MOD Systems Inks $6M Series B, Surviving Controversy Surrounding Indictment of Co-Founder Mark Phillips

Seattle-based MOD Systems, a developer of digital-media delivery systems, has had a rocky couple of years, but now it has found a new lifeline in the form of a $6 million investment.

The company, which develops technologies that allow consumers to purchase digital movies, TV shows, and music, and load them onto SD cards portably through touch-screen kiosks, raised an impressive $35 million Series A in September 2008, led by Toshiba, NCR, Deluxe Entertainment Services, and private investors. But the company drew less glowing attention after its co-founder and then CEO Mark E. Phillips was sued by an investor for fraud, embezzlement, misrepresentation, and breach of fiduciary duty in February 2009.

However, despite the public and drawn-out case—resulting in Phillips being charged in a federal wire fraud case in March—the company has found a way to regain confidence of investors, through a $6 million Series B round being announced today.

“When we raised money two years ago, the purpose of that money was to do what we’re doing now—relaunch the company and implement the technology we’re doing now,” says MOD co-founder, chairman, and chief executive Anthony Bay.

The new round of financing is being used to deploy the company’s digital entertainment download kiosks in the market. MOD’s first commercial customer, InMotion Entertainment, rolled out around 20 of the 57 kiosks it will deploy at InMotion stores in airports nationwide—including SeaTac International Airport, which was the first to host a kiosk—two months ago. Bay says the company expects to install the rest before the end of the year.

MOD chose airports as the first locations to host kiosks because of the large market for travelers who are looking for entertainment while they’re traveling by plane. Through one of these kiosk systems, consumers will be able to browse, rent, or purchase digital movies and TV shows, and load them onto an SD card (or purchase one on the spot) before boarding a flight.

“This is the first real commercial deployment of major studio content through kiosks,” Bay says. “With movies and television shows, the studios are very, very picky about content protection. SD cards are the only format that allow you to protect the content on the card—SD cards are standard secured digital. Using SD cards, we can protect the movie or the TV show, and then essentially either make it permanent use so you can keep it, or you can rent it, so you have 48 hours to watch it.” This capability means the studios don’t have to worry about content protection, and consumers still have the ability to watch a movie or TV show streaming right from their computer, without an Internet connection.

“There’s a lot of buzz about the world moving to digital content distribution. Most companies are focused on content delivery system to the home. MOD is focused on content delivery outside … Next Page »

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One response to “MOD Systems Inks $6M Series B, Surviving Controversy Surrounding Indictment of Co-Founder Mark Phillips”

  1. I am an artist name Money Green with music being distributed through Mod and I can’t wait to see these systems in malls and other retail outlets across the world. good look ;0)