KC Underweight Deal: A TV Channel That Might Not Have Legs

Summary

Today, in KingsCrowd’s Underweight Deal Section, we are going to look at the potential strengths and drawbacks of crowdfunding startup eBroadcastTV. It is the first four-dimensional television network that aspires to create a new genre of entertainment.

At the heart of this rating is a question: Will this new genre have any takers?

Naturally, the “television network” and its founders have high hopes of appealing to millennials and creating cutting-edge content through live and interactive weekly shows. Eventually, they hope to develop 20 channels in the next 5 years, with each channel airing about 48 live weekly shows.

The first of which, now in production, is called “Your Beer Show”. It was created because, according to the company’s research, 57% of the millennials are weekly craft beer drinkers. The show will deal with topics like what makes a good craft beer. It will include expert opinion, celebrities on the show, and other material to make it educational, entertaining and fun. That’s just the beginning, there will be other channels and shows dealing with topics as diverse as Alzheimer’s.

In this section, we will analyze the drawbacks of the business model, along with discussing if the company will be able to generate enough returns on investment for the small investors that generally invest in crowdfunding deals. Interests of these small investors need to be protected to ensure that their hard-earned money is being put to good use.

eBroadcastTV: Raising on WeFunder

Is there a market?

The founders of eBroadcastTV have based the business model on the assumption that experts and celebrities will interact with a live audience as part of their shows. The audience will watch the live show, listen to the so-called “experts”, and will then lead the direction of the show with their questions. eBroadcastTV plans to convert passionate people into loyal fans and become the first fan-owned E-TV network.

Currently, this seems an overly optimistic business model. Will there be a market for such shows? Will there be enough people watching these live shows? Will they actively participate in these discussions to keep the shows running? These questions remain unanswered.

Business Plan (or lack thereof…)

Presently, the television network plans to raise money only through sponsorships. There is no concrete business plan to generate revenues. You read that right: The company has not settled on a plan to generate recurring income through memberships or subscriptions.

eBroadcastTV expects to make money through sponsor packages on each channel. The people and companies that work in the channel’s field are expected to be the sponsors. The television network claims that these sponsorships will turn out to be quite cost-effective to the sponsors thanks to their new production technology. We are unsure if this will eventually look like NASCAR racing sponsorships or if there is some other analogy we are missing…

It’s not hard to imagine these plans going south. Future success rests on recurring revenues instead of cyclical sponsorship packages in our estimation.

Lack of Managerial Experience  

The executive team of eBroadcastTV is comprised of Jesse Wacht as the CEO, Chris Cashman as Live Show Producer-Director, Brendan McCourt as Technical Producer-Director, Bill Corkery as Chief Sound Engineer, Jack Hummer as Master of All Things Digital, and Nancy Roebke as Social Media ‘Goddess’.

The entire management team comes with decades of experience in their relevant fields like media, e-learning, live radio, and television production. However, none of the members has direct experience in dealing with a live television network. We have to imagine Live TV is a completely different ball game, with its own demands, methodologies, and required skills. The management team seems quite confident of handling what is going to come its way, however, they may not be prepared to handle curve balls that this business is expected to receive.

Use of funds  

The use of the proceeds of the equity crowdfunding raise seems reasonable enough at first glance. The company plans to use 35% of the capital for additional studio equipment, 17.5% for software development, 20% for the beer channel, 7.5% for a new channel pilot show, and 15% for sales, marketing, and talent acquisition.

The problem is that all the money it manages to raise serves as the proof that the company is very much in the idea phase right now. The funds are also expected to be used for promoting these ideas. The funds don’t appear to be utilized to give any concrete returns on investment.

The Bottom Line

As things stand, we are assigning eBroadcastTV an underweight rating. The ideas and the thought-process are promising enough, however, they may turn out to be overly optimistic.

Even if the company is able to raise enough funding and the funds are used for the development and growth of the live channels, there is no surety that there is even a market for such live interactive television shows. Incredibly, eBroadcastTV has already spent about four years on research & development and quite a lot of R&D is still required.

Granted, eBroadcastTV has a unique concept. But given the risks for investors eBroadcastTV does not look like the best of the options available.

With a lack of recurring revenues business model and lack of management experience, the investment opportunity presents itself to be quite uncertain. It could go either way.

If you have any questions regarding the underweight rating of eBroadcastTV, you can reach us at hello@kingscrowd.com.