86
SPT Networks FY14 Digital Budget December 18, 2012
SPT NetworksFY14 Digital Budget
December 18, 2012
Digital at SPT Networks
Games / Apps
Crackle CA, UK, AU
Crackle LatAm
Crackle US
SPT NetworksDigital Networks Group
Common Platforms, Products and Approach
LatAm Women’s Network
AnimaxUK
World of Pay TV and OTT is Colliding
THE NEW NETWORKS WORLDThe line between authenticated and open networks blurs; consumers can seamlessly access all channels without deference to source
PAY TV
DIGITAL NETWORK
S
Crackle
Women
Animax
Music
SET
AXN
SPIN
Convergence
2012 2016
Authenticated
Open
TV
Mobile
Web
As a company that already is out in front, now is the time to invest
● For Networks, move to Common Platform 3.0● Establish Crackle Digital Platforms organization● Build fully distributed set of products across online, mobile and TV● Develop “second screen” applications
● Establish a dedicated Crackle sales team in the US● Augment digital sales in Latin America● Build inventory in Europe with Animax
● Launch new brands (e.g., Women’s network in LatAm, Animax in UK)
● Extend mobile Games onto TV platforms● Explore acquisitions of new digital networks
Tech / Platforms
Portfolio Growth /
Expansion
Sales
Content
● Invest in original long-form series and IP for the Networks organization
● Develop brand extensions and original IP in the games space● Acquire long-term rights to movies and TV from outside studios
FY14 Budget PresentationDecember 19, 2012
- 6 -
Vision, Business Model, Strategy
Our vision– To be a leading on-demand programming network around the world.“CRACKLE…ALSO,” meaning Crackle is a welcomed choice even for subscribers and viewers of Pay TV (e.g., Comcast) and OTT services (e.g., Netflix)
Our business model – Deliver movies and shows to those with a male sensibility via connected devices, and monetize the traffic with advertising
Our strategy – • Differentiate ourselves
and build audience by offering programmed experiences that are freely accessible on all connected devices
• Connect brands with consumers through premium content experiences on connected devices.
- 7 -
FY13
- 8 -
FY13 Highlights
New Sales Approach• Implications of step up from $12 to $18• Mitigation: Ad network partners by platform• Building new team
Global Expansion• In Lat/BR, launched web and 9 platforms in 2 languages (not contemplated)
Full penetration of Applications• TV Platforms (5) and Game Consoles (Xbox and PS3)• Top 5 Applications on both Android and IOS• Windows Mobile, Nook, Kindle
Programming Evolution• New merchandising approach• New driver movie and TV properties• Launched 4 originals (Unknown, From The Basement Chosen, CCC)• Licensed 2 long-form properties (The Ropes, Suit Up)• Launched Music Vertical
Platform Evolution• Multi-language, • CDN and Streaming Cost Controls• DRM• Freewheel and ad operations (multiple ad breaks)
Managing Down Non-core Businesses
One Sony: Made Crackle an integral part of the SEL business discussion globally
- 9 -
Crackle “One Sony” Collaborations
• Preloaded Crackle applications drive heavy platform utilization across the entire family of Sony connected devices
• Crackle is the only fully programmed, premium movie and television service that provides free on-demand video to Sony customers
VAIOXperia Tablet Xperia MobilePlayStationTV/Blu-ray
• Preloaded application (Android)
• Exclusive to S1/S2 at launch
• Preload on 2013 Windows 8 devices (coming)
• Exploring cross-platform integration opportunities (ie, “airplay” and 2nd screen)
• Premium placement and co-marketing
• Preload application discussions for Android devices
• Exploring cross-platform integration opportunities (ie, “airplay” and 2nd screen)
• Preload application on 2013 Windows 8 devices (coming)
• Standalone “Trilithium” application live in US, Canada, and Latin America. Working with SCE to expand geographic footprint.
• Launching standalone application on Vita handheld device in 2013
• Preloaded application launch partner
• Top five video service worldwide (#2 in Brazil)
• Planning HD exclusive 2013• Latin America territory
exclusive• Exploring advanced
advertising and API integrations
• First partner to deploy dynamic ad serving
• Engaged in mutual roadmap sharing & planning
• Premium placement and co-marketing
• Exploring additional regions: India, Indonesia, Japan
- 10 -
FY13 EBIT Evolution
$ in millions
Cash $(10.9M) $(12.7M)
HC 52+18=70 70
SPE EBIT
$(5.3M)
$(6) Variance
- 11 -
FY14 Budget
- 12 -
“It takes a Village…”
PLATFORM:
• Premium User Experience• Scalable
• Innovative
CONTENT:
• Curation / Voice• Original Productions
• Acquisitions• Watchlists
MARKETING:
• Brand Awareness• Traffic
• Retention
DISTRIBUTION:
• Acct Mgmt• Expand Reach
• Licensing / SVOD
• Clips
500 Million Streams2 Billion Ad Impressions
=$44 M in Revenue
- 13 -
Key Metrics Across Platforms
TV
Mobile
Online
Uniques(monthly in MM)
Streams(avg monthly in MM)
Ad Impressions(avg monthly in MM)
Y-o-Y Growth
TV 30%
Mobile 15%
Online 8%
Increased engagement across multiple platforms will drive growth
Streams Per Unique
5.0 5.4
3.3 3.7
1.2 1.2
Ads Per Stream
3.3 9.3
3.0 3.5
2.0 2.5
2x ad load
Data as of FY13 Q3 Forecast and FY14 Budget
- 14 -
22.5%
15.4%
12.5%11.2%
9.2%
8.4%
7.8%
5.9%
1.8%1.5%
3.9%
Crackle.com ($8.5M)
Xbox ($5.9M)
PS3 Trilithium ($4.7M)
Android - Google Play ($4.3)
BIVL ($3.5M)
iOS ($3.2M)
Roku ($2.9M)
Samsung ($2.2M)
LG ($.7M)
Vizio ($.6M)
Other Partners ($1.5M)
Inventory and Platform Diversification
The top 10 integrations (out of 20+) will drive 96% of the business.
FY14 Ad Revenue $38M
- 15 -
FY14 EBIT vs MRP
Cash $(14.3M) $(14.3M)
Headcount 77 77
SPE EBIT$4M
Savings
Lower Revenues
- 16 -
FY14 Revenue and Expense Composition (vs FY13)
Components for Digital Platform for FY13 include Product Expense and Overhead of the related Engineering, Product and Video Ops.
$ in millions
Revenue Content Bandwidth
Product & Eng./
Digital Platform Marketing
Ad Sales Org
G&A Operations
Rev Share, Music,
Research, Others EBIT SPE EBIT Cash HC
FY14 44.2$ 9.9$ 3.1$ 5.0$ 6.4$ 7.4$ 5.8$ 6.6$ 0.0$ 4.0$ (14.3)$ 77FY13 18.9 5.7 3.8 4.4 4.6 1.3 4.9 3.2 (9.0) (5.3) (12.7) 70Variance 25.3 4.2 (0.7) 0.6 1.8 6.1 0.9 3.4 9.0 9.3 (1.6) 7
Ad Sales, $38.0
Var.Lic.&
SVOD, $2.6
DVD & TV,
$3.6
$-
$10.0
$20.0
$30.0
$40.0
$50.0
$9.9
$3.1
$5.0
$6.4
$7.4
$5.8
$6.6
$0.0
- 17 -
Sales Strategy
18
Identify & maximize the value of our inventory & products
Leverage inventory
packages by core Lines of
Business
Identify the size, cycles
& anatomy of our
marketplace
Align & localize a
best in class sales team
with our marketplace
Leverage data to
penetrate all revenue
channels in the
ecosystem
Sales Strategy & Principles
Leverage inventory packages by core
19
Deconstruct & re-merchandise inventory
Reposition with a premium publisher value proposition
Construct CPM tiers by placement, audience & platform
Increase average deal size with “Leveraged Approach”
Leverage Crackle Originals for 7 figure buys
Drive long term, multi-year deals & partnerships
Value of Crackle Inventory
Identify & Maximize
Deconstruct & re-merchandise inventory
20
Leveraging Inventory & Lines of Business
0
2
4
6
8
10
12
14
13
6 6 5
0
5
10
15
20
25
30
35
40
26.2
83.8
0
2
4
6
8
10
12
14
16
18
20
$20
$2$5
$2
$0
$2
$4
$6
$8
$10
$12
$14
$16
$11
$6
$15
$3
$38M $30M
$30M $30M
21
Conversion
Buyer Identification
Spending Cycles
Category Analysis
Market Size Analysis
Market Size, Cycles & Anatomy
Go To Market Approach
22
Market Size, Cycles & Anatomy
Total Size of Digital Ad Market2013 Total Digital Spending: $40B
+42% +33% +1% NC
Sector 2012 2013
Internet 32.4 35.9
Online Video 2.0 2.8
Mobile 2.6 4.1
Cable TV 35.0 37.7
Broadcast TV Networks 20.5 19.7Syndication TV
2.6 2.7
--$ Billions--
Source: Forecasts calculated from SNL Kalgan, 2011 and iamb October 2012;
23
Market Size, Cycles & Anatomy
Total Size of Digital Ad Market2013 Total Digital Spending: $40B
2013 Digital Spending Male Audience: $8B
Source: Forecasts calculated from SNL Kalgan, 2011 and iamb October 2012; classified and lead generation not shown
Display Online Video Rich Media
2.6
1.20.9
1.15
0.74
2.9
1.9
1.3 1.24
0.74
20122013
+58%+44% +1%
NC
+12%
24
Display2.9
Mobile1.9
Online Video1.3
Social Networks1.24 Rich Media
0.74
Crackle’s Share 0.22% 0.50% 1.00% 0.00% 0.20%
Crackle Revenue $6,380,000 $9,500,000 $13,000,000 $0 $1,400,000
2013 Digital Spending Male Audience: $8BCrackle Ad Sales Conversion Model
Total Revenue Available… $30M ++Source: Forecasts calculated from SNL Kalgan, 2011 and iamb October 2012; classified and lead generation not shown
Market Size, Cycles & Anatomy
25
Market Size, Cycles & Anatomy
Spending Cycles All Digital & Male Audience
Source, IAB totals by type, Kantar distribution by month, comScore Male Aud Composition; EXCLUDES SEARCH
Jan March May July Sept Nov0
0.5
1
1.5
2
2.5
Total Digital Spending
Total Digital Male Audience Spending
$Bil
lio
ns
FQ4 FQ3
26
Jan March May July Sept Nov
Finance
M&E
Retail
Communications
Computers
Auto
ED
Pharma
Travel
CPG Food
CPG Health
Male Audience Total Digital Video
Spending Cycles: By Category
Market Size, Cycles & Anatomy
Top 5 Categories Finance (FQ4)
Music & Ent. (FQ3 & FQ4)
Retail (FQ1 & FQ2)
Tele/Comp (FQ3 & FQ4)
Auto (FQ4 & FQ1)
27
Quarterly Goal Allocation & Ramp$30M Premium Target
Millions
Align & Localize Sales Team
FQ1 FQ2 FQ3 FQ4$0$2$4$6$8
$10$12$14
$1.4
$6.2
$12.3$10.1
Quartlery Goal
28
Regional Allocation of Digital Spending2013 Digital Spending: $40B
2013 Digital Spending Male Audience: $8B
WEST31%
$13B Total$3B Male
CENTRAL30%
$12B Total$2B Male
EAST38%
$15B Total$4B Male
Source: Forecasts calculated from SNL Kalgan, 2011 and iamb October 2012; classified and lead generation not shown
Align & Localize Sales Team
29
Regional Allocation of F14 GoalOrganizational Design
WEST$10M
CENTRAL$9M
EAST$11M
Source: SNL Kalgan, 2011
Align & Localize Sales Team
5 Sellers1 Sr. Lead
4 Sellers1 Sr. Lead
6 Sellers1 Sr. Lead
30
Align & Localize Sales Team
Phased Launch
Q4, Jan 1 (6) Total Sellers
Q1, April 1 (12) Total Sellers
Q2, July 1 (15) Total Sellers Q3, Oct 1 (15) Total Sellers
Q4, Jan 1 (15) Total Sellers
Quarterly Impact
Q1-Q2 Market Buying Cycle
Goal $1.3M
Q3-Q4 Market Buying CycleGoal $6.2M
Q4-Q1 Market Buying CycleGoal $12.3M
Q1-Q2 Market Buying CycleGoal $10.1M
31
Penetrate Sales Channels
Client
45%
25%
15% 15%
32
Headwinds
Behavioral targeting Implementing systems quickly
PR & brand recognition Dedicated PR / Marketing
TV Everywhere Open / Frictionless experience
Reseller dependence Current performance on target
Inventory issues relative Studio based / Premium originals
to Youtube/Portals Strong brand / Content Library
Risk & Mitigating Factors
- 33 -
Ad Revenue Business Requirements
34
Ad Revenue Business Requirements
CONFIDENTIAL
Drivers
Direct Sales Team Support Marketplace Requirements
1. Sales Support – resources needed for $29M direct sales business
2. Yield Mgmt – manages monetization of portfolio
3. Ad Networks – manages $9M reseller business
4. Market Leadership – swimming upstream to be leader in industry
Budget Priority Areas
35
1. Sales Support: Pre-Sales to Post-Sales
CONFIDENTIAL
Gather Package Pitch
Execute Optimize Renewal
HC Total: 21
1800
+ P
rop
osa
ls24
4+ C
amp
aig
ns
• Pricing & Yield Mgmt (3)• Research (2)• Designers (2)
• Ad Solutions (3)• Ad Technology (2)
• Sales Media Planners (4)
• Campaign Mgrs (5)• Ad Solutions• Ad Technology
• Campaign Mgrs• Yield Mgmt • Sales Media Planners
• Research
Data & Assets Concepts & Solutions Proposals & Media Plans
Creative Delivery Performance Ad Effectiveness
Pre-Sales
Post-Sales
36
1. Package & Execute: CCC Integration Example
2. Environmental Product Placement
3. Product Integration 4. Custom Extensions
Simply Orange juice is placed on a table
Target Circular is stacked on top of newspaper
Jane Lynch appears as a comedian around the release of her new movie A.C.O.D. and A.C.O.D. is a sponsor of CCC
CCC episode takes place at a Dunkin Donuts
1. Sponsorship
Ford receives sponsor attribution through video pre-roll billboards, editorial promotion or promercials
Presented by
Geico Lizard does a pitch to Jerry to be a guest for CCC and plugs auto Insurance
Producers buy a car on eBay for an episode and the process is captured. Car is given away through a sweeps
37
2. & 3. Yield Management & Ad Networks: Today
CONFIDENTIAL
30%IndirectAd Network
70%
Direct 30%
No Tiers
• Small Direct Sales penetration• Reseller free-for-all on all
inventory• Drives pressure on lower CPMs• Inefficient due to numerous ad
network contracts• Not sustainable
Ad Revenue Driven by Ad Networks Business
38
2. & 3. Yield Management & Ad Networks: Tomorrow
CONFIDENTIAL
Direct Sales$29M
Ad Networks$9M
Tier 1
Tiers 2-3
Po
rtfo
lio
• Premium library• Originals• Targeting• Custom Solutions• High pricing
No access
• Scale• Targeting• Low / Standard
pricing
• Programmatic Buying
• Ad network contracts
• Low / Standard pricing
Reclaim Our Premium Inventory: Tiered Strategy
Online
Mobile CTV
39
4. Market Leadership: Swimming Upsteam
CONFIDENTIAL
2. Research
3. Ad Community Awareness 4. Sales Tools & Collateral Materials
DCNF Participation, Trade Advertising and PR- $200k
Subscriptions, Post-Sales studies and What Men Want - $630k
Sales “pitch” solutions, New Media Kit, Sizzles etc. - $100k
1. Media Innovation
VICTOR Project, Interactive Video, Targeting, Packaging- $300k
40
4. Swimming Upstream: Media Innovation
CONFIDENTIAL
VICTOR Project
Mobile Interactive Video
41
4. Swimming Upstream: What Men Want example
CONFIDENTIAL
• Thought leadership• Take extra steps to
educate buyers on latest trends and value of connected TV
• Fill in the gap when no measurement in emerging platforms
42
4. Market Leadership: Swimming Upsteam
CONFIDENTIAL
2. Research
3. Ad Community Awareness 4. Sales Tools & Collateral Materials
DCNF Participation, Trade Advertising and PR- $200k
Subscriptions, Post-Sales studies and What Men Want - $630k
Sales “pitch” solutions, New Media Kit, Sizzles etc. - $100k
1. Media Innovation
VICTOR Project, Interactive Video, Targeting, Packaging- $300k
- 43 -
“Other” Revenue Streams
- 44 -
Other Revenue
No change from MRP Strategically manage down non-
core businesses Retain existing subscriber base
on legacy SVOD products
Clips
Variable Licensing & SVOD
Slight EBIT increase over MRP Partner revenue share (moving
from 30% to 45%) results in increased partner expense for FY14. Raised gross revenue target as a result.
Additional headcount is required to drive additional inventory and increase CPM to meet EBIT target
REVENUE
FY13 Q3 Forecast FY14 MRP
FY14 Budget
Variance from MRP
Variable Licensing $2,050 $950 $950 $0
SVOD $800 $450 $450 $0
TOTAL REVENUE $2,850 $1,400 $1,400 $0
($ in thousands)
($ in thousands)
FY13 Q3 Forecast
FY14 MRPFY14
BudgetVariance
from MRPGross Revenue $1,587 $1,714 $2,167 $453 Partner's Share ($476) ($514) ($975) ($461)
Share % 30% 30% 45% Net Revenue to Crackle 1,111 1,200 1,192 ($8)Rev Share to MPG -
- ($57) ($57)
G&A ($67) ($215) ($99) $116 EBIT $1,044 $985 $1,036 $51
Headcount 3 2 2 0
- 45 -
Distribution & Global Partnerships
Crackle Business Development and Clips headcount requirements
Position Description Date
Distribution Manager: Operations
The business operations manager will serve as a primary operations point of contact on all partner accounts.:• Driving improvements to the customer experience, which includes application updates and enhancements• Managing new product launches. • Assess platform opportunities, and function as the key internal partnership liaison to Crackle engineering, ad operations, video operations, and product.
April 2013
Clips Manager: Ad Strategy & Operations
The ad operations manager will be responsible for :• Global ad server integration• Sourcing of ad rep agreements• Implementation of third party ad network campaigns, content targeting, and ad reporting.
October 2013
- 46 -
Programming
- 47 -
Programming
Crackle’s programming strategy is based on four key pillars:
Editorial VoiceDigital Exclusives
& Stunts
Premium Movie & TV Content in Key
Genres
Crackle Only
+ + +
Weekly Featured Watchlist
Guest Curators
Original Productions
Crackle Only
Crackle Only
Crackle Only
Curated Network Experience
Denis Leary heads a heroic cast in a darkly funny and incendiary firehouse TV saga that has more grit than sandpaper.
On-Brand “Why It Crackles” Statement
- 48 -
Total Content Spend: $7MMSPT ($4MM) vs. Third Party ($3MM)
40%
33%
3%
3%
3%
3%
2%2%
11%
Lionsgate ($1.2MM)
TBD Studio ($1MM)
FUNimation ($85K)
Fox ("The Ropes") ($83K)
Media Blasters/GPC ($80K)
Snag Films ($80K)
Aniplex ($75K)
Warner Music ($75K)
Other ($323K)
Content Mix and Spend by Partner
Third Party Spend Detail
$1,200,000
$1,000,000
$85,000
$83,000
$80,000
$80,000
$75,000
$75,000
$70,000
$70,000
$60,000
$43,000 $40,000
$30,000
$10,000 Lionsgate ($1.2MM)
TBD ($1MM)
FUNimation ($85K)
Fox ("The Ropes") ($83K)
Media Blasters/GPC ($80K)
Snag Films ($80K)
Aniplex ($75K)
Warner Music ($75K)
Discovery Network ($70K)
Cinetic ($70K)
Content Films ($60K)
From The Basement ($43K)
TOEI ($40K)
ITV ($30K)
Bloomberg ($10K)
$3MM43%
$2.6MM37%
$1.4MM20%
Third Party (163 features, 56 series)
SPT (170 features, 470 over the year)
SPT (30 series)
$3MM43%
$2.6MM37%
$1.4MM20%
Third Party (163 features, 56 series)
SPT (170 features, 470 over the year)
SPT (30 series)
$3MM43%
$2.6MM37%
$1.4MM20%
Third Party (163 features, 56 series)
SPT (170 features, 470 over the year)
SPT (30 series)
SPT Features SPT Television Third Party Total
Spend $2.6MM $1.4MM $3.0MM $7MM
Streams 198MM 127MM 182MM 507MM
$3MM43%
$2.6MM37%
$1.4MM20%
Third Party (163 features, 56 series)
SPT (170 features, 470 over the year)
SPT (30 series)
- 49 -
Programming
Headcount Requirements
Position Description Date
Director, Content Acquisitions
• Drive content acquisition and partner management for US and ELI including all aspects of negotiation.
• Provide forecasting and financial analysis on potential and existing content.
April 2013
- 50 -
Crackle Originals
Brand Identity
Sales Growth
Retention
Original Productions
Evolve Series Approach:
Own ½ Hour Model
6 and 10+ Ep Seasons
Crackle Branded Series
● Work closely with Sales to increase volume of network originals such as “Why It Crackles”
● Establish ½ hour as viable and unique Crackle network format
● Continue to launch 6 x ½ hour season to incubate new IP
● Expand to 10+ episode seasons for franchises
Features ● Develop original features – first in industry
CRACKLE NETWORK
DVD & EST
LINEAR TV
GLOBAL
Crackle and Beyond
Original Productions – FY 13
The first season of Jerry Seinfeld’s first original series since Seinfeld
Details• Crackle Premiere : July
19, 2012• Almost 10 million streams
to date• Seasons 2 & 3 planned
for FY14• Will become Crackle’s
first multi- season unscripted original series
Featured Artists• Episode 1 - The Shins, Aimee
Mann / Father John Misty• Episode 2 - Feist / The
Happiness Project• Episode 3 - Foster the
People / Shearwater• Episode 4 - Moby / Willis Earl
Beal• Episode 5 - Red Hot Chili
Peppers• Episode 6 - Scissor Sisters /
Thundercat
Details• 12 x half-hour episodes• Produced by Nigel Godrich
(Radiohead)• VEVO partnership• Crackle premiere – August 9,
2012
Auspices-Starring Dominic Monaghan (Lost), Taryn Manning (Hustle & Flow), Tony Goldwyn (Scandal, Ghost)-Writer/Producer: Chris Collins (SOA)
Details• Crackle Premier: July 13,
2012• Red Box Release: October
16, 2012• Format: 6 x half hour
episodes
Ian Mitchell receives a mysterious box which thrusts him into a cruel game of kill or be killed.
TalentMilo Ventimiglia (Heroes) Nicki Whelan (Hall Pass) Diedrich Bader (Drew Carey)
Details• Releasing January 17, 2013• Microsoft Sneak Preview• Thriller/Action• Format: 6 x half-hour eps• Exploring second season
WHY IT CRACKLES: FY 13 - FY14
FY 13• Bi-Weekly, 4 Minute Length• Selected Sponsored Episodes• Behind The Scenes of upcoming Movies, TV Shows & Crackle Originals
FY 14• Weekly, 5-10 Minute Length• All Episodes to be Hosted & Sponsored• Interviews with Name Talent• On Location Spots / Segments• Segments on New Technology, Media & Games• Will Include Episodes Promoting Crackle Library Content
C r a c k l e O r i g i n a l s R o a d m a p F Y 1 4
Q1
All Details and titles subject to change; images used for presentation only
Q2 Q3 Q4
6 Episode Series 6 Episode Series
Digital Feature 6 x Half Hour Episodes 10+ x Half Hour Episodes 10+ x Half Hour Episodes
Season
2
E X T R A C T I O N
A Navy Seal finds himself the only survivor of a botched prisoner extraction mission at a maximum security Chechnyan prison. In order to stop a massive terrorist plot back on American soil, he must not only find a way to fight his way out of the prison – but must do so with the prisoner alive.
AuspicesWriter/Director: Tony Giglio (Chaos, In Enemy Hands) Talent: Discussing Ryan Phillippe (The Lincoln Lawyer)Producers: Ranger 7 Films (Arena, Meeting Evil)
Details• Crackle’s first made-for-digital movie• Adrenalized Martial Arts Action/Thriller • Production: Scheduled Winter 2013• Projected Release: Summer 2013
Details subject to change; images used for presentation only
U N T I T L E D P A U L L E Y D E N P R O J E C T *
Two gorgeous young women on a road trip to Vegas turn out to be a team of highly trained and lethal contract killers on the way to a job. What they discover when they arrive, however, is that they have become pawns in someone else’s game – a situation they need to change. The hard way.
AuspicesTalent: Emmanuelle Chriqui (Entourage)Producer: A Full Clip (Sam Worthington)Writer/Director: Paul Leyden
Details• Crime/Action – fast paced, stylized, sexy, fun• Format: 6 x half-hour episodes• Production: tentatively scheduled Spring 2013• Projected Release: Fall 2013
Details subject to change; images used for presentation only*Working Title
T H E B A N N E N W A Y ( S e a s o n 2 )
The adventures continue in this slick, sexy, action-packed show about Neal Bannen, a charming con-man with a police chief for a father, a mob boss for an uncle, and a weakness for beautiful women.
After sending his uncle to prison, will Bannen turn his life around and leave the criminal lifestyle behind – or will he succumb to his vices and be sucked back in?
Details
• The first second season of a Crackle original series
• The first full length Crackle series with 10+ episodes
• Format: 10 x half-hour episodes
• Production: tentatively scheduled Summer 2013
• Projected Release: Fall 2013/Winter 2014
Details subject to change; images used for presentation only
Declan Miles is a brilliant engineer who thinks he can reverse engineer anything -until he meets his match in an object he can’t crack. Our series follows Declan as he discovers the object is reverse engineering him- and he must escape a group that will stop at nothing to get the object.
Details• Action/Thriller• Format: 6 x half hour episodes
Original Productions – FY 15 Development
A former member of a small time Venice surf gang infiltrates the gang as an DEA informant when they get caught up with a ruthless international cartel. Can he save the disappearing Venice culture and his friends – or will they all get in over their heads?
AuspicesDirector: Milo Ventimiglia (Heroes) Producer: Divide Pictures (Milo Ventimiglia, Russ Cundiff)
Details• Format: 6 x half-hour episodes• Surf, Sex, and crime in the sun
- 60 -
Marketing
- 61 -
Marketing
Spending Comparison(annual, 000)
Focus will shift to awareness, working synergistically with Programming and Product to drive uniques and retention across all platforms
FY 13 FY 14
1500 1500
900 900
1350900
8002200
Awareness/Media
Traffic Driving
Creative/CRM
Search Marketing
Online Marketing
4550
5500
• Additional spend and resources behind brand marketing• Dedicated PR Director and agency
• Gain efficiencies by leveraging FY13 creative• B2B spend shifting to Sales budget• Increased focus on retention tactics (eComm, mobile alerts, social)
• Online and search marketing held flat
Additional Media To Come From Partner Marketing with Key Distribution Partners
- 62 -
Digital Platform
- 63 -
Establishment of New Digital Media Group (DMG)
ProductProject
ManagementTechnology
● Digital Media Platform Group
• App Producers• Backend Producer(s)• UI and Design mgmt• Video Producer
• Systems• Engineers• QA• Ad Technology *
• Project Managers
Marketing OperationsProgramming
● Territory Instance: US
• Media• Social• B2B• Local creative
• Content Acq• Merchandising
• Web producers• Designers• Video operations
● Territory Instance: LatAm/BR
● Territory Instance: ELI
* Outside of the 39 heads as paid for by individual P&L but worked under the management of the Digital Platform group
New (6): CMS (2), API (2), Integration (2)
22 14 3
New (4): Lead, App Producer, Web Producer, Backend Producer
New (3): Project Managers (3)
Total 39
DMG services each territory “instance”
- 64 -
Key Activities of the Digital Platform Group
AppsCore Platform 3rd Party Services
Content Management
System (CMS)
Video Transcoding &
Captioning
APIs
Systems, Data Center & Cloud
Reporting & Measurement
Development
New Features & Support
CDN / Advanced Streaming
Social, Search & Recommendations
Ad Platform Integration
Security/DRM
Customer Service (QOS)
Tools
● Producers● Video
● Engineering/QA● UI & Design
● Ad Tech● Project Mgmt
Ad Platforms & Unit Creation
KEY:
- 65 -
Digital Platform Financials
($ in thousands)BUDGET MRP Variance
REVENUE -
-
COGS -
-
OPERATING COSTS
Product Development (1,200)
(1,200)
-
General and Administrative (7,100)
(7,600)
500
TOTAL OP. EXPENSES (8,300)
(8,800)
500
ALLOCATION
CRACKLE US 60% 4,980
5,280
(300)
CRACKLE ELI 10% 830
880
(50)
CRACKLE LATAM 30% 2,490
2,640
(150)
8,300
8,800
(500)
EBIT -
-
-
Headcount 39
39
-
• Allocation is $0.5M lower than MRP due to delay in 3rd party outsourcing.
- 66 -
CDN / Bandwidth
- 67 -
March April May June July August September0
0.01
0.01
0.02
0.02
0.03
0.03
0.04
0.03
0.02
0.02
0.020.02
0.02
0.01
Dollar Per Minute Streamed
Crackle Streaming Costs per Minute 3/12 – 9/12
- 68 -
Conclusion
- 69 -
Conclusion: Well Positioned in FY14
• Dedicated Sales Organization
• Full Distribution in Place
• Higher Brand Awareness
• Global Digital Platform Organization to address US, ELI, LatAm needs
• More Content
• Unique Positioning
• Market Growth in Digital Advertising and User Engagement
ELI – Canada, UK and AustraliaFY2014 Budget
- 71 -
FY13 Highlights
• Revenue growth of 3.8X to FY13 revenue of $1.2MM from FY12 revenue of $250K
• Hired business owner, ad operations and international programming coordinator
• Secured ad rep partners for all platforms and territories to maximize CPM’s and optimize monetization (~95% fill rates for Canada and UK)
• Flipped from revenue share model to flat license fee model for Canada
• Enhanced programming volume and mix across all 3 territories
• Distribution launches on PS3, BIV, Samsung, LG, Vizio, Barnes & Noble Nook, Amazon Kindle, Windows
- 72 -
FY13 Financial Overview
• Licensing revenue fell short of expectations; covered some of loss with increase in ad revenue and other operational savings
FY 2013 FY 2013($ in thousands) Q3 Forecast Budget Variance
REVENUEAdvertising 1,200 1,087 113$ Licensing - 300 (300) - TOTAL REVENUE 1,200 1,387 (187)
COST OF REVENUES - Content Cost (586) (464) (122) Partner's Revenue Share (94) (86) (7) Hosting/Bandwidth (305) (281) (24) Ad Serving Fees (50) - (50)
TOTAL COST OF REVENUES (1,034) (831) (203)
Website/TechnologyProduct Development (136) (35) (101) Traffic & Music Fees (45) - (45)
Sales and Marketing (220) (400) 180
TOTAL OPERATING EXPENSE (401) (435) 34
General and Administrative (265) (420) 155 - TOTAL COSTS (1,700) (1,686) (14)
-
EBIT (500)$ (300)$ (201)$
HEADCOUNT 2 2 -
CASHFLOW (400) (705) 305
Q3 Forecast vs. Budget
• Unexpected product development allocation and music license fees
• Cut marketing budget to offset lower revenue
• Ad serving fees not captured in budget
• G&A savings from less headcount
- 73 -
FY14 Budget Overview
• FY14 Revenue is targeted to be 2.3x higher than FY13 as the business is redeveloped, with increased content, marketing and product efforts
• FY14 Revenue and EBIT slightly down from MRP forecasts due to following changes during budget process:
– MRP assumed ~30% ad inventory via premium sales provided by Dolphin, deemed unlikely to materialize by UK team during budget process
– Timing pushed on incremental distribution platforms in UK (Virgin, Talk/Talk, BT)
- 74 -
Financial Overview: FY14
FY 2013 FY2014 FY2014($ in thousands) Q3 Fcst MRP Budget vs. MRP vs. Last Year
Total Total Total Total Total
REVENUEAdvertising 1,200 3,100 2,789 (310)$ 1,590$ Licensing - - - - - - - - TOTAL REVENUE 1,200 3,100 2,789 (310) 1,590
COST OF REVENUES - - - Content Cost (586) (1,140) (1,111) 30 (525) Partner's Revenue Share (94) (187) (215) (28) (121) Hosting/Bandwidth (305) (615) (450) 165 (145) Ad Serving Fees (50) (85) (100) (15) (50)
TOTAL COST OF REVENUES (1,034) (2,028) (1,875) 152 (841)
Website/TechnologyVideo OperationsDigital Platform (136) (880) (880) (0) (744) Traffic & Music Fees (45) (64) (64) - (20)
Sales and Marketing (220) (470) (470) - (250)
TOTAL OPERATING EXPENSE (401) (1,414) (1,414) (0) (1,013) -
General and Administrative (265) (558) (575) (16) (310) - - - TOTAL COSTS (1,700) (4,000) (3,864) 136 (2,164)
- - - -
CRACKLE EBIT (500)$ (900)$ (1,075) (175)$ (575)$
HEADCOUNT 3 - 5 5 2
CASHFLOW (1,200) (1,200) (0) (800)
Variance
• Significant y-o-y revenue growth driven by Canada traffic
• FY14 Budget slightly down vs. MRP – Not anticipating Dolphin premium ad sales and delays in UK distribution platform launches
Variance Detail
• Re-investing in programming to increase user growth and retention
• New digital platform fee for FY14; Excluding new allocation, FY14 EBIT 2X+ improvement over FY13 EBIT
• Adding incremental resources to support growth of business
FY14 SPT EBIT (including content license fees to SPT) near break-even: ($200K)
- 75 -
FY 14 Crackle Canada
Ad Sales
● Hire incremental resources● Secure ad sales partner for online, mobile and connected TV platforms● Renew SPT deal and close third party content licensing deals● Launch marketing strategy to establish brand voice and increase
awareness
Distribution/ Biz Dev
Programming/ Product
● Rogers and Videology ● Mobile and Connected TV platforms ● Premium/direct sales
Critical Success Factors
● Leverage U.S. marketing campaigns● Localize social and consumer marketing efforts ● Build awareness via low cost tactics
FY 14 Revenue: $2.2MM
Marketing
● SPT intercompany deal● Third party content acquisitions● Increase user retention with product enhancements● Next generation connected platforms
● Tier 1 Global Partners● New local platforms● Premium placement
- 76 -
FY14 Crackle UK and Australia
UK
Australia
● Position business for growth as key EMEA digital asset for local transition
● Support Dolphin’s digital ad sales
● Optimize ad sales for all platforms
● Local market platform distribution (Virgin, Talk Talk, BT)
● Secure PS3 distribution
● Increase promotional/placement opportunities with Tier 1 partners
● Localized collections
● Explore third party content acquisition
● Risks to Hitting Budget Forecasts:
– Delay in distribution conversation in transitioning partner negotiations to local UK team
– Launch on PS3 via Swordfish implementation not ensured, challenged to get distribution on PS3 UK without Swordfish
● Optimize ad sales for all platforms
● Launch collections for localized version of Crackle
● Explore new platform launches and marketing opportunities
● Work with APAC Networks team to create long term growth plans and best management approach and evaluate opportunities for FY15
FY14 Revenue:
$550K
FY14 Revenue:
$60K
- 77 -
Headcount Requirements
Position Description Date
International Marketing Manager
Primary Brand-Builder• Drive awareness, traffic, customer acquisition and
retention• Secure partner promotions • Work closely with Crackle US marketing team for
strategy and creative development,• Create localized house campaigns• SEO, SEM, display and social media
April 2013
Account Management/ Distribution Biz Dev/Ad Sales
Partner Management• Support and cultivate day-to-day relationships with
local teams of existing distribution and content partners
• Identify and pursue new partners• Support planning and process of new business
launches• Support overall relationship with incumbent ad
sales partners
October 2013
- 78 -
APPENDIX
- 79 -
FY13 Q3 Forecast vs. Budget
• EBIT is forecasted to be -$7.35M unfavorable to Budget and -$6M unfavorable to Q2 forecast primarily due to lower ad sales.
$ in thousands Budget Q2 Fcst Q3 Fcst Q2F vs Q3F Bgt vs Q3F
Ad Sales 17,700$ 17,700$ 12,570$ (5,130)$ (5,130)$
Other Revenue 12,460 9,007 6,330 (2,677) (6,130) -
Total Revenue 30,160 26,707 18,900 (7,807) (11,260)
OI Before SPE Content 2,550 1,095 (5,317) (6,411) (7,866) - SPE Content Cost (4,200) (4,095) (3,683) 412 517
EBIT (1,650) (3,000) (9,000) (6,000) (7,350)
-
Cash (11,000) (12,100) (12,700) (600) (1,700)
HeadcountCrackle U.S. 52 52 52 - -
Digital Platform - - - - Ad Sales Plan 18 18 - 18
52 70 70 - 18
- 80 -
FY14 Budget Detail
Revenue
• Ad Revenue is 86% of total revenues
$38M Ad-supported
$6.2M Licensing, SVOD and DVD & TV distribution of Crackle Originals
Costs
• Increases in Programming and Marketing
• New Ad Sales organization
• Digital Platform shared resources
EBIT
• Consistent with MRP
• Operating Income at SPE level is $4M
REVENUES Ad Sales - Online 10.9$ Ad Sales - Mobile 7.3 Ad Sales - OTT 19.8
SUBTOTAL - AD SALES 38.0 Licensing & Subscriptions 1.4 DVD & TV Syn. - Crackle Originals 3.6
SUBTOTAL - OTHERS 5.0
Var. Licensing - YouTube CYC 1.2 TOTAL REVENUE 44.2
COSTS Content Cost (7.0) Ultimate Amortization (2.9) Bandwidth (3.1) Digital Platform (5.0) Product & Video Ops (0.2) Marketing (6.4) G&A: Ad Sales (7.5) G&A: Operating (5.7) Rev Share, Music, Research, Others (6.2) SUBTOTAL (44.0)
CYC Costs (0.2) TOTAL COSTS (44.2)
EBIT (0.0)$
HEADCOUNT Crackle U.S. 32 (excl. Digital Platform) Ad Sales Org 45
TOTAL 77
CASH FLOW Cashflow 4.0$
- 81 -
FY13 Q3 Forecast vs. FY14 Budget
Q3 Fcst Budget Variance
Ad Sales 12,570$ 38,000$ 25,430$
Other Revenue 6,330 6,200 (130) - - -
Total Revenue 18,900 44,200 25,300
OI Before SPE Content (5,317) 4,000 9,317
SPE Content Cost (3,683) (4,000) (317)
EBIT (9,000) 0 9,000
- - -
Cash (12,700) 4,000 16,700
HeadcountCrackle U.S. 52 32 (20)
Digital Platform - 39 39 Ad Sales Plan 18 45 27
70 116 46
- 82 -
FY13 vs. FY14 (Detailed)
FY13 Q3F FY14 VarianceREVENUES Ad Sales - Online 5.7$ 10.9$ 5.2$
Ad Sales - Mobile 2.4 7.3 4.9 Ad Sales - OTT 4.5 19.8 15.4
SUBTOTAL - AD SALES 12.6 38.0 25.4 Ad Sales - OTT Challenge - - - Licensing & Subscriptions 2.9 1.4 (1.5) DVD & TV Syn. - Crackle Originals 2.4 3.6 1.2
SUBTOTAL - OTHERS 5.2 5.0 (0.2)
Var. Licensing - YouTube CYC 1.1 1.2 0.1 TOTAL REVENUE 18.9 44.2 25.3
COSTS Content Cost (4.7) (7.0) (2.3) Ultimate Amortization (1.0) (2.9) (1.9) Bandwidth (3.8) (3.1) 0.7 Digital Platform - (5.0) (5.0) Product & Video Ops (1.1) (0.2) 0.8 Marketing (4.6) (6.4) (1.8) Ad Sales Org (1.3) (7.5) (6.2) General and Administrative (8.2) (5.7) 2.5 Rev Share, Music, Research, Others (3.1) (6.2) (3.1) SUBTOTAL (27.8) (44.0) (16.2)
CYC Costs (0.1) (0.2) (0.1) TOTAL COSTS (27.9) (44.2) (16.3)
EBIT (9.0)$ (0.0)$ 9.0$
HEADCOUNT Crackle U.S. 52 32 (20) (excl. SSO) Ad Sales Org 18 45 27
TOTAL 70 77 7
CASH FLOW Cashflow (12.7)$ 4.0$ 16.7$
- 83 -
FY14 Budget vs. MRP
MRP Budget Variance
Ad Sales 44,747$ 38,000$ (6,747)$
Other Revenue 7,625 6,200 (1,425)
Total Revenue 52,372 44,200 (8,172)
OI Before SPE Content 4,500 4,000 (500)
SPE Content Cost (4,500) (4,000) 500
EBIT (0) 0 0
Cash (18,300) 4,000 22,300
HeadcountCrackle U.S. 32 32 -
Digital Platform 39 39 - Ad Sales Plan 45 45 -
116 116 -
- 84 -
FY14 Budget vs. MRP (Detailed)
BUDGET MRP VarianceREVENUES Ad Sales - Online 10.9$ 15.2$ (4.3)$
Ad Sales - Mobile 7.3 10.1 (2.8) Ad Sales - OTT 19.8 19.4 0.4
SUBTOTAL - AD SALES 38.0 44.7 (6.7) Licensing & Subscriptions 1.4 1.4 - DVD & TV Syn. - Crackle Originals 3.6 3.6 (0.0)
SUBTOTAL - OTHERS 43.0 49.8 (6.8)
Var. Licensing - YouTube CYC 1.2 2.6 (1.4) TOTAL REVENUE 44.2 52.4 (8.2)
- COSTS Content Cost (7.0) (8.3) 1.3
Ultimate Amortization (2.9) (2.9) - Bandwidth (3.1) (7.0) 3.9 Digital Platform (5.0) (5.3) 0.3 Product & Video Ops (0.2) (0.3) 0.1 Marketing (6.4) (7.0) 0.6 G&A: Ad Sales (7.5) (8.2) 0.7 G&A: Operating (5.7) (6.1) 0.4 Rev Share, Music, Research, Others (6.2) (7.1) 0.9 SUBTOTAL (44.0) (52.2) 8.2
CYC Costs (0.2) (0.1) (0.0) TOTAL COSTS (44.2) (52.4) 8.2
EBIT (0.0)$ (0.0)$ 0.0$
HEADCOUNT Crackle U.S. 32 38 (6) (excl. Digital Platform) Ad Sales Org 45 37 8
TOTAL 77 75 2
- 85 -
FY13 Q3 Forecast vs. Budget (Detailed)
FY13 Q3 Fcst Prior Fcst Variance Budget VarianceREVENUES Ad Sales - Online 5.7$ 10.3$ (4.6)$ 11.7$ (6.0)$
Ad Sales - Mobile 2.4 2.9 (0.5) 3.6 (1.2) Ad Sales - OTT 4.5 4.7 (0.2) 2.4 2.1
SUBTOTAL - AD SALES 12.6 12.6 17.7 (5.1) Licensing & Subscriptions 2.9 2.9 (0.0) 3.3 (0.5) DVD & TV Syn. - Crackle Originals 2.4 2.8 (0.4) 3.4 (1.0)
SUBTOTAL - OTHERS 17.8 25.8 (8.0) 26.7 (8.9)
Var. Licensing - YouTube CYC 1.1 1.1 - 3.5 (2.4) TOTAL REVENUE 18.9 26.9 (8.0) 30.2 (11.3)
- - COSTS Content Cost (4.7) (4.7) (0.0) (4.9) 0.1
Ultimate Amortization (1.0) (1.1) 0.1 (1.5) 0.5 Bandwidth (3.8) (4.9) 1.1 (3.3) (0.5) Digital Platform - - - - Product & Video Ops (1.1) (1.2) 0.1 (1.4) 0.4 Marketing (4.6) (5.0) 0.3 (5.5) 0.9 G&A: Ad Sales (1.3) (1.3) 0.0 - (1.3) G&A: Operating (8.2) (8.4) 0.2 (8.9) 0.7 Rev Share, Music, Research, Others (3.1) (3.6) 0.4 (3.9) 0.8 SUBTOTAL (27.8) (30.1) 2.3 (29.3) 1.5
CYC Costs (0.1) (0.1) 0.0 (2.5) 2.4 TOTAL COSTS (27.9) (30.2) 2.3 (31.8) 3.9
EBIT (9.0)$ (3.3)$ (5.7)$ (1.7)$ (7.3)$
HEADCOUNT Crackle U.S. 34 52 (18) 52 (18) (excl. Digital Platform) Ad Sales Org 18 - 18 - 18
TOTAL 52 52 - 52 -
- 86 -
Historical Context: FY08 to FY14
First full year of new Crackle – re-
launched April 2009
Moved Crackle to Los Angeles –
November 2008
FY08 FY09 FY10 FY11 FY12 FY13 Fcst FY14 Bdgt
Ad Sales 1,615$ 2,969$ 6,781$ 7,522$ 11,324$ 12,570$ 38,000$
Other Revenue 557 1,673 3,312 9,185 6,286 6,330 6,200
Total Revenue 2,172 4,642 10,093 16,707 17,609 18,900 44,200
Op Income Before SPE Content (23,329) (18,145) (11,725) (846) (2,786) (5,317) 4,000
SPE Content Cost 1,177 (1,394) (4,484) (3,660) (4,021) (3,683) (4,000)
EBIT (22,152) (19,539) (16,208) (4,506) (6,807) (9,000) 0
Cash (27,204) (27,171) (14,597) (8,890) (11,411) (12,700) 4,000
HeadcountCrackle U.S. 53 53 43 38 41 52 32
Digital Platform - 39 Ad Sales Plan 18 45
70 116
First year of dedicated Crackle Ad
Sales team
