing PhotoChannel?
Mr. Hall: “Retailers are choosing us because we have
exceptional technology and we are dedicated to only servicing retailers. We concentrate on
online digital media and focus on creating the best user experience that is possible. We
do this all under the retailer’s brand. You will see us as a behind the scenes
company. We are there to enable the retailer to promote their services. We offer complete
services for our retailers, for example, some of our retailers have brought in these
new systems and have not had the need to add additional employees; we provide the
marketing, the support and the background services for them.”
CEOCFO: What is your
revenue model?
Mr. Hall: “A great percentage of our revenue is
transactional volume. This is another reason why we have been successful with retailers;
we make money when they do, it is very participatory. Because the market is big and it is
converting to being big in digital, we see this as a great upside and the retailers see it
as not having to put out a lot of dollars in initial investment to produce all this; they
do not have to spend millions of dollars writing software. The model works well for both
parties.”
CEOCFO: As you grow, do
you need more infrastructure to make this happen?
Mr. Hall: “As the volume grows, the capability that we
have, technology wise to run our systems will have to grow. Last year we made a decision
to redo our platform into what we now call the PNI Digital Media Platform. We rebuilt it
from the ground up, using the latest technology and combining what we have learned in the
last five years based on our previous platform. We are now on a brand new technology base
but as the number of users and images come through, and we are talking about millions of
images, we will need to add more processing power and storage to handle the substantial
increase in volume that is being projected by the retailers. The nice thing about it is
the equipment can continually process images and other digital media files over and over
again for years and the capital outlay pays itself back well for us.”
CEOCFO: Are you
primarily in Canada?
Mr. Hall: “We have more customers in the U.S. Our
biggest known customers in Canada are Wal-Mart and Costco. We have some big accounts in
the U.S., such as Eckerd Corporation and Brooks Pharmacy.”
CEOCFO: What is the
financial picture of the company?
Mr. Hall: “As the company grows and expands, our
financial future looks bright. In the last year, we have invested heavily into doubling
our technical staff to extend our platform. We have a strong investor base that believes
in the future of the company. Our management team and board of directors are strongly
invested in increasing our profitability through diversifying our investor base and
continuing with ongoing fundraising efforts, which will help us to reach our financial
goals for the future.”
CEOCFO: In closing, why
should investors be interested and what do people miss about the PhotoChannel story?
Mr. Hall: “Our goal for the future is to be the industry
leader in online digital media transactions. We believe we can provide the revenue
generation and customer satisfaction for our clients because our business model was
created to adapt to the clients business model. Our goal is to provide technology and
utilize telecommunications infrastructure to bridge consumer ordered content with
retailers who have on demand manufacturing capabilities for the production of merchandise
in real time. If you want to be profitable by moving and printing images we will provide
you with the platform and services that makes it possible. We believe on-demand digital
media production is the future and our platform is an essential service for retailers who
want to breakthrough into this market. This company is a great investment opportunity for
investors who believe that digital media technology is the future for photos, games,
movies and music. For more information about investor relations, you can email us at
invest@photochannel.com or call Public Relations Manager at 604-893-8955 ext 313.”
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