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Tablets and TVs

The Next Wave of Smart Growth

Introduction

• Senior Research Analyst at Robert Baird & Co.

• Baird is one of the largest private investment banks

– $1 billion revenues; 3,000 employees worldwide

• Prior experience as software developer, Internet start-up and Wall Street background at JP Morgan and Lazard

• Covered Internet and Interactive Entertainment for 11 years

• Based in San Francisco

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Games are still the most important

form of digital media

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The Four Screens of Games

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Smartphones Still on the Rise

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0.0B

1.0B

2.0B

3.0B

4.0B

5.0B

6.0B

2010 2011 2012 2013E 2014E 2015E 2016E

Smartphone Installed Base

Source: RW Baird & Co.

Android Increasing Share

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2.0B

3.0B

4.0B

5.0B

6.0B

2009 2010 2011 2012 2013E 2014E 2015E 2016E

Android on the Rise

Android Smartphones Installed BaseiOS Smartphones Installed BaseOther Smartphones Installed Base

Source: RW Baird & Co.

Games are the Killer App

7

Source: IDC, AppAnnie

Key Smartphone Trends

• Android driving growth

• Larger screens

• More power and enhanced features

• More value-priced phones

• Global distribution (e.g. BRIC countries)

• Higher speed networks (e.g. 4G/LTE)(4G)

8

9

In 2012, Smartphones represented only

18 percent of total global handsets in use,

but represented 92 percent of total global

handset traffic

4G LTE Heat Map

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Source: Cisco

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In 2012, 4G connections generated

19 times more traffic on average than

non-4G connections

Now Consider This…

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0.0B

0.4B

0.8B

1.2B

2010 2011 2012 2013E 2014E 2015E 2016E

Tablets Installed Base

Tablets Installed Base

Source: RW Baird & Co.

Tablet Games

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Connected tablets will generate more

traffic in 2017 than the entire global

mobile network in 2012

Core vs. Casual

• Tablets more like PCs or TVs than phones

• Tablet games more like core games

• This is a more lucrative market

• Core gamers happy to pay for quality content

• F2P or ASP models work, no tricks necessary

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Mobile Game Sales

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$0

$4,000

$8,000

$12,000

$16,000

$20,000

2012 2013 2014 2015 2016 2017

Smartphone + Tablet Game Sales

Source: RW Baird & Co.

Elephant in the (Living) Room

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Coming Wave of Connected TVs

• Web meets the TV (IPTV)

• Smart or Dumb screens

– Internet connection is important

– Content served from phone or tablet or set-top box or internal components

– Tablet can be the remote controller

• App stores (made for TV Apps)

• Advertising and content delivered to TVs over the web

• Cord cutting/OTT

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Why You Should Care

• Media/Hardware companies battling for the living room

• Games will be weapons in the battle

– Games are “killer apps” online and on smart devices

• Broad audience (from casual to core)

• Proven gaming space (consoles)

• Premium/rich content

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Appification of TV

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>3 Hours/Day Addressable Opportunity

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Disruption in the Living Room

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Source: Gartner

$15-20B Global Market for Living Room Games

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$0

$5,000

$10,000

$15,000

$20,000

$25,000

2008 2009 2010 2011 2012 2013 2014 2015 2016

Console software

Source: RW Baird & Co.

Conclusions

• Smartphone Market is now proven

• Tablets are Next

• Game Monetization Will Improve

• Connected TVs will represent a third wave of growth

• Cross platform franchises across Smart screens

• Global opportunities

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Eggs in One Basket

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Bookings Growth Stock Price

Don’t Let this Happen to YOU!

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E-mail: csebastian@rwbaird.com

Twitter: @colin_sebastian

Questions/Discussion