Dolphin Digital Media: Making Social Networking Safer for Kids
The following is an interesting story on a company outside of the bio-med and healthcare sector which I became aware of through my activities in the social media and networking space. It will also be of interest to parents and others who are concerned about the safety of children on the Internet. I do not own any shares of DPDM yet, but will be tracking the Company to see how their business plan progresses over the next few months.
Dolphin Digital Media Inc. (DPDM.OB) develops social networking websites for young audiences based on top Nickelodeon programming content as part of a 10-year license with Dolphin Entertainment. Dolphin is also committed to making these online communities safer from online predators and cyber-bullying and developed the underlying technology in association with companies such as Novell (NOVL), utilizing biometric fingerprint identity verification and other security features.
Earlier this year, DPDM announced a $700,000 private placement, which was led by management, insiders, and existing investors. The financing represents the first in a series to secure a total of $3M for estimated cash requirement to fund the Company's strategic plans and operations. The initial financing is sufficient to fund the first phases of planned product launches, including the associated marketing initiatives.
DPDM holds a worldwide 10-year license to all of Dolphin Entertainment's online rights for current and future properties and popular
Nickelodeon television shows such as 'Zoey 101', 'Ned's Declassified School Survival Guide', and the 'Roxy Hunter' mystery movie franchise. All of these shows are distributed on a global basis into more than 100 countries. Dolphin's most recent completed project is a television musical called 'Spectacular!', which stars Victoria Justice of 'Zoey 101'.
In late January, DPDM agreed to acquire Anne's Diary, Inc., which also provides the Company with full ownership of the proprietary rights to the biometric technology it now licenses from Anne's Diary. Anne's Diary was a privately held Canadian company which previously retained a 10% royalty to all revenue derived from the use of biometric identity authentication technology.
DPDM operates three business units, including the following:
1.) Dolphin Digital Media, U.S., is the developer and operator of secure online communities for young audiences based on Dolphin's core popular brands and integrating the Dolphin Secure online biometric login technology platform.
2.) Dolphin Digital Media, Canada, operates Anne's World, which is the licensee of
www.annesdiary.com . This site is the world's first secure social networking site (using the Dolphin Secure technology) for girls in the 5-14 year-old age range.
3.) Dolphin Digital Media, U.K., is the developer and operator of Plays on the Net (playsonthenet.com), a comprehensive global online theatre community for aspiring playwrights, and Curtain Rising (curtainrising.com), a user-friendly search engine as well as print magazine that enables theater-goers to locate productions, venues, reviews, and other information on a global basis.
The product offerings for DPDM include the following:
1.) Dolphin Secure is an innovative online security system that allows parents to have the tools to protect their children while they are using computers inside the home. Dolphin Secure allows its users to experience the full and expanded attributes of a traditional social network (limited to those 18 years of age or younger), but without the concern of online predators and cyber-bullying as a solution to what the larger players in the social media space claim there is no way to counteract.
2.) Dolphin Safe Surf protects children while they surf the Internet by only allowing access to previously approved and carefully screened sites based on parents chosen site rating level.
3.) Dolphin Chat is a proprietary chat service that will allows users to chat only with other children in the Dolphin Secure network that have been authenticated with a fingerprint scan and approved by the parent based on the security setting selected by the parent.
4.) Dolphin Secure Email Forwarding forwards emails to a private, personalized Dolphin Secure page, in a similar fashion to Research In Motion's (RIMM) Blackberry service, enabling a child to receive all emails from friends and family without the risk of receiving live chat requests from strangers.
5.) Dolphin Fan Clubs provide online fan club and interaction for the Dolphin Entertainment brands, allowing children to have access to their favorite children talent, media, gaming and other product offerings.
6.) Future Product Launches will include the Dolphin Talent Network, Dolphin Moms, and White Label Partner Sites.
Last November, Dolphin Entertainment secured more than $100M in financing to produce and market six feature films through Continental Entertainment Capital, which is an affiliate of Citigroup (C). DPDM holds the exclusive, worldwide 10-year license to develop this content (as well as the Nickelodeon television content) for use in creating secure social networking sites and other digital media ventures such as online fan clubs, video/music downloads, and branded merchandise sales.
Bill O'Dowd serves as the Chairman/CEO of DPDM and as President of Dolphin Entertainment; so the two companies have a strong relationship and complement each other. The first feature film to be produced is 'Soul Surfer - The Bethany Hamilton Story', an inspirational true story about a well-known female teen surfer who lost her left arm in a shark attack and overcame the debilitating injury to become a professional surfer. Other films to follow will cover a wide range of genres, including musicals, romantic-comedies, and thrillers.
DPDM has about 54M shares of common stock outstanding on a fully diluted basis, with a high percentage owned by management, insiders, and committed investors – which was illustrated by the $700K private placement to provide funding for the Company's initial product launches and marketing campaigns. Currently, there are 48.6M shares outstanding, with 1.4M additional shares represented by a convertible note and 3.6M shares exercisable at $1.36 through outstanding warrants (which would provide about $5M in cash to DPDM if exercised).
The combination of using technology to ensure the safety of children online, providing unique content which is targeted to a younger audience, and developing social media networks for an underserved population will offer plenty of growth opportunities for DPDM in 2009 and beyond as the it represents the first to market company in this niche space, similar to what Facebook and MySpace have accomplished for the overall social networking space. However,
this article at TechCrunch reveals that MySpace kicked off 90,000 registered sex offenders from its site over the past two years, many of which migrated to Facebook.
Online security for children is very important, with
85% of parents responding that their number one media concern has shifted from television to the Internet. Other statistics at the preceding PDF report link indicate that 32% of teens have been contacted by a stranger while online and 55% of youths age 12-17 in the U.S. use online social networking sites.
The business model is highly scalable as DPDM can launch branded and partnered social media websites in a matter of days with little incremental costs since the back-end administrative and technology infrastructure is already in place. The products are ready for market launch and scheduled to go live next week on April 6 and the company will target the U.S. media during the month of April in a marketing campaign.
Dolphin Secure costs just $60 per child per year or $5 a month with a target market that is large and could reach 1 million subscribers by capturing 2% of the U.S. and Canadian population which is age 6-15. One million subscribers would translate into $60M in revenue from Dolphin Secure alone, which is over 2X the Company's current market cap of about $27M. DPDM has a cash burn rate of less than $200,000 per month (excluding marketing costs) and only needs about 4,000 subscribers per month to reach cash flow break-even.
The management team has extensive experience in children's entertainment and the close relationship with Dolphin Entertainment provides content that will generate traffic immediately from younger audiences. Another major source of demand for the Company's products will be from parents who are looking to protect their children (for very little cost of just $5 per month) on the Internet while allowing them to access a secure web portal for interacting with their friends and enjoying popular content.
$4.34 (03/30/09)
