Has anyone done any modelling on how QFX will fund the Big W...

Has anyone done any modelling on how QFX will fund the Big W deal, and the impact on its inventories?

What is the impact going to be on DES for what will be a fairly imminent capital raising round for QFX?

Just like bricks n mortar video stores, QFX needs to purchase sufficient copies of New Release titles to keep its members happy, in a similar proportionate way.

So, it needs to speculate on which titles will be more popular than others, and do this EVERY month with new release titles.

However, unlike video stores, the return cycle is 7 days, not 24 hours, so it effectively needs 7 times more copies of titles than a video store, on a member by member ratio basis. Also unlike video stores, it doesnt have the buying power of a central, large franchise, so its titles are more expensive to buy in the first instance.

QFX is likely to be a vicitim of any success it may have in acquiring subscribers - as, the more subscribers it gets, the less "new Release" titles it has to post out, so effective "utilisation" or cycling of new release title availability to member starts to drop off quickly, leading to fewer member renewals - unless a major CAPEX spend is put in place on a monthly basis to increase proportion of New Release to Members - this is similar to problem that say small ISP's had in the early days with 'contention ratios' - never enough bandwith for customers to attract them to come on (or they do for minimum period), but, cant scale up in anticipation of customers either - catch 22.

So, back to DES with its bricks n mortar businesses - however, this one looks to be problematic even in the short term.

Netflix rented 10 million DOWNLOADS in 6 weeks, effectively putting a stop watch on its online+postal rental model.

QFX claims that Australia is "not ready" yet for download movies, however, recent results from TLS indicate 6 million transactions in last few months, and revived ReelTime.tv (ASX : RMA) in strategic alliance with its new major shareholder, EzyDVD will start to make inroads into this area quickly.

(As a note : MPH is a major supplier to EzyDVD, with solid sales via this channel.)

What is QFX's answer to this dilemma? It has experienced "strong" subscriber growth, but the EBIT to earnings is never quite catching up - and probably never will, unless the catch 22 of significantly more members come on at the same time as significantly new release titles are acquired - all of which means capital is required - unless it wants to risk losing the "new" Big W subscribers.

QFX claims 20,000 titles - of these, some 80%+ are back catalogue, and say 10% are three months old, 10% two months old and 10% one month old - so effectively, a maximum of 2000 titles to go around 25,000 members - all of whom will be wanting the same new release titles at the same time - but with an extra 7 day delay on a video store.

And MPH accounts for less than 3% of this inventory, going on box office titles to sales which lead to rental expectations - so it cant help in any meaningful way (for example, QFX and DES launched a trial VoD service with only two (2) titles (its not a misprint) to TLS's 2000 and ReelTime's 1000+) - and even with the entire MPH library thats cleared, would only make several hundred - but in itself not enough variety or depth to make a "service"

Anyone else see this problem? Anyone care to speculate how ling the $5m raise 2 months back by QFX will last? I punt another 3 -4 months, before the Big W "opportunity" is touted as the reason for another capital raise.

This is going to be a real burden on DES