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Ecast Will Aggressively Use $14M In New Funding To Grow Broadband Music And Entertainment Business

Posted On: 10/25/2002

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SAN FRANCISCO - Ecast Inc. announced in mid-October that financial backers had invested an additional $14 million in the company. An undisclosed portion of this sum was used to acquire RioPort (San Jose, CA), the manufacturer of handheld digital music devices.

In a year or so, RioPort products are expected to be integrated into the Ecast broadband network. One planned application, targeted for 2004 or 2005, would allow consumers to use RioPort storage devices to download and purchase music online through Ecast-powered Rowe digital jukeboxes. Operators will definitely receive a cut of the revenues from such transactions, according to Ecast CEO Robbie Vann-Adibé.

Currently Ecast reports that the number of digital Rowe jukeboxes on location in the U.S.A. is approaching 1,000 units. Orders for more than that number have been received since the launch of Rowe's Ecast-powered "NetStar" in the fall of 2000. Vann-Adibé said sales of "NetStars" are "starting to ramp up" as operators become increasingly confident in Ecast's financial stability, in the technical reliability of its network, and in the feasibility of broadband communications. (Average installation time has been cut in half this year, he advised.)

The RioPort merger is just the first in a series of planned expansions by Ecast. No additional acquisitions are planned at this time. However, Ecast is currently in the early stages of talks with a wide variety of industries and companies to create strategic partnerships that would achieve the following goals:

· Integrate other types of coin-op amusement equipment into the Ecast network (including pool, darts, and more)

· Add non-entertainment devices to the Ecast network, potentially including functions ranging from security cameras to ATMs and long-distance telephony

· Generate new revenue streams through placing passive and interactive advertising by major brands on the network's touchscreen monitors

· Install Ecast-powered jukeboxes, countertops, and possibly other devices into regional and national chain accounts, with full operator support and participation

· Improve existing revenue streams for music and games, and add new games and other content types from new licensed providers to "GemStar"

· Reduce the operator's cost of doing business by providing backend tools for remote management and tracking via the Ecast network.

"We have bet our company on the belief that broadband is a vital component of the future for our industry," declared Vann-Adibé. "Our core focus remains the coin-op business, for now and some time in the future. These funds secure the future of this company."

The $14 million round of new investment in Ecast was co-led by Oak Investment Partners, one of the oldest and largest venture capital firms, and previous investor DCM-Doll Capital Management, a venture capital firm dedicated to building early-stage technology companies. Other existing investors participating in the round include St. Paul Venture Capital and El Dorado Ventures, both Silicon Valley-based venture organizations.

Vann-Adibé termed the massive investment "a strong statement by new and existing investors, particularly in the current economic conditions, that our platform works and is meeting their expectations."

Ecast also confirmed several management changes in October. Former executives Roger McAulay and Caryn Michel are no longer with the firm. Paula Sowell, vice-president of corporate development, has taken over many of McAulay's former duties and senior technical director Howard Spillman has moved into the post of chief technology officer. Ecast is currently seeking a senior marketing executive and possibly talent to fill additional slots. Vann-Adibé said the changes were made because "Ecast has moved beyond the startup phase to be an operational company with a lot of product in the field. So it was felt it was time to change some of the roles and bring in individuals more focused on that aspect of management."

Plans for implementation of the RioPort merger called for the newly combined company to operate under the Ecast corporate name. Vann-Adibé will remain CEO of Ecast; Jim Long, current president and CEO of RioPort, will be general manager of Ecast's RioPort business. RioPort distributes online music downloads for major record labels and handles content aggregation and delivery for online e-tailers including BestBuy.com, Musicland Group, and MTV.com.

Ecast's CEO told VT that the company's strategic partnership with Rowe International remains on track. "We do have a longterm relationship," Vann-Adibé stressed. "Both firms remain committed to building these products. Our collaboration in this year's launch of the 'GemStar' countertop is a clear indication of that."

As reported above, Vann-Adibé said Ecast desires to put several, perhaps many, other types of equipment online via the Ecast network, including both amusement and non-amusement equipment. Equipment earnings reporting, monitoring of equipment functioning, and perhaps (eventually) even online tournament promotions could be part of this package, he said.

"Our starting point is simply to provide connectivity for all those guys," he explained. "A number of vendors in the market now recognize it's a value added function for their machines to simply report back earnings from the field. We're in conversation with a number of companies about how to use our network to convey that information. As far as reporting, tournaments and so forth, that's the next round; we've had preliminary conversations with potential partners about providing those services."

Onscreen advertising and chain retail outlet placement both appear central to Ecast's future growth strategy. Vann-Adibé said the Ecast platform appeals to "many potential advertisers" as well as major national location chains. He cited three reasons for this appeal: the network offers broadband, interactive capability; it is now achieving critical mass with desirable consumer demographics; and the terminals are placed in sites where consumers are in a cheerful, relaxed, receptive state of mind.

Vann-Adibé noted that for advertisers, "the potential for interactivity'[means that] the ads you run may be very different from those used in the past." He said a new format of interactive advertising would have to be created to take full advantage of the network's potential. Accordingly, Ecast will probably begin its advertising placements with passive, TV-type ads at first, he said.

"There is a lengthy educational process but discussions [with potential advertisers] are ongoing and we hope to have some interesting programs in place next year," he hinted. Vann-Adibé was quick to reaffirm Ecast's commitment to share any advertising revenues with operators.

For major retail chains, Vann-Adibé said the Ecast network's capability to offer content control and branding represents a major strength. He confirmed that the company is seriously interested in such blanket placements of Ecast-powered equipment, but added: "We know our route to this market is through the operating community. Our challenge is there are few national operators but many national chains. The question is how we put that equation together and we'll be working with the operator community to resolve those issues."