A Brave New Media World...

Although it predates my time, I still recall my father’s stories of when Television launched in the early 1950’s, and replaced radio as the medium for mass entertainment.  This sea-wave of change created great turmoil in the advertising worlds, but within the entertainment industries, the Radio Giants quickly adapted to become the Television Giants (ABC, CBS, NBC).  And while the transition from Black & White to COLOR TV was seismic in the eyes of consumers, again, the existing “major media players” remained the powerhouses controlling TV entertainment and the lion’s share of media revenues.

It wasn’t until the 1980’s – when cable TV began to emerge – that new media giants were born.  Then, just a few years later, the emerging home video industry spawned an explosion of new media companies… leading to today’s transformative video-on-demand platform that is finally enabling indie studios to compete one-on-one with 100-year old media giants.  VODwiz and the associated VODwiz IPTV Channel are the Hannover House windows directly to hundreds-of-millions of consumers… direct delivery to consumers of our movies (and titles from many other suppliers), with no manufacturing costs, no shipping, no middle-man fees and no time-delays for payment.  Watch “what you want, when you want it” is no longer a slogan, but a reality that VODwiz is making possible.

So what’s next?  For Hannover House (and our technology partner NanoTech Entertainment), we think that “4k TV” is the next transformative media platform… a high definition picture so clear and detailed that it makes today’s HD screens feel like a Black-and-White relic.  If you haven’t had a chance to see a 4K image, you’ll have to accept our observation that most people’s jaws literally drop open in awe!

Parallel paths will be pursued for the launch of 4k in America.  An effort to assemble and create 4k programming needs to occur hand-in-hand with the retail placement of 4k players and screens.  Hannover House is already taking active steps on both fronts – with top tier titles set for 4k remastering and VODwiz studio partners being pursued for additional 4k titles (on the programming front), with hardware and package configurations through NanoTech set for mass merchandiser presentations and 2013 retail availability.  It’s like the launch of the Sony Walkman, on mega-High-Def-steroids.  Very exciting, very cutting-edge, and HHSE is well ahead of competitors on this pioneering front.

On other matters, some shareholders have asked for more details on the eBook “BookTV” format launch – which deserves a lengthy blog on its own.  But for brevity, we’ll pose a hypothetical question: 

Do you think a 19-year-old college student is going to prefer to pay $99 for the purchase of a seven-pound textbook to lug around all semester – or $19.95 for the same “information” delivered digitally to their iPad or mobile device?  What if that digital version also contained active links to reference websites, video clips and expert demonstrations?  Which is the better, more thorough, more convenient (and less expensive) way to deliver textbooks or entertainment books (for that matter)? 

The textbook industry in America is a $10-billion annual market… the HHSE / NTEK Book-TV format makes textbooks better and less costly… both indicators of a terrific opportunity.  Sure, book wholesalers and even campus book stores will be threatened by this improvement in textbook delivery, but it’s a brave new media world.  Adapt and thrive – or ignore the coming wave and perish.  HHSE is very excited about this moment in time, and our position and direction in the digital-entertainment and digital-information age.

—ERIC PARKINSON, C.E.O. Hannover House

Tax Programs Spark Arkansas Film Production

As the only company in N.W. Arkansas with a full-service Grip & Electric truck and equipment package for motion picture production, Hannover House has enjoyed a spike in demand recently... sparked by the newly enhanced Motion Picture Tax Incentives for Arkansas-based productions.  Today is the first day of principal photography for "VALLEY INN" - just days after the completion of "THE RECRUIT" and a few weeks after the wrap of  "GREATER" (all of which utilized Hannover House production services equipment).  When HHSE shareholders ask what is meant when we describe ourselves as a "full-service" entertainment company, we mean that (like Paramount or Sony Pictures), we have the full range of services and capabilities (from the physical production of films through the actual distribution of entertainment programming through all major media channels, without requiring third party suppliers or service providers).  Just FYI... stay tuned...

OMG! NanoTech and VODwiz are AMAZING! (beta-test mode)

We just watched a beta-test streaming of a Hannover House movie from the Nanotech hosted VODwiz IPTV Channel.  What an impressive and inspiring experience!  The picture and sound quality were superb, the streaming was uninterrupted and to see the VODwiz LOGO on the Roku home page next to NETFLIX really underscores the vast potential that this channel and VOD streaming site pose:  thousands of titles (most which are NOT available through other VOD portals) will be available to consumers to watch on a pay-per-transaction basis (at competitive or better pricing models than Amazon, VUDU, HULU, etc...). 

It felt like the first time that the "Cable News Network" (CNN) was delivered on cable 30 years ago... or the first time that the Yahoo! site was posted to the internet in the early 1990's.  The VODwiz experience looks and feels MONUMENTAL!  Thanks to the technical wizards at Nanotech Entertainment for bringing to life our vision of a vast library of movies for streaming directly to homes and to mobile viewing devices.  The site is still in the beta-stage at present, but we can see the "live" date approaching soon!

Shareholder questions about pricing tiers and operations...

Hannover managers have received a variety of questions from shareholders regarding the Company's policy on tiered-pricing structures for key accounts, and how this corresponds to industry practices and / or fair-trade rules.  So here's the short answer to an otherwise complex, if not mind-numbing, pricing policy.

For DVD's and Blu-Ray units, "list" wholesale pricing by category is as follows:

a).  Direct Retail purchasers:  45% off suggested retail;
b).  Two-Step Wholesalers for Schools & Libraries:  50% off suggested retail;
c).  Two-Step Wholesalers providing "rental ready" or stickered products:  55% off suggested retail;
d).  Internet Sellers purchasing less than $20,000 per year:  50% off suggested retail;
e).  Internet Sellers purchasing more than $20,000 per year:  55% off suggested retail;
f).  Subscription outlets (e.g., Netflix):  60% off suggested retail;
g).  Mass Merchandisers requiring "retail ready" and purchasing $500,000 or more per year (e.g. Walmart):  65% off suggested retail;
h).  Kiosk retailers purchasing $250,000 or more per year, and not requiring full packaging (e.g. Redbox):  75% off suggested retail;

The above discount structures are comparable to all major home video suppliers / indie studios.  From a practical sense, how might this look on a specific title basis?  Let's use ZOMBIE WARZ as an example.

	Approx	Avg.		Percent
	Units	Wholesale	Sub-Total	Of Total
Direct Retail Buyers	150	$             8.22	$             1,233	0.48%
Two Step Libraries	400	$             7.48	$             2,990	1.16%
Two Step Rental Ready	600	$             6.73	$             4,037	1.56%
Internet (Small Accts)	100	$             7.48	$                 748	0.29%
Internet (Large Accts)	500	$             6.73	$             3,364	1.30%
Subscription Units	400	$             5.98	$             2,392	0.93%
Mass Merchants	25,000	$             5.25	$        131,250	50.77%
Kiosks	30,000	$             3.75	$        112,500	43.52%
	57,150		$        258,513

Clearly, in this particular scenario, a mass merchant (such as Walmart) and a Kiosk outlet (such as Redbox) comprise 94% of the total revenue streams.  Other items - such as "Toys in the Attic" which has been especially popular with Internet sellers, as well as with Schools and Libraries - has a revenue model that's more evenly spread away from mass merchants and kiosks. 

From the standpoint of rationalizing the different pricing for different categories of purchasers, it's most easily represented with Redbox.  The first photo below shows a partial shipment of 18,000 "DVD discs only" of "ZOMBIE WARZ" for Redbox.  The second photos shows a ROW OF PALLETS that were required to ship the same quantity of units of "PINK SKIES" for WalMart.  Clearly, from a standpoint of space, weight and freight, it's significantly cheaper to ship "discs only" than to ship fully packaged DVDs.  Additionally, the savings from not having to create four-color wrap inserts, plastic shell cases, security EAS stickers, top spines and shrink-wrap, add to the savings enjoyed on a kiosk sale vs. a standard mass merchant retailer sale.  Of course, with Video-On-Demand, even the disc manufacturing and freight costs are eliminated!  But that's the subject of a blog for another day.

Hannover pegs initial three e-Books for July 23

Hannover House will release its first three e-Book format titles on July 23, with five additional titles slated for the 2nd half of 2013.  E-Book platforms will include Amazon's KINDLE, Barnes & Noble's NOOK and other media formats for I-Tunes (I-Book) and 20-additional e-Book web streaming sites.

The first three e-Book releases will each also be available as print editions.

"One of the Lucky Ones" by Brenda Hancock (the authorized biography of her mother, Nicole Holland, who as a young girl in France during World War II, fought in the French Resistance while disguising her Jewish heritage);  E-Book release July 23; Print edition now in stock.

"Blind Vision" from best-selling author Vivian Kaplan (based on the true story of a Jewish exodus out of Spain and western Europe, and subsequent adoption of Christianity for societal survival);  E-Book release July 23; Print edition release slated for August 6, 2013.

"Sable Shore" a debut novel from James Danielson (about a man's mid-life crisis slamming head-on with a murder mystery twist).  E-Book release July 23; Print edition release slated for August 6, 2013.

SEC Football: Arkansas Razorbacks Shoot

Dear HHSE Friends - Completed a terrific and insightful interview this morning with the University of Arkansas head football coach BRET BIELEMA on his plans and program for the coming 2013 football season.  The DVD video, produced by Hannover House and Sports Personality, LLC, will be released on August 6th through a major, Arkansas-based promotion with Wal-Mart Stores, Inc.  In pursuing this project (and other major college football team videos), Hannover House has been working with IMG College Sports (the official licensor of U. of A. sports events, media and elements), and the University of Arkansas Media Relations and Athletic Departments.  Host and narrator for the program is sportscaster BO MATTINGLY, who conducts a daily "State-wide" radio program and TV simulcast on Arkansas Sports. 

As this is the first time that an "official" pre-season football video program has been produced and released for the Razorbacks, it's difficult to forecast sales potential.  However, as a point of reference, "home games" for the Arkansas Football team routinely sell over 70,000 tickets at a base price of $45 or higher.  Hannover House would like to sell 10,000 or more copies of this local-appeal video program, in order to validate the full SEC and College Football DVD product line concept.

Arkansas Film Incentives Program Stimulates Feature Production

Hannover House was proud to have played a key role in working with the Arkansas Film Office and Legislators in prompting the passage of a film and video production incentives program.  Already this year, an impressive number of new productions have benefited, including the just-wrapped football feature, "GREATER" and the start next week of the romantic-comedy "VALLEY INN."  We're also pleased to have provided equipment and support for these and other feature film productions, through the Company's ownership of motion picture equipment, lighting, support and a grip truck - essential tools for this industry.  Hollywood's loss (of production activities) is now an Arkansas gain... as the slate of films through 2013 and into 2014 looks to be non-stop!

HH Grip Truck at Company HQ

On location shoot for "GREATER"

Custom interior shelves for stands, lights, etc..

plus interior "dark room" for film and security

Grip "wagons" roll on / off truck easily