DIGITAL MEDIA

At 34, Domenic Carosa, CEO and founder of digital media and entertainment company Destra Corp, is considered a veteran of the fast moving online industry, having seen his business through the dot.com boom bust and boom cycle.

Eleven years down the track and with Destra’s market capitalisation at $85m, Carosa and his company is now reaping the benefits.

The term veteran however belies Carosa’s passion and drive for the business which is equal now to what it was when he started selling computer games and software from his home in Melbourne, with sister Anna.

Indeed just prior to jetting off for a well-earned holiday in Thailand over Christmas-new year Carosa claimed he didn’t know what downtime was. “I’m always doing the things that I love, so why would I need any downtime from that?” he says.

It’s a drive that the entrepreneur of Italian descent says has existed since he was five, with his first profitable business venture selling postcards outside his home.

At age 18, computer games and the burgeoning internet market were more interesting to Carosa than university. He dropped out of after six weeks.

It was with a technology focus that the company then named Sprint that he ran with Anna (who now runs her own fashion retail and restaurant business), was built.

For the fledgling entrepreneur it was a time of rapid expansion as the dot.com boom took hold, and quickly turned into a desire to float the company.

Rebranded Destra Corp, and including web hosting and music download business mp3.com.au, Destra successfully listed on the ASX in May 2000, three weeks before the dot.com crash as an internet services and digital media company with a market capitalisation of $13m.

While Carosa says Destra was always intended to be a content company, the market wasn’t ready for pureplay digital content company until the mayhem of the dot.com boom and bust had settled down.

Always one with an eye to what’s hot in the consumer market, Carosa also entered the music download business creating mp3.com.au after noticing that mp3 wasone of the most searched terms of the netin 1996.

MP3.com.au was the genesis of the content side of Destra and still operates today.

The idea was to aggregate content from independent artists on a website, giving them access to users and potential customers, creating an online community of music lovers and Australia’s first legal music download service.

Carosa says mp3.com.au came “out of the notion of disintermediation and putting power back in control of the artist”.

An avid technology user himself, Carosa says that to run a successful technology company executives need to be immersed in it.

“I’ve always had a great affinity for technology as an enabler – now I live and breathe it and am online all the time,” he says.

Between 2000 and 2006 Destra became the second biggest web hosting company in the country. In late 2006 Destra started selling off its business division assets to Blue Freewayand others, and an EBITA profit of $17.7mgave Destra cash to expand on Carosa’s content ambitions.

And while Destra’s internet and web hosting business was the key revenue area after the dot.com crash, its growing roster of content companies are what holds the future for Destra.

Now Destra boasts that it’s the country’s leading independent digital media and entertainment company, with interests in music, video, advertising and publishing.

The move to be a pure content company, Carosa says, was all about timing with broadband penetration increasing, the online ad market booming and the major content companies starting to make their content available online and on demand. The market was now ready for what Carosa had long wanted to do.

The difference he says between then and now is that advertisers have embraced the internet.

Online advertising at the height of the 2000 boom was worth just $30-$40m in Australia, now its over $1bn a year and growing fast.

At the same time the major content players had not moved online in any significant way, broadband penetration is now a lot more significant and there is more accountability through measurement systems like the Nielsen Net Ratings system which track where audiences are on the net.

“Now the market is ready for the kinds of things we were doing in the late 1990s,” Carosa contends.

Recast as a diversified media company, Destra Corp has a market capitalisation of $85m and in the 2007 financial year revenues had reached $116m.

At the same time it has earned plaudits from a variety of sources, with BRW magazine rating Destra in 2007 as the 40th fastest growing company in the country.

For the fourth year in a row its been ranked 23rd in the Deloitte Technology Fast 50 List having grown 324% in 2007, alongside other companies such as Carsales and Webjet.

While Destra is a minnow compared to the major media players, the company has embarked on no less than 12 acquisitions in 18 months headlined by the purchase of video and DVD distributor Magna Pacific which its now using as the base for a trial of online video distribution with the second ranked DVD rental website, Quickflix.

The acquisitions have meant that Destra has undergone a remarkable transformation from a web hosting and business services company to a pureplay digital media group focussed onindependent niche businesses with strong online communities.

Growth for Destra there will come from a three-pronged strategy of creating and acquiring intellectual property (IP or content), building online communities around that content and monetising the IP across Destra’s technology platforms and external media applications

They include Rajon distribution, the visual entertainment group, Payless Entertainment, MRA Entertainment, niche music label Central Station Records, Australia’s largest independent DVD distributor Magna Pacific, TV production and ad sales company Brand New Media, Poppychops, Thescene,com.au, Transfusion.com, short online film festival Nice Shorts and street magazine and fashion titles 3D World and Oyster magazine and most recently online music portal Mess and Noise.

With his technology background and youth on his side, Carosa and Destra have always been just ahead of the curve in offering consumers what they want online. In 1997 it was musicon mp3.com.au.

Fast forward to 2008 and the proposition is firmly wrapped around video with Magna Pacific underpinning Destra’s ownership of video content, stakes in Quickflix and TV production and distribution house Beyond International, and a strategic partnership with video on-demand company Cinema Now the cornerstone of its move into video-on-demand and video download services and convergence.

Now says Carosa, Destra’s transition to a pure play digital media and entertainment company is complete with the 2008 financial year Destra’s first full year as a purely focussed media company and a key leadership position in niche markets. That has allowed Destra to start making some strategic content partnerships with companies like MySpace, movie download service Cinema Now and most importantly a 19.9% stake in Quickflix.

The MySpace deal allows Destra to provide digital channels on the social network site in different genres – fashion through Oystermag, music through 3D World, short films through Niceshorts.com.au and extreme sportsat Planetx.com. Revenues generated are shared between Destra and MySpace.

At the same time the company is leveraging its acquisition of 3D World and Oyster magazine across the hard to reach the XY demographic by providing multiplatform advertising solutions through other Destra assets like pay TV channel Fashion TV, Brand New Media and Central Station Records.

Most interestingly the Quickflix deal gives Carosa a seat at the table with media scion Lachlan Murdoch, who through his private investment vehicle Illyria took an 1.3% stake in Destra in a stock swap engineered from Illyria’s shareholding in Quickflix.

Carosa and Murdoch have built up a relationship, “catching up every once in a while”.

“Of course I pick his brain as he’s an expert in media and a very smart entrepreneur.”

In addition Destra has recently welcomed regional TV operator Prime onto the share register with Prime a 19.9% shareholder.

Prime is there “as a supportive shareholder”, Carosa says.

In November the scale of the company appeared to move up a notch with Destra taking 10.3% of TV production and distribution house Beyond International, audaciously scuttling a takeover bid for Beyond by private equity company Mariner Financial.

Beyond is key producer of factual TV programs like the global hit MythBusters made for the Discovery Channel.

Carosa says Destra is “keeping its options open” about a beyond acquistion, with due diligence still to be completed at press time. There is also the possibity of a joint takeover bid with mariner financial.

What’s clear, however, is that Beyond would give Destra a strong global foothold in traditional media and a vast library of videocontent and production capability that Destra can parlay into video on demand and IPTV applications.

In addition, he says, “we already have close relationships with broadcasters that Beyond can take to another level.”

Indeed Carosa has said the company is looking at more communities across music, video, sport and anything in traditional media that can cross over into digital media.

“We’re looking at what I’d call old economy assets, but we see those old economy assets as not only having good solid cash flows and profits today but also giving them the base to move into the digital world,” he recently told Smart Investor magazine.

2008 will see Destra “consolidating and integrating” its recent raft of acquisitions.

It’s also eyeing a smaller number of larger, more material transactions and has a longer term international expansion plans.

“Our view is that we’d like to be offshore in five years, mainly in the UK.”

There’s a lot of upstream content to be acquired in the UK, Carosa says.

From the February edition of Digital Media 2008

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