SurfStitch acquires Garage Entertainment

The online retailer makes another acquisition relating to content.

Published: November 12, 2015PRESS RELEASES

SurfStitch Founders Lex Pedersen and Justin Cameron - Photo courtesy of SurfStitch

SurfStitch Group announces the acquisitions of Garage Entertainment and Production

SurfStitch Group Limited (“SurfStitch Group”) has agreed to acquire Garage Entertainment Aust Pty Ltd and TMG Media Pty Ltd (collectively “Garage Entertainment and Production” or the “Acquisitions”) for a total consideration of A$15 million (a combination of cash and deferred shares).
The Acquisitions create a full media and content spectrum to support SurfStitch Group’s strategy of becoming a destination site for customers to connect with everything action sports related and engage across all platforms.
By leveraging relevant content to attract and retain a rapidly evolving and increasingly sophisticated customer base, SurfStitch aims to significantly enhance customer engagement levels among the three types of action sports and surf consumers (core, enthusiast and mass).
SurfStitch Group reaffirms its FY16 guidance of A$15-18 million in EBITDA, representing 100%+ pcp grow

Overview

Burleigh Heads, Australia – SurfStitch Group (ASX:SRF) announced that it had entered into definitive agreements to acquire Garage Entertainment Pty Aust Ltd and TMG Media Pty Ltd (collectively, “Garage Entertainment and Production” or the “Acquisitions”) for a total consideration of A$15 million on 11 November 2015.

About the Acquisitions

Garage Entertainment and Production produces and digitally distributes premium action and extreme sports long form films and TV content. It has the largest library of actions sports online with over 3,000 titles which it distributes through its own SVOD platform (https://www.garageentertainment.com.au/) and dedicated TV channels. In addition, Garage Entertainment and Production has released some of the most notable titles in action sports including the highly acclaimed Australian documentary ‘Bra Boys’, the TV series ‘The Crew’ which has completed its third season and a top 5 download in the iTunes chart ‘Missing’.

Garage Entertainment and Production is a highly scalable business with extensive distribution channels within its platform. Their SVOD services can be accessed through multiple devices (laptop, desktop, mobile, tablet, chrome and apple TV) as well as through Samsung’s Fearless app and Sony’s Smart TV as a pre-loaded app. Garage Entertainment & Production’s dedicated linear cable channel on New Zealand’s SKY TV is SKY’s fastest growing TV channel in New Zealand. Current plans include linear cable channel syndication in Australia/Asia.

Garage Entertainment and Production is located in Sydney, Australia and was founded by Nick Cook and Mick Lawrence in 2009. Garage Entertainment Pty Aust Ltd forms the SVOD and distribution arm of Garage Entertainment and Production while TMG Media Pty Ltd focuses on long form productions which Garage Entertainment has sole exclusive lifetime rights to distribute. Both Mr. Lawrence and Mr. Cook will remain with the SurfStitch Group overseeing the long form content production for the Group. The Acquisitions will be part of the content network that consists of Magicseaweed, Stab Magazine and ‘The Lens’.

Rationale

The SurfStitch Group’s vision is to become the global leader in action sports and youth lifestyle. Realising the significant potential benefits of capturing customers through content-rich media engagement and linking with them all the way through purchase, in FY15 SurfStitch Group made important steps towards building a foundation that can support the vision by acquiring content businesses Stab and Magicseaweed and expanding the SurfStitch Group’s global distribution. Garage Entertainment and Production both accelerates and increases SurfStitch Group’s exposure in the strategically important content product and digital video on demand world.

There are three driving forces among SurfStitch Group’s mass consumer demographic.

Commerce: When we look at the shopping behaviour of our consumers, online purchasing of categories carried by the SurfStitch Group (apparel and hardware) emerges as by far the most popular online purchases. Fifty one percent of consumers in our age demographic have purchased an item in these categories in the last month highlighting the importance of SurfStitch Group’s assortment in online shopping habits.

Community: There are more connected devices today than there are people. As many as 50 billion devices will be connected to the internet within the next 5 years. These individuals are connected both through apps and a communities with shared interests. Consumers spend 85% of their time on smartphones in apps. SurfStitch Group’s utility platform, Magicseaweed, leverages this community opportunity.

Content: Mobile video traffic represents more than 50% of all mobile traffic today. In the next five years, global mobile traffic is expected to increase 10 fold with three quarters of that growth expected to be video. Our long-form and short-form platforms of Garage Entertainment and Production and Stab address these user trends and interests.

“Our demographic spends 1.2 hours daily on online TV, second only to social networking” stated CEO Justin Cameron. “Statistics show that the mass market engages through TV (Pay and FTA), digital subscription and apps. And we are not alone in recognising this trend. Netflix is a significant contributor to network audience projection decline. Amazon Prime has made significant investment in original content to bolster the popularity of Amazon Prime membership. We have a head start in this arena today – we have significant short-form content capabilities, a community of engaged users and marry commerce alongside it. Garage Production and Entertainment allows us to fulfil the mass appeal of SVOD.”

These Acquisitions consolidate the SurfStitch Group’s digital ecosystem. By leveraging relevant content to attract and retain a rapidly evolving and increasingly sophisticated customer base, SurfStitch Group aims to significantly enhance customer engagement levels among the three types of action sports consumers (core, enthusiast and mass). Mr. Cameron noted “All three consumer types can engage by watching films and television, even when they themselves don’t participate in the sport.”

“Garage Entertainment and Production have watched with great excitement the global expansion of the SurfStitch Group. Like SurfStitch Group, Garage’s main goal is to leverage or produce globally appealing stories based out of the amazing talents in the Action Sports and Adventure community. The SurfStitch Group acquisition allows Garage to not only amplify the reach of our films and TV but also allow the Adventure and Action Sports participants, enthusiasts and fans to watch what they want when they want. Garage can’t wait to keep ‘Unlocking Adventure’ with the SurfStitch Group” Mr. Lawrence and Mr. Cook said in a joint-statement.

The Acquisitions create a full media and content spectrum to support SurfStitch Group’s strategy of becoming a destination site for customers to connect with everything action sports related and engage across all platforms.

“These Acquisitions have meaningful benefits for our action sports partners. Across our unified platform of 6m+ enthusiasts, the action sports community will be engaging daily to watch videos, see movies, read up on athletes and news and get updates on conditions. By co-branding campaigns and features on the SurfStitch Group platform, Brands can be elevated across geographies, devices and now engagement forms within the full media spectrum. Our partners will benefit from greater brand awareness directly with the consumer most likely to purchase their product and without the consumer ever having to leave the SWELL environment” said Mr. Cameron.

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