ReelTime Mid-Year Shareholder Letter
Over the past twelve months our business has grown significantly, not only in the sheer number of signed content deals, but partnerships, technology, marketing and revenue opportunities as well. Our position within the online media sector has solidified due to the company’s advanced content delivery technology, our constant drive to unlock new sources of revenue and the first-class team supporting virtually every aspect of the business. I ask that you not measure our business performance by the future expectations of great things to come; rather, focus on the tally of what we have accomplished to date.
ReelTime is not a “here today, gone tomorrow” technology startup. What we seek is steady, organic growth, whereby shareholders are rewarded through persistent hard work, increasing revenue and a potential larger online media distribution paradigm shift in our favor, which I hope to convey here.
ReelTime will not fall victim to typical penny stock hype. With this in mind, while we are not particularly ecstatic about the decline in share price over the past months, we do believe it has served a valuable purpose for the company. At the end of the day, those who may have been artificially propping up the stock previously are likely now out of the game. Make no mistake, we seek only to increase shareholder value, but will not do so without first ensuring the company’s long-term health. We will do this by continuing to improve our already developed technology, which is the content and distribution foundation supporting a potential surge in business and revenue in the years to come.
Before I inform you of our incredible progress to date, there are a few things I must clear up about the company. Foremost, many investors believe ReelTime is a business of “online movie rentals” only: I cannot tell you how far from the truth this is. ReelTime is an online media leader in that we have tirelessly worked to develop an end-to-end delivery platform that provides piracy-proof streaming content, allowing consumers the best possible online movie experience. However, the technology beneath the surface, management of content, and the support of flexible business practices is one which allows all streaming video providers using the Reeltime platform to cut their bandwidth costs by as much as 97%. The movie rental portion of our business is the store window that has enabled us to bring the ReelTime name to the public, continually develop, and learn the emerging industry, but the understated value is within the supporting technology.
Our patent-pending Intelligent Rapid Distribution System (IRDS) was created with the sole end-goal of completely reinventing the way video is delivered over the internet by major video portals such as ABC, Netflix, Vongo, Cinema Now, Movielink and even YouTube. This has been accomplished by not only developing our own technologies and pairing them with “best in class” components, but also by engaging other companies to further develop aspects of our original system for their own commerce. Such is the case with our partnership with GridNetworks which has allowed continued evolution paramount to our ability to pursue these additional revenue models and incorporate these capabilities beyond what we could have accomplished on our own. ReelTime’s end-to-end grid based Intelligent Rapid Delivery System utilizing a distributed computing network dramatically decreases the cost of video delivery, while also substantially improving quality, efficiency and download times.
In short, the ReelTime.com movie rental front was, and continues to be, the proving ground for our technology, which we believe has substantial value for any company delivering mass content over the Internet. However, investors should be aware that the technology behind the ReelTime online storefront is emerging as the greatest future source of value for the company.
Here’s the proof:
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Traditional server based delivery networks are plagued with high upfront capital expenditures to build out data centers in every region where content is intended to be viewed.
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These data centers must be continuously maintained and expanded in order to keep up with demand and to continue functioning.
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On average, all of this equipment requires to be replaced every three to five years at the end of its usable life.
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Bandwidth must be purchased for each data center in order to support the maximum number of simultaneous streams. However, unused bandwidth is usually wasted when not utilized during off peak times, even though it is typically paid for. The vast majority of the required bandwidth is borne by the content delivery network.
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As the number of streams or downloads increases, the processing load of the servers increases, requiring further deployment of new servers to keep up with processor demand. Each addition requires upfront capital, deployment, maintenance and eventual replacement.
As a result of these dynamics, the most expensive media to be viewed from a content delivery perspective are the most popular titles. Obviously this translates into lower margins on high volume content.
Conversely, with the ReelTime system, the large upfront capital expenditures to build out multiple data centers are not an issue. IRDS utilizes, to a large extent, the bandwidth and computing power of its members. This distributes the processor load over the computers of all members while utilizing the unused bandwidth of the members to deliver the content. In direct contrast to traditional delivery systems in place today, the vast majority of the required bandwidth is borne by the unused capacity of the members and not the content delivery system. Whenever a new member is added, the network gains processing power and additional bandwidth. Whenever a member acquires a new computer, it is automatically deployed into the network, thus continuously upgrading the speed and median age of the overall network.
For these reasons, as well as other technological enhancements within the ReelTime system, the most popular titles become the least expensive to deliver, creating the highest margin relative to delivery cost. The cost-cutting effect of this technology would be likely to significantly benefit any company attempting to distribute media – of virtually any type – via the Internet.
ReelTime may seem like a front-end movie rental store, but in truth, the company is now becoming well-positioned to outsource content delivery for virtually any company in the entire world. You have already seen the beginning stages unfold, in partnerships with LG Sports Marketing, Lightworks NxT and Laguna Productions, Sony Entertainment and Disney. In essence, we are able to host and distribute (read: outsource) content delivery for other major companies, with a significantly better picture at a substantially lower cost to the provider. In doing so, ReelTime intends to maximize revenue through advertising, subscription sharing and content distribution partnerships. Deals with Sony and Disney solidified ReelTime’s presence within the online movie industry; however, the true aim of the company is to obtain joint partnerships with global media leaders for revenue sharing through our ability to significantly decrease video content delivery cost, time and poor quality. In the technology industry, everyone has a dream; ReelTime’s dream of a vastly improved – and significantly cheaper – content delivery system has now moved from the minds of men, to the empirical reality of our results to date.
As ReelTime continues to “lock-in” strategic partnerships in the months to come, we not only expect the number of names with whom we do business to grow, but revenue as well.
With this in mind, ReelTime is presently attacking two major aspects of market presence and business to increase shareholder wealth.
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Revenue: To date, revenue has been minimal, though internally we have known this would be so. Developing the IRDS technology, while securing front line strategic partnerships, has taken time; however, now that the main pillars of the company are solidly in place, the short and long-term future of the company’s share price has never been brighter. With the initial “development stage” of ReelTime now complete, the company is finally able to focus on deriving direct revenue from advertising, strategic partnerships and direct subscriptions. I cannot make any misleading statements or future promises, so I must keep quiet about the events to come. However, it is important to know that ReelTime has put revenue at the forefront of our business goals, now that our technology is solidly in place, supported by the key partnerships and agreements we have been able to sign over the past 12 months.
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Market Cap via Shares Outstanding: It is no secret that ReelTime stock is saturated with over 170 million shares outstanding. As a technology startup, the company has been forced to issue shares in lieu of payment in the past, which was necessary to create the incredible situation at hand today. However, the company is now changing its mindset to retract liquidity as opportunity presents itself. On February 21, 2008, ReelTime commenced auditing financial statements through the year end 2007, through the established and reputable PCAOB registered accounting firm, Peterson Sullivan PLLC. Through preparing comprehensive audited financial statements in accordance with Generally Accepted Accounting Principals (GAAP) ReelTime will provide increased and ongoing investor transparency with a Form 211 filing and subsequent voluntary filings of financial statements. We expect the completion of this audit to show that ReelTime is no longer a “tech startup”, but a credible global media competitor taking all of the correct steps to position itself for a potential future uplist. All of the aforementioned are necessary to begin the process of retracting liquidity.
In addition to the above items, I feel it is necessary to also mention that ReelTime has recently seen a significant decrease in short interest. As shareholders will see in the table below, during July the market witnessed a 54% decline in those holding the stock short, indicating the general investing public is also now seeing ReelTime’s progress in virtually all areas of business. I could not be more thrilled with this information, as it shows that market bears feel the stock has significant upside potential from current levels.
Short Interest Table
With everything that I have mentioned here, I would like to take a moment to cordially invite shareholders to review the ReelTime platform and content library for one month at ReelTime.com. While premium content from Sony and Disney do demand a small fee per-view, you will find the bulk of our content absolutely free of charge. Please take advantage of this opportunity by clicking: www.ReelTime.com/ReelCash. During this offer, I hope you examine the technology behind the company closely, as it is not only the empirical proof of the company’s hard work to date, but truly the foundation of greater accomplishments for ReelTime in the future.
Sincerely,
Barry Henthorn
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