Q3 2024 Cineverse Corp Earnings Call

Participants

Gary Loffredo; Chief Legal Officer & Secretary; Cineverse Corp.

Chris McGurk; Chairman & CEO; Cineverse Corp.

Mark Lindsey; CFO; Cineverse Corp.

Erick Opeka; President & Chief Strategy Officer; Cineverse Corp.

Tony Huidor; COO & CTO; Cineverse Corp.

Brian Kinstlinger; Analyst; Alliance Global Partners

Dan Kurnos; Analyst; The Benchmark Company, LLC

Presentation

Operator

Good day, everyone, and welcome to Cineverse's third quarter of fiscal 2024 financial results conference call.
My name is [Elliott] I'll be your operator today. Currently, all participants are in listen-only mode. We will have a question and answer session following management's prepared remarks at which time participants can press star followed by the number one to ask a question. If anyone needs operator help, please press star then zero. Please note this call is also being recorded. And I'd like to turn the call over to our host, Gary Loffredo, Chief Legal Officer and Secretary and Senior Advisor of Cineverse. Please go ahead.

Gary Loffredo

Good afternoon, everyone. Thank you for joining us for the Cineverse fiscal 2024 third quarter financial results conference call press release announcing Cineverse 's results for the fiscal third quarter ended December 31, 2023. It's available at the Investors section of the Company's website at www.cineverse.com. A replay of this broadcast will also be made available at Cineverse's website after the conclusion of this call.
Before we begin, I would like to point out that certain statements made today on today's call contain forward-looking state. These statements are based on management's current expectations and are subject to risks, uncertainties and assumptions. The company's periodic reports that are filed with the SEC described potential risks and uncertainties that could cause the Company's business and financial results to differ materially from these forward-looking state. All the information discussed on this call is as of today, February 14, 2024, and Cineverse does not assume any obligation to update any of these forward-looking statements except as required by law.
In addition, certain financial information presented in this call represents non-GAAP financial measures, and we encourage you to read our disclosures and the reconciliation tables are applicable to GAAP measures in our earnings release carefully. As you consider these metrics, I'm Gary Loffredo, Chief Legal Officer, Secretary and Senior Adviser at Cineverse. With me today are Chris McGurk, Chairman and CEO. Erick Opeka, President and Chief Strategy Officer. Tony Huidor, Chief Operating Officer and Chief Technology Officer, Mark Lindsey, Chief Financial Officer, Yolanda Macias, Chief Content Officer, all of whom will be available for questions following the prepared remarks on today's call, Chris will discuss our third quarter fiscal year 2024 highlights latest operational developments, outlook and long-term strategy. Mark will follow with a review of our results for the fiscal third quarter ended December 31, 2023, and Eric will provide some detail on our streaming business results and operating initiatives before we open the floor for questions.
I will now turn the call over to Chris McGurk to begin.

Chris McGurk

Thanks, Gary, and thanks, everyone, for joining us today. This morning, we announced the partnership with global technology and search giant Google with whom we developed and will soon launch a groundbreaking new AI based unified streaming search technology called sinister. Both Eric and I will speak more about this later in our remarks. However, I want to emphasize that we believe this AI technology partnership with Google and the launch of Synos search is an important milestone for the company that not only further validates our industry leading proprietary technology but should also provide an important new revenue stream for Cineverse because it directly help solve the biggest consumer issue with streaming search and discovery today, the current time consuming ArcaEx search technology that provides limited and unfiltered content choices for viewers with China search and our chat bot video guide. Eva will soon help solve that important issue for consumers.
Now let me speak to this quarter's results. Just as we reported last quarter, we again made strong progress this quarter toward our goal of dramatically reducing costs, improving margins and achieving sustained profitability. We did this by continuing to aggressively cut costs as we finalized the consolidation of the eight key streaming content and technology acquisitions we made over the past three years. While we also continue to offshore a significant number of domestic employment positions to our Cineverse services, India operation for unique competitive cost and work efficiency advantage that Cineverse enjoys versus everyone else in our space. We also continued to further optimize our streaming channel portfolio, sacrificing some revenues for improved margins and profitability by culling lower margin channels, while focusing our resources on higher margin and higher return performance, driven by these initiatives to dramatically cut costs offshore domestic positions to our Indian operation and further optimize our channel portfolio. I believe our results this quarter again demonstrate that we are well on our way towards sustained profitability. We increased our direct operating margin to 59% from 48%. And continuing last quarter's trend, we decreased our SG&A cost by $2.7 million or 30%. That's down another $0.5 million from our last reported quarter and down $7.9 million or 27% versus last year on a fiscal year to date basis. And we expect to achieve even greater savings going forward as we offshore more domestic positions and yet can see the full impact of the series and headcount cuts that we have made totaling 34 positions so far. So we remain very confident we will achieve our stated goal of $8 million in annual cost savings.
And let me reiterate what I said on our last call. Cineverse services. India is a significant competitive advantage for us, providing huge cost savings and workflow upside within a trusted battle-tested operating division of our company. Not only do we intend to leverage that advantage to the fullest extent possible, but we are also considering initiatives to turn it into a profit center by offering our back office services in India to other domestic companies. Although the adjustment for the recognition of the non-cash loss on our investment in a metaverse company certainly had a big negative impact on our bottom line this quarter. We are nonetheless very pleased with our results. Excluding that impact, excluding the metaverse adjustment, net income was positive at $200,000. Clearly, we continue to be on a path to our target of sustained profitability.
Before I end my remarks, let me quickly speak to three very important developments for the Company. First, we expanded our line of credit with East West Bank from $5 million to $7.5 million, giving us more flexibility and firepower on our balance sheet, particularly since we are not laden with the tens of millions of dollars of debt than most of our competitors are doing on second, tariff I or three just started filming and is scheduled for release in the fall of this year. This is equal to last year's film phenomenon. Terrifying to was just named as one of the 10 most highly anticipated horror films of 2004 by USA Today and should continue to be a huge catalyst for our core business. All of our blending discussing enterprises in our screen box or channel.
And third, as I mentioned at the outset of my remarks today, we announced an exciting new partnership with global search and technology leader, Google, with whom we will soon unveil an innovative AI based search platform that we're calling center search. As part of this new service. Cineverse is introducing a new AI based video adviser that will be known simply as anyone. This is groundbreaking technology that directly addresses the number one issue with streaming, the limitation of current methods of search and discovery where users are forced to seek films using archaic discovery technology and limited to only a subset of film choices spreader cost specific platforms. We believe this generative AI search technology partnership with Google not only further validates the industry-leading nature of our proprietary technology, which puts us years ahead of our competitors, but also will be a significant new revenue opportunity for the Company. Eric will speak much more in a minute about Cineverse and our partnership with Google as well as the other key initiatives and partnerships in our channel and technology businesses, we believe will have a significant positive impact on our top line revenue growth and margins. But first, Mark will add more color to our financial results and other financial matters. Mark?

Mark Lindsey

Yes, thank you, Chris. For the fiscal third quarter ended December 31, 2023, Cineverse reported total revenues of $13.3 million, which compares to $13.0 million last quarter and $27.9 million in the prior year period. As a reminder, the prior year quarter included material nonrecurring revenue of approximately $4 million for care fire to theatrical revenue and $7 million of revenue related to our legacy Digital Cinema business when excluding the impact of tariff R2 and digital cinema, the decrease in revenue was primarily due to the impact on our advertising revenue from the intentional elimination of certain lower margin channels via portfolio optimization and reallocating those resources to higher performing and higher margin streaming properties, which is important to our goal of achieving sustainable profitability in the near term, we are cautiously optimistic for double digit revenue growth in fiscal year 2025 as the economy improves, interest rates decline and the expected improvement in the advertising market in a political year, subscription based revenues increased 13% to $3.4 million, driven by the continued success of our enthusiast streaming services advertising base revenues declined 31% to $4.1 million, primarily due to our channel optimization efforts and the continued impact of the current economic environment on advertising spend. Eric will provide some additional details on the operational drivers behind our financial results. As Chris mentioned, our direct operating margin for the period was 59%, an increase from 48% in the prior year quarter, which is in excess of our previously provided guidance of 45% to 50% for the full fiscal year 2024. Our improved direct operating margin is a direct result of our cost optimization initiatives referred to earlier. Sg&a expenses decreased $2.7 million or 30% from the prior year quarter and $500,000 from last quarter. Again, this improvement is a direct result of the cost optimization initiatives discussed previously. We expect to gain even greater efficiencies as our offshoring efforts to Cineverse services. Indeed, gained momentum in the remainder of fiscal year 2024 and into fiscal year 2025. Adjusted EBITDA for the quarter was $1.8 million compared to $5 million last year with the decrease being driven by the impact from tariff prior to our legacy Digital Cinema business. In the prior year quarter, we had $5.5 million in cash and cash equivalents on our balance sheet as of December 31, 2023, and $5 million outstanding on our working capital facility.
As Chris mentioned, we recently announced an increase in our working capital facility with East West Bank from $5.0 million to $7.5 million. We appreciate our relationship with East West Bank and the confidence they're showing by expanding the size of the credit facility, which increases our financial flexibility and liquidity. And as a testament to our improving financial position and credit worthiness, this capacity increase will be used primarily to fund ongoing investments in our content portfolio.
During the quarter, our cash flow used in operations was negative $3.1 million, of which $1.9 million was related to investments in our content portfolio via advance and-or minimum guarantee payments, the largest need for tariff higher three for the last six months, our cash flow used in operations was negative $105,000 when excluding our content portfolio spend showing just how close we are to be sustainably cash flow positive. We expect this positive trend to continue for the fourth quarter and into fiscal year 2025. I also want to point out that we have a stock repurchase program in place through the end of this month. But you know, we have not utilized the stock repurchase program to date due to cash flow constraints. As such, we are working with our Board to extend the program, which we expect to be able to utilize once we have turned the corner on sustained profitability, we are keeping all of our options open with regard what we believe is a significantly undervalued stock price where we are trading substantially below book value. In addition, as good governance requires, we will be refreshing our ATM facility shortly though we don't have any current plans or needs to raise equity at this time?
We believe the increase in our working capital facility, along with the significant progress that we've made in our cost savings initiatives have the company well positioned financially.
With that, I'll turn the floor over to Eric to discuss the market environment and our growth initiatives.

Erick Opeka

Good afternoon, everyone, and thanks for joining us today.
So considering our announcement today, I'd like to start off discussing the market opportunity for our technology platform Match Point, and I will review our financial operational performance and future outlook, as you've heard and seen from our announcements and materials, we've also been rapidly focused on scaling our Matchpoint technology and services business. We believe this is the most important part of our growth strategy for numerous reasons. First, the entertainment landscape is rapidly evolving into a universe of scale bundled subscriptions, a wide array of enthusiast services, plus thousands of FAST channels and large-scale ad-supported platforms down in every major hardware manufacturer. It's a great opportunity for content owners as there is a landscape with tens of thousands of buyers globally, all of them requiring large volumes of content license from the tens of thousands of media companies around the globe today, there's no unified platform that allows companies to deliver all of these to all these partners automatically and at scale. At the same time, we're hearing from the buyers, the platforms themselves, the content owners, hardware manufacturers, but they simply don't have the infrastructure and ability to manage these massive content needs. For example, the major fast platforms have been heavily focused on scaling a VoD and bundle channel solutions for this year, but they lack the infrastructure to compete with Amazon, Apple and Google. Some are trying to build these solutions internally and are struggling on the content side. Like many of the studios they drove huge comes it's a cap sums of cash on delivery problem, outsourcing it to legacy companies. We continue doing it manually and very extensively and small to mid-sized companies are simply not equipped to keep up with the cost. In addition, all of these companies are struggling to measure the revenue performance results of these efforts so they can better improve their efforts. We believe Matchpoint is a solution to both sides of the equation for both content owners and platforms. Our vision to make Matchpoint become a media cloud, enabling both the content and platform side to manage and process their content for both today's and tomorrow's business needs. Our next gen product suite will enable the processing and management of professional-grade content at scale as simple as if they were ordering for Amazon at 100% accuracy. Beyond that, our data tools will allow them to measure the performance of all of their content so they can make better business decisions and easily integrate into their financial accounting and like the AWS storefront for the Google Cloud. So customers will have access to dozens of best-in-breed applications to further extend their capabilities we today already offering 14 for applications, including several in-house developed AI tools. So Matchpoint is really the only cloud-based media solution to do all of this, and it truly is an end to end platform. And the platform will grow with partners diseases long term, if they want to build apps in the launch FAST channels or even build their own version of 2B or Pluto. We have turnkey solutions and technology that's perfectly and seamlessly integrated into the platform and their workflows. Most importantly, we can do all of that, but a fraction of what it costs to build internally or use third party ad hoc solutions as they tried to stitch it together. All in all, we truly believe masks point can become for professional video with AWS' to the web and app economy. During the quarter, we announced our partnership with the Navy. And after quarter end, we launched our new product lightning fast at much fanfare at CES show in Las Vegas. We have a robust pipeline now ranging from small, medium-sized businesses up to studios, interested in various elements of Match Point on some major new scale opportunities to launch new platforms we expect to close in the coming weeks and months. As I noted, there are many, many companies in need of our solutions and expect to move quickly in the new year to take advantage of this burgeoning opportunity. We plan to continue building out the team and plan on expanding our sales force rather rapidly over the next several quarters to take advantage of this.
Now let's discuss a topic that Chris touched on earlier and has really become the center of attention within the media space at tremendous rates by big tech companies to compete with the early success of OpenEye. And along with that, there are many discussions on whether a will have a positive or negative impact on the entertainment business. But our vision great eye is twofold. First, we're going to enable our customers to utilize it to become far more efficient, which should help companies increase revenue and reduce operating costs. I will also provide our customers the ability to take advantage of major media company needs for LM data. And we believe our systems kind of all companies to mine their libraries at scale to do so.
And finally, we see tremendous value in leveraging AI for addressing the biggest shortcomings in the video streaming industry, unified search and discovery as you may have read, we announced the forthcoming launch of our next-gen video search and recommendation service called finish search as Advanced Tech revolutionized search over two decades ago. We believe that A. offers tremendous potential to help improve the quality of video search and enhanced recommendations with the services you use and love in ways that current search engines are capable of and who better to partner with the world leaders of search in Google with Google, we've developed an advanced and enhanced search engine that leverages extensive rich data from dozens of sources, including leading metadata providers as well as by extracting enhanced information through computer vision that analyzes every frame of your shelf. We want to go far beyond searching for things by the limited all way and by title actor director Synopsis at the end of the day, cinema and great TV is about invoking moods and will support that by allowing users to find content through much more subjective search dimensions such as setting the scene, mood tone intensity and much, much more distinct capabilities will be incredibly valuable to enable highly relevant advertising.
As you can imagine ultimately, it's about helping consumers find exactly what they want regardless of what platform or business model. And we wanted to be fun to and what could be more fund and interacting with the world's greatest movie expert. That's what we're attempting to build.
Eva, our ad-based video advisor, we envision a that to not only be a significant expert in the whole universe of cinema, but also on the films and content with any specific streaming service today is an expert across hundreds of thousands of films, and we expect to rapidly expand those capabilities.
Now when seeking something to watch, if you do it in a fun, engaging conversation with the family, a persona, but you can search through and interact with in ways never previously Emageon.
Now let's talk a little bit about our performance. Our digital and streaming revenues reached $13.3 million during the quarter, which while down 36% over the prior year quarter. That was driven by the expansion, and it was driven by the expansion and optimization of our enthusiast subscription revenues, but was offset by the lack of a comparable title to tariffs or two in the quarter. And then on top of that, our planned portfolio optimization efforts to reduce low-margin channels. And we also saw a decline in Q3 ad revenues driven by slower December sales and challenging comps with last year without political advocacy spending in the current fiscal year, subscription revenue side increased to $3.4 million, which is up 13% over last year. Our overall overall subscriber count has reached approximately $1.4 million subscribers, growth of 30% year over year and up 11% over the prior quarter. This was predominantly due to the growth in subscribers during the quarter on Dove and our cult film service, midnight pulp. This progress in a diverse array of channels underscores the strength and appeal of our enthusiast streaming services and the overall diversity of our revenue model.
Ad-based revenues dipped to $4.1 million, a decrease of 31% this decline is in line with comments made by Christian mark coming from channel portfolio optimization and of course, the tough comp with last year, which had slowed significant political and advocacy spending. We also saw lighter than anticipated in December after robust October and November, and we believe this is due to a strategic shift by brands and agencies and open marketplace for programmatic advertising. We have campaigns now ending far earlier in the month than in prior years in conversation with our marketplace peers and partners. The seems to be widespread across the industry and not just isolated to us. We believe our long-term focus on shifting our revenue mix away from open market programmatic to programmatic guaranteed by the marketplace in direct ad deals will alleviate our exposure to the volatility in the open marketplace.
During the quarter, we continue to focus on sustained profitability with operating margin and net income. We saw further progress in that area lifting our overall gross margins to 59%. We've been able to achieve those levels by leveraging our library to reduce short term content spend, renegotiating most of our operating deals to be more favorable and by focusing on the highest margin parts of our business, namely third party distributed fast and SVOD channels. At these margin levels, we unlock something that is very uncommon in the streaming business, scale operating margins. Most of the major media companies are barely eking out profits and streaming in the low to single digits with a long way to go before they have realistic businesses and streaming. We think our philosophy of operating streaming services that provide a wide array of choice in targeted high-quality library programming from around the world mall that works in the face of larger companies slashing content while raising prices. We believe this low-cost Moneyball approach to streaming can deliver outsized margins and profits and has a highly scalable model. Subsequent to quarter end, we also launched several new fast enabled services that we had previously announced, including the CGM on Douglas fir channel mediator.
Good Marty cross channel, entrepreneur, TV Barney & Friends and several other channels will be coming online in the next few weeks. As such, all of these channels are quickly ramping revenue contribution as we grow the distribution footprint over the coming two quarters over the next few quarters, we're going to continue to our focus on optimization and as we've achieved a high degree of optimization on the operating side, we're now focusing on the SG&A side. Our strategies continue to simplify our organizational structure and continue to rationalize that because new model will continue to leverage our growing capabilities for Cineverse services hub in India, which allows us to operate much of the back office services and greater cost efficiency. We think leveraging this core capability along with other cost optimizations will enable us to achieve the [15% to 20%] net income margins we're targeting in the near term for this business. All in all, we've made great strides in the last several quarters. And we now have a streaming business that can scale with best-in-class margins and innovative in-demand technology platform, but even better margins, a strong pipeline of exciting new businesses and customers we expect to bring forward during our upcoming fiscal year. Our future looks incredibly bright, and we can lead to some more as things develop.
With that operator, let's open it up for Q&A.

Question and Answer Session

Operator

Thank you. If you would like to ask a question, please press star followed by one on your telephone keypad. If you would like to withdraw your question, please press star followed by two. Once again to ask your question, please ensure your device is unmuted low.
Brian Kinstlinger, Alliance Global Partners.

Brian Kinstlinger

Great, congratulations on making the difficult but necessary decisions, call the channels and give up some revenue where economics report great to see EBITDA profit without the legacy business or one of the first times I can remember. So great job. And can you talk about we expected early commitments from the platforms related to your new channels, whether it be Darwish or immediate or sit in Marty cross channel as well as entrepreneur, how long would it take to know whether these will be needle movers and how long does it take to know whether they will. It's the success you hope they'll hit.

Chris McGurk

Hey, Brian, this is Chris.
I'm just wondering.
Thank you for that. I want to thank you for those comments?
First, Brian, there were spot on and we appreciate it very much. And I guess, Erika, I answer your question.

Erick Opeka

Sure.
Yes.
A great question. Yes. So yes, we over the last few years as we've been launching these channels?
Yes.
When we first started this because we're very early on, we've been doing fast now almost five, almost six years now today, the competition for slots have gone up dramatically, have every major studio now launching channels. And so that's the lead time and to launch new channels is really longer than it was when we first started doing this business used to be a quarter or two and it's nowhere near the duration. It used to take in cable to get full distribution that could take three to four years. If you are doing a good job, I think here six to nine months is probably a realistic, steady state for distribution. Some may take a little longer as we now have a lot of legacy media providers entering the space from Direct TV charter, others are all contemplating services. And so some of the legacy cable providers like Comcast are in it. So as we as we look at the at the market here, I think I think that part of the duration is going to continue to get longer as this business looks more and more like the new cable up for us.
I think the good news is we launch a lot of our new services on pretty large scale platforms like Tubi, Amazon and others. So we get a really good perspective right out of the gate and about how well they're going to perform. I'll give you one good data point that we find very optimistic. Our dog whisper channel is already outperforming Bob Ross, which has always been our big champion performer by about 40% on the first platforms, we've launched it and which includes some big players like Amazon and others. So we think that's very, very promising. And so we always thought, Bob, these are more on could be a second, Bob Ross, that it's doing even better than Bob Ross, is this great. And so we think as that scales out its distribution, we're hoping to see that same pattern follow-up. Same goes for meter meter on the platforms we've launched, it's been dramatically over overindexing, far above other things that we have on the platforms at time. And so we think that that we've always known that it's going to fill a niche that's really not being served by most fast channels in the market today, but we think and the performance we're seeing there is extremely impressive. So out of the gate so far, it's too early to tell on some of the other ones and just launch. But I think And overall, we're very, very pleased with the ones that should be doing well or doing better than we expected and with things like need or do you have doing even better than we had even hoped still looking like it's going to be very fruitful Our next few quarters.

Brian Kinstlinger

Great. That's super helpful.
A little way to think about because it's unclear to us how many platforms you are on early on and the adoption scale? Is there something you can share with us in terms of maybe exiting calendar 2024 for each channel in total on a run rate might look like in terms of revenue is that too difficult to provide a totally unclear?
Just maybe any a whole discussion on that would be great.

Erick Opeka

Yes, I think it's it's too early. It's too early to say. We're just rolling out the distribution on these. But the expectation out of these larger brands and channels was to stand up another Bob Ross was to stand up another sort of large scale brand and early indications are that between mediator between mediator and others?
We're really good. I think we really do have that here. I think also one of the things that's changed in the last few months and last year in the prior year, there was really a more conservative approach to channel launches. And I do think that what we're seeing is most of the major players are really ramping up on the total footprint that we that we're seeing here. So in aggregate, if you kind of look at where we are steady-state with the current business, my sense is we've added at least another Bob Ross and a half maybe to Bob Ross's long term at full steady-state distribution. I don't have any specific numbers to share with you on that. But yes, yes, I don't think I give you a sense of scale.

Brian Kinstlinger

Yes, great.
And then maybe you can provide some updates regarding the managed services business. You made some high-level comments, but last call you talked about, I think getting to a $10 million revenue run rate as you exited calendar 2024, if I'm saying that right?
Correct me if I'm wrong, which I believe would assume probably two large VSPs and maybe some smaller ones onboarded. Can you talk about if your assumptions have changed, but it's still reasonable? And any any discussions on early adopters would be great.

Erick Opeka

Yes, all our I'll get it started and Tony, who is on the call can can provide some color on that, too, as we kind of look at our product suite in our product mix from where we are. We're getting the most attention and traction is on the dispatch side, which makes all sense. United might come in my prepared comments. We said that every major fast platform, which include Samsung, Brazil, all of them know that they had it relatively easy over the last few years where had to launch to launch that platform. They took a fee from us and hundreds of other people, and it's a lot easier than managing an ad-supported service, you know, content deliveries on other people handle the programming. You don't really you're not involved at the depth of analytics versus Avon. There's no back-office problems you have to deal with for bank royalties and things like that.
Well, now that they're all aspiring to be Tubi and Pluto, like with big, vast Avon Kellogg, they'll need massive amounts of technology. On the flip side, they need to ingest lots of content. You've got the universe where Avon is rapidly growing and expanding alongside fast now and this year, I think we'll be you'll see that I've heard a lot of other pundits in the market talking about that. And I would tend to agree, given our conversation. I see us in other places with the platforms and content owners. So this universe where you have this massive demand and need for the ability to push tens of thousands of hours and receive and managed and tens of thousands of hours. I think it's led to a universe where most of these people have no systems to do this. They're doing it manually. They're doing it well, Google Sheets and paying third parties to do it manually a very high cost. And that's not scalable. And we saw this the last time a digital 1.0 and you had items in Amazon, prime and other places you have to be able to do this at scale. And so all of these companies and all of it on both sides are really going to they need massive amounts of technology. And beyond that date, you need to deploy technology that can leverage AI had to do things like content, localization, captions and enriching the meditation, meta data detection and other things that we haven't even contemplated where the industry is going today and add things like automated ad insertion. So we do all this today. So so we think long story short is dispatch. It's proving to be far more important to the market than I think we anticipated when we started going out to market, we thought the app side is going to probably be a bigger piece. So the good news is this unlocks far bigger potential customers and what that means for sales cycles is clearly, you know, it's a longer sales cycle than focusing on SMB, but the potential revenues are much greater. So I think your I think your thoughts on us having them and larger scale customers.
I think that's right. I would say I would say if we could scale it could store up two to three big scale enterprise partners on the side. And I think that would probably be that would put us on a path to those numbers that we have been talking about. We also think, obviously onboarding lots of customers on the delivery and content outside those customers who would be our motivated because the market demand for large volumes of content is there everybody from Netflix on down is ramping up licensing and some partners are saying send us everything you've got, right? And so we're so we're an immediate revenue generation solution. And we're doing this at.
Keep in mind.
We did this to support our own business on that over the last decade led us to here. So we're doing this at maybe one H., the cost of doing it through on legacy means. So not only do people save a ton of money, they make a lot of money by being able to do this at scale. So this is I think that really is going to unlock far more customers on the smaller side. So I hope that gives you some context on what that means for this year.

Brian Kinstlinger

Brand-new sneak one last question. Alumina hop off and I'm sure search this functionality that you're going to train and sell directly into streaming platforms. As a standalone solution. So like a subscription or is it going to be bundled or somehow priced into when you have your product?

Erick Opeka

Tony, you want to do you want to describe the your thoughts on the business model?

Tony Huidor

I'll take that, Brian, thank you for the question.
And it's probably the short answer is all of the above. I think from my perspective, having done some initial outreach, our TBOEM.s is following the first likely partnership. The TV manufacturers have a variety of different services and apps and mitochondrial content libraries that they can't really properly provide search for that. We think that would be the first opportunity is likely going to be in licensing model. In that case, it likely would be white label. We won't require that to keep this in check branding or the rebranding, but we're not opposed to it. I think the second tier would be smaller platforms are definitely not the Netflixes of the world, but others who are trying to compete who have difficulty with Discovery Center search once again would be made available there. And then ultimately where we see everything that we do as a showpiece for mass point. So we will make it available within some research and potentially other services that we launch. And so in that case on a consumer model, it'll be likely a hybrid, a free tier with unlimited usage, premium tier, a paid sponsorship search ads, combination of different ways to monetize. Ultimately the cost that we're trying to cover is the our access e-mail alone can be expensive, the OpenEye. So you had that problem that's really came out with the subscription $20 fee that the later raised. So we will see the same issues that a lot of our focus has been on trying to optimize the usage and better understand behavior, hence why we're coming out with the beta first with all, we can get a better understanding of the cost structure.

Brian Kinstlinger

Great.
Thanks so much, guys.

Chris McGurk

Thanks, Brian.

Operator

Dan Kurnos, Benchmark Company.

Dan Kurnos

Great. Thanks and good evening. Tony, can I just follow up on that for a second and obviously major platforms like Roku have what to watch and everyone's trying to figure out how to work on discovery in the space. And I think what you guys are proposing is really intriguing for sort of the next evolution, obviously that there are some puts and takes around and you guys met eTag everything appropriately and a I still has some accuracy issues. So I'm sure you're tracking at work all of that out and some of that's going to be incumbent on the owners of the actual content to fix some of that, I guess in order to make this thing work. But on the flip side, given how many at least for now until there's more consolidation can be given how many platforms are out there, if you're offering this tool is there not a way for you guys to ultimately participate in the bounty rates that you know, like Roku, somebody at Roku point, somebody, Netflix this as hey, this is on, you know, you might want to sign up for Netflix. And Fred, that example is they don't monetize Netlist's that way, but that they would theoretically capture bounty for that I know you guys are trying to, but this is part of a broader package, but there's a huge elements or secondary element of subscription service sign-up that is addressable here and I know the OEMs want to tap into that and just curious how you're thinking about, you know, kind of everything that I just sort of laid out in that sort of secondary revenue stream.

Tony Huidor

First of all, Brian, sorry for coming again.
And your voice continues, So Tony, it's something that we've thought about. And that's essentially what you're describing is an affiliate model, a bounty of paper Bounty. I see that probably as a secondary approach, I think for us to get to the point where that makes sense, we need scale and for us to get scale. We need some fairly large partnerships in place at that point when we have the eyeballs and the viewership in place we potentially can. And these affiliate models exist. It's not something that we need to go out and invest. So we have the ability to strike deals where we drive traffic and can show conversion. We should be able to benefit and get some type of subscription a bounty for doing so there.
What's interesting about this product is there's a lot of different ways of kind of trying to extract value and monetize the service in terms of what you're outlining, we're not relying only on traditional native data that comes from the licensors. First of all, we license, we haven't we have official license to official native data from key native data suppliers. But as Eric pointed out, we are investing heavily and we've already started the process of indexing our library as well to computer vision. And ultimately that data has tremendous value that has probably a third possible revenue stream, which is we could start passing that through the ad tag one, our ad-supported business as we're serving as we're doing FAST channels and providing these two platforms, the more detail you can provide about what's inside the movie, the value there on the advertiser side. So we think that's an area where the work that we're doing on AI. and contextual tagging has significant value in the long term. The future is all going to be about native data and AI only works well when it has a very rich library of trove of data and research from. And so for us over the last year, you've probably seen some of these announcements we've done with buying labs and others. Many of you probably don't really understand the significance, but we've been laying the groundwork for this product for the last year. And part of that groundwork has been building the major data capabilities and building our library of native data so we can better search it. And so really what we've announced today is a combination of all that work in finally to be presented in a package that consumers and investors can understand.

Dan Kurnos

Got it that's really helpful.
(multiple speakers)

Erick Opeka

I was going to add one point to that, too, is if you kind of look at the broader, the bigger opportunity for platforms as these become very skilled businesses with very large captive audiences of and the 10 million to 50 million-plus users in some cases and the scale global platforms, hundreds of millions on all of them are really thinking about how to squeeze more RPU per user out today. They're all focused on building and based experiences, but there could be a real opportunity here much the way Google deployed ad spend and with the acquisition of DoubleClick and later now scaling that across their whole search product building and building self-service ad tools and other things into this, it allows for a very intuitive and in natural advertising opportunities, native too, and no interaction with the persona. So if you can imagine, interact and interacting with the persona and the platform, if somebody wants to promote something specific and we find somebody's searching for something very appropriate. You're talking about on targeted advertising, contextual advertising. I'm doing it in a natural and very seamless way and a user interaction where users talking with the Persona, having that system the white label to offer and to every streaming service, it could be a very significant ramp opportunity.
So we're exploring things like that, come on top of a license and kind of metered usage and Airbus can I think we're feeling like we've got again, one other thing that I think the question that will be asked, why is Google doing it with Cineverse , right? Why isn't Google doing it themselves? And as Eric pointed out, I think the short answer is the short answer is Matchpoint. We have a huge head start over all. The other platforms are trying to compete in this space. What we have in Matchpoint, the underlying foundation, user authentication, recommendation engine. A lot of that fundamental sort of technology is required to power service mix and research. And there's really not a lot of players out there who kind of have that same full stack that we do, and that is really our competitive advantage that we have a head start and we're obviously anxious to get this to market. We want to get it right, but we wouldn't be able to do this if we didn't have the underlying stack that we've built with Matchpoint over the last few years.

Dan Kurnos

I'm just trying to ask another one because you guys just answered the two questions. I was going to ask on self-serve and why Google, Eric, can you just maybe talk because you brought this up in terms of expanding. I mean, look, this is obviously the key to the platform, right? Is Matchpoint based and you've talked about new capabilities. And on Tony just talked about all the groundwork that's been laid out and the fact that you just landed, who will the partner suggests that doors are open to you that may not have been open previously. And so to the extent that you're thinking about expanding through partnership, you know, obviously you guys are making noise like think back that are linked and on the back end, are there any other particular areas of opportunity that you see through partnership that you can drive more on platform creation, similar to what you announced today? And is it possible that there are other major partners, not to say they're only somebody Googles but other major partners. And Amobee was a big win to that could be coming within next 12 months?

Erick Opeka

Sure. Yes. So first up you make a good point on Google, Google Cloud. And I look at as we built a technology platform here and that getting access to more customers rapidly and scale and rapidly is critical. So in addition to obviously our own direct sales efforts, the MRV partnership really working with the existing cloud stores today, it can be very important. Clearly, we're working Google Cloud. I think the natural progression of this would be off that would be to put Matchpoint and other offerings in the Google Cloud store. And so obviously, getting access to those markets is incredibly important and we will need to do some work to our and our software stack to make it work in that environment. But I think that's an immediate path I think is a real opportunity. So I would say that's a big one, Tony, I don't know if there's any, I think adding more partners,

Dan Kurnos

-- Micro services obviously, right?

Erick Opeka

Yes, yes.
Micro services. So today, when our platform today, if you if you want to do to work with us and you can license dispatch and start using U-Shin, you can license our blueprint products. You can license our analytics products, but the reality is most major media companies, the biggest scale platforms in the world. They may want to use piece of what we're doing right? They may say, wow, the similar search is amazing, hey, these elements of your stack are awesome, but they're not going to Netflix isn't going to abandon their stack. These are stacked, right? What so that's where the microservices model comes and where we basically take all the features and capabilities and Match Point, make them into a variety of microservices that can be licensed and leverage as a PI.s in third party customer software, and they can be integrated very rapidly with developers.
The beauty of this is you can instead of us taking 6 months to 12 months to deploy a customer. If you have a good SPK. and well documented API.s and an engineer could test you out and see if it works for their SAC. And that's that's where we really need to be going. We're in the process of really on for Matchpoint 1.5 to 2.0 is re-architecting our business model approach. We're still going to offer a full turnkey solution with the backend for SMBs and midsize companies. But I think for us to work with the Netflix, Google Warner Warner Media's and other studios and others that are have their own engineering forces and massive audiences for us to get that business. We're going to sell them microservices instead. And we think ultimately, that's the AWS. model. That's no, that's it. And a lot of cloud-based models follow that. And we think that's a way for us to really win in this space from low barrier to entry, very rapid scale. And when you start having very big companies hitting our services with the meter running, it can be quite lucrative.
Very quick.

Operator

There are no further questions remaining. So I'll pass the conference back over to the management team for closing remarks.

Chris McGurk

Great.
This is Chris. So thank you all for joining us today and please feel free to reach out to Julie knows that with any additional questions that you might have. And we very much look forward to speaking to you all again on our next quarterly call. Thank you very much.

Operator

That concludes today's conference call and thank you all for your participation. You may now disconnect your lines.