Acquisition of Visual Vibe.Com Limited by iCreate Limited
iCreate Limited (“iCreate”) is pleased to announced that the Company has signed an Agreement for Sale of Shares dated June 28, 2022 for the acquisition of 100% of the shares in Visual Vibe.Com Limited (“Visual Vibe”). Visual Vibe has been the leading video board advertising company in Jamaica over the past fifteen (15) years and continues to provide quality service to its clients. Pursuant to the said Agreement, iCreate has paid the requisite deposit and the transaction is expected to be completed within the coming months. iCreate will also be funding this acquisition by way of a pending Rights Issue.

The acquisition of Visual Vibes by iCreate fits squarely within its Merger and Acquisition strategy towards building out its vision as the leader within the creative and digital economies in Jamaica and the wider Caribbean region. This acquisition comes on the heels of the Company’s successful holding of its Extraordinary General Meeting on May 27, 2022.

iCreate’s stock price hit an all time high of 3-dollars in April, following several big announcements. They’ve acquired a majority stake in E-Commerce Company, GetPaid….

And been approved by the Development Bank of Jamaica as a Business Development Organization. And we hear they have some more big news coming up! Founder and CEO Tyrone Wilson will join us!

“Visual Vibe is the largest digital outdoor advertising company in Jamaica. It was started in 2006 by businessman Ali McNab. The company has a very strong revenue stream, very strong profit and a very strong free cash flow, even through the pandemic. We are very excited about that because it will bring us to having a very solid company and help us along the way to being the GraceKennedy of creative companies in Jamaica, and help to provide strong returns to shareholders. Visual Vibe has some very good locations in terms of billboard spaces. The big screen in the middle of Half-Way-Tree where Jamaicans gather to watch Olympics and World Championship is a Visual Vibe board. With a location like that owned by iCreate with our content creation capabilities, will give us the opportunity to use it for some unique content to engage people there and across Jamaica at the other locations. So our focus from day one will be developing a content strategy that will bring eyeballs to the screens on a consistent basis.”

Tyrone Wilson, CEO of iCreate

Kimala Bennett Chief Executive Officer of the Limners and Bards Limited has released the following unaudited financial statements for the six months ended April 30, 2022.

Revenue for the six-months was $781.7 million, up 26.3% compared to $619.0 million for the corresponding period last year. The revenue growth is attributable to increases in the company’s core business, media placement (up $149.6 million or 53.4%) and advertising agency (up $16.1 million or 71.3%). Production was down $9.5 million or 6.0%.

Gross profit increased by $72.3 million or 35.7% over the corresponding six – month period in the prior year. Gross profit margin was at 35.2% compared to the 32.7% in the prior period.

Net profit increased by $9.5 million or 8.5% to $123.1 million for the six months compared to $113.5 million in the corresponding period in the prior year. The increase in net profit is attributable to increased revenue and gross profit. This result is impacted by the $1.9 million loss recorded by Scope over this period. While Scope recorded a loss for the six months, we expect a profitable return at the end of the year.

We continue to execute on our strategy for growth and profitability while anticipating the needs of our clients given the shift in digital marketing trends.

The net profit includes Finance income of $0.4 million compared to $15.0 million recorded in the corresponding period of the previous year.

Administration expenses have increased by $46.8 million, or 46.6% in comparison to the previous six– months period. These increases are primarily attributable to staff costs (due to increase work volume), repairs and maintenance of production equipment and depreciation and amortization costs.

The Consolidated balance sheet shows total assets increasing by $266.9 million or 37.3% to $981.7million compared to $714.8 million in the corresponding period last year.

Current assets increased by $222.3 million primarily because of increases in receivables ($158.8 million). Cash and cash equivalent also increased by $76.6 million reflecting a high liquidity position. The increase in receivables is mainly due to increase in revenue.

We continue to have tight monitoring and controls over the receivables.
We are pleased with the Company’s performance for this six-month period and expect continued growth for 2022.

Kimala Bennett Chief Executive Officer of the Limners and Bards Limited

More information CLICK HERE

The articles “How Shopify Outfoxed Amazon to Become the Everywhere Store,”  was published on the cover of Bloomberg Businessweek on Dec. 22, 2021. Shopify’s market cap at the time was $177 billion. The total market cap of SHOP today: $41 billion—below even its pre-pandemic value.

There are a few easy but incomplete explanations for Shopify’s decline, and they’re the same factors now plaguing other pandemic winners like Amazon.com Inc., EBay Inc., Etsy Inc. and Wayfair Inc.

Online retail sales have flatlined over the past few months and may have even decreased on an annual basis, as consumers emerged from quarantine and ventured back into physical stores.

The small and medium-sized business on which many of these sites depend have been especially hammered by the sour economic cocktail of high inflation and rising interest rates. And since the market downturn, skeptical investors are no longer focused solely on revenue growth but on the comfortable formula of profitability and margins.

Source Bloomberg

According to word on the ground an offer of US$3M was made a few years ago by a consortium, including we understand some of the minority shareholders. This offer was rejected by Lee Chin as too low.

According to sources AIC has been covering the annual shortfalls, and is said to be owed at least JA$1B, in financing loans by CVM.

But other factors must be looked at in any acquisition price consideration.

Subscription Revenue

As the former President & CEO of SportsMax Limited and parent company International Media Content Ltd, Oliver McIntosh knows first-hand the severe challenge of getting Caribbean viewers to subscribe to content.

As one writer to the media remarked “My question is, if SportsMax is really not interested in showing the Winter Olympics, why have they acquired the exclusive rights, thus preventing Jamaicans from watching it through other media outlets to which they already subscribe, and online if they wish, and in prime time? This is not an acceptable situation. Jamaicans should be able to watch their team compete without having to pay for it through SportsMax. Those of us who love the Winter Olympics and sports, like ice skating, should be able to watch it where it is being aired.”

This was always a very limiting revenue factor for Oliver while at SportsMax. One industry insider estimated that the total potential subscriber market was around 3M in the English-speaking Caribbean, with best guess rate of $12.00 per annum for each subscriber, placing at value of US$36M. SportsMax we understand found it difficult to achieve this mark.

Subscription revenue is not a major driver or part of his revenue model as we understand his business model.

Advertising Revenue

CVM TV is coming from a position of Gross Annual Revenues in 2012 of around JA$700M to what some estimate to be JA$200M today, a significant fall off and grossly insufficient to cover the cost of operations.

For some reason major local and regional advertisers are more inclined to advertise on local free to air stations rather than regional cable channels. This is seen as the major driving force for Oliver, who sees greater opportunies to maximise the advertising and sponsorship revenues from such high-priced events like English Premier League, FIFA World Cup, NBA, etc.

Again, the former President & CEO of SportsMax Limited, Oliver McIntosh, knows first-hand the severe challenges of getting Caribbean advertisers to spend against this kind of content on Cable.

Advertising and sponsorship opportunities on Cable channels such as SportsMax was estimated at the upper end to be around US$500,000 per annum, which we again understand was difficult for them to achieve.

As free-to-air channel, Verticast Media Group/CVM TV, is free to sell advertising and sponsorship at whatever price a more willing and receptive advertiser market will bear. This is critical to his revenue model for the business.

The RJRGLEANER Communications Group Experience

The following is presented for context, to illustrate the challenge media in Jamaica is facing in an effort to be profitable.

For its second quarter ended September 30, 2021 the RJRGLEANER Communications Group recorded a pre-tax profit of $25 million and after-tax profit of $27 million for the quarter, compared to a pre-tax loss of $96 million and an after-tax loss of $68 million during the second quarter of the prior year.

Primary contributors to the quarter’s performance were: –

A $191 million or 15% increase in the Group’s revenues, was mainly driven by increases in the:

• Audio/Visual division $150 million or 28% (comprising the operations of the free-to-air television station, cable stations, 1spotmedia and TVJ International.

• Audio division $28 million or 15%
• Print and Online division $10 million or 2%

Apart from general increases in advertising placements across all divisions, the Group earned event revenues, specifically from the staging of the Olympics, as well as the Junior and Senior Track and Field Trials, during the quarter. The results of the second quarter reflect a more normalised profile of the business, with the return of high-cost sporting events, necessary to satisfy viewer interest, but not supported by sufficient revenues to be strongly profitable.

No Brand Value In CVMTV

Marketing and branding experts, we reached out to point to what they consider to be a significant fall off in the brand value for CVM, due to operations and presence in the market. As such this is not an intellectual asset of much value to VertiCast Media Group and would more than likely be replaced with new branding.

Diminished Audience

Based on recent all media surveys CVM TV has less than a 20% share of the local audience, with the majority going to TVJ. Its acquisition value as a result is severely impacted, as VertiCast Media Group will not be benefiting from this value and will have to spend considerable sums to win back a reasonable share of the audience market, which directly impacts advertising revenues.

The Free To Air License

For many people we spoke to the only real asset CVM TV has is its Free To Air License, and the cherished position of one of only two Free To Air stations on the island. How much is this worth, that depends on what it would cost to secure a new one.

So How Much Is CVM TV Worth?

Only one person can answer that question, that is Michael Lee Chin, the majority owner through AIC, his holding company. CVM has a number of minority shareholders who held on to their positions when Lee Chin took over the business from Neville Blythe many years ago.

One industry insider left us with this telling observation, ” Given the fact that digital licenses are around the corner, I wouldn’t advise anyone to acquire CVM…. too much baggage and brand impairment. Stay tuned for a possible FYAH/Jamaica Observer digital TV channel.”

Will There Be A Wedding?

YES, If Lee Chin is ready to sell. We think so providing Oliver can keep Lee Chin at the table as a minority shareholder, converting debt to equity.

Stay Tuned…

Let’s look at what CVM TV has to offer.

CVM TV is A Bride In Waiting

CVM TV has for many years now lost its way and strategic direction, and has fallen dramatically in its audience share and resulting advertising revenue.

Those in the know claim that majority owner Michael Lee-Chin has been looking for a strategic way to offload the company that will somehow still give him a stake in the business and a seat at the table. Lee Chin we know has investments in other media entities, so he obviously likes the space.

A close look at the shareholders of the RJR Gleaner Group will reveal that Lee-Chin and a select number within his tight inner circle control a sizable portion of the shareholding. This would suggest that he sees value in owning a piece of the media action. It’s interesting and somewhat strategic to note that with his holdings and that of his tight inner circle, he can effectively vote and control the company.

We also understand that Lee Chin has significant interest in FLOW and Ready TV, which as one industry insider suggested would colour his decisions going forward.

A Receptive and Willing Father

So, offloading or marrying CVM TV to the Oliver Mcintosh-led Verticast Media Group and retaining a smaller stake will be perfect for him, relieving him of the need to keep funding and keeping it alive.

It’s Free To Air

Yes, even though most if not all Jamaicans receive the CVM TV transmission via their cable providers, CVM TV is a free-to-air station. A key feature of CVM TV’s operating licence is that it must be broadcast via a network of transmitters around the island and received into the household through old fashioned antennas. This is the nature of the operating license CVM TV owns. Establishing and maintaining these networks of transmitters around the island is a very expensive undertaking and digs deep into the company’s revenue.

Must Carry On Cable

For Verticast Media to get its content out a cost-effective means of distribution will be critical for the venture’s success. Why is this important? As indicated above free-to-air transmitters are very expensive to operate, so distribution access through cable is the only other viable option.

Both of the two giant cable operators, Digicel and FLOW, have competing sports-focused channels and business operations, which will present them and Verticast Media Group with a serious competitive challenge. There is no compelling reason for Digicel and FLOW to carry Verticast Media Group as a competing cable channel.

However, Digicel and FLOW as part of their operating license must carry local free to air channels, so if VertiCast Media Group acquires CVM TV, Digicel and FLOW must carry Verticast Media Group content and channels, even if they are competing channels.

Digicel And FLOW Should Pay To Carry His Content

There is a strong and overwhelming argument to be made by VertiCast Media Group/CVM TV for Digicel And FLOW to pay to carry their content on their cable networks. The argument is grounded on the fact that both Digicel And FLOW pay heavy sums annually to carry the content of all international cable channels such as CNN, HBO, ABC, NBC etc.

This could be another very lucrative source of income for VertiCast Media Group/CVM TV.

Why Not Just Acquire SportsMax?

This option was quickly shot down by most of the people canvassed.

As the former President & CEO of SportsMax Limited and parent company International Media Content Ltd, Oliver McIntosh knows first-hand what strategic value he could extract. The fact that he has already determined that a traditional media company is the way to go from a distribution strategy acquisition for this purpose is out.

However, there is one think he may want to secure. The primary operating and revenue generating assets, the content rights and ownership are held exclusively by International Media Content Ltd, which is controlled separately by Digicel. However, were Digicel to even consider selling this particular company, it would essentially be messaging that they are shutting down SportsMax, which we do not see on the cards right now.

Regional Cable Distribution

While Digicel and FLOW will have to carry a proposed merged Verticast Media Group/CVM TV free to air content in Jamaica, that is not the case in all the islands they now operate in.

To get around this Oliver may strike broadcast and content deals with other regional free to air stations such as CNC3 in Trinidad, CBC in Barbados, and Winners TV in St Lucia, where Digicel and FLOW operate. The same must carry for local free to air operates in these other islands and so they will have to carry Verticast Media Group/CVM TV free to air content. This will in effect give him the regional distribution he needs to make the business model work.

Oliver had apparently, we assume, tested this model before he departed SportsMax. SportsMax produced the recently held CARIFTA Games and broadcasted on linear TV via its many cable partners across the region and on CEEN TV outside the Caribbean and on its SportsMax and SportsMax+ channels within the SportsMax App. This was executed in addition to partnering with several free-to-air entities across the region, ensuring that fans got to see their favourite athletes engage in pulsating track and field action.

Content Management Contracts

These strategic free to air partnerships may eventual morph into content management contracts with Verticast Media Group and the local stations. These management contract options were outlined by Oliver in a recent interview with Khaliah Reynolds. One of the ways this can be executed would be for Verticast Media Group/CVM TV to feed content to them from Jamaica.

Operational Head Quarters

CVM TV’s operational headquarters and primary broadcast house on Constant Spring Road Kingston, Jamaica, is a ready-made to move in head office for VertiCast Media Group Limited. Most of what Oliver will need to get off the ground will already be in place. We suspect that significant investments will have to be made to transform the broadcast system to high quality/definition digital standards.

An Operational Team

CVM TV will already have much of the support team Oliver will need to get the business up and running in a much shorter time frame. He will also have the option to pick and choose who he wants to keep, letting go of those who do not fit into the new business.

Phased Rollout Of Digital Switchover

Jamaica has embarked on a phased rollout of digital broadcasting technology, with initial focus on the main urban centres, beginning in January 2022.

It is not clear where CVM TV is with respect to its switch over plans. What we do know from the TVJ TV experience is that it’s a very expensive undertaking.

TVJ based on recently published reports has made good progress in their plans to install key infrastructure for the impending Digital Switchover, DSO, process for television. They plan to roll out digital broadcast services in phases, leading up to the government’s stated goal of completion in 2023.

DSO is the process converting and replacing older analog television broadcasting technology with digital television services. The switchover is expected to cost the industry between US$18 million and US$20 million, while households will be able to get a setup box with the digital signal for about $4,000 to $5,000.

Where CVM TV is in this switch over process will have a strong bearing on any acquisition price. If the process has not started, or has started but is still a long way to go, then the price would be discounted bearing in mind the investment to be made and the redundant analog equipment which is of no value going forward.

If, however this process is far advanced and nearing completion them the acquisition price will be much higher given the investment already made and the new digital equipment in place.

With the Digital Switchover (DSO) transition broadcasters are allowed at least one year of simultaneous digital and analogue broadcasts to give them time to change their equipment and test the new systems.

The transition is expected to free up valuable portions of the broadcast spectrum, which can then be used for other purposes such as advanced wireless services, dedicated educational channels, public and safety services and other applications.

Analogue switch-off is set for January 2023.

How Much Is CVM TV Worth?..Part 3