refer to fat middle aged men who got their money through shady pseudo legal
means and have nothing better to do than to stuff it into speculative ventures.
Some of these 'shareholders' are your average Joes who actually believe this
will take off and be a worthwhile venture.
Looking at these numbers (and its the first time we've seen an analysis such as
this one that did not focus on the personalities and history of the principals
of Infinium) it makes it even a bit more difficult to believe they can turn a
healthy profit with this thing.
.........
"If Infinium fails to sell many subscriptions, it will go out of business. If it
sells a whole bunch, it will be heavily in debt. This is the problem faced by
any company that needs to put out substantial amounts of money in front in order
to generate long-term income.
The Phantom game console hardware is the big problem here. Each unit is going to
cost Infinium at least $300 to manufacture, and by the time you add in the fancy
keyboard/mouse assembly, the licensing cost of its Windows XP-embedded operating
system, plus custom software installation, packaging, and shipping, the total
per-unit expenditure is likely to be closer to $400 than $300. But let's be
generous and peg the final cost of each Phantom console, assembled and
delivered, at $300. That means if a customer signs up for the two year plan,
hardware costs will suck up the first 10 months of income generated by each
$30/month subscription ($300). That leaves only 14 months ($420) remaining to
pay all of the bandwidth, server, and game acquisition costs for the life of the
two-year basic subscription.
But we've forgotten the retailers' commissions and other direct sales costs, and
these are almost certainly going to run at least $60 per subscriber, leaving
only $360 to run the servers, pay for bandwidth, and acquire enough "no extra
charge" games to make subscribers feel they're getting their money's worth.
In other words, the front-end cost of each subscription is going to be $360, or
about half of the total revenue that subscription will generate during its
two-year life. If Infinium manages to sell 200,000 subscriptions in its first
year (the lowest figure we heard mentioned at the banquet), it is going to need
to spend $72 million on hardware and sales commissions during its first year of
full operation, and that's exactly how much money it will generate from
subscriptions during that year, leaving approximately $0 for servers, bandwidth,
game acquisitions, advertising, indirect marketing, salaries, operating costs,
and other expenses. In other words, to cover its "nut," Infinium will be in debt
almost from day one. How deeply in debt depends on how successful it is at
marketing its services. The phrase "one million subscribers" has been used more
than once by company executives in conversations with investors and potential
investors -- without anyone mentioning that the upfront cost of acquiring that
many subscribers would be at very least a whopping $360 million (or more,
depending on the actual cost of the Phantom unit).
Infinium has a deal in the works to raise "up to $50 million in equity
financing" with help from Los Angeles-based investment banker SG Capital
<http://sgcapital.com/> . Note the "up to" qualifier in there. Also note that
$50 million is enough to get about 138,000 subscribers going, assuming no
investors who have already put money into Infinium demand a piece of this pie,
and that the Operations Cash Fairy suddenly comes down from fairyland to pay all
the company's operating expenses during its first year or two of full business
activity. But eventually investors will want their money, the Operations Cash
Fairy will run off with the Easter Bunny to Never-Never Land, and "up to $50
million" may turn out to be $42 million or $3 million or some other number
between $0 million and $50 million, with the exact amount depending on the whims
of the investing public and the country's general economic condition at the
moment the shares are offered. So Infinium is going to be in debt, and the more
subscriptions it sells, the greater its debt load is going to be. "
http://www.itmanagersjournal.com/article.pl?sid=04/08/19/0724255
It's going to happen though, in some form or other. Both Sony and Microsoft are
looking toward Electronic retailing, especially Microsoft now that Xbox Live has
hit the 1 million mark.
-Gel
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