COE571M

(Technology Entrepreneurship)

BUSINESS PLAN

By
SUMDC

Submitted by
Group No. 3
DELA CRUZ, Carlo Dominic U.
MACROHON, Joselle A.
SANTOS, Kyle Reyner G.
UY, Ma. Elizabeth Ann L.

Write-Up Presentation
Manner: __________ Manner: __________
Content: __________ Content: __________

Prof. Joseph Paul C. Sianghio

April 3, 2016
EXECUTIVE SUMMARY

The next-generation karaoke device is here. Understanding the entertainment

value of karaoke to Filipinos, SUMDC was a partnership formed by forward-thinking
members in various technological fields. Karaoke, as we know it, tends to be associated
with immobile setups and is limited to karaoke bars in downtown areas, The appeal of
the entertainment medium is potential that leaves much to be maximized. Equipping
karaoke with next-gen portability enables it to break through its current market into the
smartphone market, a rapidly growing technological necessity. With all this in mind, we
introduce the Kokoroke, the first mobile karaoke device supported by a social
application platform.

With smartphones now being the main mobile phone units sold in the National
Capital Region, the Kokoroke seeks to penetrate this market and have karaoke
reemerge as a more eminent entertainment trend. With over 6 million smartphones in
the region, we hope to capture 11% of this as the target market of the Kokoroke. This
results in 714,000 smartphones that are expected to have Kokoroke by the end of the
first year.

Kokoroke synthesizes the mobile karaoke unit and the social media application
into a singular setup. This sets it apart from dedicated karaoke units such as MagicSing
and the many other mobile applications that do not offer full-fledged karaoke support
through technologically advanced hardware. The Kokoroke boasts high portability as
the output display device of the setup is already in the users’ hands everyday. This, in
effect, reduces the percepted hardware on the user’s part.

Annual Gross Profit Margin is projected at 0.070, with break-even sales quantity
at 47,005 units on revenue of P104,327,878.14. Payback period is under 18 months
and follows an ROI of 247.76%. Worst case scenario projection will be on a payback
period of about 3 years and ROI of 90% at the minimum. Funding requirement is at 30
million Pesos, for hardware development and manufacturing, as well as mobile app
development and maintenance. Capital shall be from proprietors, angels and loans.

The Kokoroke is brought to the market by the joint expertise of four board
members:
● Carlo Dominic Dela Cruz - Application Expert
● Joselle Macrohon - Market Expert
● Kyle Reyner Santos - Finance Manager, Idea Source
● Ma. Elizabeth Ann Uy - Logistics Head
1.0 THE TECHNOLOGY VENTURE

1.1 OVERVIEW

“The Japanese may have invented the karaoke, but the Filipino rules it!”
- Rich Kiamco, American-Filipino writer and performing artist

Karaoke has been a mainstay in Philippine culture ever since the technology was
first made available in the country. Karaoke bars are commonplace, especially in
downtown areas. They are also found in households, as the prevalence of karaoke in a
Philippines is supported by statistics from the Philippine Statistics Authority, indicating a
sizable percentage of households (26%) attributing their recreational time to their
karaoke/videoke/vcr systems. (PSA, 2011).

The karaoke bar’s establishments are built around a karaoke unit setup for
customers to use. Private owners of contemporary karaoke products suffer the same
problem. Because of the stationary nature of these setups, we find that introducing a
portable means to karaoke will modernize the product, reinvigorating long-time fans
while attracting the attention of new ones.

With the continuous development of mobile phones and tablets, these devices
continue to grow with increasingly stronger processing capabilities. With smartphones
now being the primary mobile phone unit in Metro Manila, this market opportunity
coincides with the market gap of product immobility, leading up to the conception of
Kokoroke.

1.2 PRODUCT

Wireless Microphone Receiver

1.2.1 HARDWARE COMPONENTS

Kokoroke is a portable karaoke setup that is comprised of a wireless microphone

and a Bluetooth receiver. The microphone functions as a standard sound input for the
system. The microphone communicates most of the signal to the receiver directly,
keeping the phone strictly to app and display processes only. The receiver is provided
to avoid otherwise overloading of the phone/tablet by making it serve as a bridge to too
many devices. This is a necessary component to ensure efficient hardware use.

Table 1. Technical Specifications of Kokoroke Mic

Microphone Receiver

Height 279.4 mm 50 mm

Diameter (tapered) 63.5 - 30 mm 60 mm - 800 mm

Weight 4,000 g 500 g

Power Source Via microUSB cable (1 Via microUSB cable (1

meter cable included) meter cable included)

Input signal ● For

SmartTV/SmartPhone:
Bluetooth version 4.0
Smart Bluetooth
● For
SmartTV/SmartPhone:
WiFi
○ Frequency
○ FCC: 2412-
2462MHz (Ch1-
Ch11)
○ ETSI: 2412-
2472MHz (Ch1-
Ch13)
● Standards:
○ IEEE 802.11n
○ IEEE 802.11g
○ IEEE 802.11b
 Output signals ● Bluetooth version ● For
2.1 SmartTV/SmartPhone:
Bluetooth version 4.0
Smart Bluetooth
● For
SmartTV/SmartPhone:
WiFi
● For Speakers:
Bluetooth version 2.1
● For Speakers: 3.5mm
audio jack

Transmission range Bluetooth: Up to 10 Bluetooth: Up to 20 meters

meters WiFi: Up to 30 meters

LED indicator On – steady blue light On – steady blue light

Low battery – slowly Low battery – slowly blinking
blinking blue light blue light

Battery 5000mAH 10,000mAH

1.2.2 MOBILE APPLICATION

The Kokoroke app is the software component of the product. It is a mobile

application that serves as its interface. The mobile application can be used traditionally
using touch commands of the device. Additionally, the microphone is designed that it
can fully function as an input device, able to navigate through the mobile application
with ease.

Users will be able to use the application upon purchase of the product. The
product shall come with a code to be inputted in the mobile application, granting access
via account creation. Additionally, Kokoroke seeks to work on one of the most effective
aspects of entertainment applications: competition. Implementing a high score system
adds a competitive dimension to applications, and has been an effective feature of
games. Most applications that can implement a high score systems do so. An example
of this is the largely popular brand Ketchapp, with over 30 games that all use this to
great success as part of their game formula. The app shall store the top 3 high scores
per song with a name input, respecting the communal nature of karaoke.
1.3 PRODUCT / SERVICE VALUE

Kokoroke aims to solve the portability problem of contemporary karaoke setups.

Portability is a desirable trait for almost any product, as newer, cutting-edge
technologies allow smaller physical products without significantly compromising the
quality of the product. Kokoroke aims to do just that, and break away from the standard,
TV-in tow, karaoke setup. Kokoroke aims to use the power processor capabilities of
modern smartphones and tablets as the crux of the setup. The capabilities of modern
devices nowadays can readily substitute as the output display device of karaoke and its
relatively simple program.

1.4 BUSINESS MODEL

1.4.1 Bricks and Clicks

The Kokoroke will be sold in electronic retail establishments. It will generate its
first wave of revenue with the purchase of the actual product. This can come in multiple
schemes, as either a standalone purchase or a bundled purchase with a SmartTV. The
second revenue component comes through the software medium of the product.

1.4.2 Freemium

The device comes with 5000 songs free with purchase of the product. To access
current and future releases for app use, song purchases can be made through in-app
purchases. Songs are collected into packs that typically consist of 50 - 100 songs each.
Packs are priced at P10/song.

The packs are detailed as follows:

● Artist packs (AP) - songs that belong to a particular artist or group. Size
varies from artist to artist
● Genre packs (GP) - songs that fall under one genre (e.g. pop, rock, blues)
are grouped together in this pack.
● Season packs (SP) - these packs feature popular songs released during a
certain quarter of the year (e.g. 4Q, 2015)

For users who desire only certain songs from a pack can elect to buy songs
individually, at P30/song.

Event sales will also be implemented. These are high-discount sales that last for
a short period of time (6-8 hours).
2. MARKET ANALYSIS AND MARKETING STRATEGY

2.1 MARKET DEFINITION

Kokoroke’s clients are composed of the Filipino population that have

smartphones, tablets, or SmartTVs. To limit the market size for startup purposes, the
general population shall be composed of working people or basically people in their
voting age. To further limit the market size, the concentrated population shall be located
only in Metro Manila.

2.2 MARKET SIZE

At present, the population in Metro Manila is roughly 11.9M with a growth rate of
3.1% (PSA, 2015). According to Philippine Statistics Authority (2012), the voting
population in the Philippines in 2012 is estimated to be 60%. Based on a survey done
by Rappler, the percentage of mobile users is approximated to be 50%. If it is predicted
that one out of every five people would buy a Kokoroke for their group (families, friends,
restaurants), then the target market size is calculated as:

A local karaoke company known as MEGAPRO, sees to it that they sell 4000
units of their karaoke system in a month (See Appendix B: Table B-1). If the company
adopts an average 4000 units per month, then they need a target sale of 48000
units/year. Since Kokoroke is a startup business, we can not incorporate the same
target sale. If Kokoroke incorporates the same goal keeping in mind that we only seek a
half of MEGAPRO’s target (Year 1), then Kokoroko needs to capture at least 3.36% of
the market in Year 1. At Year 5, we want to be able to catch up to MEGAPRO as a.
See Appendix B for more information.

2.3 MARKET RESEARCH METHODOLOGY

As seen and discussed in section 2.2 of this business plan, the primary source
data for Kokoroke’s market came from MEGAPRO. MEGAPRO is a Filipino-based
karaoke company that sells their designed videoke box to agents such as MARTCOM. It
is unlikely to follow MEGAPRO’s target sale (as seen in Appendix B Table B-1) as a
guide to manufacture 40000 units of Kokorokes considering that Kokoroke is still on its
startup stage.
2.4 COMPETITOR PROFILE

The main competition Kokoroke faces comes from Xtreme Magic Sing and WOW
Videoke, the well-known videoke developers. Both use the chip technology in song
expansion.

Xtreme Magic Sing is priced at around P10,000 - P20,000. It uses a traditional

entertainment system and includes a few personalization options. It has multiple options
with regard to its song chip upgrades. WOW Videoke similarly uses the chip technology
and is a lower-priced competitor of Xtreme Magic Sing.

2.5 COMPETITIVE ADVANTAGES

Kokoroke aims to enter the market at P12,000. This is made possible due to less
hardware than its competitors, and more processing power being delegated to the app
and its device. The app will also allow for more personalization options, and include the
aforementioned high score/ranking system. Other features are as follows:
● Request Songs
● Push notifications
○ New songs available
● Account Creation
○ Favorite artists
○ Scores
○ Wish list
● Create Your Playlist
● Save voice recordings
● Pre-arranged Playlists (OPM, Top 100 Billboard, POP)

Kokoroke’s main selling point it its enhanced portability and ease of use, backed
by an effective, streamlined application. People will buy the product as the next-
generation karaoke device. New competitors will be deterred by the portability entry
barrier that the product seeks to establish. With the presence of a fully functional
portable setup, competitors will be forced to compete largely on the same aspects as
Kokoroke.

The product can continue to improve over time by releasing newer hardware
components after valid user feedback. The mobile app will also have regular updates to
keep song packs at a competitive price while enabling streamlined usability.
 Features Wow Videoke Xtreme Magic Sing Kokoroke

Song list 5000 songs built- 4000 songs built-in. Unlimited online
in. Can expand using songs
Can expand using chips
chips

Limited Songs Limited Songs

Pricing Mic: P14,000 Mic: P9,000 - Mic: P6500 -

-

P35,000 P22,000 P7000

Chips: P3,200 Chips: P2,000 - Packs: P1,000 -

P5,000 P2,000

Personalization Personalized None Personal account

backgrounds Personalized BG
(access to gallery)

Platforms Traditional Traditional Smartphone, Tablet,

Entertainment Entertainment SmartTV
System System

Voice command Yes No Yes

Social Media No No Yes

Integration

Scoring Yes Yes Yes

Algorithm

Record Yes Yes Yes

2.6 MARKETING STRATEGY

Kokoroke is the first mobile karaoke system to be integrated to social media and
provides the capability to choose from thousands and eventually unlimited songs online.
The system is portable and can easily be integrated with speakers, smart devices, and
even smart television sets.
 The app already comes with 5,000 free songs easily searchable using apps
installed on the mobile device or smart TV. It will be made available on iOS, Android,
and smart TV platforms. It is easily downloadable from Google Play, the App Store, or
via APK.

Kokoroke’s microphone and receiver are available online via a dedicated

website, popular deal sites like Ensogo, and eCommerce sites like Lazada and Zalora.
It will also be made available for consignment in brick and mortar locations such as
technology hubs and music stores.

Kokoroke’s brand caters to the social nature of karaoke, but with a mobile twist.
As such, it will be advertised in social media channels where the target market are most
likely enjoying multimedia, such as Facebook, Instagram, Vine, and others. Brand recall
will be strengthened by sponsoring music-related events like summer festivals, college
fairs, and singing competitions.

Partnerships will also help drive Kokoroke in the market. We will reach out to
telecommunication companies and local mobile OEMs and explore getting the app
bundled in their devices or mobile offerings. Likewise, we will explore the possibility to
partner with local and indie artists and offer to publish their music and help gain
popularity in various niched markets. In return, partnered artist will advertise Kokoroke.

Kokoroke will enter the market with a very good introductory price of Php 12,000,
a bit lower than the competitors’ average price in order to cater to a larger market. In the
long run, prices will increase as it proves itself. Meanwhile, Kokoroke has a continued
income plan for its in-app purchases of popular songs, genres, and artists.

2.6.1 USP

Figure: Kokoroke Logo

Kokoroke prides itself as the first mobile karaoke with full app support. This will
be the main selling point that will be advertised with the product.
 2.6.2 Pricing and Profit

Kokoroke aims to enter the market at P12,000. This is made possible due to less
hardware than its competitors, and more processing power being delegated to the app
and its device. The product will also offer promotions to the first 1,000 units sold,
allowing these accounts to purchase 3 packs for free. Profit is at 750/unit sold, and at
250/pack sold.

3. FINANCIAL PROJECTIONS

3.1 BUSINESS FEASIBILITY ANALYSIS

A shown in table C-1 of appendix C, the CGS is at P11,500 for the entire setup,
as seen in Table C-1. Total Income, EBItDa and Earnings over 5 years are displayed in
Appendix D table D-1. Table E.1 of Appendix E shows the Gross Profit Margin, Break-
even sales quantity and revenue, Payback Period and ROI%. The annual Gross Profit is
0.14 while the breakeven sales quantity is at 47000 and breakeven revenue is
estimated to be 16.4M pesos. The payback period occurs after 2.7 years and the return
on investments is at 85.42%

There were many assumptions that took into play when coming up with the
business plan however majority of the assumption were made under OPEX calculation.

*Assumed Cost of Goods Sold

*Note: Starting Song License for PolyEast is 18M pesos/year. Every year an additional
3M pesos is used for contracts with other companies such as Sony, Universal Record
* Mobile App cost is based on Microsoft Azure as shown in Appendix A
* Worker cost set to 600 pesos and number of workers needed is set to 4 at year 1
while for the it number of workers is proportion for every increase in number of units
developed in the year. Table A-1 is also calculated with assumptions

3.2 CAPITALIZATION

The funding requirements are all based on the mass production of Kokoroke and
Starting Operating Expenses. An estimated funding requirement of 30 million Pesos is
required and is expected to be paid within 5 years.

Equity #1 comes from the shares of all four members of the company. Equity #2
are investments that the members of the company can gather from each respective
families.Equity #3 is sourced from venture capitalists and business angels.
4. MANAGEMENT TEAM

The team behind Kokoroke is composed of friends that met in a entrepreneurship

graduate class at De La Salle University.

Carlo Dominic U. Dela Cruz – Application Developer

Carlo Dela Cruz is the Application Expert. He is currently completing his Masters in
Electronics and Communications in De La Salle University Manila. He has various
experiences in mobile app development and has great skills in both manufacturing and
marketing perspective. He guided the team in the development of the product in all
aspects.

Joselle A. Macrohon – Market Expert

Joselle Macrohon is well-versed in the karaoke market, having worked at MEGAPRO
for the past 3 years. Her insight regarding the various aspects of the market make her
an invaluable asset to the team. Connections with the other companies in the industry
give her the knowledge and capability to lay out the necessary details for the product,
bringing out its competitive advantages. She also contributed to the design of the
hardware components of the Kokoroke.

Kyle Reyner G. Santos – Financial Manager

Kyle Santos is a graduate student at De La Salle University, completing his degree in
Civil Engineering. He will be serving as the finance expert of the organization. His
expertise on the matter stems from his family business, and it was also through this that
the potential of this product was conceptualized. Kyle is responsible for conducting a
feasibility analysis of the product and capitalization of the business. He was able to
gain important market research as well due to his connections in the family business.

Ma. Elizabeth Ann L. Uy – Logistics Head

Elizabeth Uy is the Logistics Manager. She is currently completing her Masters in Civil
Engineering Major in Structural Engineering in De La Salle University Manila. She will
be serving as the logistics head of the organization, which is a well-founded skillset of
hers, having managed projects in her college organization as well as volunteer work.
She will be in charge of managing the production plant. She is also credited for
coordinating with the various retailers that will be selling the Kokoroke.
References:

● 5 things to know about Filipino mobile users. (n.d.). Retrieved April 03, 2016,
from http://www.rappler.com/business/32732-the-filipino-mobile-user-5-things-to-
know
● Philippine Statistics Authority. (n.d.). Retrieved April 03, 2016, from
http://www.census.gov.ph/content/age-and-sex-structure-philippine-population-
facts-2010-census
● Philippine Statistics Authority NCR, Philippines. (n.d.). Retrieved April 03, 2016,
from http://www.nso-ncr.ph/
● Philippine Statistics Authority. (n.d.). Retrieved April 03, 2016, from
http://www.census.gov.ph/content/electricity-most-common-source-energy-used-
households
APPENDIX A. Additional Product/Service
Mobile Application Pricing

Table A-1, Income from karaoke song distirbution

APPENDIX B. Target Market Data

Table B-1. MEGAPRO Data

MEGAPRO

Average cost of Karaoke System ₱5000

Target Sale 4000 units/ month

Number of songs 17000 songs

Song licensing cost ₱50,000,000 per year

Table B-2. Target Sale Calculation

APPENDIX C. Sales & Revenue Projections over 5 years

Table C-1. Sales

Table C-2 Revenue

APPENDIX D. Income Statement up to Earnings Before Tax over 5 years
Table D-1. Income statement and earnings

APPENDIX E.Sales vs. Profit Sensitivity Analysis with Break-even point, Best Case etc.
Table E-1. Profitability analysis and etc.
APPENDIX F. STATISTICS