Corporate History ----------------- OBN Holdings, Inc. ("OBN" or the "Company") was incorporated in Nevada in 2003 as the holding company for four wholly owned operating subsidiaries: Omni Broadcasting Network, Eclectic Entertainment Products On Demand Channel and All Sports Television Network. Omni Broadcasting Network ("Omni") was incorporated in January 2001 as a television broadcast company. Eclectic Entertainment ("Eclectic") was incorporated July 2002 as a motion picture and television production company. Products On Demand Channel ("POD") was incorporated in December 2002 as a broadcast television network specializing in providing airtime to independent producers and companies seeking to market their products on television. In August 2003, the Company acquired KSSY television, which is located in San Luis Obispo County, California. In February 2004, OBN acquired the name and program library of All Sports Television Network ("ASTN"), which began broadcast operations as a fourth subsidiary in July 2005.
The three broadcast networks (Omni, POD and ASTN) shared a 24/7 satellite uplink facility. Omni Broadcasting Network officially began airing in September 2003. Omni broadcasted sixty hours of programming each week, which included twenty-one (21) hours during prime time. Products on Demand Channel began broadcasting February 2003 and aired programming eighty (80) hours per week primarily during the late night and early morning hours. ASTN aired twenty-eight (28) hours of programming each week during morning and afternoon time slots. In April 2006, all three networks temporarily postponed broadcasting while the firm negotiates for a new satellite uplink provider and realigns its affiliate base to take advantage of the WB/UPN merger. Broadcasting is scheduled to resume in second quarter of 2007.
Production operations began in July 2002 when Eclectic Entertainment was formed. Eclectic has initiated several television productions. To reduce the liability of Eclectic, separate corporations or limited liability companies are created for each project, which is a standard practice in the entertainment industry. Eclectic recently completed its production of a television "special" celebrating the 50th anniversary of the singing group The Four Tops. The television special aired on the Omni Broadcasting Network and several other networks as a syndicated program during the fiscal year ended June 30, 2006. Other television programs that are in varying stages of development include "Music On Demand," "Music on Demand Video," "Video Music Showcase," "Thirteen O'clock Theater," "The Mini Movie Hour," "The Vegas Variety Hour", and "The L.A. Food Scene." In August 2006 Eclectic entered into a joint venture agreement with a company located in Dubai, United Arab Emirates ("UAE") to provide content for broadcasting over a digital signage (narrowcasting) network at numerous venues throughout Dubai. Operations are scheduled to begin in the first quarter of 2007.
On May 21, 2004 the SEC/NASD granted formal approval for public trading by existing shareholders of OBN shares. On June 25, 2004 OBN's initial public offering was approved by the SEC and the Company began its effort to raise the funds necessary to implement its business plan. However, in October 2004 management decided to cancel the public offering in order to protect the stock price from "shorting" activity by third parties that had driven the
stock price down. As a result, management never received the funds it required to fully implement its business plan. Many of the originally planned endeavors were postponed and, due to contractual commitments, the major focus during the fiscal year ended June 30, 2005 was completing and distributing the Four Tops Special. After completion of the Special in May 2005, the business plan was revised to refocus on broadcast operations and other projects. Management believes the financial condition of the Company will improve and stabilize if the funds arrive from a stock sales contract that was signed in April 2006 (see page 8).
Employees --------- Currently OBN Holdings, Inc. employs four full-time and two part-time employees. Two employees work at the headquarters office. One full-time employee and one part-time employee work in our broadcast operations. One full-time employee and one part-time employee work in our production operations.
Competition ----------- For many years, the major television networks such as CBS, NBC and ABC have dominated the airwaves. These network giants have been providing viewers programming based on what they believe to be of interest to the majority of their viewers via full power stations that they own or pay as affiliates. However, since full power stations are located where the largest concentration of viewers resides in cities such as New York, Los Angeles and Chicago, those living in less populated areas are grossly under-served.
Over the past few years, low-power and Class A television stations have begun better serving the needs of small markets. These stations provide local sports and news programming which is not carried by television networks. Also, s owners have the opportunity to focus on their target market for local advertising rates not only much lower than network television rates, but for rates that are very competitive with those charged by radio stations. As of September 2000, there are 2,366 low-power broadcast licenses and 1,288 commercial licenses issued by the Federal Communications Commission. However, currently there are only five national broadcast networks - CBS, NBC, ABC, FOX, and CW - airing general-market programming. As a result, the majority of television stations have no network affiliation. The Company is aggressively expanding its affiliate base by marketing primarily to low-power and Class A television stations that currently have no affiliation.
The major problem facing owners of low-power and Class A television stations is the lack of original quality programming. This does not mean that original quality programming is not being produced; just that most of it is not being distributed. Every year, independent production companies not affiliated with television stations or networks produce hundreds of television programs and motion pictures worldwide. In the past, the major networks licensed the properties for broadcasting because they could not legally own production companies. However, because the Federal Communications Commission rescinded its regulations that barred television networks from owning production companies, all of the major networks both produce and broadcast television programs. This situation has resulted in independent producers having far fewer outlets. For various reasons, which include time slot constraints and earnings potential, independent producers do not distribute a majority of the existing products, and most individual
stations are unable to obtain programming directly. This is due, in part, to the fact that many independent producers have no desire to license their product to individual low-power and Class A stations, whereas full-power stations receive their programming from the networks. However, the independent producers will license their programming to a network, which reaches a larger audience. OBN is continuously evaluating programming and licensing submitted by independent production companies in an effort to provide the best programming for our affiliates. In addition, we have produced and continue to produce our own original television programming.
The major problem facing independent producers is successful distribution (e.g., broadcast) of their completed projects. There are literally thousands of television and feature film production companies, all vying to have their completed projects distributed. A few production companies are owned or aligned with the major broadcast networks. The others are at the mercy of the relatively few distribution outlets available. The OBN broadcast networks serve as the coveted outlets for production products produced by our production operations, Eclectic Entertainment, Inc. Eclectic productions are guaranteed a distribution outlet on its sister companies' network. Alternatively, Eclectic may choose to syndicate a program and have it aired on competing networks. We have had success with both scenarios in the past. Eclectic produced the Four Tops Special which was syndicated to eighty million (80,000,000) households via numerous television stations affiliated with other major broadcast networks, including ABC, UPN, WB, CBS and Omni. Also Eclectic produced several shows that were only aired on Omni Broadcasting. During the past year we have increased our film library by over five hundred (500) titles.
The internet is beginning to pay a major role in providing entertainment to the public. Unlike television stations and networks, internet broadcasting is capable of reaching a worldwide viewer base. To that end, OBN is in the process of entering in to that area as well.
In summary, although OBN has limited capital, the Company is competing in the market. The primary factors that allow OBN to compete are: 1) television stations not currently affiliated with television networks are seeking network affiliation so they can increase the amount and quality of programming; 2) independent and foreign television/film producers are seeking outlets for their projects because all of the major networks have developed in-house production companies as their major source for programming; and 3) our in-house productions have a guaranteed distribution.
Intellectual Properties ----------------------- Currently we have the rights to over 750 intellectual properties. Some programs were purchased and are wholly-owned as a part of our film library. Other programs are licensed. We typically enter a two-year licensing agreement with unlimited airing.
In addition to the licensed and wholly-owned programs, we have several programs in development under the Eclectic Entertainment subsidiary. They include "Music on Demand," "The LA Food Scene," "Adventures of Unit 28," and "The Mini-Movie Hour." In addition, we have sports programming such as "After the Game," "US Australian Football" and "Destination Adventure." During the fiscal year ended June 30, 2006 we have added over five hundred (500) additional titles to our film library.
Marketing Strategy ------------------ OBN seeks to provide quality programming suitable for family viewing from sources throughout the world. Our intent is to offer content that is not currently offered to the American public. Our goal is to entertain and enlighten our viewers with the sights, thoughts and visions of independent producers worldwide. We want expose American viewers to programming from other regions. To that end, our marketing strategies have an international flavor. Viewers can see an American interpretation of various sights offered by a country on the Travel Channel, but OBN will bring the true spirit of the country through the broadcasting of dramas, comedies and movies produced in the area.
With the funds raised from investors, OBN Holdings will begin an aggressive growth process that will include expansion to other countries. Our International Business Development division is responsible for securing advertisers and independent producers desiring to place programming in the U.S. market and venues to air our programming in foreign markets. The division will also be responsible for identifying new products to be introduced into the American market, and for developing strategic relationships with foreign businesses. Initially, the division's primary focus will be in the Middle East, China (mainland China, Hong Kong, Taiwan and Macau), South Korea and Japan. We have recently signed representative agreements for the Middle East and Asian, with a joint venture agreement for developing and broadcasting over a digital signage (narrowcasting) network in Dubai, UAE and an agreement for content distribution in Japan.
Television broadcasting is the foundation on which the business is built because it provides the Company with the distribution outlets for its programming, and the medium to promote its products and services. Again, there are literally thousands of television and film production companies throughout the world. All of them have one common goal - to have their productions distributed on television, in movies theaters or in video stores. The American television networks are inundated with producers and distributors worldwide seeking to have their programs aired in the U.S. Having our own television networks results in OBN having a guaranteed outlet for the programming produced by its affiliates, and affords the Company the opportunity to promote its products and services inexpensively.
The Company will not be dependent on Nielsen ratings as a basis for attracting advertising dollars, but by interesting and differentiated content instead. We believe that advertisers who are continually seeking new markets see the value in placing their advertisements with our programming. However, we must get our message directly to the advertiser, in many cases bypassing the large traditional advertising agencies. Thus, we employ a direct marketing approach to advertisers.
OBN's vertically integrated flat organizational structure allows us to minimize costs and make quick decisions. Generated revenues will cover the cost of operations, while outside funds are raised for larger productions. Our business model includes increasing the Omni, ASTN and POD affiliate bases (i.e., number of viewers) by attracting televisions stations with our original programming and with programming that cannot be seen elsewhere. We incorporate bartering and revenue sharing to further reduce costs and risks. Fixed costs are considered undesirable. Programming content is most often obtained via licenses with independent producers who have completed projects ready for airing. Thus, our production cost is limited to inserting
commercials and "wrap-around" commentary by our hosts. We air "family friendly" programs, and produce programming that we believe will appeal to foreign and domestic markets. We are very cognizant of the fact that we do not need a huge audience for the Company to be profitable. In addition to the television networks, we are increasing our activities in the area of television syndication. Our success in syndicating the Four Tops television special has clearly demonstrated our abilities in that area.
