Chicken Soup for the Soul Entertainment, Inc.
Q4 2018 Earnings Call Transcript

Published: 29 Mar 2019

[Operator:]

Good day, ladies and gentlemen. And welcome to the Chicken Soup for the Soul Entertainment and Crackle Plus Full Year 2018 Financial Results Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will be given at that time [Operator Instructions]. And as a reminder, today's conference call is being recorded. I'd now like to turn the conference over to James Carbonara of Hayden IR. Please go ahead.

[James Carbonara:]

Thank you, and welcome. With me on the call today are William J. Rouhana, Chairman and Chief Executive Officer; and Scott W. Seaton, Vice Chairman. Following this discussion, there will be a moderated Q&A session open to the participants on the call. We appreciate having the opportunity to provide you with an update on our recent Crackle Plus joint venture, as well as a brief review of our financial results. During this call, management will make forward-looking statements. These statements are based on current expectations and assumptions and are subject to risks and uncertainties that could cause actual results to differ materially. Please refer to the cautionary text regarding forward-looking statements contained in the earnings release issued on March 28th, which also applies to the content of this call. I would now like to turn the call over to William Rouhana, Chairman and CEO. Bill. Please go ahead.

[William Rouhana:]

Thanks James. Good morning, everybody and thank you for joining us today. But focus of the call will be about our announcement yesterday, the Crackle Plus joint venture with Sony. There been any questions about it and we'd like to give you as much information as we possibly we can. Before that, we're going to give you a brief overview of last year's results, which we will be filing today. As we discussed since the time of our IPO in 2017, our online network strategy has been to create a network of networks, grow our audience, lower our customer acquisition costs and through a number of strategic transactions, including Popcornflix, Pivotshare, Truli and Crackle. We have delivered on this strategy. We will continue to build our online networks and we will look to acquire more of them as we take advantage of the highly fragmented online network business and try to create critical mass and scale. Our current AVOD business performed well in 2018. Our add request increased 94% year-over-year, up from $12.7 million per month to $24.8 million per month. Our online network revenue increased of $4.4 million from 800,000. In our television and film distribution business, where we own at licensed TV series and movies across all media, we currently own copyrights and hold long-term distribution rights to approximately 1500 television series and films. In this area, our business revenue grew to $13.2 million from $2.9 million in 2017. And this was primarily because Screen Media, which we acquired at the end of 2017 was the rebounded under our management. Turning to our television and short-form video business, we've been able to successfully generate significant revenue and adjusted EBITDA in that business since we found our company in 2015. And our approach to producing content after we've obtained sponsor commitments continues as it has and we have been able to produce reliable content for our online network business as well. To date, we have aired on eight major networks, including CBS, The CW, Discovery Life, Discovery Family, TLC, FYI, A&E, and Netflix. Revenue in this segment grew to $10.2 million in 2018, compared to $7.2 million in 2017. So now, let me turn the Crackle of course is condition on the assumption that we complete the acquisition that we announced yesterday and that all of the assets of the various AVOD and SVOD businesses we own and Crackle are contributed to the joint venture. I'm sure that many of you have seen the extensive press coverage of what is clearly a major event in our industry. The combination of Crackle and our VOD assets will create a leading VOD business in the United States. We were able to attract a major media partner in Sony, who share our vision of a consolidated AVOD space where scale and addressability is given to advertisers and content diversity is available for consumers. And these we think are the key factors to long-term success. So let's turn first to scale and addressability. In Crackle Plus scale, is obvious. We will have over 10 million active users on our owned and operated networks, plus millions more on our ad rep network, each of which we intend to grow aggressively. We will have over $26 million registered users on our services, over 38,000 combined hours of programming, over $1.3 billion minutes streaming per month, 90 content partnerships and over 100 networks. This makes us a leading, if not the leading AVOD service in the U.S. The scale and addressable add technology that we have will enable us to reach to allow advertisers to reach a broad audience in one place. Let's turn to content, some of these same impressive statistics are the best evidence for the extremely robust content offerings that we can provide to consumers. The 38,000 hours of programming with 90 content partners and 100 networks are second to none, with access to library assets from Sony Pictures Television, Chicken Soup for the Soul Entertainment is screen media, we have a vast array of content that would be overwhelming, accepted it is well curated, and will be constantly refreshed. Consumers will have the richest choice in the industry. So the single most important, the most often received question I've had since that we announced to discuss it is, why did Sony decide to do this? I can't speak for Sony, I can tell you what they said in our joint press release, that they believe in the idea of our partnership, and they like our aggressive entrepreneurial approach. They like ours enthusiasm and they think we have the ability to grow Crackle Plus. But I think there's more to it than that, I think we understood correctly that Sony wanted to stay in this business and was looking for the right way of grow it. They had opportunities to sell it to others and chose instead to stay and help us building. As Mike Hopkins said in his statement, in his last statement to Variety in our joint interview yesterday, he said, we think this is a big opportunity and we agreed. Scott, over to you.

[Scott Seaton:]

Thanks, Bill. I also think it is a terrific opportunity. Well, I would ordinarily walk you through fourth quarter results, they've been filed with our 10-K and in order to have enough time to go over the impact of the Crackle transaction. I'll simply give you an update on the full year results. Total Revenue for 2018 was $27.8 million compared to $11 million in 2017. The 152% increase was primarily driven by growth across all of our businesses. So by line of business, our online networks, which again includes VOD networks and Popcornflix, generated $4.4 million in revenue in 2018, compared to $800,000 in 2017. The increase is primarily due to growth in Popcornflix, and on YouTube, plus the acquisition of Pivotshare. Television and film distribution generated revenue of $13.2 million in 2018, compared to $2.9 million in 2017, reflecting the acquisition of Screen Media. TV and short form video production generated revenue of $10.2 million in 2018, compared to $7.2 million in 2017. Gross profit for 2018 was $14.5 million or 52% of total revenue compared to $6.4 million or 56% of total revenue for 2017. The change in percentage of gross profit resulted from $6.5 million non-cash amortization of our film library in our traditional distribution business, which is required by GAAP to be included in the cost of goods sold. Without his non-cash film library amortization expense, our gross profit would have been 21 million or 76% of total revenue, which is well above last year. Operating income for 2018 was $800,000 compared to an operating loss of $600,000 without the non-cash film library amortization charge in 2018, we would have had an operating profit of $6.5 million or 23% of total revenue, which is substantially greater than last year. So, adjusted EBITDA for 2018 was $11.2 million compared to $4 million for 2017, excluding the effects of acquiring A Plus and the bargain purchase gain from the Screen Media acquisition. So turning to our balance sheet. Aat December 31, the company had $7.2 million of cash and cash equivalents compared to $2.2 million as of December 31 2017. Outstanding debt was $7.6 million as of December 31 2018 compared to $1.5 million outstanding as of December 31 2017. Now, let's turn to the Crackle transaction and let us give you some insights into what we've been learning there. Our review of Crackle for the last six months has revealed a growing vibrant video on demand network. For example, in the fourth quarter of 2018, Crackle had double digit growth in both monetized impressions and revenue. In January, that year over year growth continued. Daily active users have also grown consistently and meaningfully through those periods, and Crackles position in the industry continues to be solidified. Just four days ago, Crackle was one of the Select media partners chosen by Omnicom to participate in their video and upfront deals with leading programmers including A&E, AMC free wheel and 2B. All of this gives us confidence that the Crackle plus joint venture will more than double our company's revenue and meaningfully increase its adjusted EBITDA which is expected to be around 25% to be around 25% of total revenue. Now, I'd like to turn the call back to Bill.

[William Rouhana:]

Thanks Scott. We've been working non-stop on this acquisition for months and a number that we saw a few days ago of our company to help us grow our business. Philippe Guelton data business, which really does position us for further growth each of them are industry veterans with very strong backgrounds. And they've all contributed to the veterans with very strong backgrounds. And they have all contributed to the work that's been done here all at support of Elana Sofko, Chief Operating Officer. I am very, very excited about this team and their ability to help us grow our business. And that's one of the reasons why I think the future of what Crackle Plus and what we're doing is so bright. As I said earlier, we see a big opportunity to build even greater scale through an aggressive acquisition strategy. The AVOD business has hundreds of small networks that need to be consolidated. And we plan to aggressively do that. I think at this point, having required Screen Media, Pivotshare, Truli and now having arranged the pending acquisition or pending joint venture Crackle, we've demonstrated we know how to require media businesses and we know how to optimize them. And we think that skill will serve us well in this environment. Let me now open the call for questions.

[Operator:]

Thank you [Operator Instructions]. And our first question comes from Dan Kurnos of Benchmark. Your line is now open.

[Dan Kurnos:]

I guess we can throw the five-year plan out the window and start from here too on the streaming side. Congratulations, this is a massive deal for you guys. Look, I know that you can use some good color around metrics and around what the -- thought process behind Sony. I just want to start, because it sounds like all the media reports are just get wrong about how Crackle has been trending. We know that, Pluto TV just got acquired for $340 million I wouldn't be surprised if their 150 and revenue is inflated. So clearly, there's value in the space. So just help us think maybe a little bit more about, what you can do differently operating this asset that will help continue to what sounds like grow, and understand that you have a lot of absorbing and some thought process to go through here, but trajectory wise on a growth rate basis. Do you think that you can accelerate the growth of Crackle, at least directionally understanding that you probably can't say too much grain early to help us understand how you're thinking about, how the asset trends over the next 12 to 24 months as you absorb it, make some changes and then try to accelerate the underlying assets?

[William Rouhana:]

Thank you, Dan. I agree this is transformative for us for sure. I think the most fundamental thing that's driving growth in AVOD has really nothing to do with who you are. It's the massive trend that is taking place in the way people are consuming video to video on over online and on-demand. And Crackle positions us with the scale and critical mass, along with our other networks, to be a recipient of that trend to be a beneficiary of that trend. And there's nothing really more important than being in front of a massive trend like this. The acceleration of movement online is -- cannot be denied. It will continue, it will continue massively. And we are now positioned as, at least A-leading, if not B leading free AVOD service in the U.S. And if like us you believe that subscription video on demand will have plenty of great competitors who will be carving up what will probably be one half of one marketplace over time. But that there will be another half of the marketplace which will ultimately be videos delivered online and ad supported, we now are in a position to create one of the few meaningful companies that will be in that space. And we're in that position not just because of Crackles mass and not just because of our combination giving us such scale. But also because we have access to a very large amount of content, we've developed capabilities in our company over the last couple of years of producing original content without taking risks, which we now will be in a position to put on our own network. And by the way, it was 500,000 daily active viewers of our combined networks. If you look at as compared to some of the existing cable and broadcast networks, if you believe the numbers you see, 500,000 daily viewers would make us one of the top networks in the United States of America, including them all. So video-on-demand is growing, the trend is endless and really very strong, we are in a unique position, we have the content to provide our customers. And on top of that we become one of the few places that advertisers can go to reach scale. And so it's a very, very good combination, Dan. I think the growth will be extremely high just because of the trend. But add to that our strategy of rolling up these smaller networks, which really cannot compete, because there is no way that advertisers can go hundreds of networks placed there advertising. We will be in a position to acquire. And I think most of you who know us, know that we are responsible in the way we acquire things. We think about it carefully. We do it judiciously. We spend the time and effort to review and analyze the things we do. And we have proven that we can actually take assets and make them robust, build them grow them. So, I think we are in the right place. And all of thiss, everything I just said here was exactly the conversation we've had with Sony management over the last six months. It's exactly what they see and what we agree with, and they agree with. They see that this space is entrepreneurial, that it needs aggressive management, that there's a big opportunity. And they have belief, they come to believe that we are the right people to do that. And I agree with them, we are the right people to do it. This is one of the things we excel at. So yes, lots of growth, Dan, and very fast.

[Dan Kurnos:]

So let's talk about the tuck-in strategy for a second. I don't think anyone can really argue with your deal document acumen at this point, Bill, I don't think you've done a deal for more than four times EBITDA and you literally just became the largest AVOD player by donating to JV a handful of tiny assets and $3 million MAUs with no cash outlay. So, I don't know how anyone could argue with that. I think on a go forward basis, you're now the largest standalone public. Can you talk about maybe deal size as to what you're looking for? Do you push more into? We know Sony has some originals, but they are expensive. Do you push more into original programming live? Just how do you think about adding to your library and the messaging that you want to convey with the brand going forward.

[William Rouhana:]

Okay. So, there's a couple of questions lurking there, I'll try to take them apart. First of all, in terms of aggregating and deal size, I think we're looking at what will probably be barbell strategy. There are lots of very small players out there, who we can aggregate, really for very little. And they add increasing audience access to additional content and more real estate, which allows people who are migrating to find us. Over time, we will have to rationalize those various networks, put them together and turn them into a identifiable group of networks where people know what they're getting when they go there. But that's a process that will take place over a period of time. The other end of the barbell is the larger players, who really have to try and figure out where they're going to go next. I think we represent a great potential partner for many of those people. And we will, of course, look at all of those opportunities. And I would expect that the next thing we do, when we have this kind of an event, will be something even bigger than this. But it's hard to tell, I'm looking into the future, but I know this is a space, which has to there will be much there will be many transactions in the space. There has to be, because this is such an important change in the way people consume video, that over time, we have to have a few very large companies that we'll be servicing this area. And we all know there are other people entering in we now have an opportunity as either A we're the leader, to work with them as is appropriate to create more value for our shareholders. So no doubt, we're in a place that is really exceptional, but for now let's talk a little bit about content. As you know, we have thousands of television shows and movies that are in our collective libraries. We have the Chicken Soup for the Soul Original, we have the 3,500 or so films that Screen Media has, it has right to, we now have access to the Sony library to the extent that since they are our partners. We also have, as we say here 90 content partnerships, we have a very -- one of our important content partners is FilmRise where we have a 500 film library that we have AVOD right to for five years. We have been building these rights up over the last couple of years in anticipation of being in this space. So we have the ability to curate a whole series of networks around themes for people that will make it easier for them to find the content they're looking for. And over time, you should expect to see us do that and that'll be both on AVOD and SVOD side, because we shouldn't overlook the fact that we have this Pivotshare of technology, which allows us to create niche add side networks, which will be complementary to what will be our major focus, which is our AVOD growth. And by the way, just for we're all remembering, our original programming is getting pretty good. We did get nominated for an Emmy just last week for outstanding family doing programming in Europehere. So, I think we're getting pretty good at that, too.

[Dan Kurnos:]

So just before I ask my last questions, and step aside and let some other the people ask, just on that, Bill. How, do you think about your TV in short form production segment now. Does that become more of a content form for the AVOD networks or is that do you still try to grow that segment standalone?

[William Rouhana:]

I always said from the beginning both film and television distribution expertise, and the content creation expertise were being designed to give us an advantage, where as we moved into the video on demand business, to obtain content at a lower cost than our competitors. And what's happened is we've accelerated the growth of our VOD business much more than anybody could have hoped, and it's amazing opportunity for us. But we've also developed exactly those expertise, those two groups of expertise that we needed to give us back continuing the advantage. And now both these businesses look like to others like what they've always looks like to us. Places where we can obtain content, monetize it, and make money, not take risks, and have access to content on advantageous basis. We didn't hold back in the fourth quarter, two of our series, Going From Broke and Hidden Heroes 4, because we knew this was do was coming and we want to start to take some of our stuff and put it on our own networks. That doesn't mean Dan that its sponsors want us to go elsewhere. First, we will still do that for them, because ultimately all of these programming comes back to us in a way that is to our advantage and lowers our cost. So this strategy is still the same as it's always been. But now at least people can understand what we mean by these two activities are meant to support our VOD business.

[Dan Kurnos:]

And then just last one for me. On the cost side, can you maybe to the extent you feel comfortable talk about potential synergies there, whether it's tech, whether its personnel, whether it's your ability to utilize A Plus to how much that will contribute to profitability?

[William Rouhana:]

Well, one of the key items in our relationship with our partner Sony is that we work together to find ways to reduce costs so that we would be able to move quickly into an environment where there was profitability in our joint venture. And we are pulling our tech requirements with other parts of Sony and using one of their very good companies to provide us with our platform going forward. And that shared technology costs will significantly reduce the joint venture's overall costs, so that was one of our key items look at. When we went into look at a Crackle, we were amazed that how vibrant it was and how it was growing and what we were seeing in the way of revenue and customers. But there was also a lot of expense there and we run our business differently than that. And we looked at each line item and found ways that we believe to reduce those costs. And going in, we have achieved most of those before we actually close. So, I feel we'll hit the ground running and the EBITDA positive immediately from this acquisition, among other things. The question you raised which was the A Plus question and this is a very important thing. A Plus had billions of content us last year as have quite a few of our other social media platforms. They've been growing very quickly. But we look at them as ways to reach customers in a less costly way, because that's the second big cost on the business ultimately. Right now, acquisition of customers by acquiring other networks is much cheaper frankly than going in marketing, it's the actual lowest cost. This is a by-market right now versus a build market the way we're doing it. But after a period of time as the consolidation starts to be finished, you will have to be able to market to people. And we're building in that part of our business through our brand ownership of Chicken Soup for the Soul and A Plus and Crackle and others. We're building a series of relationships with customers. We know what they're interested in, we see what they like and we'll be able to market to them at a much lower cost than if we had to go out and find them to begin with. So that part of our business will continue to evolve, I would expect you would. You will see as I'm sure find the other brands that have wide reach and which we believe will reduce our costs of finding customers in the future as the second part of our strategy, which as you recall was, lower our content costs the way we've discussed through film distribution and content creation, and lower our marketing costs through brand acquisition where we are making money on the brands that we acquired, but also using the relationships with those customers to ultimately bring more customers to our VOD business, that's why we do that. So, I feel like this picture is starting to come together in a way that we imagined it. The only thing that I can say is this happening a lot faster than I through it would, and I'm please about that. I think we've done a good job positioning ourselves in the right place and understanding the industry and seeking out which are out there and moving at a pace that's required. These are very fast paced times, things are happening quickly. We are well positioned now to take maximum advantage of that and to implement the business strategy that we've been talking about since we went public less than two years ago. Just to remind everybody, less than two years ago, August of 2017. So, it's been quite a transformation. It is not over. It's just beginning. Thanks for your questions, Dan.

[Operator:]

Thank you. And our next question comes from Mike Grondahl of Northland Security. Your line is now open.

[Unidentified Analyst:]

Good morning. This is Greg on for Mike. Thanks for taking my questions and congrats on the deal. Just wondering if you could provide a little more commentary on the expectations for ROI from Crackle Plus?

[William Rouhana:]

I think Scott's prediction is a good one. The way we look at these numbers, we should be able to get approximately 25% adjusted EBITDA as compared to revenue from this part of our business. And I think that's a number that we will get to from the very beginning. Over time, I'm not sure whether -- I don't think it will change very much with scale, because there are both costs and efficiencies that will come as the market evolves. But I think we feel good about that approach looking the business and looking at the models that we've been looking at, I think that’s a pretty fair number.

[Unidentified Analyst:]

And then just roughly, I guess what portion or percentage of the revenue mix is expected to be video-on-demand this year and then maybe next year?

[William Rouhana:]

Now, our business shifts overwhelmingly to VOD business. You know, as we said in the press release, this joint venture will more than double our revenue. So just by that alone, when you add it to our existing VOD revenue, it will be more than half of our business for sure. And if you take a look at the way the business is likely to break down, the smallest revenue contributor going forward will be our Original business, our TV and long form -- TV and short form production business. Our film and television distribution business, which I think as you saw since we took it over has bounced back now to historically high levels for 23 year old company, so we were able to get it right back to where it was. And then that business will now be the second biggest, and our VOD business will be the biggest by far, which will be very important transition from a business that where revenue was driven by projects and where every year we opened the door with nothing and start over to a business where more than 80% of our revenue is recurring. And a very small percentage of it comes from the project driven work we have done in the past. It's a major transformation of the financial aspects of the business, and the risk of the business has been dramatically lower.

[Unidentified Analyst:]

And then I guess, lastly, just to follow-up on content. Are there any specific movies or TV shows to call out in your production or distribution businesses?

[William Rouhana:]

Well, in our production business, I repeat what I said earlier, we're very excited about the fact that we've received an Emmy nomination for Hidden Heroes, which is in its fourth season. In terms of other productions that we are really excited about going from broke, which is the Ashton Kutcher executive produced series about young people who are overcoming the dramatic impact of student debt is very, very exciting. It’s a wonderful series, and we'll premiere that on the combined Crackle Plus network. It is a terrific series, it's like biggest loser for debt, I don't know how to describe it. It's come out really well. Ashton's vision for it really has been it has been realized Dan Rosenzweig, who is the CEO of Chegg and also the host, or the star I guess, of the series, did a wonderful job. And the individual students and young people who are now trying to overcome the burden of debt, their stories are compelling. And it's a really big problem. It's a very topical timely problem in the countries, it's with 44 million plus people with $1.5 trillion worth of debt. It's great series. It's really great. So, I call out those two on the original content side. On the acquisition side, probably many of you will not have noticed that we are the ones who managed to acquire the Man Who Killed Don Quixote, Terry Gilliam's 25 year odyssey to create a movie that is really has a huge want to see associated with it and Screen Media was able to acquire that. There will be a Fathom national release of that Fathom Events release on April 10th, by the way. So feel free to go to Fathom Events and get your tickets. There are many Terry Gilliam's fans who have waited a decade or more to try and see this movie. And I think we'll probably give that Movie special status in terms of our AVOD rights our own networks. I think that will be something will track quite a few people to our networks. And then if you just look at the historical stop that we have been able to show over the years on the Popcornflix side. We've had movies like the Clue and the Hrs, Beverly Hills Cops, movies and the like. On the Crackle side, we have the Sony library, which is an extensive library. And Sony, by the way is committed to continue to provide content, and in fact it will provide more content going forward than they have in the past. So, a lot of really good stuff for consumers that I think will be helpful in attracting more and more people to our online networks.

[Operator:]

Thank you. And our next question comes Lisa Thompson of Zacks. Your line is now open.

[Lisa Thompson:]

So here, I'm going to ask you some questions so that people have pity on those of us that have to do a model. When do you think this is going to close?

[William Rouhana:]

Well, we're expecting the close it in the month of April, but it might move -- it could drag till May. And there are no regulatory issues, mostly just assignments and consensus. There's a lot of paperwork to do to get it closed. But yes, it should close, I think in I'm closing.

[Lisa Thompson:]

And you said you're going to file an 8-K on that. What financial information is going to be in there for us?

[William Rouhana:]

So the normal requirement, Lisa, as you know is the first 8-K is due about, I think its 4 days after you announced, so we will do that. But that 8-K will not contained full blown financials. 71 days might you're required to trial full blown 8-K with financials. We'll do our best to beat that timing but at the very least we'll meet that timing.

[Lisa Thompson:]

So in the interim, can you give us some number? I mean there is -- should add like $10 million a month to revenues, or where do I start here?

[William Rouhana:]

Well, I think that we are not ready to do yet. As you know, we have a need to close. So I think we've been pretty clear that this will more than double our revenue. So I think I have a two on my calculator. So I know how to multiply that so I can think you could figure that out. But this is a process that will reveal itself more fully overtime.

[Lisa Thompson:]

Does it look to be a seasonal business, or are they just growing sequentially?

[William Rouhana:]

There's a little bit of seasonality in all of advertising driven businesses for the end -- for the Christmas holiday type stuff, but not in a material way. This looks like any other advertising business in terms of seasonality, there're certain peaks and valleys. But they operate within much narrower ranges than you've been used to with our business in the past where half of our revenue was in the fourth quarter, and that's a thing here. We now have a business that generates regular recurring revenue within a pretty understandable band that generates constant EBITDA and cash flow. And it is the business we aspired to build when we started.

[Lisa Thompson:]

So let me just clarify your comment about being EBITDA positive. Do you mean for the joint venture or for the company as a whole?

[William Rouhana:]

For the company is already adjusted EBITDA positive and the joint venture will…

[Lisa Thompson:]

Oh, I know.

[William Rouhana:]

Well, the fact that joint venture will simply add to that considerably.

[Lisa Thompson:]

Okay, so right after that will be…

[William Rouhana:]

Right after that, because what we've been working on this for quite a long time. And as you know, we operate things in a very efficient way. We pay a lot of attention, because we believe you can grow a business profitably that investing in businesses makes sense. But it should be -- but you should invest as you grow rather than ahead of your growth. I know others disagree with this, that's the way they'll run their business and that's fine. I think we've been able to achieve very substantial growth in a responsible way being good custodians of our shareholders' money. And after all, we are the largest shareholders of this company, by far as we all know, it is our money and that's how we do it. And so we handle things this way, we were able to look at Crackle, understand the puts and takes of that business. And understand how to right size certain things, because we operate differently. We are a more nimble company than a major studio, you can't do the kinds of things in a major studio given the smaller and more agile companies able to move quickly. And I think that's also part of what attracted Sony, because we think -- we understand how to run a business, I know we do. And in this business we'll be run the same way, the rest of our businesses have been run. And I think if you go back to these, I said something a little earlier, which I hope everybody noticed. There are times in an industry where you are better off building things. And there are times in an industry where it's cheaper to buy things. If you look at where this particular industry is right now, this highly fragmented group of companies that control all of the AVOD and services across the country, this is the time to be a buyer not to be a builder, spending big market money. I can give you comparisons of companies who will spend multiples of the amounts of marketing money we spent last year. And they added the same number of monthly active users as we did, because right now what's driving growth is a trend. The trend is overwhelming everything else. What's also available is an opportunity to consolidate. And if you're a small guy, you really must sell. By the way, if anybody on this is a small AVOD operator, please call us when the calls out, so we can talk about buying your network because you need us to do that. You need us to buy your network, before advertisers stop giving you any money. You need to be part of a bigger and more consolidated group, because that's what's going to attract the advertisers. They cannot pick and choose among hundreds of networks. So that's what's going to drive the business going forward and it's responsible spending that you do in light of that of moment in time that really makes the difference in building a business like this. I am two minutes over what we promised people we will do today. So Lisa, if I give you one more, or that I answered your question…

[Lisa Thompson:]

Okay, I'm just going to give you one more and to address the shortfall in revenues for the fourth quarter. You said you held back two series in shipping. Does that account for everything?

[William Rouhana:]

Actually, let's go in the three -- if you look at the three segments, online networks, did better than we projected, film and television distribution did better than we projected. The only part, the only business that didn't quite live up to expectations is the one that has always been the most unpredictable, which was the business production. We did hold back two series that was largely responsible for the difference, and happily that part of our business, which is the least predictable part of our business is now the smallest part of our business as well. So going forward, this will be a rounding error or an asterisk rather than a focus. And that's really better for all of us, because it's a more valuable business, given the fact that it now has a regular recurring revenue stream, and it's no longer as project driven, and therefore the risk is gone. And that was something as I said on our last conference call, we really were striving to do to make sure that we had -- we've taken this business to a place where the risk of projects happening or not happening, timing, all the different things that are associated with individual projects that you're that you work out overtime could be taken out of the business and we succeeded in doing that.

[Lisa Thompson:]

And will we see those two in Q1 or Q2?

[William Rouhana:]

Of course, they probably are on Crackle, I'll let you know when they premier.

[Lisa Thompson:]

Okay, so you're not even going to put them on TV?

[William Rouhana:]

They're probably on Crackle…

[Lisa Thompson:]

Okay, all right. Thank you so much for all that.

[William Rouhana:]

Okay, thanks everybody. With that, I think we have to wrap up, operator. We've gone over our planned time.

[Operator:]

Ladies and gentlemen, thank you for participating in today's conference. This does conclude the program and you may all disconnect. Everyone, have a great day.