NEW YORK, March 26, 2018 /PRNewswire/ -- Adding context to my NTN board proposals, I will be
releasing highlights from prior conversations
with management regarding NTN's sales malaise as I
continue to press forward for change.
Over the past decade, NTN has
not achieved market leader status in its core industry
of gaming in restaurants/bars. Instead, the company has lost
its edge, becoming a market follower
that's unable to execute in a timely/efficient
manner. As such, it's handed the low hanging fruit to its
competitors, not only in gaming, but also in menu/order/pay and
mobile. Thankfully, NTN recently announced a new
vertical/hardware order, but it absolutely needs higher
margin/recurring software orders and to reclaim its core
market. Also, with NTN going all-in on its hardware strategy
& abandoning mobile phones, it runs the risk of being
leapfrogged again, this time by low-barrier-to-entry mobile
competitors.
Highlighted below is a broad snapshot of the restaurant/bar
market, which is core to NTN and should have provided numerous
opportunities over the past decade.
U.S. restaurants/bars – overall market size vs.
NTN's:
There are 600,000 restaurants & 70,000 bars in
the U.S.
a) Of this, NTN's site count is just 2,730 (a measly
4/10ths of 1%) Q4 2017.
b) NTN's site count is down 30% from 3,877 a decade ago.
c) CEO Ram Krishnan during the 2016 LD Micro conference predicted
having 10,000 sites in 5 years, but NTN has only lost sites since
then.
d) 200,000 restaurants/bars have stand-alone digital gaming &
many more have trivia contests (both allegedly NTN's core
competency).
e) Given the overall size of these markets, it's clear NTN is
missing a large opportunity in its core market.
U.S. restaurants/bars - industry composition vs.
NTN's:
Half of all U.S. restaurants/bars are national chains
& half are independently owned. NTN's business is similar
with 56% national chains & 44% independently owned. Both
client types have their pros/cons & offer strategic
importance.
National chains:
a) NTN has never won a national chain
under Chairman Jeff Berg's
tenure.
b) Even the company's largest customer was won 25 years ago when it
was just a small independent, which grew organically into the
powerhouse it is today.
c) NTN needs to get past its sole & circular reliance on
claiming it needs a national chain reference to win a new national
chain. NTN already has a national chain for gaming that it
hasn't leveraged—so how do they expect to leverage them for
menu/order/pay when they couldn't for gaming?
d) Meanwhile, several new competitors have won large national
chains with 1,000+ locations, directly out of the gate (as their
very 1st customer).
e) I previously advised NTN on alternative tactics to obtain
national chains, but given the hyper-competitiveness here, I won't
publicly disclose them.
f) I also suggested several large-scale unconventional/vertical
clients. One recommendation was to
leverage Board member Paul Yanover
(Fandango) & his movie theater connectivity to license dynamic trivia to 5,500+ movie theaters
via NTN's mobile app or
to Fandango's 46,000,000
mobile phone app users. NTN minimally took advantage of my idea, but
missed a much broader opportunity as it only ran a limited-time
Fandango-themed game specifically for
its existing bar/restaurant clients using
NTN's tablets.
Independently owned restaurant/bars:
a) In my
conversations with the Chairman & CEO, I've repeatedly
highlighted the need for NTN to target large markets with dense
populations.
b) New York City is the #1
Designated Market Area DMA via Nielsen Ratings
c) In NYC alone, there are 30,000 restaurants/bars combined.
d) NTN is only available in 4 NYC locations (just 1/100th of
1%).
e) Since Jeff Berg became Chairman a decade ago, we've had multiple
conversations about NTN's historical failure in large DMA's.
Mr. Berg highlighted this as a key focus going forward by
leveraging his out-of-home media expertise. However, results
never materialized & have instead been replaced by
ever-changing excuses.
f) During my last call with CEO Ram Krishnan about the continued
inability to grow NYC, Mr. Krishnan noted that NTN has saturated
the market with its legacy gaming product. So apparently with
4 NYC establishments out of 30,000, the company believes it's
"saturated the market."
g) Moving closer to NTN's own backyard, there's the Gaslamp
district of San Diego. The Gaslamp is a famous tourist area
with 150 restaurants/bars and is often enjoyed by NTN's employees
during their recreational time. However, NTN has zero
locations there that utilize its products.
h) When I suggested Mr. Krishnan follow Starbucks' passionate
founder Howard Shultz's playbook (he
visits 25 stores a week to better understand their challenges), Mr.
Krishnan said that's what NTN's salespeople are supposed to
do. Unfortunately, he completely missed my point, as the
company's salespeople still haven't grown NTN's reach in the
Gaslamp or NYC, and they continue to lose clients nationally.
In summary, NTN has been unable to grow its core gaming &
restaurant/bar markets. In addition, its
development/deployment of menu/order/pay has been painfully slow,
and its over-dependence on one large customer for these services
has set it back on numerous occasions. Thus, I remain
convinced NTN needs external help to unlock shareholder value of
$25-$50.
Sean Gordon as a proposed
Board member
a) Brings 20+ years of sales
skills & business building
b) Driven by results, not excuses
c) Passionate & focused on moving quickly
Initial Board letter
1/24/18:
https://www.sec.gov/Archives/edgar/data/748592/000147793218000647/ntn_ex991.htm
Sean Gordon
email: srg4investing@gmail.com
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SOURCE Sean Gordon