OscarLooking at it in contextSmall acquisition, small revenues...

Oscar

Looking at it in context

Small acquisition, small revenues (payback when?), mainly cash deal, small online reach, very niche

In context, hardly a deal that DES should have bothered with, unless, they were making a play on several of these (and are about to), to target a specific market with product. Ad revenue will be marginal on these, and probably decline like all magazine press is globally.

In terms of $ spent - to reach 150,000 per month, reeltime.tv paid some $150k (or 10% of what DES paid) to reach its specific market, not a fringe market, in www.xpmediacentre.com.au - whilst the two deals are only similar there - the relative price paid is interesting for the same online reach (and I note xpemedia has far more page views that these) - and both use the "community" argument.

In absolute terms, I think that DES overpaid, its a small deal and a distraction, far too niche, and cant see the fit into the overall picture.

Problem is, what IS the overall picture. This move will just confuse the market as to DES's overall strategy.

What is DES?

Wholesaler of content via MPH?
Retailer of content via MP3?
"Community" operator and online advertising?
Part owner of QFX

Wheres it going? My view would be to focus on growing MPH as an aggregrator of content (hasnt harmed Village Roadshow), and let retail channels sell the content.

To state that it is buying fringe communities (or even QFX) to 'front end' MPH is a fallacy - as communities such as the above need specific, niche content (low volume sales) and QFX needs broad content to appeal and survive - a role that MPH can only fill in a very small part. QFX will shortly be a money sink in any case, as it will need $10m plus to go to true VoD (see Netflix delivered 10m titles in 6 weeks - ouch, there goes post!) - and it will be 12-18mths form now in a Telstra dominated market, with a carve out by RMA/EzyDVD.

Pissing off the retail channels such as Virgin/HMV/Sanity/EzyDVD will HARM MPH in the short and long term, as its through these channels that it sells to earn revenue - why try to clash with them with marginal plays that will never grow to any relative size?

Dump QFX, dump "communities", focus on digital, MPH and media assets that can go the distance to WEB2.0, and taking that to the next step.