Business Plan - CoViTek is an Atlanta based company that offers a unique value added service to the $11 billion dollars video rental industry.

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Business Plan

December 2000

Contacts:

Michel Khoury, Sina Mouloud

400 E 66th St. 6E

New York, NY 10021

 

To: Matthew Toboroff

CONFIDENTIAL INFORMATION

This business plan is the property of Reve-lution International LLC., DBA: CoViTek  and is considered strictly confidential. It contains information intended only for the person to whom it is transmitted. With receipt of this plan, the recipient acknowledges and agrees that: 1) In the event the recipient does not wish to pursue this matter, this document will be returned to the address listed above as soon as possible; 2) The recipient will not copy, fax, reproduce, divulge, or distribute this confidential plan, in whole or in part, without the expressed written consent of Reve-lution International LLC.; 3) All of the information herein will be treated as confidential material with no less care than that afforded to your own company’s confidential information.

This document does not constitute an offer to sell, or a solicitation of an offer to purchase.

Table of Contents

Executive Summary……………………………………………………        3

Target Customer……………………………………………………….        3

Market Growth Perspective……………………………………………        4

Competitor Differentiation…………………………………………….        5

Growth Opportunities…………………………………………….        ……        6

National Expansion………………………………………………        ……        6

Specialized Machine Content……………………………………        ……        6

Investment Need…………………………………………………        ……        7

Management Team……………………………………………….        ……        8

Company Overview……………………………………………………        10

Operations……………………………………………………………...        10

Machine Architecture………………………………………….……….        13

Implementation Strategy……………………………………………….        15

Marketing Strategy……………………………………………………..        18

Suppliers………………………………………………………………..        20

Competitor Analysis……………………………………………..        …….        22

                        

           

Charts and Figures

Investment Need………………………………………………………..        4

Market Growth Perspective…………………………………………….        4

Relative Competitive Factor……………………………………………        5

Start Up Cost Chart……………………………………………………..        6

First Year Time Line…………………………………………………...        7

Available Models……………………………………………………….        11

Expandable System Chart………………………………………………        12

Machine Architecture Chart…………………………………………….        13

Credit Card Usage Chart………………………………………………...        16

CoViTek Locations Map……………………………………………        17

CoViTek Five Year Milestone……………………………………...        18

U.S Video Production Company Pie…………………………………….        21

Value Proposition Blockbuster VS. CoViTek………………………        24

CoViTek Consolidated Statement of Operations……………………        27

CoViTek Consolidated Statement of Cash Flows…………………...        28

CoViTek Capital Expenditures and Fixed Assets Schedule…………        29                

 CoViTek is an Atlanta based company that offers a unique value added service to the $11 billion dollars video rental industry. CoViTek will revolutionize the industry by renting movies through its video vending machines. These machines are already experiencing tremendous success in Europe, where they were invented. Customers will now be able to rent videos twenty-four hours a day, seven days a week in a timely and efficient manner at the lowest price. Our machines can be implemented anywhere, even in locations that are not accessible to our brick and mortar competitors, and we will therefore focus our efforts on all the strategic locations. Reve-lution Int. will offer a unique business-to-consumer service for the rental of videos and DVDs. The technology, containing a fully automated system, will facilitate continuous rental and return of movies bridging the gap between video stores, who only are open 15 hours a day, and services such as the nonexistent Kozmo.com, who offer video delivery for a premium price. The company has a cost-per-action (CPA) pricing structure. CoViTek’s target customers will include universities with a student body of at least 10,000 in addition to the rest of the city of Atlanta for the first six months of operation.  CoViTek will provide their clientele with a complete set of integrated tools within the machine to make accurate and enjoyable purchasing decisions. CoViTek will give video rental customers the freedom of rental 24 hours a day, seven days a week, all year long. CoViTek will build the world’s truly first convenient and efficient rental system… 

Target Customers

Movie rentals have proven to be an integral part of the everyday lives of the American population. With more than $11 billion dollars in rental sales in 1999, we acknowledge the aggregate demand for the video rental industry. Constantly seeking immediate gratification, video rental stores want the most efficient and cost-effective methods of satisfying their customers. CoViTek will make rentals simple by providing consumers the most efficient tools for with which to initialize a rental process. With the killer application technology used in these machines, the customer will be able to conduct multiple searches in order to rent the movie of their desire. CoViTek will further assist them through the provisions of an active preference search, which is currently being used by Amazon.com. This application will determine what the customer rented last and list the preferred movies of that category the customer will like based on past rental behavior. CoViTek’s potential customers will represent the bulk of video rental households who value rental outlet convenience and flexible payment plans. CoViTek will strive for the most efficient, cost-flexible payments and active searches for preservation of quality time.

Market Growth Perspective

        

According to analyst Paul Keagan & Associates, at home movie consumption expenditures will increase approximately 40% by 2005 to $27 billion, almost triple the amount spent in 1990.  The vast majority of these expenditures, about 83%, will be for video/DVD rentals and retail. However, movie consumption will also encompass pay-per-view and video on demand (VOD)
available through cable and satellite services.

Video Production Companies  

Ninety percent of our videotapes will come from one of the six major production companies:

1.Buena Vista

2.Warner Bros.

3.Universal

4.Fox

5.Paramount, or

6.Columbia-Tri-Star

The power of these suppliers is very high, as they hold the exclusive rights to the movies they produce. One of our late competitors, Kozmo.com, has built a unique strategic partnership with these production companies.

They have developed a profit sharing system with the major production companies requiring no initial investment in the videos, but agreeing to give 40% of the revenue generated by the rentals to the producer of the movie. We believe that this profit sharing system is financially unattractive, although it will allow us to reduce our initial investment costs; it minimizes our profits which in turn will delay our expansion strategy. We will use an initial video vendor, Video Bicicling, based out of Texas to supply us with our videos and DVDs. They will provide us with the most up-do-date movies for competitive prices.

Competitor Differentiation

CoViTek differentiates itself from its competitors in several key areas. While companies such as Blockbuster and Hollywood Entertainment offer the same features, only CoViTek will incorporate all of the features described below in a way that gives consumers the ultimate ease of use, active preference search, and extremely convenient locations of operations.

Time
Availability

CoViTek’s competitive advantage is based on its time availability for rentals. The machines will be open and available for usage 24 hours a day, seven days a week, all year round. CoViTek will keep customer service readily available even throughout holidays.    

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Strategic         
Locations

CoViTek will implement the vending machines in key strategic locations after performing a detailed demo-geographical analysis of the city of Atlanta. Locations will initially be university campuses and later the urban areas of the city. Each machine will be located in areas where there is heavy human traffic.

Payment
Flexibility 

Our pricing will be flexible depending on the amount of time the video is out. Since CoViTek is a system that is open 24 hours a day there are no late fees associated in our model. Our standard rental time for ...

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