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Agenda

Agenda. Executive Summary Digital Distribution Mobile Entertainment Digital Services / Grouper EBIT Reconciliation. Digital Services and Distribution Landscape. Distribution. Devices. Programming. Content. Online Services. A la carte. Films and Television. Owned. Professional

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Agenda

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  1. Agenda • Executive Summary • Digital Distribution • Mobile Entertainment • Digital Services / Grouper • EBIT Reconciliation

  2. Digital Services and Distribution Landscape Distribution Devices Programming Content Online Services A la carte Films andTelevision Owned Professional Short-form Partners DSTIPVODSVODFOD Digitalor MMC Prosumer Branded Channels User Generated Video Mobile Carriers Partners MobileGames

  3. Traditional media players are experimenting with new models for digital distribution Networks are launching branded online channels and streaming ad-supported episodes (ABC.com, CBS.com & Innertube, NBC.com & DotComedy, Turner & Super Deluxe) Digital sell-through is gaining broad support (iTunes is selling films from Disney and Paramount; television episodes from major networks) Fox / NBC / Viacom exploring concept of a dedicated JV for online content distribution Historically game-based, mobile is also proving viable for video distribution Adoption of 3G handsets continues to grow and is improving viewing experience Carriers are seeking video content to attract and retain customers A wide range of players is competing for quality UGV content and audience Google’s acquisition of YouTube raised the bar for critical mass Quality of viral video is increasing as traditional media players enhance their owned services (Fox / MySpace, Viacom / Atom Films) Online pure-plays (Heavy, Break) are compensating content creators by acquiring videos Competition is Increasing as Demand for Digital Content Grows

  4. Key accomplishments in FY07 Launched multiple new business models for digital distribution Launched mobile video Significantly expanded distribution relationships across internet services, mobile carriers, and hardware partners Created and launched first branded cross-platform channels Acquired and integrated Grouper; grew unique users by 40% Focus areas for continued growth in FY08 Add 21 distribution partners in 2008 Grow distribution revenue 140% from $16.5MM in FY07 to $39.7MM in FY08; contribute $27.8MM to other SPE divisions Broaden digital content offering, including acquired and produced content Increase number of branded digital channels and expand distribution Re-launch “Grouper 3.0” with differentiated content and service offer Continue to grow Grouper user base and begin monetizing audience Success in FY07 Established Foundation for Growth in FY08

  5. Digital Services & Distribution – Revenue Overview $50.3 $50.3 $24.2 $16.5 $8.7 DD – Op Income $6.7 $10.4 $14.0 ($5.0) ($5.1) ($8.3) ($13.8) DD – EBIT Grouper - EBIT ($10.0) ($10.0) ($10.1) ($18.2) EBIT ($15.0) ($15.1) ($18.4) ($32.0)

  6. Digital Imaging DSD Continues to Provide Support for “Sony United” Launched in 2007 In Progress for 2008 • Memory Card bundles with games and films • Integrating Grouper for online video sharing • Licensing content for digital delivery to the PlayStation 3 • Potential metadata R&D project • Grouper video and HOME service • Grouper in firmware • Memory Stick Entertainment Pack • Grouper service and SPE promotional channels on IP Bravia • Early discussions for digital delivery of films day-and-date with DVD • All US VAIOs shipping with SPE Movies • Grouper screen saver on VAIOs • Selling mobile products through “Music Box” • Distributing Sony BMG games • Project X

  7. Agenda • Executive Summary • Digital Distribution • Mobile Entertainment • Digital Services / Grouper • EBIT Reconciliation

  8. New Business Models and Partners Enable Growth in FY08 FY07: $5.8MM Launched a wide range of business models across 20total partners FY08: $19.7MM Expand to 41 partners and broaden relationship with existing accounts Broad Launch of Digital Sell-Through Expanded Digital Rental Expanded Digital Subscription Launched Ad Supported Channels

  9. Key FY07 Successes • Established and launched new business models • Launched download-to-own business • Launched cross-platform digital channels • Expanded distribution relationships • Secured deals with Amazon, Wal-Mart, Movielink, CinemaNOW, AOL, ClickStar, GUBA, AT&T, Best Buy, and NetFlix • Supported cross-Sony digital entertainment initiatives • Launched first secure digital content program for the PSP • Provided content bundles for VAIO and Sony Ericsson • Established end-to-end operational processes with SPHE, SPT, WPF and DigiPol to operate these emerging digital businesses

  10. FY07 Demonstrated Demand for a Wide Range of Studio Product Top 10 DST Titles • More feature film titles available in the marketplace than any other studio (over 300) • Business to-date is largely new release driven, but there is demonstrated demand for “long tail” product • All titles in the program have been purchased by end consumers • The Da Vinci Code • Click • Talladega Nights • Underworld Evolution • Ultraviolet • RV • Silent Hill • The Covenant • Monster House • Memoirs of a Geisha

  11. FY08 Digital Sell-Through / IP-VOD Strategy • Aggressively build on the existing distribution network • Strike partnerships across the complete spectrum of traditional and on-line players • Expand partners to include: Starz, Apple, Microsoft, Best Buy, Transworld, Target(significant opportunity for incremental revenue in an Apple deal) • Expand the overall content offering • Broaden selection of film and TV product • Launch DST of TV product by end of year • Introduce the most compelling short-form/original content • Continue to lead market in innovating digital product offerings and usage models • Continue to operate an industry-leading digital organization • Provide end-to-end asset delivery and digital operations • Create innovative marketing and promotional programs • Grow the business from $5.7MM in FY07 to $18.1MM in FY08

  12. FY08 Digital Channel Strategy World Channel • Continue to expand SPE’s digital channel offering • Comedy (Funny Bone) - Who’s The Boss, NewsRadio • Action (AXN) - SWAT, Charlie’s Angels • Kids (Bounce) - Jackie Chan, Animated MIB, • International Programming (World Channel) • Anime (Animax) - Samurai X • Movies on Demand (Now Playing/Hollywood Hits) • The Minisode Network • Grouper “Off the Hook” • Introduce additional film and television properties complemented by a blend of original programming and interactive features • Establish relationships with 3rd party content holders to improve channel offerings • Nelvana for Bounce (e.g., Rescue Heroes, Rolie Polie Olie, Babar) • Ban Dai for Animax (e.g., Gundam) • Aggressively expand channel distribution to high-traffic destinations across platforms

  13. Digital Distribution – Revenue Overview $19.7 $14.0 $5.8 $5.0 $0.1

  14. Digital Distribution – Summary P&L

  15. Agenda • Executive Summary • Digital Distribution • Mobile Entertainment • Digital Services / Grouper • EBIT Reconciliation

  16. FY07 was Profitable and Provided Critical Foundation for FY08 Growth Full Suite of Mobile Content Products Comprehensive Marketing and Distribution Footprint + Personalization Carriers Mobile Video Mobile Games Direct to Consumer Handsets SMSInteractivity MobileApplications Aggregators New management team put in place to run daily operations

  17. Games in FY07: New Approach Proving Successful • Despite having ½ as many games in the market in FY07, MEG managed to increase total monthly unit sales • Generated significantly higher unit-sales-per-game through: • Tighter carrier relationships • Strategic handset porting and ops management • Targeted marketing and product rollout • Better product selection Ratchet and Clank • Case I: Re-Launch • Drove new sales of popular PlayStation title • Porting, placement and marketing drove re-launch • Sales now exceeding original title launch – not typical in the games industry Re-launch Wheel of Fortune – ‘07 • Case II: Re-Fresh • Top-selling mobile brand grew 12% after distribution of a new version of the game • More strategic handset porting, mixed with securing better deck placement Re-fresh James Bond: Casino Royale • Case III: New Game Launch • First new title release in nearly 12 months • Strategically planned around movie release • Strategic handset porting, secured deck placement and marketing • Sales exceeding Jeopardy, previous number 2 title for MEG Launch

  18. Mobile Games in FY08: More Games, Expanded Distribution Launch New Games (current slate) Grow Distribution for Catalog(carriers, handset, online) Spider-Man 3 APR Snoop Dogg Cruisin’ God of War MAY JEOPARDY! 2007 Spider-Man 3 Puzzle JUNE Fish’n Tunes Jump That Car JULY Casino Royale Bond vs. Bond AUG Wheel of Fortune 2007 JEOPARDY – Rock & Roll SEPT Ghostbusters Ivan Moscovich Puzzle OCT Ratchet & Clank Untold Legends NOV Q*Bert Q*Bert “2” DEC Balloon Breaker Wheel of Fortune JAN Elevator Action JEOPARDY! FEB Snoop Dogg Boxing Bond Driving MAR • Launch 1 new game per month; strategically manage the portfolio/roadmap • Aggressively optimize carrier deck placement • Expand existing Motorola and Sony Ericsson embed programs, and land new OEM deals • Utilize consumer product marketing approach • Strike relationship with leading publisher (e.g., Glu) to secure game pipeline • Grow revenue from $7.0M to $13.2M in FY08 ’08 Strategy

  19. Sony Pictures • Exclusives • In Theatres • Coming to Theatres • On DVD • Coming to DVD • Game Previews • FearNet • PlayStation FY08 Will Build on Launch of Video Services “Hollywood Hits” (launching in March) Sony “Sneak Peeks” Movies Over-the-Air • Promotional channel featuring clips from theatrical, television, PlayStation, FearNet and mobile games • Currently at 350k streams / month on Sprint and Verizon – increased programming to 20% growth month-over-month • Sony Pictures is now distributing full-length movies over-the-air on mobile carriers’ video services • Sprint Movies offers pay-per-view service with DVD features • Offer 7 movies at a time • Average view time ~ 1.5 hours • Negotiating with other carriers for distribution • The only linear looping movie channel within Sprint’s Basic + tier of video • Two looping channels with four classic movies on each channel; movies include comedy, action and drama • One movie on each channel refreshed weekly • Optimizes library value by utilizing unused inventory on a spot basis Memory Cards • Sony Pictures pioneered delivering full-length movies to mobile handsets via memory cards • Successful handset bundle programs launched in the UK, France, Germany, Switzerland, ItalyNetherlands, & S. Africa

  20. SPT Channels Premium Video Services Launched into Carriers’ “Basic Tiers” in FY08 Extend Channel Brands to Mobile World Channel …using a range of business models …and consumer experiences Fee-per-sub Sell-through Linear streaming Long-form programs Ad Supported Transactional On-demand Short-form programs • Concentrate on biggest video distributors (in order)- Sprint, Verizon, Cingular • Launch quality video services in multiple genres, with a breadth of business models, addressing a variety of consumer experiences • Aggressively optimize deck placement and marketing tactics • Draft off marketing for IP-video and other mobile products where possible ’08 Strategy

  21. Large Footprint Secured in FY07 will Serve as Foundation for Future Growth FY07: Grew relationships, marketing and tech ops capabilities with partners D – to - C Carriers Handsets Aggregators TXT 4SONY ’08 Strategy Carriers: Continue to focus aggressively on top 3 players in the market, push T-Mobile and Alltel for growth, and add additional strategic players (e.g., Virgin) Handsets: Continue to push on embed deals with Motorola; secure deals with Nokia and Sony Ericsson Online Aggregators: Increase reach by licensing to a select group of top online retailers Direct-to-Consumer: Establish direct-to-consumer distribution, leveraging applications and web

  22. Mobile Entertainment – Revenue Overview $20.0 $17.7 $16.2 $10.7

  23. Mobile Entertainment – Summary P&L

  24. Digital Distribution & Mobile Entertainment – Consolidated P&L

  25. Digital Distribution and Mobile: Requested Increase in Headcount Headcount Reconciliation FY08 Additions 2 Sales • Driving growth in new accounts 4 Account Mgmt. • Expanding to support growth in new accounts 4 Product / Asset Creation • Developing new products; creating marketing and programming assets

  26. Agenda • Executive Summary • Digital Distribution • Mobile Entertainment • Digital Services / Grouper • EBIT Reconciliation

  27. Recent Progress and FY08 Focus Areas 2008 represents an opportunity to address a gap in the marketby blending Hollywood quality with the viral nature of UGV FY07 Accomplishments FY08 Focus Areas • Successful integration with Sony Pictures • Developed content and programming strategy • Retained and grew initial user base • Supported “Sony United” by integrating with other divisions • Launch 3.0 to address market gap • Capitalize on market opportunity to grow and monetize the service

  28. FY07: Integrated Grouper and Expanded User Base • Unique SPE content offering -- ScreenBites • DVD promotion for Seinfeld Season 7 • Contests for SPE theatrical releases (Pursuit of Happyness launched, Spider-Man 3 in process) Integrated with SPE • Grouper in PSP firmware • Integration with IP-enabled Bravia • Working on PS3 prototype Integrated Across Sony 9.0 7.8 6.4 Expanded User Base • Grew users 40% to 9MM • Grew daily video streams to 1.6MM

  29. Establish Grouper as a trusted and recognized brand for online video by combining the viral nature of user-generated video with the quality of “Hollywood” content Build a large base of high quality short-form video Attract content creators through a “path to recognition” Identify and invest in the best videos Produce original short-form content Offer users a compelling content syndication proposition Implement a differentiated, channel-based programming strategy Improve overall user experience through a superior content guide, high-quality playback, easy publishing to other sites Execution Grouper 3.0 Vision Launching Grouper 3.0 in June 2007

  30. Attract Content Leaders to Grouper Example of “Path to Recognition” • Provide incentives to attract quality content and actively engage audience • “Path to recognition” for each channel, with online and offline rewards • Tools for users to create, manage, and promote their own shows • Financial incentives / compensation for content creators • Enable creators to broadly distribute their content through syndication and “path to recognition” partners “The Red Carpet” (Potential Show on “All Access” Channel) Content Featured in “Best of” Show Guest Host on “Red Carpet” Show Featured Content (Views, Ratings, Editorial) Attend premieres and interview celebrities All Content Uploaded to Channel

  31. Invest in Differentiated Content Acquired Produced Niche Collections General UGV OriginalProduction Prosumer • Opportunistic acquisition of content with lower production value but proven audience appeal • Quality UGV content with an established online audience • Grouper will acquire or license for a fixed fee or revenue share on an exclusive basis • Fixed fee paid for exclusive distribution rights • Short-form, higher production quality • Shows developed for specific channels • Mix of in-house (60%) and commissioned 3rd party shows (40%) Investing $3.9MM to produce 450 short episodes and acquire roughly 5,000 videos

  32. Program on a Channel Basis • Quick Laugh • Election 2008 • Instant Karma • All Access • Project X • Holiday / Events • Don’t Try at Home • Trends / Lifestyle • Action Sports • Sexy • Travel • Citizen Journalist • How-To • Pets & Animals • Car Culture • Video Games • Family Friendly • Blog! • Colleges • Spirituality Launch Grouper 3.0 with 5 to 6 Channels in June 10 Channels Live by End of Fiscal Year

  33. Improve Overall User Experience: Product Roadmap Q4 FY07 Q1 FY08 Q3 FY08 Q2 FY08 • 2.5 Launch • Continuous playlists • Multi-file upload • Enhanced external player • New home page • Advertising • 1-click to new distribution partners • Syndicate Grouper to network partners • Channel home pages with shows • 3.0 Launch • Re-branding • New content strategy implemented • Path to recognition in place • Multi-site publishing • “My Show” • Enhanced external player with ads and sponsor support • Family filter • Updated advertising technology • Enhancements • Talent show • Content creator self promotion tools • Web-based groups • Recommendation engine • Web-based IM integration • Update advertising technology • Mobile sharing 1.0 • Sony Ericsson syndication • Enhancements • Mobile sharing 2.0 • Hardware integration • Cameras • PCs • Devices • Client re-launch • Geo sharing

  34. Extending Audience Reach Through Marketing & Distribution Attract New Users through Marketing Online Marketing Project X Prizes Leverage SPE Cross-Sony Support Extend Reach through 3rd Party Distribution Partners Social Networks Online Portals Verticals Hardware / Embed deals Path to Recognition Partners $2.5MM investment in Grouper Marketing and Distribution $3.0MM in Prizes for Project X

  35. Revenue Strategy Advertising and sponsorships forecast to deliver $10.6MM in FY08 revenue Non-Channel-Based Sponsorship Revenue Channel-Based Sponsorship Revenue Advertising Revenue • Video Interstitials • Run-of-Site video advertising inventory (max ad ratio 1:3 videos) • Banners • 1 banner per page; 2 impressions per stream • User Initiated Video • Ad placement against sponsored terms • Remnant • Domestic and Int’l banner and domestic video interstitial inventory sold at a discount • Branded Channels • Custom Channels dedicated to a single brand (i.e. ‘Mini Cooper’ channel) • 20 total in FY08 at average price of $20k - $30k each • Project X • Competitions within Project X talent categories • Talent-based sponsorships • Channel Sponsorships • Advertiser pays fees for persistent branding, enticements, and sponsored downloads from a channel • Video Interstitials • Sponsor receives dedicated portion of video interstitial inventory w/ companion rich media ad at a premium CPM $4 MM $2.8 MM $3.8 MM

  36. Growth in Audience and Traffic Growing domestic, on-site user base increases user activity, generates additional inventory, and ultimately drives more revenue Domestic / International Mix On-Site / Off-Site Mix MRP37.2 MRP37.2 26.0 26.0 MRP16.9 MRP16.9 9.0 9.0 % Domestic % On-Site 60% 50% 33% 30%

  37. Audience Benchmarks Ending FY08 Grouper Audience (domestic, on-site) vs. Current Competitor Audience Sizes (1) MM MySpace 55.3 YouTube 38.0 Break (2) 9.8 Heavy 7.8 Grouper FY08 Budget 7.8 PureVideo (2) 5.5 American Idol (3) 4 - 5 Daily Motion 3.9 eBaum’s World 3.8 Addicting Clips / Atom Films (4) 3.0 iFilm 2.3 • Most recent available unique user numbers per Nielsen and Comscore unless otherwise noted, domestic on-site users only • Per the company • At peak months of April and May • Combined 1.8MM Addicting Clips & 1.2MM Atom Films

  38. Factors Impacting FY08 Revenues • Addressed disruption caused by litigation to ensure continued growth • Disabled Grouper client and downloads as a precaution • Although growth was dampened, grew audience 40% since acquisition • Delayed launch of advertising to remain competitive and solidify customer base • Key competitors, including YouTube, waiting to roll-out advertising • Launching full advertising initiative in conjunction with Grouper 3.0 service • Adjusting business model to mitigate impact on revenues • Launching Grouper 3.0 to differentiate service and ensure continued user growth • Increasing proportion of domestic traffic; more easily monetized • Increasing proportion of on-site traffic; drives greater usage and ad inventory • Expanding revenue models to include sponsorships

  39. Grouper – Revenue Overview $18.6 $10.6 $3.0 $0.1

  40. Grouper – Summary P&L

  41. Headcount / Org Chart End of FY07 Grouper 49 End of FY08 Grouper 66 Project X 10 Sales / Collections 5 Total 81 MRP/Acq. Model 67 Incremental 14 Headcount vs. MRP / Acquisition Model GrouperContent 4Project XTalent Mgmt 4 Judge Staff 4Editorial 2 Total 14

  42. Agenda • Executive Summary • Digital Distribution • Mobile Entertainment • Digital Services / Grouper • EBIT Reconciliation

  43. EBIT Reconciliation Digital Distribution Grouper

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