Pulse Evolution ($PLFX) – A New Class of Entertainment
- Ideal Management Team in Place for Revenue Growth
- Abba and Michael Jackson Tours in Pipeline
- Transition to Revenue Generating Production Company
- Value Stock not Factoring Current Production Contract
Pulse Evolution (PLFX) is at the heart of a new type of entertainment poised for rapid growth. PLFX has a steadfast focus on creating the most lifelike digital humans. At the 2014 billboard music awards PLFX unveiled their Michael Jackson digital character who’s hologram performed on a stage with live dancers. This show was choreographed to give the concert goers the ultimate stage experience. Attention to detail seems to be PLFX’s specialty because they have over 12,000 moving parts of the face mapped that are responsible for the micro impressions of the character that fool audiences to believing they are real. This means eye movements, pupil dilation, and even sweat beading. In the science fiction TV Series Star Trek – New Generations they had a holodeck with holographic projections of people that looked and even felt real. Pulse, with it’s digital character technology is now pushing the boundaries of what was considered science fiction 10 years ago. Their core entertainment business model has huge revenue potential and could potentially alter how concerts are actually produced in the future. Other applications such as Artificial Intelligence, education, and medical could eclipse the entertainment in time. With the recent change of the CEO it seems clear that the company is in transitioning to revenue and growth.
The company recently announced Jordan Fiksenbaum as the new CEO of PLFX in June. This was a strategic move by the board to shift toward a revenue producing company. Jordan is an industry veteran that was already on the senior advisory committee so it seems it was a natural fit to bring him on board to develop and market a new form of entertainment using cutting edge technology. He is well known for his involvement in Cirque de Solei. Over the past 30 years of his career he has booked over $5.0 billion in sales. His special skill set has been his vision to build a complete brand using sponsors and branding opportunities. In terms of operational skills he was widely successful in finding sponsors and negotiating with artists and venues. In the press release associated with his announcement in June, he discussed his desire to become fully reporting. This month a 15-D filing was made which is essentially a cost effective way to become fully reporting and current. After a 2 year hiatus in reporting this demonstrates the level of seriousness management has in moving the business forward.
Technology Ready for Commercialization
Close to $40 million dollars has been invested into PLFX since it was started. About $10 million came from the board director Harley Zhao who is also President and CEO of Original Force , an animation studio which has done work for Electronic Arts, Microsoft, Sony, Activision, and Disney. The team at Pulse was responsible for the 2012 Tupac Coachella Valley Tour and the 2014 Billboard Music Awards Show with Michael Jackson. The technology improved with each iteration of these high profile events. The Michael Jackson digital character in now complete and could be ready for commercialization right away and this is where the new leadership in place takes such a pivotal role. Investors should look for announcements in regards to this digital character in the near future as well as the development of other digital characters. The company announced in June that they were working on another high profile project that couldn’t be named. The speculation clearly links back to Abba. In March 2016 Simon Fuller’s XIX Entertainment announced a partnership deal with PLFX to produce a series of entertainment properties featuring digital humans. Then in October 2016 Fuller announced they were going to develop a new form of entertainment using hyper-realistic digital humans. Since Fuller is the common denominator for ABBA and PLFX for technology it’s easy to see the linkage. If this is true then this translates to revenues and earnings on a large scale because it hard to imagine a show without a digital actor not costing over $100 million to produce. This revenue recognition could be very good news for shareholders.
2014 Billboard Music Awards Performance – Never Performed Michael Jackson Song
2012 Coachella Valley Tupac Hollogram
At times it is difficult to put a value on technology by traditional metrics, but the fact remains that $40 mil was invested into the company and if the technology is viable, it should be at least worth as much as the investment. With 218 mil shares outstanding the current market capitalization at $.25 is $54.5 million. That is only a $14.5 mil premium over the amount of money invested. If in fact the company has landed the Abba deal this asset is grossly undervalued because the Abba sales should be in the Billions. The reason billions of revenue is justifiable is because that is what the group has turned down on no less than 2 occasions to do a reunion tour. The business model for entertainment production companies like PLFX allows them to get production money on the front end and a portion of the box office on the other end. The production costs on this tour could be 20- 25%. Assuming the tour grosses $1.0 billion, 10% would represent $100 million on the back end which would translate dollar for dollar to earnings. Since investors are not privy to the actual terms of the deal this is speculation but in line with current modeling.
This is a still of Michael Jackson from the billboard Music Awards – Is he behind a live dancer or hologram? Watch the video again.
The entertainment market is clearly the proverbial low hanging fruit when it comes to digital humans but there are a wide variety of applications that will come from developing this technology. The medical applications are still far from functional development but the company has an equity interest in Pulse BioLogic which seeks to commercialize the technology by making actual digital organs of a patient that allow the surgeons to operate using haptic sensors built into their surgical gloves to simulate the resistance of operating on an organ. This would allow surgeons to practice the procedure beforehand improving outcomes and also serve as a cost saver by not requiring cadavers for surgical purposes.
The cosmetic applications of the technology are not that far off in the future because FDA won’t be as actively involved with a technology that models what you might look like versus a surgical simulation technology that tests outcomes. Pulse Biologic plans to enter the market by digitizing the patients and then simulating what that person would look like after a cosmetic procedure. Examples of the most practical applications are showing a patient the effect that different sized implants have on the body for a breast augmentation or perhaps a collagen injection into the lips. Early adopters of this technology would use it to differentiate themselves from the competition.
This technology will also find itself used in conjunction with artificial intelligence. A perfect example of a functional use of a digital human is during security screenings at the airport. A TSA agent routinely tells people to empty their pockets and lay things flat on the screening belt. The Agent could be replaced by a hologram doing the same thing over and over. In regard to artificial intelligence programs people would much rather see a hyper realistic human talking to them versus a logo as it is the case with IBM’s Watson.
PLFX has a market forming technology that seems to be year ahead of the competition. All one has to do is look at the digital humans used in to the latest Star Wars movie Rouge One and compare that to the Michael Jackson’s digital actor used at the 2014 Billboard Music Awards show. It’s clear that they have carved a niche out for themselves using hyper realistic digital humans but the question remains on their monetization strategy. The very public disclosure that they intend to be a fully reporting company coupled with the new CEO Jordan Fiksenbaum seem to indicate they are very serious and excited about their business model. Etiquette prevents them from openly stating they landed ABBA but that is also what creates such a great opportunity in this equity. They landed a production contract they started in June which means revenue will be reported once they clean up the corporate structure and go current. Once the contract that they landed becomes official then most of the opportunity to buy the equity at cheap valuations might evaporate as the Abba fan base finds out who is producing the show. Do investors really need an “official” announcement to connect the dots on the Abba tour? There is additional upside for investors should there be an announcement of a Michael Jackson tour. A talented CEO like Jordan Fiksenbaum should make quick work of finding venues and sponsors for a Michael Jackson Tour. With the announcement of the latest production, the company is no longer a development stage company and has its sights set on future revenues. With no serious dilution on the horizon to execute its business plan this appears to be a golden opportunity to snap up discounted shares in what could morph into a new form of entertainment and grow into a multibillion dollar market.
This article was submitted by Mike Sheikh. Mike is a contributor for Seeking Alpha. Mike (or PSinvestor) has NOT been compensated for this article but does not hold a position in the company, and may trade it in the near future. You can follow Michael on TWITTER @breckskifan
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