Operational update

Posted: 20/01/2016

Forbidden Technologies plc (AIM: FBT), the AIM-quoted owner and developer of the market leading cloud video platform, Forscene, the video social network, ‘eva’, and the online video editor, ‘Captevate’, is pleased to announce an operational update. The objective of this update is to provide a summary of the Company’s refocused business and its strategy.

The Business

In recent months the Company has undergone a significant structural reorganisation. With a new Board in place and a rejuvenated growth strategy, there is now a very clear focus on commerciality and growing the top line.

In Autumn 2015, Aziz Musa was appointed CEO, having previously spearheaded the Company’s marketing, as well as the design and launch of its latest products, eva and Captevate. Aziz replaced founder Stephen Streater, who in turn assumed the role of Chairman with a view to spending more time on the continued development of the Company’s video platform. In November, the Company appointed two new non-executive Directors in order to further strengthen the leadership team, bringing with them significant commercial experience and contacts.

Under the direction of Aziz and the new Board, progress is already being made in the execution of the new strategy. R&D costs are being reduced, additional resources are being invested into the Company’s sales apparatus and, as a result, the Company’s pipeline across its product set is growing.

Strategy

Forbidden Technologies is comprised of three distinct products. Each product is built using Forbidden’s cloud video platform, but targets different user segments of the internet video market:

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The video editing market, in its broadest sense, consists of multiple verticals including News, Sports, Entertainment, Music, Reality, Factual, Social, Children’s, Education, Drama, Adult, Web Advertising, Corporate and Movies. In many cases there are multiple user segments within a single vertical. For example, in Sports, you may have a situation where an untrained marketing manager needs a simple method of editing and publishing content quickly and easily, such as Captevate, while you may also have a skilled editor who needs to use more advanced software, such as Forscene, to carry out more complex work on the same event.

With this in mind, within these verticals and across its product set, the Company is focusing its efforts where it has:

— a clear competitive advantage;
— a product which is ready and requires minimal additional investment;
— customers from which it can produce case studies and grow; and
— a customer penetration rate of less than 15%.
Within News, the Company has historically had a single client whose revenues have declined over the past three years as a result of internal structural changes. Going forward, the Company will leverage the competitive advantages associated with Captevate and Forscene with the objective of rebuilding the sector into an important source of growth. Forbidden’s main competitive advantage, as pinpointed by a new US client, is its ability to dramatically reduce workflow – a particularly important factor when you consider how much the success of modern News hinges on time to market of content. The Company will continue to grow and evolve its relationships with News resellers across the globe to drive sales in News.

Encouragingly, growth in Sports exceeded management’s expectations in 2015. As with News, the Company’s core competencies offer disproportionate value to sports broadcasters and therefore the Company will continue to focus a large proportion of its efforts on increasing and diversifying Sports clients and events.

Growth in Entertainment, Reality and Factual will come mainly from our long-standing set of existing customers and through international expansion via low fixed cost and targeted reseller programmes.

In Education, the Company has identified an opportunity to remove the ‘technology barrier’ to storytelling and is currently in discussions around selling Captevate, the Company’s online video editor, as a storytelling tool for media students. There is also ample opportunity for Forbidden to support the growing amount of production necessary as the proliferation of digital TV continues.

Through Captevate, the Company will address the growing consumer direct market. Initial testing has shown a high engagement rate in the product, with many hundreds of videos created by thousands of registered users in the first month of beta testing. As the product evolves, the Company will introduce a pay wall after a free trial, and users will be able to subscribe for a monthly fee. Whilst Captevate is expected to contribute in 2016, it will be a more significant revenue stream in 2017 and 2018.

With eva, the Company’s video social network, Forbidden has identified a unique niche which is resonating with brand marketers and influencers. Currently brands run marketing campaigns through social channels such as Twitter, Instagram and Facebook, and at the end of each campaign they assess the reach and impact. However, these campaigns tend to be very linear and do not generate content that can be reused. Through taking an eva channel, a brand can run the same campaign but, with the option of repurposing content for use across their owned and paid media. Instead of simply buying a campaign, they are now able to buy content.

There are growing numbers of influencers who have large audiences of followers who engage with them because of their authenticity. When these influencers begin to monetise their audience through conventional brand advertising, they negatively impact their authenticity with their audiences. eva offers these influencers an alternative: a channel where they can raise their profile through the dissemination of exclusive content. By converting a small percentage of their existing audience to their exclusive eva channel, both the influencer and the Company can generate material revenue.

The Company has a growing pipeline of brands and influencers interesting in leasing eva channels. In deliberately targeting these segments, the Company is focusing on its strengths with a view to entering into other market segments as revenues grow and sales capacity increases.

Market

Forbidden operates in several growth markets. The Company’s research indicates that professional video editing is a $366 million market (source: Devoncroft 2014 data); 83% of video content recorded through mobile devices (source: Company research); the consumer mobile segment of the market is growing too with mobile phones outselling digital cameras and camcorders by 36 to 1 (source: Camera and Image Products Association); and digital video consumption has increased 397% in the past four years (source: emarketer.com), with consumers watching on average 115 minutes of digital video content per day (source: emarketer.com).

At the same time, there has been a marked shift towards consuming more content through mobile devices and a greater requirement to shoot, edit and share content as quickly as possible. Where production quality was once the main source of competitive advantage, speed to market is emerging as the most important consideration for News and Sports broadcasters. By leveraging case studies of a core of relevant and high profile clients, the Company is better placed than ever before to offer clients a competitive advantage through speed.

The propagation of digital TV brings with it a huge growth in the number of TV channels. Over the last decade there has been a significant increase in the number of free-to-air channels, rising to many thousands of channels across the globe (source: Statista.com). Within the broadcast sectors of Entertainment, Reality, Factual, Drama and Children’s, the market driver for content production has shifted from content quality to content quantity, and cost of delivery. It has also diluted advertising and sponsorship revenues and necessitated a focus on postproduction cost control. The cloud-based nature of Forbidden’s products offers broadcasters significantly cheaper TV production than the incumbent models.

The additional markets of Web Advertising, Social, Corporate, Adult and Movies have other specific market drivers, within many of which the Company has true competitive advantage. As the Company expands its sales capabilities beyond 2017, it will look to address some of these sectors.

Stephen Streater, Chairman of Forbidden, said:

“Forbidden has for many years devoted itself to developing exceptional technology but the challenge has consistently been converting that into significant sales. The last few months have seen the biggest step change in the Company since inception and I firmly believe that, under the commercially driven leadership of our new CEO, Aziz Musa, we now have the right structures and expertise in place to deliver a period of sustained revenue growth.

“2015 has been a year of stabilisation – we have achieved our revenue expectations and look forward to growing the business in 2016 and 2017.”

Enquiries

Forbidden Technologies plc
Stephen Streater, Chairman
Aziz Musa, Chief Executive
Tel: +44 (0)20 8879 7245

Allenby Capital Limited (Nominated Adviser and Broker)

Nick Naylor
John Depasquale
Richard Short
Katrina Perez
Tel: +44 (0)20 3328 5656

Redleaf Communications (Financial PR Adviser)
Rebecca Sanders-Hewett
David Ison
Susie Hudson
Tel: +44 (0)20 7382 4730
Email: forbidden@redleafpr.com

About Forbidden Technologies plc

Forbidden Technologies plc (AIM: FBT, www.forbidden.co.uk) floated in February 2000.

The Company develops and markets a powerful cloud video platform, which is used by broadcasters, in professional web video, in education and by consumers. The Company platform is one of the world’s most advanced browser-based and mobile platforms, which underpins Forscene in professional markets, its eva video social network and its new consumer video editor, Captevate.

Websites
www.forbidden.co.uk
www.forscene.com
www.eva.co
www.captevate.com

Social media
www.facebook.com/FORscene
www.plus.google.com/+Forscenepro/posts
www.linkedin.com/company/forscene
www.twitter.com/forscenepro
www.youtube.com/user/ForsceneTraining