INTRODUCING THE RED TAG SECURITY SYSTEM The new industry standard in security packaging

1. BREAKTHROUGH IN DVD & GAMES RENTAL & RETAIL • INTRODUCING THE RED TAG SECURITY SYSTEM • The new industry standard in security packaging • Developed by AGI Amaray, the inventor of the video and DVD box. Now part of the US giant Mead-Westvaco packaging conglomerate. • Already implemented by the studios in Australia and now full in roll-out in Europe. • Being adopted by retail and rental with any type of EAS system: AM, RF and EM. RED TAG 1

2. THE PROBLEM - 1 • The devastating impact on margin from retail theft by: • casual thieves • fanatics • professionals • unfortunately, staff RED TAG 2

3. THE PROBLEM - 2 • Unacceptably high cost of deterring thieves: • high labour costs in using “safers”, “library” or “master-bag” systems • equally high cost of purchasing safers, cabinets and space • unattractive presentation of stock • inefficient use of precious space on shelves and in stock reserve • lost sales through all stock not being on display • inability to freely merchandise and display major titles • V V V V V • ‘Something has to give if things are going to improve!’ RED TAG 3

4. THE CHALLENGE • Unlock the full sales potential of DVDs and games • A totally new approach is needed. A low cost solution which can: • reduce the cost of loss-prevention measures AND • provide greater profit returns RED TAG 4

5. A STRATEGIC SOLUTION • Adapt the standard industry packaging as a security package: • World-best practice initiative replicated by Kmart, Australia on behalf of CML brands • Insert a simple low cost security lock into the box at store level • Ensure it is staff-friendly and can reduce labour costs • Demonstrate that the system can reduce or at the very least maintain stock losses at current levels • Demonstrate that very significant sales increases are possible • Quantify GP$ increases to prove success of strategy. RED TAG 5

6. BENEFITS TO THE INDUSTRY AS A WHOLE • No negatives - only upside • No impact on operations or marketing “presentation” as 70% of majors already using the market-leading Amaray/DVD-Safe box • No cost increase compared with other quality product • Source tagging not necessary • Up to 400% retail sales increases, across the total catalogue, as live product sells better • Opportunity for impactful merchandising and displays – anywhere in store, anytime. • Product displayed as intended – greatly improved presentation • Less stock in stock reserves = faster sell-through & fewer returns • Sale or return stock remains in near perfect condition RED TAG 6

7. A SIMPLE BUT EFFECTIVE DETERRENT The Red Tag is easy to insert and remove. Red Tag holds the disc and an EAS tag inside the box - then “staples” the box shut. RED TAG Benefit denial: Thieves need to break the box (loudly) and may break the disc trying to remove it. They get less for their trouble and are more likely to be apprehended. The professional thieves may then “shop” elsewhere. 7

8. ALL THE UPSIDE OF A THRIVING DVD MARKET • Increasedsales of sell-through product • Increases of 200 to 400% in pilots • Live stock means more sales, including back catalogue titles • Now more free to display stock how and where you wish • More efficient use of precious store space • At least 22% more stock on show compared to bulky safers • Less space taken up behind counter - and in stock reserve • Labour efficiencies • Stock put on show far more quickly • Tags removed from stock far more quickly • Easier to return sale or return stock • Negligible impact on the outer wrap. • Rapid payback on investment – inside of 12 months. RED TAG 8

9. BENEFITS TO CUSTOMERS • A better shopping experience! • Extremely positive feedback from stores using Red Tag • More customer friendly • No more scratched, opaque “safers” or shabby dummy boxes • They browse more freely • They receive unopened, pristine product • No delays at the service desk • Greater customer satisfaction – they’ll come back for more. RED TAG 9

10. SUMMARY • Not just cost-effective loss-prevention: • – a total stock management strategy for DVD and games • Losses held to a more palatable rate – a lower proportion of sales • Vastly increased sales over more cumbersome measures • Reduced impact of losses on margin • Staff efficiencies – more staff friendly; quicker and easier stock management • Space saving – at least 22% more stock on shelves and also behind counter in stores • Better customer service • Better shopping environment RED TAG 10

11. TAKE-UP IN AUSTRALIA • Close to 100% support from studios in DVDs and interactive games. • Coverage of 30% of the mass retail market – rising to 80% in 2003. • CML brands - Kmart (all stores) including pilot stores dating to Oct 2001 - Target (worst 35 stores) - Megamart (all stores) - MGB (Frankston store only at this stage). • HMV (all stores), participant in trials conducted in the UK in 2001. Extremely positive results in Australia. • Borders, also a participant in UK trials. • Harvey Norman (majority of stores). • Blockbuster – 9 stores initial pilot. Now want to roll out to another 30 stores. • About to roll-out in ToysRUs, Dick Smith Powerhouse and JB HiFi. • Pilots in Big W, Civic Video and VideoEzy. RED TAG 11

12. IMPLEMENTATION & LEARNING • Wide spectrum of operating environments for Red Tag - from smaller, tightly controlled and well-supervised spaces - to large, self-service spaces with little direct staff interface. • Red Tag addresses different sets of problems in each retail or rental operation according to their individual set-up. No two are the same. • Vital to set and manage expectations of Loss Prevention, Buying and Store Operations teams. There are no perfect solutions to this problem. • No margin for error in production schedules to produce volumes required for Christmas demand. • Uncertainty re deliveries via DC were overcome by direct deliveries, addressed to Store Manager. Still some boxes being found in off-sites. • Low incidence of incorrectly inserted tags and stuck tags addressed by shipper of empty cases. Faulty Red tags are covered by warranty. • Appreciate the support of LP team in each state to address any remaining issues, misconceptions or procedures in stores ( eg EAS gates tuning). RED TAG 12

13. FUTURE PLANS • Changes to the box to make it harder to remove disc • Closing off avenues to attack system with knives, screwdrivers and powerful magnets • The search for the Holy Grail: - a means of creating an interaction between Red Tag and disc to render the disc useless if removed unlawfully • Next, protection of DVD-Audio and CD-Audio, as per the agreement with CML. RED TAG 13

14. FOR MORE INFORMATION • Please call: • Patrick Gleeson or Don McNeill • Red Tag Australia • 02 9913 8107 • Or via email at: • enquiries@redtag.com.au • Or our web site: • www.redtag.com.au RED TAG 14