When digital entertainment is downloaded, it's likely FAB
By John D. Oravecz
Published: Tuesday, April 23, 2013, 12:01 a.m.
When fans of comedian Adam Carolla download his show from iTunes, a Pittsburgh company is working behind the scenes to deliver it.
In fact, 80 percent of the shows in the comedy section of iTunes, and 65 percent of the programs in its education section are actually delivered by FAB Universal Corp., an Oakland-based distributor of digital programming.
FAB Universal was known as Wizzard Media Inc. until last year when it acquired Digital International Entertainment Ltd., a Beijing-based company that operates a chain of FAB-branded kiosks and entertainment stores in mainland China.
That acquisition and growth in delivering shows and programs to consumers' computers and smartphones for entertainers, traditional media and corporations is bringing explosive growth to FAB, which was started by several University of Pittsburgh students in the late 1990s.
FAB Universal said last week that it expects revenue for 2013 to surge nearly fourfold — to at least $98.9 million from $27.4 million last year. And net income to grow to at least $19.3 million, up from a loss of $4.0 million a year ago.
The company said digital audio and video shows it delivers were viewed by 28 million people a month during the first quarter of this year, up from 20 million monthly in the first quarter of 2012, a jump of 40 percent.
Its delivery unit, the Libsyn Network, will generate a $1 million profit this year, a first for the division, the company said.
“We're very excited, because we've been working hard on growth at Libsyn, and we're hopeful for 2013,” said President Laurie Sims.
Libsyn claims to be the largest deliverer of audio and video files on the Internet for more than 13,000 producers and with 1.1 million unique files. Carolla's daily talk show set a record as the “most downloaded podcast” as judged by Guinness World Records.
FAB Universal and Libsyn still refer to content as “podcasts,” a term that became popular when Apple Inc. started iTunes in 2003 and the commercial download of entertainment files to consumers' computers took off.
“A podcast at a very low technical level is the download of media,” either audio or video, to computers or mobile devices such as iPhones, iPads and Android devices, Sims said.
Libsyn recently crossed a threashold, with more than 50 percent of the shows it delivers being downloaded to mobile devices instead of computers at home or work, she said.
“Now the way you consume a podcast is much different, and people doing it don't even know they are consuming a podcast,” Sims said. “On smartphones you can just open an app and have content there playing for you. It makes it easier on the producers of the media.”
In addition to shows for Carolla and other popular comedians, Libsyn — short for liberated syndication — delivers shows for National Public Radio, Slate magazine, Harvard Business and corporate clients such as Salesforce.com, Adobe and Microsoft, who use it for product promotion, education and staff training. Other shows range from yoga classes to learning a language.
FAB Universal said it uses a “world-class” web hosting company, which it declined to identify, and its own servers to deliver content.
The company has 18 full-time and five part-time employees, mostly software developers, that support the Libsyn operations in Pittsburgh, and 192 employees that work for the FAB's media business in China, Sims said.
Analyst Rob Goldman of Goldman Small Cap Research said in a report that FAB Universal has reached a key point in its business model with the acquisition of the FAB business in China.
“Overnight, it has transformed itself from a niche market leader to a profitable, global digital media distribution power,” Goldman said. Instead of being associated with early-stage, unprofitable companies, it will now be valued on revenue and profit growth as its podcasting business improves, he said.
FAB Universal's stock closed on Monday at $3.84, up 14 cents, or 3.78 percent. The stock is up 19.3 percent so far this year. Its 52-week high was $5.70 on Oct. 27, up from a low of $1.90 on July 12.
In China, the DEI deal brings new revenue to FAB Universal from its sale of DVDs, hardware and software to retail chains, its own retail stores and a kiosk concept that is akin to “Redbox meets Netflix meets iTunes,” Goldman said.
Sims said the company has 12,500 FAB-branded kiosks at 8,400 locations in 40 cities in China, ranging from mini-stores with one kiosk in smaller shopping areas to larger stores in malls with banks of kiosks. They are ATM-style, intelligent terminals that deliver downloads to smartphones using USB connections, and other services such as video games, podcasts, ringtones, ebooks, movies and subscription delivery of shows, similar to Netflix, as well as bill payment service.
It is hard for American consumers to envision these kiosks, Goldman said, but they are in demand in China because home Internet there does not have the bandwidth and speed that allows downloads of large files.
Revenue comes from download fees and paid advertising. FAB has more 350,000 members for its subscription delivery service.
“The kiosk business is the key driver of growth for FAB Universal,” Goldman said. “We believe the company has not yet even scratched the surface of its deployment. There are 160 cities in China with greater than 1 million citizens. ... We would not be surprised to see 100,000 kiosks operational in the next few years.
DEI has two large “FAB” brand retail stores in Beijing malls that sell copyright-protected audio and video products. One is in the Joy City mall in Beijing, and it recently opened an entertainment store in the SoShow mall.
These flagship stores are sites for weekly celebrity appearances and signing events that attract thousands of fans and promote sales and increase FAB brand recognition, Goldman said.
John D. Oravecz is a staff writer for Trib Total Media.
He can be reached at 412-320-7882 or firstname.lastname@example.org.
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