Operation Edge Business Plan Personal Interactive Network


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Operation Edge Business Plan Personal Interactive Network

  1. 1. OPERATION EDGE McGraw Broadcast Communications P.O. Box 75345 100 Woodside Place Fort Thomas, Kentucky 41075-0345 Voice (859) 781-5664 Fax (859) 781-5668 mbmcgraw@Insightbb.comOPERATION EDGE
  2. 2. CONFIDENTIAL EXECUTIVE SUMMARYAnyone, Anywhere, Anytime, on Anything. How often does a product or service come along that offers business thesepossibilities? Today, there is more promise than ever for business and professional organizations large and small. As companies aretold daily on tech blogs, the information highway is expected to be a kind of silver bullet that will allow access to everyconceivable kind of gadget. But this is still a promise waiting to be kept. Our proposal, on-the-other-hand, provides a way and ameans of getting businesses onto the Information Superhighway cheaper, better, and faster than anyone ever before. [1]Overview Facts, as Winston Churchill once stated, are stubborn things. Every day, business faces a deluge of new facts to confront in an ever-changing marketplace. In the past decade, conventional business philosophies have had to be replaced with new ones while established markets are giving way to remarkably fast-growing .coms. For companies trying to keep abreast of these changes while still marketing their products, it is a difficult challenge. How will business be conducted in the first decade of the twenty-first century? In this summary, we address the challenges that lie ahead and how they can be overcome. One of the most important, if not the most significant, changes in the past decade has been in the area of communications infrastructure. Voice, data, and video applications have radically changed in less than a generation. Yet, while progress has been made in the broadcast and the telecommunications industries, these technological changes have not produced the promised results one might think an information highway promises. [2] For instance: Marketing (or buying) a product or service is still done largely using traditional advertising techniques; that is, mass marketing though broadcast channels using established television, radio and print media. Even .coms have adapted to this method. Which begs the question: If the Internet were intended to by-pass traditional channels (TV) —why are they still using them? So, to understand the roots of mass marketing, you have to review its assumptions. In the early part of the twentieth century, communications researchers began studying peoples attitudes as influenced by the media. At the time, still-and-motion pictures were just starting to convey imagery and ideas to a broad audience. As a result, scholars were led to postulate the magic bullet theory of marketing. Also referred to as the hypodermic needle theory or the stimulus-response theory, the magic bullet theory assumed that a given message reached every eye or ear in the same way or provoked essentially uniform responses. Whose eye or ear did not matter; people were thought to inherit basically the same instincts, so social or psychological differences between people seemed rather unimportant. People were collectively viewed as the masses. Marketing to a particular group, let alone an individual consumer, was never considered. It was on this foundation that mass marketing began, and advertising agencies began growing in number as well. Since then, for businesses, the underlying assumption has always been this: the larger audience one has to market a given product, the greater likelihood of that products success. That equation still resonates today throughout the business world. So, just how easy is it to sell in this day and age? What financial and logistical considerations must be made if an organization is to successfully create a busiess environment? A quarter century ago, the Internet only existed for a 2
  3. 3. handful of industry and government agencies attempting to share information. Today, anyone not marketing onthe Internet risks losing its share to the competition. In another five years, will firms have to face another new,explosive communications medium, and if so, how will they be prepared to deal with it? [3]So it is that in this 21st Century, business and professional people are all faced with two equally difficult butopposing tasks: Getting a product or service to market more quickly than ever; while reaching the broadestpossible audience as directly as possible. For anyone to market a new, or even an existing product, the generalpath begins by contracting an advertising agency whose associates go about creating a concept. Then, once theconcept is signed-off-on by the company whose product will be advertised, a production/post-production companygoes about implementing it. The concept is eventually translated into a 30-second spot during a prime-timesporting event on a major network; a one-minute spot on the radio during the afternoon rush hour; a full-page adin a popular magazine or a “banner” on the Internet. And if successful, in most cases, this same pattern isrepeated numerous times.The reason for the former is abbreviated product life cycles largely driven by consumers (the masses) demandingmore products and services than ever before. The latter translates into ever-growing advertising budgets to marketto those very consumers. Even the cost of the technology that provides established businesses the maximum reachis becoming incredibly expensive. So, for any business, it is becoming increasing more difficult then ever tosuccessfully bring a product to market especially using traditional means. And-yet-again, the traditional way toadvertise a product is to use established channels. Television, radio, print media, and now the Internet all aimedat reaching broad audiences.They are also expensive. So for everyone, this path, as laid out using traditional broadcasting channels, is takenfor granted as a cost-of-doing-business. However, for new entrants though, the fact remains that it is practicallyimpossible to use these same traditional media venues. The costs (and risks) of launching a new product are justtoo staggering for them. Yet the goal is the same for both large and small businesses: Maximizing the reach of aproducts message. Reach is the distance and the number of people who receive the products message. Moreover,the pervasive use of electronic media has directly shaped fundamentally new processes in the workplace. Audio,video, computer, and telecommunications equipment; all seem to be proliferating in complex ways to meet not socomplex needs. And, with all the new systems that are out there, can these really be harnessed to help solve theseproblems? What this signifies is that all technical boundaries must be challenged, and in their place, non-traditional connections can and will continue to be created. For example: With the development of powerfulmicroprocessors in this decade, sophisticated communication systems including data, e-mail, fax, video-on-demand and Me-distribution services have already changed the way business is carried out. In essence, complexitywill continue to become rampant since there will be more new systems between media forms performingindependent tasks to better communicate.What we see then is a need for the emergence of a single system to handle multiple tasks concurrently. Thisrevolution of technological change is and will be the key to the financial success of businesses and professionalsin this millennium. Therefore: To meet the needs for this next decade and to exploit emerging new media systems;businesses must look at the advantages of a non-traditional broadcast communications network. [4] 3
  4. 4. Agenda MBC Non-Traditional Broadcast and Presentation System (NTB/PS): The “technical” lessons we have learned in broadcast communications have strong analogs in traditional advertising. Realizing long-ago that; a) “human nature” tends to explore and leverage their knowledge no-matter-the-medium; thus, b) having gained intellectual property with the potential to directly impact human interaction; that would, c) by means of initiating a patent pool, deliver content in a highly granular way; d) with systems ability to enable the possibility of “fine tuning” content to optimize any desired message to any target Audience —Anywhere, Anytime and on Anything. Subsequently: 1) MBC’s patented Cloverleaf technology will provide an environment to tune-in/tune-out, to buy/sell metrics (message) with a patented methodology (a curriculum for Best Practice) for content delivery — literally to live-inside-this-thing; 2) with Quality of Service (QoS) on a second by second basis and the ability to provide content in “rough cut” or “final cut” (wrap) modes; 3) that would enable Copyright © Content providers to optimize time-to-market through a creative phase (i.e., Idea Factory); and/or 4) to deliver messages to the market while helping to reduce the selling-time and expense usually associated with presently accumulated marketing ad methodologies. [5] Operation EDGE —Personal Interactive Network; a product/distribution approach, seeks to provide the following: • to market directly to the consumer (eye-ball to eye-ball) • to efficiently market by eliminating or controlling the requirement to use outside advertising agencies and production/post production companies (the middle man) • to distribute advertising costs (affiliates) • to achieve maximum market penetration (reach) • to gain product momentum (market share) • to allow businesses to achieve product message saturation (predictability and repeatability) What we propose is the development and implementation of a Non-Traditional Broadcast and Presentation System (NTB/PS) to the EDGE; using an affiliated Personal Interactive Network (PIN) of broadband users. Our goal is to accommodate business and professional people who will need an electronic sales and marketing platform for broadcast and interactive promotion of products and services. This EDGE will will provision Affiliates to carry out complex interactive telecommunications tasks throughout the United States and internationally. Our primary reason for starting this endeavor is competitive reality, coupled with significant possibility and profitability. There is no question that the coming decade will present tough challenges, as well as outstanding opportunities to build strong and profitable relationships around the world. But, what and where exactly is the marketplace of the future going to be? How are we going to position ourselves and with whom? As more businesses are becoming aware, a products success can (if not does) start at the grass-roots level (niche-marketing) before becoming so popular that it becomes part of the publics collective conscience (mass appeal). How then can a non-traditional broadcast network allow businesses to market products and services today and in the future with as much flexibility as possible? 4
  5. 5. The unique benefits of the non-traditional broadcast network concept include: • An EDGE Network consisting of a national broadcast center and affiliates. • Affiliates —each PIN will create operational improvements exponentially exceeding those currently charged separately by the broadcast and telecommunications industries as basic services. • Opportunity —in all markets, price signals change.After analyzing the marketplaces, we have come to the following conclusions: • There exists a broad misperception in business today that suitable telecommunications access is already available (that is, that the technology is usable now and is affordable). • There is not an accurate understanding of how existing broadband systems can work together in a systematized fashion. • There is misinformation put forth by all communications providers attempting to protect their market share and rate payment for each of their basic services provisioned individually and separately. • No one seems to be effectively promoting any idea of how providers can move toward technical modernization affordably and efficiently.Our idea is a relatively simple one: To use existing technology to radically reduce the cost of mass marketing sothat small and large businesses can much more easily afford it. Our goal is to provide not only the means butalso a location where an organization has the opportunity to showcase its products and/or services. This idea usesexisting technology, but systematizes it in a much more cost-effective and technologically effective way.And given the misleading news scattered around by telecommunications providers about the obstacles to usingtechnology more effectively, it is not really unreasonable to conclude why there is no single business utilizing allof the broadband systems available (concurrently) to them at present. The reason for this is that no one has everthought that a single (communication) method could be provided which would create a working environmentgreater than the sum of its separate (telecommunications) parts.At the core of the PIN is an already patented technology: BROADCAST AND PRESENTATION SYSTEM ANDMETHOD (Search U.S. Patent # 5,577,042). This Non-Traditional Broadcast and Presentation System (NTB/PS)is the outgrowth of a proof-of-concept project that started approximately ten years ago in Cincinnati, Ohio.Initially nicknamed Cloverleaf it is a system that capitalizes on the technical concept of managing bandwidth.As provided by the carriers, bandwidth is the fuel applications need in order to move on the information highway.Bandwidth enables users to process huge amounts of voice, video, and data communications. The presentbandwidth equation: The more bandwidth you have, the faster you can move your application on theinformation highway. What the carriers don’t say: They separate voice, video, and data applications in theirnetwork just as they are separated in your computer. But unlike your computer, the carriers have sub-segmentedthese applications into “networks within their network.” That means they are provisioned and charged separately;this has created an “overlay” of many networks within their (overall) network. 5
  6. 6. On top of that, they do not provide you with a multiple connection device so you can conveniently “switch” with and between YOUR numerous applications. So, when you buy more bandwidth, you’re not buying more efficiency. A metaphor would be: “No matter how fast you drive, you can only drive one-way.” And by limiting egress to one roadway at a time; the carriers only allow you to go fast “THEIRWAY” at a time. Without you even realizing it; a “GO FAST — NO FAIR” road has been developed on THEIR information highway. On-the-other-hand —the Cloverleaf is this: Develop a method to connect telecommunications networks all together and thus systematize an Information SuperHighway for all applications. Not one operating system on the market today has provider/end-user content network-access controls built-in as part of the design. But doing so would allow the systematization of all the networks into a “whole network” greater-than-the-sum-of-its parts. The Cloverleaf is an electronic (business) model, much like a literal (highway) cloverleaf —it provides a common denominator for reconciling differences between diametrically incompatible traffic (operating systems are different roadways). The method primarily champions any service over broadband rather than current service bundles. In other words, the Cloverleafs affiliates will get multiple, affordable services that the telecommunications providers would charge as individual (service pack) services. Setting aside any allowances for the obvious economies of scale or efficiencies the Cloverleaf system could bring to its users, consolidation alone (eliminating multiple connection fees) would create savings in the neighborhood of 100 percent of those currently being offered to the consumer.Objectives Many regions of the world are beginning to see the influx of businesses taking advantage of lower labor, property, and other tax expenses, not to mention the specific geographical import of each of those areas. For these reasons, the market in these areas that presents the best growth potential for Operation EDGE for the foreseeable future is located within an emerging broadband segment that’ll become the marketplace of the future. [6] We propose to provide technology to establish an integrated network process that will generate prospects for marketing broadband services within this segment. We feel that the availability of suitable locations for regional headquarters should be provided to promote the Cloverleaf technologys utility. Therefore, headquarters, including national broadcast centers, we believe, should be located using the following regional criteria: • Have the World’s most advanced communications infrastructures. • Must be an affordable primary location (travel and lodging costs cannot be too expensive). • Have a strong distribution network. (fulfillment) • Atmosphere —Lifestyle conducive to a creative environment • Numerous affiliates contributing to each affiliate’s broadband marketplace. After the initial start-up, qualifications for the many prospective affiliates (individual PINs) can begin a rapid build-up in major metropolitan areas. Next, our efforts will concentrate on identifying and developing the entire business and professional telecommunications market potential. Each (market) should foster its own unique opportunities. We believe that the services we would help an affiliate offer will be viewed favorably by the targeted markets, with potential for strong growth throughout many other (contributing) markets. 6
  7. 7. Objectives in Sum: This project is not a small undertaking. However, after reviewing the available information, and the lack of anyone else offering this patented methodology in the marketplace, we believe that this plan will be highly successful. This project offers: • A non-traditional broadcast and communications center (technological infrastructure) from which affiliates can produce/post produce content for multiple product and service offerings. • A strong investment opportunity to participate in either the communications center development or development at the affiliate level. • A clear path for businesses to successfully reach broader audiences with lower cost-to-performance ratios. • Innovation that utilizes existing technology.Strategy Our strategy for gaining revenue is expected to result from the following sources: • Usage fees charged to customers using the PIN at the network level (percentage of product sales). • Usage fees charged to business clients at the affiliate level (percentage of product sales). • Service fees charged to business clients at the affiliate level. • In-Network production facilities (offered to clients seeking services at the national level). • In-house distribution facilities (offered to clients seeking these services at the local level). Note: We will start by promoting sophisticated communication tools. The Cloverleaf will be the primary vehicle for sales broadcast and direct communication. It will be important to remember that an affiliate will be very attractive to each local business community, that it will be profitable from its inception. In an age of technological miniaturization, when the term downsizing is becoming part of our collective vocabulary, an affiliate will make the world itself smaller, serving as a bridge to remote markets that may have once been deemed too far away. Think Local Act Global: Businesses large and small —searching for a different means of marketing their products or services will recognize an affiliates potential immediately —especially when they realize the cost of doing business has diminished dramatically though the Cloverleaf’s lower costs. The price for this kind of exposure will be a fraction of the cost typically associated with established media venues. Our expectation is that once business sees how cost-effective it will be to market product/service through the PIN, compared to traditional mass marketing channels, there will be no comparison.Tactics Faced with growing competitive pressure on all fronts, traditional telecommunication operators are examining their voice-centered business models (POTS) and finally making substantial investments in next-generation networks (NGN). The Trends in Telecommunication Reform report highlights the opportunities and the challenges that arise amid the shift from circuit-switched, voice-based, single service networks to packet-based, broadband, multi-service networks —or NGN. The change means policy-makers and regulators must update licensing, interconnection and consumer protection measures that were designed for yesterday’s technology and market conditions. [7] 7
  8. 8. It should be understood that Operation EDGE intends to gain an immediate presence in the broadband market by establishing connections to customers by using OneCommunity and Global Change to promote and teach non- traditional mass-marketing techniques (NTB/PS) and venues (Affiliates) that introduce its Cloverleaf technology as a Mecca for business and professional presentation (at the local or national level), and establish it’s reputation as the location for utilizing communications technology that promotes everyone’s products and services fairly. At its most fundamental level, each EDGE affiliate will provide a true forum for advanced multimedia business and professional presentation —specifically; global right-of-entry ―participation that will enable citizens around the world to conduct business in todays expanding global marketplace. Therefore, our plan consists of three tactics: 1. Build the EDGE Network National Broadcast Center. This must be done first since it is the means of distributing the message. The Cloverleaf will be headquartered in the broadcast center to serve as the pipeline for affiliates. 2. Establish the PIN network of affiliates worldwide. The affiliates and the broadcast center go hand-in-hand. Each needs the other in order to be profitable for their individual regions. 3. Build service bureau business. The broadcast center will have production and distribution services in-house to provide PIN affiliates an easy means of producing product advertising and dispensing their products to consumers.Summary In today’s world, businesses are faced with an ever-increasing need to get products to market as quickly as possible. However, small businesses, especially entrepreneurs, have no affordable means of advertising products and services once they decide to enter the marketplace. The fact is that to bring a products message to the public is practically impossible, offering control to the business customer only at a steep price. What this proposal offers is not only a solution to businesses; but also a tremendous investment opportunity. As a result of our analysis, we have identified the following: • a market (Broadband) • an absence in the marketplace of an enabling technology (Cloverleaf) • a plan to capitalize on this absence (Operation EDGE) • a lack of competition (an Affiliated network) We believe that this business venture is a strategically advantageous investment opportunity. We encourage you to thoughtfully review our business plan. 8
  9. 9. References: 1. “INDY METHOD 5-31-06”; Copyright © McGraw Broadcast Communications 2. “Big Report: Terror in Telco Town”; Written by: Graham Finnie; 12/14/07 Copyright © CMP Media 3. “Scrapping Intermet”; by Anick Jesdanun, AP Internet Writer; 4/13/07 4. “Embrace the Edge —or Perish”; by John Hagel and John Seely Brown; 11/28/07; Newsweek: Viewpoint 5. “Navigating the Patent Thicket: Cross Licenses, Patent Pools and Standard-Setting; By Carl Shapiro; University of California At Berkley; March 2001 6. “GAID Technologies and Development Business Plan for 2006-2007; Secretariat; UN GAID; Email: gaid@un-gaid.org 7. “Trends in Telecommunication Reform 2007—Summary”; Copyright © 2008 ITU/BDTNOTES: 9
  10. 10. PERSONAL INTERACTIVE NETWORK“We must have a suitable apparatus for sale before we can sell (the radio).” David Sarnoff, memo to senior executives at RCA [1919]EDGE Business Plan 10
  11. 11. PERSONAL INTERACTIVE NETWORK (PIN)Introduction Operation EDGE is a bold plan. After carefully studying the global marketplace, analyzing business trends, and searching for available technology solutions from established equipment providers, we have concluded that a means of providing businesses and consumers with an affordably-priced integrated marketing platform does not currently exist. Practically speaking there is no way; that together, consumers, businessmen or professionals can leverage or promote their products and/or services to a broader market. [1] It is on this foundation that our project plan seeks to do the following: • Use a patented method to leverage todays technology to deliver tomorrows business needs ―the Cloverleaf system as outlined in the Executive Summary; • Set up EDGE regional network centers as a prototype serving as the demonstration site for affiliates; • Create a network of affiliates to allow small and big business alike to systematize infrastructure for mass marketing at more affordable prices than could be afforded elsewhere; • Make it easier for consumers at the EDGE to want to use their own Personal Interactive Network (PIN) by offering them product and distribution centers and production/post-production services thereby fulfilling all their needs through one integrated system; • Provide a solid financial opportunity for individual investors who can foresee the benefits this plans implementation offers to the business community. This business plan addresses each of these points.Mission The companys mission is to deliver a patented EDGE network as quickly as possible to capitalize on this technology’s absence in the existing marketplace. We have already identified a diverse market —BROADBAND; nearly 4 billion mobile and fixed line phone subscribers; plus over 1 billion Internet users worldwide that can use an “edge”; more particularly, a Non-Traditional Broadcast Presentation System (NTB/PS) that can readily meet their needs. And, having analyzed the service offerings USPTO 5,577,042 brings to this “thing” that all-of-us are going to live inside; we feel confident that we are not at significant risk of competition largely because our Operation EDGE/Personal Interactive Network (PIN) concept is unique. [2]. 11
  12. 12. EDGE Business Plan We believe that there will be a strong demand for the PIN once businesses see the utility, affordability, and its efficiency for meeting their needs. Behind the concept of the EDGE; the technology that allows the PIN to actually work is a Cloverleaf System. By and large, the method the Cloverleaf offers is managed bandwidth. This means that rather than having bandwidth that resides solely in the hands of telecommunications service providers (who charge businesses for every kind of service offering); the PIN can control its own EDGE by selectively delivering better bandwidth (and passing the savings onto its customers). Therefore, the Cloverleaf method is the affordable approach that will allow the PIN to come into being. Moreover, the EDGE Mission will be to marry the “edge” of the network with each “PIN”; to take advantage of the technological breakthrough the Cloverleaf offers.The Method The PIN provides access to network application technology at a bargain price. It will do this by using a method (a Cloverleaf) that allows presentation to Anyone, Anywhere, Anytime and on Anything. The EDGE national network (brand) provides a consumer shopping location in a persistent world; as-well-as all local marketplaces for manufacturers, distributors and consumer alike; without taking large chunks of capital to do so. Each PIN affiliate takes local product and service offerings and digitizes their selling presentation; then transmits it via whatever bandwidth requirement, affordable and with Quality of Service (QoS); and then sends it to the EDGE where the presentation is ‘set’ in an integrated channel framework (IP and TV) and shown to the consumer. Then the EDGE broadcast center provides eye-ball to eye-ball communications via commercial channels between buyers and sellers. The value of this method to the product or service provider is the “grass-roots” marketing through a national channel at a fraction of the cost of traditional marketing channels. Thus the Cloverleaf Method creates a Business Exchange —networks interlaced together designed to capture a significant new supermarket of individuals and organizations that are anxious to enhance their telecommunications capabilities without encountering unnecessary expenses. Moreover, the Cloverleaf helps end users develop working models that carry out complex communications tasks by transmitting data and or visual-based media through the use of specialized working environments. Therefore, the EDGE intends to establish a foundation strategy for worldwide telecommunications. Moreover, it is through its method that the Cloverleaf System will provide network applications for rapidly combining diverse communications systems (i.e., IP, TV, VTC) together for common communication. This new capability provides fully integrated networks ―a multiple networking protocol for the information superhighway. Thus, systematizing all networks together on demand; the Cloverleaf will act as a catalyst for businesses and professionals. Its architecture brings into being a Global Information Infrastructure (GIl) throughout the United States and internationally. Initially, Operation EDGE (Franchisor) will be sixty (60%) percent owned by MBC. Affiliates will become available to individual investors after specific performance criteria are decided upon and met. See the notes to Financials for additional detail.EDGE Business Plan 12
  13. 13. Target Market We have identified Broadband as the target market for Operation EDGE/PIN Affiliate opportunity. Broadband Market Data, 2006: the top 25 economies Total fixed Broadband Price per 100 kbit/ As a % World broadband subscribers s Economy subscribers of monthly rank (per 100 per month, (000s) income (GNI) inhabitants) in USD, 2006 1 United States 58 137 19.3 0.49 0.01% 2 China 50 916 3.8 1.47 1.01% 3 Japan 25 755 20.1 0.06 0.00% 3 Germany 14 085 17.0 0.52 0.02% 5 Korea (Rep. of) 14 043 29.3 0.08 0.01% 6 United Kingdom 12 995 21.7 0.63 0.02% 7 France 12 699 20.9 0.37 0.01% 8 Italy 8 639 14.9 0.31 0.01% 9 Canada 7 676 23.6 1.08 0.04% 10 Spain 6 655 15.3 4.89 0.23% 11 Brazil 5 922 3.1 1.20 0.42% 12 Netherlands 5 192 31.7 0.14 0.00% 13 Taiwan, China 4 506 19.8 0.18 0.02% 14 Australia 3 900 19.1 3.41 0.13% 15 Mexico 3 728 3.4 6.24 1.03% 16 Russian Federation 2 900 2.0 28.13 7.57% 17 Turkey 2 774 3.7 9.85 2.51% 18 Poland 2 640 6.9 1.27 0.21% 19 Belgium 2 354 22.6 1.22 0.04% 20 Sweden 2 346 25.9 0.24 0.01% 21 India 2 300 0.2 3.56 5.93% 22 Switzerland 2 140 29.5 1.57 0.03% 23 Hong Kong, China 1 796 25.2 0.83 0.04% 24 Denmark 1 728 31.7 3.28 0.08% 25 Argentina 1 568 4.0 2.46 0.66% Top 25 257 394 16.6 76.01 0.80% World 279 678 4.3 2.94 194.56% Note: Broadband is ≥ 256 kbit/s in one or both directions. Source: ITU World Telecommunication/ICT Indicators Database, 2006. ITU Note: Although much of the work on Next Generation Networks (NGN) is taking place in developed countries that have large sums of capital to invest, in developing countries too, NGN-related technologies are now being deployed. They allow infrastructure (such as wireless broadband) to be provided cost-effectively, and the lower pricing of services, such as voice over Internet protocol (VoIP). This provides opportunity for expanding access to a multitude of services that are delivered online, through mobile phone or at communal telecenters.EDGE Business Plan With technology comes the fracturing of audiences and consumer markets alike; advertising and media paradigms must evolve to compete. So in the future, whose companies will rank among the world’s elite marketing and media organizations? Or maybe, “Knowing earlier is what hockey legend Wayne Gretzky is talking about with 13
  14. 14. his famous declaration: “I skate to where the puck is going to be.” Now, more than ever, the medium for advertising effectiveness and product concept, marketing and research experience provides the competitive edge to its customers. And MBC brings years of leadership in broadcast communications —including intellectual property strategies. MBC also brings extensive experience in media research as well; resulting in unique technologies, methodologies and insights for understanding the interplay between mediums, messages and products. The information contained in this plan takes all germane content elements into account and then provides the reader leveragable intelligence, including intellectual property, that is highly actionable. [3] What will make the PIN attractive to this market is this: By purchasing a PIN Affiliate, an individual or small business can begin reaching mass markets at a fraction that it would cost to do the same thing through traditional IP and TV networks separately. The PIN sells three things: • A convergent network marketplace. • A framework for Product and Service fulfillment. • Communications functionality with customers and other PIN affiliates. Most significantly, the EDGE becomes the brand. Each PIN becomes an on-line gateway for customer relationship management (CRM). Once consumers begin experiencing convergence through their own personal interactive network; and collectively distinguishing themselves through it; we anticipate explosive growth. And by passing on the affordability of services (thru a “cloverleaf”) to every business, they can pass on that savings to consumers, making a PIN significantly more appealing to consumers than competitors such as eBay (IP) or QVC (TV). [4]Marketing Merchandising Costs This accounts for all sales and marketing, technical support and training to the affiliates, customer service management to the affiliates, travel, commissions, and on-air talent.SALES & MARKETING 1st Year 2nd Year 3rd Year 4th Year 5th Year Advertising 1,650,000 3,850,000 7,036,290 5,629,032 6,754,838 Postage 16,055 45,600 59,404 89,105 219,793 Voice Telecomm 18,000 40,000 44,000 48,400 53,240EDGE Business PlanAgenda The companys agenda is: 14
  15. 15. 1. Build the EDGE National Broadcast Center. This must be done first since it is the means of distributing the message. The Cloverleaf will be headquartered in the broadcast center to serve as the pipeline for affiliates. Timeline: six months from initial capitalization. 2. Establish the PIN network of affiliates nationwide. The affiliates and the broadcast center go hand-in-hand. Each needs the other in order to be profitable. Timeline: selling the first PIN occurs at the same time as that of the broadcast centers construction. Therefore, the first PIN can go online three months (or sooner) from the time that the national broadcast center opens. 3. Build service bureau business. The broadcast center will have production services (in-house) and distribution services (outsourced) to provide PIN affiliates an easy means of producing product advertising and fulfilling their products to consumers. Distribution fulfillment services will also be ready to go six months from capitalization.Strategy/Implementation The company intends to grow its affiliates at a rate of six in the first year. In the second year, we plan to add at least another six affiliates. By the end of the second year, we will have a second viewing channel to fulfill the needs of these additional affiliates. Because this is a nascent market, it is difficult to estimate the curves steep incline. However, at the end of the third year, we conservatively estimate having 36 affiliates online, viewed on four channels with a goal of 96 hours of on-air time per month for each affiliate.SALES & MARKETING 1st Year 2nd Year 3rd Year 4th Year 5th Year # of Affiliates 6 12 36 54 80 # of Channels 1 2 4 4 4 15
  16. 16. EDGE Business Plan Sales & Marketing Salaries 150,000 165,000 330,000 363,000 399,300 Tech Support Salaries 75,000 123,000 492,000 541,200 1,082,400 Customer Service Salaries 22,500 52,500 210,000 231,000 462,000 Billing Logistics 53,352 218,543 197,401 217,141 730,383 Travel 36,600 38,400 53,760 59,136 82,790 Commissions 126,803 610,373 1,407,258 2,110,887 5,629,032 Part-time Salaries 118,800 237,600 475,200 712,800 1,069,200Sub-Total for Sales & Marketing 2,267,109 5,381,016 10,305,312 10,001,701 16,482,977,See the notes to Financials for additional detail.Competitive Pricing It is difficult to quantify exact savings for every client since an integrated EDGE marketplace is not a service they can access already. However, we believe that our prices will be competitive using a marketplace based on the following assumptions: • One Hundred (100) Thirty (30) second spots on local cable in a typical broadcast market cost approximately $3500.00; • Studio time is for these spots costs $360.00; • The market reach from these spots is approximately Four Thousand (4,000) people at any given time; Consider: By using the personal interactive network, a client might pay twice the money for these same spots but reach potentially double 5,500,000 people (eBay and QVC audience numbers). As you can see, the EDGE offers businessmen, entrepreneurs and the enterprise the chance to reach a much larger market at a fraction of the cost of using traditional means. However, the real costs we plan to charge clients are structured differently than this equation. For example, a client will be charged $180 per hour of studio time, which the EDGE center and affiliate will split evenly ($90 each as revenue). In addition, the EDGE center receives 10% of the clients gross product sales for the product advertised on the PIN. Each Affiliate PIN receives 15% of the clients gross product sales for the product advertised at the EDGE. In addition, clients are charged line fee usage at the rate of $3 per minute (or $180 per hour) of on-air time. 16
  17. 17. EDGE Business Plan We anticipate that the number of consumer buyers grows as follows: Buyers per Hour Start-up 1st Year 2nd Year 3rd Year 300 1,500 1,500 1,500 After the third year, we expect incremental increases of approximately 20% per year. Exactly what makes our pricing competitive is a comparison with QVC and Home Shopping Channel rates. Using the EDGE Network, a businessman could anticipate spending 25% of their products gross sale as overhead to the PIN. Also, there are relatively small line charges and studio fees to use the PIN. By comparison, QVC and the Home Shopping Channel charge businesses 60-65% of their gross product sales for their traditional, non-integrated services. When companies see the savings the PIN affords them, we believe that the EDGE will be the beneficiary of tremendous growth. Even if QVC and the Home Shopping Channel cut their rates to correspond to the PIN, their service offerings are still just “one-way” (VOD) communication. As a result, we believe that business and service providers alike will realize the EDGE market potential and respond accordingly.Revenue/Sales For the national broadcast center, selling franchises and selling the PIN brand to consumers, we anticipate the following revenues: • Commissions from sales ―10% of a clients gross product sales • Franchise fees ―$150 to $250,000.00 to purchase an individual affiliate • Service Bureau Sales ―see the notes to Financials for additional detail.Affiliate Revenue Generation We anticipate the following numbers for affiliate revenue creation: Affiliate Revenue Generation 1st Year Income per PIN Affiliate 1,934,786 Expenses Sales & Marketing 309,300 Transmission Costs 243,410 General & Administrative Cost 515,422 Total Expenses 1,068,132 17
  18. 18. EDGE Business PlanGross Profits per PIN Affiliate 853,791License Fee to PIN Company 200,250Income Before Taxes 701,548Net Profit After Taxes 425,619See the notes to Financials for additional detail.Risks/CompetitionFailure has been built into all of the financial data. The lowest price point is $20 for product sales; however, for theEDGE we have lowered the price point to $10, thereby providing a cushion for our loss ratio. For affiliates and thenetwork operations center, the greatest risk is product selection. The most critical issue to the PIN success is not thetechnology, nor the business target market, nor the consumer market. Rather, it is selecting the right products andservices that will be the most attractive to consumers. We believe that the most important decision to make about thepersonal interactive network is choosing the Executive Producer. Finding the right person for this position is vital tosustaining the kind of growth our plan is projecting.The risks to investors of the national broadcast center are potentially reduced because the affiliates pay all the on-aircosts. That is, the affiliates pay for the line fees. As a result, while the success of an affiliate depends critically on itsproduct selection, the success of the national broadcast center depends less on product selection since its broadcastingfees will be paid by the affiliates regardless of how well a product or service sells. However, it is clear that for this plan tosucceed, the national broadcast center and the affiliates must operate as a unit. Each needs the other to ultimately succeed.Again, neither eBay nor QVC, our competition, can undercut our pricing. Because of the Cloverleafs patentedtechnology, no competitor can meet our threshold, innovation and patented time-to-market; nor can they offer the kind ofone-to-one marketing (eye-ball to eye-ball) that businesses and professionals want and need to continue to grow.Management/LeadershipWe plan to have a Board of Directors in place to oversee decision-making. The board and its advisors have yet to benamed.Again, the selection of an Executive Producer to oversee product and service selection is critical. The Executive Producerwill also be on the Board of Directors.The following table outlines the positions within the PIN national broadcast center:Title Background/ResponsibilitiesExecutive Producer • Coordination and look of the PIN from creative design to product selection; • Must have the ability to strategically position a new-age shopping venue; • Minimum five years experience in a home shopping channel capacity; • And subsequently as the new-way national home shopping venue; • Must be involved in the overall franchise planning. 18
  19. 19. EDGE Business PlanTitle Background/ResponsibilitiesExecutive Vice President, • Experience in putting together national advertising campaigns;Sales & Marketing • Primary responsibility will be building the PIN brand name; • Experience in fostering network affiliate growth.Executive Vice President, • Extensive experience in video production and telecommunications;Technology • Responsibilities also include getting the affiliates up and running; • And video signals through a variety of signal transfer methods; • Also, this person must be familiar with frequency and format; • And overseeing the network.Executive Vice President of • Responsibilities include overseeing billing, accounting, administrative,Operations and personnel functions.Director of Sales • Background must include franchise sales along with closing high-ticket Item deals.Director of Marketing • Responsibilities include channel placement in cable/television markets.Director of • Duties involve continual and persistent world of network operationsTechnology (including remote locations on a 24 hour per day 7 days per week basis) • Experience in running a large network television and broadcast operation.Executive Director • Responsibilities are to oversee content programming and product presentation.Assistant Director • Serves as the primary advance person for product selection with reports to the Executive Director.Four Production • Perform continual oversight of real-time programming.DirectorsStrategic Partnerships At the outset, Operation EDGE will have two strategic partners: • MBC • Major National Fulfillment Company The EDGE will have a limited exclusive license to MBC’s patented Cloverleaf method. A fulfillment company will provide consulting to both the national broadcast center and to PIN affiliates. In addition, the network operations center will provide all telecommunications applications together with backhaul. 19
  20. 20. EDGE Business Plan The Master Franchiser will provide consulting and facility construction consultation to affiliates. A national fulfillment company has yet to be selected. By means of outsourcing product distribution services, the PIN client will receive seamlessly integrated customer service, billing, and shipping services. By adding fulfillment to a portfolio of broadcast and production services, we believe that we can meet all business needs. And more particularly: An outstanding opportunity to build successful businesses into every participating community. [5]Staffing For the national broadcast center to provide broadcast services 24 hours per day seven days per week, we anticipate the following staff: National Broad Cast Center Staff 1st Year Administrative 10 On-air Talent 6 Sales & Marketing 3 Technical Support/Training 2 Customer Service 2 Engineering 5 Additional staff will be added as necessary in subsequent years. In addition, salary increases of 10% per year can be expected.Government Regulation The company will be subject to telecommunications regulations put forth by the FCC and international commissions where applicable. We will be in compliance with all Federal Trade Commission rulings and regulations regarding "direct market-level" selling, and furthermore, the company will comply with any rulings by the various attorneys general in the states in which we operate.Financial ProjectionsThe high cost of establishing production facilities and advertising costs to establish the network (market share) delayprofits until the end of the second year. Investors can expect a return on investment of 100% at the end of the secondyear.See the “Notes to Financials” for additional detail. 20
  21. 21. EDGE Network: Financial Projections NOTES TO FINANCIALS1. Capitalization It is assumed that a level of capitalization is desired that will provide enough cushion to deal with the inevitable peaks and valleys of the growth process. The cash flow projection bears out the choice of $5 million as providing enough for start-up and growth until enough cash flow is created by sales, while still allowing for a 15% deviation from projections without running out of working capital.2. Income a. Interest Income: Interest is calculated at 6% per year, based on the ending cash level of the previous month. b. Sales: The EDGE network makes its money from services it bills to the PIN affiliates, and in commissions from sales of their clients products and services. Nowhere in these projections are gross product sales listed. The EDGE national network receives a total of 10% of gross product sales ―as a direct commission (7%) and for co-op advertising (3%), listed as “Commission from Sales”. Gross sales are based on a fraction of known numbers of buyers on existing shopping channels (starts at 300 per hour, topping-out at 1500 per hour), multiplied at $7.00 to $10.00 per consumer "caught". It is accepted shopping channel knowledge that the minimum retail price per item should be $20.00. By using the much lower retail prices, a failure rate of 65% at first, later to 50% is built-in. The other revenue streams as from fees paid for studio rental time when the affiliates clients products are being presented ($90.00 per hour). MBC Note: The EDGE Franchisor intends to be an “original access” incumbent. Each affiliate will have content distribution for consumers and application services for business —a whole mix of high-level services. The unique, integrated nature of the Cloverleaf will be to make this breakthrough: Primarily a patented Non-Traditional Broadcast and Presentation System (NTB/PS) —an audio, video-communication and data network application. Affiliates pay for transmission fees for connection between the PIN affiliate and the EDGE central production facility. Fees will be charged at $36.00 per hour, including time ahead of the actual broadcast for run-up. [6] Data/Voice Transmission Fees are a projection of sales of long distance, voice mail, and Internet services to be provided by strategic partner McGraw Broadcast Communications (MBC). The assumption is that for the hours on the air, a buyer of these services will surface in one hour out of four, and only one out of ten of those buyers will be caught in that hour. That is a 2.5% response of buyers already assumed to be ready to buy from a Personal Interactive Network. [7] Affiliation Fees are those up-front fees for the affiliate license. These are paid at the time the affiliate begins construction on their facility. The affiliate can elect to amortize the cost of the license ($200,000) over one year. For the sake of pointing-up the rate of affiliate sales, these projections show the entire fee at time of start-up.3. Expenses a. Sales and Marketing: The EDGE sales and marketing staff will be responsible for making the PIN a national brand. For this reason, advertising is one of the largest expenses listed in these projections. The advertising strategy is to spend the greatest amount of money after a critical mass of affiliates is in place, so as to show the PIN in its best light, and so that enough diverse product items are available. More than half of this money is going to be spent in placing ads with local CATV operators, hopefully as part of a “trade-out” with a percentage of sales as they take-on the PIN signal. Postage is used as an advertising tool, and as a follow-up device with captured consumers. It fluctuates from .5% to 1.2% of sales.12/29/98 ― 1/07/08 Confidential 1EDGE Network: Financial Projections Voice telecomm is for data/voice transmission fees, purchased wholesale via T-I fiber access. 21
  22. 22. Sales and Marketing Salaries assume one head of marketing at $60,000/year, and two sales people at $45,000 per year. Tech Support Salaries are for positions designed to provide tech support and training to the affiliates. They comprise two people at $45,000/year. Customer Service Salaries are for two people at $15,000/year. These people deal with both affiliates for non-technical support and consumers who ask for information. Billing Logistics is projected at 1% of sales. This would include billing from the PIN to affiliates, and pass-through billing to and from clients. Travel is high in the beginning to sell affiliates. It will be fairly constant as long as affiliates are being sold. Commissions are for sales people selling services and affiliations, at 3% of sales. Part-time Salaries are for production support at $10,000/year. b. Transmission Costs and System Maintenance Satellite Bandwidth This number is based on $140.00/Hour. Inter-Lata Bandwidth This number is based on starting with a fractional DS-3 fiber line to the EDGE switching facility, then ramping up when voice/data transmission traffic increases. Engineering Consultation: Consultation fee paid to Operation EDGE for setting-up and monitoring systems at the PIN. Engineering Salaries: For the first four months, this includes two engineers for setting-up and testing the systems, after which there will be five part-time engineers at $45,000/year. Exterior Net Connection Costs: This is a raw Internet connection cost passed through from McGraw. Miscellaneous Network Costs: This is a catch-all for equipment support and maintenance. c. General and Administrative Expenses Accounting and Legal: This is for accounting and legal support, contracted for outside the company. Administrative Salaries: As per text relating to this subject, this number includes 10 employees, with salaries ranging from $30,000/year to $75,000/year. One salary, that of Director, is set at $125,000. Equipment Lease: This is based on $5 million in equipment leased over 3 years.12/29/98 ― 1/07/08 Confidential 2EDGE Network: Financial Projections Equipment Purchase: Inevitably, it will be expedient to purchase some equipment. This amount constitutes about 10% of the total equipment worth. Insurance: This covers equipment and key person insurance. 22
  23. 23. Licenses and Permits: After a construction permit this number consists of 5% of gross sales to MBC, plus the $500,000 yearly license fee to NBC amortized over 12 months. Office Expenses: After start-up, this is based on 1% of sales. Rent: $7.00/sq.ft. for 15,000 sq. ft. Employment Tax/Benefits: Based on the standard 35% of full-time salaries, 11% of part-time salaries. Leasehold Improvements: $35.00/sq.ft. Utilities: $4.00/sq. ft. of space. Taxes: Calculated at 25% of Net profit.12/29/98 ― 1/07/08 Confidential 3PIN Affiliate Typical Set- Up Costs, Monthly Overhead AnalysisMcGraw Broadcast CommunicationsPersonal Interactive Network AFFILIATESCost Item Pre-Operation Monthly Expense Overhead Comments 23
  24. 24. Sales & Marketing Costs PIN Franchise Set-up Fee $ 1,500.00 Monthly fee is a % of salesVoice/Data Telecomm Costs $ 175.00 $ 725.00 Local loop set-up for voice/data @.10Equipment Costs Equipment Lease $ 4,444.44 $ 4,444.44 $100,000 in equipment leased for three years Equipment Purchase $ 10,000.00 Some equipment will have to be purchased outrightTransmission and Engineering Bandwidth Set-up Fees $ 600.00 $ 420.00 Set-up EDGE service, monthly service fee Bandwidth Usage $ 2,000.00 4 hours of NTB/PS each day Set-up Engineering $ 1,680.00 2 engineers, 2 days, $17.50/hr Engineering Consultation $ 840.00 48 hours @ 17.50General & Administrative Administrative Salaries $ 5,833.33 $ 5,833.33 2 people at 35,000/yr to start Other Administrative Overhead $ 2,916.67 $ 2,916.67 50% of administrative salaries Monthly Rent $ 2,187.50 $ 2,187.50 3500 sq at 5/ft/yr Leasehold Improvements $ 70,000.00 $20.00 sq/ft @ 3500 sq ft Utilities $ 1,166.67 $4/ft @ 3500 sq ft per monthTOTAL EXPENSE $ 99,336.94 $ 20,533.61Confidential Sheet5 Page IMcGraw Broadcast CommunicationsOPERATION EDGE Network Operations CenterCost Item Pre-Operation Monthly Expense Overhead CommentsSales & Marketing Costs PIN Franchise Set-up Fee $ 150,000 Monthly fee is a % of sales Telecom Costs $ 75.000 Certified Carrier Status: 2,000,000 minutesEquipment Costs Equipment Lease $ 133,333 $ 111,111 $100,000 in equipment leased for three years 24
  25. 25. Equipment Purchase $ 250,000 Other equipment will have to be purchased outrightTransmission and Engineering Bandwidth Set-up Fees $ 2000 Bandwidth Usage $ 2,000 8 hours NTB/PS each day Set-up Consultation $ 420,000 MBC Estimate Engineering 14,583 $ 840 48 hours @ 17.50General & Administrative Administrative Salaries $ 27,083 $ 27,083 $325,000 total salaries Other Administrative Overhead $ 20,883 $ 13,962 50% of salaries Monthly Rent $ 9,375 $ 9,375 3500 sq at 5/ft/yr Leasehold Improvements $ 300,000 $20.00 sq/ft @ 15000 sq ft Utilities 5,000 $ 169,371 $4/ft @ 15,000 sq ft per monthTOTAL EXPENSE $1,407,208 $ 169,371Confidential Sheet6 Page 1REFERENCES: 1. “Which Way to the Future?;” by Michael Mandel and Robert D. Hof; Business Week; 8/20/07 2. “ITU —Creating an Enabling NGN Environment; Chapter 9 Network Reform; 2007 3. “Leading on demand businesses —Executives as architects” — IBM and Marshall Faulk; S.H. Haekel; IBM Systems Journal VOL 42, NO 3, 2003 4. “Your Television’s Ringing;” Tom Standage; From the Economist print edition; 12/12/06 5. “Nets Loss, Web’s Gain;” Paul Farhi; Washington Post; 11/12/07 6. Search USPTO 5,577,042; McGraw Broadcast Communications; 11/19/96 25
  26. 26. 7. “On the Internet, a Tangled Web of Classified Ads”; by Sam Diaz; The Washington Post; 8/31/07NOTES: 26