Hollywood Media Q3 2006 Earnings Call Transcript

Nov. 9.06 | About: Hollywood Media (HOLL)

Hollywood Media Corporation (OTCPK:HOLL) Q3 2006 Earnings Call November 9, 2006 4:30 PM ET

Executives

Mitchell Rubenstein - CEO

Brian Walsh - Associate General Counsel

Analysts

Richard Ingrassia - Roth Capital

Jeff Miller - JMG Capital

Murray Arenson - Ferris Baker Watts

Chris Zess - SAC Capital

Jeff Shelton - Bleichroeder

Mickey Strauss - Strauss Asset Management

Nelson Obus - Wynnefield Capital

John Hardenbol

Operator

Good afternoon. My name is Vicky, and I’ll be your conference operator today. At this time, I would like to welcome everyone to the Hollywood Media Third Quarter 2006 Financial Results Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer period. (Operator Instructions). Thank you.

It is now my pleasure to turn the floor over to your host, Mr. Mitchell Rubenstein, CEO of Hollywood Media. Sir, you may begin your conference.

Mitchell Rubenstein

Okay. Thank you very much and thank you everyone and welcome everyone to today's conference call regarding Hollywood Media's 2006 second quarter financial results. Today’s press release announcing these results is available for viewing on the Investor Relations section of our website at Hollywood.com. At the conclusion of the call, there will be a short question-and-answer period.

At this time I would like to turn the call over to Mr. Brian Walsh, Associate General Counsel of Hollywood Media, to read a cautionary statement about forward-looking information. Brian.

Brian Walsh

Good afternoon. This presentation may contain, in addition to historical information, forward-looking statements within the meaning of Federal securities laws regarding Hollywood Media Corp. These forward-looking statements are based on current management expectations and are subject to risks and uncertainties that may cause actual outcomes to differ materially from expectations reflected in forward-looking statements.

Potential risks and uncertainties include the company’s ability to manage its growth and integrate new businesses, the company’s ability to develop and maintain strategic relationships, the company’s ability to compete with other media, data and Internet companies, technology risks and risks of doing business over the Internet, the company’s ability to realize anticipated revenues, cost efficiencies, and sources of capital, as well as governmental regulations, the volatility of the company’s stock price and other risks described in Hollywood Media’s filings with the SEC, including its Form 10-K report for 2005. The Form 10-K includes a discussion of risk factors and can be accessed through the Investor Relations section of the Hollywood.com website or from the SEC’s EDGAR database at sec.gov. Because forward-looking statements are subject to risks, we caution you not to place undue reliance on any forward-looking statements. Forward-looking statements made during this presentation speak only as of the date of this presentation. All written or oral forward-looking statements by Hollywood Media or made on its behalf are qualified by these cautionary statements.

I will turn the call back to Mitch.

Mitchell Rubenstein

Okay, thanks Brian. The third quarter was an important milestone in the company's history as we sold our Baseline StudioSystems business unit, a former component of our Data Business segment to The New York Times Company for $35 million in cash. The ability to monetize this business at a highly favorable multiple of approximately 21x EBITDA demonstrates that we have aggregated our business with significant value. Meanwhile, our remaining businesses continued to strengthen during the quarter as we achieved gains in company wide net revenues with each of our three largest segments, Broadway Ticketing, Data and Ad Sales ahead of where they were in the same period last year with each generating positive EBITDA.

Let's now review the financials. I should note that as a result of the Baseline StudioSystems sale, the financial results discussed on today's conference call have been reclassified for all periods to reflect the operations, assets and liabilities of Baseline StudioSystems and the gain on the sale as discontinued operations. This presentation is required by GAAP and provides more meaningful year-over-year comparisons for our continuing operations. Please refer to the press release or our quarterly report for additional information on it.

Hollywood Media's net revenues for the three months ended September 30, 2006, increased 33.2% to $26 million, compared to $19.6 million for the same period of 2005. As I will discuss more in our segment detail discussion, this revenue growth was led by particularly exciting performances from our Ad Sales segment, which posted a 194% gain year-over-year and our Broadway Ticketing segment, which posted a 27% gain year-over-year.

The loss from continuing operations for the third quarter 2006 decreased by 25.2%, to $2.1 million, compared to the loss from continuing operations of $2.7 million in second quarter of 2005. It is important to note that the third quarter is traditionally slower than the second quarter, since the second quarter includes the Tony Awards as the driver for our Broadway Ticketing division, and is certainly slower than the fourth quarter when the holiday season drives stronger Broadway ticket sales. Despite this seasonality we continue to grow revenues while substantially narrowing our operating loss.

EBITDA from continuing operations, which as I mentioned earlier excludes the sale and operating results of Baseline StudioSystems, was a loss of $1.1 million, an improvement of $1.3 million, compared to the loss of $2.4 million of EBITDA from continuing operations in third quarter of 2005.

The most concrete examples of this EBITDA improvement were Broadway Ticketing, where EBITDA was up 27.7% over the same period last year, and the $580,000 year-over-year swing in EBITDA for the Ad Sales division, up to an EBITDA gain of $73,000 for third quarter 2006. You can find additional information about the EBITDA data discussed on this call in today's earnings release posted on Hollywood.com.

Net income, which includes the Baseline discontinued operations, for third quarter 2006 was $15 million, or $0.45 for basic and diluted share, based on 33 million weighted average shares outstanding during the period. Net loss from continuing operations for third quarter 2006 was $2.1 million, or $0.06 on a per share basis, as compared to the net loss from continuing operations of $2.7 million for third quarter last year, or $0.09 on a per share basis.

We completed the third quarter of 2006 with $27.4 million in cash and cash equivalents, compared to cash and cash equivalents of $6.9 million on December 31, 2005. This increase is due to the sale of Baseline StudioSystems, but does not include $3.5 million cash portion of the purchase price for Baseline StudioSystems, which is being held in escrow to cover indemnification claims should there be any under the purchase agreement.

Management is currently reviewing all of its options with Hollywood Media's Board of Directors regarding the appropriate uses for its cash on hand, for the benefit of Hollywood Media and our shareholders. Now I will discuss the financial results in our different business segments. Please refer to the press release including the select segment highlight table for additional financial data on our segments including revenue, EBITDA and net income.

Starting with Broadway Ticketing, in the third quarter of '06, our Broadway Ticketing revenue was $21.5 million, 27.1% increase compared to $6.9 million for third quarter last year. EBITDA for Broadway Ticketing increased 27.7%, to $701,000 in third quarter, compared to the year ago quarter. Net income in this segment increased by 31.9%, to $635,000, compared to net income of $481,000 in the prior year quarter.

Deferred revenue relating to our Broadway Ticketing business, a leading indicator of future Broadway Ticketing revenues was $19.6 million as of September 30, 2006, up 40.7% compared to the $14 million in deferred revenue as of September 30, 2005. We are excited by the sales occurring now for the holidays, as indicated by our increased deferred revenue and we are currently looking to strategically increase the size and quality of our Broadway Ticketing inventories further to satisfy the growing demand for tickets from visitors to Broadway.com.

We are also happy with the traction we are getting from our London ticketing operations with Theater.com, and indications are that this business is going to be strong for us. We are proud of the way we have been able to manage Theater.com's growth and expect that this February 2006 startup will increase in significance to the segment and to the company overall.

As I discussed on last call, we have not invested heavily in marketing efforts for Theater.com, preferring to wait until the major search engines begin to pick up the Theater.com website on their own -- a process which typically takes about nine months or so. We are now beginning to increase search engine marketing of Theater.com and we believe this will accelerate its growth.

We are on pace for a record year in our Broadway Ticketing segment. We continually look for innovative ways to develop effective marketing programs to help us increase sales and visibility in the markets. Our recent hire of former Disney marketing specialist as Director of Marketing for Broadway Ticketing division is already yielding positive results.

Turning to Ad Sales. Revenues in our Ad Sales segment, which includes Internet Ad Sales on Hollywood.com, Broadway.com, Internet and other sales of CinemasOnline, in the third quarter of 2006 were $2.6 million, an increase of 194.3%, compared to $873,000 in revenues for the third quarter of 2005. These revenue increases are primarily attributable to Internet ad sales generated by the CinemasOnline business, which we acquired in November 2005, as well as growth of the ad sales generated by Hollywood.com. As a result of such increased revenue in the third quarter of 2006, the net loss in Ad Sales in third quarter of 2006 was reduced by 57.4% to $214,600, as compared to a net loss of $503,500 in third quarter of 2005. And this segment achieved positive EBITDA of just over $73,000 in the third quarter of 2006, as compared to negative EBITDA of $390,500 in third quarter of 2005.

As previously discussed, we have been devoting much time and investment over the past year to improving the overall quality of our website properties, most significantly Hollywood.com. These improvements have led to substantially increased Internet user traffic on the Hollywood.com website. This traffic increase led to more page impressions on the website, which in turn increased potential inventory of pages available for placement of the actual advertisers. We are now in a position to take further steps to better modify the increased traffic, as well as to promote a further traffic revs.

In July 2006, as previously mentioned, we hired a new senior ad sales manager for this segment, and he is adding several experienced ad sales persons to improve our ability to monetize our website traffic and realize the potential for substantial increases in ad sales.

Turning to our Data Business. Following the sale of Baseline StudioSystems, our Data Business segment is currently comprised of the existing Source business units, namely, CinemaSource, EventSource and ExhibitorAds. The remaining Data Business segment contributed revenue of $1.6 million during the third quarter of 2006, an increase of 16.4%, compared to the $1.4 million in Data Business revenue, excluding Baseline StudioSystems revenue during the second quarter of 2005.

Net income for the Data Business segment, again excluding Baseline StudioSystems for all periods, increased by 13.8%, to $486,700 in third quarter 2006 compared to $427,600 in third quarter of '05. The Data Business net income includes accrued compensation expense of $223,900 and $392,800 for the three months and nine months ended September 30, 2006, respectively, relating to potential future performance-based compensation under employment agreement for the senior manager of this segment, which agreement was not in place during the corresponding 2005 periods. These particular expense accruals, which impacted 2006 results, are anticipated to be a substantially reduced level after the end of 2006.

Turning now to Hollywood.com Television. Our free video-on-demand cable TV network, Hollywood.com TV, is still in the early growth stage. It did generate $82,600 in revenue for the third quarter of 2006, marking the third consecutive quarter in which the segment generated revenue. The company's limited number of ad slots for sale in fourth quarter of 2006 quickly sold out, and management is anticipating increased advertising inventory and sales in 2007 for this business.

Based on the rapid sellout of advertising, we will increase the inventory for sale in coming quarters, slowly ramping this business from a revenue standpoint, while we continue to increase the penetration of the network. We are also seeing some traction from the bundling of cable television advertising with our Internet advertising, and we expect our advertising model overall will continue to show good progress.

In summary, this was a solid quarter for our core businesses and we would expect continued operational and financial improvements going forward.

At this point, I would like to open it up for questions. Vicky.

Question-and-Answer Session

Operator

(Operator Instructions). Your first question comes from Richard Ingrassia with Roth Capital. Please go ahead.

Richard Ingrassia - Roth Capital

Thanks. Good afternoon everybody.

Mitchell Rubenstein

Yes, hi, Rich.

Richard Ingrassia - Roth Capital

Mitch, I assume, Mary Poppins is a big show for the holidays -- correct me if that’s not right. But, I know, you are probably a little gun shy when deciding what kind of inventory to expect after the Tarzan experience. Can you just comment I guess on advance buying in general, and how you gauge demand going into the busier periods?

Mitchell Rubenstein

Well, we have a very sophisticated methodology for determining which shows to buy. A show will be very popular like a Mary Poppins, but we buy with a focus on weekends and Thursday performances which we know will be in high demand, especially during the holiday periods. In terms of inventory, just to kind of discuss it for a second, at the end of Q3 2005 unsold inventory only represented $67,000. So, at the end of -- so, just as a -- so, it’s a -- it's not a big part of our cost structure. So we are very good at managing our inventory and we typically have significantly more demand, particularly in inventories than supply. So, it's really getting more inventory, and with more cash we are able to increase inventory, especially for the shows that have highest demand, like Wicked and so on. So, we are now sitting on about $3.6 million of ticketing inventory, and when you look at the level of inventory that goes unsold, that's really almost deminimus as a percentage. We also have insurance where the customer pays us a fee, and that generates almost a million dollars of EBITDA for the company and almost all the inventory left at the end of a particular period that's unsold represents inventory return from insurance program, kind of, at the last minute. We only have a chance to resell it. So, I hope that answers your question. And yes, Mary Poppins, we expect good things for that, but we don't really speculate as much as invest in inventory.

Richard Ingrassia - Roth Capital

Thanks for the detail. Just one other question on expenses and maybe an update on operating efficiencies and from the move you made in the last year or so. Are we getting close to what you would call a steady run rate for operating expenses at quarterly run rate?

Mitchell Rubenstein

Yes. I mean, we are looking, in certain areas we expect reductions, like in our Broadway Ticketing business, for example; where we are putting in new systems and things in Q1 of next year. So, we expect efficiencies there. We are doing a little more offshoring, we expect efficiencies there. On the flip side, obviously with the growth we are experiencing, the high double digit growth, there is always additional people for controls and things like that. And hopefully we will get some relief in the Sarbanes-Oxley area, which would further -- which they are talking about alleviating some of the auditing procedures, which people have been reading about the last few days, which will reduce cost as well if that should happen.

Richard Ingrassia - Roth Capital

Thanks Mitch.

Mitchell Rubenstein

Thank you, Rich.

Operator

Your next question is coming from Jeff Miller with JMG Capital. Please go ahead.

Jeff Miller - JMG Capital

Hi guys.

Mitchell Rubenstein

Hi.

Jeff Miller - JMG Capital

So a couple of question. First one is, what was the cash burn during the quarter?

Mitchell Rubenstein

Hang on one sec.

Jeff Miller - JMG Capital

Sure.

Mitchell Rubenstein

It was about $5 million over the first nine months of the year, which included cash going towards inventory.

Jeff Miller - JMG Capital

Can you bring it down to this past quarter as well?

Mitchell Rubenstein

We don’t have that handy in front of me, wasn’t a large cash burn. We did expend money in the third quarter for inventory, which is not offering any cash deficit --

Jeff Miller - JMG Capital

Right.

Mitchell Rubenstein

Going into the strong fourth quarter.

Jeff Miller - JMG Capital

Okay. And just want to make sure I heard you clearly. On the outstanding 8% notes, the Board -- you discussed in that, you haven't made a decision on whether or not you want to take those out with the proceeds from the sale?

Mitchell Rubenstein

We are looking at that. The interest is about 3 percentage points per year benefit to take the -- the notes, that’s the expense -- the interest expense in notes versus the income that we get on interest income on the cash.

Jeff Miller - JMG Capital

Right.

Mitchell Rubenstein

So, it's just a question of discussions we’re having with the note holders right now. We are allowed to prepay it. We -- just seeing, we can get a little better terms than just paying it flat. But it does make sense perhaps just to pay it.

Jeff Miller - JMG Capital

Okay. Great, thank you.

Mitchell Rubenstein

Thank you.

Operator

Your next question is coming from Murray Arenson with Ferris Baker Watts. Please go ahead.

Murray Arenson - Ferris Baker Watts

Thanks. Good afternoon. A few quick questions, Mitch, and I apologize if I missed something, I hopped on late. But, can you quantify the contribution coming from London thus far?

Mitchell Rubenstein

It's representing approximately 5% of our overall what Broadway.com is doing.

Murray Arenson - Ferris Baker Watts

Okay.

Mitchell Rubenstein

And we [space] this currently, and our goal is to get it up around 9% to 12% within 12 months or so, if not sooner. Of course, we’re going up against a moving target, because the Broadway.com and related Broadway Ticketing businesses, the US or the New York-based business for Broadway is growing at such a rapid pace, that just holding that percentage alone will be good. So, we'd like to grow against that percentage because of the London market is very large, and as we believe, it’s the exact same -- we’re experiencing the exact same model we're using in the US. So, we think once the -- we get the organic search, which takes nine months or so, as I mentioned in the -- in my opening remarks, we could already see our page results moving up virtually every week on the major search engines there with Theater.com. So, as more and more time goes by, as we begin to market, get a brand recognition in the market and so on, we think we can get up to that 9% to 12% segment results there.

Murray Arenson - Ferris Baker Watts

Okay. When you talk about increasing inventory on that side of the business, can you give us a sense of what sort of order of magnitude you are see doing there?

Mitchell Rubenstein

Well, actually London is a little different. We don't -- look, the model there is different. We don't actually have to buy inventory. We get allocation, so we don't have to buy inventory there. We have allocated a certain number of seats per share as long as we demonstrate that we can sell it. We get that same allocation [turn up] on a regular basis, and as our demands increase, we get bigger allocations. We do intend to be supplementing the allocations with some purchases, which is virtually unheard of in that market, which will increase our market share and we can grow the business that way. But I was referring to just increasing inventory volumes in New York, because our demand is so much greater than our supply.

Murray Arenson - Ferris Baker Watts

Right. I missed -- that's what I meant to get at, but can you talk about order magnitude you are looking at there?

Mitchell Rubenstein

Well, we are holding right now about $3.5 million of inventory. We don't really see it getting much above $4.5 or $5 million.

Murray Arenson - Ferris Baker Watts

Okay. On the Internet advertising side, if I am looking at my numbers right, the EBITDA level was down this quarter sequentially versus, kind of, a similarish revenue number from previous quarter. Can you explain what the deal is there?

Mitchell Rubenstein

Just seasonality in that business. Traffic generally is higher in Q2 than in Q3, and therefore there is more ad sales. So, we are not seeing any fundamental decrease or difference whatsoever. And that is why, if you look at it at Q3 '06 versus Q3 '05, there is significant growth.

Murray Arenson - Ferris Baker Watts

Okay. Lastly I wondered if you just, kind of, give some color on the source portion of Data Business, it still remains, maybe talk either qualitatively or quantitatively about the differences and the existing business model versus the Baseline business that you sold, so we can kind of get a sense of what you are thinking relative value wise?

Mitchell Rubenstein

Okay. Well, Baseline, which we sold, is an historical database, which means it had movie and TV information dating back to the beginning of the industry. And, therefore, to be updated just needed to be supplemented each week with new information as it came out. Then that database was primarily licensed to professionals in the movie industry, like studios and those that work at studios and agencies and so on. By contrast, and that's the business we sold to The New York Times.

The business that we kept -- the source business had three parts to it; CinemaSource, which aggregates movie showtimes, information and licenses that not to professionals, but to primarily websites. And the customers include Google, Yahoo!, MSN, AOL, MySpace and so on, kind of, a laundry list, even The New York Times website as a customer. So, kind of a laundry list of Who's Who of big Internet sites. Large newspaper companies use it for their Internet properties, like Gannett, as well as for their newspapers; and wireless and telephones companies use it. So, it's kind of must carry, kind of, data. They kind of must have movie times, something people want. So, it's a utilitarian type product. And unlike an historical database, you have to run around and recollect the data every week, because of the showtimes in effect are -- were refreshed and different movies change every week and so on. We have expanded the business, so it's in US, Canada and now the UK, which includes both England and Ireland.

And our plan going forward is to further increase in other territories. We also have EventSource, which basically is the same thing, but for event information, community affairs, concerts and so on, down to the smallest venues. There, our customers include the big city guides, like AOL City Guide, like Interactive's Digital City, Yahoo! Local and so on, primarily Internet properties. And then we have ExhibitorAds, which we started as kind of a spin off, its been in the Source, which does marketing services for theater chains, primarily doing like their website, email [alerts], which include movie showtimes, information for their theatres, and putting ads into newspapers for them that include their showtimes. So, that business has a completely different management team, completely different subject matters, and completely different method of collection and dissemination of the data, but nevertheless still entertainment data business. So, we in terms of qualitatively, it's a solid business. It's -- we are internally discussing, is it a core business to us or non-core, and haven't made a final determination of that.

Murray Arenson - Ferris Baker Watts

And so how would you -- can I ask how you characterize the growth prospects of that and our profitability aspects of that in contrast to Baseline

Mitchell Rubenstein

Well, Baseline, at least in the short term over the next year or two, had very high growth characteristics, because it was just beginning to start to syndicate data to websites. So, the Source business by contrast already has a large number of the big players, which I kind of listed off to you. There's growth potential primarily in new territories, expanding beyond the US and Canada where we’re beginning to penetrate pretty heavily in the UK market. So, good solid growth there. And with EventSource, where there is a lot of large websites in the US or based here in the US that are not currently taking it. So, it's hard to say. I mean, you have a horse race, I think in the short term next year or two Baseline would have run out, and on the other hand, the Source business is certainly not mature by any stretch of the imagination.

Murray Arenson - Ferris Baker Watts

Okay, great. That helps. Thank you.

Mitchell Rubenstein

Okay, thank you.

Operator

Your next question comes from [Chris Zess] with SAC Capital. Please go ahead.

Chris Zess - SAC Capital

Hi Mitch. A few quick questions. First, could you talk about the margin leverage just, and broad terms that we should expect in 2007?

Mitchell Rubenstein

Well, we’re seeing in our -- let me just cover that by division real quick. In the Broadway business, we’re seeing margin growth, our gross margin is actually up in Q3 '06 to about 16% versus 15% in the prior year period. And I remember, going back, when we first started the Broadway business, I think we were around 11% or 12%. So, what we're doing is we're really focused on high margin and on products in our Broadway Ticketing business, so whether that's insurance, which is very high margin, restaurant reservations, hotel rooms. And the same thing in London, and we are getting better and better at selling these ancillary products. And as the quality of the inventory is getting so much better and the demand is so high. We can -- we are more effective selling the ancillary products as part of the package that includes the very valuable Broadway tickets. And unlike the scalpers, we keep our prices on the Broadway tickets very rationale that has no more than 20% markup, and that allows us to add on these ancillary products at pretty healthy margins. So, we are looking for pretty good margin growth in '07. Having said that, the one qualifier I will give is, we have group sales business where margins, these are the big (inaudible) and things where margins are 8% to 10%, and to the extent that that business rose in gross dollars, it does adverse -- it does soft and dilute a little bit the results in the margin. But the overall gross dollars generated by the Broadway Ticketing business will go up as a result and overall gross margin dollars will go up. So, looking just at percentage is not really the way to focus on, I'll try to point that out in future calls.

Chris Zess - SAC Capital

Okay.

Mitchell Rubenstein

On the Data Business, it's primarily that the CinemaSource does the movie showtimes, EventSource, the event data, have virtually a 100% gross margin on incremental business. So, we will see in '07 that that continues to be the case, because if there are services business has a cost of goods sold associated with it and from SG&A if it grows, so will be a 100% margin, will be closer to 40% to 30% margin on incremental revenues there. So, that business grows disproportionately to the others margins will be affected, but they will be really high margins at any case. So, we are looking for good solid margin growth in our Data Business as well. And then Ad Sales, on incremental revenues we are looking at 75% to 80% gross margin.

Chris Zess - SAC Capital

Okay, great. And then quickly, J.P. Morgan, are you still paying them as an advisor?

Mitchell Rubenstein

Well, they worked with us, as you know, on the sale of the Baseline StudioSystems and do continue to advise us.

Chris Zess - SAC Capital

Okay. And then finally when do you expect you and the Board to decide what you are going to do with your new found cash [flow]?

Mitchell Rubenstein

Well, we have had a couple meetings on it already, and we are doing some additional work on it and we hope to make that decision within the next couple of months. I just want to mention for the listeners that, and hopefully I made this clear in the course of today's conference call that we are really excited about the progress we are making in several key areas of the business. And our number one priority right now is to drive shareholder value by continuing its improved performance in these businesses and make necessary investments in the businesses to generate returns. As was the case with the recent Baseline sale and as we mentioned in prior call, we are wide open to exploring various options with all of our businesses in the interest of our shareholders on an opportunistic basis.

Chris Zess - SAC Capital

Okay, that’s great to hear. Thank you.

Mitchell Rubenstein

Thank you.

Operator

Your next question comes from Jeff Shelton with Bleichroeder. Please go ahead.

Jeff Shelton - Bleichroeder

Thanks. Just a quick follow-up onto your last comments. What parts of the business do you think makes sense to making more investments? Are you happy where Broadway Ticketing is now or do you think you can really get behind that in regards to marketing or making acquisitions to drive growth there?

Mitchell Rubenstein

Well, in terms of Broadway, we were really open, as I mentioned, we were opportunistic. We are not looking to make any major acquisitions. So we are not expecting to take a big chunk of that cash and buy something. We are certainly not opposed and our history has shown, we will make smart tuck-in acquisitions at reasonable prices and reasonably low multiples of EBITDA if we feel we can enhance the EBITDA once we have tucked into our operation. In terms of investing, and particularly our Broadway business, buying more quality inventory, not speculating but investing a little bit, really not a lot in our London business and the growth there. We really think we are really well positioned to expand that segment. We don’t see any need for much incremental investment in our Data Business. In our Ad Sales business what we are doing -- in our Ad Sales business, which would include Holywood.com, we think we had a pretty darn good level of SG&A in terms of the personnel we have (inaudible) and big add-ons associated with that other than ramping up the Ad Sales department, and that’s strictly adding revenue generating resources, people that will actually go out on the street and produce revenue. So, no big capital projects or anything like that on the horizon that I can think of.

Jeff Shelton - Bleichroeder

I know you have talked in the past about getting into Nevada in the ticketing business, where do you stand on that now?

Mitchell Rubenstein

We've been focused on London, making that successful. We think that Theater.com URL in particular is a platform that can be used beyond London to markets including Las Vegas, and possibly other markets. We had several potential opportunities in Las Vegas, and we've just been very conservative about that market. The market has a lot of upside, but it's also got some risk potential associated with it and we’re very risk adverse. And the one thing we’re not going to do is, gamble with our money in Las Vegas. So, we are looking to move into Las Vegas at the appropriate time, and right now our focus is growing the Broadway business in New York and getting Theater.com as successful as possible. So, you won't see us do anything in the next few months, but maybe toward the latter part of '07 or '08, but it's definitely on our list and we are very focused on it.

Jeff Shelton - Bleichroeder

Okay, thank you.

Mitchell Rubenstein

Thank you.

Operator

(Operator Instructions). Your next question comes from Mickey Strauss with Strauss Asset Management. Please go ahead.

Mickey Strauss - Strauss Asset Management

Hi. Mitch, I wondered just how you bring us up-to-date on the Movie division, [and the subsidiary]?

Mitchell Rubenstein

On MovieTickets.com or Hollywood.com TV?

Mickey Strauss - Strauss Asset Management

MovieTickets.com.

Mitchell Rubenstein

Okay, Mickey. As a reminder for those out there, Hollywood Media owns 26.2% of MovieTickets.com, which we consider a very valuable minority ownership stake and we handle the operations day-to-day along with our partners AMC and National Amusement. In terms of what our goals are there, our goal is to seek to either consolidate the inventory with Fandango, which will enhance the user experience or to figure out a way to form a joint venture consolidation with Fandango which is the only other competitor in the space, and is something that we think will benefit ultimately those that use the site and therefore increase traffic and one plus one equals three and all that sort of thing. I cannot give you an update in terms of any discussions because of confidentiality that exist, unfortunately.

Mickey Strauss - Strauss Asset Management

Are you still optimistic that something can be developed or not?

Mitchell Rubenstein

I am very optimistic. On the other hand, if you would have asked me this time last year, I would have said the same thing.

Mickey Strauss - Strauss Asset Management

Right, I know that. I think you did, and how is the business doing?

Mitchell Rubenstein

It's doing very well. It basically is a neat business, because it has two streams of revenue. It has the share of a service fee that's charged which typically is a $1 per ticket and it shares that with the theater chains and there is also its ad sales. So, it's a model -- it's more than just an advertising sales model. It's really robust model, and as more and more people buy things online as you have popular movies that come out and reach that demand, that's more and more people buying online. If you don't buy online, you have to get closed out of going to these popular movies, and therefore kind of [steal] upon itself. And I think the one missing link is -- and I understand strategically and financially that it makes sense to put the two businesses together. But really if you look under the hood, it makes really -- because it makes so much sense to the ultimate user, to deal with one site, Fandango or MovieTickets.com, and get all of the inventory of all of the theater chains on that site, it's just so -- will be so convenient, and I think it will increase significantly the penetration rate of online versus direct box office sales or telephone sales. And I think for that reason alone it makes sense to do it, and I think it's almost inevitable at some point that it will happen. And I just what I can't say is when that will be or what the terms of that situation will be, other than to say that it does (inaudible).

Mickey Strauss - Strauss Asset Management

Okay, thank you.

Mitchell Rubenstein

Thank you.

Operator

Your next question comes from Nelson Obus with Wynnefield Capital. Please go ahead.

Nelson Obus - Wynnefield Capital

Hi. Just looking at the segment breakdown here in the other area, what you define as corporate wide expenses, audit fees, proxy cost, insurance, accounting, centralized IT technology, consulting, etcetera, and Sarbanes. Two questions. First of all, with the elimination of the sale of one of your major EBITDA producing assets, have you given some thought how you can -- what the opportunities might be to reduce corporate expense?

Mitchell Rubenstein

Well, I mean, one of the -- the answer is yes, of course, and there will be some savings as a result of that. We are currently working under a transition or arrangement with The New York Times. We signed and closed very quickly, and so we're still handling a lot of the back office, probably -- probably continue to do that till the end of the year. They are reimbursing us for that. It's not allowed us to kind of step back and assess all the savings you have, although we've started to assemble that in. But there will be some savings, of course. The real advantage of the sale, besides the obvious advantage of getting the cash and getting the high multiple on the sales, is it allows management to focus more on the other businesses. So, our focus now on Broadway and Ad Sales and the remaining Data Business is increased, because we don’t have to worry about that business. Even though that business was growing and successful, it still required a lot of time by people at corporate in terms of overseeing it and expanding it and so on. It is going through a lot of growth related decisions, so I think that will benefit the other businesses as well. I think by the next call, we will have a dollar amount as to what those are.

Nelson Obus - Wynnefield Capital

In that vein by the way, what do you think it cost you to be a public reporting company, Sarbanes and everything else?

Mitchell Rubenstein

I have a sheet on that, I just don’t have it front of me. I used to look at it all the time and it's quite a lot..

Nelson Obus - Wynnefield Capital

We can do this offline, but let me just put a little plug in here for something that we are looking at very, very carefully for companies like yourself. You only have 193 public shareholders, which qualifies you for filing you a Form 16, which would allow you to go dark. Now, we've been very adamant about not wanting companies to go dark, because it takes away the certainty of being able to disclose what's going on out there to shareholders and give them a zone of comfort. But, the guy who runs the pink sheets has come up with something, I'll just read this real quickly. "Companies that have substantial operating businesses and provide credible disclosure to the public, qualify for the premium tier OTCQX, which commences trading on January 1, 2007." This is something I really think you ought to look at. You get a -- somebody who is -- maybe your outside lawyer who oversees your disclosure, won't may have to worry about 404. You put the audit out, but you're free from the SEC, and I think for -- I mean, I can -- we can talk about this offline. But I really think you qualified for this, and the stigma of delisting is removed by being in this tier, and I think it's something you should look at very carefully.

Mitchell Rubenstein

Okay, I mean anything to save money and --

Nelson Obus - Wynnefield Capital

Well, I know you've tried to do that, and this is a real money saver, and it's just -- it's something new, and we don’t have to go on into it a lot of detail here, but I'll talk to you offline, okay?

Mitchell Rubenstein

Yes,. I mean, the only issue that we would have with something like that is whether it increases or decreases liquidity for our existing shareholders.

Nelson Obus - Wynnefield Capital

The whole idea of the premium tier is, it should be washed, because you'll get -- the stigma goes away. And obviously if you're going to go out there and raise capital, it’s a different story. But assuming you're not, you seem to be selling your assets and don’t have great need for capital other than what you have on your balance sheet. I mean, this would be a big saver. I expect these costs are in excess of a million bucks a year, so anyway --

Mitchell Rubenstein

You know, that’s interesting. Thanks for mentioning it.

Nelson Obus - Wynnefield Capital

Yes, we'll talk about it. Thanks.

Mitchell Rubenstein

Okay.

Operator

(Operator Instructions). Your next question comes from [John Hardenbol], a Private Investor. Please go ahead.

John Hardenbol

Yes. Hi, Mitch. How are you doing?

Mitchell Rubenstein

I am good. How are you?

John Hardenbol

Good. Quick question. I enjoy the website. I am on it every once a while. I have been buying all my tickets obviously through the website that contributes towards the bottom line. There are lot of conversation and lot of positive argument towards [multiple] movies. Is there any propensity on the management team over there to look at the venture as a possible avenue of additional revenue?

Mitchell Rubenstein

The answer is -- great question. Basically our websites are, kind of, like railroad tracks or portals. I mean, there is a ton of additional things we can add into that. We did try to have a relationship with a third party, downloading movies on Hollywood.com about three years ago. It was probably premature. We certainly are going to be -- are looking into that right now, not necessarily creating a download movie service ourselves, but just becoming affiliate of one of the existing download movie services, again, basically a share of those fees. Obviously that's something that would be beneficial, especially if we didn't have the serving cost associated with the downloading of the movies.

John Hardenbol

Thank you.

Mitchell Rubenstein

Thank you for the question.

Operator

Sir, there appear to be no further questions.

Mitchell Rubenstein

Okay. Well, I’d like to thank everyone for their questions and listening, and joining the call and I look forward to updating you at the next occasion, which will be after our year end numbers. And everyone have a happy holiday and buy your Broadway tickets on Broadway.com.

Operator

This concludes today’s Hollywood Media conference call. You may now disconnect your lines and have a wonderful day.

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