Caribbean Media and Communication Services - A Quick Guide

Transcription

1 Caribbean Media and Communication Services Ltd. Five-Year Business Plan (FY ) Prepared for CMC by CBET Inc. in cooperation with 4P Group, Inc. 15 November, 2002

2 1.0 Executive Summary 1.1 Description of Business Opportunity This business plan assesses the feasibility of establishing a for-profit subsidiary of the non-profit Caribbean Media Corporation (CMC). This new entity called Caribbean Media and Communication Services Ltd. (CMCS) will be chartered to provide numerous media and communication services initially to the English speaking Caribbean region, followed by the Spanish and French speaking Caribbean if economic opportunities warrant such an expansion, but ultimately, to the global market. To accomplish this task will require an infusion of funds from investors as well as potential public sector grants for various public interest projects. Full first year start-up costs will be up to US$4.460 million for corporate and production staffing. The number of jobs created is dependent on the number of services implemented, but would range from 49 at the end of year one to 65 at the end of year 5. From the point that the decision is made to proceed, CMCS could start limited operation within three months but full first year production would not begin until six months later. 1.2 Market Needs Given the relatively small size of the population, territories and markets in the Caribbean states, the number of television channels and their financial resources are inevitably limited. Bearing in mind that the only local television productions, in most cases, are televised news; sports; special events and some locally developed soap operas, Caribbean television is, therefore, to a very high degree dependent on and influenced by foreign programmes, most of them from the United States. There is, however, a need for a greater volume of regional programmes on both radio and television to reinforce traditional Caribbean values, traditions and culture, education, health and other public information areas. For example, the most watched soap opera on Trinidad is the locally developed Westwood Park. It is clear that the capacity exists within the region to do this. It is equally clear that a methodical plan to achieve critical mass in sustainable regional media productions, is however required.

3 Advertisers desiring to reach the Caribbean market as a whole have up to this point not been able to deal with a regional media distribution channel directly to consumers. There is a need to establish a framework for a regional advertising market that advertisers could take advantage of and thereby increase the number of new advertising dollars allotted to the Caribbean. The deployment of a regional radio network, regional newspaper insert magazine, and the distribution of regional TV channel(s) to cable operators would provide the enablers necessary for the formation of this regional advertising framework. World wide the Internet has experienced tremendous growth during the past five years. Although, up to this point, Internet growth in the Caribbean has been relatively slow due to past regulations and associated high access charges, recent deregulation and liberalization measures have poised the region for significant growth. Numerous Information Service Providers (ISPs) have already started local operations, however, there is a need for a Caribbean Regional ISP similar to AOL in the U.S. that allows business travellers equal local Internet access anywhere within the region. Although up to this point such a service has been lacking in the Caribbean, current CBET business intelligence uncovered that Cable & Wireless is expected to launch such a service soon. A strategic alliance between C&W and CMCS could give CMCS an opportunity to provide streaming audio and video news services to C&W regional ISP operation and have C&W host streaming media capability to customers on a subscription basis. In addition, CMCS has the opportunity to provide Short Message Service content feeds to numerous Caribbean wireless service providers. 1.3 Financial Summary A financial model was used to identify relevant investment needs and capital expenditures in conjunction with sales and expense projections to generate pro-forma financial statements. Those financial details are included in the Appendix (Sections A-2 through A-9). The following provides the reader with a summary of pertinent financial data Funding requirements To establish CMCS will require US$4.460 million in external funding if all proposed services are implemented during the five-year timeframe of this plan. US$4.460 million in start-up costs are associated predominantly with 12-month of operating and miscellaneous expenses to implement the various services described in this plan. To significantly improve the probability of success US$125,000 in funding has also been allocated for the following business health care functions: Mentoring of CMCS management team o CBET deems it critical that CMCS management team be trained and mentored in strategic management, marketing, operations (technical, administrative and information technology), human resources, finance, corporate and legal issues and be trained in numerous aspects of media, telecommunications and international business requirements. CBET will facilitate the outsourcing of the necessary resources required for this task.

4 CMCS monthly financial monitoring o To ensure that investment funds are utilized properly and efficiently in the interest of CMCS growth, CBET insists that CMCS agrees to utilize the services of an independent accountant working with management, to ensure that timely financial statements are presented to the CMCS Board for monitoring and analysis purposes. The health of a business entity is reflected in its financial position. Deviations from norms raise red flags and, if appropriate, preventive actions can be quickly implemented. CBET wants CMCS to be successful and believes that its Business Health Care Programme will add to the success of this plan Five-Year Revenue Forecast Total Sales Summary 5 years (US$000) $50,000 $45,000 $40,000 $35,000 $30,000 $25,000 $20,000 $15,000 $10,000 $5,000 $ Total gross sales Total cost of goods Total net sales Five-Year Profit & Loss Projections The following five-year profit and loss forecast assumes that CMCS will launch its services as shown in the Table The reason for this phased implementation is to first get CMCS established and operational with an opportunity to hire the qualified resources it needs to implement the various services proposed. Secondly, a phased implementation allows CMCS to minimise external financing and modify this plan based on changing market conditions. This approach minimizes downside risks and enhances the probability of success. Table Service Launches Fiscal Year Calendar Year

5 Contract for Core CMC Services Regional News Gathering & Dissemination TV & Radio Programming Special Events Negotiation Launch Phase-1 Enhanced Services News Text Feeds to Caribbean SMS Operators Streaming Media Feeds to Caribbean ISPs or Subscribers Subscription Programming to Caribbean CATV Operators Caribbean Weekly Insert Magazine Launch Phase-2 Enhanced Service Caribbean Radio Network International Media Programme Broker for Caribbean Originated Programming Month 1 FY2003 January 2003 Month 7 FY2003 July 2003 Month 1 FY2004 January 2004 $50,000 $45,000 $40,000 $35,000 $30,000 $25,000 $20,000 $15,000 $10,000 $5,000 $0 Profit and Loss Projected (US$000) 5 years Total sales Gross profit Total overheads Net business result Break-even point Break-even occurs at a point where sales revenue equals fixed costs plus variable costs. The financial model demonstrated that the break-even point occurs at approximately Gross profit margin 86.7% 82.3% 81.2% 81.1% 79.3% Break even point $3,585 $4,235 $4,515 $4,916 $5, Sensitivity Analysis Sensitivity analysis demonstrates as follows that CMCS can operate profitably even if sales are 60% less than projected.

6 Profit and Loss Projected (US$000) (Sales at -60% from current projections) $20,000 $18,000 $16,000 $14,000 $12,000 $10,000 $8,000 $6,000 $4,000 $2,000 $ Total sales Gross profit Total overheads Net business result 1.4 Return on Investment Investors are willing to make investments in business ventures as long as the risks are reasonable and the returns on investment attractive. The following table depicts projected rates of return on investment (50% of net earnings distributed in dividends) based on optimistic, most likely and pessimistic sales projections: Year 1 Year 2 Year 3 Year 4 Year 5 Optimistic (+15%) % % % % % Most Likely % % % % % Pessimistic ( 50%) 76.16% % % % % 1.5 Economic Benefits In addition to creating jobs on Barbados, it is estimated that foreign exchange earnings will amount to US$146.9 million (75% of regional advertising dollars earned) over the five-year study period. Furthermore, regional advertising, programming, and streaming media sales will increase employment, diversify the economy, promote ancillary services and enterprises, generate tax revenues and have a positive ripple effect on local economies. 1.6 Formal Relationships Formal relationships usually take time to establish and negotiate but are critical to the success of most ventures. This case is no exception. The following lists some of the relationships that need to be put in place for CMCS to succeed: Funding A number of potential regional and international investors may need to be approached to secure funding for the various opportunities presented in this plan Business Champion A business champion is someone who has the vision, passion, drive, perseverance, leadership ability and experience necessary to launch CMCS and its associated services.

7 leadership ability and experience necessary to launch CMCS and its associated services. It is critical to the success of CMCS that the right person be selected to undertake this task. Finding the ideal candidate may be difficult since CMCS is expected to launch various new ventures that require both media and a variety of telecommunication experiences. In the event that an ideal candidate cannot be found to lead CMCS, it is recommended that the board, in addition to hiring a well-qualified CEO, also temporarily hire executive assistants on a consulting basis, with the necessary expertise to assist CMCS new CEO in successfully launching the various services. Relationships need to be put in place with the proper experts once all consulting needs have been identified Subscription Channel(s) for CATV Operators Popular quality programming tends to draw viewer-ship, market share and ratings. Ratings, in turn, determine the number of advertising dollars a show can command. A one percent drop in ratings can equate to millions in lost advertising revenues. Therefore, it is important to build the necessary relationships to secure excellent programming channel(s) and locally developed programming. The following are some of the relationships that should be explored: US Channel Programming o ABC o NBC o CBS Information Channels o The Weather Channel o Fox News o Financial News Network/ Bloomberg Entertainment o Disney Channel o Nickelodeon o Cartoon Network Local Programming o Independent Producers o Media Houses o Government Information Services, etc. US broadcast networks would like nothing better than to have someone like CMCS represent their interests and associated revenues in the Caribbean Infrastructure Satellite operators (C and Ku Bands) o Regional CATV Subscription Channel Feeds o Regional Radio Programming Feeds CATV system operators ISP Strategic Relationships Cable & Wireless Regional ISP Operation

8 Local ISPs like Sunbeach, etc. o Provide streaming media hosting Caribbean Radio Programming Local Talk Show Hosts and Personalities Announcers Local Music and Entertainment Industry Note: The music and entertainment industry are major stakeholders. They command a lot of content for all media and can be the lynchpin of CMCS entree into certain International markets Weekly Newspaper Insert Magazine Target Stakeholders o Corporate Advertisers Target Content Providers o Local Writers o Investigative Reporters Target Delivery Channel o Newspapers CBET Services The CBET Vision is based on the following concepts: Generating a Continual Pipeline of Business Ideas to Fuel Business Growth Linking Caribbean Supply and Brand with Global Niche Market Demand Developing a Smart Partnership Philosophy towards National and Regional Cooperative Prosperity Fostering a Collaborative Private Sector Business Gearing System Linking Macro- and Micro- Enterprise Promoting Corporate Governance (effective management of relationships) to Facilitate Financially Self-Sufficient Operations The CBET Mission is: To facilitate the generation of business ideas and the promotion of business success in order to stimulate and sustain rapid global niche market growth for Small State economies. The Seven Business Drivers and Goals 1. Generate Business Ideas to Diversify Global Niche Market Trading 2. Mobilise Seed Capital to Convert Ideas into Full Business Plans 3. Match Plans with Champions to Augment Deal-Flow 4. Syndicate Grant and Equity Funding to Adequately and Appropriately Capitalise the Business 5. Mentor the Management Team to Strengthen the Understanding of Business Systems

9 6. Promote the Business Health Care Concept to Enhance the Chances of Business Success 7. Advocate Timely Public Sector Support to Provide a User-friendly Enabling Environment. It is recommended that a formal CMCS/CBET relationship be established to: Mentor the Management Team Practise Preventive Business Health Care Advocate Timely Public Sector Support This will facilitate the monitoring of CMCS holistic health (marketing, human resources, operations, IT and finance) thus enhancing the chances of its business success Regional Advertisers Air Jamaica, BWIA, American Airlines, Delta Airlines, Sea Island Cotton, Shell, BP Dell Computers, HP, Cisco, Microsoft, Intel, IBM, Apple GE, Duracell, Panasonic, Hitachi, Sony FedEx, UPS, DHL Coca Cola, Pepsi, Nestle Xerox, Canon Ford, Toyota, Honda, Gillette, Kraft, Colgate, Caribbean Cigar Co. Etc., etc. It should be noted that shareholder ownership in CMCS is recommended to be comprised as follows: A minimum of 51% of CMCS ownership should be controlled by CANA and CBU through CMC A maximum of 49% of CMCS outstanding shares should be owned by outside investors