Welcome to the Hannover House Investor Relations Blog

Friday, September 16, 2016

Footrace to Year-End: An Overview of what is likely to be a RECORD year for HHSE / Medallion!

Greetings HHSE Friends & Followers.  "The silence has been deafening," as reported to us by many shareholders.  Why has the company refrained from P.R. Announcements, I.R. outreach, customary (scheduled) filings, as general communications?

The detailed answers would be voluminous.  But the SHORT answer is: Establishment of Corporate Priorities (and a focus onto those areas of greatest immediate and long-term benefit to the Company).

In the past year, so many new opportunities have arisen, and so many market changes have occurred, that an evaluation of what is working best, and how to "do more of it" has become essential.

While handling the revisions and updates to the Company's Form 10 filing - and making the in-depth disclosures and managerial analyses required for a proper registration - one can take a high-altitude view of the business that the day-to-day distractions of managing a complex business can sometimes obfuscate.  The patterns and data results that have emerged suggest that some of the Company's activities are less attractive than others - and by a significant degree.

For instance, two areas that are NOT meeting management's hopes are:

1).  "Direct to DVD" Releases - the return-on-investment for low-end titles has fallen dramatically, as consumers are less willing to spend $9.96 on a no-name, non-theatrical horror video than in year's past.  As the sales have declined, the cost-of-goods has stayed the same, as we have an obligation to keep the Walmart and Best Buy shelves well stocked (even for "slow" moving titles).  This changing aspect of the market indicates that non-theatrical titles are less attractive now for HHSE / Medallion to release.

2).  "Low-End" International Sales - After a highly visible presence this year at Cannes - including a booth, multiple full-page trade ads, and four official market screenings - we have concluded that the international market for "low-budget" / non-A-star features is insignificant.  Most of the international licensors prefer to handle smaller films under "distribution deals" without paying an upfront licensing advance... and the only titles getting advances and big minimum guarantees are the higher-end, original productions.  Accordingly, the benefit of handling and promoting smaller titles for the international market is dubious.

... and two areas that are EXCEEDING management's hopes are:

3).  "Theatrical Services" - as major outlets (most notably NETFLIX and the PAY CABLE Networks) now REQUIRE some level of USA Theatrical release, the need for access to theatres has grown many-fold.  Accordingly, the access that HHSE / Medallion have to secure screens at the top theatre chains nationwide has become a valuable commodity - and source of "theatrical servicing fees."  This activity provides up-front payments to the Company - as opposed to prior business models in which the Company put up hundreds-of-thousands (or MILLIONS) of dollars in P&A Cash, Credit and Loans, only to have to wait YEARS for the revenue streams to pay it back (think back to the release of the movie "TWELVE" - and how painful that debt burden had been to the Company for the past five years). Additionally, we have found that MANY (if not MOST) of our paid, theatrical servicing clients have ALSO been engaging HHSE / Medallion to handle Home Video, Video on Demand and Television.  So our access to theatres has become a strong acquisition tool as well as a source of operating cash flow... and the side benefit is that mass merchants and major video buyers (including REDBOX KIOSKS) have a strong preference towards carrying videos of films with theatrical momentum.

4).  "Production Services" - As the worldwide film distribution market continued to mature in favor of bigger budgeted films, HHSE / Medallion have the challenge of trying to acquire rights to such titles.  We have found that buying finished films on the festival circuit is a costly endeavor... with bidding wars against the Major Studios, the Weinsteins and Lionsgate often jacking prices to unprofitable levels.  Instead, what we have found, is that facilitating the production of higher-end films is a smarter strategy for both controlling the distribution rights up-front... but also as a source of up-front "production services" fees for the Company.  Mid-level productions such as "Shadow Vision", "True Freshman" and "The Final Minute" provide reasonable cash-flow for overhead and operations... while mega productions such as "Mother Goose" and "AJA" are structured even more lucratively for the Company.  Having ownership of our own film gear and Grip Truck is another plus, as are the three State of Arkansas incentives for original productions (15% across the board; an additional 10% for Arkansas entities and residents; and additional 25% for technology positions and post-production under the EEDC).

So Parkinson, Shefte and Sims have been working to reorganize the DVD side to minimize costs and maximize efficiencies.  As the Company has been very pleased with the consistent success that Cinedigm has achieved in placing two or three titles PER MONTH into Walmart and Best Buy (and sometimes into Target), we are looking for ways to increase profitability.  Accordingly, over the next two months, HHSE new release DVD and BluRay fulfillment will be moved to Technicolor (Memphis) to save on freight, overhead and time efficiencies (and this is the warehouse facility where the Cinedigm distributed studios are shipped out from). 

We are also looking at providing more managerial attention to both the Theatrical Servicing activities as well as to the Production Services.

We remain commited to our existing product lines, but want to provide greater attention and emphasis into those areas of greatest benefit.  Below is a list of three titles already slated for Q4 theatrical release (there's another BIG title, a possible fourth Q4 theatrical release, but it's still in post-production at present and may not make it in time for Academy eligibility this year).  Also below is a list of upcoming DVD and BluRay placements for Walmart (and other Mass Merchants), showing an ongoing commitment to the physical home video side of the business.  Each of these titles is also being exploited day-and-date with home video onto Video-On-Demand Platforms, and 60-days later, the theatrical items will be available for subscription streaming through Netflix.

These managerial priorities impact the daily operations and affect the narrative of the Form 10 and business plan.  But they are the reasons that the Company has been incredibly QUIET for several months.  This is about to change, beginning Monday with a nice feature interview from Uptick Newswire and I-Heart Radio / as well as Investor's Hangout featured visibility.  There will also be traditional Newswire press releases, and enhanced visibility from social media platforms and websites.  The Q2 filings at long last will be released in the next few days, and as the Company feels prepared to provide information on the current status of the FORM 10 and the pre-build-up of features for VODWIZ, these will also be released (but not necessarily next week). 

We are appreciative of the extreme patience that our LONGS have provided to the Company - and know that you have suffered for months under a cone of silence from the Company.  We recognized that the Stock Price and Volume have suffered, and we hope that our ignition of outreach through information and disclosures will help reverse this currently low pricing status.

HAVE A GREAT WEEKEND > for you College Football Fans, the Oklahoma vs Ohio State game (7pm Eastern Time, Fox Sports) tomorrow could be Epic!


SPICES OF LIBERTY” – Oct. 28 / Top 25 Markets / “Bollywood” specialty locations

CHOSEN” – Dec. 2 – NY, LA, plus other top 10 DMA’s / Indie-Art film locations

STANLEY: A MAN OF VARIETY” – Dec. 16 / Top 25 Markets / Indie-Art film locations

The June test release of “THE HOMELESS BILLIONAIRE” was a financial success. However, the film’s director has since commenced on some re-editing / remixing issues that he felt could be improved. Accordingly, the theatrical expansion dates for that release are not yet set.  The Company also is continuing to book playdates for “A REMARKABLE LIFE.”  Another title pegged for Academy Qualifying release, may not be completed by Dec. 16, and is not appearing yet on our schedules; but still may be added.

Q4 & Q1 DVD & BLU RAYS / MASS MERCHANTS (Shipping in Q4)

BAD GIRL – Urban / Christian / Family
THE CONGREGATION – Urban / Christian / Family
DAY OF REDEMPTION – Action / Thriller

JOB’S DAUGHTER – Action / Thriller
REVELATIONS – Thriller / Christian
DINOSAURS OF THE JURASSIC (Walmart Canada) – Edu Documentary

PALI ROAD – Sci-Fi Thriller
DINOSAURS OF THE JURASSIC (Walmart USA) – Edu Documentary

BONOBOS: BACK TO THE WILD (Walmart USA)* - Nature Docu-Drama
SLEEPER CELL: THE ALGERIAN  (Walmart USA)* - Action / Thriller / Politica
COME OUT FIGHTING - Action / Adventure
GUEST HOUSE - Horror-Thriller

*  Both were previously PLANNED for release to mass merchants earlier via ALCHEMY, but were held back for release later,  once HHSE recognized the financial duress of Alchemy