[DRAFT: 10/1/2012] INVESTMENT IN FLIXELA

Transcription

1 [DRAFT: 10/1/2012] INVESTMENT IN FLIXELA Deal Overview October 1, 2012

2 Executive Summary SPT Digital Networks has the opportunity to launch Flixela, the premier multiplatform digital network for women in Latin America Features premium movies for women A18-44 and follows same business model as Crackle, free ad-supported video on demand (AVOD) anywhere, anytime Exploit significant advertiser demand to reach female demographic; alongside Crackle s male-skewing audience, opportunity to broaden addressable market and provide all-encompassing solutions to advertisers Capitalize on window of opportunity to fill market gap and be an early mover for premium AVOD services in high growth Latin America market, forecasted to experience significant increase in broadband penetration and online advertising Drive synergies by leveraging SPT s ad sales capabilities and Crackle s backend infrastructure, as well as cross-promotional opportunities across SPT Network s pay TV channels/websites in region (AXN, SET, SPIN) Launch Network in August FY2014 in Brazil and LatAm across web, OTT (BIVL), and mobile (ios/android); 2.3mm uniques/month in Y1 growing to 7.1mm in Y5, and net $2.0mm of revenue in Y1 growing to $15.7mm in Y5; by FY16 (Y3), revenue forecasted to be 10%, 18%, and 8% of total video advertising market in Brazil, Mexico, and Argentina respectively, based on current estimates(1) Including licensing fees (considered incremental) and ad sales commission to SPT, investment forecasted to generate a NPV of $8.6mm and IRR of 44% based on a $5.3mm DWM. On a stand-alone channel basis, investment forecasted to generate a NPV of $1.9mm and IRR of 23% based on a $8.0mm DWM No FY13 EBIT/Cash impact; total EBIT impact of ($4.0mm) and cash impact of ($4.0mm) in FY14 A potential cumulative 5mm uniques miss from FY14-FY18 generates a cumulative decrease in revenue of 20% or $9mm resulting in NPV of ($2.9)mm and IRR of (8.2%) based on a $7.0mm DWM from an SPT view (1) By 2016E, Flixela and Crackle combined video advertising market share is 32% in Brazil and 52% in Mexico Source: Media and Entertainment Outlook

3 Overview of Flixela Latin America s premier digital network featuring movies for women Same business model as Crackle: Free to consumer Ad-supported Long form content Targets female audiences A18-44 On-demand Features popular romantic comedies, dramas, thriller films with strong Multiplatform (OTT/mobile/web) female leads Provide an enhanced movie experience that satisfies advertisers demands for a female-focused network Capture highly attractive female demographic in Latin America 66% are between ages 15-34(1) 45% prefer web than TV(1) 23% access the internet via mobile/tablet(1) 58% are regular cinema goers(1) SPT receives approx. 50% of its online video RFPs targeting a female audience; Crackle s audience is ~65% male(2) Significant interest from consumer product companies including Dove, Pampers, Rexona, Sedal, Bimbo, and Baileys (1) Source: TGI Global, Crackle MRP Infographic (2) Source: ComScore.com April

4 Strategic Benefits to SPT, SPE, and Sony Be first to market to establish the dominant female-branded digital network in Latin America Complements Crackle s male-focused offering to fully exploit advertisers digital marketing demand across demos Build a bouquet of digital networks, creating synergies by leveraging: Existing ad sales infrastructure to enhance upfront and scatter offerings Crackle s technology backend with minimal incremental investment Crackle s management team to oversee operations Hedge constraints on Pay TV in Mexico and Brazil(1) Leverage SPT s pay TV Networks in region (SET, AXN, SPIN) to drive brand awareness and enhanced ad sales opportunities Establish ad barter relationship to drive large scale on-air messaging and cross promotion Create custom ad sales packages sold across SPT s portfolio of digital and pay TV networks Use key findings from Flixela Latin America launch to rollout brand in other regions (e.g., U.S., Canada) Exploit SPT s library of female-oriented film content to generate incremental returns for SPT s licensing team Utilize ad inventory to market SPE television and film products, as well as Sony consumer electronics (1) New laws for international Pay TV networks in Mexico and Brazil restrict total number of advertising minutes per hour

5 Market Overview LatAmBroadbandHouseholds Latin America will experience strong double digit growth in broadband households and internet advertising over the next (milions) couple years Broadband Households '12-'16 CAGR: 15.1% Broadband Household Penetration '12-'16 CAGR: 13.4% 15 13% % 24% 34 29% % 40% 56 47% % 60% 84 67% E 2013E 2014E 2015E 2016E 100% 80% 60% 40% 20% 0% LatAmBroadbandHouseholds Penetration ($inmilions) $1,750 $1,500 $1,250 $1,000 $750 $500 $250 $0 Video Internet Advertising '12-'16 CAGR: 36% Internet Advertising (Exec. Search) '12-'16 CAGR: 20% $216 $306 $375 $493 $617 $751 $925 $1,124 $1,328 $1, E 2013E 2014E 2015E 2016E Broadband households are forecasted to grow at a 15.1% CAGR from 2012E to 2016E Total broadband penetration is expected to increase from 40% in 2012E to 67% in 2016E Watching online video and downloading media are in the top 5 most popular bandwidth activities; 85% of broadband users in LatAm watch video (comscore, April 2012) Total Internet Advertising (Excluding Search) Video Internet Advertising, LatAm Digital video advertising is forecast to grow faster than total internet advertising (excluding Search) at CAGR of 36% from 2012E to 2016E Total internet advertising (excluding Search) is forecasted to grow at a 20% CAGR from 2012E to 2016E By 2016E, Flixela and Crackle combined video advertising market share is 32% in Brazil and 52% in Mexico Opportunity to expand the market for digital video advertising and to gain a strong foothold in LatAm Advertisers seeking outlets to market on premium longform content but limited by offerings in market Counter downside of internet piracy Source: PWC Media and Entertainment Outlook

6 Competitive Landscape Opportunity to capitalize on limited premium AVOD content in online market and fill void of a dedicated female-focused online network Historically limited female TV options due to the traditional 'machismo' roles men had in society Within the past 10 years, Argentina, Trinidad and Tobago, Brazil, Chile, and Costa Rica have all elected female presidents. According to the United Nations, women doubled their presence to over 20% in the region's legislatures between 1990 and 2009 Strong competition in subscriptions (Netflix, NetMovies) and short form content providers (YouTube and Vevo) Terra is primary competitor (offers AVOD, SVOD, TVOD content) 12mm unique users on Terra TV, with an average of 1.5bn streams / year(1) By FY 2016E, Flixela is projected to have 7.1mm uniques / month and have an average of 21.6mm streams / year Some traditional media portals (e.g. Globo, Televisa) and video leaders (e.g. YouTube, Vevo) retain users for an average of 3 to 9 minutes Crackle s average stream is 26 minutes Key Competitors(2) (1) Source: South By South West (2) Source: comscore April 2012, MRP Infographic

7 Key Operating Assumptions [TBD LATAM: Upfront vs. Scatter model and sponsorship vs. spot model] Distribution Ad Sales Content / Programming Operations Marketing Launch in Brazil and LatAm: August 2013 (19 countries) Launch on Web & Bivl: August 2013, Android: September 2013, IOS: October 2013, Syndication Partner: November mm uniques / month in FY 2014E growing to 7.1mm uniques / month in FY 2018E 2.1 streams / unique in FY 2014E growing to 3.0 streams / unique in FY 2018E (average) $2.0mm of net revenue in FY 2014E growing to $15.7mm of revenue in FY 2018E [TBD: 90% sponsorship vs. 10% spot in FY 2014E shifting to 50% sponsorship vs. 50% spot in Y3 and beyond] Revenue mix: 85% premium, 15% sponsorship revenue in Year 1, Years 2-5: 90% premium, 6% ad network, 4 % sponsorship revenue Premium CPMs: Year 1: $35/$30/$25 for OTT/Mobile/Web decreasing to $29/$24/$19 in Year 5 Streams monitized Year 1: 75%/60%/75% for OTT/Mobile/Web. Years 2-5: 85%/70%/85% 2.9 ads / stream in FY 2014E growing to 3.5 ads / stream in FY 2018E (across all platforms) Content mix: All movies (no TV content is planned) 90 titles at launch growing to 109 in FY 2018 Content mix at launch list AAA (6), AA (10), A (34), B/C (38), Drivers (2) Approx. 40% of content licensed from 3rd parties across forecast period Crackle LatAm FY14: 151 movies / 605 TV episodes; Crackle Domestic FY14: 300 movies / [1000 TV episodes] Leverage Crackle s backend infrastructure Development capex Year 1: $680k, Years 2-5: $400k/year Leverage existing management. Hire 15 new employees starting in April 2013E (including 5 ad sales) scaling to 27 in FY 2018E (including 8 ad sales) $1.6mm of annual marketing support $500k of annual in-kind barter advertising on SPT LatAm cable channels (SET, AXN, SPIN) $1mm of annual in-kind marketing from ($700k) Sony Electronics and ($300k) Syndication Partner and Device Partner Integrations

8 Summary of Financial Projections ($ in thousands) [TBD: 1. TBD LATAM: Discuss why is ad sales charging a 40% commission for Y1 and Y2 and 20% in Y3-Y5] Year 1 Year 2 Year 3 Year 4 Year 5 CAGR Channel View FY 2014E FY 2015E FY 2016E FY 2017E FY 2018E FY'14-FY'18 Revenue: Brazil $1,077 $2,901 $4,718 $5,921 $6,909 Pan Regional 700 2,114 3,445 4,610 5,880 Mexico ,222 1,664 2,114 Argentina Colombia Other Countries Gross Revenue $2,142 $6,257 $10,440 $13,627 $16,733 Brazil Sales Tax $153 $413 $672 $844 $985 Net Revenue $1,989 $5,844 $9,768 $12,783 $15,748 68% Growth % % 67.2% 30.9% 23.2% Programming Costs $1,087 $1,601 $2,063 $2,063 $2,664 Hosting / Bandwidth Ad Sales Commissions 660 1,756 1,473 1,937 2,393 Agency Incentives ,369 1,793 2,209 Other Cost Of Sales Product Dev. & Search Shared Services Marketing 2,039 1,968 2,081 2,203 2,480 Total Expenses $5,147 $7,225 $8,437 $9,845 $11,925 Gross Profit ($3,159) ($1,382) $1,331 $2,938 $3,823 % Net Revenue (158.8%) (23.6%) 13.6% 23.0% 24.3% Staff $750 $952 $1,180 $1,345 $1,405 G&A EBIT ($4,025) ($2,475) ($13) $1,417 $2,237 % Net Revenue (202.4%) (42.4%) (0.1%) 11.1% 14.2% Channel View Cash Flow ($4,009) ($3,156) ($796) $812 $1,667 Cumulative Channel Cash Flow ($4,009) ($7,165) ($7,961) ($7,149) ($5,482) SPE View Cash Flow ($3,470) ($1,832) $435 $2,290 $3,619 Cumulative SPE Cash Flow ($3,470) ($5,301) ($4,867) ($2,577) $1,042 Notes: FX rates used in the projections: 2.07 Brazilian reals / $1 US, Mexican pesos / $1 US, $4.51 Argentine pesos / $1 US, 1,787 Colombian pesos / $1 US Service launches in August 2013; Year 1 includes 8 months of results.

9 Financial Impact to SPE ($ in thousands) Cash flow break even in Year 3 Cumulative cash flow break even in Year 5 Year 1 Year 2 Year 3 Year 4 Year 5 FY 2014E FY 2015E FY 2016E FY 2017E FY 2018E Aggregate Benefit to SPE Cash Flow After Taxes ($4,009) ($3,156) ($796) $812 $1,667 Commission to Ad Sales (1) 414 1,140 1,025 1,300 1,612 Ad Sales Expenses (2) (223) (359) (443) (483) (497) Aggregate Cash Flow to SPT Networks ($3,818) ($2,376) ($214) $1,629 $2,782 Licensing Revenue to SPT (3) $348 $544 $648 $660 $837 % Licensing Revenue of Programming 60.0% 60.0% 55.0% 55.0% 55.0% Total SPE Impact ($3,470) ($1,832) $435 $2,290 $3,619 Cumulative Cash Flow ($3,470) ($5,301) ($4,867) ($2,577) $1,042 (1) Calculated based on the timing of Commissions to Ad Sales cash flow less taxes (2) Calculated as expense only for Ad Sales staff less taxes (3) Deemed as incremental revenue. Calculated as a percentage of programming, less 15% for talent residuals, less taxes

10 Preliminary Valuation Overview ($ in millions) METHODOLOGY IMPLIED VALUATION COMMENTS DCF Channel View (Exit Multiple) $3.4 $6.1 WACC range: 17.2% % Conservative 9.0x x terminal multiple DCF Channel View (Perpetuity Growth) $1.0 $3.1 WACC range: 17.2% % Perpetuity growth: 2.0% - 4.0% DCF SPT View (Exit Multiple) $9.9 $13.1 WACC range: 17.2% % Conservative 9.0x x terminal multiple DCF SPT View (Perpetuity Growth) $7.5 $10.1 WACC range: 17.2% % Perpetuity growth: 2.0% - 4.0% $0 $3 $6 $9 $12 $15 Enterprise Value DCF Perpetuity Growth Method Summary Cost of Equity 18.2% Channel View SPE View NPV of Cash Flows ($1,918) $4,798 NPV of TV $3,845 $3,845 NPV Combined $1,926 $8,643 IRR 23% 43% DWM ($7,961) ($5,301) Notes: Appendix includes detailed calculations SPT View includes add-backs of after tax Commission to Ad Sales expense, Ad Sales staff expense less taxes, and incremental Licensing Revenue less 15% for talent residuals and less taxes

11 Risks & Mitigants [TBD LATAM: Please provide thoughts on mitigants] Risks Mitigants Ad revenue does not materialize as forecasted Ad revenue market share projections are relatively high to market forecast; Flixela and Crackle LatAm projected to take 32% of video advertising market in Brazil and 52% in Mexico by FY16(1) Significant advertiser demand to reach female demographic Advertising revenue forecast is diversified; no industry represents more than 25% of total revenue and no client represents more than 7% of total revenue Crackle LatAm outperformed advertising forecast in business plan (excluding FX adjustments), demonstrating strength of ad sales capabilities and ability to enter emerging market High organic market growth: LatAm internet advertising industry (excluding search) projected to grow from $751mm in 2012E to $1.5bn in 2016E, a 20% CAGR(1) No significant upfront investment required; ability to manage costs should revenue be slower than anticipated to materialize Ability to attract and retain users is less than forecasted Projected amount of organic traffic across all platforms is high relative to marketing spend; grows from 33% of total uniques in FY14 to 78% in FY18 [TBD] Programming mix may not drive sufficient usage; 90 movies in FY14 growing to 109 movies in FY18 with no TV programming when compared to Crackle LatAm (151 movies in FY14 to 221 in FY18 with 886 TV episodes) [TBD] Unable to compete effectively due to increased market competition or changes in consumer viewing habits (e.g., TV Everywhere) Unique market positioning as first female-focused online multiplatform network Void of free AVOD premium content in market; greater competition in subscription and short form space Launch on additional OTT platforms with minimal incremental investment to expand distribution footprint and adjust to changes in consumer behavior (1) Source: Media and Entertainment Outlook

12 Next Steps September October November Sun Mon Tue Wed Thu Fri Sat Sun Mon Tue Wed Thu Fri Sat Sun Mon Tue Wed Thu Fri Sat /27 Update with Eric Berger and Drew Shearer 10/1 Update meeting with TC Schultz Week of 10/1 End of week 10/1 Week 10/22 Incorporate changes to business plan and presentation Update Andy Kaplan Finalize SPE approval process

13 Appendix

14 Market Analysis ($ in millions) Flixela is first to market, no current competition Flixela and Crackle LatAm will provide SPT significant shares of double digit growth video advertising markets in Brazil, Argentina, and Mexico Market Analysis FY 2013E FY 2014E FY 2015E FY 2016E FY 2013E FY 2014E FY 2015E FY 2016E Brazil Argentina Market - Video Advertising $23 $31 $40 $49 Market - Video Advertising $3 $4 $5 $6 Growth % 35% 35% 29% 23% Growth % 50% 33% 25% 20% Market - Total Internet Advertising $460 $536 $618 $706 Market - Total Internet Advertising $56 $65 $74 $86 Growth % 17% 17% 15% 14% Growth % 17% 16% 14% 16% Flixela Revenue - $1.1 $2.9 $4.7 Flixela Revenue - - $0.2 $0.5 Growth % % 63% Growth % % % of Video Advertising Market - 3% 7% 10% % of Video Advertising Market - - 4% 8% % of Total Internet Advertising - 0.2% 0.5% 0.7% % of Total Internet Advertising % 0.6% Crackle LatAm Revenue $1.5 $4.5 $8.4 $10.9 Crackle LatAm Revenue - - $0.5 $1.1 % of Video Advertising Market 6% 14% 21% 22% % of Video Advertising Market 0% 0% 11% 18% Flixela & Crackle LatAm Revenue $1.5 $5.5 $11.3 $15.7 Flixela & Crackle LatAm Revenue - - $0.7 $1.6 % of Video Advertising Market 6% 18% 28% 32% % of Video Advertising Market % 26% Mexico Colombia Market - Video Advertising $9 $12 $15 $19 Market - Video Advertising $10 $17 $24 $31 Growth % 50% 33% 25% 27% Growth % 67% 70% 41% 29% Market - Total Internet Advertising $167 $197 $228 $262 Market - Total Internet Advertising $202 $276 $350 $426 Growth % 22% 18% 16% 15% Growth % 44% 37% 27% 22% Flixela Revenue - $0.7 $2.1 $3.4 Flixela Revenue - - $0.2 $0.4 Growth % % 63% Growth % % % of Video Advertising Market - 6% 14% 18% % of Video Advertising Market - - 1% 1% % of Total Internet Advertising - 0.4% 0.9% 1.3% % of Total Internet Advertising % 0.1% Crackle LatAm Revenue $2 $3 $5 $6 Crackle LatAm Revenue - - $0.5 $0.8 % of Video Advertising Market 17% 22% 33% 33% % of Video Advertising Market 0% 0% 2% 3% Flixela & Crackle LatAm Revenue $1.6 $3.3 $7.0 $9.8 Flixela & Crackle LatAm Revenue - - $0.7 $1.2 % of Video Advertising Market 17% 28% 47% 52% % of Video Advertising Market - - 3% 4% Note: Total Internet Advertising for each country excludes Search Source: PWC Media and Entertainment Outlook

15 KPI Comparison [TBD: Need to compare bandwidth costs with existing Crackle bandwidth costs] FY 2013E FY 2014E FY 2015E FY 2016E FY 2017E FY 2018E CAGR '13-'16 CAGR '14-'18 Uniques (Monthly Average) Flixela - 2,274,500 3,719,479 5,514,070 6,426,343 7,138,149 33% Crackle LatAm 3,094,116 5,310,840 8,970,346 10,841, % Crackle U.S. 16,803,675 19,125,810 21,550,972 24,461, % Streams / Unique Flixela - 2.1x 2.3x 2.5x 2.8x 3.0x 10% Crackle LatAm 2.1x 2.3x 2.6x 2.8x % Crackle U.S. 2.7x 3.1x 3.2x 3.3x - - 7% Streams (Monthly Average) Flixela - 4,691,509 8,525,079 13,966,332 17,853,918 21,644,881 47% Crackle LatAm 6,497,643 12,352,304 22,982,952 30,412, % Crackle U.S. 45,610,188 59,813,754 69,676,505 81,511, % Ads / Stream Flixela - 2.9x 3.0x 3.2x 3.4x 3.5x 5% Crackle LatAm 2.8x 3.0x 3.2x 3.4x - - 6% Crackle U.S. 2.8x 4.3x 5.3x 6.6x 34% Number of Ads Served (Monthly Average) Flixela - 13,516,952 25,824,759 44,595,390 60,151,222 76,768,144 54% Crackle LatAm 18,435,960 37,459,465 73,725, ,424, % Crackle U.S. 125,823, ,086, ,959, ,769, % CPM Flixela - $18.4 $18.9 $18.3 $17.7 $17.1 (2%) Crackle LatAm $16.2 $19.3 $19.9 $ % Crackle U.S. $13.3 $14.6 $15.2 $ % Revenue (Annual) Flixela - $1,988,528 $5,843,685 $9,767,969 $12,783,469 $15,748,090 68% Crackle LatAm $3,588,000 $8,696,000 $17,587,039 $23,560, % Crackle U.S. $20,077,758 $44,746,642 $67,228,101 $97,566, % Movie Titles Flixela % Crackle LatAm % Crackle U.S % TV Episodes Flixela Crackle LatAm % Crackle U.S. - [1000] [1000] [1000] [1000] [1000]

16 Margin Comparison FY 2015E Margin Analysis Flixela Crackle LatAm Gross Revenue 100% 100% Brazil Sales Tax (7%) (7%) Programming (26%) (19%) Partner's Revenue Share (4%) (3%) Hosting / Bandwidth (4%) (9%) Ad Sales Commissions (28%) (29%) Agency Incentives (13%) (14%) Search (1%) (0%) Product Development (6%) 0% Shared Services (2%) (18%) Marketing (31%) (11%) Gross Profit (22% ) (10% )

17 A League of Their Own Across the Universe Almost Famous Programming Overview and Comparison Blind Date The women s movie category is smaller and more targeted than the general audience for Crackle The budget for Flixela is deemed incremental; these are titles that do not cross over to Crackle For Crackle LatAm, ~40% of content (~95% movies / 5% TV) drives 80% of ad starts Year 1 Year 2 Year 3 Year 4 Year 5 Programming Titles FY'2014 FY'2015 FY'2016 FY'2017 FY'2018 Flixela Movie Titles Growth - 0% 10% 0% 10% TV Episodes Growth Total Can't Hardly Wait Charlie's Angels Closer Da Vinci Code [TBD LATAM: To provide backup on contribution of movie and TV titles to overall ads] Exorcism Flixela of Emily Sample Rose Programming List Flatliners Fun with Dick and Jane (2005) Groundhog Day Hitch Hook Jawbreaker Julie & Julia Kramer Vs Kramer Made of Honor Michael Jackson's This Is It Nick & Norah' Infinite Playlist Crackle LatAm Movie Titles Growth - 10% 10% 10% 10% TV Episodes Growth - 10% 10% 10% 10% Total ,006 1,107 Only You Panic Room Resident Evil RV Sex, Lies & Videotape Silent Hill Single White Female Sleepless in Seattle Spanglish Stomp the Yard The Big Chill The House Bunny The Messengers The Net

18 Detailed Revenue Build % Growth Year 1 Year 2 Year 3 Year 4 Year 5 Year 2 Year 3 Year 4 Year 5 CAGR FY 2014E FY 2015E FY 2016E FY 2017E FY 2018E FY 2015E FY 2016E FY 2017E FY 2018E FY'14-FY'18 Uniques (Monthly Average) OTT 27, , , , , % 134% 63% 34% 142% Mobile 159, , , , ,487 40% 56% 73% 61% 57% Web 2,087,516 3,310,633 4,733,667 5,120,297 5,225,354 59% 43% 8% 2% 26% Total 2,274,500 3,719,479 5,514,070 6,426,343 7,138,149 64% 48% 17% 11% 33% Streams / Unique OTT 2.5x 2.8x 3.0x 3.3x 3.7x 10% 10% 10% 10% Mobile 1.5x 1.7x 1.8x 2.0x 2.2x 10% 10% 10% 10% Web 2.1x 2.3x 2.5x 2.8x 3.1x 10% 10% 10% 10% Total 2.1x 2.3x 2.5x 2.8x 3.0x 11% 11% 10% 9% Content Streams (Monthly Average) OTT 68, ,300 1,304,132 2,336,634 3,445, % 157% 79% 47% 167% Mobile 239, , ,953 1,205,541 2,133,531 55% 71% 90% 77% 73% Web 4,383,783 7,647,563 12,028,248 14,311,743 16,065,925 74% 57% 19% 12% 38% Total 4,691,509 8,525,079 13,966,332 17,853,918 21,644,881 82% 64% 28% 21% 47% Ad Streams (Monthly Average) OTT 204,371 1,597,995 4,313,415 8,114,839 12,563, % 170% 88% 55% Mobile 718,808 1,166,179 2,096,799 4,186,692 7,779,960 62% 80% 100% 86% Web 12,593,772 23,060,585 38,185,176 47,849,691 56,424,375 83% 66% 25% 18% Total 13,516,952 25,824,759 44,595,390 60,151,222 76,768,144 91% 73% 35% 28% Ads / Stream OTT 3.0x 3.2x 3.3x 3.5x 3.6x 5% 5% 5% 5% Mobile 3.0x 3.2x 3.3x 3.5x 3.6x 5% 5% 5% 5% Web 2.9x 3.0x 3.2x 3.3x 3.5x 5% 5% 5% 5% Total 2.9x 3.0x 3.2x 3.4x 3.5x 5% 5% 6% 5% Revenue (Annual) OTT $42,918 $520,363 $1,334,369 $2,384,834 $3,507,706 1,112% 156% 79% 47% 201% Mobile 84, , , ,070 1,532, % 71% 90% 77% 107% Web 1,700,884 5,229,506 8,239,556 9,826,364 11,010, % 58% 19% 12% 60% Display/Sponsorships 314, , , , ,750 (24%) 71% 34% 24% 21% Total $2,142,000 $6,257,087 $10,440,307 $13,627,168 $16,732, % 67% 31% 23% 67% Revenue by Country Brazil $1,077,000 $2,901,069 $4,718,163 $5,920,695 $6,908, % 63% 25% 17% 59% Mexico 700,000 2,114,335 3,445,009 4,610,200 5,880, % 63% 34% 28% 70% Pan Regional 345, ,881 1,222,142 1,663,799 2,114, % 58% 36% 27% 57% Argentina 0 188, , , ,513 N/A 155% 35% 28% N/A Colombia 0 172, , , ,602 N/A 111% 36% 27% N/A Other Countries 20, , , , , % 97% 36% 28% 107% Total $2,142,000 $6,257,087 $10,440,307 $13,627,168 $16,732, % 67% 31% 23% 67% Brazil Taxes (14.25%) $153,473 $413,402 $672,338 $843,699 $984,502 Net Revenue $1,988,528 $5,843,685 $9,767,969 $12,783,469 $15,748, % 67% 31% 23% 68% Growth % % 67.2% 30.9% 23.2% Note: FX rates used in the projections: 2.07 Brazilian reals / $1 US, Mexican pesos / $1 US, $4.51 Argentine pesos / $1 US, 1,787 Colombian pesos / $1 US

19 Marketing Budget Detail [TBD LATAM: Provide backup on customer acquisition costs to arrive at more realistic organic number of uniques] FY 2014E FY 2018E CAGR '14-'18 Marketing Budget Uniques Marketing Budget Uniques Marketing Budget Uniques Branding/Acquisition $950,000 1,662,500 $848,000 1,545,833 (3%) (2%) Social Media 180,000 61, , ,000 3% 16% B2B/Trade 250,000 85, , ,000 (3%) 9% Public Relations 130,000 44, ,000 82,000 4% 17% SEL & Syndication Partner (in kind) 1,000, ,600 1,000, ,000 0% 13% SPT Pay TV Channels Cross Promote (in kind) 500, , , ,000 0% 12% Subtotal $3,010,000 2,368,700 $2,923,000 2,683,833 (1%) 3% Organic 104,601 4,453,288 Total Budget for Paid Uniques $3,010,000 2,473,301 $2,923,000 7,137,121 (1% ) 30% Marketing Budget FY 2014E FY 2015E FY 2016E FY 2017E FY 2018E Acquisition $900,000 $760,000 $760,000 $760,000 $800,000 Branding Elements 50,000 10,000 20,000 20,000 48,000 Branding/Acquisition $950,000 $770,000 $780,000 $780,000 $848,000 Social Media 180, , , , ,000 Agency 100, , , ,000 97,000 Production (Creative) 120,000 80,000 80,000 80, ,000 B2B/Trade 250, , , , ,000 Public Relations 130, , , , ,000 Other (Crm, Customer Service) 59,000 58,000 60,000 60,000 82,000 Total $1,789,000 $1,518,000 $1,541,000 $1,555,000 $1,702,000

20 Headcount Overview Headcount Summary by Position Title Location Start Date 1 Community Manager Miami 04/01/13 2 Marketing Manager Miami 04/01/13 3 Video Ops Specialist Los Angeles 04/01/13 Headcount Summary Year 1 Year 2 Year 3 Year 4 Year 5 FY'2014 FY'2015 FY'2016 FY'2017 FY'2018 Brazil Los Angeles Mexico Miami Women's Channel Headcount Los Angeles Mexico New York Ad Sales Headcount Los Angeles Shared Services Headcount Miami Finance Headcount Total Headcount Graphic Designer Los Angeles 04/01/13 5 Web Producer Los Angeles 04/01/13 6 Editor-In-Chief Miami 04/01/13 7 Editorial Specialist Brazil 04/01/13 8 Programming Specialist Miami 04/01/13 9 Community Specialist Brazil 04/01/14 10 Community Specialist Mexico 04/01/14 11 Editorial Specialist Mexico 04/01/14 12 Programming Specialist Miami 04/01/15 13 Marketing Manager Miami 04/01/15 14 Community Specialist Miami 04/01/16 15 Editorial Specialist Miami 04/01/16 16 Digital Sales Planner Mexico 07/01/13 17 Account Executive Mexico 05/01/13 18 Tech Ops Specialist Los Angeles 07/01/13 19 Ad Ops Specialist New York 07/01/13 20 Ad Ops Specialist New York 07/01/13 21 Ad Ops Specialist New York 04/01/14 22 Ad Ops Specialist New York 04/01/15 23 Digital Sales Planner Mexico 04/01/16 24 Account Analyst Miami 06/01/13 25 Account Analyst Miami 04/01/16 Note: Difference in headcount total are the two finance heads which are allocations

21 User Profile: LatAm Female Demographic Source: TGI.net Y2010 Wave2 (2011), MRP Infographic

22 Cost of Equity ($ in millions) Debt to Total Capital Debt to Equity Marginal Tax Rate Company HQ Levered Beta Market Cap Total Debt Blanco y Negro S.A. Chile 0.28 $63 $0 0% 0% 17% 0.28 Blinkx USA % 0% 40% 0.49 Coinstar USA , % 26% 40% 0.78 Grupo Clarín S.A. Argentina % 173% 35% 0.48 Grupo Radio Centro, S.A.B. de C.V. Mexico % 4% 28% 1.15 Netflix USA , % 12% 40% 0.65 Unlevered Beta Average Median Assumptions Unlevered Beta 0.57 Peer group median. (CapIQ) Calculated Levered Beta 0.57 Levered Beta = Unlevered Beta * (1+[(1-Tax Rate) * Target Debt / Equity Value]) Risk-free rate 1.8% Yield of 10 year US Treasury Bond (WSJ, 9/21/12) Market Premium 6.6% Long-horizon expected equity risk premium (Ibbotson's) Company Size Premium 9.8% Decile 10b for companies with market caps between $1 million - $128 million (Ibbotson's) Country Risk Premium 2.9% Weighted average risk premium based on revenue for key markets (Damodaran) Tax EBIT at tax rate of 31.5% Weighted average risk premium based on revenue for key markets (Damodaran) Equity as a Percentage of Total Capital 100.0% Debt as a Percentage of Total Capital 0.0% Cost of Equity 18.2%

23 Discounted Cash Flow Analysis: Channel View ($ in thousands) Valuation Summary WACC 18.2% Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10 FY'2014E FY'2015E FY'2016E FY'2017E FY'2018E FY2019E FY2020E FY2021E FY 2022E FY 2023E Unlevered Free Cash Flow ($4,009) ($3,156) ($796) $812 $1,667 $2,199 $1,752 $2,190 $2,628 $3,023 PV of Free Cash Flow ($3,392) ($2,259) ($482) $416 $722 $806 $543 $575 $583 $568 Terminal Value Method NPV of Cash Flows ($4,994) NPV Terminal Year EBIT (FY 2018E) $2,237 Exit Multiple Terminal Multiple 10.0x $4, x 9.0x 10.0x 11.0x 12.0x Terminal Value $22, % $3,384 $4,439 $5,495 $6,551 $7,606 Present Value of Terminal Value $9, % 3,063 4,075 5,086 6,098 7,109 % of Enterprise Value 206.3% 18.2% 2,761 3,731 4,700 5,669 6,639 NPV Combined $4, % 2,476 3,405 4,335 5,264 6,193 IRR 39.3% 20.2% 2,207 3,098 3,989 4,881 5,772 NPV Combined as a Multiple of 2014E Revenue 2.4x NPV Combined as a Multiple of 2015E Revenue 0.8x Implied Perpetuity Growth Rate 10.0% WACC WACC Perpetuity Growth Method NPV of Cash Flows ($1,918) NPV Terminal Year FCF (FY 2023E) $3,023 Perpetuity Growth Rate Perpetuity Growth Rate 3.0% $1, % 2.0% 3.0% 4.0% 5.0% Terminal Value $20, % $2,927 $3,289 $3,707 $4,192 $4,764 Present Value of Terminal Value $3, % 2,111 2,405 2,740 3,126 3,576 % of Enterprise Value 199.6% 18.2% 1,413 1,654 1,926 2,237 2,595 NPV Combined $1, % 814 1,012 1,236 1,488 1,776 IRR 23.0% 20.2% ,086 NPV Combined as a Multiple of 2014E Revenue 1.0x NPV Combined as a Multiple of 2015E Revenue 0.3x Implied Terminal EBIT Multiple 4.0x

24 Discounted Cash Flow Analysis: SPT View ($ in thousands) Valuation Summary WACC 18.2% Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10 FY'2014E FY'2015E FY'2016E FY'2017E FY'2018E FY2019E FY2020E FY2021E FY 2022E FY 2023E Unlevered Free Cash Flow ($3,470) ($1,832) $435 $2,290 $3,619 $4,701 $5,000 $6,157 $2,628 $3,023 PV of Free Cash Flow ($2,935) ($1,311) $263 $1,173 $1,568 $1,723 $1,551 $1,615 $583 $568 Terminal Value Method NPV of Cash Flows ($1,242) NPV Terminal Year EBIT (FY 2018E) $2,237 Exit Multiple Terminal Multiple 10.0x $11, x 9.0x 10.0x 11.0x 12.0x Terminal Value $22, % $10,687 $11,743 $12,799 $13,855 $14,910 Present Value of Terminal Value $9, % 10,065 11,076 12,088 13,099 14,111 % of Enterprise Value 84.9% 18.2% 9,478 10,447 11,416 12,386 13,355 PV of SPE Cash Flows (2019E-2021E) 2, % 8,923 9,853 10,782 11,712 12,641 NPV Combined $11, % 8,400 9,292 10,183 11,074 11,966 IRR 65.8% NPV Combined as a Multiple of 2014E Revenue 5.7x NPV Combined as a Multiple of 2015E Revenue 2.0x Implied Perpetuity Growth Rate 1.7% WACC Perpetuity Growth Method NPV of Cash Flows $4,798 NPV Terminal Year FCF (FY 2023E) $3,023 Perpetuity Growth Rate Perpetuity Growth Rate 3.0% $8, % 2.0% 3.0% 4.0% 5.0% Terminal Value $20, % $10,231 $10,593 $11,011 $11,496 $12,068 Present Value of Terminal Value $3, % 9,113 9,406 9,742 10,128 10,577 % of Enterprise Value 44.5% 18.2% 8,130 8,371 8,643 8,953 9,311 NPV Combined $8, % 7,261 7,460 7,683 7,935 8,223 IRR 43.4% 20.2% 6,490 6,655 6,839 7,046 7,280 NPV Combined as a Multiple of 2014E Revenue 4.3x NPV Combined as a Multiple of 2015E Revenue 1.5x Implied Terminal EBIT Multiple 4.0x WACC

25 Scenario Analysis ($ in thousands) Year 1 Year 2 Year 3 Year 4 Year 5 Uniques, Net Revenue, and EBIT Scenarios FY'2014E FY'2015E FY'2016E FY'2017E FY'2018E Total Case: Base Total Uniques 2,274,500 3,719,479 5,514,070 6,426,343 7,138,149 25,072,543 Net Revenue $1,989 $5,844 $9,768 $12,783 $15,748 $46,132 EBIT ($4,025) ($2,475) ($13) $1,417 $2,237 ($2,859) Case: Uniques Decrease 5% Each Year Total Uniques 2,160,775 3,533,505 5,238,367 6,105,026 6,781,242 23,818,915 Decrease in Number of Total Uniques (113,725) (185,974) (275,704) (321,317) (356,907) (1,253,627) Net Revenue $1,889 $5,552 $9,280 $12,144 $14,961 $43,825 Cumulative Revenue Miss ($2,307) EBIT ($4,070) ($2,613) ($315) $1,024 $1,755 ($4,220) Case: Uniques Decrease 10% Each Year Total Uniques 2,047,050 3,347,531 4,962,663 5,783,709 6,424,334 22,565,288 Decrease in Number of Total Uniques (227,450) (371,948) (551,407) (642,634) (713,815) (2,507,254) Net Revenue $1,790 $5,259 $8,791 $11,505 $14,173 $41,519 Cumulative Revenue Miss ($4,613) EBIT ($4,116) ($2,750) ($617) $630 $1,272 ($5,581) Case: Uniques Decrease 15% Each Year Total Uniques 1,933,325 3,161,557 4,686,960 5,462,392 6,067,427 21,311,661 Decrease in Number of Total Uniques (341,175) (557,922) (827,111) (963,952) (1,070,722) (3,760,881) Net Revenue $1,690 $4,967 $8,303 $10,866 $13,386 $39,212 Cumulative Revenue Miss ($6,920) EBIT ($4,161) ($2,888) ($919) $236 $790 ($6,942) Case: Uniques Decrease 20% Each Year Total Uniques 1,819,600 2,975,583 4,411,256 5,141,075 5,710,520 20,058,034 Decrease in Number of Total Uniques (454,900) (743,896) (1,102,814) (1,285,269) (1,427,630) (5,014,509) Net Revenue $1,591 $4,675 $7,814 $10,227 $12,598 $36,905 Cumulative Revenue Miss ($9,226) EBIT ($4,206) ($3,025) ($1,221) ($158) $308 ($8,303) Net Revenue Miss by: DCF Perpetuity Growth Method Scenario Analysis Base Case (5% ) (10% ) (15% ) (20% ) Channel View SPT View NPV of Cash Flows ($1,918) ($3,282) ($4,672) ($6,121) ($7,925) NPV of TV $3,845 $2,653 $1,461 $460 ($535) NPV Combined $1,926 ($629) ($3,211) ($5,661) ($8,460) IRR 23.0% 16.4% 7.4% (6.9%) NA DWM ($7,961) ($8,354) ($8,746) ($9,416) ($10,305) NPV of Cash Flows $4,798 $3,143 $1,462 ($278) ($2,373) NPV of TV $3,845 $2,653 $1,461 $460 ($535) NPV Combined $8,643 $5,796 $2,923 $182 ($2,908) IRR 43.4% 36.8% 28.9% 19.0% (8.2%) DWM ($5,301) ($5,511) ($5,910) ($6,431) ($6,953)

26 Precedent Media Transactions Analysis ($ in millions) Announced Target Buyer PRECEDENT MEDIA TRANSACTIONS ANALYSIS Target Headquarters 06/04/12 Grupo Clarín S.A. GS Unidos, L.L.C. Argentina Target Business Description Enterpise Value Enterprise Value / Revenue Operates a cable TV network that offers basic pay TV, premium video, pay per view, HD, as well as broadband Internet services. Additional segments include Digital Content segment produces content for the Internet and mobile digital platforms, Broadcasting and Programming $ x 4.2x EBIT 04/19/12 New Video Group Vistachiara Productions, Inc. USA Operates as a distributor of independent films, documentaries, and television sports and kids programming through DVD, Blu-ray, downloads, streaming platforms x - 01/31/11 LOVEFiLM Amazon.com UK Online Retail, Online Video /25/11 Dailymotion SA France Telecom France Media technologies / Content delivery / Streaming media x - 01/07/11 Qik Skype USA Online Video, VoIP /23/10 Sonic Solutions Rovi Corporation USA Online Video, Production Tools - Media x - 10/12/10 Ngmoco DeNa USA Mobility / Mobile content / Entertainment x - 09/28/10 5min Inc. AOL, Inc. USA Internet content & commerce / Video /19/10 Locaweb Serviços de Internet S.A. Silver Lake Partners Brazil Offers Internet solutions that include infrastructure for audio and video streaming, Web hosting, domain registration x - 01/22/10 Dori Media Central Studios S.A. - Argentina Operates as a television production company which offers production services and owns production facilities and TV studios x 12.0x 12/04/09 La La Media Apple USA Media technologies / Content delivery / Streaming media /30/09 The Orchard Enterprises, Inc. Dimensional Associates LLC USA Distributes digital music and video products High $ x 12.0x 75th Percentile $ x 10.0x Median $72 0.7x 8.1x Mean $ x 8.1x 25th Percentile $54 0.4x 6.1x Low $15 0.3x 4.2x

27 Latin America Public Media Comparables Analysis ($ in millions) PUBLIC MEDIA COMPARABLES ANALYSIS Enterprise Value as a Multiple of: Market Enterprise Revenue EBITDA EBIT Company Name Headquarters Description Value Value LTM LTM LTM Blanco y Negro S.A. Chile Engages in the organization, production, participation, and marketing of shows, and professional activities of entertainment and leisure sporting activities $63 $68 2.4x 9.7x NA Blinkx USA Provides video search and advertising services on the Internet worldwide x 24.7x 49.5x Coinstar USA Provides automated retail solutions. Owns and operates Redbox Kiosks - expanding into OTT 1,429 1, x 3.4x 5.5x Grupo Clarín S.A. Argentina Operates a cable TV network that offers basic pay TV, premium video, pay per view, HD, as well as broadband Internet services. Additional segments include Digital Content segment produces content for the Internet and mobile digital platforms, Broadcasting and Programming 432 1, x 2.1x 3.2x Grupo Radio Centro, S.A.B. de C.V. Mexico Engages in the production and broadcasting of music, entertainment, news, and special event programs x 8.4x 9.4x Netflix USA Operates an Internet subscription services for TV shows and movies 3,209 2, x 12.3x 15.4x High $3,209 $2, x 24.7x 49.5x 75th Percentile $1,179 $1, x 11.6x 15.4x Median $394 $ x 9.1x 9.4x Mean $939 $1, x 10.1x 16.6x 25th Percentile $199 $ x 4.7x 5.5x Low $63 $68 0.5x 2.1x 3.2x