Portal Business Unit
The Portal business unit at MAGIX merges two revenue streams. First, this is where the revenues achieved with the above-referenced online services and direct sale business via the online shop with registered customers are booked. Second, revenues with MAGIX's business customers are also encompassed in this category.
During the 2006/2007 fiscal year, the group achieved revenues in the Portal business of EUR 9.9 million (2005/2006: EUR 8.1 million), corresponding to 30.2% share of overall revenues (2005/2006: 22.5%).
MAGIX Online Shop/Direct Sales to Registered Customers
At www.magix.com and further group websites, end customers can directly access and purchase MAGIX's complete product range via the Internet. In order to lead new customers to make purchases of products and services requiring the payment of a fee, this is also where software Internet services are made available free of charge.
In addition, MAGIX communicates with its registered customers directly by email and makes product offers to them. The company has recurring revenues from the resulting direct sales. As of 30 September 2007, 7 million users were registered with MAGIX. During the 2006/2007 fiscal year, these customers purchased 318,232 products at an average net price of EUR 28.63. This corresponds to revenues of EUR 1.42 per registered user.
Business Customers
Our Portal business unit also covers the customer services provided by the MAGIX group for its business customers.
In this area, computer products are combined with the group's Internet services pursuant to our customers' wishes, enabling the customer to integrate a comprehensive multimedia solution into its own Internet portal within the shortest possible time. In this context, MAGIX's products are adapted, at the customer's request, to their customer's expectations in terms of their functionality and design. Thus, for example, the group designed the entire photo service for freenet.de AG.
Where required, the group can also perform storage of digital content, so-called hosting, for its business customers.
For the services described here, MAGIX invoices its customers as a systems provider would. Revenues are generated from the adaptation of products as well as from licence fees for the use of individual applications. Where the business customer achieves revenues itself through the Internet services furnished by MAGIX, these are shared between the parties pursuant to a pre-arranged revenue sharing formula. If, in addition, MAGIX's products are also sold, then these revenues are likewise shared. However, these revenues are attributed to the OEM business unit.
OEM Business Unit
The abbreviation OEM stands for "Original Equipment Manufacturer“. In recent years, this abbreviation has become established particularly in the IT industry as a buzz word for the joint marketing of hardware together with software which usually has limited functionality. The products with reduced functionality for OEM sales are referred to as OEM versions (in contrast with the so-called full versions).
The MAGIX group licenses its products to OEM partners who manufacture digital end devices such as computers, laptops, camera phones, photo or video cameras or MP3 players. By means of the included MAGIX software and the associated Internet services, OEM partners are able to offer their end customers added value in addition to the hardware supplied, and thus to achieve greater differentiation from their competitors.
For providing OEM versions, MAGIX ordinarily receives fixed licence fees from its business associates, which, however, are significantly less than the fees for the full versions. Due to the hardware manufacturers' tight margins, MAGIX has also started demanding licence fees only for products that are actually used by end customers. To trigger the fee, the user initially must activate the program when using it for the first time. If the user later purchases the full version associated with the OEM version on a fee-paying basis ("upgrade sales") for the product, then these revenues are split between the OEM partner and MAGIX, with special attention being given to the differences as between the licence fee models described above.
In its OEM business unit, the MAGIX group generated revenues during the reporting period in the amount of EUR 1.5 million (2005/2006: EUR 1.8 million). This corresponds to a 4.6% share in group revenues (2005/2006: 5.2%).
Despite its relatively small contributions to the MAGIX group's total revenues, OEM sales constitute an extremely important element of the group's product strategy. By linking its products to the hardware of business associates, the group is also able to directly reach users who do not seek information on multimedia products on the Internet or in specialist markets in a direct way. Thus, OEM sales make a significant contribution to expansion of the group's customer base.
If the OEM partner desires a change in design or function of the products, the revenues generated through the provision of such adaptations are, however, allocated to the Portal business unit. The same applies in the case of fees that may be charged for any hosting services provided.
Professional & Consumer Business Unit
The Professional & Consumer business unit is the category covering the retail sales of classic computer products. Both nationally and internationally, MAGIX is listed at the retail chains with the top revenues such as Amazon, Dixons, BestBuy, Saturn/Media Markt, or Fnac. Beyond these, the group is developing new market expansion options through alternative sales channels, such as specialist retail and supermarket chains.
In the audio segment, MAGIX also additionally offers products for professional users. Samplitude and Sequoia, in particular, are used by television and radio networks such as the BBC, Westdeutscher Rundfunk, Mitteldeutscher Rundfunk, Bayerischer Rundfunk and Radio Bremen. By its acquisition of the British Xara Group Ltd., the group is in a position now to offer a program for image processing in the professional segment, with Xara Xtreme Pro. In addition, with Video Deluxe Audio & Effects Edition, a product has now also been developed for professional users in the video segment. The programs referenced have been sold in specialist trade since September 2007.
During the 2006/2007 fiscal year, EUR 21.2 million in revenues were achieved in the Professional & Consumer business unit (2005/2006: EUR 25.9 million), corresponding to a 65% share in total group revenues. During the prior year, this unit had contributed a 72.7% share to revenues. The reduction was, on the one hand, the result of the tense situation in retail trade during the reporting period, and on the other hand, the continuous growth in the Portal business led to a shift in revenue stream.