Left smarting by Smartbox

Controversial screen media company Smartbox went bust owing large sums of money to hundreds of licensees, who are tied into onerous three-year lease deals. Ewan Turney looks at what went wrong

The Smartbox offer was an attractive one that around 700 licensees bought into. You could get a big screen TV and subsidise the cost by up to £50 a week simply by loading a disc and playing some adverts.

"The idea was great," said Brian Priest of the Chequers in Swinford, Leicestershire. "It adds to the atmosphere of the pub and I was able to sell my own ads. The thing is, I was never paid."

So where did it all go wrong?

Unobtainable promise

A senior source within the company claimed the "basic fundamental error" was agreeing to pay licensees up to £50 every week. "The problems started when they promised to pay landlords without ever knowing what revenue they would be raising," he said.

"I am 100% sure there was no intention to rip people off. The problems gained momentum and escalated. Landlords were upset, to say the least, as they were not getting paid. So, they did not co-operate with any promotions, and I don't blame them for that, but that made it harder to get advertisers. It really needed to be a service with a subscription fee."

Another employee believes that the company just did not have the required skills to make the business model work. She said: "I was told around 95% of customers were not getting paid at one stage. It was a great idea but there was just no business acumen behind it. They could not sell ads - they didn't have the right people. It is outrageous that small businesses did not get paid."

Two separate agreements

One side of the company, Vision Leisure Services, sold the equipment to finance companies at a commission. That equipment was then leased to licensees on a three-year deal while another part of the company, Smartbox, raised revenue through advertising. The idea was to give its customers a share of that advertising revenue to pay off the finance company. Yet despite signing large deals with Mastercard during the World Cup and with Littlewoods Pools, it could not sell enough adverts to make the scheme viable.

The company's third arm, TEC rentals, is still running. It hires out big screens direct to licensees. TEC Rentals is registered at the same Sutton Coldfield address as Smartbox and lists its directors as Kate Venables, her father, Neil Orton (Smartbox finance director), and Amanda Alston (Smartbox operations director).

Some licensees claimed they were misled by salesmen. "I didn't realise it was two separate agreements," said Julian Harris of the Lion & Bell in Congleton, Cheshire. "They didn't make that crystal clear."

Steve Cooper of the Earl Kitchener in Ipswich, Suffolk, added: "We got it on the basis that we get paid £50 a week and we pay £50 a week for the equipment. They didn't tell you it was two separate agreements."

However, one employee told us: "We always pointed it out, but to be honest, not many

people read it all before signing."

Feeble excuses

Managing director Kate Venables insisted throughout that the company was suffering "growing pains" but assured licensees they would get paid.

Customer service was almost non-existent. Hosts were sent cheques that bounced and fed feeble excuses about a change of banks causing a delay and a technical error with the log system. Phone calls were not returned and its customers were ignored. In fact, the only calls some received from Smartbox were from salesmen trying to flog them the system that they already had.

"I had a cheque for £600 bounce three times," said Mark Humphreys, of the Good Measure, Caldicot, Gwent. "The company seemed to have no conscience. I sent emails to the directors and the responses were unsatisfactory."

Barry Russell of the Londonderry in Oldbury, West Midlands, added: "It was like talking to a brick wall. They kept phoning us and saying have you ever heard of Smartbox? It was un-believable."

No doubt feeling cornered by negative press coverage, Smartbox offered up examples of those who enjoyed the service. Yet one of their hand-picked candidates, Josie O'Reilly at the Plough and Harrow in Leamington Spa, said she was owed £750. Another had the system for less than a month and so had no idea if he had been paid yet. It was a staggeringly poor attempt at a defence.

Sales continued until the end

What is indefensible is that Smartbox, despite amassing large debts, continued to sell the system when it was on the verge of collapse. The company went under on Thursday 23 November and one licensee, Norman Storm of the Black Dog Inn in Oadby, Leicestershire, even had a sales call that morning.

One installation engineer said: "We started getting a lot of complaints about the service, but we were told to blag people that we were getting investors in and it would be OK. They still owe me a month's wages. So I am stuck a month before Christmas without a job, a mortgage to pay and two children.

"I feel sorry for the licensees. Someone signed a lease with us on Monday (of the week it went under). Smartbox started as a family business, but it tried to be too big, too quickly. I am glad I didn't install it in any of my local pubs."

Top heavy company

Stories from head office of expensive company cars and large expense accounts will not sit well with those licensees left wondering how they will now keep their heads above water.

One former employee said: "At first I thought it was a great company, but it was too top heavy. There was a lot of money at head office. I went around telling people it would not cost them a penny to have the system, but in reality it has done. I feel awful."

Another said that sales staff were given expensive company cars and stayed in top London hotels. "I thought the company was minted," he said.

Way out?

The priority for licensees now is to find a way out of the agreements. Finance companies Weatherbys and Haydock Finance have both offered preferential settlement terms with discounted interest rates.

It is hoped that other firms including Lombard and ING follow suit. Bill Ganley of the Grange Inn, in Burton-on-Trent, Staffordshire, is also appealing to others to get in touch to start an action group and share legal costs in seeking to find a way out of agreements. His email address is william.ganley@eaststaffsbc.gov.uk for those who are interested.

In all probability, there will now be several rescue attempts to salvage something from the smouldering ruins of Smartbox. The idea was a good one, but the business model dubious and customer service awful.

Bob Langley's Monkey Puzzle TV company used to produce and post the Smartbox discs. He is also owed money by the company. He is testing a solution under the banner MakemPay, replacing the Smartbox with a DVD player. Discs will cost £4 a week.

Licensees can fully expect other offers to come their way, with the possibility that discs will be offered for free, meaning there would be no risk.

However, suspicion is now rife. Kim O'Brien, licensee at O'Briens in Stretford, Manchester, summed up the feelings of many. "The worst thing I ever did was to get Smartbox," he said.

The Smartbox sales literature stated: "We will forgive you if you have to double take once you've glanced over the Smartbox package. There is no catch, even if it may sound too good to be true."

The harsh lesson of the story has to be, once again - if something sounds too good to be true then it probably is.