Item 8.01. Other Events.
As described earlier in this Report, following the effective time of the Merger and the sale of the Business, Loop, the Company's wholly-owned subsidiary, will continue its pre-Merger business and operations. Information regarding Loop's historic business is set forth below. For purposes of this Item 8.01, references to "we," "us," and "our" refer to Interlink Plus, Inc. and its direct and indirect subsidiaries on a consolidated:
Market and Industry Data
Information included in this Report relating to our industry, industry size, share of industry sales, industry position, industry capacities, industry demand, growth rates, and other industry data consists of estimates based on Reports compiled by professional third-party organizations and analysts, data from external sources, our knowledge of our sales and the industry in which we operate, and our own calculations based on such information. While we have compiled, extracted and reproduced industry data from external sources, including third-party, industry or general publications, we have not independently verified the data. Similarly, while we believe our management estimates to be reasonable, they have not been verified by any independent sources. Forecasts and other forward-looking information with respect to industry and ranking are subject to the same qualifications and additional uncertainties regarding the other forward-looking statements in this Report.
Among others, we refer to estimates compiled by the following industry sources:
·comScore, Inc., or comScore, an agency that measures audiences, advertising, and consumer behavior;
·The Recording Industry Association of America (RIAA), an organization that conducts consumer, industry, and technical research;
·Billboard, a trade publication devoted to music news;
·International Federation of the Phonographic Industry (IFPI), a group which releases an annual Global Music Report shedding light on trends in the industry;
·Alpha Data (formerly, but commonly known as BuzzAngle Music), a music analytics firm which provides statistics for the music industry, including record sales and music streaming;
·Statista.com, or Statista, a business analytics platform.
Overview
Our mission is to deliver an engaging premium short-form video experience linking out-of-home with in-home via a continuous loop of curated and personalized social viewing experiences.
When we formed Loop in May 2016, the music video industry was dominated by one music video company (Vevo, which was initially formed by two of the major labels) and its partner YouTube. User Generated video choices were also available. People were watching music videos online, but the market needed an alternative to YouTube, a better way to deliver content, and a legal, simpler way to view videos. We set out to create a product
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that provided a better way for both artists and consumers to benefit from the digital transformation of the music video industry. Loop was founded on the belief that we could offer a better consumer experience for viewing music videos.
We have one of the largest music video libraries available. The foundation of our company was built around "OOH" (or Out-of-Home) servicing: providing licensed music videos to public venues. Our premium service, or Premium Service, provides subscribers with unlimited, high-quality streaming access to our full catalog. The Premium Service offers a commercial-free music experience with several interactive search and social media features that the market is lacking right now.
Our upcoming ad-supported service, or Ad-Supported Service, has no subscription fees and will provide users with limited on-demand online access to a vast library through dozens of our curated lists that we produce and update on a regular basis. Our business to business, or B2B, music video service has been supporting the hospitality and retail industries with music video services for about 20 years, originally under the company Screenplay, Inc. which we acquired in 2018.
We anticipate our users will be highly engaged and we have programmed in many features to our services to make sure they stay engaged. We will monetize our service through both subscriptions and advertising. We have two distinct service offerings: our B2B music video service and our Direct to Consumer, or D2C, music video service. Although they live independently, they thrive together. Our B2B service is targeted at commercial outlets throughout North America. With this service we build tools to assist our clients in programming their in-store monitors and audio systems. Our service allows our B2B clients to create the perfect in-venue environment for their business and is already distributed to thousands of venues directly by Loop or via third party distributors.
An upcoming feature will allow us to engage customers while they are at one of our venues through social media applications and on-screen identification. The goal is to get the customer to download our D2C application which will allow them the opportunity to influence what is playing on select screens while in the venue (at the venues discretion). Using the D2C application the user will be able to access a large variety of playlists in the free advertising supported version of the application. Premium Service subscribers will be able to access even more content and features in the paid version of our application. If user engagement declines or if we fail to continue to grow our Ad-Supported user base or Premium Service subscriber base, our revenue growth will be negatively impacted.
Our Market and Industry
The Global streaming music industry, led by giants Spotify and YouTube, reached over 1 billion users in 2019 and is predicted to show 6% growth each year between 2020 and 2024 (Statista.com). With a Global penetration rate of 13.9% that is expected to reach 15% by 2021, this growth is led by a US Market with a penetration rate of over 40%. With Spotify reaching a milestone of 110 million users in 2019 (they nearly doubled between early 2017 and 2019), users love of on-demand streaming has grown in tandem with the companys expansion.
·Videos are king: 2019 Worldwide on-demand streams hit over 5 trillion, with video streams doubling those of audio streams and audio plus video reaching 1.72 trillion and 3.4 trillion respectively (BuzzAngleMusic). The IFPI Global Music Report found that consumers spend about 3.5 hours per week listening to music via video streaming - the equivalent to about 70 3-minute music videos. While overall streaming was up 29.3% from 2018, on-demand video streams earned a bigger uptick (40.7%) more than on-demand audio streams, which rose 23.8%. Those video streams account for 52% of on-demand music streaming globally, with 47% taking place on YouTube (Billboard). Its also important to note that, of the 30 most-viewed YouTube videos of all time, 28 of them are music videos.
·On-demand streaming drives overall growth: On-Demand Streams in 2019 accounted for 85% of all music consumption in the United States - thats a 7.6 point jump from 2018 (77%) (BuzzAngleMusic). The highest rate of growth for use of streaming services is in the 35-64 age group. 54% of 35-64 year olds used a music streaming service in the past month.
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·Paid subscribers drive spending: The IFPI Global Music Report found that 52% of 16-24 year olds used paid streaming in the last month (highest amongst all age brackets, with 63% of them having used an audio streaming service in the last day).
·Music streaming is increasingly mobile: IFPI found that 27% of the Global share of music listening is done on a smartphone, but almost half amongst 16-24 year olds, suggesting an importance for any streaming platform to be mobile-ready.
·Digital signage is a powerful promotional tool: The digital signage market is expected to grow globally from USD 18.55 billion in 2019 to USD 31.71 billion by 2025, at a CAGR of 8%. Moving forward, North America is estimated to dominate the signage market over the forecast period, owing to the presence of major vendors in the United States and also due to early adoption of and advancements in technology. Furthermore, the advancements in display technology are also likely to drive the market. Asia Pacific is anticipated to overtake Europe, in terms of market share, by 2024, mainly owing to the growing awareness regarding benefits of digital signage. In 2018, the retail sector accounted for the maximum market share.
Loop is one of the Largest In-Venue providers of Music Videos
Loop has transformed the way venues throughout the world program the audio and video within their venues. At the core of our business is a philosophy rooted deeply in the customer experience. Our mission is to ensure a pitch-perfect audio-visual environment for the spaces we service. With usage rights to one of the largest music video catalogs in the world, Loop is uniquely positioned to continue to lead the industry with music video services.
Today, millions of people around the world view our playlists in hospitality and retail venues through the Loop B2B service. For 20 years we have been providing music videos to retail and hospitality venues throughout the United States and, in a limited manner, throughout the world. The major labels have provided very few music video licenses to companies in the retail and hospitality market, and we are the largest company in our category. However, there is still a lot of growth available in this market. Capital investment in equipment has been a major barrier to entry for many venues. To address this issue Loop has recently released our Loop Player, bringing the cost of specialty equipment down by over 80%. Now even the smallest of coffee shops can afford the Loop service. The new Loop Player will also be the key to gaining entry into franchise and chain store business who want a lightweight, interactive solution for their expanding A/V needs.
With the introduction of our D2C service we will be able to take the programing and music video management experience we have developed in our B2B service to the under-serviced consumer market. Although there are other avenues to watch individual music videos on-line, there is a shortage of professionally produced music video programs available. We are transforming the music video industry by allowing users to move from a "transaction-based" experience of viewing music video to an "access-based" model which allows users to stream individual music videos on demand. In addition to being able to play individual music videos, users of our premium version will also be able to program their own playlists in ways that have never before been available to the general public. Even our advertising-enabled free service will be revolutionary in the way that brings dozens of professionally produced video programs to the market at no cost to the viewer.
Loop - Building a B2B and D2C Market
Loop has created a platform where users can access the best short form content wherever and whenever they are. Through our business solutions, Loop is servicing a broad swath of commercial establishments with hand-curated playlists and aggregated short-form content, including movie trailers, sports highlights and viral videos. We help create the perfect environment for customers in a broad variety of establishments, primarily focusing on bars, gyms and restaurants, but rapidly expanding to other sectors.
In launching our mobile application, we will be meeting the next generation where they discover content - on their phones. Our beautifully curated platform makes finding new music a simple and exciting process for users. By creating a tie-in experience with venues - live Loops - we are also closing the circuit and uniting artists, venues and consumers in a single, unified ecosystem.
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We are focused on enabling the best of breed platform of music videos for our users through our range of products and services.
Benefits for users of B2B Streaming Application:
-Proprietary hardware: Customers can purchase Loop player which comes with an expanded local memory. The Loop player has more memory for offline caching and provides a failsafe in the event of loss of internet. The B2B streaming player is also equipped with a wide range of direct inputs for various A/V setups including audio and stereo outputs, ethernet plugin, USB 2, USB 3, HDMI, SD input and Bluetooth.
-Playlists built for businesses: We offer a curated experience designed to meet the specific needs of commercial venues. Our playlists are all between 5-10 hours long to prevent repeats and are pre-screened for content that may not be appropriate for businesses (including content that might disrupt the auditory flow of a business, inappropriate imagery, etc.).
-Corporate control: We understand that our standards might be different than those of business owners, so weve given B2B users the ability to control what content their patrons see. Business owners can filter out content based on ratings or explicit language, and even control which genres to exclude from their programming. Business owners can also use our scheduling function to play specific playlists that highlight the natural rhythms of their businesses (Everything from Happy Hour to Ladies Night).
-Digital signage: We help businesses improve their bottom line by pairing engaging visuals with signage advertising food and beverage specials, events and more. Weve seen businesses improve sales on specialty drink items by almost 2.5 times the system average using our digital signage packages.
-Alternate content streams: In addition to our main music video offerings, we also provide viral video content, movie trailers and highlights for sports fans. This allows our customers to tailor content depending on the specific zone, time of day and any other unique circumstances.
-Unique customer engagement: Future releases will allow mobile app users to interact with the content on public screens, taking into account their unique preferences and giving them another platform for social engagement via comments and shout outs. We have engineered an experience for consumers that deepens their connection with traditional retail spaces, forging valuable connections for businesses trying to get an edge in a competitive space.
Benefits for Users of Mobile Consumer App:
-A curated, human experience: Our content team is fervently devoted to building playlists for any situation. Weve created over 200 playlists from every major genre and for every mood. While we favor new music, users will find old classics on our lists as well.
-Discovery: We sift through dozens of videos every day on the hunt for great content from both new and established artists. While we receive videos from all 3 major labels, our independent status allows us to display any artists we feel are creating compelling art. We frequently showcase independent artists on our playlists to help consumers find their new favorite video. In an increasingly fractured media landscape, we are committed to using preferences and user data paired with our human curation to find the superstars our users might not have heard already.
-Connection: A signature feature of our app is the Loop: a 24/7 live channel of videos where users can comment, leave videos shoutouts and influence what plays next. Combining both the thrill of live streaming, the comments section of traditional social media and tangible connection to physical venues, Loops are a completely new way to experience music videos. Traditional businesses can create a Loop and broadcast what is playing at their venue. Artists can share their favorite music with fans and pop in from time to time with a shoutout. Users can experience new videos with their friends or alongside popular influencers. The connections that we are enabling with Loop are both familiar and exciting - a perfect blend of new technology and much of what has already made other social networks massively successful.
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Benefits for Creators
Loop provides a large platform for creators and artists to connect with existing fans and to be discovered by new fans.
·Discovery: with thousands of tracks being uploaded to DSPs and 300 hours of content being uploaded to YouTube every minute, it is difficult even for established artists to cut through the noise. Loops platform is built specifically for music videos, and our team works endlessly to help surface artists that we believe deserve a breakthrough.
·Analytics: We can provide numerous analytics for artists including streaming counts, the number of real-time users on a Loop, song performance data, playlist placements and information about public performance in venues all over the country.
·A new form of fan interaction: artists Loops are an incredible way for musicians to showcase the songs to which they are listening, but they also offer artists the opportunity to have a live, face-to-face interaction with fans via shoutouts. This can be a great way to hear from fans about potential collaborators, to get feedback on a new song, or to premier new music.
Our Business Model
We offer premium and free music video plans for business owners as well as a free mobile streaming app for iOS. Our B2B clientele is clustered in the bar and restaurant industries, but we service clients in health & fitness, hospitality and even the military. The synergistic relationship between our mobile and B2B streaming applications will allow the growth in our business subscriptions to fuel expansion and adoption of our mobile streaming application by exposing potential users to our application in retail spaces. Premium B2B subscribers can enjoy longer playlists and create their own custom mixes by importing Spotify playlists.
Weve added additional content streams to provide our customers with supplementary content including movie trailers, collegiate and professional sports highlights and viral videos. These provide complementary income streams to our core music video offering. We plan to add additional content pieces via strategic partnerships as well as some smaller original productions such as hosted countdown or chart shows with Loop VJs; while some competitors have focused on so-called "background entertainment" including slow moving scenery and shoegaze visuals, we have worked to identify, secure and provide short form content for an engaged consumer and continue to look for other high quality premium short-form content that works well in a public screen experience. Other such content could include news aggregation, extreme sports clips or short-form stand up comedy clips.
Digital signage and advertising packages round out a third income stream. At present, we allow business owners to customize their digital signage and display as an overlay or as a ticker scrolling across the bottom. This is one of our most valuable and lucrative packages for business owners, as it allows them to pair compelling visuals with messaging about their products.
Future Developments
Loop will invest in further development and technological enhancements. In addition, while we will not spend major amounts on original content, we will produce some affordable and appealing content unique to our platform that would work for both B2B and D2C.
Loop also plans to focus intently on the university market via on-campus venues, nearby venues and to students directly. We are capable of creating customized playlists and offerings of music videos and local sports highlights and campus happenings via our digital signage offerings to create customized campus loops (i.e. The Stanford Loop, The University of Illinois Loop, Duke Loop, etc.). This will allow deep localized experiences that result in loyal users of the app as well as engaged venues on and near campus with more relevant and appealing content on their screens.
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Our Growth Strategies
We believe we can grow our business in several areas, including:
·Expanding our B2B Distribution via aggressive pricing, reliable small "Plug N Play" hardware and appealing content
·Using that B2B exposure to market to and attract app downloads for our D2C offering
·Expansion into international territories starting with Canada and Latin America then to other countries and continents over 2020-2022
·Introducing a new linear OTT/CTV (Over the Top/Connected TV) offering featuring a multitude of 24/7 music video channels and another channel featuring movie trailers
·Potential M&A opportunities of related companies
Certain Risks Associated with our Business and of Owning the Our Common Stock
Our business and owning our common stock are subject to numerous risks and uncertainties, including, but are not limited to, the following:
·your ability to sell your common shares at or above the price you bought them for due to (i) our listing not having the same safeguards as an underwritten initial public offering, which may result in the public price of our common shares being volatile and declining significantly upon listing, or (ii) the failure of an active, liquid, and orderly market for our common shares to develop or be sustained;
·our ability to attract prospective business and users and to retain existing business and users;
·our dependence upon third-party licenses for video recordings and musical compositions;
·our ability to comply with the many complex license agreements to which we are a party;
·our ability to generate enough revenue to be profitable or to generate positive cash flow on a sustained basis;
·our lack of control over the providers of our content and their effect on our access to music videos and other content;
·our ability to accurately estimate the amounts payable under our license agreements;
·the limitations on our operating flexibility due to the minimum guarantees required under certain of our license agreements;
·our ability to obtain accurate and comprehensive information about music compositions in order to obtain necessary licenses or perform obligations under our existing license agreements;
·potential breaches of our security systems; and
·assertions by third parties of infringement or other violations by us of their intellectual property rights;
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