Dear HHSE Friends & Followers - HHSE Managers have been getting a LOT of emails from shareholders today, due to Aug. 25 being the announced launch date back in May for the MyFlix Streaming site.
Some of you may have already seen the Access Wire release / USA Today story about the MyFlix Launch. But this blog will provide additional information to shareholders that was too much in-the-weeds of details for a consumer press release.
https://www.accesswire.com/viewarticle.aspx?id=603340
So here's the status of what HHSE management is resolving with respect to MyFlix. The vast majority of titles that have been licensed from the 43 supplier studios are films that are MORE than eight years old. This is an important consideration because "direct-to-home-digital streaming" was not a key revenue source eight years ago, and MANY (if not MOST) of the licensing agreements did not specifically spell out "direct to home digital streaming" as a media right being granted. Accordingly, before Hannover House / VODWIZ / MyFlix can be safely covered under the Errors and Omissions Insurance Policy, there needs to be additional steps taken on a per-title basis to verify that the owner of the films (or authorized copyright proprietor) has approved the inclusion of "direct-to-home-digital streaming" rights in whatever agreement they originally entered into with suppliers X, Y or Z.
Some of the MyFlix suppliers define streaming as an extension of the physical home video rights granted to them. Other suppliers classify streaming as being included in television rights that were granted (because there's not a physical videogram unit). Some suppliers have found that the ambiguity can result in litigation, because a film's actual owner or copyright proprietor might use the absence of specific digital-streaming rights as the basis to file a lawsuit against the MyFlix Studio Supplier (and possibly also against MyFlix, Vodwiz and HHSE). Accordingly, the company's Errors and Omissions underwriter has asked for copyright owner acknowledgment of the MyFlix placement AND an indemnification to MyFlix from the supplier studios for every, single title to be offered on MyFlix. So far, we have only lost about a dozen titles to this process... and we are getting the proper verifications at a good clip (about 300 per week). But we cannot chance it, launch the site, and face huge copyright violation claims. As of today, we have cleared over 1,100 of the 2,500 titles otherwise on-boarded. We should be able to clear another 1,200 to 1,500 in the next four weeks.
Another key issue impacting a planned MyFlix launch today is marketing funds. We have said for years that you only have one chance to make a first impression. Accordingly, we felt that a successful MyFlix launch would need AT LEAST 2,500 TITLES to start, including MAJOR STUDIO HITS, and a handful of "EXCLUSIVES." But we also need more than a hope and prayer for a successful launch: we need marketing impressions and consumer outreach. A HUGE amount of our exposure will be generated through "barter" placements of key websites onto MyFlix in exchange for MyFlix links on theirs. But even with a $200,000 value barter campaign with IMDB, there is still a mandatory $35,000 out-of-pocket PAID ad expense component (which the company cannot comfortably fund until we get the first disbursement of S1 Proceeds). Overall, we have a $1-mm launch for MyFlix ads, requiring about $150,000 in out-of-pocket cash. We can internally fund the on-boarding process, the clearances and even the preparation of ads and promotions. But the launch of the high-impact consumer ads is something that will require a chunk of cash in the $150,000 range that we do not currently have available. Could we launch with a "soft start" and limited noise? Yes, we can do that... and we can re-invest cash flow (collected via credit cards quickly) into offsetting our marketing fund needs. But we're not doing it until we have at least 2,500 titles both on-boarded AND cleared for insurance coverage.
The company is also not ready to file the Form 10. There is about a two week time requirement remaining for the last applicable accounting period to be updated to June 30, 2020 (and to avoid having "stale" financials). There is also some non-public information in the Form 10 regarding certain titles and supplier deals for MyFlix that we prefer to not release until the site has been launched. But we can scrub this information from the Form 10 and release the registration statement as soon as the auditors sign off on the June 30 updates.
We have acquired three "exclusives" for MyFlix, which is pretty exciting. We also have a letter-of-intent regarding the financing of $5.5-million for "THE LEGEND OF BELLE STARR" for production in Spring of 2021 (two MAJOR stars), which provides operating cash flow and overhead for HHSE.
Hannover House is chasing really big stuff with really small resources. As a result, we cannot solve some of the problems we encounter by throwing tons of cash at them. At present, we must rely on hard work, a cheap staff and a little bit of luck. But isn't that the American dream? Even Jeff Bezos was packing boxes in his garage back in 1995 during the "hard work, cheap staff and little bit of luck" years for Amazon.com.
Hang in there, we're going to get this done...
