Investment in Crackle Australia Overview August 2013
Executive Summary SPT Networks is seeking approval to make an additional investment in Crackle Australia Foxtel has recently decided not to renew TV1 and Sci-Fi s ( SF ) affiliate agreement. The elimination of Foxtel s subscriber fees has forced the TV1/SF joint-venture between SPT, CBS Studios and Comcast/NBC Universal to begin the process of winding down the business In light of these developments, SPT can capitalize on this window of opportunity to realign SPT s strategy in Australia by positioning Crackle to be the premium AVOD service in Australia filling a market gap left by the impending shutdown of the TV1/SF JV Crackle Australia launched in 2010 and has been able to build an audience with minimal investment in programming and marketing with a free ad-supported video on demand ( AVOD ) anywhere, anytime With a rapidly growing mobile advertising market, national rollout of a new high speed broadband network over the next decade, and lack of entrenched competition, Australia is well positioned for an expanded Crackle presence Investment will be used to significantly increase the content offering, expand marketing budget to $1.5MM and add 8 in headcount in Year 1 1
Australian Market Overview Broadband households in Australia expected to grow at a 3% CAGR from 2012 to 2017 with significant uptick expected once the National Broadband Network project finishes rollout in 2022 Smartphone users expected to reach 70% of the population by 2017 due to the lag in broadband connectivity The Australian video advertising market is expected to grow at a 45% CAGR from 2012 to 2017, from $91MM to $582MM Fixed Broadband Households (MM) Smartphone Users (MM) and % Penetration of Population 7.0 6.5 6.0 5.5 5.0 6.5 6.6 6.2 6.3 6.0 5.8 5.6 2011 2012 2013 2014 2015 2016 2017 22.0 18.0 14.0 10.0 6.0 64% 67% 68% 70% 54% 14.4 15.1 15.6 16.2 42% 31% 12.0 9.3 6.6 2011 2012 2013 2014 2015 2016 2017 Smartphone Users % of Population 80% 60% 40% 20% --% Australian Digital Video Advertising Market ($ in MM) $800 $600 $400 $200 $0 $582 $432 $310 $213 $139 $5 $15 $39 $69 $91 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2 Source: emarketer as of April to May 2013 and PwC.
Australian National Broadband Network Project The National Broadband Network ( NBN ) is a national mandate to develop a high speed broadband network to reach 100% of Australian premises with a combination of fiber, fixed wireless and satellite technologies Broadband speeds up to 100 Mbps Operated by government-owned enterprise, NBN Co. Goal is to rollout over 10 years with commencement in 2011 Services available in New South Wales, Queensland, Victoria, Tasmania and South Australia Expected costs to reach ~A$36B with funds to come from a government investment of A$27B and NBN Co s own revenues and private debt markets NBN accelerates opportunity for digital growth in Australia Tablet/smartphone penetration at 65% of population at end of 2012 with current high-speed infrastructure an obstacle Broader high-speed access enhances demand for digital services such as AVOD, SVOD and other mobile applications NBN Fiber Australian Coverage 2012-2022 3 100% 88% 100% 80% 78% 64% 60% 52% 40% 40% 31% 21% 20% 14% 1% 4% --% 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 Source: NBN website.
Competitive Landscape Opportunity to capitalize on limited premium AVOD content in online market as consumer appetite is rapidly building for ondemand entertainment Existing AVOD services are primarily catch-up services focusing on TV Increase in penetration of smart TV, tablets, and mobiles and faster internet supporting growth in streaming Amazon Instant, Hulu and Netflix are not offered in Australia Viewster, Crackle s direct competition in Australia, is increasing it s international presence, particularly in APAC region VOD Providers Australia and New Zealand s only subscription online DVD rental and streaming service Subscription and PPV streaming of 3,000+ movies HBO invested $10MM for a ~16% stake in Feb 2012 Leading cinema exhibitor with top DVD rental kiosk network Plans to launch online streaming service in late 2013 Subscription services that offer access to Australia s FTA television channels in addition to subscription channels, radio, games and PPV content Well distributed TVOD service offering mainstream movies and TV Films Viewster Recent Developments May 2013: Announced licensing deal for 240 hours of programming from Starz Digital Media, Shine Group, ALL3MEDIA, and KBS Media catering to its young audience April 2013: Viewster announced plans to open an office in Australia in addition to the US, UK and Singapore March 2013: Reported 29MM global uniques, of which 8.3MM in the U.S. and 3.7MM in the UK Ad Supported Video Services Currently only offering TVOD movies but potential to expand offering Public estimates of ~11MM monthly uniques on YouTube TV 4 Clips Full Length
Strategic Benefits to SPT, SPE, and Sony Elevate the Crackle brand to be the premiere destination for premium long form content free to the consumer Solidify position in the Australian market while digital ad spend grows sharply in the coming years coupled with the rollout of a new high-speed broadband infrastructure backed by the government Further grow Crackle s international presence while creating synergies from leveraging Crackle s technology backend Exploit SPT s movie and television products to generate incremental licensing revenue in Australia Utilize ad inventory to market SPE television and film products, as well as consumer electronics such as next generation PS4 5
Critical Success Factors Hire local team with strong digital expertise Secure distribution deal with PlayStation Australia 100% fill rate and floor net CPM of $19 to $20 guaranteed by ad sales representative Acquire AVOD rights of third party content (e.g., CBS) at discount to the linear rate card Cheaper, higher quality broadband made more widely available to Australians via NBN 6
Ignite Relationship/Performance to Date For FY12 and FY13, Ignite served as Crackle s exclusive ad representative for Australia Renewed relationship in good faith to agreed upon terms of $17 net CPM; 100% fill rate would have equated to $80k in revenue for FY13 Due to lack of sales on Ignite s part, moved start date back to July and lowered fill rate commitment to 100% for online, 50% mobile and 50% for CTV platform following a 2 month integration/ramp up period which equated to about $30k in revenue due to Crackle For FY13, Ignite had an average fill rate of 25%, never executed a legal agreement, and reneged on $17 CPM to a revenue share resulting in less than $10k pay out to Crackle for FY13 we are in process of reconciling efforts Ignite did not deliver any marketing support per the commitments they gave us Crackle replaced Ignite with other ad representatives for FY14 who guaranteed $19 net CPM s and 100% fill rate as Ignite could not commit to any minimum CPM or fill rate going forward Due to existing relationship with Ignite, Crackle offered Ignite the first opportunity to sell Days of Our Lives exclusive as a premium brand sponsorship but Ignite declined the opportunity and Crackle s existing ad reps are monetizing instead 7
Operating Assumptions DISTRIBUTION Expand (re-launch) in Australia in April 2014 on Web, Mobile and CTV 800k uniques / month in FY15 growing to 1.9MM uniques / month in FY19 3.5 streams / unique in FY15 growing to 4.4 streams / unique in FY19 (average) $2.7MM of net revenue in FY15 growing to $9.9MM of net revenue in FY19 Crackle Australia: 184k uniques in July 2013 (54%/22%/24% for Web/Mobile/CTV) AD SALES Network CPMs: FY15 FY19 Net CPM of $19 for Web/Mobile/CTV 95% streams monetized in FY15 for Web/Mobile/CTV and staying flat to FY19 4.5 ads / stream in FY15 growing to 6.0 ads / stream in FY19 (across all platforms) CONTENT / PROGRAMMING OPERATIONS Content mix: Movies and TV 311 monthly movie titles at launch in FY15 growing to 321 in FY19 Movie content license from third parties: 20% in FY19 growing to 60% in FY19 47 monthly TV shows at launch in FY15 growing to 53 in FY19 TV content license from third parties: 28% in FY15 growing to 34% in FY19 Utilize Crackle s Digital Platform Group for core platform and app development support: $339k in FY15 growing to $660k in FY19 Australia hires 8 new employees starting in January 2014 and leverages existing management. Hire an additional 4 employees starting in April 2016 Assumes hiring of one finance employee as part of Home Office MARKETING Annual marketing support of $1.5MM in FY15 growing to $1.9MM in FY19 (includes $150k launch marketing) 8 Note: US dollars.
Uniques by Platform Uniques are based upon Crackle s current distribution on the following platforms in Australia: CTV: Bravia, LG, Samsung, Xbox Mobile: Android, Blackberry, ios, Windows 7 Phone Web: Google Chromeapp, Windows 8 Crackle plans to add apps for PlayStation 4, FetchTV/Optus IPTV set-top boxes ( STB ) and Wowtel IPTV STBs Web: FY 2015 FY 2016 FY 2017 FY 2018 FY 2019 FY 2020 FY 2021 FY 2022 FY 2023 FY 2024 Total Internet Users 17,100,000 17,300,000 17,600,000 17,800,000 17,978,000 18,157,780 18,339,358 18,522,751 18,707,979 18,895,059 Crackle Uniques per Month 410,874 519,000 528,000 534,000 539,340 535,655 531,841 527,898 523,823 519,614 Monthly Uniques as % of Internet Users 2% 3% 3% 3% 3% 3% 3% 3% 3% 3% CTV: Total CTV Devices 6,074,161 7,483,140 8,977,806 9,951,670 10,863,947 11,421,833 12,054,791 12,680,952 13,389,023 14,094,428 Crackle Uniques per Month 187,107 261,910 359,112 447,825 543,197 565,381 590,685 615,026 642,673 669,485 Monthly Uniques as % of Devices 3% 4% 4% 5% 5% 5% 5% 5% 5% 5% Mobile: Total Mobile Devices 20,460,526 22,372,632 23,963,526 25,399,879 26,345,873 27,287,732 28,223,496 29,151,400 30,069,904 30,977,730 Crackle Uniques per Month 202,019 380,335 479,271 571,497 658,647 668,549 677,364 685,058 691,608 696,999 Monthly Uniques as % of Devices 1% 2% 2% 2% 3% 2% 2% 2% 2% 2% Total Uniques: Web 410,874 519,000 528,000 534,000 539,340 535,655 531,841 527,898 523,823 519,614 CTV 187,107 261,910 359,112 447,825 543,197 565,381 590,685 615,026 642,673 669,485 Mobile 202,019 380,335 479,271 571,497 658,647 668,549 677,364 685,058 691,608 696,999 Total 800,000 1,161,245 1,366,383 1,553,322 1,741,184 1,769,585 1,799,890 1,827,982 1,858,104 1,886,098 % Growth NA 45% 18% 14% 12% 2% 2% 2% 2% 2% % of Population 4% 5% 6% 7% 7% 8% 8% 8% 8% 8% Total Uniques Mix: Web 51% 45% 39% 34% 31% 30% 30% 29% 28% 28% CTV 23% 23% 26% 29% 31% 32% 33% 34% 35% 35% Mobile 25% 33% 35% 37% 38% 38% 38% 37% 37% 37% 9
Ad Projections (US$ in thousands) Crackle Australia FY 2015 FY 2016 FY 2017 FY 2018 FY 2019 FY 2020 FY 2021 FY 2022 FY 2023 FY 2024 Monthly Uniques 800,000 1,161,245 1,366,383 1,553,322 1,741,184 1,769,585 1,799,890 1,827,982 1,858,104 1,886,098 Implied Devices to Uniques Conversion Rate 2% 2% 3% 3% 3% 3% 3% 3% 3% 3% Streams per Unique 3.5x 3.5x 3.9x 4.2x 4.4x 4.5x 4.6x 4.7x 4.8x 4.8x Monthly Streams 2,776,233 4,097,577 5,296,643 6,515,445 7,578,009 7,904,378 8,248,343 8,587,246 8,944,845 9,108,839 Ads per Stream 4.5x 4.9x 5.2x 5.8x 6.0x 6.1x 6.4x 6.5x 7.0x 7.1x Monthly Ad Opportunities 12,434,555 20,136,616 27,372,326 37,727,572 45,494,695 47,993,039 53,093,236 55,871,708 62,812,374 64,684,647 Monetized Ad Opportunities - % 95% 95% 95% 95% 95% 95% 95% 95% 95% 95% Monetized Ad Opportunities 11,812,827 19,129,786 26,003,710 35,841,193 43,219,960 45,593,387 50,438,574 53,078,122 59,671,755 61,450,415 Monetized Ads per Stream 4.3x 4.7x 4.9x 5.5x 5.7x 5.8x 6.1x 6.2x 6.7x 6.7x Direct Sale Ad Streams Opportunities - % 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% Monetized Direct Sale Ad Opportunities -- -- -- -- -- -- -- -- -- -- Network Filled Ad Streams Opportunities - % 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% Network Filled Ad Opportunities 11,812,827 19,129,786 26,003,710 35,841,193 43,219,960 45,593,387 50,438,574 53,078,122 59,671,755 61,450,415 Direct Sale CPM NA NA NA NA NA NA NA NA NA NA Annual Direct Sale Net Revenue $-- $-- $-- $-- $-- $-- $-- $-- $-- $-- Network Filled CPM $19 $19 $19 $19 $19 $20 $20 $20 $20 $20 Annual Network Filled Net Revenue $2,693 $4,362 $5,929 $8,172 $9,854 $10,942 $12,105 $12,739 $14,321 $14,748 Net Revenue $2,693 $4,362 $5,929 $8,172 $9,854 $10,942 $12,105 $12,739 $14,321 $14,748 % Australian Video Advertising Market (1) 1.3% 1.4% 1.4% 1.4% NA NA NA NA NA NA 10 (1) Source: PwC. Data shown during periods available.
Financial Projections Assumes 100% of TV Linear Rate Card (US$ in thousands) Pre-Launch FY 2015 FY 2016 FY 2017 FY 2018 FY 2019 FY 2020 FY 2021 FY 2022 FY 2023 FY 2024 Net Revenue $2,693 $4,362 $5,929 $8,172 $9,854 $10,942 $12,105 $12,739 $14,321 $14,748 % Growth 61.9% 35.9% 37.8% 20.6% 11.0% 10.6% 5.2% 12.4% 3.0% % Australian Video Advertising Market (1) 1.3% 1.4% 1.4% 1.4% NA NA NA NA NA NA Movie Programming Costs $916 $974 $1,055 $1,154 $1,260 $1,300 $1,452 $1,597 $1,756 $1,932 TV Programming Costs 5,582 7,655 8,114 8,363 8,865 9,397 9,629 10,207 10,819 11,469 Total Programming Costs $6,498 $8,629 $9,169 $9,517 $10,125 $10,696 $11,081 $11,804 $12,576 $13,401 Hosting / Bandwidth 168 259 366 480 590 460 495 530 568 595 Partner's Revenue Share 299 360 406 556 682 762 858 909 966 1,005 Ad Serving Fees 91 159 251 334 397 417 458 481 537 552 Traffic and Music Fees 67 109 148 204 246 274 303 318 358 369 Other Cost of Sales $626 $888 $1,171 $1,575 $1,915 $1,913 $2,114 $2,239 $2,429 $2,520 Gross Profit ($4,430) ($5,155) ($4,411) ($2,920) ($2,186) ($1,667) ($1,089) ($1,304) ($684) ($1,173) % of Revenue NM NM NM NM NM NM NM NM NM NM Marketing $150 $1,483 $1,666 $1,745 $1,811 $1,878 $1,886 $1,911 $1,939 $2,023 $2,126 Headcount 221 885 912 1,304 1,343 1,383 1,435 1,478 1,522 1,568 1,615 Other G&A 121 283 291 300 309 319 328 338 348 358 369 Digital Platform Group Allocation -- 339 408 456 488 517 543 570 599 629 660 Total SG&A $492 $2,991 $3,278 $3,805 $3,951 $4,097 $4,192 $4,297 $4,408 $4,578 $4,770 EBIT (2) ($492) ($7,421) ($8,433) ($8,216) ($6,871) ($6,282) ($5,859) ($5,386) ($5,711) ($5,262) ($5,943) % of Revenue NM NM NM NM NM NM NM NM NM NM NM SPT EBIT (add back SPE Content Costs) ($492) ($4,160) ($4,408) ($4,035) ($2,941) ($2,123) ($1,470) ($1,080) ($1,114) ($354) ($701) SPT Cash Flow (3) ($451) ($7,183) ($8,617) ($8,498) ($7,307) ($6,613) ($6,131) ($5,673) ($5,892) ($5,592) ($6,087) SPT Cumulative Cash Flow (451) (7,634) (16,251) (24,749) (32,056) (38,669) (44,799) (50,473) (56,365) (61,957) (68,044) SPE Cash Flow (4) ($451) ($5,404) ($6,271) ($6,022) ($4,976) ($4,150) ($3,531) ($3,118) ($3,171) ($2,686) ($2,984) SPE Cumulative Cash Flow (451) (5,855) (12,126) (18,148) (23,124) (27,274) (30,806) (33,924) (37,095) (39,781) (42,765) 11 (1) Source: PwC. Data shown during periods available. (2) Does not include Finance headcount. (3) Cash flow assumes 2 month lag on inflow of cash and 1 month lag on outflow of cash. Includes Finance headcount. (4) Cash flow after Licensing Revenue to SPT. Includes Finance headcount.
Financial Projections Assumes 10% of TV Linear Rate Card (US$ in thousands) Pre-Launch FY 2015 FY 2016 FY 2017 FY 2018 FY 2019 FY 2020 FY 2021 FY 2022 FY 2023 FY 2024 Net Revenue $2,693 $4,362 $5,929 $8,172 $9,854 $10,942 $12,105 $12,739 $14,321 $14,748 % Growth 61.9% 35.9% 37.8% 20.6% 11.0% 10.6% 5.2% 12.4% 3.0% % Australian Video Advertising Market (1) 1.3% 1.4% 1.4% 1.4% NA NA NA NA NA NA Movie Programming Costs $916 $974 $1,055 $1,154 $1,260 $1,300 $1,452 $1,597 $1,756 $1,932 TV Programming Costs 946 1,287 1,629 1,805 1,986 2,149 2,364 2,600 2,860 3,146 Total Programming Costs $1,863 $2,262 $2,684 $2,959 $3,246 $3,449 $3,815 $4,197 $4,617 $5,078 Hosting / Bandwidth 168 259 366 480 590 460 495 530 568 595 Partner's Revenue Share 299 360 406 556 682 762 858 909 966 1,005 Ad Serving Fees 91 159 251 334 397 417 458 481 537 552 Traffic and Music Fees 67 109 148 204 246 274 303 318 358 369 Other Cost of Sales $626 $888 $1,171 $1,575 $1,915 $1,913 $2,114 $2,239 $2,429 $2,520 Gross Profit $205 $1,213 $2,074 $3,638 $4,693 $5,581 $6,176 $6,303 $7,275 $7,150 % of Revenue 7.6% 27.8% 35.0% 44.5% 47.6% 51.0% 51.0% 49.5% 50.8% 48.5% Marketing $150 $1,483 $1,666 $1,745 $1,811 $1,878 $1,886 $1,911 $1,939 $2,023 $2,126 Headcount 221 885 912 1,304 1,343 1,383 1,435 1,478 1,522 1,568 1,615 Other G&A 121 283 291 300 309 319 328 338 348 358 369 Digital Platform Group Allocation -- 339 408 456 488 517 543 570 599 629 660 Total SG&A $492 $2,991 $3,278 $3,805 $3,951 $4,097 $4,192 $4,297 $4,408 $4,578 $4,770 EBIT (2) ($492) ($2,786) ($2,065) ($1,731) ($313) $597 $1,389 $1,879 $1,896 $2,697 $2,379 % of Revenue NM NM NM NM NM 6.1% 12.7% 15.5% 14.9% 18.8% 16.1% SPT EBIT (add back SPE Content Costs) ($492) ($1,508) ($758) ($448) $918 $1,916 $2,687 $3,263 $3,417 $4,371 $4,220 SPT Cash Flow (3) ($451) ($2,934) ($2,393) ($2,022) ($755) $239 $1,086 $1,591 $1,686 $2,338 $2,205 SPT Cumulative Cash Flow (451) (3,385) (5,779) (7,801) (8,556) (8,317) (7,231) (5,640) (3,954) (1,615) 590 SPE Cash Flow (4) ($451) ($2,237) ($1,627) ($1,269) ($28) $1,019 $1,855 $2,407 $2,585 $3,327 $3,293 SPE Cumulative Cash Flow (451) (2,688) (4,315) (5,584) (5,612) (4,593) (2,738) (331) 2,254 5,581 8,873 12 (1) Source: PwC. Data shown during periods available. (2) Does not include Finance headcount. (3) Cash flow assumes 2 month lag on inflow of cash and 1 month lag on outflow of cash. Includes Finance headcount. (4) Cash flow after Licensing Revenue to SPT. Includes Finance headcount.
Appendix
KPI Across Plans Web Mobile CTV Total Monthly Uniques (thousands) Australia - FY15 411 202 187 800 United States - MRP FY15 13,100 3,000 5,500 21,600 Women's Network - FY15 3,310 224 184 3,718 LatAm - FY15 6,320 904 1,747 8,970 Streams per Unique Australia - FY15 2.8x 3.8x 4.8x 3.5x United States - MRP FY15 1.9 4.9 5.5 3.2 Women's Network - FY15 2.3 1.7 2.8 2.3 LatAm - FY15 2.5 1.8 3.0 2.5 Ads per Stream Australia - FY15 3.1x 4.2x 6.4x 4.5x United States - MRP FY15 4.9 4.7 5.9 5.3 Women's Network - FY15 3.0 3.2 3.2 3.0 LatAm - FY15 3.2 3.3 3.3 3.2 Ad Opportunities (thousands) Australia - FY15 3,514 3,197 5,724 12,435 United States - MRP FY15 119,600 68,600 179,800 368,000 Women's Network - FY15 23,061 1,166 1,598 25,825 LatAm - FY15 50,822 5,426 17,477 73,725 14
Programming (US$ in thousands except per title/episode costs) Assumes 6% rate card increase every year for movies and TV Rate card for Sony and 3 rd party content is the same Assumes 100% of linear rate card for TV shows based upon TV1/SyFy pricing for CBS Total annual programming cost of $5.6M in FY15 growing to $8.9M in FY19 Cost Per Average Shows Per Month Rating Episode (US$) FY 2015 FY 2016 FY 2017 FY 2018 FY 2019 A $1,667 4 5 5 4 4 B 1,250 4 7 7 7 7 C 833 10 11 11 12 12 D 583 5 6 6 6 6 Anime (B) 2 9 9 9 9 9 Bewitched 13 1 1 1 1 1 I Dream of Jeannie 6 1 1 1 1 1 Jackie Chan Adventures 6 1 1 1 1 1 Originals 13 10 10 10 10 10 Other 10 2 2 2 2 2 Total TV Shows Per Month 47 53 53 53 53 % Sony 72% 68% 68% 66% 66% % 3rd Party 28% 32% 32% 34% 34% Title Cost Per Average Titles Per Month Episode Cost Per Average Episodes Per Month Rating Month (US$) FY 2015 FY 2016 FY 2017 FY 2018 FY 2019 Rating Month (US$) FY 2015 FY 2016 FY 2017 FY 2018 FY 2019 AAA $1,200 9 7 6 6 6 A $1,667 80 100 100 80 80 AA 780 31 30 30 29 29 B 1,250 80 140 140 140 140 AA 270 29 28 27 28 27 C 833 200 220 220 240 240 B 102 41 42 39 40 36 D 583 100 120 120 120 120 C 36 100 100 100 100 89 Anime (B) 2 270 270 270 270 270 D 18 23 24 29 28 29 Bewitched 13 200 200 200 200 200 DTV-A/New 120 24 28 35 35 36 I Dream of Jeannie 6 100 100 100 100 100 DTV-B / TV-B 60 40 45 40 40 46 Jackie Chan Adventures 6 85 85 85 85 85 DTV & TV LR/UNS 6 12 12 12 13 21 Originals 13 200 200 200 200 200 Current Title 10,000 2 2 2 2 2 Other 10 20 20 20 20 20 Total Movies Per Month 311 318 320 321 321 Total TV Episodes Per Month 1,335 1,455 1,455 1,455 1,455 % Sony 81% 69% 58% 48% 42% % Sony 81% 77% 77% 75% 75% % 3rd Party 19% 31% 43% 52% 58% % 3rd Party 19% 23% 23% 25% 25% Annual Movie Programming Cost $916 $974 $1,055 $1,154 $1,260 Annual TV Programming Cost $5,582 $7,655 $8,114 $8,363 $8,865 15
Marketing (Figures in thousands and US$) FY 2015 FY 2016 FY 2017 FY 2018 FY 2019 Uniques by Platform Web Uniques (Monthly) 411 519 528 534 539 Mobile Uniques (Monthly) 202 380 479 571 659 CTV Uniques (Monthly) 187 262 359 448 543 Total Uniques (Monthly) 800 1,161 1,366 1,553 1,741 % Total Uniques Across All Platforms Web Uniques (Monthly) 51% 45% 39% 34% 31% Mobile Uniques (Monthly) 25% 33% 35% 37% 38% CTV Uniques (Monthly) 23% 23% 26% 29% 31% % Total Uniques Across All Platforms by Marketing Budget Paid 50% 49% 47% 44% 40% Retained 5% 8% 12% 17% 24% CTV 23% 23% 26% 29% 31% Organic 21% 21% 15% 10% 5% Marketing Budget Web SEO $120 $132 $145 $160 $176 Web SEM 200 220 242 266 293 Paid Web Uniques $320 $352 $387 $426 $469 Mobile 200 377 474 566 652 CTV (1) -- -- -- -- -- Subtotal $520 $729 $862 $992 $1,121 Newsletter $50 $52 $53 $55 $56 Launch Marketing -- -- -- -- -- Public Relations 150 155 155 159 164 Social Media 50 52 52 53 55 Research 50 52 52 53 55 Organic Shortfall 513 474 418 341 264 Total Marketing Budget $1,333 $1,512 $1,591 $1,652 $1,714 16 (1) Assumes CTV promotions through partner marketing.
Headcount (US$ in thousands) Assumes hiring of an Australia operations team of 8 new employees starting January 2014 in advance of proposed launch in April 2014 Hiring of remaining Australia operations team consisting of 4 new employees to occur in April 2016 FY 2015 Title Responsibilites Start Date Location Salary Bonus (1) Total Comp. 1 GM - Business Owner P&L Responsibility, Local Distribution, Monetization Jan 2014 Australia $150 $23 $173 2 Programming Manager Managing Acquisitions, Scheduling, Metadata Jan 2014 Australia 90 14 104 3 Marketing Head Head of Partner/Promotions, SEO/SEM, Social/PR Jan 2014 Australia 100 15 115 4 Ad Ops Traffic campaigns, Manage inventory yield, Ad tech integration Jan 2014 Australia 75 11 86 5 Art/Creative Slideshow, Creative Assets, Channel Art Jan 2014 Australia 65 10 75 6 QA Identify, raise and address technical issues Jan 2014 Australia 65 10 75 7 Vid Ops Ingest content assets, Encoding, Rights Management Jan 2014 Australia 80 12 92 8 Producer Production set up in CMS, Playlists, Channel Launches Jan 2014 Australia 80 12 92 9 Programming Acquisitions, Scheduling, Metadata Apr 2016 Australia -- -- -- 10 Marketing Partner/Promotions, SEO/SEM, Social/PR Apr 2016 Australia -- -- -- 11 Vid Ops Ingest content assets, Encoding, Rights Management Apr 2016 Australia -- -- -- 12 Producer Production set up in CMS, Playlists, Channel Launches Apr 2016 Australia -- -- -- Total Before Fringe Benefits $705 $106 $811 Fringe Benefits (2) 190 4 195 Total After Fringe Benefits 895 110 1,005 17 (1) Assumes 15% bonus. (2) Assumes fringe benefits of 10% on salaries and 4% on bonuses.
Appendix Assumes 100% of TV Linear Rate Card and Includes Ad Sales
Ad Projections Assumes 100% of TV Linear Rate Card and Includes Ad Sales (US$ in thousands) Crackle Australia FY 2015 FY 2016 FY 2017 FY 2018 FY 2019 FY 2020 FY 2021 FY 2022 FY 2023 FY 2024 Monthly Uniques 800,000 1,161,245 1,366,383 1,553,322 1,741,184 1,769,585 1,799,890 1,827,982 1,858,104 1,886,098 Implied Devices to Uniques Conversion Rate 2% 2% 3% 3% 3% 3% 3% 3% 3% 3% Streams per Unique 3.5x 3.5x 3.9x 4.2x 4.4x 4.5x 4.6x 4.7x 4.8x 4.8x Monthly Streams 2,776,233 4,097,577 5,296,643 6,515,445 7,578,009 7,904,378 8,248,343 8,587,246 8,944,845 9,108,839 Ads per Stream 4.5x 4.9x 5.2x 5.8x 6.0x 6.1x 6.4x 6.5x 7.0x 7.1x Monthly Ad Opportunities 12,434,555 20,136,616 27,372,326 37,727,572 45,494,695 47,993,039 53,093,236 55,871,708 62,812,374 64,684,647 Monetized Ad Opportunities - % 95% 95% 95% 95% 95% 95% 95% 95% 95% 95% Monetized Ad Opportunities 11,812,827 19,129,786 26,003,710 35,841,193 43,219,960 45,593,387 50,438,574 53,078,122 59,671,755 61,450,415 Monetized Ads per Stream 4.3x 4.7x 4.9x 5.5x 5.7x 5.8x 6.1x 6.2x 6.7x 6.7x Direct Sale Ad Streams Opportunities - % 0% 40% 80% 85% 85% 85% 85% 85% 85% 85% Monetized Direct Sale Ad Opportunities -- 7,651,914 20,802,968 30,465,014 36,736,966 38,754,379 42,872,788 45,116,404 50,720,992 52,232,853 Network Filled Ad Streams Opportunities - % 100% 60% 20% 15% 15% 15% 15% 15% 15% 15% Network Filled Ad Opportunities 11,812,827 11,477,871 5,200,742 5,376,179 6,482,994 6,839,008 7,565,786 7,961,718 8,950,763 9,217,562 Direct Sale CPM NA $30 $31 $32 $33 $34 $35 $36 $37 $38 Annual Direct Sale Net Revenue $-- $2,755 $7,739 $11,699 $14,548 $15,812 $18,007 $19,490 $22,520 $23,818 Network Filled CPM $19 $17 $17 $17 $17 $17 $17 $17 $17 $17 Annual Network Filled Net Revenue $2,693 $2,341 $1,061 $1,097 $1,323 $1,395 $1,543 $1,624 $1,826 $1,880 Net Revenue $2,693 $5,096 $8,800 $12,795 $15,870 $17,207 $19,550 $21,114 $24,346 $25,699 % Australian Video Advertising Market (1) 1.3% 1.6% 2.0% 2.2% NA NA NA NA NA NA 19 (1) Source: PwC. Data shown during periods available.
Financial Projections Assumes 100% of TV Linear Rate Card and Includes Ad Sales (US$ in thousands) Pre-Launch FY 2015 FY 2016 FY 2017 FY 2018 FY 2019 FY 2020 FY 2021 FY 2022 FY 2023 FY 2024 Net Revenue $2,693 $5,096 $8,800 $12,795 $15,870 $17,207 $19,550 $21,114 $24,346 $25,699 % Growth 89.2% 72.7% 45.4% 24.0% 8.4% 13.6% 8.0% 15.3% 5.6% % Australian Video Advertising Market (1) 1.3% 1.6% 2.0% 2.2% NA NA NA NA NA NA Movie Programming Costs $916 $974 $1,055 $1,154 $1,260 $1,300 $1,452 $1,597 $1,756 $1,932 TV Programming Costs 5,582 7,655 8,114 8,363 8,865 9,397 9,629 10,207 10,819 11,469 Total Programming Costs $6,498 $8,629 $9,169 $9,517 $10,125 $10,696 $11,081 $11,804 $12,576 $13,401 Hosting / Bandwidth 168 259 366 480 591 461 496 531 569 596 Partner's Revenue Share 299 420 602 871 1,098 1,198 1,386 1,507 1,643 1,752 Ad Serving Fees 91 159 251 334 397 417 458 481 537 552 Traffic and Music Fees 67 127 220 320 397 430 489 528 609 642 Other Cost of Sales $626 $966 $1,439 $2,005 $2,483 $2,506 $2,828 $3,047 $3,357 $3,542 Gross Profit ($4,430) ($4,500) ($1,809) $1,273 $3,263 $4,004 $5,641 $6,264 $8,413 $8,756 % of Revenue NM NM NM 10.0% 20.6% 23.3% 28.9% 29.7% 34.6% 34.1% Marketing $150 $1,713 $1,960 $2,074 $2,119 $2,169 $2,166 $2,183 $2,202 $2,286 $2,390 Headcount 221 885 2,116 3,208 3,843 4,354 4,557 4,694 4,834 4,979 5,129 Other G&A 121 283 291 300 309 319 328 338 348 358 369 Digital Platform Group Allocation -- 339 408 456 488 517 543 570 599 629 660 Total SG&A $492 $3,220 $4,775 $6,038 $6,760 $7,358 $7,594 $7,784 $7,983 $8,253 $8,548 EBIT (2) ($492) ($7,650) ($9,275) ($7,847) ($5,486) ($4,095) ($3,589) ($2,143) ($1,719) $160 $208 % of Revenue NM NM NM NM NM NM NM NM NM 0.7% 0.8% SPT EBIT (add back SPE Content Costs) ($492) ($4,389) ($5,249) ($3,665) ($1,557) $64 $799 $2,163 $2,878 $5,069 $5,450 SPT Cash Flow (3) ($451) ($7,394) ($9,469) ($8,407) ($6,153) ($4,609) ($3,889) ($2,610) ($2,040) ($426) ($73) SPT Cumulative Cash Flow (451) (7,845) (17,313) (25,721) (31,874) (36,482) (40,371) (42,981) (45,021) (45,447) (45,520) SPE Cash Flow (4) ($451) ($5,615) ($7,123) ($5,931) ($3,822) ($2,146) ($1,290) ($55) $681 $2,480 $3,030 SPE Cumulative Cash Flow (451) (6,066) (13,188) (19,120) (22,942) (25,088) (26,378) (26,432) (25,751) (23,271) (20,241) 20 (1) Source: PwC. Data shown during periods available. (2) Does not include Finance headcount. (3) Cash flow assumes 2 month lag on inflow of cash and 1 month lag on outflow of cash. Includes Finance headcount. (4) Cash flow after Licensing Revenue to SPT. Includes Finance headcount.
Appendix Assumes 10% of TV Linear Rate Card and Includes Ad Sales
Ad Projections Assumes 10% of TV Linear Rate Card and Includes Ad Sales (US$ in thousands) Crackle Australia FY 2015 FY 2016 FY 2017 FY 2018 FY 2019 FY 2020 FY 2021 FY 2022 FY 2023 FY 2024 Monthly Uniques 800,000 1,161,245 1,366,383 1,553,322 1,741,184 1,769,585 1,799,890 1,827,982 1,858,104 1,886,098 Implied Devices to Uniques Conversion Rate 2% 2% 3% 3% 3% 3% 3% 3% 3% 3% Streams per Unique 3.5x 3.5x 3.9x 4.2x 4.4x 4.5x 4.6x 4.7x 4.8x 4.8x Monthly Streams 2,776,233 4,097,577 5,296,643 6,515,445 7,578,009 7,904,378 8,248,343 8,587,246 8,944,845 9,108,839 Ads per Stream 4.5x 4.9x 5.2x 5.8x 6.0x 6.1x 6.4x 6.5x 7.0x 7.1x Monthly Ad Opportunities 12,434,555 20,136,616 27,372,326 37,727,572 45,494,695 47,993,039 53,093,236 55,871,708 62,812,374 64,684,647 Monetized Ad Opportunities - % 95% 95% 95% 95% 95% 95% 95% 95% 95% 95% Monetized Ad Opportunities 11,812,827 19,129,786 26,003,710 35,841,193 43,219,960 45,593,387 50,438,574 53,078,122 59,671,755 61,450,415 Monetized Ads per Stream 4.3x 4.7x 4.9x 5.5x 5.7x 5.8x 6.1x 6.2x 6.7x 6.7x Direct Sale Ad Streams Opportunities - % 0% 40% 80% 85% 85% 85% 85% 85% 85% 85% Monetized Direct Sale Ad Opportunities -- 7,651,914 20,802,968 30,465,014 36,736,966 38,754,379 42,872,788 45,116,404 50,720,992 52,232,853 Network Filled Ad Streams Opportunities - % 100% 60% 20% 15% 15% 15% 15% 15% 15% 15% Network Filled Ad Opportunities 11,812,827 11,477,871 5,200,742 5,376,179 6,482,994 6,839,008 7,565,786 7,961,718 8,950,763 9,217,562 Direct Sale CPM NA $30 $31 $32 $33 $34 $35 $36 $37 $38 Annual Direct Sale Net Revenue $-- $2,755 $7,739 $11,699 $14,548 $15,812 $18,007 $19,490 $22,520 $23,818 Network Filled CPM $19 $17 $17 $17 $17 $17 $17 $17 $17 $17 Annual Network Filled Net Revenue $2,693 $2,341 $1,061 $1,097 $1,323 $1,395 $1,543 $1,624 $1,826 $1,880 Net Revenue $2,693 $5,096 $8,800 $12,795 $15,870 $17,207 $19,550 $21,114 $24,346 $25,699 % Australian Video Advertising Market (1) 1.3% 1.6% 2.0% 2.2% NA NA NA NA NA NA 22 (1) Source: PwC. Data shown during periods available.
Financial Projections Ad Projections Assumes 10% of TV Linear Rate Card and Includes Ad Sales (US$ in thousands) Pre-Launch FY 2015 FY 2016 FY 2017 FY 2018 FY 2019 FY 2020 FY 2021 FY 2022 FY 2023 FY 2024 Net Revenue $2,693 $5,096 $8,800 $12,795 $15,870 $17,207 $19,550 $21,114 $24,346 $25,699 % Growth 89.2% 72.7% 45.4% 24.0% 8.4% 13.6% 8.0% 15.3% 5.6% % Australian Video Advertising Market (1) 1.3% 1.6% 2.0% 2.2% NA NA NA NA NA NA Movie Programming Costs $916 $974 $1,055 $1,154 $1,260 $1,300 $1,452 $1,597 $1,756 $1,932 TV Programming Costs 946 1,287 1,629 1,805 1,986 2,149 2,364 2,600 2,860 3,146 Total Programming Costs $1,863 $2,262 $2,684 $2,959 $3,246 $3,449 $3,815 $4,197 $4,617 $5,078 Hosting / Bandwidth 168 259 366 480 591 461 496 531 569 596 Partner's Revenue Share 299 420 602 871 1,098 1,198 1,386 1,507 1,643 1,752 Ad Serving Fees 91 159 251 334 397 417 458 481 537 552 Traffic and Music Fees 67 127 220 320 397 430 489 528 609 642 Other Cost of Sales $626 $966 $1,439 $2,005 $2,483 $2,506 $2,828 $3,047 $3,357 $3,542 Gross Profit $205 $1,868 $4,677 $7,831 $10,142 $11,252 $12,906 $13,871 $16,372 $17,079 % of Revenue 7.6% 36.7% 53.1% 61.2% 63.9% 65.4% 66.0% 65.7% 67.2% 66.5% Marketing $150 $1,713 $1,960 $2,074 $2,119 $2,169 $2,166 $2,183 $2,202 $2,286 $2,390 Headcount 221 885 2,116 3,208 3,843 4,354 4,557 4,694 4,834 4,979 5,129 Other G&A 121 283 291 300 309 319 328 338 348 358 369 Digital Platform Group Allocation -- 339 408 456 488 517 543 570 599 629 660 Total SG&A $492 $3,220 $4,775 $6,038 $6,760 $7,358 $7,594 $7,784 $7,983 $8,253 $8,548 EBIT (2) ($492) ($3,015) ($2,907) ($1,361) $1,071 $2,783 $3,658 $5,122 $5,888 $8,119 $8,531 % of Revenue NM NM NM NM 8.4% 17.5% 21.3% 26.2% 27.9% 33.4% 33.2% SPT EBIT (add back SPE Content Costs) ($492) ($1,737) ($1,599) ($79) $2,303 $4,103 $4,957 $6,506 $7,409 $9,794 $10,372 SPT Cash Flow (3) ($451) ($3,144) ($3,245) ($1,932) $399 $2,244 $3,328 $4,654 $5,538 $7,504 $8,219 SPT Cumulative Cash Flow (451) (3,596) (6,841) (8,773) (8,374) (6,130) (2,803) 1,852 7,390 14,894 23,113 SPE Cash Flow (4) ($451) ($2,447) ($2,479) ($1,179) $1,126 $3,023 $4,097 $5,471 $6,437 $8,493 $9,306 SPE Cumulative Cash Flow (451) (2,898) (5,377) (6,556) (5,430) (2,407) 1,690 7,161 13,598 22,090 31,397 23 (1) Source: PwC. Data shown during periods available. (2) Cash flow assumes 2 month lag on inflow of cash and 1 month lag on outflow of cash. (3) Cash flow after Licensing Revenue to SPT.