Thoughts on Meineke's Partnership with AutoNet TV

AutoNet TV added another feather to its cap this week. AutoNet TV has signed an agreement with Meineke to deliver its waiting room digital signage network to Meineke's 850 corporate owned and franchise car care centers. With a distribution channel of over 6,000 service centers, the Company has already established itslef as the dominant digital signage network operator in the automotive sector.

In signing on Meineke, AutoNet has added another significant auto industry partner (with major brand recognition) and further extended its market leadership. Having just recently announced an advertising sales partnership with the publisher of Car and Driver and Road & Track magazines, the addition of Meineke centers to its portfolio of locations will serve AutoNet well as it looks to significantly increase its advertising revenue.

The uncertainty facing the American automobile industry is not lost on AutoNet's management team. The economic downturn has put pressure on the Company, but AutoNet remains optimistic about its growth prospects. By continuing to expand its network footprint and forging long-term strategic partnerships, I believe the Company is doing what's necessary to emerge from the recession as a stronger organization.

Rather than tighten its operations, AutoNet TV has been very active over the past year. The Company has brought on additional content partners, expanded its multimedia and web offerings, strengthened its advertising sales division, and engaged in a Nielsen audience reasearch study. The results of the study strongly support the network's effectiveness. Of those surveyed, 84% agreed that "AutoNet TV is a good thing for service centers to offer their customers."

As AutoNet TV enters the second half of the year, its likely that some of the service centers in which its network airs will close (if they haven't already) as result of the economic downturn. While this may put some strain on AutoNet's audience figures, the Company will not bear extraneous service costs in pulling out networked digital signage equipment from these locations. It's ironic that because AutoNet TV still runs as a sneaker net (programming distributed by DVD) the closure of these service centers will have less of an impact on the Company's bottom line.

It was back in March 2008 that AutoNet announced it would be working with digital signage provider 1-2-1 View to transition some of its locations to a web-based content distribution system. This, of course, would provide the network and its advertisers with greater efficiency, flexibility, and targeting power. Since the initial announcement, however, there hasn't been any additional news on the pilot and its expansion beyond the first 150 target locations.

I think the management team at AutoNet TV would agree that transitioning from a DVD-based distribution system to a fully networked digital signage solution is necessary as the Company moves forward. I would say that this process needs to be greatly accelerated for the company to protect its position in the industry. Without a robust web-based digital signage network, the Company is unable to provide advertisers with audited playback reports, gauge the technical health of its locations, and, most importantly, take advantage of the diverse targeting and advertising benefits such systems provide.

I would be surprised if AutoNet TV had the necessary capital right now to install networked digital signage equipment in even a quarter of its service centers (this would amount to 1,500 locations and require a major chunk of change to do so). What AutoNet TV seemingly needs is working capital. The Company is probably in the process of seeking venture capital or other forms of private funding. These sources of investment have been difficult to come by during the recession.

With indications that the economy is beginning to turn around, there's a chance AutoNet TV could secure funding by the close of the year. As long as the network isn't carrying a significant amount of debt, AutoNet TV is a very promising investment. Considering the Company just signed an agreement with Meineke, has over 6,000 locations in its network, offers top notch programming through a number of content providers, and counts the publisher of Car and Driver and Road & Track magazines as an advertising sales partner, AutoNet TV is in a position to achieve great success.

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