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Table of Contents
FreeTV Antenna – Opportunity Overview ……………………………………………..………. 3
Market Entry and Market Penetration Strategies ……………………………….……….... 7
Marketing Mix and Go-to-Market Strategy ………………………………………..………… 11
Manufacturing and Distribution Strategies ……………………………………..…………… 14
Product and Brand Awareness …………………………………………………………………….. 16
Distribution Channel Strategies …………………….……………………..……………………… 19
Market Opportunity and Target Markets ...……..…………………………………………… 23
Customer Care and Administration ………………………………………………………………. 32
Competition …….…………………………………………………………………………………………… 33
The Future …….……………………………………………………………………………………………… 34
Summary and Conclusion ………..……………………………………………………………………. 35
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FREETVSM ANTENNA – OPPORTUNITY OVERVIEW
FreeTV has developed a revolutionary, patented, hybrid product that is the most advanced,
powerful and user-friendly antenna in the world. The Free TV antenna delivers HD quality
reception at an affordable price of $199 (MSRP) and is operational in minutes with an
omnidirectional range of 125 miles. The antenna is available with a five-year replacement
warranty and can be delivered in 48 hours. The rollout of this product is targeted at markets that
have traditionally been unable, or unwilling, to subscribe to traditional cable and satellite TV
services due to affordability or simply being unwilling to pay fees that average $70-80 per month.
Consider the following two scenarios. The scenario on the left depicts monthly and five year cost
for a traditional cable solution whereas the opportunity utilizing the FreeTV antenna as depicted
on the right is a savings of almost $6,000!
•Basic Cable cost month $69.00-$79.00•4 Set top boxes 5.95 x4 = $23.80•Total Monthly cost $102.80
•Annual cost $1233.60•Five year cost $6,168.00
•Basic Cable cost month None Required• Set top boxes None Required•Total Monthly cost Zero Cost
•Annual Cost Zero•On time cost $199.00•Saving s next five years + $5,969
CUT the CABLE!
The antenna receives signals from up to 125 miles from broadcast antennas and is
omnidirectional, thereby maximizing the number of available channels to the user. Key product
attributes that set the FreeTV antenna apart from others who participate in the TV antenna
market are the HD clarity of the picture and the ability to support up to eight (8) televisions
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without the use of a converter or set top box. With a suggested retail price of $199, the payback
for the average cable user is less than three (3) months. The antenna will be covered by an initial
one-year replacement warranty and an optional extended five-year warranty will be available for
$19.95.
The product is highly attractive for technology distributors, retailers, associations and affinity
programs, with product attributes that set the FreeTV antenna apart from similar products
including:
- omnidirectional capabilities, pulling a full spectrum of channels being rebroadcast
- US and internationally patented
- HD quality TV picture
- affordability
- range of up to 125 miles; no comparable product in the market
- no disruption with weather such as heavy rain or snow
- operational within minutes
- supports up to eight television sets without converter or set top box
- one year replacement warranty with an available extended five-year warranty
In addition to the potential channels defined above, consideration is being given to expanding
the distribution model to include lease and rent-to-own programs through furniture rental
companies, as well as providing consideration of rental agreements with several financial
institutions. FreeTV will also offer a “white label” capability that will enable partners to deliver a
product tied to their unique brand.
FreeTV is a sales and marketing organization created with the express purpose of providing a
highly flexible, highly reliable TV antenna product to domestic and global markets. It began
development and field testing in 2008 and has successfully sold almost 200 units across North
America, all of which are still in use with no defects. With patents that date to 2008, FreeTV is
well positioned to capitalize on the unique capability of its antenna to target specific consumer
and commercial markets. FreeTV’s senior management team is comprised of sales and
marketing, financial, and engineering resources with experience across all media and geographic
markets.
Implementation of the marketing strategy will rely extensively on the efficient use of third party
manufacturing and distribution capabilities to support the go-to-market strategy outlined in the
next section, Market Entry and Market Penetration Strategies. Customer care and support will
be managed internally so that FreeTV can maintain a very key focus on service and support issues
encountered by those who purchase the product, enabling FreeTV to quickly address technology,
installation or other concerns that arise.
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The FreeTV antenna will be discounted to a wholesale price level that affords its distribution
partners the opportunity to achieve a high margin, while also leaving the partner with the
opportunity to allocate up to 20% of the retail price of the product toward product promotion
activities. Recognizing the critical importance of establishing brand and product recognition
quickly, FreeTV intends to directly allocate in excess of $11M in year one (see page 12) to support
distribution partners and their sales efforts, effectively spending more than $27M including
incentives offered through channels.
In addition to use of distribution channels, FreeTV’s marketing strategy will rely extensively on
“guerilla marketing”, or one-to-many, with a particular emphasis initially on using this strategy
to communicate product and brand capability to the senior citizen sector. Specifically, this effort
will involve face-to-face interaction with senior citizen centers in the geographies where sales
efforts are targeted. Based on the anticipated success of this marketing strategy, efforts will be
expanded to other geographies.
Guerilla marketing is also anticipated to be an effective tool to develop brand and product
awareness in geographies where there is a high concentration of one or more customer
segments, e.g., low income, Hispanic, senior citizen, or a combination of more than one of these.
Accordingly, a significant amount of the $11M direct marketing budget has been tentatively
allocated toward a one-to-many approach to targeting specific geographies and segments.
Marketing will be focused on several different outlets to promote the FreeTV antenna including
media advertising (i.e., radio, TV, and print), website promotion, social media (including banner
ads on specific sites), and cooperative advertising programs with partners. As a sales and
marketing company, FreeTV will utilize efficient B2B /B2C strategies; that is, all leads generated,
whether direct or through the website, will be referred to distribution channels for fulfillment.
FreeTV recognizes that a major key to establishing its success as an influential player in the
consumer and commercial antenna marketplace is extensive, efficient and effective marketing,
as well as sales and promotional campaigns. With that in mind, FreeTV intends to aggressively
target and penetrate this opportunity on a national and global basis with its pioneering and
patented technology.
Key factors for success with FreeTV’s marketing and sales programs include:
- targeted market alignment and a focus on execution globally
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- strategic business alignment and adherence to plan for economic optimization of
delivery through managed outsourcing and contract manufacturing and distribution
- an efficient internal operations and support organization to identify and track
customer and product issues
- ensuring agility and adaptability to market
- increasing global buyer awareness with target marketing through all mediums
- leveraging relationships with channel partners
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MARKET ENTRY AND MARKET PENETRATION STRATEGIES
The strategies for both the initial launch and ongoing positioning for FreeTV’s technologies and
pioneering FreeTV antenna and Internet services will be to:
- position the FreeTV antenna as the most advanced, affordable, powerful and user-
friendly antenna product for senior citizens households, both domestic and globally
- position the product as an inexpensive, effective alternative to viewing many Spanish and
English speaking channels for free, utilizing a targeted advertising and marketing
approach to Hispanic households
- position the FreeTV antenna as an efficient overhead savings product to the largest retail
commercial end-users
- position the product as a viable alternative to those who are ”zero TV” households (those
who have eliminated their cable TV subscriptions) or those individuals with lower or fixed
incomes
- expand the awareness of the FreeTV antenna and future Internet services through the
effective use of supportive marketing and advertising programs that motivate potential
consumer and commercial end-users to purchase the product, as well as to educate these
potential buyers on the pitfalls of purchasing ineffective antennas marketed through
misleading and false advertising
- offer affordable five-year warranty protection for all FreeTV antennas including repair and
replacement as necessary
- consistently reinforce FreeTV’s message with potential consumer and commercial end-
users using target specific and broad-based marketing and advertising programs, as well
as potential media partnership programs
- emphasize the 50 to 70% more FreeTV content provided by the antenna’s ability to draw
signals as compared to the competition
The reception is consistently better than cable and satellite antenna services; unlike cable, there
is no disruption with weather such as heavy rain or snow. The antenna has a payback period of
less than 3 months (based on US standard monthly cable rates) and one antenna will service up
to 8 TVs within a single North American household with no incremental boxes or expenses.
Because of its superior product capability to deliver television programming with a short term
payback, FreeTV acknowledges that there will likely be competitors who target technologies to
deliver similar capabilities. An essential element of the long-term viability and sustainability of
FreeTV’s business plan is the need for ongoing product and technology development.
Acknowledging the market leadership of the FreeTV product today, FreeTV will continue to
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dedicate a significant amount of technical resource and R&D dollars to ongoing product
development.
In order to maintain FreeTV’s focus and strategy as a sales and marketing organization, FreeTV
does not intend to manufacture the products internally but will, as with distribution partners,
leverage the capabilities of those companies who have capabilities in a particular area. The use
of contract manufacturing companies will enable FreeTV to drive manufacturing costs to a level
that will make it possible to maintain the required margins for both FreeTV and its distribution
partners. In addition, these relationships will enable FreeTV to quickly scale production volumes
to meet the increasing consumer demand for its products.
The following SWOT Analysis outlines what FreeTV perceives as its overall product and market
positioning. Through an understanding of each of these elements, FreeTV can readily respond to
each of these market attributes, ensuring consistent market leadership.
FreeTV SWOT Analysis
Strengths Weaknesses
Opportunities Threats
•Global sales and marketing centric organization•Competitive price•Unique offering to growing market segment•Product availability•Easy to Operate and Install•Unmatched signal strength•Product and service roadmap•Leadership and relationships•Leverage distribution channels•Not subject to global regulatory concerns
•Market crowded with many products; product differentiation•Competitive threats from overseas companies•Margin erosion•Brand creation challenges•Challenges of staying ahead of development curve •Legal Challenges of doing business in foreign markets
•Lack of Brand awareness in market with penetration success•Potential challenges with installation•Need to define manufacturing and fulfillment capability
•Senior market•Hispanic market•Economic disadvantaged markets•Other ethnic market segments•Nursing homes, secondary care markets•Associations and affinity programs•Global markets, Europe, Asia, Latin America, Middle East, Africa•Distribution domestic and abroad•Alliances both domestic and abroad•MMDS
The Strengths and Opportunities are outlined in the prior section. Recognizing the need to
address the Weaknesses (internal) and Threats (external) is an essential part of the success of
FreeTV, its partners, and its affiliations with associations and affinity programs. The following
outlines how FreeTV intends to address each of these.
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Weaknesses
- lack of brand awareness in market: FreeTV has committed to directly spend $11M in
year one for marketing and brand awareness. This number is in addition to the
anticipated $16M that will be provided by the distribution partners to support their
brand awareness and marketing activities. FreeTV is clearly dedicated to taking
aggressive action to develop brand and product awareness.
- potential challenges with installation: While FreeTV has defined ease of installation
as one of the attributes of product rollout, there will be individuals who desire to have
installation handled for them. FreeTV will have relationships with other entities that
can handle installation on a per unit basis.
- need to define manufacturing and fulfillment capability: A key element of FreeTV’s
Marketing Plan is to identify potential distribution partners to handle fulfillment of
demand created through marketing campaigns and that process is underway. In
addition, FreeTV will establish contract manufacturing relationships that can quickly
scale to meet the anticipated demand.
Threats
- product differentiation: While potentially a threat, FreeTV believes it has a superior
product that is clearly differentiated from competitive products purportedly offering
similar capabilities. With significant investments in R&D, FreeTV intends to maintain
a market leadership position.
- competitive threats from overseas: FreeTV believes that a strong distribution channel
strategy and established relationships with high volume manufactures,
complemented by a strong internal R&D organization, will be successful in
maintaining product differentiation. In addition, FreeTV will continue to develop
and/or pursue additional offerings.
- margin erosion: Without question, initial product rollout will have higher margin
opportunities than those longer term, but the margins afford the channel partner the
opportunity, in conjunction with the investment by FreeTV, to quickly establish a
brand that will guard against margin erosion through increased unit sales and global
reach. Any potential margin erosion will be more than offset by increased unit sales
and the opportunity for expanded global reach. Contract manufacturing and design
efficiencies will support this as well.
- staying ahead of the development curve: FreeTV is making a significant commitment
to R&D and product development efforts. As a sales and marketing organization,
FreeTV will closely monitor opportunities within the defined market segments to
provide additional products. In addition, through its internal customer care
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organization, FreeTV will be able to monitor customer issues that can be addressed
and resolved through product development efforts.
- potential legal issues in overseas markets: Much of FreeTV’s go-to-market strategy is
focused on leveraging third parties having expertise in specific areas and pursuing
opportunities in overseas markets is no different as FreeTV relies on partners who
have a strong overseas presence. FreeTV bas also undertaken efforts to ensure that
there are no legal issues with selling its technology into overseas markets.
Specific to brand creation and brand awareness for FreeTV and its product portfolio, the
following are the key considerations:
- FreeTV is a sales and marketing organization, relying on third party relationships for
manufacturing and fulfillment
- The mantra of FreeTV will be the ease of installation and operation, complemented
by the elimination of recurring cable or antenna TV expense
- sustained excellence in product range, design, reliability and durability
- outstanding support and problem resolution
- adoption of B2B and B2C strategies that leverage relationships with FreeTV partners
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MARKETING MIX AND GO-TO-MARKET STRATEGY
FreeTV has defined a number of vertical segments and is working closely with several
media/advertising firms, each having expertise in particular geographies and/or vertical
segments, to develop an initial allocation of the $11M direct marketing committed in year one.
Part of the challenge (and opportunity) is that the utilization of the various “offline” and digital
options varies by segment targeted. Print media will be far more effective with senior citizens
than it would be with millennials. Guerilla or one-to-many marketing will also be more effective
when focusing development and sales efforts on the senior citizen segment. Digital media,
however, will be a main vehicle for reaching the growing millennial segment.
An initial breakdown and allocation of the $11M direct marketing spend is shown below (note
that market trials in select geographies and verticals will be used to fine tune this allocation
before FreeTV goes past the initial trial markets). Offline and digital media each represent
opportunities depending on the vertical segment being targeted.
MARKET RESEARCH
There are multiple sources available to FreeTV as it seeks to better define positioning of both the
FreeTV brand and the FreeTV antenna product itself. Much of this is generally available today,
whether through research efforts of FreeTV or utilizing third party research firms. Included in
this effort will be an analysis of cable penetration by geography, plotting of all terrestrial antenna
towers to assist in defining markets, household income, buying habits and values by segment.
FreeTV anticipates that conducting secondary research and gathering specific data will be
relatively inexpensive.
FreeTV anticipates, however, that there will be a need to conduct research to follow up on and
validate some of the findings from the secondary research. These efforts could include
household surveys in defined geographies, focus groups, online surveys, etc.
MARKET TRIALS
FreeTV has previously completed extensive secondary research that sheds light on initial
geographic and vertical markets. Based on this initial research, FreeTV proposes a market trial in
no more than three (3) distinct geographies to test, among other elements, different allocations
of the media mix between traditional offline media and digital media as well as an assessment of
the effectiveness of the various media options in creating both brand and product awareness. It
is anticipated that the initial market trial could last up to 120 days and that tweaks to the
marketing mix would be made during that time frame in an effort to maximize the impact of the
marketing spend.
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As a specific example, one target might be a geographic area heavily populated by senior citizens,
but not necessarily dominated by one ethnic group, e.g., Hispanics. Another geography might
focus solely on the ethnicity makeup while a third might target a geography where there is strong
overlap between the senior citizen and Hispanic communities. Part of the reason for segmenting
trials in this manner is to give FreeTV a greater view into how the various buyer attributes impact
the allocated marketing mix.
An additional consideration relates to selection of specific geographies and both the cost and
media efficiency of options available. As FreeTV conducts the initial market trials, it believes that
media efficiency (cost per 1000 or CPM) should be a consideration along with some of the other
attributes that will impact buying behavior (income, existing cable penetration, etc).
OFFLINE MEDIA
Offline media includes “traditional” advertising media, including television, radio, and print,
(including billboards). The challenge with using offline media is that the impact is largely
unmeasurable - at least directly - but it is generally believed that it does have the greatest impact.
It is for this reason that FreeTV’s marketing plan is heavily focused on use of the traditional media.
However, FreeTV also realizes that certain segments are better impacted by online media than
others (please see the summary of proposed marketing mix below).
DIGITAL MEDIA
Digital media continues to evolve, both in terms of the number of options and the overall media
efficiency. Unlike offline media, digital media affords FreeTV the opportunity to more readily
assess the impact of utilization. However, the utility of digital media seems to be largely
concentrated among certain segments, primarily the under 40 population. Nevertheless, digital
media will be used extensively. What looks to be a fairly significant gap between the projected
spend for offline and digital media, however, is offset by the media efficiency of digital.
MEDIA/PUBLIC RELATIONS
Especially during product and company launch, media and public relations will play a key role in
positing both in the marketplace. Activities in this area could include press releases and press
conferences, as well as published articles and blog activity highlighting the uniqueness and value
of the FreeTV antenna. While budgeted as a year one item, this aspect of the marketing mix will
remain an integral part of the marketing strategy, especially as content and internet access are
launched in the second year.
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ONE-TO-ONE (GUERILLA) MARKETING
The strategy behind use of a one-to-one or guerilla marketing approach is to get as close as
possible to the point of purchase, with the intent that doing so yields a shorter term sales/order
cycle than relying on other media opportunities. At the same time, however, FreeTV recognizes
that this type of an approach has a limited product reach since these efforts are highly targeted.
What is truly important here is to acknowledge that no one media element will, by itself, generate
the projected sales activity for the FreeTV antenna. Fueled by market trials, the mix proposed as
an initial draft and breakdown below will clearly evolve over time and be refined based on
outcomes from the various media utilized. However, FreeTV clearly understands the time
sensitivity of market trials and other product and brand positioning efforts and will act/respond
accordingly. This is a great but somewhat limited window of opportunity and FreeTV is clearly
positioning its efforts to respond accordingly.
MARKETING MIX
The following reflects the proposed initial breakdown by media and segment for the committed
year one spend equal to $11M. As defined above, the effectiveness and impact of this mix will
be defined through market trails and will be used as a basis for changes to the mix.
Cost element Percent of spend Dollar allocation
Market research (primary and secondary) 3% $350,000
Offline (print, TV, radio, etc.) 38% $4,200,000
One-to-One (Guerilla) Marketing 38% $4,200,000
Digital (banner ads, web site, etc.) 16% $1,750,000
Media/public relations/bloggers 2% $250,000
Channel incentives/promotions 2% $250,000
Total projected spend (preliminary) by segment is as follows.
Cost element
Hispanics 18+/Low income
Non Hispanics
18+/Low income
Seniors
Small-to-Medium
Business/ Associations
Offline (print, TV, radio, one-to-one, etc.)
$4,100,000 $1,350,000 $2,550,000 $0
Digital (banner ads, web site, etc.)
$420,000 $370,000 $420,000 $220,000
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MANUFACTURING AND DISTRIBUTION STRATEGIES
As a sales and marketing company, FreeTV will contract with a third party or parties to
manufacture the FreeTV antenna. Utilizing a third party will enable FreeTV to maximize cost
efficiency, while providing the capability to quickly scale production of units to meet increased
demand. It is critical that the manufacturing of the product supports the commitment by FreeTV
to 48 hour fulfillment of orders placed through its distributor, retail, association and affinity
program partners.
In order to manage demand generation and fulfillment, FreeTV has internally developed a
logistics management application that provides the following capabilities:
- Sales order management
- Inventory management system (warranty)
- Customer care and maintenance
- Financial reporting
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FreeTV anticipates that not all partners will choose to carry an inventory of the FreeTV antenna.
In those situations where the partner does not inventory the antenna, FreeTV will have the ability
to utilize UPS for fulfillment of orders and shipping directly from the manufacturer to the ordering
entity. This capability will ensure that a 48 hour delivery commitment (from time of order
confirmation) can be met. It will also help manage distribution costs by minimizing the number
of “touches” required for fulfillment of orders.
Other partners may choose to maintain inventory and to fulfill orders directly from that
inventory. In negotiating distribution agreements, FreeTV will strive to include a “best efforts”
clause in the distribution agreement that will support its commitment to 48 hour delivery.
As noted previously, orders may be initiated from a number of sources, including online. Again,
orders initiated through FreeTV’s web site will be routed to a partner for fulfillment; FreeTV will
not manage order fulfillment directly. Partner order and provisioning systems will tie to its
inventory platform so that FreeTV can closely monitor fulfillment and ensure that manufacturing
capabilities are in line with product demand. Once product has been shipped, responsibility for
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operational support rests with FreeTV (reference the Customer Care and Administration
section).
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PRODUCT AND BRAND AWARENESS
With a proven technology, installed in almost 200 locations and with zero defects or returns, the
FreeTV antenna is poised to assume a position as a market leader. To meet this goal, FreeTV will
rely extensively on a clearly defined and implemented plan to create both product and brand
awareness. Even in those situations where a partner chooses to “white label” the Free TV
antenna, awareness of the technology and introduction to specific markets are critical to the
success of the product and FreeTV.
In order to fulfill the opportunity, FreeTV has adopted a number of approaches and defined a
marketing mix that cuts across multiple mediums. Keep in mind that FreeTV has committed to a
direct expenditure in year one of $11M in marketing funds, and this number is supplemented by
funds made available to partners for marketing efforts, yielding a total year one marketing spend
exceeding $27M.
Included as elements of the marketing mix are the following:
o FreeTV web site (freetv.com)
o One-to-one (guerilla) marketing
o Ad dollars dedicated to radio and TV (including cable)
o Local (initially focused on target locales) and national media buys
o Cable TV networks
o Internet pay to click
o Google, Yahoo, Facebook banners
o Banner ads on sites popular with target markets (e.g., Univision, AARP)
o Public relations (e.g., partner alliances and product announcements)
o Search engine optimization
o Active blog and social media presence
FreeTV is currently working with several agencies based on geographies and target markets, each
having varying levels of expertise, to refine the specific marketing mix and allocation of the $11M
year one direct marketing budget.
FreeTV believes that association and affinity programs represent a significant opportunity to
achieve market share in the targeted markets. As examples of initially defined opportunities,
FreeTV will engage in discussions with AARP, AMAC and Team National regarding opportunities
to “white label” the product. AARP and AMAC’s reach into the senior community is significant
and must be leveraged.
A challenge currently being addressed is to better understand how the target markets receive
marketing messages targeted at them. As defined, this will help focus media, PR and advertising
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efforts through those agencies and entities that will achieve maximum product and brand
awareness. As an example, AARP should be a resource in determining how senior citizens get
their information and news.
The following highlights some of the initial forays into relationships and efforts to develop a
focused and targeted marketing message.
- Since up to 80% of a customer’s buying decision (depending on the target market) is
made based on what an individual can learn through the internet, FreeTV will develop
an industry leading web site that is focused on how the product will change lives and
create opportunities. Well written, concise information and storytelling will be critical.
- The web site, freetv.com, will not serve as a lead generation vehicle but will focus on
information and support required to drive awareness and ongoing market
penetration.
- Storytelling is a critical element in developing product awareness and answering the
questions, “Why should I buy this product?” and “How will it impact my daily life?”
With an eye toward this positioning, FreeTV is working with a media company that
will deliver “news-like” content that tells the story.
- Content developed through this effort will find its way to FreeTV’s web site and
content will be refreshed periodically based on what is learned about the target
markets.
- Acknowledging that there is significant broad scale appeal to the target markets, the
initial market launch will be handled on an iterative and incremental basis, i.e., select
a target market and small number of geo locales to run test marketing and validate
target customer sets within those geographies.
- FreeTV is engaged in discussions with a media company surrounding the development
and placement of short (3-5 minute) infomercials that could, for example, be targeted
at QVC or the Home Shopping Network. These will focus on product differentiators,
as well as the ease of installation and use, among other themes.
- Social media will have perhaps its greatest play with millennials (those born in the
early 1980’s or later). These individuals are highly mobile and typically do not
subscribe to either cable TV or newspapers. However, they actively use social media
and stream programming, and access to news, individual sports (e.g., X-Games and
other nontraditional sports) and other “basic” programming that is of interest to
them.
- Addressing the rapidly growing Hispanic market, FreeTV is working with several
national media and advertising agencies whose efforts and expertise are focused on
addressing needs and opportunities in the Hispanic community.
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- Through relationships with media companies, FreeTV will create and place banner ads
on the major social media outlets, including Google, Facebook, Yahoo, Ask.fm,
Pinterest, Tumblr, and We Heart It, and maintain a consideration of more business-
oriented sites such as LinkedIn.
- While not anticipated as a problem area, FreeTV will create a “disaster”
communications plan that will enable it to respond quickly to media requests
surrounding product failures or other events.
In addition to a media presence, FreeTV is developing plans to provide specific incentives for
partners’ representatives, operating within the partner environment, to focus on creating brand
awareness. In essence, FreeTV will fund a resource in year one to ensure mindshare within the
partner’s sales and marketing environment, and to focus on those activities that will generate
sales of the FreeTV antenna. In addition, FreeTV is considering funding an in-house FreeTV
representative who would serve as a product manager for the partner and assist in defining
activities that will generate sales activity.
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DISTRIBUTION CHANNEL STRATEGIES
An effective distribution channel strategy is essential to FreeTV’s long term success. To that end,
FreeTV has targeted a number of potential distribution partners across a broad range of
capabilities and scope, including traditional distributors, retailers, associations and affinity
programs. Each of these channels will help fulfill a need to address certain market segments. In
addition, FreeTV will maintain an aggressive web site to facilitate communication and servicing
of consumer inquiries and opportunities. As a B2B company, the web site is not intended to
generate sales activity and FreeTV has no plans to handle sales directly; rather, any leads
generated will be referred to channels for fulfillment.
The appeal to the distribution channels lies in the fact that FreeTV’s products are not simply a
replacement product for products already carried nor do they address the markets typically
targeted by a distributor. Note that, while retail outlets, association and affinity programs are
focused on a specific consumer set, the products also represent incremental sales and goodwill
opportunities for them.
A second, and perhaps more significant, consideration for FreeTV’s distribution partners is the
margin opportunity to be realized through the sale of each unit. The margins to the distribution
channel will yield an opportunity for the channel partner to utilize 20% of the retail price of
FreeTV’s products to support marketing and sales activity by the partner, while still enabling
them to attain margins that exceed what they experience in their current core business. In
pursuing these relationships, FreeTV has defined a number of requirements, but the primary
focus is on defining relationships that are complementary and mutually beneficial to both
entities.
Key elements sought by FreeTV in establishing partner relationships include:
- established presence in the geographies targeted
- strong name recognition
- strong marketing thrust in support of sales of the product portfolio
- ability to create demand (with support from FreeTV) and quickly fulfill demand
- commitment on the part of the partner to support FreeTV’s sales and marketing
efforts and to initiate activities to drive sales activity
- willingness to commit to co-op marketing efforts that generate increased demand
for FreeTV’s product portfolio
From a channel partner’s perspective, FreeTV perceives the key requirements to be:
- ability to acquire product at a wholesale price that will enable promotional expense
while achieving desired margins
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- FreeTV to provide marketing and brand development support
- FreeTV to provide a product and service roadmap that drives a long term
relationship
- FreeTV to host a back end support/customer care organization to address product
and technical issues
The use of channel partners permits FreeTV’s marketing and sales organization to focus on global
sales without the organizational challenges of traditional supply line distribution and
manufacturing.
FreeTV has established a list of strategic partnerships and alliances to potentially strengthen and
further its global business model and profitability. Each of the identified prospects has the
capabilities sought by FreeTV, and FreeTV believes that it can meet the demands of the partner
in an effective and cost efficient manner. Senior management of FreeTV has relationships with
many of the identified companies that will help quickly establish credibility and relationships
between the two entities. In addition, the management team will continue pursuit of further
agreements with other organizations capable of providing exceptional or exclusive value-added
functions for all of its FreeTV antenna product end-users in order to achieve greater sales and
optimum profit results.
FreeTV Distribution Partners (Preliminary)
Distribution
Retail
Affiliation
Service providers
Associations
FreeTV anticipates that one or more of the identified potential partners may be in a position to
fulfill multiple roles relating to manufacturing, distribution and support. Where possible, FreeTV
will strive to define those whose capabilities span multiple disciplines. At a minimum, FreeTV will
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pursue relationships relating to contract manufacturing and to fulfillment. It is anticipated that
the customer care organization will be an internal company function, enabling FreeTV to
maintain a keen awareness of any product and/or support considerations identified by the
purchaser of its products, regardless of channel.
The following is the anticipated list of strategic partnerships and alliances of FreeTV:
Alibaba group is a family of Internet-based businesses that makes it easy for
anyone to buy or sell online anywhere in the world. Since its founding, it has
developed leading businesses in consumer e-commerce, online
payment, business-to-business marketplaces, and cloud computing,
reaching Internet business in more than 240 countries and regions. Alibaba
consists of 25 business units and is focused on fostering the development of an
open, collaborative and prosperous e-commerce ecosystem.
FreeTV has targeted Amazon for distribution, manufacturing, and service and
delivery. Amazon has a Fortune 500 rank of 35 and as of fiscal year-end for 2014,
has 117,300 employees, including almost 2500 IT employees.
FreeTV recognizes the potential advantages of working with the master distributor
for the SMB market space, leveraging both the reach and relationships of this CDW
marketing and sales machine.
Insight is a recognized global provider of information technology (IT) hardware,
software and service solutions to business and public sector organizations. With
approximately 5400 teammates worldwide and operations in 23 countries, Insight
serves clients in 191 countries worldwide and transacts business in 18 languages
and 14 currencies.
AT&T Wireless operates in the non-franchise areas of AT&T. FreeTV can partner
with AT&T Wireless to provide TV and Internet services.
Verizon operates in the non-franchise areas of Verizon Fios. The offering would
actively compete against AT&T franchise areas of satellite and U-Verse, providing
a competitive offering.
Ingram Micro Incorporated, a Fortune 100 company, is the world’s largest
wholesale technology distributor, creating unique marketing programs for
vendors and resellers. They support global operations through an extensive sales
23
and distribution network throughout North America, Europe, the Middle East,
Africa, Latin America, and Asia-Pacific.
Newegg Inc. a leading e-tailer with more than 3 million products and an award-
winning website. Newegg owns and operates over 1,000,000 square feet of
warehouse space in the US alone.
Tech Data Corporation is one of the world’s largest wholesale distributors of
technology products, services and solutions. Its advanced logistics capabilities and
value-added services enable 120,000 resellers in more than 100 countries to
efficiently and cost-effectively support the diverse technology needs of end-users.
Sears/Kmart is positioned as a supplier of electronic, home product and services
throughout the lower and middle classes, all target markets for FreeTV. In
addition, Sears has a nationwide network of installation specialist with capabilities
to install FreeTV antennas, as well as catalog and Internet sales possibilities and
instant brand strength and penetration opportunities.
Team National is a buying coop with millions of members in the US and abroad,
providing membership savings with a wide variety of products and services across
multiple industries. Through their membership program, they are able to provide
value pricing to consumers and businesses alike.
24
MARKET OPPORTUNITY AND TARGET MARKETS
MARKET OPPORTUNITY
The overall size and shifting trends of the potential markets for FreeTV are massive. Globally,
more than 1.4 billion households now own at least one television set. Recent data and trends
show that there are more than 15 million senior citizen households in the US. Additionally,
Hispanics, households with lower or fixed incomes, or households that have eliminated cable TV
are potential customers. There are also approximately 3,000,000 potential retail businesses in
the United States of which up to 70% receive TV signals through regular antennas.
Number of TV households in the United States from season 2000-2001 to
season 2014-2015 (in millions) Season Number of TV households in millions102.2105.5106.7108.4109.6110.2111.4112.8114.5114.9115.9114.6114.2115.6116.32000-20012001-20022002-
20032003-20042004-20052005-20062006-20072007-20082008-20092009-20102010-20112011-20122012-20132013-20142014-2015
The antenna industry is a very fragmented industry. In addition to the major manufacturers
outlined herein and in the investor memorandum, there are approximately 900 antenna
manufacturers and antenna suppliers supplying either United States or global markets that may
become competitors. However, the FreeTV antenna, with its superior hybrid design featuring
superior range, reception, and clarity., proprietary signal meter for easy installation, and multiple
25
frequencies is the” best-of-breed” product in the market today. Through aggressive technology
and design efforts, the product will remain superior to potential competitive products.
While FreeTV anticipates other companies will attempt to mimic its product, FreeTV will establish
itself as the ”preferred” leader and brand of choice in the antenna communication sector of the
marketplace . Further its existing patents and intellectual property will remain a strong barrier
to the development of competitive products by other companies.
While the total number of US and global households having a TV has remained relatively flat,
there is an increasing trend toward more television sets per household. The implication of this
as relates to marketing of the FreeTV antenna is the savings associated with elimination of the
need to have a set top box, an amount that often exceeds $15/box/month.
TARGET MARKETS
FreeTV believes that there are numerous markets in North American for its revolutionary hybrid
FreeTV antenna. By providing an inexpensive alternative to the high cost of cable and satellite
fees with a product featuring superior range, reception, clarity and easy installation, FreeTV
envisions it will successfully penetrate markets within the United States.
The initial target is to reach three core audiences for sale of the FreeTV antenna: seniors,
Hispanics, and other economic classes/minority market targets. The second round will focus on
global expansion inclusive of Europe, Latin America and China. FreeTV’s ability to adapt quickly
to global markets will be based on its distribution relationships and their respective geographic
market coverage. Because TV antenna and cable penetration rates are lower in many
international geos, the overseas markets represent an opportunity to achieve higher growth
rates than those projected for the North American markets.
This phased approach to market pursuit is necessary to ensure that the organization reaches the
stated core sales and EBITDA goals according to the plan. As FreeTV achieves success in these
initial target markets, it expects to introduce Internet services to expand its brand, presence and
loyalty in the North America and target specific global markets.
The following graphic depicts the individual geographic and market segments being targeted by
FreeTV.
26
Hispanic
Market
Retail
Under 35
Seniors
Asia
Low Income
South
America
Small
Medium
Business
Europe
FreeTVMarket Prioritization
:
More specifically, a summary of each of the potential target markets follows:
Senior citizen individuals and households
o provides the best opportunity for successful access, penetration and
saturation levels based on the market’s immense size, television viewer habits
and price sensitivity to high cable or satellite fees due to its lower or fixed
income level situations
o In 2011, the 65 and older population included 5.7 million people 85 and older.
o The population of those 65 and over has increased from 35 million in 2000 to
40 million in 2010 (a 15% increase) and is projected to increase to 55 million
in 2020 (36% increase for that decade)
o there are 25.3 million households of people 65 years of age and older
o the median income of those 65 years of age or older in 2010 was $25,704 for
males and $15,072 for females
o households containing families headed by persons 65 and over reported a
median income in 2010 a $45,763.
27
Hispanic individuals and households
o The Hispanic market presents an incredible penetration and revenue
opportunity for FreeTV’s pioneering FreeTV antenna based on this market
sector’s overall size and income levels. There are over 30 free Spanish
broadcasts now reaching millions of Hispanic individuals who are paying cable
and satellite fees every month for those channels that they could be receiving
free of charge by using FreeTV’s advanced, exclusive and affordable antenna.
o The most populous minority group in the United States is Hispanics,
numbering 52 million in 2011.
o Hispanics are also the fastest growing population group, increasing by 3.1%
per annum.
o The Hispanic share of the nation’s total population is now 16.7% (in 2011).
o More than 50% of the Hispanic population live in California, Florida, and Texas
as of July 1, 2011.
Commercial establishments and other consumer oriented businesses (SMB businesses).
o There are nearly 30,000,000 businesses in the United States. Of these,
approximately 88,000 employ 100 to 500 people and approximately 2.9
million are retailers and food service providers.
o It is not uncommon for many of these SMB businesses to purchase cable and
satellite services as entertainment for their customers; the FreeTV antenna
would represent a cost reduction and service improvement
o Additional establishments, such as hospitals, nursing and assisted living
centers, restaurants, and retailers that have waiting rooms or provide
broadcast entertainment for their clientele are excellent markets for FreeTV’s
products.
o As of January 2015, there are 115 million apartment complexes across the
United States. It is not uncommon for many of these complexes to purchase
cable, satellite, phone and Internet services for their tenants. The FreeTV
antenna would represent multiple opportunities for the landlord to reduce
tenant turnover, add new revenue streams, and improve tenant services.
Individuals or households on lower or fixed incomes who cannot afford high cable and satellite
fees:
o More than 1 million cable television subscribers in the United States canceled
their service in 2011.
28
o It is estimated that roughly 930,000 customers eliminated cable or satellite
television in 2012.
o It is estimated that up to 22% of the US population has canceled their pay-TV
services for free over the air broadcast TV.
o More than 5 million US homes, according to a recent Nielsen study, have ”zero
TV” and cost was a factor for 36% of these homes.
o The number of people in low income working families is now estimated at 50
million people. This represents an opportunity for market to enjoy FreeTV.
Individuals or households who no longer desire to subscribe to cable or satellite pay-TV
services:
o The total number of subscribers to cable and premium TV services was
approximately 61 million people, paying an average of $70-80 per month for
the services, resulting in approximately $35 billion in revenue for these
operators in 2013
o Free TV believes that a certain number of current subscribers of these
organizations can be converted to its advanced FreeTV antenna and future
internet services
Millennials:
o growing segment of the population
o high reliance on digital media
o typically don’t subscribe to cable or newspapers
o heavy use of social media
Global markets
o In 2013, the global TV market represented 1.2 billion TV households (North
America 39%, Europe 31%, Asia-Pacific 21%, Latin America 8%).
o 5.1 billion people (approximately 78% of the global population) are considered
low income consumers, many of whom are potential consumer targets for
FreeTV’s product.
o The global market is stable and mature with gradual and steady growth, part
of the appeal for FreeTV along with the huge size of the market.
o Up to 70% of the market is currently receiving their TV signals via regular
antennas of inferior quality with substandard reception, range and clarity.
29
TARGET GEOGRAPHIES
There are a number of geographic considerations that extend beyond the “vertical” markets
identified above. Among the considerations are the areas having the largest Latino populations
as represented in the following map. Within each of the top 10 states, there are specific locales
that represent the greatest potential for short term penetration.
Note that, in the above, the numbers represented reflect the following:
- The first number [e.g., California (+3 million)] is the absolute population change in
the period from 2000-2010.
- The second number [e.g., California (27.8%)] is the percent change over that same
time period.
30
The target markets having the largest population of Hispanics are as follows:
In terms of population of senior citizens, consider the following breakdown (according to the US
Census, 2010):
Eleven states had more than 1 million people aged 65 and older in 2010.
States with the highest proportions of older people in 2010 included Florida, West Virginia,
Maine, and Pennsylvania (all above 15 percent).
The West and South regions experienced the fastest growth in their 65-plus and 85-plus
populations between 2000 and 2010.
In 2010, more than 7 out of 10 older Hispanics lived in four states: California (26.9 percent),
Texas (19.2 percent), Florida (15.7 percent), and New York (9.0 percent).
Clearly this overlap of two vertical markets suggests a need to focus initial efforts in those
states where FreeTV can address at least two distinct verticals. This will involve a deep dive
data mining effort to specifically identify target geography/segment overlaps. FreeTV is
currently engaged in discussions with two firms whose expertise is in the area of research and
demographic analysis. In an ideal world, this effort would provide guidance to FreeTV’s
marketing efforts surrounding geographic markets where multiple verticals can be targeted,
31
e.g., finding communities such as the Rio Grande Valley in Texas with a large population of low
income Hispanic senior citizens. An initial effort will be targeted at identifying specific test
markets where FreeTV can validate such considerations as buyer motivation, receptiveness and
access to various marketing and advertising media, suitability of the solution offered by FreeTV,
and buying criteria.
For example, Laredo, TX, a city in the Rio Grande Valley of Texas with a population of 240,000,
has the highest cable penetration rate of any large city in the US. Market research reflects that
this is largely due to the desire for entertainment but limited access to same. As a result, this
largely Hispanic community, a community that has family and entertainment as core values,
relies on cable for their entertainment. Add to that the fact that advertising and media rates in
the Valley are among the lowest in the country and this becomes a potentially significant
market for FreeTV’s products.
Data mining will focus on the following analysis of six key variables:
Segmentation
based on:
Segmentation Attributes
Geography Metropolitan Suburban Rural
Socio-economic
status (SES)
Upper class
Middle class
Poverty class
Age Baby boomers (50-68)
Generation X (36-49)
Millennials (20-35)
Ethnicity Caucasian Hispanic African-American
Asian Other
Media delivery Cable Satellite Streaming internet
Over the air antenna
None
Housing Home ownership
Rent – single family
Rent – multiple unit (<8)
Rent – multiple unit (>8)
CRITICAL SUCCESS FACTORS
The critical success factors in being able to penetrate the identified target markets include the
following:
- successful marketing and sales (business-to-business) programs to all of the largest
potential commercial end-users in the United States with regard to FreeTV’s product
and its anticipated value-added premium content subscription packages and services.
- establishment of an effective external and internal sales force geared to prospecting
the largest potential retail and other commercial end-users throughout the United
32
States regarding FreeTV’s commercial antenna communications product savings
opportunity
- introduction, awareness, and expansion in support of FreeTV’s unique, money-saving
FreeTV antenna to the commercial market through the utilization of effective and
repetitive marketing, advertising and promotion programs and sales support
programs and activities.
- demand generation programs in conjunction with partners that focus on a “sell
through” strategy, not simply “sell to”. Expectations of FreeTV’s business model are
that it will leverage the strengths of its partners in the areas of distribution and
marketing rather than attempt to create these capabilities internally. Customer
support, however, will be handled internally to ensure that it is able to quickly monitor
and respond to issues faced by those who purchase the product.
33
CUSTOMER CARE AND ADMINISTRATION
The sale of a FreeTV antenna is only the beginning of meeting the needs of an expanded customer
set. The one expectation of all potential customer groups is that the antenna will perform
without issues. Of the approximately 200 trial installations across 26 states, there have been
zero defects and a zero return rate, speaking not only to the reliability of the product but also to
the degree to which the antenna is meeting consumer expectations. While this is certainly a
small sample size, especially in light of the anticipated market growth, the success of the trial
installations supports the potential for a highly successful launch.
However, despite manufacturing controls and other variables, it is likely that some consumers
will have issues and it is imperative that FreeTV have a plan in place to do exactly that. The
product will be sold and delivered with a one year replacement warranty, with a five year
warranty available. In order to be able to quickly respond to customer issues and to achieve
short term resolution, FreeTV will create and staff an internal customer care organization on a
24/7 basis that will be tasked with tracking all issues by source (e.g., product capability,
technology, installation). The customer care organization will be authorized to make decisions
on how best to address the customer’s issue, up to and including exchange of the antenna.
FreeTV will rely extensively on its distribution partners for selling product on a broad scale basis.
Recognizing, however, that their primary role is in sales and distribution, it is not FreeTV’s intent
to burden the distributor with handling exchanges. Instead, it will create a capability through its
customer care unit to gather the required information in order to generate a request for advance
replacement shipments that will quickly restore the customer’s confidence in the integrity of
both the product and FreeTV as a company; this is an essential element of creating positive brand
awareness throughout the target markets.
34
COMPETITION
Although there is no competitor offering anything having the capabilities and product strengths
of the FreeTV antenna, FreeTV’s senior management team does recognize the opportunity for
new entrants, as well as challenges from some who currently participate in the antenna market.
Competitors of FreeTV are those organizations with the potential to capture sales that could have
been executed through the sale of the FreeTV antenna, including those firms who use false and
misleading advertising to sell their inferior product lines. The following is a list of those
organizations that the leadership team considers to be the most competitive to the FreeTV
antenna in both North America and globally.
specializes in broadband directional, mudflap and circularly polarized antennas;
MoHu Curve and Leaf have 30 mile reach
leader in production of set-top boxes, home networking accessories, digital media
devices
manufactures and markets one-way satellite and over the air antennas, wireless
broadband, and two-way real-time broadband communications
design and development of several families of high gain, compact OTA antennas
markets its antennas as having more elements than other antennas, is more
directive and reduces or eliminates ghosting
markets low-cost antenna, primarily through the use of infomercials
Those who have antennas with similar capabilities generally have a range of no more than 35
miles. The challenge is to differentiate other attributes that will negate the apparent “me too”
feature set promoted by competitors. One other consideration is that potential customers in
large urban areas will generally be within that 35 mile radius, suggesting that they may lean more
toward the less expensive antennas. Company brand, product capability and ease of use, and
customer support will be key differentiating elements.
35
THE FUTURE
The US markets represent the greatest short term opportunity for market penetration and sales,
although accounting for less than 40% of the total worldwide households with TV sets. To
capitalize on the global opportunity, FreeTV will, over the next 3 years, expand its distribution
presence to include access to these other geographies. It is anticipated that several of the
distribution partners initially targeted for US distribution will have the capacity and capability to
support markets outside of the US. By putting in place the support infrastructure to focus on the
US market, FreeTV will be well positioned to strategically expand into other geos.
FreeTV will continue to evaluate new markets, new associations, and key partnerships that will
continue to add value, extend sales and generate recurring revenue streams for all in this
segment of the TV market. It will also consider broadcast stations, content providers, alternate
channels, incremental product and service offerings, and market niche plays, both domestically
and globally. Its product management strategy will be focused on developing and/or partnering
to develop products that:
- are state-of-the-art
- are affordable for the targeted markets defined herein
- offer significant revenue and margin opportunities for partners
- have international acceptance.
Consistent with this, FreeTV has plans to introduce internet access over the near term. This will
create not only a competitive advantage but a significant recurring revenue stream.
The following graphic depicts FreeTV’s view of an expanded strategy and focus over time.
36
SUMMARY AND CONCLUSION
FreeTV is an emerging, innovative, global technology-based sales and marketing organization
with a patented, game changing product. Combined with a progressive sales and marketing
model, FreeTV is designed to capitalize on the changing trends in expansive market opportunities
in the highly fragmented global TV distribution markets. Initially, FreeTV will produce exceptional
multiple revenues and bottom-line profits for its partners by executing a global sales and
marketing plan and reducing costs through quality managed outsourcing, assembly and
distribution. Beginning no later than the third year after funding, FreeTV will also introduce
Internet access, which will provide a recurring revenue stream.
FreeTV’s omnidirectional FreeTV antenna has been successfully sold in nearly 200 different North
American locations in 26 states, providing a genuine and affordable alternative for individuals
who no longer desire to subscribe to or cannot afford to pay for high cable and satellite fees.
FreeTV has the longest range capability of any competitive product and can be easily installed,
both indoors and outdoors, due to its patented built-in signal finder. The antenna will receive HD
signals through concrete walls and other substrates and will receive unlimited over-the-air DTV
channels, while connecting up to eight televisions to one TV antenna without external converter
boxes or amplifiers. The FreeTV antenna provides the most powerful and versatile antenna
product in the market today, improving reception on an average of 3 to 4 times better than
regular antennas, enabling more viewing options from greater distances.
FreeTV will utilize a number of different distribution channels to take the products and services
to market. While heavily weighted initially toward technology distribution providers, FreeTV
intends to structure relationships with traditional “big box” and electronic retailers, as well as to
create affinity programs with AARP and AMAC, both organizations that are focused on serving
the needs of the senior adult community.
FreeTV is also in the process of identifying target associations, included among them the National
Apartments Association and potentially the National Automobile Dealers Association. In the case
of the former, the opportunity exists for an apartment owner to bundle TV services with rent and
utilities; with the latter, FreeTV can potentially enhance the customer experience of those who
are customers of a dealership. Among other channel considerations are organizations such as
hospital and nursing home/assisted living organizations.
The flexibility and adaptability of the product lends itself well to satisfying several different
consumer expectations, ranging from reduced household expense to access to expanded
37
programming opportunities to revenue generating opportunities realized through a bundling of
services. In short, FreeTV dramatically expands the available market for TV programming.
Although entering a fragmented industry, FreeTV is confident that there is a definite and
significant opportunity to focus on segments of the TV household market that are currently
underserved, ranging from senior citizens to those on fixed incomes, to those who have typically
opted not to subscribe to pay services even though they may have the financial ability to do so.
The FreeTV antenna addresses a unique market opportunity to address not only the economic
considerations surrounding access to services, but also focusing on product positioning that
meets - or exceeds - expectations of consumers.
FreeTV also recognizes that one of the keys to success in serving the potential market is to
establish and leverage relationships with those who have expertise in a particular discipline,
whether that be distribution, manufacturing, marketing, or post-sales support. Using such third
parties not only enables FreeTV to go to market sooner and more efficiently, but it also serves as
an efficient cost model for all parties.
Through FreeTV’s initial product introduction and continuing through the development of new
markets and products over the next 3-5 years, FreeTV is well positioned to achieve a significant
leadership role in the TV antenna space. With the financial resources, management structure,
third party relations and target markets that have an increasing need for services such as those
provided by FreeTV, FreeTV is indeed positioned to take its place as a market and technology
leader.
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