Algorhythm Holdings, Inc. (RIME) Earnings Call Transcript & Summary

Greetings. Welcome to The Singing Machine Company 2020 Annual Meeting of Shareholders. [Operator Instructions] Please note, this conference call and accompanying webinar are being recorded. I will now turn the conference over to your host, Gary Atkinson, Chief Executive Officer. You may begin your presentation.

Good morning, ladies and gentlemen. My name is Gary Atkinson. I am the CEO of The Singing Machine Company. On behalf of the company, I want to welcome and thank everybody for attending what I believe to be the first ever virtual annual shareholder meeting. I'd like to also introduce the officers and directors that are on the line with me as well this morning. We have Lionel Marquis, CFO of the company; Bernardo Melo, VP of Global Sales and Marketing. We have Joseph Kling, Director; Harvey Judkowitz, Director; and Brendan Hopkins, Investor Relations. This meeting is now called to order. Lionel Marquis will act as secretary of this meeting. Will the secretary please report the number of shares outstanding and entitled to vote at this meeting?

The Board of Directors has set the close of business on August 17, 2020, as the record date for stockholders entitled to notice of and to vote at this meeting. A certified list of stockholders entitled to vote at the meeting is available and may be inspected by any stockholder. As of the record date, 38,557,643 shares of common stock were outstanding, each share being entitled to 1 vote on all matters properly before the meeting. Also available for inspection by the stockholders is the affidavit of mailing certifying to the timely mailing on August 27, 2020, of the notice of the meeting to all stockholders of record on the record date.

A tally by the inspector of election indicates that a quorum is present and the meeting will proceed. Lionel Marquis has been appointed as inspector of election for this meeting. He has taken the customary oath of office, which will be filed with the permanent records of the meeting. I ask now that the secretary report on the vote of the proposals presented at the meeting.

There were 2 proposals on the agenda. First of all, it's established, the quorum. As stated earlier, there were 38,557 -- sorry. Can you hear me?

Yes.

There were 38,557,938 shares outstanding and entitled to a vote. The shares voted through the meeting were 23,892,124. That's 61% or almost 62% of shares outstanding that were voted, so quorum was established. With 2 proposals on the agenda, one to elect the current Board of Directors, those were passed by approximately 98% of the voters, the shares voted, elected to renew all of the existing officers. And proposal #2 with regards to retaining EisnerAmper as our accountants, that was approved by 99% of the voters. So I declare that stockholders have ratified and approved the election of the following members to the company's Board of Directors: Phillip Lau, Joseph Kling, Harvey Judkowitz, Peter Hon and Yat Tung Lau. I also declare that the stockholders have ratified the appointment of EisnerAmper LLP as the company's independent certified public accountants for the fiscal year ended March 31, 2020. The inspector of election will file their certificate with respect to the results of the voting in the company's minutes of the meeting. The results of the voting is also available here for any shareholder to inspect after the meeting.

Thank you, Lionel. At this point, we've prepared a little presentation. So for those that are joining us via the webcast, please direct your attention over to the screen, and we will get started. On today's agenda, I want to highlight some things, some of the accomplishments that we achieved in the last fiscal year. Also want to talk about some of the challenges that we faced last year, quickly run through some of the financials. We'll talk a little bit about Carpool Karaoke and the evolution of that story. Bernardo is going to help talk through the current karaoke product line, also including some new products, and we'll conclude by talking about some of the music sales. [Presentation]

So last year, obviously, for those that are following the company, we were very, very excited when we signed the [ collective ] agreement with CBS for the Carpool Karaoke brand. We launched it to the retail trade at New York Toy Fair and had just an amazing show with great feedback and a lot of buzz and energy that came out of the show. We're actually voted as one of the best products of Toy Fair that year when we launched the product. So we were very excited about that launch. We had great success launching it into retail. We were successful in getting placement with Amazon, and the product got into Amazon's holiday gift book last year. We had Best Buy supporting the products in line every day. They took in a floor shipper display, did very well with the product. Target also carried it in all of their stores nationwide. And Walmart was one of the first retailers to get behind the product and carried it almost right after launch, I think, starting in July. Walmart took that product in last year. So retail distribution was a big success story for Carpool Karaoke. But unfortunately, we -- I think the product took about a year before it really gained its footing. So we'll talk a little bit more about the Carpool Karaoke story, but it was a product that we're all very excited about, and we believe would have longevity, and we'll address more of that later.

Can I interrupt you?

Sure, Joe.

Are we coming out with any new accessories into the Carpool Karaoke category? It looks like…

We will be, and -- yes, Bernardo has a slide on the future direction of Carpool Karaoke, which we'll cover later in the presentation.

Okay. Thank you. Sorry to interrupt.

No problem. Some of the other successes that we saw last year is we were successful and able to get back into Best Buy stores. We've -- Best Buy for a number of years has been more of a dot-com play for us. But last year, it was the first year in a while that we were able to get back into the stores. It started with Carpool Karaoke. They got really excited behind the product. They were -- they took it into all of their stores nationwide, and that helped sort of parlay us into doing a whole seasonal program with Best Buy where they carried 2 karaoke products for the holiday season and also carried the Carpool Karaoke with a floor shipper display. So that was a big success story for last year. Now moving on to some of the challenges. Unfortunately, the challenges that we faced last year sort of overshadowed the successes that we saw last year. For those that have been following the company, I am sure everybody is already familiar with the incident that occurred last year. We saw approximately 80,000 units of karaoke product that were damaged during shipment to a major Black Friday program due to moisture damage. We were fortunate enough that we happen to have marine cargo insurance coverage, but it took almost a year before we were able to sort of have the dust settle on that whole situation. So Lionel's going to talk a little bit more about how that incident impacted last year's numbers, but it was approximately a $1.2 million write-off in fiscal year 2020 and resulted in us having to file an insurance claim of approximately $2.4 million. The other challenge that we faced really through the whole year of 2019 was the trade war between the U.S. and China. There was, at one point in time, a threat of 25% tariffs being placed on Singing Machine products and, obviously, not just Singing Machine product, but really, anything and everything being produced out of China. And really, what that did is it created a very, very crippling effect throughout the entire supply chain. So from our customers all the way down to our suppliers, there was an extreme amount of uncertainty as to how our product is going to get impacted from a price perspective, who is going to be responsible for the tariff if there was one to be placed. And what it ended up doing is it caused our retailers to be very risk averse. They held off and held off, not wanting to place orders because they weren't -- they didn't want to be liable for the 25% tariff if it was going to be imposed. And so it really just condensed and crunched our year into just a few months when there was comfort that the tariffs weren't going to happen. It unfortunately shortened our year into just a few months. And unfortunately, the other side effect is that we were out of stock on some major key items, high-volume items that went out of stock at some of these retailers. So it definitely caused problems throughout the whole year. One of the outcomes from the tariff is we are now seeing a 7% tariff that is now in effect on all microphones, which is an increase from about 2.5% that we were paying prior to 2019. And the other challenge we saw, as I mentioned at the beginning, was we were all very excited with Carpool Karaoke. We had great distribution, but we found that it did take about a year for people to understand and find the product. And so the first year in retail was slow with the exception of Best Buy. And we have -- there's more to that story to come. So we're going to get into that here in a bit. I'm going to turn it over to Lionel here. We've -- I know we've already had an earnings call to go through the fiscal 2020 results, but I just want to -- for anybody that's not familiar, just quickly talk through it. So I'll turn it to Lionel.

Thank you, Gary, and good morning, everyone. As Gary said, I just want to cover some of the highlights for last year compared to the prior fiscal year. It's one of those years that you like to put behind you and talk about the future, which is looking a lot brighter. But we went from $46.5 million in fiscal year 2019 down to $41 million in net sales. A couple of reasons for that. The Canada -- our Canadian distributor and our United Kingdom distributor had tough years. They were fat with inventory. The Canadian distributor, that Canadian business has been dropping for several years straight. We may come with that in a little bit, but we ended up taking out that business over directly, and we're currently building that business back up. But that accounted for about $3.5 million of the drop in sales for that from 2020 and 2019. We also had a $1.6 million drop in sales due to the damaged goods problem as the retailer charges back 100% for those damaged goods, those 80,000 pieces that were damaged. The remaining drop was kind of a mixed bag here. You had Best Buy, which Gary alluded to, that we had a lot of luck in getting back into the stores, and that contributed an increase [ above ] $1.5 million, but that was offset by $2.1 million of returns, if you will. The holiday season in general last year was not very good to us, and we ended up taking a lot more overstock than planned. So the combination of those 2 and one offsetting the other, we still took back more inventory than we were able to add to the mix of products to the customers. From a gross profit standpoint, we ended up at 26.6% versus 25.3% in fiscal year 2019. So $1.3 million pickup, and that's reflective of what Carpool Karaoke, which carries significantly higher margins than the rest of our product line. It did contribute a significant piece to margin uptick. Operating expenses, well, those are up by $3.6 million. And again, there were a lot of onetime issues in there, one of them was the damaged goods that was approximately $1.2 million. That hit the general and operating expenses. There was marketing expense increase of -- discretionary marketing expense increase of approximately $600,000, a lot of which had to do with the rollout of the Carpool Karaoke product. Also, we had a onetime incident with the old Fingerhut, if you will, or [ blue stand file ] bankruptcy, and we got caught with $200,000 of receivable write-off there. In addition to that, there were increase in co-ops of -- co-op advertising, about $700,000 extra programs that we had to give just to try and boost that holiday -- that slow holiday season and keep as much inventory in the hands of the retailers as possible. And we did have some freight increases, about $0.5 million worth of freight increase, part of that due to the increase in overstock that we took back last year and part of it due to an increase in outbound freight cost just going up last year. So bottom line, $2.8 million loss versus a $600,000 profit year before. Like I alluded to earlier, it's 1 year you just want to put behind this. So just to talk about this current year, I mean, the good part is Carpool Karaoke, to talk about later, is now taking off and is really contributing to the gross profit margin, the bottom line and everything going on. Selling and administrative expenses, well, they're going back to historical levels. We don't have these onetime marketing costs, the onetime damage loss, these extra co-ops. We should not be giving those away this season as we've seen a significant increase just in general in the market in stay-at-home products because of COVID. A lot of companies, toys, games, appliances, building improvement things, home improvement things, things that -- everybody is anticipating a strong stay-at-home because of COVID holiday, and this is leading to increased interest in karaoke products. We've -- at this point, we've recovered 100% of the insurance claim. Again, we could only reserve so much last year because of the uncertainty and what the settlement -- the ultimate settlement would be. So we ended up having the pickup of the $2.4 million claim. We had to pick up $1.2 million as part of that uncertainty that we didn't know how the insurance claim was going to come out, but we're happy to report that 100% of that has been recovered as of this quarter. And one more positive note, we did not lay off anybody due to COVID. We were able to pick up a payroll protection program loan of approximately $443,000 that we anticipate to be 100% forgivable once all the guidelines that were forgiven us have been set out. That's my report, and I'll turn it back over to Gary.

Lionel, are we applying for other PPP?

I'm looking into the program to see if we qualify for another ramp.

Okay.

Thank you, Lionel. I wanted to turn it over to Bernardo to just touch a little bit on how the pandemic has -- some of the success we've seen at retail since the stay-at-home orders and the quarantines went into effect.

Yes. Thank you. And I'll take over control, if you want, on the presentation.

Yes, sure. Let me pass over the control to you.

Yes, you passed that over. But -- like Gary was saying, we've been pleasantly surprised since about end of February, mid-March, when most of the country -- where most of the country went on lockdown. Parents are just looking for home entertainment for their kids. And one of the good things about karaoke is it's something that not only the kids could get into, but also the family can get into and what has kept us in business for many, many years. And we saw -- most retailers that had a food component, like the Targets, the Walmarts, the Sam's Club of the world, the Amazons, really take off in sales, both online and at the store level. So if they're going to the store and pick up toilet paper or paper towels or food, they were stopping by the electronic department, and one of our item -- and our items were highly visible and shown. So for us, we thought it was going to be a short run, but it has lasted now well into the second quarter and into the third quarter. Just -- so for example, just -- these are just first quarter numbers. You'll see when we report our second quarter earnings some additional pickups. But Target was up 84%; Walmart, 51%; and Amazon, 40%, just to name a few. And everybody was scrambling for inventory. Target was out of inventory on their top items for a couple of months. Walmart has been at about 60% or 70% inventory for most of the year, which we usually average about 98%. And Amazon as well, we've been chasing inventory there. So the good thing is we were able to move a lot of current inventory during Q1 and Q2, and now we've had to catch up and buy some additional reorders. So that was very good for us. I want to touch a little bit on Carpool Karaoke and just give you some time lines. Earlier in the year, we were thinking, oh, man, did we make a mistake on this item? But we knew the item was a hit because we've seen it in Toy Fair, we've seen it in -- when we did Comic-Con. People are waiting 2 hours just to -- people waiting just 2 hours just to basically singing in the car. And we saw the excitement of people during those times. So we knew that once people got it in their hands, they were going to share content, they were going to do things, but it was still slow-moving. So during January and March, we're seeing regular sales. And then rather on early April, we started seeing the sales numbers jump up, and we were trying to figure out why. All of us being a little bit older, we're not -- all of us are not quite on TikTok, but my daughter actually sent me a text message and said, hey, your item is trending on TikTok, you should look into it. And then we started to do more research. And it just seemed to became a real big hit. We have some videos embedded here that are hard to play because of the virtual-ness of this. But if at any point in time, you want to see these videos, just go to TikTok and put in the hashtag carpoolmic, and all those videos will be -- will pop right out. But -- so early in April, we started seeing about 400 a week. We used to see only like 20 to 50 pieces a week. And that continue. And as more content became available, as more people started posting videos, we started seeing upwards of 1,000 units a week and selling out in Target stores, and then Target and Amazon chasing business by asking us for last-minute inventory. And by end of August, September, we were completely sold out on whatever we had in reserves, I mean, in stock. We saw it highlighted on ESPN, on Access Hollywood, on Barstool Sports, all major accounts that were carrying this. And the momentum just kept on going into -- we worked out a deal with Amazon, who was very interested on the item. They bought into -- they bought it to 26,000 pieces but only made about 15,700 available for Prime Day. We were on the main page of Amazon for over an hour. We had a livestream, something new that Amazon is doing. They concentrated on the Carpool Karaoke livestream for about 30 minutes talking about the product. We were the featured Prime Day deal on the page for 2 hours. And we were 100% claimed before the 2 hours were up. I mean we're supposed to have a 6-hour promo, but before we hit 2 hours, we're already 100% claim. We were like a little hesitant. We wanted to put in more inventory, but we were happy with the 16,000 pieces. And even after hours, after the price went back up, we sold close to about 800 units already back at full price. We got awarded the best seller badge, which is still live today. It was the #1 Lightning Deal for the time slot, #1 trending deal. It competed with the bows and some of the Amazon products. And we were getting texts and e-mails from internally -- internal Amazon employees saying, man, everything is really buzzing with this. And so we are looking to repeat this later on in the year with some additional Lightning Deals. And like I said, we were really excited about the product. It shows the validity of the product. Everybody -- we're averaging about 200 or 300 reviews a week now on the product, people -- for the most part, about 4.5, 4.6 average rating, and people are saying they love the product. So we're really looking forward to just continuing to take this off and maybe getting back to our original goal of selling 0.5 million units on this item for a year. So -- maybe not this year because the inventory was not there. But hopefully, going into 2021, we could continue the momentum and go higher. And this is just a snapshot of what's happening. We've had over 200 million views on the product. We've had people like [ Daniel ], who's been an influencer for us, who did this on his own, that has over 50 million views already on it. [ Kelly ] has over 5 million views. So yes, it's really taken off. And those of you with young kids, I mean, I'm sure you mentioned to them, and they've probably seen it somewhere somehow. They're using it for -- parents are using it from [ embarrassing ] their kid to school and for making some rap battles. So we've seen some really creative ideas. And always for brands and stuff, it's always better when things go organically. And what that allowed us to do is, although last year, we spent over probably like $1 million in general advertising this, we've drastically reduced that marketing expense and hired interns and influencers for as little as $50 for polls or $200. So it costs a lot less, and you'll see that reflected in some of our marketing costs that are going to be weighed down this year. With that being said, I just wanted to talk about some of the new products that we launched this year, how we're going to get into some new products moving forward. For those that have been following The Singing Machine, you know the iconic look for us is the Pedestal. It's been a visual item for us since the year 2002. It was originally created as a furniture piece, a piece that lives in the living room that complements your furniture, and ever since has been selling extremely well. Well, we're glad to introduce it this year in a true WiFi streaming technology, which is a reincarnation of something we created about 5 years ago, which was the home, which was probably a little bit before its time before the smart speakers, but now has been reintroduced. It allows the consumer to basically stream directly from YouTube, from the Singing Machine app or any other apps that are out there -- that are currently out there. And we're excited to see this really take off. As we all know, streaming is here, is the future, and it's going to continue to be the way that we interact with music over videos. So this is our first foray back into that technology. We're happy to report that our 2 biggest customers for high-end product supported the item, both Costco and Sam's Club, so big commitments on it this year, and they've already given soft commitments for next year. We have internationally done it as well. So you'll see the U.K. Costco -- during this next year, you see Mexico, Australia and Canada jump on -- Costco jump on it as well. So everybody is really excited about this. Some of the early signs of sales are positive, and we're looking to hopefully clean out by the end of the year on this item. By early 2021, when we get some additional inventory, we'll introduce it to some of the other dot-coms at a much higher price point. So this is going to be $1.99 at the clubs, and you'll see it at $2.99 every day on some of the online retailers. So healthy margins on this and some back-end potential that Gary will get into later on. Another thing that we did this year, we used to separate our categories into streaming, download, regular karaoke. This year, we sort of introduced a True karaoke stamp. And the reason behind that is we have a lot of invitations of what True karaoke is from PA systems, from party speakers, from Bluetooth microphones claiming to be the full karaoke experience, which we all know is quite not. Those are basically sing-alongs. So we try to differentiate ourselves, and we are sort of branding our product through karaoke, so that when the consumer goes online and sees the Singing Machine brand, they know that they're getting a true karaoke experience, which allows them to sing along with the lyrics and synchronize their voice with the synchronized lyrics on a screen where there is on -- directly on the machine or connected to your TV. The other thing that we started and really focused on this year is honing in on what's working. Before, we used to have about 28, 30 different SKUs, and we wanted to be everything for everybody. And we realize that, that sometimes takes a burden on cash flow, on inventory. So this year, we wanted to focus on the key items that are generating good revenue and also steady stream so that we stack those items healthy with inventory and continue to have the turnover. So one of those staple lines is the Groove CUBE line. It continues -- we're on our third year now. We've introduced new technology with HDMI. As we all know, the HDMI input on the flat screen is a lot better accessible than the RCA cable. So the group mainly launched this year at HDMI, with Sam's Club taking a substantial inventory position on it. They're making it their #1 item for kids in the toy department. We've introduced it in black and pink for them. And you'll see it in their VIP event come November, so be on the lookout for that. And they have the early exclusivity to the HDMI on the one with the screen, which is the Groove CUBE-XL that you'll see on Target and Best Buy this year. And then the Groove CUBE, which is the middle -- in the middle one, but you'll see that spread out almost everywhere. So this line continues to be solid for us. We're looking at it, how do we enhance it even more for 2021. So stay tuned for that. The other thing that I wanted to highlight is our traditional core items are still selling out. We're still recognized by these items. The 385 and the 625 are still selling close to 200,000 pieces a year on each. They're just steady, they sell every week. We carry the inventory, and the demand is high. And it's just because it looks like a traditional, fun karaoke machine that parents want to introduce to their kids. You'll see it anywhere between $49 to $69 in the marketplace. And it's good, it's good sound, fun, and there's still no reason to drop these out of the line. They've been going strong for many years and are still continuing to be some of our best-sellers. We also introduced our first line of party machines. Party machines have been taken over. A lot of people are staying home, hosting parties, so they like these big speakers. The first introduction for us was more in the accessible area for kids and teenagers. And we partnered with Walmart to launch this, so you'll see it in the Walmart stores. We outsee ION on this particular item. So that was good news because ION, traditionally, is known for the #1 line when it comes to party machine. And this will enter us into that, and we will continue to expand on it moving forward. We still believe in our kids line. This has helped us out internationally as well because most of the international distributors that we have are in the kids sector. So these are lower-priced items. But the key is that we've made them still with the taste of Singing Machine, the quality of Singing Machine. So you're still -- although they're kid items, you still see the quality of the sound. We've packed them with good features. For example, this is the mini Superstar, acts like a purse and a sing-along item that the young girls could take with them. And this is -- these 2 are the mini and then the extension of that. And it's cool. For as low as $29.99, you'll get different voice effects, 6 different voice effects. You'll get an internal memory that allows you to record your performance. So kids could quickly record their performance and play back about 1.5 minutes and 2 minutes of that. And it's been really satisfying. This year -- and this year, we introduced the [ traveling ] version, which allows the kids to take it on the go. This is kind of the -- this has kind of for us been the hottest one for the kids. As of right now, we're -- we have commitments for everything that we have in stock, which bodes well for this item moving forward. And again, no other competitor is moving this under $40 and showing these many features on kids' sing-along items. So we're still looking to expand that section, and it allows us to go to multiple departments within the retailer. And then I'll just preview a little bit of what the 2021 we'll bring in store. We're continuing to move forward product that's a key of our company, and we're never [ super on that ]. Product development has been difficult without being able to go to China. A lot of our Hong Kong staff are not able to go to China. But with partnerships that we have tied with the retailers, we have ongoing product calls, and we've been able to still put some products down the pipeline that we're moving forward. So I'm happy to announce that we are under development for the second version of Carpool Karaoke 2.0. As Apple did and some of the other electronics, we're introducing really cool colors to the line. We're going to first drop them into some of the hands of the influencers, see which colors really attract the users on the back end. But besides the colors, we are excited to announce that we're going to be able to create a direct between 2 mics. So now mics are going to be able to interact in between each other. So if you're on a road trip and you bought a mic and then your friend brings another mic, there's going to be a special button that's going to allow to connect 2 microphones in the same car and same -- through the same Bluetooth song that one of the microphones is attached to. And now that it's going to create a lot more fun, and we could only imagine what the virtual content is going to be on TikTok and Instagram. And the other thing that's really exciting is we're going to introduce some fun voices into it as well. So as we've seen, the interaction with the microphone, a lot of the consumers are screaming out of their car or singing out of their car so that people could hear them. And now they're going to be able to alter their voices. So this is going to be a strategic launch. We're going to launch it probably during the summer, early fall, with some of the retailers that -- and we're going to launch it at $49.99, which leaves us with plenty of margin for it. And then we'll take the 1.0 and move that down to $39.99, similar strategy to some of the electronic announcements that have been -- that happen all the time. And we're going to call that the 1.0, and we're going to be able to -- and we're able to launch that simultaneously with the 1.0. And next year, we may look at running some heavy promotions on the 1.0 to really get users with the product in hand. So beyond [ the number ] is…

Bernardo?

Yes, yes?

Does anybody else have that feature?

Not that we know so far. Not that we know so far. So we're excited to be one of the first ones to have that feature. We are hearing in China that people are asking about it now, and we hope to -- we hope that just people want the real thing. So that's why, even in the redesign, we're still keeping some of the iconic look of the microphone so that when people go on it, they -- and post videos, they want to post videos with the authentic one and not a cheap knockoff.

Is it patentable?

No, no. The technology is pretty open. So…

Somebody can [ imitate ] it very quickly.

Yes, yes. But we have the branding and we have a head start. So that's why the 1.0 is going to go down in pricing. But we'll answer some of the more questions, Joe, at the end, if it'll be okay.

Okay. No problem.

The other thing that we're doing is we are seeing the rise of the handheld Bluetooth microphone. We've dabbled in this before, but this is our first -- this is the first time that we've really concentrated into it. We branded it the party machine by Singing Machine so that people know that there's a differentiation with this and the Carpool Karaoke and the True karaoke product. So this, we've launched now exclusivity with Target. And 2021, we're going to launch it everywhere else with different colors and things like this. If you go to Amazon, 5 of the top items right now are these Bluetooth microphones. So we feel like once we launch it properly on Amazon and we run proper campaigns and people see the Singing Machine, the Singing Machine brand name behind it, we believe that the consumers will really get behind it. So this is one of those items that we also believe is going to be a top seller, as you can see now. This one, I'll let Gary talk about it a little bit. This is an item that we've worked on for a while. He's been a little bit more involved in it. So Gary, I don't know if you wanted to talk about some of the features in here.

Yes, sure. Thanks, Bernardo. So we've seen, obviously, there's been a rise in demand for people that are doing podcasts, right? So you see a lot of people now, especially with COVID, a lot of people staying at home who are sort of hosting their own mini radio stations or podcast. And so in response to that, we are currently working on a product that has some of the auto-tune functionality that we saw that we introduced into our studio a few years ago that gives you the pitch correction and some of the other vocal effects with it. And we haven't seen this before. We haven't seen -- there's plenty of microphones in the market that are more high-end for podcasting but nothing that really incorporates the vocal effects functionality. So this is an item that will be a hybrid. You'll be able to use it as a tabletop microphone and also be able to hold it as a regular handheld mic. And it will also be wireless. So this is something new to the market that hasn't been done yet. So we're excited about this and continuing to work on it.

Yes. And we're working on some cool designs to it. So this would be -- it will be a brand-new category for us. So this is really close. So I'll continue. And then I just wanted to show some refreshes that we're doing. Some of these -- I can't speak on the retailer in mind, but some of these are already -- already have a retailer attached to it. But I just wanted to show you what some of the refreshes are for some of our core items that we're doing. And like I said, they have a retailer in mind, so you'll see them out in 2021 for big launches. And this is one that's a play on for the Groove CUBE line. We developed what we call the Karaoke Glow, and you'll see this year in an annual event/Black Friday. We have some huge commitments on this. They're already in their [ DCs ], no damage happened to it. So we like that, and we'll roll it out this year. And again, it will be one of the staples for next year as well. We're introducing some new colors into the kids Pedestal, which has been highly popular for us. We believe by introducing the black color, it could level it up in terms of age. Right now, we're kind of restricted in that 6 to 8 range or maybe even a little bit younger. But coming up this -- by adding it in Black, we definitely think that we could go as high as 12-year old on this product. So that opens up a whole new segment. And lastly, for those of you that didn't know, we do have a really good partnership with our U.K. distributor. One of their main business is musical instruments. They've rolled out 2 different brands by the name of [ Rod Gam ] and [ Martin Smith ]. And we've been in steady conversations with them to see how we could help them expand their musical instrument business here in the U.S. And for us, we're starting to see an uptick. Every time you see an uptick in karaoke is almost synonymous with an uptick in musical instruments. So the musical instrument kind of wave goes every 5 to 6 years, and we believe that, that wave is coming up again. So we think that right now is the time to get into the market, especially with some of the key players getting out of them, like PD and things like that. And first, really focusing mostly on licensed product. We're like the Marvel line and the Disney line. So we think that this is something that we want to explore, and we will. So with that, we have some more things that we're working on, like tabletop, Wi-Fi streaming, which enters the world of the smart home speaker. But we'll talk about that later on. For now, I want to turn it back to Gary, who's going to discuss some of the music success that we're having and how we're going to benefit from that. So Gary, I'll turn it back over to you.

All right. Thanks, Bernardo. I appreciate that was a really good presentation on the product. Like Bernardo mentioned, we currently have a few different ways of providing music content to our machines. So we've had a partnership with a company called Stingray Digital based out of Montreal, a publicly traded company, really a music content company. And through that partnership, we've been able to introduce an app for the iOS and Android platforms. That app works with Bluetooth. And it's similar to the Netflix model. You pay a subscription fee, and you have access to the entire catalog. So that app has been out in the market now for a while. It's doing very well. We're seeing good growth year-over-year on subscriptions, and we're adding new content constantly. Every week, there's more new content coming into the apps, a lot of new popular songs. That -- the app has sort of replaced what we originally launched as our download store. So when we first introduced the Singing Machine download products, we had a download store, very similar to what Apple has with their iTunes store. You could purchase songs a la carte for $1.99 through the download store. But as I said, it's -- most people these days, most consumers really favor streaming as opposed to downloading, which makes sense, right? If you're having a karaoke party and you're having a lot of guests over, you'd rather have access to the entire catalog rather than picking and choosing each individual song. So we've really seen the streaming revenue which has overtaken the downloading revenue. And then finally, this year, like Bernardo mentioned at the beginning, we've introduced a brand-new Wi-Fi streaming product that's now in Costco and Sam's Club. And this product is one of the firsts to have the Wi-Fi streaming built directly into it. So this is our -- once you connect it to Wi-Fi, you're connected to our store, you have access to all of the songs right inside the machine through Wi-Fi. And so that's going to be launching this year. We're giving 1 month free trial for people who buy the product and register, and then it's going to be $15 a month after that to continue to use it and have access to all of the songs. The next slide here -- I think you're still controlling it on. Next slide here, I kind of wanted to cover just a recap of some of the growth we've seen in the stores, the music content stores. Last year, for 2019, we saw approximately about $1.5 million in total content sales. Now that is -- keeping in mind, that's sort of spread out 3 ways. The partnership that we have with Stingray, roughly 33% goes to the music publishers, which pays the artists; 33% goes to Stingray, the content partner; and the last 33% goes to us, The Singing Machine. And it is something to note that we do support artists. We are one of the very few fully licensed legal karaoke song catalogs that's out there. You see a lot of apps that are available that are not legal. They are not using licensed content, they do not sort of pay royalties to the artists. So we are one of the few that we actually have the largest fully legal licensed catalog for karaoke that's out there. And I think that's important. I think people understand nowadays with streaming that artists need this to keep living, and we're proud to support those areas. We've seen roughly 30% growth in revenue over the prior year. And at the beginning of this year when the pandemic first started, we did a promotion where we unlocked the app on the Android and iOS platforms free for a little over a month as a way to sort of give back to our customers and give people some more free entertainment options at home. And it was a successful promotion. We saw about an 80% growth in new installs going out -- coming out of that promotion. And so we're excited to see where music sales can be for this coming holiday season, particularly excited to see where the new Wi-Fi streaming product can be just because of the fact that it's completely frictionless. You buy the product, you take it out of the box and, immediately, you have access to the content catalog, which is a significant improvement over using the app and having to connect the app to your phone and to the machine. This just puts everything in one nice, simple place. So we're excited to see where the music revenue can go for this year and moving forward as we continue to expand the Wi-Fi streaming hardware line. So I think with that, we're coming up close to the end of time here. I just want to open it up, and I think this is a good opportunity, if there's any questions out there. So I think, moderator, if there's any questions, we can…

I have a question.

Sure.

Gary, I really appreciate all the features that we're aiming. How do we make the consumer cognizant of these new features?

That's a great question. I think that's something that we see a lot of. There's a lot of confusion in the karaoke market, and Bernardo touched on it earlier that there's so many options now. There's PA systems that have microphones, there's -- ION has a line of portable Bluetooth speakers, and they're starting to introduce microphones into their products. And so we do get a lot of confusion about what is karaoke and what's just a sort of a sing-along gimmick? And so one of the things that we…

How do we clarify it?

Yes. So that's something we've really thought a lot about. And so we've introduced this sort of True karaoke badge that we're putting on all of our products now. We're trying to do a much better job of educating and explaining what the differences between real karaoke, which, to us, means having lyrics, right, having scrolling lyrics that you can see on your screens and following along. That is True karaoke, whereas a lot of other products in the market are not. They're just PA systems, and they're trying to sort of position themselves as karaoke machines when they're really not. So I think a lot of it is…

To touch on it too, Joe, the one thing that I've always said, games, PA system, anything that mentions the word karaoke is ultimately a positive for us because that keeps the category going and strong. Like even last -- this year, yes, we heard JBL is even jumping into putting some karaoke features on their higher-end $1,000 machines. And what we feel ultimately is, as long as the word karaoke and the use for karaoke is out there, ultimately, that keeps the category alive, it makes a less niche. And with us being positioned well in a lot of the retailers owning the space of karaoke at Target, at Walmart, at Amazon, at Best Buy, they have to come back and continue to support the category because it's something that the consumer wants, and we see it by the proof of every other sort of product out there mentioning the word karaoke. So we ultimately think that people may enter it with a PA system, and then they go, oh, you know what, I want the true experience of showing the lyrics. And once they do that and they do searches, Singing Machine is always top of search when googling karaoke or when searching karaoke in the Amazon platform as well, which we know about 65% or 70% of the consumers are not even searching Google anymore. They're searching Amazon, and we pop up immediately to the top of that. We're also investing a lot into keywords. So SEOs playing a big part on that; and AMS, which is Amazon Marketing Services, is playing a big sense of that. So a lot of our marketing dollars is going into keyword searching and also the Amazon marketing platform, where we're bidding out for the Singing Machine brand and the karaoke brand and things like that. So as long as karaoke stays top of mind, it's always going to be positive news for The Singing Machine.

I have other question then. Where does VTech fit into the competitive nature against us? And are they being marketed?

Yes. VTech is more of a sing-along…

Do they have any pieces that we don't have?

No. Not really, not really. They have their Kids Star item, and that's placed in mostly the toy section, next 2 hours with our toy products. So when you compare it, they're roaming around $49. Most of our [ cheap ] products are around $29, $39. So we have a little bit of a price advantage. And we also have a brand recognition advantage, too. So we think that we are positioned well to compete with them.

So I have another question, if you don't mind. What do you estimate on sales volume in the karaoke category? And what is the potential of the entire category? And what was our peak volume in the history of Singing Machine?

Our peak volume was close to $100 million.

That's what I thought. So when are we going to get there?

Yes. I mean, during that time, a lot of retailers were giving in like 8 to 10 to 12 feet of space. As most of you guys know, a lot of these retailers that are shrinking their electronic department or toy department and really growing their food section, right, because the food section is what keeps people coming back to the stores. So for example, Target used to be 8 to 10 feet of space. Now they're down to 4 feet. But we own the 4 feet, where before we used to share with others.

It sounds like [indiscernible] will offset that?

I'm sorry?

Isn't that offset the retail space?

It does to an extent, but on dot-com, also it's easier to introduce off brand, Chinese brands, right? Like on Amazon, it's noted with Chinese brands that are coming in. They don't take a lot of volume from us, but they do take volume. The microphones take some volume off of us. So we think that the karaoke market is there and is growing. But we also think that we want to open up to some different categories to be able to get to that sales volume of $100 million. We're thinking of what certain categories we could get into, like I mentioned before, the musical instrument category. I think with the Wi-Fi streaming, once we make it more accessible -- right now, the Wi-Fi streaming is $200 and above. We're working hard to try to get to that under $99 or at least $129 with the Wi-Fi streaming. Once we get to that Wi-Fi streaming, and we bring it to a mass price point. We also think that, that could change the karaoke segment for the better. The technology is coming down in pricing. It's not quite there yet, but we are working on that. And we've got some other technologies that we're working on right now. We just engaged with a new designer this week, and he has a proposal outstanding for us. And once we take a look at that proposal, we're probably going to sign on and see. And then there's some other categories that we want to get into. I mean, I think it's still a little too early to talk about, but we do want to start expanding the product line, especially that we have the relationship with a lot of the retailers and especially that we have the relationship with a lot of the dot-coms, where we could release product and place them on dot-com fairly easy.

This is a question, and you're going up against Jazwares, who's spending a lot of money on advertising. How are we going to compete against them? It's just another estimate.

Yes. That's a perfect question. And that's why we think that the ability to get in there is to partner up with somebody that already has an established brand. So we are in the talks with our distributor to see if we could reverse distribute here in the U.S. The one thing with Jazwares, if you see in the marketplace, a lot of the First Act stuff is branded to Disney and Marvel. And so we think that there's a gap for entry-level musical instruments that are not licensed. So between that $59 and the $129 price point, there is a gap that First Act has left there. And I think it's because Jazwares focuses mostly on [ toy ] product, and they lost some of the knowledge of the First Act team that focuses on that like $99 price point. So we're continuing to talk with the distributor and also with the retailer as well as to how we could fit in that marketplace.

Okay. Well, I think we are -- yes, I think we're a little bit past time. And I'm looking at the queue here to see if there's any questions in the queue. Moderator, I don't see any at this time.

There are no questions at this time, Mr. Atkinson.

I have 2 questions.

I move the meeting be adjourned.

Just a second. Bernardo, I have 2 questions. Number one, with the new Toy Fair date reestablished, are we -- supposed the New York Toy Fair?

Yes. I mean if it rolls out this year, next year, we will go. I mean both the Nuremberg and the Toy Fair have moved a little further out. But I could assure you, Joe, that we're already having customer needing. We already had our Sam's Club line review for next year. We will have a Walmart line review here before the end of October. We're not going to wait for the shows. We're moving forward with -- we're having some line reviews here early on in the year.

Okay. And one other question. Are we selling Kohl's?

What?

Kohl's? No. I could tell you, Kohl's, their electronic department is pretty much in shambles. They're not doing much changes since the pandemic. They weren't even taking meetings. And from what I understand now, about 70% of that is online, and we are online to one of our distributors called Optimal Fulfillment. So we will have preference -- I mean a presence on kohls.com for now. And once they clarify what the direction is going to be, we have relationships there, so we'll be hopefully positioned well.

Thank you very much.

Okay. All right. Well, thank you, everybody. I'm going at this point to entertain a motion to adjourn the meeting.

I move that the meeting be adjourned.

Second.

Okay. All those in favor, say aye. [Voting]

Gary, thanks for the [ meeting ]. Good luck.

Thank you, Joe. The motion is carried, and the Annual Meeting of the Stockholders of The Singing Machine Company is now adjourned. I want to thank everybody for…

Gary?

Oh, yes, Harvey?

Yes. Do me a favor. I just sent you an e-mail. Would you address it when you get a chance, please?

Sure thing. Don't worry.

Thank you.

Well, thank you, again, everybody, for joining, and we look forward to talking to everybody on our second quarter earnings call. Thanks, everybody, and have a great day.

This concludes today's conference. You may disconnect your lines at this time. Thank you for your participation. Good luck, and be well.