IMO opinion the deal to supply video content is not yet finalised and I believe the reason it drags on relates to the need for either TV2U or Divan to put a minimum guarantee sum, probably in excess of $1 million, into a trust account, for the contingency of if Divan fans fail to watch and pay for a minimum number of titles in the supplied catalogue, over say a month.
Vubiquity and other suppliers of content operate to a principle that their contracts guarantee themselves and the Hollywood studios a minimum revenue per month. TV2U has to sign that contract and either pass the risk onto Divan as a back-to-back contract as operator, to pay up the same minimum guarantee of revenue each month, or TV2U has to pay the minimum guarantee each month regardless of actual revenue.
Its a tough negotiating environment for every smart business will play pass the risk parcel to the other and not want to settle holding the parcel and the risk of having to set aside the trust funds, or have the legal obligation to pay what would be a loss generating scenario, over which they may have little influence to change if it occurred.
Imagine if TV2U took on this risk and guaranteed 50,000 titles being consumed a month, and Divan only managed to get 20,000 title watches that month. TV2U are now in the hole not just for the month, but in a scenario where that might last for a number of months till break even numbers were achieved, or it simply fails and TV2U bleeds till a legal stoush occurs over the business venture outcome.
TV2U will not control the Divan marketing arm so are powerless to react if the venture does not achieve mass adoption. IMO the real risk here is Divan is choccka full already of titles and content, so any TV2U supplied catalogue is competing for Divan eyeballs each month with Divan's own content catalogue.
I personally much prefer the Toomai model which is greenfields and all content is fresh content for starved African(pardon the pun) consumers. If the catalogue is a cheap subscription in Africa then the minimum guarantee issue may be less a risk than at Divan IMO.
If a deal is struck with say Vubiquity along these lines with TV2U needing to guarantee minimum guarantees then I expect an ASX announcement to occur. This is because if TV2U are forced to reserve monies to fund a minimum guarantee provision it will be material as it will affect available working capital and hence burn rates and the cost to income ratios used by us all to work out if things like a cap raise or loan facility need to be put in place, then potentially loom for investors to mull over.
In essence IMO I think the music has not stopped yet in the pass the parcel game for content and minimum guarantees, and resolution of that issue should conclude negotiations, with the additional update technical questionnaire(TQ), showing Scott's DRM solution inside the Divan network, ready to accept video content, establish encryption and digital rights to Hollywood CENC standards. TV2U can pile in their content then with no issues IMO.
Expand
