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March 2010 Newsletter - Spotlight: Online Video
1. March 2010
Internet & Digital Media
Industry Perspectives
Oppenheimer Internet & Digital Media Investment Banking Team
Gerry Walters Bill Lisecky Mathew Salter Andrew Bracy
Managing Director Managing Director Director Director
Head of Digital Media Head of Media & Entertainment Digital Media Media & Entertainment
gerry.walters@opco.com william.lisecky@opco.com msalter@opco.com andrew.bracy@opco.com
(650) 234-2482 (212) 667-5888 (650) 234-2469 (212) 856-3756
2. Market Spotlight | Online Video
Large addressable video market U.S. online video revenue by business model
$250.0 $16.0
$14.0
$14.0
$200.0 $191.0 $196.5
$177.7 $181.8 $12.0
$167.0 $171.8 $171.0
$10.0 $8.8
($ billions)
$150.0
($ billions)
$8.0
$100.0 $6.0 $5.5
$4.0 $3.4
$50.0 $1.9
$2.0
$0.0 $0.0
2007 2008 2009E 2010E 2011E 2012E 2013E 2008 2009E 2010E 2011E 2012E
TV advertising Cable subscription Home video / DVD PPV & VoD Advertising Subscription Download Rental
• The U.S. Television and Home Video Market is a $172 • The online video market is a ~$2 billion market expected to grow
billion market in transition and expected to grow by a 2.7% by a 65% CAGR over the next 4 years
CAGR over the next 4 years
• Online video subscription services, driven primarily by TV shows,
• Consumers watched, on average, 140 hours 20 minutes of movies, and sports content, are expected to be the largest
TV in the home per month in Q3 2009, representing a revenue segment and grow by a 58% CAGR from 2008-12
slight decrease of 0.3% from Q3 2008 becoming a $6.2 billion market
• In contrast, consumers watched, on average, 12 hours 11 - if content / channels are truly unbundled online, the
minutes of online video per month in Q4 2009, subscription services revenue segment may be smaller than
representing a 209% increase over Q4 2008 anticipated
• So far, online video has not cannibalized traditional TV • Video advertising is the next biggest revenue segment and is
video consumption, but the threat is real forecasted to grow by a 46.1% CAGR from 2008-12 into a $4.3
billion market, as more premium content is made available online
and consumers become more comfortable viewing video ads
online
- enhanced targeting capabilities inherent in online video and
large investment in emerging online advertising technology
could cause this revenue model to become bigger than
subscription services
U.S. online video revenue by content type
Long-form video is expected to account for the majority of revenue generation in 2012 and
projected to grow from $1.5 billion in 2009 to $7.8 billion in 2012, representing a 71% CAGR
2009 2012
Total: $1.9 billion Total: $14.0 billion
Long-form video 1% 1% 1%
1% 6%
3% 3% content (TV shows
5% and movies)
Sports 9%
7%
Other
News
48%
56%
Music videos
26%
Movie trailers
33%
UGC
2
Sources: Veronis Suhler Stevenson, 2009; IDC, 2009; Nielsen, 2009; comScore 2009
3. Market Spotlight | Online Video
2007 film studio revenue Home entertainment spending
Total: ~$27.0 billion $35.0
4% $30.4 $30.2 $29.8
8% $30.0 $29.3 $28.7 $28.8 $28.4 $28.6 $28.3 $28.6 $28.8
6% $25.0
($ in billions)
$20.0
$15.0
54% $10.0
$5.0
28%
$0.0
2003 2004 2005 2006 2007 2008 2009E 2010E 2011E 2012E 2013E
DVD VHS Online download PPV & VoD
DVD Theatrical Broadcast TV Cable TV PPV & VoD
• DVD sales to the home video market account for over • Blu-ray DVD shows promise but consumer adoption has
50% of all studio revenue, but have been declining: DVD been slow and sales have not been sufficient to offset
sales are projected to decrease from $24 billion in 2008 traditional DVD declines
to $19 billion in 2013
• Video on Demand and Pay-per-View are the fastest
• The 80/20 revenue split on retail DVDs, represents a growing home entertainment segments, accounting for
lucrative channel the studios are reluctant to change 6.3% of total spend in 2009, and highlight the importance
of digital distribution to the industry
• Despite the decline in DVD sales, studios have been
slow to embrace newer online distribution channels, • While still nascent, the online download market
preferring to protect this large and profitable retail represents a large opportunity with many emerging
channel companies looking to capitalize on the shift towards
digital distribution
New digital media business models present a challenge to the existing ecosystem
Retail /
Retail / Rental / VoD
Rental / VoD Subscription
Subscription AdAd supported
supported
download
download
2009 traditional
market size $ 14.8 billion $8.2 billion $69.3 billion $73.2 billion
Incumbents
2009 online
$ 0.8 billion $4.6 billion $1.4 billion $5.4 billion
market size
Emerging
Sources: Wall Street Research; Veronis Suhler Stevenson, 2009; Stevenson Communications Industry Forecast, report dated August
3
2009; IDC, 2009
4. Time
Box Office Retail DVD Digital VoD Rental DVD Cable TV Ad supported Syndication
Cable PPV Internet download Internet rental Broadcast TV Internet
Release
- 0 + 21 days + 28 days + 5 months + 10 months +∞
Window
Consumer
$7.18 $29.99 $5.99 $14.99 $3.99 $1.00 $14.99 / month - -
Price
Studio $5 billion $15 billion $1 billion $2 billion $2 billion $1.5 billion $50 million
Economics split: 50/50 80/20 60/40 30/70 75/25
Market Spotlight | Online Video
Distribution
Partners
Emerging
Access
Partners
Games
TV / DVD
• Worldwide box office • The largest and most • Release window has been shrinking (e.g. Sony simultaneous release of DVD • Release window has • Increased distribution • With 2011 revenues projected to surpass YouTube, • Online syndication of
reached an all-time high in profitable studio channel; and VoD titles) as studios try to figure out the optimal revenue / profitability mix
been expanding and access options in the Hulu has validated the ad supported online model older studio content
2008 at $28.1 billion, strong attempt to maintain (WB/Netflix/Redbox) as Digital VoD release presents an emerging and
increasing 5.2% over release window despite • Access platform landscape is very unclear. Box or no box? Emerging platforms studios try to protect retail window is putting • Hulu's exclusive licensing deals with NBC and Fox potentially lucrative
2007 anticipated DVD declinescontinue to struggle with this question - Boxee has moved to a box solution while DVD channel - pressure on Premium are set to expire - will studios abandon Hulu in favor distribution channel
Vudu has abandoned its box for a software distribution model. Traditional CE Blockbuster positioning is Cable providers to move of a direct to consumer link on their own sites (HBO
28 days later: where will the bodies be buried?
• 3D movie technology • Retailers are embracing manufacturers (TV/DVD/Game Console) are providing direct access to yet to be determined online and sell through GO model, Viacom pulling Comedy Central from
(e.g. Avatar) is enhancing digital access partners consumers by partnering with embedded solutions providers (Yahoo Widgets, more digital channels Hulu)?
the consumer experience (Walmart/Vudu, DivX, CinemaNow, Netflix) who are looking to reach broader audiences • Netflix: will gains from (HBO GO, StarzPlay)
BestBuy/CinemaNow) as additional streaming titles • As long-form and premium content become more
• AMC, Cinemark and digital becomes more • The industry is watching for a much stronger play from Apple (AppleTV, iPad) and lower DVD costs be • As more studio content pervasive online, will YouTube's market position, as
Emerging Regal have secured prevelant high enough to offset lost is distributed digitally, king of UGC, ever lead to meaningful revenue
$660m in funding to • Critical question is to what extent studios/content providers will bypass consumer demand for Premium Cable providers opportunities?
Trends
convert most of their traditional distribution channels to port directly on devices (e.g. MLB.com) and new releases? will demand lower pricing
theaters to digital screens how this will disrupt later release windows and partner economics and shorter release • Like Premium Cable providers, Broadcast TV will
Sources: Adams Media Research, MPAA, company filings and websites, Wall Street research, Oppenheimer estimates
by 2013 windows demand lower pricing and shorter studio release
• Can Xfinity, or similar offerings, keep cable operators in the game? windows as more content is consumed in earlier
• Digital infrastructure • Unified authentication is channels
offers cinemas more key to driving bundled
flexibility on programming, subscription online and
e.g. live sports and few solutions have
concerts emerged to solve this
problem
4
5. 5
Emerging Creative Established Traditional
Emerging Content
Tools Creative Tools Content
Creation
CMS Content Delivery
Distribution
Emerging Platforms Video Search Aggregators
Access
Ad Rights Metadata
Ad Mgmt. Analytics Ad Networks
Serving Mgmt. Mgmt.
Monetization
Digital video landscape
Market Spotlight | Online Video
6. Company Spotlight | Online Video
Founded: • 2009 • 1998
Headquarters: • Los Angeles, CA • Research Triangle Park, NC
Employees: • 20 • 42
Investors: • Benchmark Capital, Redpoint Ventures, Jafco, • .406 Ventures, Aurora Funds, Chrysalis
and Allen & Company Ventures, Cisco Systems
Profile: • Clicker provides the most comprehensive, • Videosense solution powers next generation
organized and unbiased way to navigate what’s search, discovery, and navigation of video
available to watch online, where and when to through rich metadata to deliver on the promise
watch it, and, finally, what’s worth watching of any content, anywhere on any device
amongst infinite choices • Ability to index video with ~78 tracks of time
• The solution is powered by a massive based metadata
structured database with more than 400,000 • Computer vision-based video indexing, search,
episodes, from over 7,000 shows, from over and interpretation algorithms aim to allow
1,200 networks - in addition to more than content owners and publishers to monetize their
30,000 movies, and over 50,000 music videos digital video content, and advertisers to target
from over 20,000 artists ads to thematically relevant video content
• Programming is organized by episode, show, • Digital content publishing system enables
network, media type, title, popularity, duration simplified multi-platform content syndication,
and artist, and divided into over 1,200 intelligent content recommendations, and
categories reporting and analytics
• Clicker complements this database with search
and recommendation technologies, a
proprietary playlist system for saving and
tracking shows, social features for sharing and
discovering programs, and trending lists of the
most popular shows by category or time
Customers: • Online consumers • WarnerBros, Buena Vista, Paramount,
Fox/Twentieth Century
Business Model: • Advertising, lead-generation • Technology license and fee for search
Financial: • Amount raised: $19 million • Amount raised: $18.2 million
Founded: • 2005 • 2004
Headquarters: • Palo Alto, CA • San Mateo, CA
Employees: • 25 • 23
Investors: • Greylock Partners, Redpoint Ventures • Intel Capital, Mayfield Fund, Polaris, Cisco,
Comcast Interactive Capital
Profile: • Video ad platform for publishers to better • Provides advanced advertising products and
monetize and index online video content technology for network programmers and
• Ad platform supports ad flighting and serving, content distributors
creative management, yield optimization, • Offers a multiplatform advertising system
detailed forecasting, and real-time reporting designed specifically for video content
• Indexing system automates the process for distributed over any on-demand platform,
content owners to identify, track, and monetize enabling networks and content distributors to
video content across the web maximize advertising revenues
Customers: • Apple, Comcast, DoubleClick, eBay, Google, • Adobe, Akamai, Arris, BrightCove, Cisco,
PayPal, MTV Networks, MySpace, Warner EdgeCast, Highwinds, Limelight Networks,
Brothers and Yahoo! Motorola, Move Networks, Multicast Media,
RGB Networks, SeaChange, thePlatform
Business Model: • Advertising, lead generation • Software license
Financial: • Amount raised: $11 million • Amount raised: $32 million
6
Sources: VentureSource, CapIQ, Press releases
7. Company Spotlight | Online Video
Founded: • 2007 • 2006
Headquarters: • San Mateo, CA • New York, NY
Employees: • 90 • 36
Investors: • Battery Ventures, Foundation Capital • Spark Capital, Globespan Capital Partners
Profile: • Offers a robust system for digital video ad • Online video portal for instructional, knowledge
management and monetization and lifestyle videos
• Monetization Rights Management product • Enables consumers to share video on “how to”
allows content owners to effectively manage ad and instructional guides in the arts, business,
sales rights, analyze video ad performance, fashion, sports, health, technology, and food
and forecast future inventory areas
Customers: • Sling Media, Vevo, CBS, Warner Brothers, and • Online consumers
Next New Networks
Business Model: • Revenue share of ad revenue • Online video advertising
Financial: • Amount raised: $12 million • Amount raised: $12.5 million
Founded: • 2001 • 2005
Headquarters: • Fremont, CA • New York, NY
Employees: • 80 • 51
Investors: • Canaan Partners, European Founders Fund,
SAP Ventures, Meritech Capital Partners
Profile: • Popcorn Hour provides digital media players to • Developer of rich media and online video
stream video and other digital media from the advertising solutions
internet to consumer TVs • Video ad network that provides in-banner and
• Popcorn Hour’s set top boxes handle a variety in-stream video advertising on leading publisher
of file and content types based on open sites
development platforms, which allow media
companies to rapidly develop and deploy a
wide range of interactive high definition
applications and content
• Popcorn Hour’s latest set top box, Popbox, is
expected to launch Spring 2010
• Popcorn hour has a large network of premium
content partners including Twitter, MLB, and
Clicker
Customers: • Online consumers, large international installed • Major consumer brands and online video
base publishers
Business Model: • Hardware sales, advertising revenue share • Video advertising revenue share
Financial: • Amount raised: $1.8 million • Amount raised: $39.4 million
• Revenues: ~$20 million; profitable
7
Sources: VentureSource, CapIQ, Press releases
11. Market Movement & Traffic Data
30 Day Stock Performance(1) February Traffic Metrics(2)
Advertising | Search, Marketing Services
Unique Page
SCOR 25%
Visitors growth Views growth
(mm) (YoY) (mm) (YoY)
INSP 13% GOOG 171.9 15% 41,990.7 30%
YHOO 153.1 6% 36,485.3 -9%
Index 6% AOL 110.4 5% 12,762.6 -30%
ANSW 49.2 97% 215.4 93%
ANSW 3% LOCM 13.8 21% 52.8 6%
Index 521.4 14% 91,640.6 1%
ARB -6% Index median 31.5 73% 163.5 80%
-30% -20% -10% 0% 10% 20% 30%
Advertising | Vertical Content, Lead Gen
Unique Page
TZOO 30% Visitors growth Views growth
(mm) (YoY) (mm) (YoY)
HGRD 28% WBMD 22.6 17% 303.2 34%
INET 13.1 95% 199.2 179%
Index 9% HGRD 9.8 92% 53.6 79%
MOVE 8.4 8% 256.3 -19%
EHTH -3% TSCM 3.7 9% 45.3 76%
Index 69.4 31% 1,054.6 18%
KNOT -16% Index median 1.9 -27% 45.3 51%
-30% -20% -10% 0% 10% 20% 30%
Cloud Services | Consumer
Unique Page
TIVO 94%
Visitors growth Views growth
(mm) (YoY) (mm) (YoY)
ACOM 29%
NFLX 16.9 17% 650.2 58%
ACOM 5.7 -3% 299.4 17%
Index 36% LOOP 1.4 4% 26.3 16%
TIVO 0.1 -42% 2.0 -21%
NFLX 13% RNWK 0.0 -43% 0.1 -58%
INTX 3% Index 24.2 10% 978.0 41%
Index median 1.4 4% 26.3 16%
0% 20% 40% 60% 80% 100%
Cloud Services | Business
Unique Page
OPEN 43% Visitors growth Views growth
(mm) (YoY) (mm) (YoY)
SPRT 25% MWW 17.1 -13% 253.7 -18%
CTCT 4.6 14% 69.2 30%
Index 16% VPRT 4.5 5% 125.6 8%
OPEN 1.6 2% 22.5 28%
WWWW -2% LOGM 1.3 30% 163.3 97%
Index 56.5 5% 1,952.9 7%
INWK -2% Index median 1.3 11% 47.3 170%
-10% 0% 10% 20% 30% 40% 50%
(1) 30 day stock price measured from 2/1/10 through 3/1/10 according to CapitalIQ; Index composites calculated based on aggregate 11
values for the comparable groups listed on pages 8-10. (2) Traffic metrics reflect comScore data for the month of February 2010
12. Market Movement & Traffic Data
30 Day Stock Performance(1) February Traffic Metrics(2)
eCommerce | E-tail
Unique Page
PRTS 31% Visitors growth Views growth
(mm) (YoY) (mm) (YoY)
VITC 30% EBAY 67.3 0% 7,299.1 7%
AMZN 60.6 21% 1,595.5 35%
Index 12% EXPE 25.8 13% 534.6 -9%
OWW 11.5 -17% 209.7 -20%
SYX 2% PCLN 10.7 11% 188.7 5%
Index 207.9 7% 10,379.9 9%
TIXC -2% Index median 3.2 15% 46.2 14%
-10% 0% 10% 20% 30% 40%
eCommerce | Services
Unique Page
DRIV 20% Visitors growth Views growth
(mm) (YoY) (mm) (YoY)
GSIC 16% GSIC 4.5 5% 125.6 8%
ARTG 0.9 49% 1.8 -18%
Index 14% BVSN 0.3 -50% 3.4 -40%
Index 5.7 4% 130.8 5%
PFSW 3% Index median 0.9 43% 3.4 -40%
WWWW -2%
-30% -20% -10% 0% 10% 20% 30%
Gaming
Unique Page
THQI 19%
Visitors growth Views growth
(mm) (YoY) (mm) (YoY)
TTWO 10%
ERTS 2.3 81% 17.2 30%
ATVI 1.2 -64% 13.0 -87%
Index 6%
UBI 0.9 -5% 3.6 -37%
THQI 0.3 -28% 2.3 -51%
UBI -6% GLUU 0.0 37% 2.0 NM
GLUU -28% Index 4.7 -21% 38.2 -70%
Index median 0.6 -12% 3.0 -43%
-50% -25% 0% 25% 50%
Digital Media Technology
Unique Page
SNIC 42% Visitors growth Views growth
(mm) (YoY) (mm) (YoY)
DMRC 32% AAPL 61.1 20% 974.8 7%
ADBE 37.4 12% 317.3 16%
Index 12% LOGI 1.8 130% 16.9 142%
SNIC 1.4 -9% 22.9 144%
DIVX 1.3 54% 4.0 42%
LOGI 2%
Index 104.1 18% 1,358.6 12%
IMMR -3% Index median 0.9 68% 10.6 222%
-10% 0% 10% 20% 30% 40% 50%
(1) 30 day stock price measured from 2/1/10 through 3/1/10 according to CapitalIQ; Index composites calculated based on aggregate 12
values for the comparable groups listed on pages 8-10. (2) Traffic metrics reflect comScore data for the month of February 2010
13. Market Movement & Traffic Data
30 Day Stock Performance(1) February Traffic Metrics(2)
Diversified Media & Entertainment
Unique Page
CKXE 28% Visitors growth Views growth
(mm) (YoY) (mm) (YoY)
MSO 25% CBS 62.8 28% 1,150.8 31%
VIA.B 59.3 34% 1,577.9 -25%
Index 11% NYT 52.4 13% 561.4 11%
DIS 28.1 NM 688.3 NM
NYT -1% TWX 25.1 -3% 310.2 -73%
Index 293.4 25% 5,630.5 -13%
SNI -3% Index median 19.0 31% 333.2 0%
-30% -20% -10% 0% 10% 20% 30%
(1) 30 day stock price measured from 2/1/10 through 3/1/10 according to CapitalIQ; Index composites calculated based on aggregate 13
values for the comparable groups listed on pages 8-10. (2) Traffic metrics reflect comScore data for the month of February 2010