VIDEO: Backstageplay Inc (CVE:BP) on Music Industry Gamification
Backstageplay Inc (CVE:BP) (FRA:DOZB) CEO Scott White visits the Midas Letter studio to talk to James West about the growing trend of gamification. White explains that Backstageplay’s platform is geared toward the music industry and helps artists attract more fans and concert-goers while providing fans with once-in-a-lifetime experiences. As a result, Backstageplay is creating a previously untapped revenue stream for artists but uses a plug-and-play content platform that minimizes risk. The platform recently rolled out with Daughtry and James Maslow, but White sees broad applicability across all fandoms, such as WWE, the NFL, and internet influencers.
James West: Hey, welcome back to Midas Letter Live. My guest in this segment is Scott White; he’s the CEO of Backstageplay Inc., trading on the TSX Venture under the symbol BP. Scott, welcome.
Scott White: Thank you.
James West: Scott, Backstageplay is a sort of a gamification for celebrities that gives them the ability to connect with and interact with their audience at a much higher rate. What exactly does Backstageplay do?
Scott White: So we build and operate technology, primarily focused on gamification, where we provide a network so that a fan and an artist can connect together. And essentially, a fan plays games, they get on leaderboards, they get to the top of the leaderboard, and the objective is to win life-changing prizes that money can’t buy.
James West: Right, like backstage pass?
Scott White: Like backstage passes.
James West: That’s where this Backstageplay comes from?
Scott White: Absolutely.
James West: It just dawned on me. Nothing slow about me here today. So for what kind of celebrities are you targeting specifically?
Scott White: Initially, the platform is geared towards the music industry. So we’re looking at small, medium and large sized music artists, heroes, others, you know, that have an attractive fan base, a significant fan base. And, you know, essentially in the process of trying to convert those fans into a membership, top up, and provide a revenue share with the artist.
James West: So at the end of the day, this is a way for the artist to attract a bigger fan base, engage them with their game, and then get them to the concerts?
Scott White: Yeah. I mean, the music industry is having difficulties these days, and you know, when an artist is down and they’re not touring, the cash flow and the generation of revenue is slower. So we’re providing a brand new revenue channel for each artist and, in fact, the music industry.
James West: Okay. And so what does the revenue model look like?
Scott White: So it’s a 50/50 revenue share with the artist, after Backstageplay’s costs. Typically, we expect that a fan will spend $4.99 per month, or approximately $4.99 per month, and we’ll get them to top up throughout the course of a year with another $50.
James West: Okay, so that’s not too onerous for the fans, and it’s significant for the artist over time.
Scott White: Absolutely.
James West: Great. So you’ve got currently, you’ve just started this?
Scott White: We have.
James West: Just rolled it out, and so you’ve already got two artists that are taking advantage of this platform?
Scott White: Yes.
James West: Daughtry and James Maslow. Now, James Maslow has 3 million followers on Twitter, 1.8 million followers on Instagram, 536,000 subscribers on YouTube…that’s pretty significant.
Scott White: It’s decent. They would be considered a small artist.
James West: Is that right, eh? And so, James Maslow is in the early part of his career, where he’s growing his fan base, and so for him this is a no-brainer, I’m assuming?
Scott White: Again, it’s a revenue stream that doesn’t exist for the artist.
James West: Right. And how much does it cost to build and maintain this platform?
Scott White: So to turn around an artist, white label, for example – so it’s one technology platform, with multiple white labels on top, and each artist would represent a white label. If they want a website connected and they don’t have a website, which would be unusual, you know, it’s a couple of man-days of development; if we are not building a website and we’re integrating right into their social media platforms, it’s less than that. So it’s not significant for Backstageplay to launch an artist.
James West: Okay, so, I mean, what artist wouldn’t want to do this?
Scott White: Well, we’re about to find out. So you know, we have, we’ve just really been testing this thing for the past several months. We have two clients that are live today, we have a number in the pipeline, and we are accelerating those potential groups in the pipeline because we have finders that are out there in Los Angeles that are agents and representatives of the music industry.
James West: So this is solving a pretty major problem for artists, which is growing their fan base.
Scott White: It’s quite disruptive.
James West: Yeah. The engine on the backside, though, is not something that you’ve just developed brand new; it’s something that’s proven already.
Scott White: Right. So you know, I’m an online gaming veteran; I’ve been in the industry since it began in 1998, and through another company, we built a technology platform that has processed, you know, billions of dollars in transactions and wagers, and it’s that technology platform that we’re using at Backstageplay.
James West: Great, okay. So then, what is sort of the volume of artists that you expect to onboard, in what time period?
Scott White: Yeah, so we’re hoping, if we look at three a quarter – and again, it’s going to depend on the size of the artist. It’s a bit of a process to get through the development of creative, and to get everybody in the band to approve it, but if we put together a three-artist launch per quarter, you know, 9 to 12 acts per year, in our first year, we think that that would be a decent-sized business.
James West: Sure. And so, what typically, or on average, would you expect each artist to represent in terms of annual revenue, bottom line, to the company?
Scott White: Yeah, so we’re just in the process of learning what the KPIs are going to be at this point; we don’t have them yet. But our model is that we will convert approximately 7 percent of what we would call a hardcore fan, and we use the YouTube subscriber number as that number, into a $4.99 membership per month, and then get them to spend an additional $50 per year. So with an artist that has half a million users, half a million subscribers on YouTube, converting 7 percent, with that $50 spend per year, translates into about 350,000 per month. So it’s a $4 million business for a smaller artist; a much larger artist, that would have sort of a 10 million plus fan following, converting at 7 percent with that additional $50, translates into about a $6.5 million per month business.
James West: Hmm. So it sounds to me like this is essentially for the artist, after you get through the creative process, a plug-and-play platform that you don’t actually have to develop each time?
Scott White: No, that’s right.
James West: And it’s just re-skinning it with a new artist sort of front?
Scott White: Correct.
James West: Wow. So that strikes me as extremely, you know, sort of capital efficient from an investor perspective.
Scott White: Yeah. The margins on a white label platform, you know, to run and operate a platform with five clients, you’re probably looking at about 3 million a year. So you can cash flow, you know, with five decent-sized clients, cash flow something in the vicinity of 35 million, so your margins are 90 percent.
James West: Wow.
Scott White: The great thing about the social gaming sector is that we don’t have to acquire the fan; the fan is already there. There really isn’t a cost in terms of prizing, because these are typically virtual prizes that money can’t buy, like backstage passes, and so therefore, the two most expensive parts of the online gaming sector don’t exist in this model.
James West: That’s interesting. How many artists are there – like, what’s the global market for this, potentially?
Scott White: Well, you know, literally every artist that is of decent size will, at some point, gamify what they do; but we also believe that the music industry is just the start. We think that there is applicability to any professional, anyone that has a following, any hero. So all the way from, you know, WWE to internet influencers down to the NFL and any kind of professional sports, e-sports, etcetera.
James West: And how do you attract the artists? How do you get them to join you?
Scott White: Yeah, so we have a great Board of Directors and team in Los Angeles, primarily veterans in the music industry that are either currently agents or advisors to the music industry, or they’re clients, or they’re lawyers, or others in the industry. So that’s basically the tap for us.
James West: I see. Internal trapline.
Scott White: Indeed.
James West: That’s handy. Who else does this in the world?
Scott White: No one does this. We do have competition in the fan management side of the business, so what that would mean is providing, you know, peer-to-peer opportunities for fans; but no one really is looking at the gamification, social gaming aspect of that engagement.
James West: Mm-hmm. So does this platform allow the artists’ top fans to gravitate towards sort of the ultimate prize, which is backstage access at every show?
Scott White: Yes. In fact, Chris Daughtry is doing that right now; we have Chris giving away front row and then backstage passes to leaderboard leaders on his tour today.
James West: And leaderboard leaders would then be people who are most often playing the game?
Scott White: Correct.
James West: Wow. Sounds like a spectacular model. Where’s the downside in all of this?
Scott White: I don’t think there’s a lot of risk. You know, we think that this is, the social gaming sector is now a $4 billion sector with gams like Candy Crush; it really hasn’t been used to zero in on fan engagement, and we think that there’s an opportunity. You know, a fan wants to touch their hero; the hero wants to touch their fan; it’s all going to be gamification at some point, and we believe that because we’re first movers, we have a really good stab at creating that market.
James West: Sounds fascinating, Scott. We’re going to leave it there for now. We’ll come back to you in a quarter’s time and see how you’re doing. Thanks very much for joining me today.
Scott White: Thank you so much.
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