EXECUTIVE SUMMARY
Bonus Video is a new venture in the movie rental market in Latvia. The Company is planning to operate in the central area of Riga and provide movie rental service with “home delivery” to the customers working or residing in the area of its operations. Bonus Video will operate a telephone and Internet based ordering system. In the initial development stage of the Company, Bonus Video will offer rental of both videocassettes and DVD disks, however, options exist to add rental services of movies in other formats, as well as extend operation to offering complementary products.
To our belief, the Company will have the following advantages over the present video rental stores in the market:
■ Greater potential operation area/number of potential customers. The Company will have access to population of approximately 200 thousand people, with relatively simple expansion;
■ Higher visibility. The selected marketing campaign ensures effective reach of the potential clients;
■ Cost efficiency. Due to the specific set-up structure, the Company does not require a retail store presence, and operates with relatively flexible cost structure;
■ Innovative pricing technique. Unlike the conventional video rental “pay-per-rent” system, Bonus Video charge will be based on a monthly subscription rate;
■ Convenient service offering. The delivery service provided by the Company, to our belief provides an essential convenience service, particularly due to a relative underdevelopment and under-penetration of video rental stores in Riga and Latvia as a whole, as well as congestion problem in the capital city;
■ Higher number of available movie titles. The Company’s lack of street rental store presence allows for almost unlimited movie stock compilation, taking into account the market demand for the movies as well as availability of the titles as provided by official distribution companies in Latvia.
With the estimated market size of about LVL 150 thousand and significant under-penetration of the video and DVD playing equipment in Latvia compared to the levels of the Western Europe, we believe that this industry has considerable growth potential in the coming years. The Company expects to obtain and sustain 30 per cent market share in its area of operations. Furthermore, Bonus Video has significant potential of expanding operations further regionally and vertically, would initial performance be satisfactory to the shareholders and creditors of the Company.
The Company is expected to reach break-even point in the 10th month of operation with the net profit reaching LVL 8,252 at the end of the forecast Year 5. The summary table bellow presents the key estimated financial performance indicators of the Company:
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