ASX-listed video streaming pioneer Quickflix has called in a voluntary administrator after a restructure and cost cutting failed to save it from increased competition.
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In a note to investors, founder and chief executive Stephen Langsford highlighted a shareholding by rival streaming service Stan as a key stumbling block for the ailing business.
Stan is jointly owned by Nine Entertainment and Fairfax Media, publisher of this website. It acquired the redeemable preference shares, currently worth $11.7 million, from US studio HBO in 2014.
Quickflix's market capitalisation is currently just $2.22 million.
"Despite Quickflix being first to the streaming market and holding a leadership position in 2014, ongoing growth has required capital for continued investment in content and marketing," Mr Langsford said in a statement to the ASX.
"Neither Nine Entertainment nor Stan have ever participated in any capital raisings to assist Quickflix's growth and its ability to raise capital from any source has been constrained by the redeemable preference shares."
Mr Langsford said Stan had imposed conditions on restructuring its shareholding: either Quickflix pay Stan $4 million; or pay $1.25 million cash and hand over its streaming customers, while agreeing to not compete with Stan.
"Neither alternative presents a viable option for Quickflix," Mr Langsford said.
"In the first instance Quickflix does not have the funds to make payments to Stan, nor does the company believe it can raise funds from investors for that purpose."
A Stan spokesperson declined to comment.
Administrator Ferrier Hodgson said it was undertaking an "urgent analysis of the company's position" and is exploring a sale or restructure.
However it said the business would continue to trade as usual, with no disruption to customers.
Quickflix's New Zealand business continues to operate through its local subsidiary and is not in voluntary administration.
Mr Langsford founded Quickflix more than a decade ago as a DVD rental business based in Perth. He later followed the lead of Netflix in the US by adding a digital streaming service.
But in 2015, Quickflix faced unprecedented competition as the Australian subscription video on demand (SVOD) market exploded.
The arrival of Netflix in March was pre-empted by new local players, including Stan and Foxtel's streaming offering Presto.
Quickflix had neither the capital nor marketing nous to compete.
This time last year prominent media analyst Steve Allen argued Australia couldn't sustain so many SVOD players. He predicted Quickflix would take the biggest blow.
"Not everyone's going to survive – not even the three new players are all going to survive," he said, describing Quickflix as "a minnow in a giant's game".
"It doesn't matter that they were the first and it doesn't matter how serious they are in their endeavours, particularly with Netflix in the picture. It's a global play."
A restructure, cost-cutting and a series of botched deals failed to improve Quickflix's situation.
In August it negotiated a partnership to distribute content from Presto. However the arrangement fell over.
Quickflix then announced a surprise agreement to take over a Chinese language video production firm, subject to due diligence. That deal also fell over.
Another homegrown online video company, Ezyflix, shut its doors in September.
Quickflix shares have been in decline since April 2012 and were suspended in August. They last traded at 0.1¢.
