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Exhibit 10.1
THIS AGREEMENT dated the 31st day of July, 1999,
BETWEEN:
SENSUS CAPITAL CORP.
("Sensus")
- and -
ALLTEAM ONLINE INC.
(the "Developer")
NOW THEREFORE in consideration of the respective covenants contained herein,
Sensus and the Developer agree as follows:
1. MAKE-UP OF AGREEMENT
1.1 The complete agreement between the parties with respect to the acquisition
of the idea and the development of the technology required to operate an
internet web-site to be operated as the HIGHLIGHTREEL.COM web-site and all
related domain names generally in accordance with the Business Plan attached as
Schedule "A" (herein called the "AOI Network") and for the support of the
web-site and any related services (herein called the "Agreement") shall be made
up of the following documents described under paragraphs (1) through (3):
(1) This "Head Agreement" which contains all of the terms, conditions and
provisions under which Sensus will acquire the technology and the rights to the
web-site address including any computer software and related services from the
Developer;
(2) The "Business Plan" which outlines the Custom Developed web-site which is to
be developed on behalf of Sensus which attached as Schedule "A"; and
(3) The "Technology Support Services Schedule" which sets out the Technology
Support Services to be provided by the Developer to Sensus which is attached
hereto as Schedule "B".
1.2 In the event of any inconsistency between this Head Agreement and any of the
Schedules, the Head Agreement shall prevail.
2. DEFINITIONS AND SCHEDULES
2.1 General -- Unless otherwise expressly defined herein, all data procession
industry terms in this agreement shall have the meaning applied to them by the
[American National Dictionary for Information Processing Systems] (ANSI - X3.172
- 1990) and published by the American National Standards Institute, Inc., 1430
Broadway, New York, N.Y., 10018 Copyright 1991].
2.2 Specific -- As used in this agreement, and any schedule hereto, and any
amendment hereof, and any documents to be executed and delivered pursuant to
this agreement and in any documents executed and delivered in connection with
the completion of the transaction contemplated herein, the following words and
phrases shall have the following meanings, respectively:
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(a) "AOI Network" means the web-site to be developed by the Developer
in accordance with the Business Plan attached as Schedule "A";
(b) "Business Day" means each of Monday, Tuesday, Wednesday, Thursday
and Friday except where any such day occurs on any federal or
provincial statutory holiday observed in the Province of Alberta;
(c) "Custom Developed Technology" means those new computer programs
and associated Documentation provided in conjunction with the
development of the AOI Network by the Developer described in the
Business Plan attached as Schedule "A";
(d) "Documentation" means all written instructions, procedures and
practices regarding the operation of the Technology which are
required to enable Sensus to operate, maintain and manage the
Technology upon Sensus' Hardware and which includes, but is not
necessarily limited to, all of the manuals, handbooks,
maintenance libraries, operating instructions, overviews and
guides for the Technology;
(e) "Equipment" means the aggregate of electronic information
processing equipment and related components, including but not
limited to all processors, servers, workstations and tape drives,
all as acquired by Sensus for the specific purpose of operating
the Technology;
(f) "Sensus' Affiliates" means all corporations, companies, trusts,
and other entities controlled directly or indirectly, by means of
a trust, a corporation, or otherwise by Sensus;
(g) "Hardware" means the Equipment and the System Technology;
(h) "Implementation Period" means the period of time through which
Sensus pays the Developer for the development of the AOI Network
pursuant to the Implementation Plan;
(i) "Implementation Plan" has the meaning ascribed to it in Paragraph
4.2;
(j) "Installation Sites" means those sites as may be designated in
this agreement and as designated from time to time by Sensus for
both installation and operation of the Technology;
(k) "Enhancements" means the changes and additions to the Custom
Developed Technology;
(l) "Functional Specifications" has the meaning ascribed to it in
Paragraph 5;
(m) "Party" or "Parties" means either Sensus or the Developer if used
in the singular and both the Developer and Sensus if used in the
Plural;
(n) "Products and Services" means those Technology products, services
and assistance described in paragraph 3.1 and 3.2 and the
Schedules;
(o) "Source Code" means the counterpart human readable version of the
Custom Developed Technology required to be provided hereunder in
machine readable object code, and being capable, upon
compilation, of being translated into machine executable object
code when operated upon the computer system;
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(p) "Source Materials" means the Source Code and System Design
Specifications, logic diagrams, and all other relevant
documentation relating to the Technology;
(q) "System Design Specifications" means those technical
specifications for the Technology developed or to be developed by
the Developer for the purpose of enabling any persons reasonably
skilled in software design, analysis or programming to maintain,
and further develop, the Technology;
(r) "System Technology" means those operating systems, compilers,
development software, utilities and related documentation
hereafter specifically acquired by Sensus from third party
Technology Developers for the specific purpose of operating the
Technology upon the Equipment.
(s) "Technology" includes the computer programs comprised of Custom
Developed Technology and the Hardware to operate the AOI Network
as described in the Business Plan;
(t) "Technology Support Services" means the provision by the
Developer of Technology maintenance services upon the terms set
out in paragraph 8 of this Head Agreement and the Technology
Support Services Schedule;
3. DELIVERABLES
3.1 Single complete transaction -- Subject to the terms and conditions of this
Head Agreement, Sensus is hereby granted the following rights:
(a) All rights to the AOI Network and the Custom Developed
Technology, including, without limitation:
(i) all intellectual property rights arising in respect of the
operation of the web-site and the AOI Network;
(ii) any copyright in any software or any creative works
developed by the Developer as part of developing the
web-site and the AOI Network;
(b) the rights to the INTERNIC domain names described in the Business
Plan;
(c) the right to further develop the web-site and the AOI Network,
and in this respect, the Developer hereby waives any moral rights
it may have in respect of any software or other copyright
property developed for Sensus hereunder;
(d) to the extent the Developer provides any sublicense of System
Technology, which is specifically authorised hereunder, it shall
contemporaneously provide a letter addressed to Sensus, from the
owner of that Technology, in which that owner irrevocably
undertakes to directly license Sensus to use the Technology on
substantially the same terms and conditions as those contained
herein should any Head License from which or through which Sensus
derives its rights to that Technology, be terminated;
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(e) the right to be provided project management assistance and
services in accordance with paragraph 6;
(f) the right to be supplied training services in accordance with
paragraph 11;
(g) the right to be supplied Technology Support Services as specified
in Schedule "B".
3.2 Developer responsibility -- By entering into this agreement, the
Developer agrees that it will, during the Implementation Period and in
accordance with the terms and conditions of the agreement:
(a) assume overall contractual responsibility to Sensus for the
development of the AOI Network and for the delivery and
installation of all Technology components regardless of origin or
manufacture;
(b) assume contractual responsibility to Sensus for all web-site and
AOI Network development activities, which include, identifying
and obtaining any required Technology and correcting all
Technology failures, including failures relating to performance
and functionality;
(c) secure the full time services of Graham Heal and such other
employees of the Developer as are necessary to work on the
development of the web-site and the AOI Network on behalf of the
Developer in accordance with the Implementation Plan as provided
below.
3.4 Customer's responsibilities -- Except as otherwise provided in this
agreement, Sensus shall be responsible for performing the following activities:
(a) the furnishing of all supplies, including, without limitation,
all Hardware;
(b) furnishing the Developer with all information mutually determined
by the Developer and Sensus to be necessary for the performance
of those services to be provided by the Developer as specified in
this agreement.
3.5 Technology support -- Paragraph 8, together with the Technology Support
Services Schedule, specify the nature and cost to Sensus of any ongoing
Technology Support Services following expiration of the Implementation Period of
Technology Support Services.
4. CHARGES AND PAYMENTS
4.1 In order for Sensus to secure the rights described in paragraph 3
Sensus shall be required, on or before November 1, 1999, to issued 25,000 Sensus
Shares to the Developer. Thereafter, for Sensus to be able to maintain the
rights so described, and to secure the services of the Developer:
(a) Sensus is required, on or before December 31, 2000, to commence
funding the development of the AOI Network, by making monthly
payments of $25,000 US to AOI, in exchange for which AOI will be
required to arrange for the full time services of Graham Heal,
who shall be obligated to use his best efforts to develop the
web-site as efficiently as possible (provided however that if
Sensus does not make the first payment of $25,000 US, on or
before December 31, 2000, all rights to the web-site and any
related technology will revert to AOI).
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(b) After the development is completed and an operating web-site has
been completed, Sensus will be required to pay AOI a management
fee equal to 10% of the gross revenues derived from the AOI
Network, in exchange for which AOI will be required to provide
the services of Graham Heal to manage the AOI Network, subject to
Sensus directions;
provided however that if the parties do not agree on the Implementation
Plan or if Sensus does not provide the first advance of $25,000 before
December 31, 2000, the Developer's only recourse against Sensus will be
for the reversion of the rights acquired by Sensus pursuant to
paragraph 3.
4.2 Price all inclusive and terms of payment - It is estimated that it will take
the Developer four (4) months for the first version of the web-site to be
developed after Sensus commences funding development with the first advance of
$25,000. Prior to commencing work on the development of the AOI Network
web-site, Sensus and the Developer will meet to complete a web-site development
implementation plan that will form the basis of the work to be performed by the
Developer (the "Implementation Plan"). The actual cost of development shall be
based upon the actual time it takes the Developer to complete the web-site and
train Sensus' employees to use, the Technology (and the cost to be billed to
Sensus for any development work representing a portion of a month shall be
prorated based on the portion of the month so worked).
4.3 Taxes and other charges -- The price for all of the deliverables described
in paragraph 3.1 and 3.2, shall have added thereto, all applicable customs
duties, goods and services taxes, provincial sales taxes and any other sales or
use taxes as well as any applicable transportation, insurance and freight
charges.
5. FUNCTIONAL SPECIFICATIONS
The Parties agree that the AOI Network shall be developed in the manner set
forth in the Business Plan which describes the functional way in which the AOI
Network will operate (the "Functional Specifications").
6. PROJECT RESPONSIBILITIES
6.1 Developer project co-ordinator -- The Developer shall appoint Graham Heal,
as the Project Co-ordinator. The Developer Project Co-ordinator shall assume his
or her duties and responsibilities upon execution of this agreement and continue
performing them until expiration of the Implementation Period and thereafter the
Developer shall provide project management services on a time and materials
basis at their then current published rates. The Developer Project Co-ordinator
shall have the following responsibilities:
(a) ensure the products and services provided under this agreement
conform to the requirements under this agreement;
(b) ensure compliance with the requirements set out under paragraph
3.3;
(c) schedule meetings at a time mutually agreed to by Sensus Project
Co-ordinator, to review the project status or communicate
problems or difficulties that may be of concern to Sensus or
affect Sensus' activities;
(d) attend meetings initiated by Sensus Project Co-ordinator, and
(e) prepare monthly status reports and submit them to Sensus Project
Co-ordinator.
6.2 Customer project co-ordinator -- Sensus shall appoint one individual as the
Primary Project Co-
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ordinator. Sensus Project Co-ordinator shall assume his or her duties and
responsibilities upon execution of this agreement and continue to perform
them until the Technology Acceptance Date. Sensus Project Co-ordinator
shall have the following responsibilities:
(a) schedule meetings at a time mutually agreed to by the Developer
Project Co-ordinator, to review the project status or communicate
problems or difficulties that may be of concern to the Developer
or affect the Developer's activities;
(b) attend the meetings initiated by the Developer Project
Co-ordinator;
(c) facilitate the availability and co-operation of Sensus'
personnel;
(d) designate desk space for the Developer Project Co-ordinator, the
Developer personnel as determined sufficient by the Developer
Project Co-ordinator,
(e) provide controlled access for the Developer to Sensus locations
as is necessary to develop the Technology; and
(f) purchase and arrange for the delivery, in a timely fashion, of
all of the Hardware necessary, as specified by the Developer
Project Co-ordinator, to allow the Technology to be developed and
thereafter to allow for the Technology to function according to
the Technology Specifications.
6.3 Mutual project responsibilities -- The following are responsibilities that
to both the Developer and Sensus Project Co-ordinators:
(a) schedule and attend meetings at least once a week during the
Implementation Period;
(b) provide the vehicle for communication of any concerns of their
respective staff as far as is practicable.
6.4 Management level meetings -- At Sensus request and with Sensus designated
personnel in attendance, the Developer and Sensus shall hold management level
meetings to review the general progress of the implementation and specific
management related issues. For purposes of such meetings, the Developer and
Sensus shall each provide at least one authorised representative with
decision-making authority who shall be fully authorised to make commitments on
behalf of the Developer and Sensus, respectively, at such meetings.
6.5 Changes -- The Technology and the Custom Developed Technology shall be
furnished to Sensus together with all Enhancements. Prior to installation of the
Technology on the Hardware, the Developer shall make all required additions and
modifications to ensure conformity with the Functional Specifications and the
Developer further agrees, that it will, whether requested prior or subsequent to
installation to make any minor additions, modifications, or other fine tuning
changes upon the written request of Sensus.
7. IMPLEMENTATION AND ACCEPTANCE
7.1 Scheduling -- The installation and testing functions specified in this
paragraph 7 and all deliveries of Documentation shall be in accordance with the
Implementation Plan, unless otherwise agreed to by the Parties in writing.
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7.2 Installation and site preparation -- Sensus agrees to provide a suitable
installation environment in accordance with installation procedures communicated
in writing by the Developer to Sensus. Sensus shall give notice to the Developer
once the installation environment has been prepared.
7.3 Conditional acceptance of AOI Network
(1) Sensus will throughout the Implementation Period conduct such tests as it
deems appropriate to enable it to verify that the Technology functions and
performs in accordance with the Functional Specifications on the Computer System
(the "Test Period").
(2) If Sensus notifies the Developer in writing during the Test Period that
Technology has failed any of the tests set out in paragraph (1), and
demonstrates such failure to the Developer, then:
(a) the Developer shall have seven (7) Business Days (the "Cure
Period") during which to correct the deficiencies listed by
Sensus, and
(b) upon installation of the correction by the Developer, the tests
set out in paragraph (1) shall be repeated by Sensus using the
same test data.
(4) If the Technology fails the re-test specified in paragraph (3)(b), then the
complete process of cure and re-testing as set out in Paragraph (3) shall be
repeated once only.
(5) If the Technology fails the final re-test specified in paragraph (4), or if
the Developer fails to deliver corrected Technology by the end of either of the
Cure Periods, then, at Sensus' option, Sensus may invoke the remedies specified
in paragraph 12.
(6) If no written notice of failure has been given by Sensus to the Developer by
the end of the initial Test Period, or the re-test set out in paragraph (3),
then the Technology shall be deemed to have been conditionally accepted by
Sensus.
7.4 Computer system acceptance test
(1) Installation - Installation shall be considered to be complete
upon satisfaction of the following conditions:
(a) all the Technology has been conditionally accepted by Sensus
pursuant to paragraph 7.3; and
(b) Sensus' staff has received the Training, or at Sensus' request,
the Training has been scheduled to occur after the conditional
acceptance;
(d) the Developer has delivered all of the Documentation, and
(e) the Developer has certified to Sensus in writing that it has
verified that the Technology performs in accordance with the
Functional Specifications.
(2) Computer system acceptance test
(a) Sensus shall have thirty Business Days commencing from the day
next following the Date
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of Conditional Acceptance (the "Computer System Test Period")
during which it shall be entitled to perform those processes,
procedures, and other testing methodologies and results to be
obtained therefrom, to verify that all of the components of the
Computer System function together in accordance with the
Functional Specifications.
(b) The Computer System shall be deemed to have been accepted by
Sensus if, at the end of the Computer System Test Period, Sensus
has not notified the Developer of any deficiency in the Computer
System, the term "deficiency" being a failure of the Computer
System, or any of its components, to function together in
accordance with the Functional Specifications or a failure to
successfully fulfil Sensus' Acceptance Criteria. If Sensus does
notify the Developer of any deficiency, the Developer shall have
a further twenty Business Day period (the "Computer System Cure
Period") during which to correct said deficiencies. The Computer
System shall be considered to have been accepted by Sensus if
Sensus has not notified the Developer of the continuing existence
of such deficiencies or other previously identified, corrected
but recurring deficiencies in the Computer System, within five
Business Days after the Developer notified Sensus that the
deficiency was corrected.
(c) If deficiencies which have been identified by Sensus to the
Developer have not been corrected at the end of the Computer
System Cure Period, or a plan of correction agreed upon before
the end of the Computer System Cure Period, the provisions of
paragraph 13 shall apply.
(d) The date upon which Sensus unconditionally accepts or is deemed
to have unconditionally accepted the Computer System, the
Computer System shall be known as the "Date of Computer System
Acceptance".
(e) Where any activity is measured in the Implementation Plan as
occurring within a specified number of Business Days, the
Developer agrees that it will to the best of its ability
undertake and pursue, the required activities as close to the day
from the period of time is measured, it being understood and
agreed that any such specified period merely delineates the
agreed upon time frame for completion of a task and is not to be
interpreted as merely an allowance with a terminal date by which
a task must be completed.
8. TECHNOLOGY SUPPORT SERVICES
8.1 The Developer shall be responsible for providing, or arranging to have one
of its sub-contractors provide, Technology Support Services in accordance with
the terms and conditions of the Technology Support Services Schedule, for a
period of six (6) months following expiration of the Implementation Period, at
the lowest rates at which they provide such services to others.
9. WARRANTIES
9.1 Length of warranties -- The warranties in this paragraph 9 shall:
(1) extend to all updates, upgrades and enhancements made to the
Technology pursuant to this agreement, and
(2) apply for a period of one year from the Date of Computer System Acceptance,
except as may be otherwise expressly stated in this paragraph.
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9.2 Operational warranties -- the Developer warrants that:
(1) the Custom Designed Technology will be original in design and any rights to
be granted hereunder are and will remain proprietary to Sensus and, at the date
of this agreement, there are no claims made nor actions pending or threatened
regarding the ownership of the Custom Designed Technology or rights to be
granted hereunder;
(2) the Technology has been or will be developed, installed and implemented
in a proper and workmanlike manner;
(3) the Technology will function in accordance with the Functional
Specifications and for a period of one year from the Date of Computer System
Acceptance of the Technology;
(4) the Developer has all the rights as are necessary for it to grant the
licenses for the use of the Technology as set out in paragraph 10.1;
(5) Sensus shall hold and enjoy the rights to the Technology without any
claim, interference or demand whatsoever by the Developer, its successors
or any third party;
(6) the Developer shall indemnify Sensus against all liabilities, costs and
damages including but not limited to indirect and consequential damages arising
out of Sensus' inability to possess and enjoy the license as set out in
paragraph 9.2 (5); and
(7) the Documentation is and will continue to be accurate, complete and
reflect all changes made to the Technology.
9.3 Limitation of warranty -- The warranties provided in paragraph 9.2 do not
apply to modifications to the Technology, other than modifications made by the
Developer or its sub-contractors.
10. PROPRIETARY RIGHTS
10.1 Technology Rights
(1) The Developer hereby transfers all rights itemised in Paragraph 3, subject
to receiving the 25,000 Sensus shares, and agrees that the rights granted shall
be the exclusive rights granted for the use of the Technology.
(2) This License authorises Sensus and Sensus' Affiliates to use the
Technology in such applications as they may desire:
(a) to copy the Technology and Documentation in support of the use of
the Technology;
(b) to modify or alter the Technology and to merge it into other
systems or software as necessary to maximise the use of the
Technology and to adjust for changing business conditions; and
to use, copy, modify and enhance the Technology using the Source Materials.
(3) Sensus is entitled to make use of the Technology for Sensus' and Sensus'
Affiliates' administrative,
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accounting and management purposes, without any restrictions.
(4) This Technology is not CPU or machine dependent and may be freely
transferred by Sensus by any other class or category of compatible Hardware,
without additional payment or charge therefor to the Developer.
(5) The provisions of this paragraph 10 shall apply to all Custom Developed
Technology, and Enhancements.
10.2 Patent and copyright indemnity -- The Developer will defend at its own
expense any suit or proceedings brought against Sensus based on a claim that any
equipment or software product constitutes an infringement of any patent or
copyright anywhere in the world, provided that the Developer is notified
promptly in writing and given full and complete authority, information and
assistance from Sensus for the defence of same. If the foregoing provision is
complied with, the Developer will pay damages and costs awarded against Sensus,
but the Developer will not be responsible for any compromise made without its
consent. If such equipment or software product is held to constitute
infringement and its use is enjoined the Developer may, at its election and
expense, obtain for Sensus the right to continue using such equipment or
software product, modify the same so that it is not infringing, or remove the
same and grant Sensus a credit therefore. the Developer will not be liable to
Sensus if any infringement claim is based upon the interconnection or use of
such equipment or software product in combination with equipment, software
products or other devices not made by the Developer use in any matter for which
such equipment or software product was not designed.
10.3 Survival -- Paragraph 10.2 shall survive termination of this agreement.
11. TRAINING
11.1 Training schedule -- the Developer shall provide the Training services set
out in the Implementation Plan to be developed by the Parties. The Training
Schedule shall consist of separate and distinct pre-Installation and
post-Installation programs.
11.2 Commencement of training -- Training shall commence from the date of upon
which the AOI Network is operational to such extent as would allow commencing
the Training activities set out in the Training Schedule.
11.3 Experienced trainers -- All Training will be conducted by experienced
personnel of the Developer and the presentations will be adjusted, where
possible, to the general level of knowledge and experience of Sensus staff.
12. CONFIDENTIALITY
12.1 Definition
(1) "Confidential Material of Sensus" means:
(a) any information of a proprietary or confidential nature,
including but not limited to financial and business information
relating to Sensus or any Sensus customers which are communicated
to the Developer at any time;
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(b) any business systems, methodologies or computer programs of
Sensus of which the Developer may acquire knowledge in connection
with or while performing its obligations under this agreement,
and
(c) any other information or data received by the Developer from
Sensus that is identified as proprietary or confidential.
(2) "Confidential Material of the Developer" means the Developer portion of
the Technology, Documentation and Source Materials.
12.2 Confidentiality obligations
(1) Sensus acknowledges that the Confidential Material of the Developer is
confidential and constitutes a valuable asset of the Developer. The Developer
acknowledges that the Confidential Material of Sensus is confidential and
constitutes a valuable asset of Sensus. Unless otherwise provided under this
agreement, Sensus and the Developer shall:
(a) treat the Confidential Material of the other as confidential;
(b) exercise at least the same degree of care and discretion with
respect to the Confidential Material of the other as it exercises
in protecting its own Confidential Material;
(c) take all necessary steps including but not limited to instruction
of employees and agents of the Developer and Sensus to ensure
that the confidentiality of the Confidential Material of the
other is maintained;
(d) not disclose, publish, display or otherwise make available to
other persons any of the Confidential Material of the other, or
copies thereof; and
(e) not duplicate, copy or reproduce any of the Confidential Material
of the other without the prior written consent of the other.
(2) This paragraph 12.2 does not apply to:
(a) information that is in the public domain or enters the public
domain through no breach of confidence by Sensus or by the
Developer;
(b) information that is available to one Party from some source other
than the other Party without a breach of confidence with the
other Party;
(c) general computer technology, ideas, concepts or tools;
(d) information which has been provided in the first instance to
someone other than Sensus or the Developer; and
(e) any disclosure as may be required to be made by a court of
competent jurisdiction.
13. REMEDIES
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13.1 Remedies
(1) Should the Technology fail to meet or exceed the criteria as set out in the
Functional Specifications within the Implementation Period, then at Sensus'
option, and without prejudice to any of Sensus' rights under this agreement or
at law or in equity, Sensus shall be entitled terminate this agreement and
employ its own contractors to complete the work required to allow the Technology
to meet the Functional Specifications. In such case Sensus shall be required to
pay the Developer for its costs incurred to the date of termination but shall be
entitled to deduct therefrom, the added expenses it had to incur over and above
that which it would have incurred had the Developer completed the Technology.
(2) If the Developer is delayed by more than ten Business Days in its
performance of any activity which is specified for completion by a Performance
Date or any extension thereof agreed to by Sensus, then in the absence of Sensus
having agreed to any further extension, Sensus may, upon notice in writing to
the Developer, terminate this agreement and thereupon the provisions of
paragraph 13 shall apply.
(3) If the Developer is unable to correct any deficiency under any of paragraph
7 within the applicable Cure Period, then in addition to any other remedy
available to Sensus under this agreement or otherwise available at law or in
equity, Sensus shall have the right to terminate this agreement and correct
itself or to arrange with someone else to correct any deficiencies, at the
Developer's cost and expense.
(4) The remedies of Sensus herein or elsewhere in this agreement are neither
exclusive nor mutually exclusive for breaches of other terms and conditions of
this agreement or shall any delay or failure of Sensus to exercise any right or
remedy available to it in respect of other breaches operate as a waiver thereof,
except where specifically provided to the contrary.
(5) If Sensus terminates this agreement as a result of the Developer's default
it will, without charge, afford Sensus perpetual use of such components of the
Technology as Sensus shall determine.
13.2 Refund -- Upon rejection by Sensus of the Technology pursuant to paragraph
7, or upon termination of this agreement pursuant as a result of the Developer's
default, the Developer shall provide a refund, to Sensus, of the additional
expenses Sensus has had to incur to ensure the Technology meets the Functional
Specifications.
13.3 Obligations on termination -- Any termination of this agreement by Sensus
pursuant to any of the provisions of this agreement shall result in:
(1) Subject to the provisions of paragraph 13.1, the termination of all
agreements for Technology Support Services. The Developer agrees to indemnify
Sensus against all claims, actions or proceedings that may be made or taken
against Sensus by any person in connection with the said licenses, subcontracts,
and agreements; and
(2) The Developer's obligation to deliver to Sensus all Sensus copies of all
available working papers, and all computer programs, documentation, files and
output then in the possession of the Developer relating to the Technology.
13.4 Developer default -- In the event of a breach of this agreement by the
Developer, Sensus shall be entitled to resort to any remedy or remedies
available at law or in equity or any combination of remedies as Sensus may in
its discretion determine. No delay or failure of Sensus to exercise any right or
remedy will operate as a waiver thereof, except where specifically provided to
the contrary. Sensus shall have the right
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to terminate this agreement on written notice to the Developer if the
Developer breaches any provision of this agreement and fails to remedy
the breach within thirty (30) days after receipt of written notice from
Sensus.
13.5 Customer Default - If Sensus fails to make any payment when due and such
non-payment shall continue for a period of ten (10) days after notice of default
in payment is sent to Sensus, the license to use the Technology shall thereupon
terminate, and Sensus shall thereafter have no right to use the Technology or
any components thereof. In such event, Sensus shall thereupon be required to:
(1) delete from its Hardware, all copies of the Technology;
(2) return all copies of the Documentation to the Developer.
13.6 Referral of disputes to referee
(1) The Parties acknowledge that for the purposes of amicable resolution of any
dispute which may occur between the Parties relating to the interpretation and
implementation of any of the provisions of this agreement, it will be in the
best interests of the Parties to first refer such dispute for determination to
an informal referee. The Parties agree that the purpose of such reference is for
the economical and expedient resolution of the dispute and that it shall not be
in the nature of arbitration as contemplated by the Arbitration Act, R.S.A.
1990, and that the decision of the referee shall not be binding upon the Parties
but shall be considered as a bona fide attempt by the referee to judiciously
resolve the matter in dispute. In the pursuance thereof the Parties further
agree that either Party may compel the attendance of the other Party before a
referee by serving the other Party with notice of such intention which notice
shall contain the proposed time and location of the reference and a list of at
least three and not more than five proposed referees.
(2) Upon receipt of the said notice, the notified Party shall within five
Business Days following receipt select one of the proposed individuals as the
referee. In the event that it should fail to do so within five Business Days of
receiving such notice, the compelling Party shall be free to select the referee
of its choice from the same list. The referee shall be required to proceed to
hear and to referee the matter and shall, within the next ensuing ten Business
Days or so soon thereafter as may be practical, render his decision in writing.
(3) The compelling Party shall act reasonably in designating the three to five
proposed referees and shall in such designation be guided by considerations such
as impartiality, industry knowledge, expertise and experience.
(4) The cost of such reference, as determined by the referee, shall be
borne equally between the Parties.
13.7 Backup and disaster availability -- In the event that any item of Hardware
upon which there is a Technology dependency becomes non-operational at any time
for a period of time sufficient to require the use by Sensus of another computer
facility in order to maintain business operations, or if any item of Hardware
for any reason becomes permanently non-operational, the Developer shall:
(1) use reasonable efforts to promptly provide computer processing time on a
fully compatible system which is the property of the Developer, if available at
mutually agreed to prices, or
(2) at the request of Sensus, actively participate in the arrangements for the
rental of computer time from another the Developer customer with substantially
compatible Hardware.
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14
14. GENERAL
14.1 Order of interpretation -- In the event of any dispute relating to the
terms and conditions of this agreement, or the interpretation of this agreement
in relation to the obligations of the Parties, or any other matter or thing
relating to the Technology, the Functional Specifications and the Integrated
Network Configuration, the following shall govern the order of interpretation:
(1) this Head Agreement;
(2) the Business Plan, then
(3) any other component of this agreement.
14.2 Notices -- Any notice, direction or other instrument required or permitted
to be given hereunder shall be in writing and may be given by mailing the same
postage prepaid or delivering the same addressed to the following addresses:
Developer
Sensus
Any notice, direction or other instrument aforesaid if delivered shall be deemed
to have been given or made on the date on which it was delivered or if mailed
shall be deemed to have been given or made on the fifth (5th) business day
following the day on which it was mailed. Any party hereto may change its
address for service of notice by giving notice in writing to the other parties
hereto as above provided.
14.3. Time Of The Essence -- Time shall be of the essence in relation to
interpretation of this Agreement.
14.4 Laws -- This Agreement shall be governed by and construed and enforced in
accordance with the laws of the Province of Alberta.
14.5 Successors -- All the terms, covenants, representations, warranties and
conditions of this Agreement shall be binding upon, and enure to the benefit of
and be enforceable by the parties hereto and their respective administrators,
successors or assigns. This Agreement and the rights and obligations hereunder
shall not be assignable by Sensus without the prior written consent of the
Developer.
14.6 Amendments -- This Agreement may be amended, modified, superseded or
cancelled, and any of the terms, covenants, agreements, representations,
warranties or conditions hereof may be waived, only by a written instrument
executed by all parties or in the case of a waiver by the party or parties
waiving compliance.
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15
14.7 Waiver -- The failure of any party at any time or times to require
performance of any provision hereof shall in no manner affect the right at a
later time to enforce the same. No waiver by any party of any condition or of
any breach of any term, covenant, agreement, representation or warranty under
this Agreement, whether by conduct or otherwise, in any one or more instances,
shall be deemed to be or construed as a further or continuing waiver of any such
condition or breach or a waiver of any other condition or of any breach of any
other term, covenant, representation or warranty under this Agreement.
14.8 Headings -- The headings contained in this Agreement are inserted for
convenience of reference only and shall not otherwise affect the meaning or
interpretation or be deemed a substantive part of this Agreement.
14.9 Severability -- If any provision of this Agreement shall hereafter be held
to be invalid or unenforceable for any reason, that provision shall be reformed
to the maximum extent permitted to preserve the parties' original intent,
failing which, it shall be severed from this Agreement with the balance of this
Agreement continuing in full force and effect. Such occurrence shall not have
the effect of rendering the provision in question invalid in any other
jurisdiction or in any other case or circumstances, or rendering invalid any
other provision contained herein to the extent that such other provisions are
not themselves actually in conflict with any applicable law.
14.10 Counterparts -- For convenience, this Agreement may be executed in several
counterparts, each of which so executed shall be deemed to be an original and
such counterparts together shall constitute but one and the same instrument.
In witness whereof the parties have executed this agreement with effect the date
and year first above written.
SENSUS CAPITAL CORP.
Per: /s/ (signature illegible)
ALLTEAM ONLINE INC.
Per: /s/ (signature illegible)
16
SCHEDULE "A"
BUSINESS PLAN
17
ALLTeam Online, Inc. (AOI)
An online media company to bring out the star in all of us.
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TABLE OF CONTENTS
Executive Summary
Mission Statement
1. Business Definition
2. Market Definition
2.1 Internet Industry & Growth
2.2 E-Commerce Industry & Growth
2.3 Streaming Media - What is it and how will it grow?
2.4 HighlightReel.com - A User Profile
2.5 Encoding for Streaming Media - A Revenue Opportunity
2.6 Business & Market Assumptions
3. Programming
3.1 Content
3.1.1 HighlightReel.com Site Structure & Functionality
3.1.2 User Incentives
3.1.3 Other Content Offerings & Services
3.2 Content Partnerships
3.3 Community Service & Relations
3.4 Premium Content Store
3.5 Data Acquisition - A Streaming Media Encoding Partnership
3.6 Future Market Development
4. Revenue Model Summary
5. Market & Distribution
5.1 Image & Positioning
5.2 Strategic Distribution Partnerships
5.3 Affiliate Program
5.4 Direct Marketing
5.5 Advertising
6. Operations
6.1 Corporate Finance
6.2 Organization
6.3 Principals
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6.4 Other Key Hires
6.5 Contracted Services
6.6 Directors
7. Major Cost Items
8. Risks
9. Competition
10. Critical Keys to Success
11. Second Stage Content Channels & Businesses
12. Financials
13. Appendices
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EXECUTIVE SUMMARY - ALLTEAM ONLINE, INC.
Online content and new media development is an exciting and wide open industry
made possible by the emerging acceptance of the Internet as the mass-market
communications and information medium of the 90's and the coming 21st Century.
ALLTeam Online, Inc. (AOI) is a Seattle based online and Internet media &
commerce company that will be the most recognized network of niche Internet
portal sites and WebTV/set top channels utilizing streaming media to present
original, copyright-free, entertainment content in multiple categories including
sports, film and comedy. This collection of sites and channels will become the
AOI Network.
AOI's objective is to build a scalable, easily replicated platform from which
the innovative and entertaining theme sites and communities can be developed and
introduced on the Worldwide Web. AOI will launch its first branded property from
its family of sites known as HighlightReel.com. This property will become an
online mecca for athletes and sports enthusiasts of all ages that are
entertaining, interactive, and fun. In simple terms, HighlightReel.com users are
asked to submit their very own sports highlights captured on their vide
camcorder or other video capture device. HighlightReel.com houses and hosts the
copyright-free highlights on its web site or channel arranged by sport or
activity and state/province so that any family member, friend or fan can access
it via a regular Internet connection to the Worldwide Web. Regular corporate
sponsored promotions will take place at the site where highlights are judged by
the audience and winners are awarded great prizes, merchandise and scholarships
to academic institutions. One might say it's like the online "StarSearch" of the
90's. The spirit of competition, desire to be seen, show off your talents and
winning valuable prizes and awards keep participants coming back over and over.
Sports is one of the top three areas of interest for Internet users. While there
is a multitude of Internet sites catering to all aspects of professional sports
today (e.g. ESPN Sportszone, CBS Sportsline there are very few online properties
bringing non-professional athletics and sports activities together in a
compelling entertainment package. Sports played in schools or community leagues
is a strong rallying point in North American society and everyone likes to be
recognized for their achievements. HighlightReel.com will appeal to anyone's
desire to be a star and be seen literally anyone surfing the Web, now a
potential audience of 100 million plus users worldwide and growing. Through
HighlightReel.com anyone or any team can have a channel to showcase their
game-winning touchdown or buzzer-beating basket.
In the US and Canada there are over 60 million participants in amateur sporting
activities whether it be as part of school athletics, community centers and
associations or city leagues. With this large pool of potential players,
contributors and audience members already owning or able to easily access video
capture equipment and almost anyone can participate. As hosting of the
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content online is provided essentially as a free service in order to drive rapid
growth of the sites' body of content, revenues will be generated by:
o Advertising;
o Merchandising Partnerships;
o Corporate Sponsorship;
o Encoding fees (involves the specific conversion process of standard
video to "encoded" internet-ready streaming content -- a must for
broadcasting online);
o Value-added and copyrighted entertainment content sold on a per use
and perpetual license basis from the HighlightReel.com Streaming
Store;
o Production and broadcast of live and taped sports events via streaming
on the Internet.
Families with sports participants and vide camcorders represent a very
attractive demographic that advertisers and merchandisers want and parents are
very enthusiastic about their children's participation in sports and athletics
and will embrace ways to raise their child's profile and recognition. Parents
will also appreciate HighlightReel.com's association with scholarship and its
focus on offering awards that can impact children's futures. Result -- motivated
users hunger for a visibility form that is also entertaining and fun! And what
kid doesn't like to see him or herself on screen or call friends and say "check
out my personal HighlightReel.com site! AOI will be there to serve, entertain
and reward them.
The Company will benefit greatly by establishing its operations in Seattle, the
streaming media technology and content nexus led by industry giants
RealNetworks, Microsoft and Disney's Starwave. An initial key strategic
partnership has already been forged with a streaming media encoding leader and
Seattle neighbor. The greater Seattle area also offers a strong, skilled pool of
talent with experience in online streaming content development and publishing.
Further the principals have large personal contact bases of Internet and
E-commerce professionals who can be attracted to the venture as key hires or
contractors. Similarly the principals will use their extensive industry contact
bases with key management personnel at major Internet media and traffic leaders
to establish "anchor" distribution arrangements ensuring a strong audience and
user base.
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MISSION STATEMENT
"To be the recognized network of branded niche Internet portal sites and
WebTV/set-top channel leveraging streaming media technologies to showcase
original, copyright-free, entertainment content in multiple categories including
sports, film and comedy. In short an entertainment network and online community
for everyone, populated with content produced by anyone."
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1. BUSINESS DEFINITION
Online content and new media development is an exciting and wide open industry
made possible by the emerging acceptance of the Internet as the mass-market
communications and information medium of the 90's and the coming 21st Century.
ALLTeam Online, Inc. (AOI) is a Seattle-based online and Internet media &
commerce company that will be the most recognized network of niche Internet
portal sites and WebTV/set top channels utilizing streaming media to present
original, copyright-free, entertainment content in multiple categories including
sports, film and comedy. This collection of sites and channels will become the
AOI Network.
AOI's objective is to build a scalable, easily replicated platform from which
innovative and entertaining theme sites and communities can be developed and
introduced on the Worldwide Web. AOI will launch its first branded property from
its family of sites known as HighlightReel.com. This property will become an
online mecca for athletes and sports enthusiasts of all ages that is
entertaining, interactive, and fun. In simple terms, HighlightReel.com houses
and hosts the copyright-free highlights on its web site or channel arranged by
sport or activity and state/province so that any family member, friend or fan
can access it via a regular Internet connection to the Worldwide Web. Regular
corporate sponsored promotions will take place the site where highlights are
judged by the audience and winners are awarded great prizes, merchandise and
scholarships to academic institutions. One might say its like the online
"StarSearch" of the 90's. The spirit of competition, desire to be see, show off
your talents and winning valuable prizes and awards keep participants coming
back over and over.
Sports is one of the top three areas of interest for Internet users. While there
is a multitude of Internet sites catering to all aspects of professional sports
today (e.g. ESPN Sportszone, CBS Sportsline) there are very few online
properties bringing non-professional athletics and sports activities together in
a compelling entertainment package. Sports played in schools or community
leagues is a strong rallying point in North American society and everyone likes
to be recognized for their achievements. HighlightReel.com will appeal to
anyone's desire to be a star and be seen by literally anyone surfing the Web,
now a potential audience of 100 million plus users worldwide and growing.
Through HighlightReel.com anyone or any team can have a channel to showcase
their game-winning touchdown or buzzer-beating basket.
In the US and Canada there are over 60 million participants in amateur sporting
activities whether it be as part of school athletics, community centers and
associations or city leagues. With this large pool of potential players,
contributors and audience members already owning or able to easily access video
capture equipment almost anyone can participate. As hosting of the content
online is provided essentially as a free service in order to drive rapid growth
of the sites body of content, revenues will be generated by:
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24
o Advertising;
o Merchandising;
o Corporate Sponsorship;
o Encoding fees (involves the specific conversion process of standard
video to "encoded" Internet-ready streaming content - a must for
broadcasting online);
o Value-added and copyrighted entertainment content sold on a per use
and perpetual license basis from the HighlightReel.com Streaming
Store;
o Production and broadcast of live and taped sports events via streaming
on the Internet.
Families with sports participants and video camcorders represent a very
attractive demographic that advertisers and merchandisers want and parents are
very enthusiastic about their children's participation in sports and athletics
and will embrace ways to raise their children's profile and recognition. Parents
will also appreciate HighlightReel.com's association with scholarship and its
focus on offering awards that can impact children's futures. Result - motivated
users hungry for a visibility form that is also entertaining and fun! And what
kid doesn't like to see him or herself on screen or call friends and say "check
out my personal HighlightReel.com site?! AOI will be there to serve, entertain
and reward them.
2. MARKET DEFINITION
The growth and future of the Internet as a medium of mass communication,
information and entertainment is no longer a matter of speculation as it was in
1994 or 95, but a self-evident reality. As network bandwidth pipelines expend
and increase speed to keep pace with market and technology demands a wider range
of compelling content will not only be available but home consumers will be
equipped to receive and enjoy in very high quality. Sure the big media players
like Time Warner and Disney will be there producing excellent mainstream
entertainment like they always have but independent new media companies like AOI
will fill the niches. And these niches will represent the majority of all
content available on the Internet making AOI an exciting opportunity.
Let's review some basic yardsticks of Internet growth, usage, commercial
activity and multimedia content development to understand the scale of the
opportunity:
2.1 INTERNET INDUSTRY & GROWTH
o Fewer than 40 million worldwide were connected to the Internet in 1996.
By the end of 1997, more than 100 million people were using the
Internet. Some experts believe that one billion people may be connected
by 2005.
- US Dept. of Commerce, "The Emerging Digital Economy". 4/98
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o As of the 12/96, about 627,000 Internet domain names had been
registered. By the end of 1997, the number domain names more than
doubled to reach 1.5 million.
- US Dept. of Commerce, the "Emerging Digital Economy". 4/98
o Traffic on the Internet has been doubling every 100 days.
- US Dept. of Commerce, "The Emerging Digital Economy". 4/98
o More than 58 million adults in the US & Canada use the Internet
representing 45% of the potential market.
- CommerceNet & Nielsen Media Research, 5/98
o Nearly 45 million PCs in the US access the Internet regularly, a 43%
increase from 1st quarter of 97 to 1st quarter 98.
- Ziff-Davis, 5/27/98
o The number of PCs that use the Internet has grown more than 140% in
the past two years, from 18.6 million in 1/98 to 45 million in 1/98.
- Ziff-Davis, 5/27/98
o "About one in three workplace PCs access the Internet, and nearly one
in tow home PCs does the same. In just two years, the Internet has
become a home PC mainstay.
- Ziff-Davis, 5/27/98
o "The average Internet PC was connected to the net 4.5 hours a week
therefore Internet "eye-ball hours" increased some 80% in the last
year. It's no wonder that more and more companies are looking to the
Internet as an advertising medium to reach their customers. What other
medium grew 80% in the past year?"
- Ziff-Davis, 5/27/98
o Online traffic momentum based on web page views grew 430% in the past
year at Excite.com
- Excite, Inc., 2/9/98
o Ad spending grew on average 27% in one quarter (Q3-Q4 97) at the four
largest search engines/web portals (Excite, Yahoo, Lycos, Infoseek).
- Excite, Inc., 2/9/98
o Total Internet ad spending was $907 million in 1997. It is projected
to top $1.4 billion in 1998, an increase of 55%.
- Internet Advertising Bureau, 6/98
o Sports sites overall were winners in June, 98 in terms of total
traffic and visitors.
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- June Web Report, Relevant Knowledge. 6/98
o Venture Capitalists provided $12 billion to hundreds of IT start-ups in
1996 and 1997.
- US Dept. of Commerce, "The Emerging Digital Economy", 4/98
o Venture Capitalists poured a record $567 million into Internet
start-ups Q2 1997 and another $460 million in Q1 1998. Michael Moritz
of Silicon Valley's Sequoia Capital says "I don't think we have yet
seen even 10% of all the interesting new ideas related to the emergence
of the Internet".
- Wired Technology News, 7/15/98
2.1 E-COMMERCE INDUSTRY & GROWTH
Here are some facts that point to the emergence, growth entrenchment of commerce
and retailing online:
o By 2002, the Internet may be used for more than $300 billion worth of
commerce between businesses.
- US Dept. of Commerce, "The Emerging Digital Economy". 4/98
o A total of 10 million PCs used the Internet to shop for e-purchases in
1997.
- Ziff-Davis, 5/27/98
o Internet users are split 55.8% males, 44.2% females with median
household income at $55,740 who will spend $360/yr just on Internet
access in 2001.
- Forrester Research, Inc., 12/97
o Today it's mass-market book titles (that are selling new), reflecting
the mainstream consumers now on-line.
- Forrester Research, Inc. 12/97
o Today's online shoppers are satisfied and ready for more. They are
hooked on the convenience of this new experience.
- Forrester Research, Inc., 12/97
o During the next five years, the market will quadruple in size to 43
million on-line shoppers, slightly less than 50% of the on-line
audience.
- Forrester Research, Inc., 12/97
o By 2000, web households will purchase on-line an average of ten times
per month.
- Excite, Inc., 2/98
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o In 1996, Amazon.com, the first Internet bookstore, recorded sales
of less than $16 million. In 1997 it sold $148 million in books to
Internet customers.
- US Dept. of Commerce, "The Emerging Digital Economy", 4/98
o In January 1997, Dell Computers was selling less than $1 million of
computers per day online. During the December 97 holiday period Dell
reported reaching $6 million in daily sales several times.
- US Dept. of Commerce, "The Emerging Digital Economy", 4/98
o Categories leading ad spending during Q1 98 were computing (27%),
consumer products (25%), telecom (14%), financial services (13%) and
new media (10%). Banner advertisements continue to dominate spending at
55% with sponsorships making up 40%.
- Internet Advertising Bureau, 6/98
o Use of the Internet and online services by the American public is
reducing the time devoted to other prominent daily activities such as
watching TV, exercise and reading. 64% of Internet users report the use
of the Internet has reduced the amount of time they spend watching TV
or using a VCR.
- Strategies Group Internet User Trends Report, 6/98
o Total Internet spending by businesses and consumers will increase to
$500 billion worldwide in 2002.
- IDC White Paper, 6/98
2.3 STREAMING MEDIA - WHAT IS IT AND HOW WILL GROW?
As recently as 1995 the prospect of listening to high quality audio or watching
passable video over the Internet was limited to discussions at cocktail parties.
With the great majority of Internet users still suffering through online
sessions at modem speeds of 14.4 kps, or maybe 28.8 kps, a real opportunity to
develop a solution to "stream" audio and video within existing bandwidth
constraints arose. While a variety of innovators jumped into the fray it was
RealNetworks of Seattle that developed a technology, the RealPlayer, which at
the end of 1997 had over 20 million unique users. Further RealNetworks'
RealSystem and servers are now used to deliver content on more than 85% of all
streaming media enabled web pages. Microsoft also waded into the streaming
technology market and invested in RealNetworks, licensed its technology and
released its own streaming media platform, Netshow. Seattle is now the worldwide
streaming technology nexus and the home to a burgeoning number of online content
developers and media companies leveraging these streaming technologies.
What's the impact of high quality streaming? In the 4th quarter of 1997 alone,
total web pages containing streaming media doubled. Every week 145,000
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hours of sports, music, news and entertainment are broadcast over the Internet.
For broadcasters like Seattle's Starwave (recently purchased by Disney) who
produces ESPN Sportszone, CNN and Playbill Online, live and on-demand streaming
programming is one its most popular features. What sites like Starwave have
found is that by enhancing the experience with streaming media they INCREASE
TRAFFIC, KEEP VISITORS COMING BACK AND STAYING LONGER WHILE GENERATING MORE
SALES. Unlike text and pictures the Internet comes alive with streaming media
and can deliver on its potential to become a mass medium comparable on scope
with TV and radio.
Streaming media enhances and expands the quality and scope of offerings for
online content producers, broadcasters, advertisers and merchandisers. As
Streaming takes greater hold it is expected to increase consumer demand by
greatly improving the users' experience, and accelerate a shift in advertising
revenues away from traditional media to the Internet. In fact Forrester Research
predicts that advertising revenues from online content businesses will grow to
$8.5 billion by 2201 or 5% of all ad spending valued at $175 billion in 1996.
But while streaming will be a catalyst to many facets of online growth it
requires help from bandwidth providers to fulfill its promise - and there is
good news! Standard Internet access via 28.8 kps or 56k modems puts limitations
on streaming quality and the race is on from a host of telecommunications
players to lay the infrastructure and offerings for the next generation of high
speed Internet gateways. Whether it be DSL technologies from major telcos like
GT, cable modems from consortiums like AT&T/TCI?@Home or wireless, satellite or
even electric utilities, high speed access will be available throughout North
America shortly. Once these service offerings, ranging up to 10 Mps, are
embraced by bandwidth hungry consumers opportunities for content providers to
deliver superior products will be countless. When bandwidth is coupled with
ever-improving streaming technologies we expect more and more people will want
to put their own audio and video clips online. AOI will be ready to maximize
this opportunity.
2.4 HIGHLIGHTREEL.COM - A USER PROFILE
It is worth noting some online user dynamics recently identified by Forrester
Research. HIGHLIGHTREEL.COM will appeal to a huge user base including online
segments Forrester calls "Neo-hearthminders", who are families with kids and
multimedia starved, entertainment-oriented "Mouse Potatoes". These segments
currently cover 43.3 million people in the US, of which only 45% are currently
on the Internet today.
It is this piece of the Internet usage market that we believe will be most
affected by the emergence and growth of the TV set-top box access roll-out.
Notably Microsoft acquired WebTV in 1997 based on its belief that a great number
of new users who may not be power computer users would readily adopt the
Internet
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through their televisions. America Online has also announced the launch of its
"AOL Anywhere" service which target new and existing users who will access the
Internet through new devices including screen phones, handheld PCs and
especially the TV. It is particularly the "Neo-hearthminders" with children that
will seriously consider Internet access through what may be more convenient or
familiar devices and the bulk of WebTV/set-top access services will be directed
at them. This is an opportunity for AOI in that we will position
HighlightReel.com to appeal to this market by creating entertaining web
properties as well as targeted WebTV/set-top "channels". A speedy build-out by
AOI will allow it to ride this growth curve.
HIGHLIGHTREEL.COM'S potential user base can be segmented into a variety of
groups:
Players: HIGHLIGHTREEL.COM'S participants or "Players" (highlight subjects)
represent a huge and diverse group including k-12 kids participating in school
or community sports, university and college student-athletes and adults in city,
community or corporate leagues. These groups participate in a huge range of
activities in sports and athletics and represents 60 million individuals in
North America. Many would enjoy, and be entertained, by the exposure
HIGHLIGHTREEL.COM offers them. They will also be able to compare their talents
with other players in their age group or league and continue friendly
competition and sportsmanship online.
Behaviour Trait - "They want to be stars, or at least have a shot".
Capture-Meisters: This sub-set as all those with video capture equipment like
camcorder who will be seeking the best highlight or shot of their child, student
or school pal. It is in this group's hands not only to get best highlight but
also capture it with the highest level of quality, skill and clarity. Parents,
coaches and team mates are the artists in this group. With video camcorders
already a staple household appliance entry costs are low and the ability to
capture and broadcast a large body of highlight content from a multitude of
contributors is viable. Another encouraging trend is that digital camcorders are
the fastest growing segment of the home movie market and are expected to reach
$2.7 billion is sales in 1998 and 50% of all camcorders sales by 2002.
Behaviour Trait - "They want to ensure their Players get their shot and are
recognized for their efforts", or "consider themselves damn good directors".
Family, Friends, & Fans (F3's): This is highly a motivated audience group for
HIGHLIGHTREEL.COM as they are closely associated with participants and are keen
to follow their progress and see how they stack up. They are also often spread
out geographically and viewing video of loved ones on the Internet is much more
convenient and immediate than mailing around a bunch of VHS tapes. Give this
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group new highlights of their favorite star and they will return over and over
again.
Behaviour Trait - Very nurturing and territorial - "Jimmy next door is on that
site so Johnny Jr. should be too" or "Let's check out that Granddaughter's
latest soccer goal highlight".
Recruiters: While this may be a smaller user sub-set it is a very motivated one.
By viewing highlights at our site Recruiters from colleges or junior hockey for
example may find a diamond in the rough. Another proposed AOI property will be
introduced later to leverage this group. At CentralScouting.com highlights will
be archived by age, sport and state/province on a release basis so that
registered coaches and recruiters may review highlights of potential talent
moving up to the next level and make contact with them.
Behaviour Trait - "That kid up in Maine was phenomenal but have you checked out
that winger from Boston? Wow!!"
2.5 ENCODING FOR STREAMING MEDIA -- A REVENUE OPPORTUNITY
HIGHLIGHTREEL.COM can host highlight clips in a superior destination site but
there is a critical step in highlight clip preparation prior to presenting audio
and video on the Internet as streaming media. Every audio and video transmission
over the Internet requires compression and conversion from the original
recording or production format. This is called "encoding" and it is required
for all video recording formats from traditional VHS or Beta formats to the many
new digital formats including QuickTime, Microsoft NetShow or RealNetworks
RealVideo. Beyond the actual conversion process a skilled encoder can also
enhance the original content quality with a variety of techniques and use of
state of the art digital encoding equipment.
It is possible for home users to purchase encoding equipment and software
required to publish their video and audio content on the Internet. However the
cost is high and the time required to master the skill is considerable. It's the
perfect process for an "as-needed" service business rather than making an
investment in rapidly changing technologies and "moving target" standards. In
many respects it's like "FotoMat" for the Internet where your original audio and
video is "developed" for streaming onto the Internet. It is AOI'S assessment
that a strategic partnership with a market leader providing optimized encoding
services is crucial both in terms of offering a comprehensive package for our
users and establishing a predictable, ongoing revenue stream. A partnership with
a qualified firm has been secured and will be discussed in Section 4.
2.6 BUSINESS & MARKET ASSUMPTIONS
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o HIGHLIGHTREEL.COM can be successfully positioned and marketed as the
"COOL" site for players and teams to showcase their highlight clips and
let their friends, family and fans follow their sports journeys and
endeavors;
o Players, teams and coaches are motivated by the pursuit of recognition
of their achievements to the extent they will capture, submit, encode
and publish their highlights at HIGHLIGHTREEL.COM;
o Players will be further motivated to play by the potential of winning
exciting prizes, like sports equipment from top manufacturers, and
athletic and academic scholarships at top institutions;
o University and college-level athletic recruiters will value a large
archive and clearinghouse for player highlights as a resource for
identifying up and coming talent;
o Advertisers and merchandisers will value the site's large and diverse
user group projected to be over 90 million in North America. As the
Player group includes the "hard to crack" teen demographic advertisers
and merchandisers will actively attempt to establish long term brand
loyalties at the site;
o Compelling sponsorship products will entice corporations to associate
and partner with HIGHLIGHTREEL.COM for visibility, brand-building and
will actively participate in the provision of valuable merchandise and
prizes and underwrite coveted scholarships at academic institutions;
o Leaders in online content, media and access will wish to license or
share ad revenues in exchange for use of HIGHLIGHTREEL.COM branded
content. These partnerships will also be integral for increasing
visibility of the site, entrenching brand awareness and driving high
player participation;
o Other strategic partnerships and associations with organizations such
as DARE, the NCAS, Net Nanny or Pop Warner, will enhance
HIGHLIGHTREEL.COM'S credibility and standing with its main users and
constituents;
o A HIGHLIGHTREEL.COM interface and we site with easy to use templates
and formatting can be created with off-the-shelf tools and relatively
little development and creative time and cost;
o A variety of outsourced providers can be contracted as alternatives to
building systems in-house such as Web servers and hosting, data
warehousing, bandwidth management etc.;
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o Hosting highlight clips free will quickly populate the site with
content and audience. Encoding services can be offered at price points
appealing to the user while maintaining margins for the service
supplier-partners and revenue shares for AOI.
3. PROGRAMMING
AOI will become an online partner synonymous with entertaining users who are the
authors of their own fun. By giving our Players a simple to use online channel
where their sports highlights are available for viewing by a worldwide audience
24 hours a day we offer anyone a chance to be a star. AOI has secured the
following Internet web site domain names which will form the family of
properties to be built-out and leveraged:
HIGHLIGHTREEL.COM STUDENTATHLETE.NET
HIGHLIGHTPACKAGE.COM CENTRALSCOUTING.COM
LEAGUEZONE.COM ATHLETICSCHOLARSHIP.COM
STUDENTATHLETE.COM
Initially HIGHLIGHTREEL.COM will be the charter property to be developed by AOI.
Here is how we propose to do it.
3.1 CONTENT
In the simplest terms HIGHLIGHTREEL.COM will leverage its user base to populate
itself with content by hosting and broadcasting highlight clips submitted by
Players and Capture-Meisters. This methodology will also give rise to a loyal
audience of F3's who are pulled to HIGHLIGHTREEL.COM to view each Player
highlight clip. A further benefit is that the majority of content for the site
will be acquired at virtually no cost. Players will be incented to participate
and submit view clips on a repeat basis through a series of monthly and annual
competitions to select the best highlights. Winners will be awarded with a
variety of valuable prizes and scholarships to academic institutions of their
choice. AOI feels very strongly about the positive relationship between
athletics and scholarship and believes this focus will be viewed very positively
by Players, F3's and indeed all site visitors.
3.1.1. HIGHLIGHTREEL.COM SITE STRUCTURE AND FUNCTIONALITY
Player highlight clip submissions of up to 3 minutes will be accepted from any
state or province in the US or Canada and hosted absolutely free of charge
(Encoding for streaming media will be offered for a fee and is detailed in 3.4).
This site will be arranged into an easy to navigate and browse graphical
interface so site visitors will be able to find what they want quickly.
Generally speaking the interface and highlight clip archive will be segmented
and organized by:
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- Gender;
- Sport of activity;
- Age Groups (3) (Child - p to 12, Teen - 13 - 18, Adult).
This site will not distinguish between levels of athletics eg. Varsity, JV,
Intramurals, etc., but will accept and judge clips on their level of skill,
endeavor and even uniqueness.
Once a highlight clip has been received by the site it will be assigned a
specific URL and posted to the main site index. The Player and/or person making
the clip submission will be notified by e-mail of the URL. As part of the free
hosting service the site will also as the user if he or she would like
HIGHLIGHTREEL.COM to notify any others about the URL which it will do if
supplied with the addresses. Basic Player profiles will be requested but due to
sensitivity regarding minors' personal information only data supplied will be
posted. Completely confidential clips without Player profiles are acceptable but
unpublished registration information is mandatory. At the time of writing the
highlight clips will be hosted at HIGHLIGHTREEL.COM for two months before they
are removed. AOI may adjust free hosting period based on the data loads and
bandwidth optimization as the quantity of content grows.
It should be noted that once users have a URL for a particular clip they also
require a "viewer", or software to enjoy this or any other clips hosted at the
site or anywhere on the Internet. Already 20 million Internet users have
versions of REALNETWORK'S, "REALPLAYER" or MICROSOFT'S NETSHOW so the ability to
view clips is already firmly entrenched within the computer desktop. For those
users still requiring a "viewer" a link to download free versions from multiple
courses will be offered at the site. The site will also host an educational
step-by-step streaming tutorial on how to shoot better, winning highlight clips
with tips on editing and submitting video in the proper format. The better the
quality of videos received the better the content will be at HIGHLIGHTREEL.COM.
3.1.2 USER INCENTIVES
While simply offering free hosting of highlight clips and the opportunity to be
broadcast as part of a new media "channel" may be enough incentive for many
Players to joint in at HIGHLIGHTREEL.COM we will not leave this to chance. To
keep players posting new highlights on a regular basis and to keep F3's and our
audience at large highly involved AOI has devised a valuable incentive program
for all of our constituents. The cornerstone incentives will be in-house and 3rd
party corporate sponsorship programs where the best highlight clips will be
rewarded with compelling prizes and academic/athletic scholarships. One possible
reward program is as follows:
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o Three monthly highlight clip awards, one per age category (Child,
Teen, Adult) for each major sport. Awards to be $1000 approx. in
merchandise or scholarship value;
o Three annual Grand Champion highlight awards, one per age category
for each major sport. Awards to be $10,000 approx. in merchandise or
scholarship value.
A combination of judging formats are being considered will be utilized including
in-house HIGHLIGHTREEL.COM editors, celebrity judges such as pro athletes &
coaches and an audience voting process via automated online balloting and
selection i.e. like Major League Baseball All-Star Game voting. The audience
voting format is an interesting one in terms of driving additional audience
traffic. If promoted that awards were based on highest "click-thru's (literally
how many times it was seen) we can expect that Players will ensure that everyone
they know visits their personal highlight URL to check out their latest
highlight clip. This judging process is ultimately the most democratic, least
subjective and is tied to a standard online measurement parameter that is
verifiable (multiple viewings by the same address will be excluded). These
techniques will be explored in detail.
A comprehensive sponsorship program will be created and marketed to online
advertisers and merchandisers who will want to associate their company and
products with the HIGHLIGHTREEL.COM brand its diverse usership. While the bulk
of the sponsorship fee will secure a minimum level of enhanced visibility at the
site a portion will cover the award cost commitment. Sponsorships will be priced
for varying visibility values including annual and monthly positions. A wide
range of award sponsorship packages outside the main monthly and annual
offerings are possible. There are some hypothetical examples:
Nike sponsors an ongoing, annual "anchor" feature known as the
"HIGHLIGHTREEL.COM GRAND CHAMPIONSHIPS" involving high visibility and placement
and contribution of $30,000 for three major awards. Tie-ins with complementary
TV and in-store advertising programs run by Nike are possible;
Rawlings sponsors "Golden Glove Award" for defensive play in baseball for
monthly highlight clip winner during baseball season;
CompUSA sponsors a monthly award sponsorship for best football highlight and
awards a new PC package to winner;
Sony sponsor a video clinic online with a streaming tutorial including tips on
capturing better highlights and features its latest digital AV equipment
packages.
As part of general site programming regular features such as rotating viewing
buttons of top highlights archived at HIGHLIGHTREEL.COM will always be
available.
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Sponsorship packages such as "Top 10" clips of the month, "Simply the
Best" clips from all archives or "Hot out of the Can" featuring the latest
submissions will also be programmed and marketed. These will give users a
yardstick of quality to shoot for and ensure that above average content is
always a mouse click away.
Scholarship will be heavily promoted as one of the main missions of
HIGHLIGHTREEL.COM - to promote athletics as a vehicle to achieving, and as an
integral part of, academic success and growth. It is the intention of AOI to
give award winners the ability to select merchandise or a scholarship as their
prize. Scholarship funds for post-secondary institutions will be held in trust
until valid proof of enrollment is submitted by winners. An appointed trustee
(such as Ernst & Young) will be entrusted with scholarship funds and responsible
for their disbursement towards tuitions or other acceptable academic costs or
expenses. The winner is free to select which post-secondary institution the
scholarship funds will be used at. An adult winner is free to allocate
scholarship prizes toward their child or anyone of their choosing.
3.1.2. OTHER CONTENT OFFERINGS & SERVICES
In addition to its core content focus HIGHLIGHTREEL.COM will also integrate a
variety of entertaining offerings, many of which will provide additional
sponsorship opportunities:
o Develop branded "HIGHLIGHTREEL.COM" sporting events for "webcasting" to
an Internet audience such as the "HIGHLIGHTREEL.COM High School
Basketball All-Star Game" featuring seniors who submitted the best
highlights clips form the just concluded season. AOI will also seek out
opportunities to simul-webcast 3rd party produced sports events, such
as the NCAA Ice Hockey National Championship Series, and build
sponsorship vehicles around them;
o Integrate entertaining chat rooms into content that is conducive
comparison and discussions about highlight clips;
o Publish sports-related information and multimedia presentations
including coaching tips and clinics, training methods and regiments,
injury prevention and treatment;
o Merchandise a wide variety of offerings for sports equipment, team
apparel and gear, or video capture and editing equipment targeted to
HIGHLIGHTREEL.COM'S community of loyal, repeat users;
o Establish a HIGHLIGHTREEL.COM discount club with major sporting goods
merchandiser for athletes and teams;
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This site will also launch other co-branded sites and channels that branch from
HIGHLIGHTREEL.COM, offering complementary content that is of interest to our
core usership and audience. Here are two possibilities under consideration:
ATHLETIC SCHOLARSHIP.COM WILL OFFER:
o Academic development tools and information including study skills
enhancement, tutoring resources, time management, SAT preparation, goal
setting, etc.;
o Resources to assist student athletes access and win athletic and
academic scholarships by providing a clearinghouse and database of
available programs. Information concerning potential financial support
and sponsorship from sports foundations will also be available;
CENTRALSCOUTING.COM WILL OFFER:
o A special zone for athletic recruiters from university and college
institutions searching highlight archives for high school recruits.
High school players will have the opportunity to submit additional
personal information along with their highlight clip in this zone such
as statistics, profiles, GPA's, SAT's etc.
o AOI has already identified two new and innovative online services
targeted at university and college athletic departments and allowing
them to search databases of high school recruits and their profiles.
Online Scouting Network (www.osn.com) and Scout Net (www.scout-net.com)
both offer players the opportunity to post their profile and video clip
for a fee of $70 - 150. AOI has already initiated discussions with
these firms and is hopeful to establish commercial partnerships with
one or both. In this case HIGHLIGHTREEL.COM would co-brand and offer
these value-added services to its users on a revenue share basis.
3.2 CONTENT PARTNERSHIPS
In addition to the "backbone" content and services previously discussed AOI will
seek partnerships with a wide variety of organizations to supply compelling and
entertaining content targeted at our core usership. It will be AOI'S continuing
challenge to offer the most valuable content possible to its users and audience
and partnerships to secure and offer these elements are a major key to success.
Some examples may include:
o The National Coaches Association and a corporate sponsored property
such as Gillette's "You Make the Call" team up to provide content on
clinics, training and rules;
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o NCAA and its divisions such as "The Big Ten", offer content related to
qualifying for and becoming an intercollegiate athlete, and in
promoting specific institutions for college consideration;
o Previously discussed partnerships with recruitment services such as
Online Scouting Network or ScoutNet;
o Major online sports properties, like CNNSI or ESPN Sportszone offer
specific pro sports content that is complementary to HIGHLIGHTREEL.COM
in exchange for traffic. An excellent example - Sports Illustrated
Magazine print version has a well known feature known as "High School
Roundup" featuring outstanding student athletes from across the nation
each week. This could be leveraged online at HIGHLIGHTREEL.COM;
o Team up with Broadcast.com and simulcast the video portion of a
major sports event it is providing via radio webcast for eg. NCAA
Baseball Championships.
o Leverage the RealNetworks' Site Partner Program as a one of a family
sites fully embracing and extending usage of the Real streaming media
platform for content, advertising and merchandising. This will quickly
position HIGHLIGHTREEL.COM as a streaming content leader along with
other members including Wall Street Journal Interactive and Rolling
Stone Network. An outstanding opportunity presents itself for
RealNetworks to host a content area at HIGHLIGHTREEL.COM devoted to
tips for capturing and producing the best highlight clips possible.
3.3 COMMUNITY SERVICE & RELATIONS
AOI, INC. intends to develop the "HIGHLIGHTREEL.COM Foundation" to create key
relationships and initiatives which enhance and extend its profile in the
community while helping student athletes:
o Develop partnerships with "grassroots" community programs like
"D.A.R.E." and "Stay in School";
o Create a corporate sponsorship program to award coveted
"HIGHLIGHTREEL.COM Academic All American Scholarships" to academically
high achieving student-athletes;
o Partner with pro athletes who are active and visible in their
communities for promoting scholarships, athletics or community service
eg. "Stay in School", The United Way etc.
3.4 PREMIUM CONTENT STORE
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While HIGHLIGHTREEL.COM'S users and audience will return over and over to review
new highlights that they have a personal connection to our user-base also loves
professional and tier one college sports. They already have a long history of
consuming this content in television as spectators and consider it one of the
ways they would most like to spend free time.
An emerging market for premium streaming content is now taking hold along with
the ability to merchandise these products on a per view or perpetual license
basis. It is AOI'S intention to build a branded HIGHLIGHTREEL.COM STREAMING
STORE within the site where these products are merchandised and a revenue share
is paid by the content's license holder to AOI. Here are some examples:
o Sports Illustrated's "NFL Crunch Course" featuring top "hits" of the
year;
o Don Cherry of Hockey Night In Canada hosts his annual "Rockem Sockem
Hockey" Featuring the NHL's toughest hockey clips;
o NBA Final Series Review footage from NBA Licensing;
o HIGHLIGHTREEL.COM'S own branded compilation of "The Year's Best
Highlights".
It is expected that the quantity of premium digital streaming content will
increase dramatically over the next several years and AOI will aggressively seek
out the best products and offer them to its users. To increase buyer interest
and brand loyalty some very innovative "purchaser incentive" programs are being
launched online by a host of aggressive technology companies. One in particular,
NetCentives, Inc. of San Francisco, has devised a scheme allowing merchandisers
to offer online buyers major airline frequent flyer points for each purchase.
AOI will establish a variety of these programs to entrench HIGHLIGHTREEL.COM as
a destination merchandising property.
Finally it should be noted that as the site collects submissions from users it
will be in a position to build a comprehensive user database from which
merchandise offerings and advertising messages can be tightly targeted. The
tools to target on the Internet continue to improve allowing direct marketers to
build buyer histories and preference profiles. AOI will leverage these
techniques and tools at the HIGHLIGHTREEL.COM STREAMING STORE and in other
merchandising efforts to be discussed later.
3.5 DATA ACQUISITION
- A STREAMING MEDIA ENCODING PARTNERSHIP
HIGHLIGHTREEL.COM is really a content channel run by its users, who populate it
with entertaining content - their own highlight clips. For this reason it is
imperative that AOI build a highlight submission system that is both easy to use
and cost conscious, reducing barriers and allowing the largest number of
potential users to play and compete. Returning to section 2.5 there is also the
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additional step of encoding original video highlights into streaming media ready
for broadcast online. Submission and encoding must be executed flawlessly.
Rather than divert its attention from its core business of building entertaining
content sites and channels frequented by loyal users AOI has determined that a
strategic partnership with a leader and specialist is the best way to fulfill
the encoding requirements of its users. Such a firm has been identified and
discussions are now underway to position Seattle-based ENCODING.COM
(www.encoding.com) as the AOI'S streaming media encoding supply house led by
Microsoft alumnus and e-commerce visionary, Martin Tobias, ENCODING.COM was
launched in September 1997 out of the belief that streaming media online was
here to stay. The company has invested heavily in production equipment and
throughput systems to produce the clearest, sharpest sound and pictures
available. Their technologies are multi-platform both in terms of support for
all original capture formats (Beta, VHS, etc.) and streaming technologies
(RealNetworks' RealSystem.Microsoft's Netshow etc.).
At this time a fee structure for encoding is being developed. It is anticipated
that costs will be based on a maximum of three (3) minutes of encoded streaming
video at a price point of $9.95. As AOI is directing considerable traffic volume
for retail encoding to Encoding.com it will keep a pre-determined percentage of
each encoding fee. Further revenue potential lies in upselling users to higher
bit streams which are clearer and these opportunities should increase as
streaming media usage approaches critical mass on the Internet.
As part of the partnership ENCODING.COM would build a seamless interface for
HIGHLIGHTREEL.COM users to submit their video clips with registration
information via electronic file transfer (FTP) for required encoding prior to
posting the main site index and archive. For the large number of users not
capturing video with the latest digital camcorders a process of easy delivery of
actual video media such as VHS tape cartridges will be offered. A registration
form will be available at the site online for printing and inclusion with the
submitted tape. The original master will be returned to the customer for a
nominal shipping charge. To offer other submission alternatives to our users the
AOI plans to leverage ENCODING.COM'S growing number of retail outlet
relationships where physical drop off for tapes is possible. The company has
also had initial discussions with one large retailing chain for photographic
products about the potential of a partnership to accept tape submission. Chain
operations like Wal-Mart, Costco etc. are excellent prospects for this kind of
tie-up and it will be a priority to build a network of relationships to
facilitate retail drop off.
Of course the company will accept video clips from users that have already been
encoded and post them free of charge as normal. However we anticipate that the
great majority of consumers/users will not possess the required equipment and
software for high quality encoding for many years to come. Not to mention it's
just not very easy and most consumers don't have the time to fuss with
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formats, protocols and optimization tool sets. By offering users with an easy,
"one stop shop", per use cost approach that takes original video to broadcast as
painlessly as possible most HIGHLIGHTREEL.COM users will opt for our encoding
solution.
3.6 FUTURE MARKET DEVELOPMENT
For the purposes of this business concept we have confined HIGHLIGHTREEL.COM'S
activities to the North American markets of the US and Canada, where online
usage for sports entertainment is most entrenched. However this does not mean
that great opportunities do not exist in other markets where online usage is at
or approaching critical mass Australians and rabid about rugby and cricket,
British are the same about soccer as are all European markets and the Japanese
love baseball. All of these markets and many others have a variety of sports
played at multiple levels from children to adults. Once HIGHLIGHTREEL.COM has is
built-out and operating successfully at home we anticipate a wealth of
opportunities to leverage the basic platform in a host of new, ready-to-play
markets.
4. REVENUE MODEL SUMMARY
o ADVERTISING
As HIGHLIGHTREEL.COM'S usership and traffic ramps we will be in a position to
offer a wide variety of standard, animated and streaming banner advertising
opportunities to a diverse range of potential advertisers. Particularly good
advertiser prospects are sports equipment (Foot Locker), electronics/computer
(NEC Now, Sony), apparel (Gap, Levis), music (CDNow), books (Amazon.com), ticket
agencies, (TicketMaster), Travel (Preview Travel) and image seekers (Coke,
RayBan) etc. A standard rate card for national, regional and local targeting
will be developed based on a cost per thousand basis. It is the company's
intention to partner with one or more of the web media placement agencies such
as DoubleClick or 24/7 to sell its advertising positions and leverage these
firms large advertiser-client bases. Both have affinity marketing programs for
sports, family and technology sites and channels.
All efforts to leverage the highly desirable demographics of the site will be
taken while ensuring the quality of the overall presentation of the property.
This will be partially achieved by integrating streaming media banner technology
alongside HIGHLIGHTREEL.COM'S core streaming content. Studies show that
streaming ads generally produce "click-thru" rates (the percentage of served ads
actually clicked upon) twice that of standard "flat" banners. Also the ability
now exists to take existing TV advertising campaigns and move them to the
Internet with streaming media is here. Known as "webisodes" this ad tool will be
seen much more in 1999. To make the most of this opportunity the site will joint
the RealNetwork's
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"Site Partner Program" by supporting streaming ads and extending its positioning
as a true streaming media proponent and advocate.
o MERCHANDISING PARTNERSHIPS
The web has become the new arena of direct marketers who have moved online now
merchandising literally anything on the Internet. Sales numbers grow monthly and
one only need look to brands like Amazon.com, CDNow, Cyberion Outpost and Dell
to see Internet merchandising success stories. Just recently a joint study from
IDC and RelevantKnowledge now predicts online purchases will explode to $54
billion by 2002 from $4.3 billion in 1997!
Why is it working? ACCESS SELECTION, IMMEDIACY AND DELIVERY. Particularly it is
the medium's immediacy which is fully exploited when merchandising offers are
tightly integrated with content. When Elmo Dolls can be pitched in a live chat
session with Rosie O'Donnell or "Parent's Soup" baby name finder brings up
special offers for price reduced cribs you have a compelling sales tool indeed
and remember our "Neo-Hearthminders" ? According to Forrester Research this
HIGHLIGHTREEL.COM friendly segment will grab hold of online purchasing in the
next few years and push it to new heights.
Given these trends large, traditional bricks & mortar retailers like Sears and
new breed players like Cyberion Outpost are both paying big dollars for prime
positioning partnerships with top online traffic aggregators (eg. New York Times
Online) and web portals (eg. Lycos, Yahoo), Software.net recently paid AOL $21
million to be the exclusive seller of software at the online giant through 2001
and CDNow just paid MTV Online $22.5 million for a complex three-year music
retailing partnership involving TV and online promotions to name two examples.
While its market power will not compare with likes of AOL excellent
opportunities exist for AOI to leverage its audience into a wide variety of
multiple category merchandising partnerships where specific product offers are
made to HIGHLIGHTREEL.COM users. In exchange for aggregating demand and building
a compelling brand the company will structure deals that combine a monthly
minimum fee and a revenue share from products sold by the merchandiser partner
positioned at the site. AOI will also be able to offer its user database to
extend direct product offers via e-mail pushing recipients back to
HIGHLIGHTREEL.COM and its merchandiser-partner for the purchase. Product
categories that come to mind immediately are sports equipment & gear (eg. Nike,
Foot Locker), AV equipment (eg. Sony), music eg. CDNow, Music Blvd.), books (eg.
Amazon.com, Barnes & Noble) and apparel e.g. The Gap, Levis). All active online
merchandisers are looking for new sources of "eyeballs" for their online offers
and HIGHLIGHTREEL.COM intends to be one of these sought after positions.
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o CORPORATE SPONSORSHIP VEHICLES
When considering HIGHLIGHTREEL.COM's user and audience segments including
children, teens, parents, relatives, friends and fans there are promotional
opportunities for a very wide range of companies wishing to extend their
message. The company will create a range of compelling and visibility catching
sponsorship vehicles allowing sponsors to build brand awareness, introduce and
merchandise products and services and build an effective association with
HIGHLIGHTREEL.COM's entertainment-seeking audience. Here is a brief summary of
vehicles under consideration:
Award Sponsor - Annual Grand Championship or Monthly Championship positions
including contribution for scholarship and/or merchandise. Example - Reebok buys
a permanent position sponsoring the Grand Championship;
Content Feature Sponsor - regular feature spot for well-known property from
traditional media. Example - Sport Illustrated's Weekly High School Round-up;
"Best of" Highlight Sponsor - Positions to sponsor special content features such
as monthly "Top 10 Clips" or "Top Football Clip of the Year". Example - ESPN
Sportszone buys a monthly position for "Top 10 Clips";
Clinic Sponsor - Positions to sponsor special multimedia streaming clinics and
tutorials related to sports and athletic coaching clinics and educational
sessions detailing video capture how to's, editing and the do's and don'ts of
streaming media. Example - Spalding buys an annual position for basketball
coaching clinics;
Merchandising Sponsor - Special feature areas will be programmed to allow
merchandise partners to introduce and explain products with streaming ads and
build a following at HIGHLIGHTREEL.COM. Example - JVC buys a position to host
the "JVC AV Station";
HIGHLIGHTREEL.COM Streaming Store Sponsors - a number of media companies with
products stocked at the store will be approached to sponsor particular content
categories and features. A range of coop vehicles will also be developed.
Example - NFL Films heads up the stores football section;
All vehicles will be priced based on traffic, visibility and overall promotional
value.
o ENCODING FEES
As previously discussed the great majority of HIGHLIGHTREEL.COM users will not
have the ability or the inclination to encode their video highlight clips for
streaming online. Through ENCODING.COM the company will offer encoding service
at an attractive consumer price point of $9.95 for a 3 minute clip and earn
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a revenue share for each. This is an easy to establish, volume-based revenue
stream which is positioned as a requirement for participation at
HIGHLIGHTREEL.COM or for any streaming vehicle on the Internet.
In the future as users become more sophisticated and skilled at video capture
and demand more clarity we expect an opportunity to upsell higher quality
encoding processing at higher through put bit streams.
o HIGHLIGHTREEL.COM STREAMING STORE
The company will operate a branded online storefront at the site offering
premium entertainment content for streaming sold on a per use and perpetual
license basis. In addition to focusing on sports content other complementary
content products in multiple categories will be available including such diverse
subjects such as eg. Cooking with Martha Stewart, Home Renovations with Bob
Vilas etc.
o EVENT WEBCAST PRODUCTION
As the company advances its business it will actively seek out opportunities to
secure digital rights for, and develop, produce and webcast, branded live sport
events which will be compelling and entertaining for its audience. Under
consideration are events like the Pop Warner National Football Championships.
o RECRUITMENT NETWORK PARTNERSHIPS
Due to the high number of high school students expected as Players and audience
at HIGHLIGHTREEL.COM the site is an attractive demand aggregation point for
online student-athlete recruitment services. The company would receive a revenue
share from each new recruit signed up through the site.
o USER DATABASE LEVERAGING
As HIGHLIGHTREEL.COM'S usership and audience grows the company will own and
manage a large database of highly coveted online consumers that can be utilized
by a whole range of direct marketers. AOI will market this database and develop
partnership programs to share in merchandise sales directed at its loyal users.
5. MARKETING & DISTRIBUTION
5.1 IMAGE & POSITIONING
AOI'S challenge will be to position HIGHLIGHTREEL.COM with the following key
elements and messages:
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o "A place to bring out the star in everyone";
o "A sports channel by you for you";
o "Everyone gets a shot, and it's so easy";
o "Scholarship and Sports - a Great Partnership";
o "Families and Sports - another Great Partnership";
o "Interactive Programming is here - You select what you want".
To drive these points home the first steps is to push forward with an attention
catching media launch and blitz. A suitable high tech media and press relations
firm will be retained to design and execute an awareness program for the
company. The program elements will include:
o Holding a press launch event with an AV presentation demonstrating
HIGHLIGHTREEL.COM'S content offering;
o Distribute media kits to press contact database in media, technology,
sports, publishing and general categories;
o Principals to participate in press tour to interview with selected
media outlets in New York, Washington DC, Los Angeles and
San Francisco;
o Participation in a selection of Internet, streaming and interactive
publishing trade shows including hosting several media awareness events
within them;
o To drive home the positive aspects of the site build an association
through corporate sponsorship or some other means to secure a
"signature anchor" affiliation(s) with a household name professional
athlete who embodies the core values of AOI (eg. Troy Aikman, David
Robinson, Ken Griffey Jr. etc.)
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5.2 STRATEGIC DISTRIBUTION PARTNERSHIPS
The principals have considerable experience establishing strategic partnerships
for commerce and traffic generation with online leaders and will seek to build
HIGHLIGHTREEL.COM'S exposure and audience through positioning the property
within appropriate large media properties online.
A range of strategic partnership classes can be identified, sought and
implemented by the company;
o DISTRIBUTION & TRAFFIC
The Internet "Gold Rush" or "Land Grab" is on and a whole host of traditional
media organizations and youthful, Internet-bred web portals and content leaders
are fighting it out to be destination "home bases" for users online now and the
massive host still to come. Activity is so fierce that a whole new round of
acquisitions are now in play such as Disney's recent buy-out of Infoseek. It has
now become clear that the way to win or lead this battle is to offer the most
compelling, entertaining and informative content, services and tools available.
AOI will position HIGHLIGHTREEL.COM as a new content feature that online content
leaders can simply plug into their menu of offerings. Given the site's appeal to
such a wide range of ages and demographics the potential should interest a wide
variety of new media players. Here are some examples:
Excite, Yahoo, Lycos, AOL, Disney/Infoseek, MSN, Snap!Online/NBC etc.
Alternatively the best possibilities may exist with well-financed new portals
and properties, that may be late to the game as content players and are now
moving fast to extend their brand online and catch up with their full featured
programming menus. Some examples are:
Alta Vista, GeoCities, Mindspring, AT&T/TCI/@Home. USWest Internet, Go2Net, Time
new Media, Washington Post Online, BellSouth.net. etc.
In the case of the telcos and cable organizations providing their subscribers
access and bandwidth, such as AT&T and USWest, there are interesting
opportunities to demonstrate what streaming media is, and can achieve with new
high speed offerings such as cable modems and DSL. The company will seek
partnerships with this group allowing it to offer an initial hosted and encoded
clip as a promotion enclosed with monthly billing statements.
HIGHLIGHTREEL.COM is also a good fit with any sports category site or channel
such as CBS Sportsline, ESPN Sportszone and The Sporting News and these will be
explored as tie-up targets. The same can be said for family-friendly
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properties such as Net Nanny and Ziff Davis' Family PC Online due to their heavy
traffic from parents and educators.
The nature of any potential tie-up would likely involve co-branding and
licensing HIGHLIGHTREEL.COM'S content free of charge to the partner and sharing
ad revenues generated within the partner's domain. Commerce partnership deals
will also be offered to traffic partners who will be incented by receiving a
10-20% revenue share of encoding fees payable to the site. The company is also
keen to establish exciting launch promotions with its partners including
offering a first highlight clip with free hosting and encoding included.
A final note is that AOI/HIGHLIGHTREEL.COM may be an excellent acquisition
target for a wide range of online content players looking to broaden and extent
their offerings. A recent example of smallish content takeover had Go2Net
offering $36 million in stock to the popular, 2-person, Silicon Investor.
o TECHNOLOGY PROMOTION
Another tie-up possibility for the company involves promoting streaming media as
a new mainstream communications vehicle that is both accessible and easy to use.
Both RealNetworks and Microsoft will be approached on the basis of highlighting
the site as a real-world example of the power of streaming for leveraging the
Internet as an entertainment medium. Both companies have launched "Site Partner
Programs" and HIGHLIGHTREEL.COM will grow these associations to the greatest
extent possible.
o EDUCATION & COMMUNITY PARTNERSHIPS
In keeping with the value placed on athletics as a vehicle to academic
achievement the company will establish a range of affiliations that position it
within the educational community and neighbourhoods everywhere. After building
awareness and buy-in from this constituency the company will seek to promote
itself through association with organizations such as the:
o NCAA;
o NCAA Athletic Conferences;
o National & State High School Coaches Associations;
o National and State Principals Associations;
o "Stay in School Program";
o DARE etc.
5.3 AFFILIATE PROGRAM
Many web sites and online content publishers are looking for new and exciting
content to compliment their online offerings in the struggle to attract traffic
and revenue. AOI will develop an affiliate program that allows independent sites
to
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quickly build and activate a co-branded version of HIGHLIGHTREEL.COM for
presentation at their sites at no cost or obligation. Particular attention will
be given to sites devoted to streaming media development and presentation AV
merchandising, and family content players like Parent's Soup. Adult pornographic
sites will be excluded.
5.4 DIRECT MARKETING
To build awareness quickly and make a promotional offer to play the company will
execute a highly targeted direct response campaign via traditional mail and
electronic mail vehicles. This organization's target lists are suitable to
convey the HIGHLIGHTREEL.COM opportunity to their constituents.
Specific databases that may be considered include:
o K-12 Schools and Athletic Departments;
o Regional representatives for Pop Warner Football, Little League
Baseball, Minor Hockey;
o Community Centers;
o Cable, Telco and ISP subscribers;
o Web portals and major traffic properties;
o Online Merchandising Leaders.
5.5 ADVERTISING
The company is prepared to consider a range of paid advertising vehicles to
build awareness and make promotional and special offers. Family, parenting and
youth print publications are one alternative. Online advertising programs
provided through media placement companies like the DoubleClick Network and 24/7
are particularly interested based on the ability to make ad buys from a range of
affinity sites in specific categories like family, sports or technology. The
necessity or utilizing paid advertising will be determined by the success of
other visibility and distribution programs mentioned previously.
6. OPERATIONS
6.1 CORPORATE FINANCE
It is the intention of AOI to secure financing by being acquired by a listed
public vehicle which may be trading on either an exchange in the US or Canada.
Alternatively AOI may establish itself by listing as a small cap venture from
the outset. Several corporate finance groups have expressed interest in the
project and AOI is assessing proposals at this time.
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6.2 ORGANIZATION
AOI is based in Seattle, Washington and intends to further build its operations
from there once corporate financing arrangements are in place. Seattle is the
optimal location for AOI due to its focus on streaming media and entertainment.
With leaders such as RealNetworks, Microsoft and Disney's Starwave situated
locally, and its prime strategic alliance with Seattle-based Encoding.com in
place, AOI will take advantage of many benefits by growing within the world's
streaming media nexus. Modest, well-located premises with the latest Internet
connection infrastructure will be secured for the operation.
6.3 PRINCIPALS
Both principals have requisite Internet and e-commerce experience gained in
online technology ventures dating back to 1994, including management positions
in marketing, business development, software and product licensing and corporate
finance.
GRAHAM HEAL (37), CEO & PRESIDENT
Graham Heal has online industry experience dating back to 1994 when he was a
founding member of Net Nanny Software, the well known Internet filtering tool.
At that tim