VIDEO GRAIL: CONFIDENTIAL BUSINESS PLAN

April 6, 2010

Converging Trends

Broadband Usage
71 million households have broadband connections to the internet while rural areas are growing exponentially

E- Commerce / M-Commerce Online retail sales in the US rose to $32.4 billion and accounted for 3.6% of all retail sales in the second quarter of 2009, even as total retail sales fell 0.4%

Online Advertising US Online video advertising will surpass $1 billion in 2010 and will not slow down anytime soon.

Multimedia Content Online By 2013, 35% of ALL video content will be accessible via Internet Protocol Social Media Not only is almost everyone using some form of social media for personal use, 77% of the fastest growing companies have a social media strategy

OMNIVIDEO TV is already the worlds most powerful medium, yet it is about to evolve into a form that will be even more powerful, OmniVideo. OV includes TV content experiences and devices but goes beyond these, creating new content, distribution, and device possibilities, all of which feed the human need to consume video experiences. All video product strategists whether at the TV networks, cable networks, TV service providers, or video device manufacturers must take note: OmniVideo is about to explode, driving up total video viewing time from 4 hours per day to 5 hours by 2013, increasing the market potential.

VIDEO GRAIL: CONFIDENTIAL BUSINESS PLAN

April 6, 2010

Technology Adoption
The Internet is a now fundamental way for consumers, advertisers, and content owners to interact. Entertainment, commerce, and social networking are not limited by devices. Trends show that as technology infrastructure continues to expand, prices for technology will go down introducing even more consumers.

There was 6.5 million new broadband households in 2009 bringing the overall total close to 71 million households that report they have access to the abundance of activities on the internet that are enabled by faster connection speeds. Broadband users can more easily take advantage of the range of offerings the internet has, and this is evidenced in the significant uptake of more advanced online activities such as social networking and multimedia entertainment. While the number of households that reported being online only grew slightly more than 3% between 2008 and 2009, reported broadband adoption among Internet households grew slightly more than 6%. With the majority of households having a broadband connection and more than 50% of online consumers having been online for 10 years or more, the Internet starts to resemble a traditional media channel. People have specific preferences and behaviors and a limited amount of time to dedicate to their activities.

Technology Changes Demand

Internet TV on demand continues to evolve rapidly, with the lines between Internet TV and DVR services rapidly blurring.

VIDEO GRAIL: CONFIDENTIAL BUSINESS PLAN

April 6, 2010

The rise of broadband and the underlying networks that support its deployment provides greater opportunities for online video services, including the potential to deliver high definition, full-length content to an increasing proportion of users. The concept of DVRs and DVR services is already disrupting traditional media content delivery and broadcast models, and the pace of this disruption is likely to accelerate in the near future.

The online and broadcast markets are colliding, with video services making the move to the PC environment and web-based services becoming a core element of the TV viewing experience. Online video delivery is emerging as a true competitive threat to existing content service providers, offering the potential to extend reach to new consumer groups.

VIDEO GRAIL: CONFIDENTIAL BUSINESS PLAN

April 6, 2010

Broadband, Storage Capacity, and Improved Hardware supports OmniVideo

Device Used Content Produced Traditional TV Television Set TV Networks and Movie Studios OmniVideo TV, PC, Mobile Device, Media Player TV Networks, Movie Studios, Independent Producers, Amateur Producers, Individuals Viewers 5 hours/day(2013)

Content Finalized Consumption

Producers and Directors 4 hours/day

OmniVideo makes content meaningful to individuals. Advertisers have a tremendous potential to address the individual over just the target market. The pace at which online video services develop may well be closely aligned to development in the advertising market; with broadcasters struggling to maintain advertising revenue via traditional TV-based services, many will look to derive income from the development of new platforms.

E-Commerce and M-Commerce

E-commerce continues to expand with no end in sight as sales have been up over 400% in the last 3 years. 90% of Americans own a mobile device and still only 7% have conducted a transaction from it. Mobile commerce today in the U.S. is still in its infancy, but its growing at an astounding rate.

VIDEO GRAIL: CONFIDENTIAL BUSINESS PLAN

April 6, 2010

Multimedia Content Online

Traditional TV broadcasters are struggling to retain viewership in the face of multi-channel fragmentation, and more recently the emergence of internet-based video alternatives. Broadcasters around the world are seeking to evolve into multi-platform video distribution networks, aiming to reproduce their traditional TV business online,

Networks and studios have taken audience share from YouTube and created viable revenue streams by moving beyond viral video into Internet television. They are offering branded, episodic, quality programming that taps into consumer desires around chapterized content, integrated video experiences, and unobtrusive advertising. VG is carefully monitoring 4 emerging trends that could dynamically change the marketplace: streaming library size, YouTube and Hulu content deals, exclusive distribution, and Web serials. Both large and small content companies have an incentive to drive traffic downward to the branded destinations. A Website entirely focused on a single media brand, programmers can drive users to additional videos free from competitive offerings on aggregators. Higher engagement and association with a brand could yield highly targeted audiences and correspondingly higher adverting rates (e.g., DailyShow.com vs. AOL.com/DailyShow). With 47% of online television watchers discovering content directly from branded destinations, companies should utilize promotional episodes and clips on aggregators that can direct content back to branded destinations.

VIDEO GRAIL: CONFIDENTIAL BUSINESS PLAN

April 6, 2010

While there is no suggestion that content owners will sever their ties with traditional partners anytime soon, the balance of power in the value chain is shifting. Although the early development of the online video market has been driven by the availability of user-generated content, the emergence of professional content is key to driving future revenue growth. Current market trends suggest that advertising-supported content is more appealing to the average consumer than paid downloads.

Ad-supported online video business models are now becoming commonplace, challenging the market for paid downloads/rentals. In order to succeed, paid content providers will need to innovate and differentiate their services to deliver greater value and flexibility than is possible via ad-supported alternatives.

VIDEO GRAIL: CONFIDENTIAL BUSINESS PLAN

April 6, 2010

Online Video Advertising Market

Online video advertising will make up the majority of the market, accounting for over $2.3 billion by 2012 and over $3 billion by 2014. Companies will have to balance reach and revenue share in maximizing value captured for content.

In certain markets, industry associations report that online advertising spending has overtaken spending on some traditional advertising channels leading advertisers and publishers to ask new questions about when online advertising will achieve its fair share of the total advertising market. Despite a downturn in the economy, many advertisers continue to boost spending on the online channel in international markets. The overall online advertising market is set to reach $39 billion in 2012.

VIDEO GRAIL: CONFIDENTIAL BUSINESS PLAN

April 6, 2010

Forecasts show that social media marketing in the US will grow to $935 million in 2010, about 20% less than spending on online video advertising and we believe the social media market will grow to $3.1 billion in 2014, just 3% bigger than video advertising spending. See the July 6, 2009, US Interactive Marketing Forecast, 2009 to 2014 report.

Advertisers Tendencies
The Internet video market has expanded from a limited library of paid downloads to an expansive library of advertisement-supported content that is syndicated across the Internet.

Marketers Are No Longer Afraid To Run In-Stream Ads Despite the growing prevalence of pre-roll advertisements and other in-video advertising formats, plenty of interactive marketers are scared that users will be overwhelmed by in-video advertising. But most marketers are finally getting comfortable with the format. When given a choice between paying for video content or watching free ad-supported content, online video viewers are four times more likely to choose the ad-supported option. Its little surprise that interactive marketers, faced with a growing opportunity to reach consumers with video advertisements, are flocking to the format. 63% said in a 2009 survey that they are running online video advertisments. Brands like Dove, Kraft Foods, and Tide have most aggressively adopted instream video advertising. According to 2009 US interactive marketing forecast, video ad spending including in-stream Advertisements, video banners, and other video formats will exceed $1 billion for the first time in 2010 and reach $3 billion in 2014. Video has quickly become one of the most popular types of online content. Nearly every website features video, and 66% of Internet users in America watch online video each month. Generation Y consumers watch more online video than any other age group, but even the majority of seniors watch online video monthly or more. In October and November 2009, Forrester conducted a WebTrack review of 39 US sites and 45 European sites with online video content to learn more about how marketers are deploying in-video advertising like pre-rolls and overlay advertisements. The WebTrack included only short video clips of 10 minutes or less

VIDEO GRAIL: CONFIDENTIAL BUSINESS PLAN

April 6, 2010

not full-length TV shows like those available on Hulu or NBC.com because short clips remain the dominant form of online video. Marketers can buy in-stream advertisements on almost any major US site. In fact, its becoming difficult to find online publishers that dont accept in-video formats. WebTrack review gathered that 85% of the US sites visited were running in-stream advertisements and just six of the 39 US sites we reviewed were not. Publisher acceptance of other in-video ad formats has grown quickly. Just more than two years ago YouTube became the first major publisher to accept overlay advertisements; now, nearly 1/4 of the sites tracked are running the format. Another 18% of the sites featured video sponsorships. However, its rare to find a site that offers each of the main in-video ad options: Of the 39 US sites only two (including YouTube) were running all three formats.

Understanding the Consumer

VideoGrail has synthesized OmniVideo with the drivers behind enhanced viewer experience therefore improving the monetization intelligence. VG analyzed an assortment of research reports, marketing studies, and consumer data to comprise what OmniVideo viewers are looking for and how VGs EI and MI will produce superior brand targeting:

The Consumers Stipulations

Consistent Content

Better Advertising

High-Quality Videos

Consumers most outstanding motivator is consistent content experience. In a recent report, 57% respondents said they would watch more television through the internet if more or all episodes/seasons of a show were available on a website. Consumers second most important motivator is fewer advertisements (47%), while shorter advertisements came in fourth (37%). Distributors do not need to abandon advertising, but they should look to incorporate best practices with better creative units, targeting, and frequency capping. Consumers are increasingly watching high-definition (HD) content in their living rooms and are becoming accustomed to high-quality video 40% of online consumers cite HD quality as a motivator to watch more online video. Most of the existing Internet TV destinations, including Hulu, have been free to access; however, the cable TV destinations that are being planned, such as Comcasts On Demand Online, are likely to be accessible only to subscribers who pay monthly fees. Forresters preliminary research into price elasticity shows a steep drop-off at the $9.99 price point, which puts the on-demand offering in line with other common pay-TV up sell products, such as digital video recorders (DVRs) and premium channels like HBO and Showtime.

Free Content/Cheap Subscriptions

VIDEO GRAIL: CONFIDENTIAL BUSINESS PLAN

April 6, 2010

Multiple Device Connections

The ability to move content from the PC to the TV is becoming increasingly important to consumers: 36% cited watching Internet video on the TV as a motivator and 10% cited being able to watch Internet video on mobile devices.

OmniVideo originates as a requirement for the Generation Y consumers. These consumers have characteristics in terms of how they want content and advertisements presented to them.

Generation Ys Online Behavior

Communicating and Sharing Opinions

Consuming Free Media

Viewing Chapterized Content

Generation Y likes to stay connected to their friends and is comfortable using the applications available to them on the Web. While communication is a key to Generation Y, its even more so to spread their opinions. More importantly, theyre happy to use the Internet as a tool to take this formerly offline activity to the next level. 11% post ratings and reviews, 18% comment on other peoples blogs, and 16% also contribute to online forums and discussion groups More than half of online Generation Y consumers watch video content from other users online. 30% also watch full-length TV shows online, and more than 40% listen to any kind of audio or radio online. However, the conversion rate to getting these consumers to pay for content online is low. Only 11% have paid to download TV shows, and 14% have paid to download music Popular wisdom on the Web is that only short-form video content will work. In the YouTube tag experience, consumers may have no idea what comes before or after the segment they watched, and an opportunity to watch more video is often lost. Moving beyond these experiences is a key to unlocking value for video content, where a consumer starts at one point in a video but advances to many numerous related parts of the longer-form content. MTV Networks has gone so far as to partition and catalog every episode of the Daily Show, allowing consumers to finds clips by subject or favorite correspondent.

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VIDEO GRAIL: CONFIDENTIAL BUSINESS PLAN

April 6, 2010

Integrating into Activities

Avoiding Obtrusive Advertising

As with search engines or social networks before it, Internet video created a plethora of video destinations that will not all survive. Many have shut down and many more are bound to join the list of casualties. Consumers are yearning for easier ways to find video than adding another new destination: Take the video to consumers rather than force consumers to come to the video. Market leader YouTube again serves as a paradigm example, syndicating its videos into Googles general search results, allowing users to embed video on social networking pages, and even letting users easily view video on an iPhone. Consumers frustration is not with advertising, but rather obtrusive and irrelevant advertising. Consumers do show a willingness to accept advertisements, particularly with free episodic and television produced content. Leading practices to improve the advertising experience include NBC announcing limiting video commercials to 15 seconds for clip content, as well as AOL, YouTube, and VideoEgg all starting to implement overlay ticker advertisements. Even with limitations on the number and type of advertisements, the largest challenge remains creating engaging advertisements for the medium.

SWOT Analysis
STRENGTHS Incentive- based Interaction to gather intelligence Strategically differentiated from competitors Superior intelligence on the content for the Viewer Superior intelligence on the Viewer for the Advertiser Social Media Integration iPhone, iPad, iTouch seamless integration OPPORTUNITIES No barriers to enter No industry standard Existing social media networks to piggyback off of Online video consumption is still free Exclusive Digital Rights Agreements Fledgling DVD prices and sales Licensing agreements with competitors WEAKNESSES No Digital Rights Agreements No established brand No established user-base Lack of developed technology Dependent on available, embeddable content

THREATS Piracy Conservative Content Owners Competitor launches prior to Video Grail Large players making moves

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VIDEO GRAIL: CONFIDENTIAL BUSINESS PLAN

April 6, 2010

Competitive Moves from outside Companies

Amazon launched its revised Amazon Video On Demand service in 2008. It has since forged partnerships with vendors including Microsoft, Sony, Roku and TiVO to enable its content services to be accessed directly via TV sets. Apple has undergone a huge transformation over the past few years, building on its computing roots to become a leading player in the digital media market. Crucially, the firm offers a complete ecosystem of device and content services. The BBC iPlayer has quickly eclipsed other legitimate forms of online video delivery in the UK. Having started as a PC-only service, the iPlayer has evolved into a truly multi-platform offering, with optimized interfaces available for Phone, Nintendo Wii, and Virgin Media / BT Vision pay-TV services. As a major part of Comcasts Project Infinity its vision to give consumers the ability to watch any content On Demand, either via digital TV or online the operator launched Fancast in January 2008. Google has yet to find ways to adequately turn clear consumer interest in YouTube into significant revenues. Google plans to launch a premium content section on the site which will feature full-length movies and TV shows Via the Xbox 360 and PlayStation 3, Sony and Microsoft aim to bring high speed computing and broadband connectivity into the living room, providing the opportunity for consumers to easily access and purchase content direct from the TV without the need for a pay-TV subscription.

Video Grail Factors for Success

More Effective, More Dynamic Advertisment Lengths and Formats

Viewer's Choice of Brands and Advertisments

Entertainment & Monetization Intelligences

Largest, Most Organized Collection of Video Content

Incentivized Viewer Interaction

1. 2. 3. 4. 5.

Matching advertising length with length of content Adjusting to how viewers watch video on their computers Rotating through advertising inventory frequently Sponsorships for long-form video Proprietary Player

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VIDEO GRAIL: CONFIDENTIAL BUSINESS PLAN

April 6, 2010

Gaps in the Market Place

Driven by increasing amounts of leisure time, digital content, and services that can be accessed almost anywhere, anytime, the consumption of all types of media continues to grow. Consumers are accessing the internet for social networking, entertainment, and commerce from their computers, mobile devices, and their televisions. The integration of web-based solutions across every device has led to more advertising and more video content. The trends converged so quickly with rapid adaption by users that there hasnt been enough time to collect intelligence to formalize proper technique and practices: Consumers are inundated with advertisements yet struggle to find content that appeals to them Advertisers are not in tune with consumer preferences for their advertisements. Marketers still cannot bring Social Media and Word-of-Mouth marketing together seamlessly Content owners are at a loss on how to monetize their content through syndication while keeping digital rights

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VIDEO GRAIL: CONFIDENTIAL BUSINESS PLAN

April 6, 2010

Appendix Material

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