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I saw were little ed is planning to get into viaticals here is a pretty good article about viaticals, what it is and the risks involved. From fast food to betting on peoples lives so that he can make a profit - sound business plan isn't it? On one hand, he wants to put out a healthy menu, on the other hand, he needs people to die to make money?????
Viaticals: Quick Cash, But AT What Cost?
by Larry M. Elkin CPA, CFP
Originally Published June 2000
You are getting ready to retire after a successful business career. With your working days over and your family well provided for, you no longer need that big life insurance policy you have been carrying. Your options include:
Surrendering it for its cash value.
Transferring it to a trust so your children can eventually collect the death benefit, free of estate taxes if you survive at least three years after the transfer.
Selling it to a stranger, who could then profit handsomely from your early demise.
Does that last option give you the willies? Sorry. Let’s try another scenario. You are eating your corn flakes when the phone rings. Your financial planner, Bam Bam, is calling to alert you to an exciting opportunity. An outfit called Vulture Viaticals is looking for investors who want to lock in a long-term fixed return of up to 150%. The deal is simple: You buy an insurance policy on a Mr. Schlemiel’s life. Schlemiel is “projected” to die eight years from now. The policy has a face value of $250,000, but you can own it today for $100,000. Voila! You absolutely, positively get your 150% return, assuming the unfortunate Schlemiel dies on schedule.
Now, you happen to know that Bam Bam sells life insurance, so you ask the obvious question. He cheerfully informs you that, yes, he is the agent who sold Schlemiel the policy. In fact, it is a “wet ink” policy, issued so recently that Bam Bam has not gotten around to spending the commission he received for selling it. And, yes, Vulture Viaticals will pay Bam Bam another commission for getting Schlemiel to sell it to you, with Vulture Viaticals as intermediary. Bam Bam giggles as he mentions that the commission for selling the Schlemiel policy to you is double what the insurance company paid him for selling the policy to Schlemiel in the first place.
You consider the possibilities. They are:
Someone pulled a fast one on the insurance company. Surely, no sane underwriter would have issued the policy if he knew that Schlemiel has less than a decade to live.
Someone is pulling a fast one on you, and Schlemiel actually has a normal life expectancy for his age — or maybe his age is not what you are being told it is. In any event, you may have to wait a lot longer than eight years to receive a return on your investment, assuming you ever do.
Schlemiel recently received some unexpected bad news. But the news can’t be too terrible, considering the miracles that medical science can accomplish in eight years.
Compassion Run Amok
Welcome to the viatical settlement industry. This business in its modern form did not even exist in this country until 1989. A decade later, an estimated $1 billion face value of life insurance was bought and sold.
This, in my opinion, is a compassionate idea run amok.
The viatical industry arose out of the misery of the AIDS epidemic. As their bodies withered and medical costs mounted, desperate patients looked to their life insurance policies as a source of funds. What these patients found, mainly, was a bitter irony that policies on young people — and most AIDS victims were in the prime of life — often have little cash surrender value, if any. A policy that would be worth a small fortune a moment after the patient’s death might be worth nothing a moment before, unless someone could be found who was willing to buy and hold the policy. Some prominent advocates for AIDS victims were among the organizers of the early viatical companies that arose to meet this need.
There were problems with viatical transactions from the beginning. One major obstacle was in the tax law. A 1994 private ruling by the Internal Revenue Service (PLR 9443020) held, as many tax professionals likewise believed, that an insured individual who sold his policy was liable for taxes on the difference between the amount he received and the premiums he had paid. Had the policy not been sold, the eventual death benefit would have been free of income taxes.
Many professionals also believed that the same treatment would apply to the insurance industry’s own answer to the problem. By the early 1990s, some insurers had begun offering “living needs benefits” or “accelerated death benefits” to terminally ill policyholders meeting certain requirements. These payments, like those being made by viatical companies, were not triggered by the death of the insured (who was not yet dead), and therefore did not seem to qualify as tax-exempt death benefits.
But the IRS, in a remarkable act of charity, issued proposed regulations late in 1992 that made insurance company living needs benefits tax-exempt. The viatical industry called for equal treatment, but this call was not answered until 1997, when Congress made viatical settlements as well as living needs benefits tax-free when received by individuals who are either terminally or chronically ill. Since then the viatical industry has grown rapidly, even as U.S. deaths from AIDS have plunged due to improved therapies.
The growth in viaticals has come largely from three new groups of insureds in addition to those who are terminally ill. The new groups are those who are chronically, but not terminally, ill; older insureds who are otherwise healthy; and people who take out new insurance policies and quickly sell them to viatical companies.
The Extreme Case
The downside risk to the insured individual of a viatical sale is obvious. In an extreme case, and I am confident that the extreme case is bound to happen sooner or later, someone is going to be killed because an investor gets a little too eager to recoup his outlay. While most viators (as individuals who sell their policies are called) will not be so unlucky, many are going to have to put up with frequent calls from buyers who are checking to see if their ship has come in.
On the other side of the transaction, anyone who pays a fair price for a single policy on someone else’s life is gambling, not investing. Sure, you might get lucky if the insured dies an early death, but except for the terminally ill, there is no statistically valid way to identify these individuals. You stand an equal chance of being unlucky and having your insured live longer than average. Remember the French landlord who gave lifetime residency rights in an apartment to a woman who lived to be 120?
If, on the other hand, you paid fair value for a pool of insurance contracts on the lives of healthy people, you would simply be stepping into the shoes of the insureds. Your expected return would be comparable to the return on stocks or bonds, which, after all, is where the insurance company is investing most of the premium money.
So is there potential for buyers of viaticated policies to consistently reap better-than-average returns? To be fair to the viatical companies, yes. A certain percentage of people will get sick and die young. Insurance companies build this certainty into their premium rates. By locating these people and persuading them to accept a higher-than-normal discount rate when selling their policies, a predictable and stable profit can be built into the investment if there is a diversified pool of policies. Basically, you turn the insurance companies’ loss into your gain.
But there is a big catch. You must have a diversified pool of lives. You must be sure that the life expectancy has been materially shortened. You must get the sellers to accept a big discount. You must have financially stable insurers who actually will pay the death benefits when due. You must have policies that are soundly structured and adequately financed even if the insureds live longer than expected, lest the policies lapse and the investment be completely lost.
Policy owners have other options besides selling to viatical companies. They can borrow against policy cash values, ask banks or other lenders to let them borrow against face values when the insured is terminally ill, or ask the insurance company itself to pay a living needs benefit. They also can shop around for the best deal among viatical companies, in which case competition may force viatical returns down to the point that they lose their appeal to investors.
So what do I think of viatical transactions? As an investor, I would stay away because of the financial risks as well as the lack of regulation and disclosures. As a policy owner, I would look closely at all the alternative ways to raise quick cash.
now down to .02...but there is a positive news release, kinda sortof
I shouldn't be too disappointed....I made a good little profit the last time it spiked at .015 or so, plus Sirius has really done well for me lately. I will look into QBid. Thanks.
that's it...I'm done with subpenny stocks!
It was sometime in October. I don't live that far from their HQ, so I thought I may take a weekend spin just to see if what they were saying was accurate. They have been pretty forthcoming when things have been delayed (i.e. hurricane delaying infomercial), but I hadn't seen anyting concerning a delay in the office building.
I don't think you are...I emailed them wanting to know if ground has been broke for the office building that they announced they were building, as well as where it was located. I have yet to receive a response.
WNMI was starting to PO me and it started to make a run this week...ATNG tends to spike quickly - make sure you have your alerts on.
have to admit I thought the stock would have been better by now..I'm surprised it has gone as low as it has. I have been wanting to average down, but the last time I did that with a stock it R/S.
Hopefully they are smart enough to read the board going back a couple of months when (and if) they do their due diligence.
What a generous guy - stock instead of paychecks...wonder what he does for Christmas bonuses?
thanks again! I have noticed that several of the penny stocks I either own or monitor have not done well since the Berlin Exchange deal broke several months ago, and they were listed on it. I wasn't sure if it was all due to that or if there are other factors. I have read PR's where the companies have requested to be taken off the exchange, but no follow up to find out if they actually have.
Thanks! I wasn't aware of the ghost shares.
Berlin Exchange Question
Just how is the Berlin Exchange affecting ATNG or any other penny stocks that are listed on it? Some of the other boards I monitor have talked on this subject and it is kind of an even split if there is an effect. I'm just curious about it...don't really have a clue other than it may have something to do with shortselling.
my goal is to not be a basher, but to warn people against this stock...same with GWAD...both are run by scumbags.
So do I...
From what I understand, Both Frances and Ivan put everything on hold, so we will have to wait and see how the campaign goes...even if there is further delay, I would just have to wait and see what the press releases say....Simpson has met every goal he has set forth with this company, so I am content to be patient and see what happens. right now I am averaged at .006 with plans to average down more if some of the other stocks I own hit my sell points or my wife allows me to invest some more. When this thing pops, be ready, but if you miss it, I wouldn't worry because it has a habit of popping and they have really positioned themselves for great gains.
I wonder if the managers salary is actual cash or if it is combined with stock options.
my stock is worth about $15 and change...appears everything he is doing is legal, he is just playing on the greed of penny investors. $450K may be a legitimate cost for the restaurant, but the 15K a month for a managers salary isn't. Looks like he has managed to run this think into the ground thought...it used to be one of the largest volume movers on the penny board.
not dead, just being patient. Hurricane slowed the rollout of their advertising campaign. Waiting to see how that plays out.
It's a company that exists soley to support its owner and his salary...Hey little ed...how is the catering business doing, move any more on the Koolcow venture, or how about the greek restaurant...how about your independent label? Oh that's right, your central focus is to agressively acquire Frulatti's cafe's...still planning on opening 8-10 locations by the end of the year?
must have some vendors to pay
it was just an idea, but several of the stocks that I follow that were (and may still be) on the Berlin exchange are not doing too well as compared to before they were listed. I have noticed that when a company gets delisted from that exchange, they have put out a PR.
did Warning ever get off the Berlin Exchange? Could be the problem.
I remember that Monster.com had their first commercial during the superbowl a couple years back and that instantly launched them into the stratosphere....I also remember that an upstart internet company was the first to go to a monthly fee and they had a multitude of problems - people paid but couldn't log on, people kept getting bumped, poor customer service, but this company had a plan, stuck with it and became very successful - AOL.
I wouldn't even send him soap on a rope
little ed needs to reduce his salary to minimum wage...his two juice bars don't justify that kind of salary... I doubt they make 25K a year each...make his salary commensurate with sales..This company has suffered recurring losses from operations and is dependent on existing stockholders and new investors to provide the cash resources to sustain its operations and his salary. Go back and look at all his pr's...what has he carried through on? Heard anymore about his catering business? How about the koolcow venture, or even better, how about the product label he was going to put out? He is just dangling a carrot in front of those investors who don't know little ed's history.
What is the lawsuit all about anyway?
If your product is as good as touted (sorry, haven't heard of it), there there will be a whole lot of other companies better than this one to do business with. but if you want to sell to little ed, do it for cash.
"Short selling" normally involves borrowing shares, which the borrower perceives as being overvalued, from a securities dealer and selling them at the current market price. When the price later goes down, the short seller figures to buy the shares back at a lower price and repay the borrowed shares to the dealer, pocketing the difference.
Naked short selling does away with the lending and borrowing of shares and permits dealers and short sellers to accomplish the same thing by contract, without buying or selling actual shares. Either way, they win or lose depending on whether an underlying stock's price falls or rises.
thanks! I hope GZFX will take notice if they monitor this board.
GZFX needs to get on this list! Looks like everyone that does video and game rental is on this list except GZFX.
http://www.bestwebbuys.com/video/dvd-rentals
look at their earning statement - they have no capital...and don't let little ed sweet talk you into exchanging his company stock as part of the purchase price - his capital is is the money he raped from investors. Sounds like your product is too good to be associated with little ed and his organization.
PIPE Deals Smoking
By Christopher Byron
The New York Post
June 1, 2004
It didn't get much attention in the press, but in a Tampa, Fla., courtroom last week, the Mafia's much-chronicled rampage through the penny-stock market a decade ago officially came to an end, with sentences finally handed down for the four top remaining insiders in the case.
So is the so-called "microcap" end of the stock market any safer a place to put your money now that the bell has finally tolled for men like New Jersey crime under-boss Philip Abramo and his henchmen? Don't count on it. Just as Henry Kissinger once observed of diplomacy, each solution simply opens the door to the next problem, and on Wall Street, from behind every door wafts the scent of easy money.
This week we follow the beguiling aromas of Wall Street's newest penny-stock ploy - the so-called PIPE deal (for "private investment in public equity"), a kind of new-and-improved version of the so-called Regulation S deals on which Abramo and his crew feasted back in the 1990s.
In "Reg. S" deals, men like Abramo were able to cheat the market by orchestrating penny-stock pump- and-dump schemes while hiding behind the veil of offshore brokerage accounts held by local nominees in places like the Bahamas and the Netherlands Antilles.
In the new version, the hiding goes on in plain sight, via self-styled "micro-" and "small-cap" hedge funds that often function as willing patsies to pump worthless stock onto the market at outrageous prices.
Some on Wall Street say that more than $12 billion has been raised already from PIPE deals of all sorts. One trade group publication, the so-called PIPEs Report, estimates that close to $8 billion of fresh money has flowed into PIPE deals since January alone, with close to $1 billion of it funneled into itty-bitty transactions of $2 million or less - the typical-sized deal for an obscure penny-stock issuer.
In fact, however, no one can really see the full picture for any of this since the whole point of such transactions is to keep them free of regulatory oversight and control - the exact sort of conditions that sooner or later brings on the swindlers.
Hedge funds are attractive customers for PIPE deals because the law treats such funds as "sophisticated" investors that don't need any help from the SEC in order to decide where to put their money. That apparently applies even when the funds are pouring money into the same sorts of troubled penny-stock companies that outfits like the Abramo crew exploited in their Reg. S swindles of the 1990s.
One such company, American Stock Exchange-listed Magic Lantern Group, Inc., has no working capital, no tangible net worth and no cash flow, and keeps producing quarterly net losses that exceed gross revenues. What's more, nearly half the company's stock is held by the court-appointed receiver of New York's Mob-connected Lancer hedge fund, which was shut down by the SEC following disclosures first published in this newspaper two years ago.
Though the stock is currently trading for 90 cents a share, the company has no obvious market value at all. Yet it was nonetheless able to raise $1.5 million from New York's Laurus family of penny-stock hedge funds.
Why would Laurus invest in such a company? One answer can be found in the deal it got, which boils down to 7.1 million shares of Magic Lantern stock, or 10 percent of the entire company, at less than 26 cents per share - a staggering 71 percent discount from the price that everyday investors had to pay in the public market. As a result, even if Magic Lantern Group's share price falls by 50 percent by the time the Laurus folks decide to bail out, they'll still be able to reap a stunning 80 percent profit on the deal while outside investors get hosed.
Or consider Summus Inc., an OTC bulletin board-traded company with a colorful past. At various times this company has functioned as a plaything for everyone from Vancouver penny-stock promoters to a North Carolina man who began his career peddling horse shampoo as a cure for human baldness.
These days, Summus claims to be in the business of developing "applications and solutions that optimize the consumer wireless experience," which basically involves selling photos of fashion models in bikinis that you can download into a cell phone.
The company's new boss, who's been on the job since February, says business is going great.
But apparently, it's not going quite great enough. During the first three months of this year, cash in the kitty fell by 86 percent, and by the end of March it was down to $300,000. In the process, the company's day-to-day working capital evaporated and the company plunged into insolvency, even as net losses soared by nearly 75 percent while the company's deficit in operating cash flow jumped by nearly 35 percent.
So is Summus a smart investment? At a current price of a mere 18 cents per share, the stock hardly seems to have many fans. But last month, the company was able to raise $2 million in a PIPE deal in which nearly 43 million shares of stock were offered at the equivalent of roughly 4.5 cents per share, or a 75 percent discount from the market price.
Nearly 40 percent of the Summus PIPE went to a penny-stock player named Joseph D. Samberg who runs hedge funds in New York and the Cayman Islands. Now Mr. Samberg is undoubtedly a fine individual, but he has a habit of turning up in deals with men whom you wouldn't want your daughter to bring home to dinner.
In October 1999, Samberg's funds paid roughly $15 million for about 2.5 million shares of a NASDAQ-traded company called Futurelink Corp. Thereafter, the company's stock price surged from $8 to nearly $36 per share, after which it precipitously collapsed in the early months of 2000, settling eventually in the pink sheets at its current price: roughly 1/100th of a cent per share.
There is no evidence that Samberg or his fund were knowing participants in what was obviously a well-orchestrated pump-and-dump heist, which wound up lifting an amazing $2.5 billion from the market. But he should have known who he was getting in bed with when he handed over the money.
For one thing, only two months before the deal, the company fired its founder and CEO, a Canadian penny-stock promoter named Cameron Chell who had recently run into problems with Canadian regulators and been banned from the Alberta Stock Exchange.
And not long after Samberg became an investor, the company filed papers with the SEC acknowledging that "persons formerly associated with our business may have engaged in unlawful activities designed to manipulate our stock" - an apparent reference not just to Chell but to others who had been associated with him at the company.
Chell, whose previous business associates have included a confessed Internet stock swindler from Illinois and a Canadian penny-stock promoter now awaiting trial on criminal charges in Miami, was not about to let his ouster from Futurelink slow him down. Two years ago he sold a company he controlled - the aforementioned Magic Lantern Group, Inc. - to a Canadian company that promptly resold it to New York's Mob-connected Lancer hedge fund.
Not every PIPE deal involves companies - and deals - as convoluted and fishy as these, and many of the larger ones are undoubtedly on the up and up.
But the smaller and more troubled the issuer of the stock, the fishier and more suspect the transactions become. And just because the Mafia is no longer in the game hardly means the game itself is going to stop.
As Glenn Frey reminds us in "Smuggler's Blues," the lure of easy money has got a very strong appeal. And that is just as true on Wall Street as anywhere else.
Does this ploy look a little familiar?
PIPE Deals Smoking
By Christopher Byron
The New York Post
June 1, 2004
It didn't get much attention in the press, but in a Tampa, Fla., courtroom last week, the Mafia's much-chronicled rampage through the penny-stock market a decade ago officially came to an end, with sentences finally handed down for the four top remaining insiders in the case.
So is the so-called "microcap" end of the stock market any safer a place to put your money now that the bell has finally tolled for men like New Jersey crime under-boss Philip Abramo and his henchmen? Don't count on it. Just as Henry Kissinger once observed of diplomacy, each solution simply opens the door to the next problem, and on Wall Street, from behind every door wafts the scent of easy money.
This week we follow the beguiling aromas of Wall Street's newest penny-stock ploy - the so-called PIPE deal (for "private investment in public equity"), a kind of new-and-improved version of the so-called Regulation S deals on which Abramo and his crew feasted back in the 1990s.
In "Reg. S" deals, men like Abramo were able to cheat the market by orchestrating penny-stock pump- and-dump schemes while hiding behind the veil of offshore brokerage accounts held by local nominees in places like the Bahamas and the Netherlands Antilles.
In the new version, the hiding goes on in plain sight, via self-styled "micro-" and "small-cap" hedge funds that often function as willing patsies to pump worthless stock onto the market at outrageous prices.
Some on Wall Street say that more than $12 billion has been raised already from PIPE deals of all sorts. One trade group publication, the so-called PIPEs Report, estimates that close to $8 billion of fresh money has flowed into PIPE deals since January alone, with close to $1 billion of it funneled into itty-bitty transactions of $2 million or less - the typical-sized deal for an obscure penny-stock issuer.
In fact, however, no one can really see the full picture for any of this since the whole point of such transactions is to keep them free of regulatory oversight and control - the exact sort of conditions that sooner or later brings on the swindlers.
Hedge funds are attractive customers for PIPE deals because the law treats such funds as "sophisticated" investors that don't need any help from the SEC in order to decide where to put their money. That apparently applies even when the funds are pouring money into the same sorts of troubled penny-stock companies that outfits like the Abramo crew exploited in their Reg. S swindles of the 1990s.
One such company, American Stock Exchange-listed Magic Lantern Group, Inc., has no working capital, no tangible net worth and no cash flow, and keeps producing quarterly net losses that exceed gross revenues. What's more, nearly half the company's stock is held by the court-appointed receiver of New York's Mob-connected Lancer hedge fund, which was shut down by the SEC following disclosures first published in this newspaper two years ago.
Though the stock is currently trading for 90 cents a share, the company has no obvious market value at all. Yet it was nonetheless able to raise $1.5 million from New York's Laurus family of penny-stock hedge funds.
Why would Laurus invest in such a company? One answer can be found in the deal it got, which boils down to 7.1 million shares of Magic Lantern stock, or 10 percent of the entire company, at less than 26 cents per share - a staggering 71 percent discount from the price that everyday investors had to pay in the public market. As a result, even if Magic Lantern Group's share price falls by 50 percent by the time the Laurus folks decide to bail out, they'll still be able to reap a stunning 80 percent profit on the deal while outside investors get hosed.
Or consider Summus Inc., an OTC bulletin board-traded company with a colorful past. At various times this company has functioned as a plaything for everyone from Vancouver penny-stock promoters to a North Carolina man who began his career peddling horse shampoo as a cure for human baldness.
These days, Summus claims to be in the business of developing "applications and solutions that optimize the consumer wireless experience," which basically involves selling photos of fashion models in bikinis that you can download into a cell phone.
The company's new boss, who's been on the job since February, says business is going great.
But apparently, it's not going quite great enough. During the first three months of this year, cash in the kitty fell by 86 percent, and by the end of March it was down to $300,000. In the process, the company's day-to-day working capital evaporated and the company plunged into insolvency, even as net losses soared by nearly 75 percent while the company's deficit in operating cash flow jumped by nearly 35 percent.
So is Summus a smart investment? At a current price of a mere 18 cents per share, the stock hardly seems to have many fans. But last month, the company was able to raise $2 million in a PIPE deal in which nearly 43 million shares of stock were offered at the equivalent of roughly 4.5 cents per share, or a 75 percent discount from the market price.
Nearly 40 percent of the Summus PIPE went to a penny-stock player named Joseph D. Samberg who runs hedge funds in New York and the Cayman Islands. Now Mr. Samberg is undoubtedly a fine individual, but he has a habit of turning up in deals with men whom you wouldn't want your daughter to bring home to dinner.
In October 1999, Samberg's funds paid roughly $15 million for about 2.5 million shares of a NASDAQ-traded company called Futurelink Corp. Thereafter, the company's stock price surged from $8 to nearly $36 per share, after which it precipitously collapsed in the early months of 2000, settling eventually in the pink sheets at its current price: roughly 1/100th of a cent per share.
There is no evidence that Samberg or his fund were knowing participants in what was obviously a well-orchestrated pump-and-dump heist, which wound up lifting an amazing $2.5 billion from the market. But he should have known who he was getting in bed with when he handed over the money.
For one thing, only two months before the deal, the company fired its founder and CEO, a Canadian penny-stock promoter named Cameron Chell who had recently run into problems with Canadian regulators and been banned from the Alberta Stock Exchange.
And not long after Samberg became an investor, the company filed papers with the SEC acknowledging that "persons formerly associated with our business may have engaged in unlawful activities designed to manipulate our stock" - an apparent reference not just to Chell but to others who had been associated with him at the company.
Chell, whose previous business associates have included a confessed Internet stock swindler from Illinois and a Canadian penny-stock promoter now awaiting trial on criminal charges in Miami, was not about to let his ouster from Futurelink slow him down. Two years ago he sold a company he controlled - the aforementioned Magic Lantern Group, Inc. - to a Canadian company that promptly resold it to New York's Mob-connected Lancer hedge fund.
Not every PIPE deal involves companies - and deals - as convoluted and fishy as these, and many of the larger ones are undoubtedly on the up and up.
But the smaller and more troubled the issuer of the stock, the fishier and more suspect the transactions become. And just because the Mafia is no longer in the game hardly means the game itself is going to stop.
As Glenn Frey reminds us in "Smuggler's Blues," the lure of easy money has got a very strong appeal. And that is just as true on Wall Street as anywhere else.
and don't forget, little ed gives the sellers stock in his company towards the purchase price...we should get together and file a lawsuit against little ed like several folks are doing against the warning model agency.
How can something be best new product 3 years in a row - once it is introduced it is no longer new....kind of like winning rookie of the year more than once.
Blockbuster vows to go after Netflix
NEW YORK (Hollywood Reporter) -- Blockbuster Inc. chairman and CEO John Antioco promised shareholders Tuesday that the video rental giant will take the fight to online rental rival Netflix Inc. when it launches its own Internet-based rental service this year.
While Blockbuster executives have in the past often shrugged off the competitive threat from Netflix and the significance of the online rental market in general, Antioco openly acknowledged its strategic importance at his company's annual shareholder meeting.
"Two million (customers) have spoken," he said, referring to Netflix's subscriber base. "We can't continue to allow our customers to erode away from us. We are not going to ignore these folks."
Antioco said current online renters tend to be affluent and technology-savvy, just like many of Blockbuster's customers, meaning that his company has likely been losing a sizable share of consumers to Netflix. Assuming that about 30 percent of Netflix users may have been Blockbuster customers, Antioco said fighting for online renters is "a significant opportunity" for his firm.
The CEO gave few further specifics on Blockbuster's online rental site, for which the company has been running a beta test with a monthly subscription price undercutting Netflix.
Antioco didn't say when the site will go live but hinted it will be sooner rather than later. "We will be launching when we're ready to launch," he said. "I'm comfortable that it will be long before" the previous guidance time frame, which had called for a launch by the fourth quarter.
While subscriber acquisition costs will be high over the first year, the online rental service will bring "significant profit beyond that," Antioco predicted, adding he expects Blockbuster's profit per subscriber to be above Netflix's.
Sources expect Blockbuster will not immediately be able to replicate Netflix's overnight delivery but will focus on getting DVDs to online renters within two days.
Among the matters approved at Tuesday's shareholder meeting was a proposal to adopt an amended and restated certificate of incorporation, which will facilitate a proposed split-off of Blockbuster from Viacom, which currently controls the company.
Details of an exchange offer that will help affect the split-off have not yet been decided, but Antioco suggested that the offer will happen around September. He said the goal will be to structure the offer in a way that is attractive to both Blockbuster and Viacom shareholders.
Antioco also said Blockbuster's board will explore how to create value for shareholders after the split-off with options including stock buybacks, dividend payments and investments in developing businesses.
Besides the online rental service launch, Antioco in a presentation outlined online and in-store subscriptions as a key focus for management. "There could be some upside to the whole rental market" because of subscriptions, he said, predicting that about 10 percent of Blockbuster's customer base and 20 percent of the firm's revenue could come from monthly subscriptions by the end of next year.
Asked whether Blockbuster's $24.95 a month in-store subscription pass compares well with Netflix's slightly cheaper online offer, Antioco said it is "a hell of a better deal," because his company offers unlimited numbers of rentals under the pass. While Netflix users rent seven to eight DVDs a month, Blockbuster's Movie Pass owners rent more than 10 a month.
Antioco said his management team also will focus on expanding its video game rental operation and building a DVD and video games trading business, as previously announced with customers getting store credit for selling Blockbuster a film title. Margins on this trading business could reach up to 40 percent, making it the highest dollar-margin transactions the company has.
Blockbuster stock ended unchanged at $14.30 on the New York Stock Exchange Tuesday.
Don't overlook the fact that Blockbuster is also offering in store unlimited rentals, so they will have two revenue streams. I heard on the Motley Fool radio show that most of Blockbusters profits were from overdue fees, not rentals, therefore they had implement changes to compete with the mail rental arena. GZFX admittedly does not have the titles and warehousing (yet). Consider the competition between convenience stores and hypermarketers (i.e. Walmart, Meijer, Krogers) who can afford to sell gas cheaper than convenience stores, it is hurting the convenience stores as a whole and they are looking at how to compete against the hypermarketers. I think GZFX, Netflix and any others are going to have trouble competing with the hypermarketers such as Walmart and Blockbuster. They do have game rentals in their favor, but it is a matter of time before the others catch on to that also. Look what happened to Netflix's stock last week, went down 30%, doesn't bode well for a penny stock.
you may be right - the number I saw was $15, but that was for two rentals out at a time. Looks like folks are offering different pricing based on the number of movies checked out.
Blockbuster is offering unlimited game rental, but instore only and the offer I saw was 3 months for 49.99. Probably testing the market. having both mail and store pickup will only help the bottom line - they already have the infrastructure in place. Another player to worry about, at least with movie rental is Walmart - they are now offering this service significantly below BB and GZFX.