sony pictures television networks digital mrp fy14 – fy16 mrp 7-16-20… · as a company that...

S o n y P i c t u r e s T e l e v i s i o n N e t w o r k sD i g i t a l M R P F Y 1 4 – F Y 1 6

P r e s e n t e d J u l y 1 7 , 2 0 1 2

Introduction: Digital Networks Group

Games / Apps

Crackle CA, UK, AU

CrackleBr/LatAm

SPT NetworksDigital Networks

Group

Common Platforms, Products and

Approach

Content Studio

CrackleUS

Rapid Shift to a Connected World

Significant Adoption of Connected Devices

People are Watching Video Everywhere

Target Audience is Global

● % of People Watching Online Video

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

Woman

Music

Health

SET

AXN

SPIN

Convergence

2012 2016

Authenticated

Open

OTT

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 for mobile and tablets, and Drupal by FY16

● Establish Crackle Shared Services● Build fully distributed set of products across online, mobile and OTT

● Establish a dedicated Crackle sales team in the US to get to $100M● Augment digital sales in Latin America● Evolve Dolphin into a digital sales company in Europe

● Launch new brands (e.g., Women’s network in LatAm, Animax in UK)

● Extend mobile Games onto OTT 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

MRP Presentation

July 17, 2012

U.S.

- 10 -

Crackle Growth Strategy Themes for FY13

Retention, Not Just Acquisition

Global and Scalable

Sales as a Product (Ad Experience)

3 Platform Business

Minors to Majors:Quality is Pervasive

(sales, software, product, content, marketing)

Consumer Experience

World Class Platform

…and keep building the talent pool, and hit financial milestones

- 11 -

Key Metrics Across Platforms

OTT

Mobile

Online

Uniques(monthly in MM)

Streams(avg monthly in MM)

Ad Impressions(avg monthly in MM)

Y-o-Y Growth

OTT 86% 20% 20%

Mobile 37% 20% 20%

Online 0% 8% 9%

Increased engagement across multiple platforms will drive growth

Streams Per Unique

5.5 5.5 5.5 5.5

4.2 4.9 4.9 4.9

1.9 1.8 1.9 1.9

Ad Pods Per Stream

2.8 3.2 3.9 4.9

2.3 2.5 3.1 3.9

2.9 3.2 3.7 4.4

2x ad load

- 12 -

Sales Revenues

Net Total $44.7 $67.2 $97.6

Sellout 85% 85% 85%

Premium 70% 80% 80%

Network 30% 20% 20%

Crackle is poised to match sales with inventory created over online, mobile, and OTT TV platforms.

OTT

Mobile

Online

CPM OTT Mobile Web

Premium $18 $25 $15

Network $11 $14 $9

CPMs held flat across forecast period

- 13 -

Crackle U.S. Historical Context: FY08 to FY16

First full year of new Crackle – re-

launched April 2009

Moved Crackle to Los Angeles –

November 2008

• From $2.2M revenue to $10M in FY10 (New Crackle) to $104M in FY16 (10x increase in 6 years).

• In 8 years, from ($22M) EBIT loss to $14.4M profit, and from ($23M) loss to SPE to $23.4M.

FY08 FY09 FY10 FY11 FY12 FY13 Fcst FY14 MRP FY15 MRP FY16 MRP

SPT Ad Sales 1,615$ 2,969$ 6,781$ 7,522$ 11,324$ 17,700$ 44,747$ 67,228$ 97,566$

Other Revenue 557 1,673 3,312 9,185 6,286 9,007 7,625 6,922 6,790

Total Revenue 2,172 4,642 10,093 16,707 17,609 26,707 52,372 74,150 104,356

Op Income Before SPE Content (23,329) (18,145) (11,725) (846) (2,786) 1,095 4,500 13,200 23,400

SPE Content Cost 1,177 (1,394) (4,484) (3,660) (4,021) (4,095) (4,500) (6,000) (9,000)

EBIT (22,152) (19,539) (16,208) (4,506) (6,807) (3,000) (0) 7,200 14,400

Cash (27,204) (27,171) (14,597) (8,890) (11,411) (12,100) (18,300) (8,200) (4,600)

HeadcountCrackle U.S. 53 53 43 38 41 52 40 42 43

Ad Sales Plan 24 35 48 58 76 75 90 101

- 14 -

Crackle U.S. Plan-Over-Plan Comparison

FY16

Q2 Fcst Budget Variance 2012 MRP PY MRP Variance 2012 MRP PY MRP Variance 2011 MRP

SPT Ad Sales 17,700$ 17,700$ -$ 44,747$ 32,385$ 12,362$ 67,228$ 45,560$ 21,668$ 97,566$

Other Revenue 9,007 12,460 (3,453) 7,625 10,860 (3,235) 6,922 9,560 (2,638) 6,790

Total Revenue 26,707 30,160 (3,453) 52,372 43,245 9,127 74,150 55,120 19,030 104,356

OI Before SPE Content 1,095 2,550 (1,455) 4,500 7,700 (3,200) 13,200 11,700 1,499 23,400

SPE Content Cost (4,095) (4,200) 105 (4,500) (4,000) (500) (6,000) (4,000) (2,000) (9,000)

EBIT (3,000) (1,650) (1,350) (0) 3,700 (3,700) 7,200 7,700 (501) 14,400

Cash (12,100) (11,000) (1,100) (18,300) (8,000) (10,300) (8,200) (6,300) (1,900) (4,600)

HeadcountCrackle U.S. 52 52 - 40 51 (11) 42 52 (10) 43

Ad Sales Plan 24 - 24 35 35 48 48 58 76 52 24 75 51 24 90 52 38 101

FY13 FY14 FY15

- 15 -

Distribution

- 16 -

Distribution & Global Partnerships

Deepen Existing Strategic

Partnerships

● Focus on top five strategic partnerships that drive ~75% of our offsite revenue: Xbox, iOS, SEL/PS3, Android, and Roku

● Secure and expand tier one partnership status via preinstall and premium placement opportunities

● Work with partners to gain early access and insights into their strategic initiatives to leverage for our own advantage: HTML5, companion experiences, second screen, etc.

● Establish ourselves as the market leaders in OTT and mobile distribution to help improve overall brand awareness

Improve Retention, Loyalty, Usage,

and User Engagement

● Improve and update native integrations● Optimize ad experience (develop next gen ad units, improve measurement, etc.)● Develop products for next generation connected platforms

Shift focus from building our distribution network to driving audience growth and retention on critical strategic partners and our existing integrations

Drive New Business

Development Opportunities

● Secure early access to strategic discussions with major emerging platforms (e.g. Apple TV, Nexus)

● Prioritize online efforts on existing and new dominant platforms (e.g., Win8, Facebook)

● Leverage global partnerships to support incremental international expansion and the launch of new digital networks

● Hit revenue targets for licensing, subscription, and CYC businesses● Exploit Crackle IP by continuing to leverage SPE’s ancillary distribution channels

Strategies & Tactics

- 17 -

$8.2

$6.0

$3.1

$2.9

$2.6

$2.0

$1.4

$0.7

$0.7

$0.5

$0.3

$0.3

$0.3 $0.3 $0.2 $0.1

$0.0

FY14 OTT and Mobile RevenuesAll figures in millions

Xbox

IOS

PS3

Android - Google Play

ROKU

BIVL

Samsung

Android - AMZ Kindle

Vizio

LG

Panasonic

Windows

Toshiba

Android - Nook

Western Digital

Playstation Home

GoogleTV

2/3 of revenue will come from OTT and Mobile; several key accounts will drive success.

Distribution Partnerships

Total: $29,563,602

- 18 -

Ad Sales

19

Exec Summary

CONFIDENTIAL - NOT FOR RELEASE OUTSIDE OF SONY PICTURES

Sales & RevenueStrategy

End-to-EndSales Structure

1. Go directly to clients (brands)

2. Strategic acct builds drive planning & solution requirements

1. Sales talent and footprint

2. Support scope & scale

3. Yield mgmt

1. Marketing solutions & Research

2. Marketing / brand awareness

3. Quality programming content

4. Tech & Product capabilities

Situation

Sales Support &Tactics

• Transform the Crackle positioning, value proposition and sales organization

• Move from a video ad network to a premium network to drive revenue

• Accelerate FY14 plan by one yr/$13MM to $45MM

• Inventory is growing a year ahead of plan but ad-revenue is lagging

— Eight part time sales reps— RFP driven business— Value proposition unclear

• FY14 plan $32MM • FY15 plan $45MM

Strategy

20

Sales Leadership Requirements


Sales Outreach Structure & Experience

• Focus on Clients (brands) in parallel with agencies

• Change overall proposal activity to be a balance of “proactive” pitches to clients and RFPs from agencies

• Dedicated sales leadership in all regions that positions us for success

• Proven digital track record for securing meetings with clients to influence “media buy” decisions and close multiple $400M to $1MM+ major accounts

21

Revenue Composition


Automotive; 16%

Studio/Tune In; 21%

Gaming; 10%Packaged Goods; 17%

Mobile; 9%

Alcohol; 3%

Other; 14%

Retail; 5%QSR; 5%

Revenue by CategoryRevenue by Category and

Major Accounts Model

Source: Sales MRP Plan

Premium Revenue Analysis

Category % of Rev Rev Major Accts

MJR Acct Rev % of Rev

Studio/TV 21% 7,405,230 9 4,620,000 13%CPG 17% 5,994,710 7 3,740,000 11%Auto 16% 5,642,080 7 3,520,000 10%Other 14% 4,936,820 6 3,080,000 9%Gaming 10% 3,526,300 4 2,200,000 6%Mobile 9% 3,173,670 4 1,980,000 6%QSR 5% 1,763,150 2 1,100,000 3%Retail 5% 1,763,150 2 1,100,000 3%Alcohol 3% 1,057,890 1 660,000 2%

100% 35,263,000 44 22,000,000 62%

• 4-5 Categories: 65% of revenue

• 44 Accounts/Brands: 62% of revenue

Measurements for Success:

22

• 352 premium campaigns sold• 44% of revenue will be tied to marketing solutions• 56% media only• 4% of the campaigns will represent 24% of revenue

Campaign Analysis


Mrkt Solutions have a major impact:

Ad Revenue Type Revenue %/Total$ AvgCampaigns

%/Campaigns

Premium Custom Integrated Mrkt 10,650,500 24% 500,000 21 4%Premium OTS Mrkt 8,950,000 20% 100,000 90 17%Premium Media Only 15,662,500 35% 65,000 241 45%Network Media Only 9,486,075 21% 50,000 190 35%

44,749,075 100% 82,642 541 100%

23

FY14 Revenue & Sales Activity Output


Q1 Q2 Q3 Q4 TotalPremium Revenue Total 5,641,691 8,462,536 10,578,170 10,578,170 $35,260,567Premium Revenue % 16% 24% 30% 30% 100%Proposals 469 704 879 879 2931Campaigns Sold 56 84 106 106 352

Network Revenue Total 3,320,126 3,320,126 1,422,911 1,422,911 $9,486,075Network Revenue % 35% 35% 15% 15% 100%Campaigns Trafficked 66 66 28 28 190

• FY14 Sales activities begin FY13 Q3• 2900+ proposals and media plans will be created• Premium revenue will ramp up by Qtr• Dependency on network revenue will decrease by Qtr

The Path to Revenue

24

SPT Ad Sales P&L

OTT

Mobile

Online

SPTAS Plan (Fully-Loaded)

Hybrid Plan add’l cost

Net Total $36.9 $56.6 $84.1

Cost as % of Sales 17.6% 16.0% 13.8%

Premium $35.2 $52.5 $84.1

Network $9.5 $9.7 $13.4

Crackle is at a critical state to develop its own sales team to stay competitive and achieve higher goals.

$ in millions

25

EBIT Impact

We decided to pay for our own Sales, so now we need to do it right.

FY13 FY14 FY15 FY16EBIT before Ad Sales Plan ($1,900) $5,400 $14,200 $22,400SPTAS Plan (1,100) (5,400) (7,000) (8,000)

(3,000) (0) 7,200 14,400

Hybrid Plan - add'l costs (760) (2,460) (3,670) (5,480)EBIT ($3,760) ($2,460) $3,530 $8,920

26

Range of Scenarios Evaluated


Following our strategy and requirements to grow our ad business, we evaluated a range of scenarios:

Hybrid• Dedicated sales leadership for national and regional• New SVP of sales with a proven digital track record• Planning and Ad Ops leadership continues to be a shared resource

• Reports into Crackle• Dedicated sales leadership for national and regional• New SVP of sales with a proven digital track record• New Planning and Ad Ops team

Go it Alone

SPTASPlan

• Shared sales leadership for national and regional• Leverages current sales mgmt

27

Scenarios: Pros & Cons


PROS CONS

• Keeps TV connection & multiplatform

• Utilizes current operations• Unified 26MM Crackle Media

uniques• Avoids sales channel conflict• Costs are lower

• No proven digital track record

• Keeps TV connection & multiplatform

• Utilizes current operations• Unified 26MM Crackle Media

uniques• Avoids sales channel conflict• Dedicated sales leadership with

proven digital track record

• Search time for new SVP• Costs are higher

• Dedicated sales leadership with digital experience

• No multi-platform• Sales channel conflict• No unified comScore number• Operations issues ie. office

space• Search time for new SVP• Costs are higher

Hybrid

Go it Alone

SPTASPlan

28

SPTAS ORG Design

Source: Sales MRP Plan

29

Hybrid ORG Design

SALESSales Asst

LA

SALESSR. AE

LA

PLANNINGSR. Media

PlannerLA

AD OPSCampaign Mgr.

LA

SALESAELA

SALESVice President

West

SALESAELA

PLANNINGMedia Planner

LA

AD OPSCampaign Mgr.

LA

SALESSVP

National

SALESVice President

Central

SALESSales Asst

CH

SALESSR. AEDetroit

PLANNINGSr. Media Planner

CH

AD OPSCampaign Mgr.

CH

SALESSR. AE

CH

SALESSales Asst

NY

SALESSR. AE

NY

PLANNINGSR. Media

PlannerNY

AD OPSCampaign Mgr.

NY

SALESAENY

SALESAENY

PLANNINGMedia Planner

NY

AD OPSCampaign Mgr.

NY

SALESAENY

SALESSVPEast

PLANNING & AD OPSSVP

National

PLANNINGExec. Director

NY

AD OPSExec. Director

NY

PLANNINGDirector

Revenue AnalystLA

AD OPSSr. Campaign

Mgr.LA

PLANNINGSr. Mgr.

Revenue AnalystLA

TECHDirector

LA

TECHAd Engineer

LA

TECHAd Engineer

LA

Indicates shared service

Indicates dedicated planning, ad ops or tech

Indicates dedicated sales

SALESAELA

SALESAENY

SALESAELA

SALESAENY

30

Staffing & Costs Comparison


add'l Hybrid costs 0.76 2.46 3.67 5.47

Sales leadership costs and levels within teams are the primary difference in estimates

SPTAS Hybrid

FY13 FY14 FY14 FY16 FY13 FY14 FY15 FY16Revenue Target - $44.7 $67.2 $97.5 - $44.7 $67.2 $97.5

Premium Revenue - $35.2 $57.5 $84.1 - $35.2 $57.5 $84.1Network Revenue - $9.5 $9.7 $13.4 - $9.5 $9.7 $13.4

% Increase - 38% 50% 45% - 38% 50% 45%Dedicated Sales

Leadership Headcount0 0 0 0 4 4 5 6

Sales AE Headcount - 16 22 28 5 14 20 26Revenue per AE - $2.20 $2.61 $3.00 - $2.51 $2.88 $3.23Sales Assistants - 5 7 8 2 3 4 5

Planning - 7 9 10 6 7 9 10Ad Ops - 5 7 8 2 5 7 9

Technology - 2 3 4 1 2 3 4Total Headcount 24 35 48 58 20 35 48 60

Headcount Cost Estimate $1.10 $5.40 $7.00 $8.00 $1.86 $7.86 $10.67 $13.48

31

VP, GSM

Director, Sales Mrkt

(Current)

Sr. Mgr, Sales Mrkt

(FY13)

Mgr, Integrated Mrkt Services

(FY14)

Director, Ad Solutions

(FY13)

Admin(TBH)

Sales Solutions & Marketing Support


VP, GSM● Director, Sales ● Admin

1. Strategy

2. Proposals & RFP response

3. Marketing solutions• Media innovation• Research & Insights• Custom packages• OTS packages

4. Sales Materials & Tools

5. Post-sales Execution

6. Trade marketing

7. Corporate synergy

Key Functions & Roles

GraphicDesigner(FY13)

GraphicDesigner(FY14)

32

Programming & Content Acquisitions

- 33 -


Establish a Reputation as a

Legitimate “Buyer” with SPT

Reinforce Curation and Strengthen

Our Editorial Voice

● Curate premium feature films that support and further core genres: Comedy, Action, Thriller, Crime, Sci-Fi, Horror, Anime and Music

● Enhance TV quality and sharpen focus to better align with brand strategy by defining five TV programming pillars (Drivers, Genre-based Action & Sci-Fi Series, Cult, on-brand Reality, Anime)

- Create timely and seasonal assemblages of content for high value, premium sponsorships (e.g. Kill Count)- Engage users with compelling watchlists that convey curation and further the Crackle voice and brand- Launch 2-3 on-brand celebrity guest programming stunts per year- Minimize dependencies to program for Hulu

Program and acquire feature films, TV and originals that solidify Crackle’s positioning as the best free ad-supported digital entertainment network for males 18-34.

SPT Licensing:- Manage market complications and cost increases commensurate with the evolution of SVOD and TV

Everywhere to secure exclusive availabilities for driver titles and lock in long term windows- Purchase short network window avails for high value, on-brand feature films (District 9, Zombieland, etc.)- Acquire driver TV series from SPT (e.g. Rescue Me, The Shield)- Select genre-targeted, on-demo library features and TV product to support ad-sales initiatives and ad

packages

Expand Content Offering via 3rd

Party Content Acquisitions

3rd Party Licensing:- Close ground breaking AVOD license opportunities with other major studios and maintain existing 3rd

party licensing relationships (Snag Films, Content Films, etc)- License on-brand genre-targeted TV series (e.g. Stargate SG-1, Hercules) from at least 2-3 major studios- License on-demo, adrenaline-based reality TV and originals (e.g. Discovery Channel, Military Channel)- Source premium content to support launches of new verticals (e.g. anime, music).


- 34 -


Content Spend continues to be focused on movies, though TV plays a larger role over time.

** Illustrative content progression over MRP. **

Movies per Month 250 300 350 400Driver Titles per Month 5 10 15 25

% SPT 70% 60% 55% 50%Non-SPT Major Studios 1 2 4 4

Total Series per Month 60 50 55 60Driver Titles per Month 1 3 5 7

% SPT 40% 50% 40% 40%Non-SPT Major Studios 1 2 4 4

Licensed Originals 3 3 4 4

Television

Movies

Originals

$3.63

$6.50 $8.25

$13.00

$0.75

$2.00

$3.00

$4.00

$0.15

$0.50

$0.75

$1.00

$-

$2.00

$4.00

$6.00

$8.00

$10.00

$12.00

$14.00

$16.00

$18.00

$20.00

FY13 FY14 FY15 FY16

Content BudgetAll budgets in millions

Original Acquisitions

TV

Movies

$4.525M

$9M

$12M

$18M

- 35 -

Original Programming

- 36 -

Original Crackle Series

Evolve Series Approach:

Own ½ Hour Model

Features and 6 Eps Series as “Pilots”

Fully Integrate “Second Screen” into Production

Dramatically increase the volume and quality of original content while establishing a unique format and transmedia experience to enhance perception and widespread use of Crackle as a true linear network alternative.

Crackle Branded Series


● Build 360 experience (second screen, gaming platforms, social integrations, etc.) around original production franchises

● Dual screen integrations for all series increases advertising and sponsorship opportunities

● Second screen experience executed in parallel with production

● Increase volume of short-form network originals such as “Why It Crackles” and “Smokin’ Crackle Movie”

● Speed the pace of the traditional TV drama hour● Evolve to 13 x ½ hour drama approach, with an eye towards 13 x 1 hour format

in FY16● Establish ½, high-intensity drama as viable and unique Crackle network format. ● Produce second seasons of successful shows to build franchise properties● AXN / Crackle 13 eps long-form series partnership tentative in FY15● Increase per episode budgets from $175k to $300+k by FY16

● Original features to serve as pilots for future franchises and special events● Launch AXN / Crackle international back-door pilot / feature partnership

annually

- 37 -

Crackle Original Development – Production Slate Strategy

FY13 FY14 FY15 FY16

feature 6x22 13x22 13x44 feature 6x22 13x22 13x44 feature 6x22 13x22 13x44 feature 6x22 13x22 13x44

a a a

b

c

d d

e

f f f

g g

h h

i

j

k

- 38 -

Marketing

- 39 -

Marketing

Cable Level Awareness

● Achieve awareness of 50%+ among target audience (Men 18-34)● Continuous (year round) media presence● Achieve continuous press presence via dedicated resources

Exploit Partnerships to

Drive OTT/Mobile

Target “Must Buy” Status


● Leverage growing awareness to gain visibility on partner decks (“virtuous circle”)● Supplement high profile permanent placement with editorial stunts and features● Launch cross platform awareness campaign (e.g., ad slot dedicated to platform

promotion)

● Continuous targeted B2B media to achieve virtual 100% awareness● Establish thought leadership via custom research and associated trade press● High profile presence at Newfronts (annual originals slate announce)

Grow all KPIs to position Crackle as a “cable network without the cable”

Facilitate Global Growth

● Learnings/Best Practices summits● Global advertising assets● Global vendor agreements and templates where feasible (eCommunication, social,

etc.)

Grow Online Audiences

● Build and engage network level social followings via acquisition drives, partnerships and social evangelists

● Dramatically expand ecommunication via list acquisition and frequency enhancement

● Expand search marketing and maintain best in class SEO practices

- 40 -

Marketing Spend

Values in 000s FY13 FY14 FY15 FY16

Traffic Driving 1,500 1,500 1,500 1,500

Media 2,100 4,675 7,700 1,4700

Creative 600 600 1,000 1,500

PR 175 300 300 300

B2B 100 600 1,000 1,500

Research, etc 325 325 500 500

Total $4,800 $8,000 $12,000 $20,000

- 41 -

Financial Overview

Content Cost includes SPE Licensing, Originals Productions, Acquisitions and Editing

Other includes Outside Participation, Deprec, Amort, Rev Share, Music Fees, Ad Serving, Ad Creative, Originals Distribution Costs

FY13 Q2 Fcst FY14 FY15 FY16REVENUES SPTAS - Domestic - Online 11.7$ 15.2$ 20.8$ 28.0$

SPTAS - Domestic - Mobile 3.6 10.1 16.0 23.9 SPTAS - Domestic - OTT 2.4 19.4 30.4 45.7

SUBTOTAL - AD SALES 17.7 44.7 67.2 97.6 Advertising - Domestic - OTT Challenge 2.3 - - - Licensing & Subscriptions 2.9 1.4 0.5 - DVD & TV Syndication - Crackle Originals 2.7 3.6 3.7 4.0

SUBTOTAL - OTHERS 7.9 5.0 4.2 4.0

Var. Licensing - YouTube CYC 1.1 2.6 2.8 2.8 TOTAL REVENUE 26.7 52.4 74.2 104.4

COSTS Content Cost (4.5) (9.0) (12.0) (18.0) Ultimate Amortization (1.2) (2.9) (2.7) (2.8) Bandwidth (4.8) (7.0) (10.0) (14.0) Technology Shared Services - (6.1) (6.4) (6.8) Product & Video Ops (1.2) (0.3) (0.4) (0.7) Marketing (5.0) (8.0) (12.0) (19.5) General and Administrative (8.4) (6.2) (6.5) (6.8) SPT Ad Sales Plan (fully-loaded) (1.1) (5.4) (7.0) (8.0) Other (3.4) (7.2) (9.5) (13.0) SUBTOTAL (29.6) (52.2) (66.6) (89.6)

CYC - G&A (0.1) (0.2) (0.3) (0.4) TOTAL COSTS (29.7) (52.4) (67.0) (90.0)

EBIT (3.0)$ (0.0)$ 7.2$ 14.4$

HEADCOUNT Crackle U.S. 52 40 42 43 SPT Ad Sales Plan 24 35 48 58 TOTAL 76 75 90 101

CASH FLOW (12.1)$ (18.3)$ (8.2)$ (4.6)$

- 42 -

Crackle is looking to add several head over the MRP period to address strategic growth opportunities

Headcount Requirements

FY14 Description FY15 FY16

Distribution Manager Primary business contact for key partner accounts, and responsible for cultivating new partnerships and driving revenue opportunities with existing partners

BD Technical Project Manager

Product

Public Relations Director

Have been sharing resource with SPT; dedicated resource required to drive dramatically enhanced press presence

Programming

Partner Marketing Manager

Frees up director to focus on larger, more strategic platform partnerships; needed to achieve 20% unique user growth

Web Producer Programs, schedules and quality-checks on-site web content and cross-platform media.

Web Producer Allocate and manage workload among design team

Production Artists (2) Develop pitches, RFP responses and implement integrated ad deals

Original Production Development Manager

Increase in volume of original content studio output requires additional head to help grow slate and bolster development capabilities

Ad Solutions Director XXX

Sales Marketing Manager

XXX

Integrated Mktg Service Mgr.

XXX

Graphic Designers (2) Changes status of current graphic designers to full time

Total 13 2 1

TO BE UPDATED

Shared Services Organization

- 44 -

A Shared Services Organization will support Crackle / Digital Networks globally

● For Crackle US, ELI and Latam/BR, there currently are 26 heads working on the platform (10 product/16 engineering)

– 0 paid for by ELI– 4 paid for by Latam/BR– 22 paid for by US

● We recommend pooling those 26 heads into a Shared Services Organization

● To support the objectives of the SSO the following incremental costs are required:

– 13 New Headcount (6 Engineering, 7 Product); $2.2MM-$2.3MM FY14-FY16

– Outsourced developers: $1.6MM FY14, $1.8MM FY15, $2.0MM FY16

26 Existing Headcount

(Product/Ops, Engineering)

● 13 Incremental

● Shared Services Organization

- 45 -

Why Pool Resources Into a Shared Services Organization?

● Consistency of Technology and Operations across all networks and regions

1

● Re-architect, develop and maintain a scalable global platform for all networks

● Scalability = efforts of one benefit the many

● Centralization of Product Roadmap to better coordinate launch efforts/opportunities

● Central knowledge store keeps experience and expertise centralized so that all may benefit

● Will require fewer resources to launch and maintain products than if onus fell on individual networks

2

3

4

5

6

- 46 -

Why is it Necessary to Increase Headcount for a Shared Services Organization?

● To effectively launch new initiatives - current capacity is ideal maintenance only

– Current capacity limits ability to launch products at the pace needed to hit our goals

– Would afford the Digital Networks group the much needed yet often overlooked capacity for projects to help keep organization competitive

● To build platform to a state where it can more effectively scale (channels, languages, regions, products)

● To achieve faster time to market for new channels (incremental work vs. building from scratch)

– Less guesswork due to collective experience acquired and retained by SSO

– Fewer resources required to launch new networks and regions with fuller feature sets

- 47 -

What are the Key Elements to the Shared Services Center?

AppsCore Platform

Project Management Office (PMO)

3rd Party Services & Security

Content Delivery(CDN)

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Core Platform

● Update with improved support for multiple languages, regions, platforms & devices● Iterate and improve on proprietary Crackle features/IP (Rights Management, GPMS)● Utilize newer technologies to build a best-in-class platform (vs. platform built in 2006 for

UGV-focused experience)●

Content Management

System (CMS)

Video Transcoding

● Continue to enhance Crackle’s state-of-the-art video transcoding infrastructure to enable sharing of video transcode capacity and expertise across all regions and services at low cost

● Incorporate multiple content protection and digital rights management (DRM) schemes in order to facilitate licensing of content from other studios and to protect SPE content

● Continue to leverage and innovate with cloud providers Amazon and Microsoft in order to build out high value infrastructure with low investment, maintenance and deployment costs

● Continue to maintain highly scalable, secure and reliable infrastructure utilizing a hybrid of cloud providers and ancillary SPE-hosted data centers

● Improve API consistency, versioning and documentation to more efficiently power apps● Broaden APIs to support new devices and protocols● Improving APIs increases potential for full integration between SPT Networks sites / apps

and Crackle, and the ability to share content across regions, devices, services

APIs

Systems & Data Center

Reporting

● Build YouTube / Hulu-grade reporting tools that enable comprehensive ad-serving performance metrics - this will increase the attractiveness of advertising on any SPT, Crackle or other service integrated with the Shared Services platform

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Apps

● New product and feature development for fast evolving space (e.g., new set-top platforms, expanded feature-sets, second screen experience, etc.)

● Integration of “ads as product” into myriad platforms and devices● Dedicated R&D time to scope out new app technologies and user

experiences● Improved Quality Control (proactive functional, load and unit testing) and

test coverage across the growing list of consumer devices and platforms

Development Scale

Market Input & Power

● Collective bargaining with third parties and technology vendors based on a global organization spanning multiple networks

● Improved focus on user feedback and stakeholder input

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Content Delivery Networks (CDN)

● Build tools to distribute video content across multiple content delivery networks (CDN) and to configure and balance distribution of that content across the various CDNs, thereby maximizing quality of service (user satisfaction and engagement) and cost-effectiveness

● Leverage additional products from CDNs (such as content protection, firewall, and site acceleration) across all Shared Services implementations

● Centralize CDN evaluation, testing and contract negotiations within SPT

CDN Management

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3rd Party Services

● Implement cutting-edge search and recommendations engines (and other utility features) that can be used ‘a la carte’ by all the Crackle regions & other SPT Networks

Search & Recommendations

Social

● Ensure key third party API integrations are continually improved and updated (e.g., Facebook, Twitter, Windows Live ID, PSN). Integrate into the shared platform then re-use the improvements across all regions. This makes the individual services more engaging and facilitates social marketing across the entire network

● Implement tools that enable pinpointing playback issues on a per-user basis (e.g. by IP address) and fixing such issues, thereby increasing user satisfaction, engagement time and as a result increasing ad revenue

● Continual user and content security monitoring and improvement. Provide content and user security protection that is up-to-date, scales and performs well and is consistent with SPE and third-party content owner specifications. Proactively monitor & fix security issues, instead of in response to intrusion or hacking attempts

Security

Improved Customer Service

(QOS) Tools

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Project Management Office (PMO)

● Improved collection and management of stakeholder requests● Product decisions based on empirically measurable business needsManage &

Schedule Inputs / Requests

Manage Project Executions

● Dedicated team project managers to ensure timely delivery of scheduled products

● Vastly improved management status feedback and project transparency

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How Does it Work?

● Establishment of Project Management Organization to collect business requirements, analysis and prioritize based on business need, while providing detailed feedback and status to stakeholders

● Designate dedicated teams to certain key tasks so that they become experts in their field (e.g., player, social, CDN, systems integration); further improves time-to-market and scalability

● Additional budget to off-shore/outsource necessary yet more predictable technology tasks to third party contractors/developers

Video OpsProduct

DevelopmentProject

Management

EngineeringArt & Design

● Shared Services Organization

New Territories:India, Poland

US

New Networks:Vidzone, Animax,

WomensLATAM / BR

● Network Instances

● Network Operations

Ad Tech

ELI

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FY14 FY15 FY16Existing New Total Existing New Total Existing New Total

Headcount 26 13 39 26 13 39 26 13 39Salaries/ Fringe/ Bonus $4,330 $2,180 $6,510 $4,430 $2,240 $6,670 $4,560 $2,300 $6,860Product Development $1,200 - $1,200 $1,320 - $1,320 $1,452 - $1,452Outsource - $1,600 $1,600 - $1,804 $1,804 - $1,989 $1,989Overhead $890 - $890 $906 - $906 $999 - $999Total $6,420 $3,780 $10,200 $6,656 $4,044 $10,700 $7,011 $4,289 $11,300

What Does It Cost?

● SSO Costs

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How Will Costs be Allocated to the Networks and Regions?

● Allocated 60% US, 10% ELI, 30% LATAM / BR

● SSO to be a cost center with additional budget to be paid for as a portion of new business opportunities

60%

10%

30%

USELILatam

FY14 FY15 FY16US

% Allocation 60% 60% 60%Cost $6,120 $6,420 $6,780

ELI% Allocation 10% 10% 10%Cost $1,020 $1,070 $1,130

LATAM/ BR% Allocation 30% 30% 30%Cost $3,060 $3,210 $3,390

Total $10,200 $10,700 $11,300

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FY14 Timeline for Implementation

Assign Shared Services Role

to Existing Team

Hire Additional Shared

Services and Network

Instance Heads

Identify Long Term 3rd Party Partners, Bring

Up to Speed

Full Operating Capacity

● Jan 2013 ● Apr 2013

● July 2013 ● Sept 2013

ELI – Canada, UK and AustraliaFY2014 MRP

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($ in thousands)

FY13 Q2 Forecast

FY14 FY15 FY16

REVENUETOTAL REVENUE $1,501 $3,170 $5,094 $8,578

COST OF REVENUES - - - - Content Cost (671) (1,203) (1,670) (2,300) Partner's Revenue Share (93) (193) (348) (645) Hosting/Bandwidth (556) (671) (795) (1,017) Ad Serving Fees (50) (85) (126) (197)

TOTAL COST OF REVENUES (1,370) (2,152) (2,939) (4,160)

Website/TechnologyProduct/Tech Shared Services Alloc. (150) (1,020) (1,070) (1,130) Traffic & Music Fees (33) (71) (113) (191)

Sales and Marketing (220) (470) (740) (1,150)

TOTAL OPERATING EXPENSE (403) (1,561) (1,923) (2,471)

GROSS PROFIT (272) (543) 232 1,948 - - - - General and Administrative (262) (561) (638) (656) - - - - TOTAL COSTS (2,035) (4,274) (5,500) (7,287)

- - - - - - - -

EBIT (534)$ (1,104)$ (406)$ 1,292$

SPE EBIT Impact (Inc. Content Licensing) 137$ (21)$ 930$ 3,017$ - - - -

Headcount 2 5 5 5

CASHFLOW (728) (304) 194 602

Financial Overview

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Crackle Canada

• Strategic Benefits– Unencumbered by challenging regulations for traditional networks, Crackle establishes wholly owned SPT Networks brand

in a rapidly growing online ad market to one of the most engaged digital audiences in the world – Ad sales partnerships with Videology and Rogers provides data gathering opportunity to inform and drive content and

marketing decisions, improve ad targeting/experience, and consider bringing in-house– Expanding Crackle’s footprint as a multi-territory operator increases leverage in relationships with global distribution

partners– Canada business supports shared services infrastructure and scales Crackle to accelerate growth internationally in all

English language speaking markets – Establishes relationships with players across distribution, ad sales and content providers to support new launches in other

markets– With incremental investment in content, marketing and resources, business positioned to be EBIT positive by FY15

• FY14/15/16 Strategy– Work with ad sales team and ad rep partners to explore premium direct sales opportunities/sponsorships/collections– Enhance content offering through third party acquisitions – Improve and update native integrations– Develop products for next generation connected platforms – Ensure customization of product to be localized specifically for Canada (collections, social messaging, newsletter)– Build upon U.S. marketing campaigns with incremental and timely spend in Canada– Continue to build awareness and traffic via low cost tactics such as search marketing, social media and e-communication – Deepen strategic partnerships with key global partners (Apple, Google, Samsung, Sony) and expand relationships with local

teams in Canada

Incremental investment in Canada has driven content offering, user growth and brand awareness

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Crackle UK

• Strategic Benefits– Ad sales relationship with Videology and existing ad operations infrastructure provides market data and best practices to

develop SPT/Dolphin digital ad sales capabilities in key digital advertising market (~$7.8 billion online advertising spend in 2011)

– Largest and core digital asset in EMEA, Crackle will be critical driver in growing EMEA digital networks portfolio – Increase scale and strengthen position with ad reps for network websites, Animax SVOD and other new digital networks– Leverage existing distribution partner relationships to launch new digital networks– Potential co-branding/marketing cross-promotional opportunities with Movies4Men channels

• FY14/15/16 Strategy– Manage Crackle UK operations out of Los Angeles and provide guidance to prepare for transition to local management of

Crackle operations (target FY15)– Optimize monetization by leveraging Dolphin direct sales force and third party ad networks– Switch from content revenue share to licensing model – Secure 3rd party content to bolster and establish differentiated and compelling offering for users– Launch Playstation Swordfish implementation– Build relationships with local teams of global distribution partners to increase promotional/placement opportunities – Initiate marketing spend to increase brand awareness of Crackle in the UK

Providing a digital presence in EMEA to position traditional networks for strategic growth and digital integration

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Crackle Australia

• Strategic Benefits– Positions SPT Networks on forefront of digital video streaming trends in market – Standalone digital asset for SPT Networks portfolio in APAC region in favorable digital ad market – Online video

advertising spend in Australia expected to grow at a CAGR of 27.1% from 2012-2016 and Crackle commanding favorable market CPM’s

– Limited investment and resources necessary to operate close to break-even and seed brand with early digital enthusiasts while providing option value for mid-term future

– In depth data-gathering further positions Crackle to maximize value in this growing territory – Partnership with Ignite Media benefits both growth in Crackle business and SPT’s equity stake in Ignite

• FY14/15/16 Strategy– Secure deal with large strategic distribution partner in Australia (e.g. Telstra) by FY14 or re-evaluate overall business and

structure– Manage Ignite and other ad rep relationships to optimize monetization and increase fill rates to similar levels of Canada

and UK– Work with APAC Networks team to create long term growth plans and best management approach– Continue to improve content offering– Leverage major global distribution partnership relationships to launch on new platforms and explore

promotional/marketing opportunities

Maintain operations with minimal investment until large local distribution partnership is secured (i.e. Telstra)

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International Expansion – New Markets

• Leverage global distribution relationships for immediate reach and product/technology shared services infrastructure to expand Crackle’s international footprint and brand with incremental investment

• Closely partner with local SPT Network teams to maximize ad sales synergies, co-marketing opportunities and identify local content prospects

Launch Crackle in healthy digital markets where SPT Networks provides ad sales and marketing advantages

India and Other English Speaking

1

Germany and Austria

Track China, Turkey, France, Russia, Korea

and Japan for Deployment

Spain and Portugal2

3

4

• India Opportunity – Market conditions of 3G roll-out, mobile online video consumption, lack of competition and 300MM+ English language speaking population present attractive opportunity to launch Crackle supported by strength of MSM market position, infrastructure and promotional support on PIX and SIX channels [Target launch November 2012]

• Other English – Assess incremental expansion opportunities in other English language markets including Africa, Scandinavia, etc.

• Spain and Portugal Opportunity – Potential to customize existing Spanish language and Portuguese language products of Crackle LatAm for Spain and Portugal markets. Launch supported by strength of SPT Iberia infrastructure and traditional networks presence. [Spain targeted for April 2013]

• German Language – Explore opportunities for German language territories including Germany, Austria and Switzerland

• Work closely with local SPT Networks teams to track opportunities in high growth and high potential digital markets and pursue launches opportunistically

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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

December 2013

Crackle ELI is looking to invest in resources over the MRP period to address strategic growth opportunities

sony pictures television networks digital mrp fy14 – fy16 mrp 7-16-20… · as a company that...

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