e.Digital Corporation (fka EDIG)

[cksla]

Posted by: nekos
In reply to: None Date:6/27/2002 7:03:54 PM
Post #of 13899

About today's subscription PR...

After first reading the PR today about subscription services...I liked it a lot. After mulling it over driving home from work today...I now love it a lot. Here's why...

First. Don't be too concerned on the short term issues. Those being increased employee overhead and not immediately offering premium music content (yet). Again, this will start with free independant artists, who by the way, have been known to pay companies a small fee to have their content included in hardware/software offers. So in the short term, this businesss may see some immediate revenues, but probably not much. In the eyes of the independant artist, I'm sure they would love to have their music pr-loaded in our devices. It gives them a captive audience they would probably have never reached. Also keep in mind we have an experienced executive from MP3.COM who has been in this industry already. Collier would not have brought him on unless Jones was able to deliver a sound business plan of his own.

Second. The next step. Collier seems to do things with at least a forwad looking five step plan with multiple positive outcomes. I believe this new entity in e.Digital is no different. The natural extension of what was stated in the current PR is to eventually offer premium content----hence, it will turn into a paid subscription service. How will e.Digital be able to do that all others have failed at so far? Keep reading....

Through the company's involvement in SDMI and other ventures, I'm sure they have a frim grasp of the issues of secure content (audio and video). What e.Digital now has in place is the hardware and software architecture to have a "closed loop" secure downloading system. Here are the specifics...

In the May 9th Conference Call, Collier made an interesting statement regarding ACTEL. To paraphrase, "Their troops are in here all the time and ours over there." The ACTEL PR was dated 10/16/01 http://www.edig.com/news/releases/pr101601.html. The original premise of this relationship was to secure the company's IP from copying and hacking. If that was the only reason, that could have been accomplished months ago. From Colliers statement, both firms are actively working on "something". Secure downloads now come into the forefront with today's PR. Imagine for a moment audio/video content that is for the PC to handheld or set-top-box to handheld that had a marriage of software between the PC and the handheld. In other words, the secure content would be downloaded onto the PC with EDIG software and transferred to an EDIG handheld using EDIG software. It wouldn't be comaptible with other hardware designs without liscensing our software (if we were to allow such licensing at all).

My belief is the plan overall plan is to ecompass the total secure downloading experience which may ease the jitters of the content providers. Who knows...maybe we have been working on a proprietary DRM? I've seen the comments that we must be partnering with Liquid Audio or someone else to do this, but actually, I would think Collier would rather not do that. Can EDIG do all of this alone? I think the premise of launching it's own CE line is more complicated than subscriptions.

Other quick thoughts. If we were to demonstrate premium secure downloads, I believe the royalties to the artists will be paid as the downloads happen (logistically once per month to a subscription clearing house of some kind). Meaning for EDIG...minimal or no upfront licensing fees for content. We would just be vehicle of securing and distributing the content with our slice of the pie at pay out time.

Digitalway partnering with us? If the above is correct, no wonder they are working so favorably with us. Tehy could be our Asian partners in this whole business and we would still reap the rewards.

Odyssey product lines and future subscription capable players. Beside the 20% margins on the initial sale, these devices now become sources for even more revenue as they are used for paid downloads in the future. The margins over time will continue to increase as htose consurmers who take advantage of our subscription services buy in. For the moment, even when free in July, this might offer enough incentive to the consumer to maybe buy our product.

On Monday's conference call. If the above is even partially correct, I doubt it would be spelled out in defined terms at the moment. I would see this being a 2 year plan to full fruition. We'll see. I'd project the video subcription would have faster "legs" than the music being we're partnered with DIVX.

All of the above is just some mind ramblings. Hey, we'll see what happpens...but I firmly believe this whole subscrioption thing is much larger than what appears on the surface.

I may have more thoughts later...

Comments welcome.