Brand Extension

John Stuart
When SilverCash launched SilverSinema, it became one of the few online companies to take the plunge into DVD sales. The move coincided with the 10th anniversary of SilverCash's online launch, so it's a celebration of sorts. It's also a major diversification move that has some other online companies scratching their heads.

"We did some strategic planning and saw a window of opportunity," said SilverCash Albert, vice president of business development for SilverCash/SilverSinema.

"The DVD market is somewhat saturated in our opinion, but we had a strong product and the advantage of our branding online. We thought it was just a good move in general to extend our operation. In turn, we had the resources in-house, like secondary management with a strong marketing acumen, and on top of that, we had good designers. It was planned for quite a long time, and it was feasible now because we had the right team managers in place, and it wouldn't affect the momentum of SilverCash," he said.

Albert said that the move was the brain child of SilverCash President and CEO, Mike Price, based on the fact that the customer-retention numbers for the HD content that was shot specifically for the website, showed its highest increase ever. SilverCash moved ahead, cutting a deal with PurePlay Media to distribute the DVDs. It was a choice based on the experience of PurePlay.

"We've done this sort of distribution with some other companies that have a business model with a lot of similarities," said Richard Arnold, PurePlay Media president and CEO. "It works well for a lot of different reasons. Primarily, what we find is if the product is proven to be in demand by the time we get it, it will work. These companies develop websites to attract customers. As a result, they know whether something is popular or not. So by the time it comes out on DVD, it has a proven track record."

According to SilverCash Albert, his company's considerable research before making this big transition turned up other reasons why it may be a sound business move.

"I think one of the major advantages for online companies that convert to DVD is that they have to buy from their sites anyway," he said. "When you can absorb that cost with your main company, you're able to sell DVDs at a reasonable price, and still have high-quality content.

"There are only a couple of companies that have been successful with the move, however. The resources and relationships that you build with an online site are very much the same as in the DVD world. Contract producers work on both sides, and great companies like XBIZ [cover] online and DVD. We've extended our producers, and we went out and got guidance from unique places. We know in SilverCash that the DVD market is not our area of expertise, but we're here to learn off the good people."

Instant Brand Impact
Albert and Price believe that one of the major benefits of the move will be the impact it has on the SilverCash brand name, transforming it into an adult lifestyle brand rather than just an online name.

"It also gives us opportunities to really produce strong content," Albert said. "It allows us to set up relationships in a new dimension. This opens up different business models, opens up different advertising paths, and gives us opportunities for reciprocal business. It also gives us a Plan B, C and D if the online world changes tomorrow through legislation or technology, and SilverCash has to close its doors. It gives us another division that we can all rely on for employment."

Arnold agrees. "In the long run it's going to give the people who are doing it [online-to- DVD] the advantage over companies that are not doing it," he said.

But if the transition is such a no-brainer, then why have so few online companies tried it?

"I think a lot of companies grapple with whether they should do this on their own, or whether they should farm it out to somebody, and then it becomes a trust factor," Arnold said. "As good as any contract is, it always will boil down to a trust factor between the two parties, and that always seems to throw some people off. Plus, the logistics of doing it by yourself are kind of daunting, because for most online companies, it's a totally different field than what they're used to."

One factor behind the reticence of most firms to make this move is the intense competition in the DVD market. This has created a totally different atmosphere in DVD as compared to online, according to Albert.

"What we've learned from companies who already made the move from online to DVD," he said, "was that when you're established online, your best friend could be your largest competitor, because of the traffic deals that we run. The DVD world is not like that. It's a little more cutthroat. They're not as friendly, and it's more competitive, because that market is shrinking.

"The ethics in the online side are very different in terms of relationship-building, being generous, helpful, and giving guidance. That's because in the online world, we get traffic in, and we know we'll only retain it for a certain number of months before we have to send the traffic away. People only pay for a few months, depending on the content, so we might as well be a webmaster for another person, and make some extra revenue. Otherwise, you couldn't be profitable.

"The DVD side is more proprietary. It's just the nature of the business, and in the business world, that's the norm."

Arnold, however, believes that fears of over-saturation and declining sales in the DVD marketplace are overblown and should not hinder online companies from moving into it.

"I talk to the distributors, and they tell me sales aren't really down," he said. "What's really happening is that two years ago, they might have 150 vendors, and now they have 300 vendors. It's about a lot of new companies entering the business, and a lot of existing companies expanding their product.

"I've looked at the raw DVD statistics, and actually the sales are still increasing. They just have not been increasing like they were in years past. In the past, it was a 20 to 25 percent annual increase. Now, it's maybe down to five percent. That can have a big impact on companies that are managing things, expecting that 25 percent annual increase, because it's a totally different way than managing for a five percent increase. I believe that some people mistake that for a decrease."

Although Arnold admits that the entrance of Internet companies like SilverCash into the DVD market is adding to the saturation problem there, he feels that only certain genres — specifically gonzo — are being hit hard. This knowledge has not been lost on SilverCash, which intends to circumvent the DVD saturation by offering a better product.

"We've seen a lot of good content, and we've seen a lot of poor content," Albert said. "So when we had HD capability in place, we knew right away that this is a selling product. The numbers from the website supported this. Having the SilverCash name behind SilverSinema gave us a credible company name with the consumers who are familiar with our site. They have more confidence in us from a distribution and wholesale aspect, because we've been around online for 10 years."

Wager on HD
SilverCash is betting heavily that its HD content will set it apart in the crowded DVD market, even though few customers have converted to HD.

"It's a well-known fact that your typical Windows Media Player and Quicktime are not true HD players online," Albert said. "But the major advantage for us is that the product we shoot is still superior to non- HD content. Our numbers don't lie. On the DVD end, once we figure out where the market is going with Blu-ray vs. HD DVD, we're going to be right there. We'll produce the actual disc in one of those formats, depending on where the market shifts to."

Gearing up for its May launch, SilverSinema is shooting its own movies as well as buying movies from other producers right now, but plans are to become totally self-contained as DVD producers.

"Our short-term goal is for everything to be done in-house, with our own camera crew, so we can control it," Albert said. "We hope to grow to the point where we'll be with the top players, and do larger budget films to really make an impact with the high-end glamour line.

"One unique aspect in our negotiations for our distribution deal with PurePlay was cooperating with them in the certain niches they're selling to consumers. SilverCash was a natural fit, because we know they can sell in all of those niches. Not only do we do well with the HD hardcore, but we have the ability to come in with niches they couldn't fulfill with the current line that they had. Speaking with PurePlay, my understanding was that we could be kind of a utility to fill in the gaps.

"So now when you're a salesperson for PurePlay talking to your retailers, they don't have to deal with two or three other distributors. They can just deal directly with PurePlay, and that becomes very advantageous for the market share in distribution."

Since the SilverSinema line hasn't debuted as of this writing, there are no sales figures by which to gauge the success of its online-to-DVD move. But SilverSinema's research indicates that the venture will be "extremely profitable." The nature of its distribution deal with PurePlay is one reason for this, but SilverSinema management feel that the ability to keep DVD costs down also will enliven sales.

"We have an advantage in being able to use the content we shoot for our sites as well," Albert said, "so the added costs of HD can be absorbed there, and not passed along to the DVD consumer. Also, some movies will be on DVD, and some will just be on our site. Some will be released on both.

"We want to keep the site and the DVDs mutually exclusive, but it's going to come down to whether both ends are profitable. I think the DVD consumer and the online consumer are two different types of individuals, and we'll target both of them."

The only thing left to do is see how SilverSinema floats. Arnold is completely confident, however, that the venture will be a great success, and he believes it will be due to an x-factor as much as to the extensive market research done by both companies.

"Whenever we enter deals, it's always equal between product line and the people we're doing business with," he said. "I'm really happy to be working with SilverCash. These guys are hitting home runs."