UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
8-K
CURRENT
REPORT
PURSUANT
TO SECTION 13 OR 15(d) OF
THE
SECURITIES EXCHANGE ACT OF 1934
Date
of Report (Date of earliest event reported): October 30, 2014
RIGHTSCORP,
INC.
(Exact
name of registrant as specified in its charter)
Nevada |
|
000-55097 |
|
33-1219445 |
(State or other
jurisdiction |
|
(Commission |
|
(I.R.S. Employer |
of Incorporation) |
|
File Number) |
|
Identification Number) |
3100
Donald Douglas Loop North
Santa
Monica, CA 90405
(Address
of principal executive offices) (zip code)
310-751-7510
(Registrant’s
telephone number, including area code)
Copies
to:
Gregory
Sichenzia, Esq.
Jeff
Cahlon, Esq.
Sichenzia
Ross Friedman Ference LLP
61
Broadway
New
York, New York 10006
Phone:
(212) 930-9700
Fax:
(212) 930-9725
(Former
address, if changed since last report)
Check the
appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under
any of the following provisions (see General Instruction A.2. below):
[ ] Written
communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
[ ] Soliciting
material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
[ ] Pre-commencement
communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
[ ] Pre-commencement
communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Item
8.01 Other Events.
On
October 30, 2014, Rightscorp, Inc. (the “Company”) posted a letter to shareholder on its website. The Company commenced
mailing of the letter to shareholders on October 31, 2014. A copy of the letter is attached as Exhibit 99.1 hereto.
Item
9.01 Financial Statements and Exhibits.
(d)
Exhibits
99.1
Letter to Shareholders
SIGNATURES
Pursuant
to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf
by the undersigned hereunto duly authorized.
|
RIGHTSCORP,
INC. |
|
|
|
Dated:
October 31, 2014 |
By: |
/s/ Christopher
Sabec |
|
Name: |
Christopher
Sabec |
|
Title: |
Chief Executive
Officer |
Letter
to Shareholders
October
2014
Dear Rightscorp
Shareholders:
I
would first like to thank you for your continued support in our initiative in protecting and preserving the value of digital assets
and copyrights. Since going public in October 2013, we have announced annual revenue growth of 236% and have made significant
headway within the industry. This year has been marked by growth and transformation for Rightscorp and in the first two quarters,
we have reported revenues that have already exceeded revenues for the full year of 2013.
Our
growth is a result of the increase in our internal business metrics, as well as the growing acceptance of our proven industry
solution. The internal metrics include growth in copyrights under contract, increased ingestion rates of this content, and increased
numbers of Internet Service Providers (ISPs) forwarding our notices. Compounding these metrics drives the number of closed cases
of copyright infringements and hence our revenues. We have continually refined our technology to make our process more streamlined
and efficient. The growing acceptance of our solution is evidenced in the recent press we have received as well as the new clients
adopting our solution. With the right elements in place, we believe that we will generate another record year.
Recent
Media Sheds Light on Impact of Piracy
Over
the past decade, unauthorized digital use of copyrighted intellectual property (IP) has resulted in billions of dollars of lost
annual revenues for the owners and creators of these works. It is estimated by Frontier Economics that U.S. internet users consume
between $7 billion and $20 billion worth of digitally pirated music annually. If we add in the losses from film, TV, video games,
software, and books, the numbers become even more staggering. Rightscorp helps ensure that owners of copyrighted content are paid
for their work, assuring that this generation and future generations of singers, songwriters, performers, authors, and filmmakers
are rewarded for developing quality content.
Rightscorp
continues to lead the charge against a very serious issue that has plagued the entertainment industry. In recent months, the topic
of copyright infringement has moved into the headlines with the media shedding light on the billions of dollars in damages lost
by artists and content owners. Thom Yorke, lead singer and writer of the wildly popular band Radiohead, experimented with his
recent album release on Oct 1st, “Tomorrow’s Modern Boxes.” Hoping to thwart popular piracy sites like the Pirate
Bay and Kickass Torrents from facilitating illegal downloads, Yorke made a surprise release of a download-only version for a nominal
fee of $6.00. Despite that attempt, thousands of infringers still managed to illegally distribute the album within hours of its
release. Demonstrating how internet piracy has crippled the music industry for the past decade, the day after the release, a free
version of “Tomorrow’s Modern Boxes” was the number one download on pirate sites, but the version that cost
$6.00 was not even in the top twenty. This is just the latest example of how piracy impacts the creative works of artists and
how digital assets can quickly be misappropriated, even when the artist tries to avoid piracy by offering an affordable version
download.
www.rightscorp.com | 3100 Donald Douglas Loop North Santa Monica, CA 90405 | OTCQB: RIHT |
Rightscorp Shareholder Letter
Page 2 of 4
Copyright
infringement continues to move beyond music and affects the motion picture and TV industry as well. Recent press surrounding several
new releases highlights the problem. “Expendables 3” was illegally downloaded over 2.2 million times, while the Wall
Street Journal stated that, “pre-release piracy reduces a movie’s domestic box-office take by an average 19%, according
to findings by researchers at Carnegie Mellon University.” Additionally, HBO’s “Game of Thrones” set piracy
world records upon its recent release of a new season.
Rightscorp
offers a simple and effective solution to the multi-billion dollar piracy dilemma, which does not cost the copyright owner anything
– our solution actually helps make sure rights holders are paid for their content. Rightscorp’s process begins by
identifying the infringer that is distributing content without the owner’s authorization. We then send an infringement notice
and settlement offer via e-mail to the infringer’s ISP. By working with the ISPs and notifying them of the unauthorized
activity on their network, we help to assure that the notices are sent to the proper infringers in a timely manner. Rightscorp’s
unique process lies in our ‘Repeat Infringer Technology,” a proprietary technology that makes it possible for us to
raise the ISP’s awareness of the continuation of abuses occurring on their network. Because of the effectiveness of this
solution, we believe Rightscorp is emerging as a leader against illegal copyright infringement on peer-to-peer networks.
Our
Operational Metrics Generate High Growth Rates
On
an operational level, our growth is determined by three major key metrics. First is the addition of copyrights we acquire and
sign on to represent – we call this our authorized copyright catalog. At the end of the second quarter 2014, we reported
that we have surpassed over 1.5 million copyrights, which include music, movies, books, and other digital content.
Second is
our ingestion rate. This is the process of adding content from our approved copyright catalog to our proprietary copyright monetization
system. We continue to make strides in advancing and accelerating this ingestion process. The following chart shows a steady increase
in the number of copyrights we have ingested this year.
Third is
the number of participating ISPs that forward our notices and settlement offers. We recently reported that this number has increased
by over 100% to more than 150 participating ISPs. Significantly increasing the amount of participating ISPs is meaningful for
us because each additional ISP allows us to pursue, monetize, and collect upon thousands of potential infringement cases. To highlight
that number on a macro level, we currently estimate roughly 1800 ISPs in the US, and work with over 150 ISPs, which we believe
represents approximately 15% of the US population. These three factors directly impact our top line growth and help drive our
business revenues.
www.rightscorp.com | 3100 Donald Douglas Loop North Santa Monica, CA 90405 | OTCQB: RIHT |
Rightscorp Shareholder Letter
Page 3 of 4
Progression
of Ingested Copyrights
Today,
we have more than 160,000 copyrights in our system and this number continues to grow. We also announced that we settled more than
130,000 cases of copyright infringement and collected payments from distributors through notifications sent by their ISPs. This
represents a 73% growth from the 75,000 cases we reported in May 2014, which is a major accomplishment for a company of our size.
This number continues to increase daily.
The
automation and scalability of our business allow us to operate efficiently on a larger scale as we continue to ingest more copyrighted
assets. We have significantly increased the number of copyrights we represent and the industries and types of content we can support.
Roughly a year ago, we expanded our representation into the film and video market and more recently, we signed a deal in the $15
billion book publishing industry.
Large
Capital Infusion to Accelerate Growth and Path to Profitability
From
a capital expansion perspective, we completed a $2.7 million capital raise in late September, making this the largest single injection
of capital since the inception of the Company. The warrants attached to this deal, if exercised for cash, will potentially bring
in another $4.5 million. It is a significant event for us as we believe this funding will allow us to further expand our automation,
continue to ingest more content, propel our growth trend, and bring the Company to profitability. Our vision is to preserve, protect,
and rightfully monetize digital assets, so that the next generation of great music, movies, video games, books, and software can
be made and their creators can prosper.
www.rightscorp.com | 3100 Donald Douglas Loop North Santa Monica, CA 90405 | OTCQB: RIHT |
Rightscorp Shareholder Letter
Page 4 of 4
The
Next Generation Solution
In
September, we became aware that at least one ISP had begun setting up our notices on a browser redirect screen for the infringers
on their network to establish compliance protocol. We have responded to inquiries regarding this from many of their customers
and continue to assist them when contacted. This next step may be a natural progression for our technology to assure ISPs are
compliant with current laws. The solution has the potential to significantly increase our efficacy and provide a better quality
service to the market. With that regards, we have already filed patents around this solution.
Looking
Ahead: Strong Momentum Play in Multi-Billion Dollar Market
It
took over a year to build out this foundation and we are now seeing solid traction. We are very encouraged by the opportunities
we have generated thus far and believe we offer a compelling investment proposition to both our clients and investors. We continue
to generate quarterly and annual revenue growth. We have reported a 49% quarterly growth rate from when we began our operations
in March 2012 to June 2014.
Rightscorp is leading the charge against online P2P copyright
infringement. This is a multi-billion dollar dilemma and our solution is effective and building acceptance in the industry. A
great way to look at the market opportunity and our built-in growth is this: as of 2012 there were 27 million items reported available
on iTunes, we are currently authorized to represent 1.5 million copyrights and have ingested over 160,000 of this authorized copyright
catalog into our proprietary copyright monetization system. As you can see from the diagram, the opportunity is immense and we
are only beginning to scratch the surface of this market.
|
|
|
On
behalf of the management team at Rightscorp, we encourage you to pay close attention as we continue to execute on improving value
to our clients and our shareholders.
Sincerely,
/s/
Christopher Sabec |
|
CEO |
|
www.rightscorp.com | 3100 Donald Douglas Loop North Santa Monica, CA 90405 | OTCQB: RIHT |
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