Oovie was founded in 2005 by Ian O’Rourke and Andrew Evetts, who have been friends since going to school together in Rockhampton, Queensland.
Oovie has a network of 250 ‘vending machines’ which allow consumers to rent DVDs via a touch panel on the front of the machines. We speak to Ian O’Rourke to get the Oovie start-up story.
How did the idea come about?
I saw a DVD machine in New York in 2004 and thought it was a good idea. I had little idea how much money and time it would take to start it up!
My background is in software and Andrew was a derivatives trader. We were looking for things to do as we were getting sick of working for other people.
Why were you convinced the idea would work?
The idea was done well in the US and we had the ability to see how well it was received as it had already launched. They took out 30% of the DVD rental market and we watched their progress closely.
We spoke to a lot of retailers to see what the landscape was here.
We convinced ourselves that this would be a success in Australia. We then went around the world trying to find the right manufacturer, which took six months.
Where did you find your ideal manufacturer?
We found a manufacturer in Sweden that supplied the same machines to one of the main players in the US. The machines were readily localisable in terms of currencies and tax rates.
How did you come up with the name?
We had a clever ad agency called Moon who we commissioned to come up with a name. It was catchy – ‘get a movie with Oovie.’
What was the next step?
We bought 10 machines and then got them into pilot programs across a diversity of locations. We got them into supermarkets and other locations, such as IGA and 7/11. Woolworths now has 120 of the machines.
We use an aggregator of the studio releases for the DVDs. We have professional people who look at machines and look at their rental history, the demographics and how they’ve performed. We then select which DVDs go where.
We got up to about 50 machines after the pilot, which gave us a good understanding of what worked and what didn’t. Retailers liked Oovie as their customers were coming back into store to buy snacks.
What are the points of difference offered to consumers by Oovie?
Oovie is built on lower prices - $2.99 for a rental versus $7. Also, they are placed in convenient locations. Those are the two main pillars of Oovie.
It also has a general appeal – 20 to 45-year-old, 60% of customers are female. It’s a broad demographic.
How did you fund the business?
It was initially self-funded. We spent about $1 million ourselves.
More investment came in when we sold to Hoyts in 2009. The company has grown rapidly, we’ve gone from 50 to 250 and if we can get 30% of the rental market, that would be great.
We went with Hoyts because they are experienced in the entertainment market. It was a logical fit – in-home entertainment and out-of-home entertainment.
We both still run the company – I look after sales and marketing and Andrew looks after operations.
There’s no competition with Hoyts. Going to the cinema is an activity and as an experience it’s not the same as getting a DVD to watch at home. One activity doesn’t preclude the other.
What were the main challenges in starting up?
Funding was one. It’s hard to get funding until you have that proof of concept, which is when Hoyts came in.
We spent a lot of time on the business plan. It’s a good discipline to sit down a write a whole business plan and flesh out your idea. We spent a year on customer research and pricing.
Starting up a business takes longer and you spend more than you ever think it will. I’m still looking for something that takes less time and costs less than expected – that’s the Holy Grail.
Surely, digital downloads are going to decimate the DVD market?
We all agree that all entertainment will end up being downloaded, we just don’t all agree on when this will be.
I think it will be a few years before there is mainstream adoption of video on demand. We’re capitalising on a window that’s open at the moment. There’s probably five years before downloads have an impact on us.
We took a chance on that window remaining open. We wanted to get as many machines out there as possible. If there’s no risk, it’s not a start-up!