Break Media - WikiLeaks · Break Media is a recognized category leader in providing content to users and solutions to advertisers Men are the primary influencer in automotive, investing,

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For Sony Use Only

Break Media Confidential Investment Memorandum


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This presentation (the “Presentation”) contains material, non-public, confidential and proprietary information regarding NextPoint, Inc. (dba Break Media), a Delaware corporation (the “Company”) and is solely for the use and benefit of the recipient (the “Recipient”). By accepting this information, the Recipient agrees that it will, and it will cause its directors, partners, officers, employees and representatives to, use the information only to evaluate its potential interest in a possible transaction involving the Company (the “Transaction”) and for no other purpose and will not divulge any such information to any other party. By electing to view this information, the Recipient represents, warrants and agrees that it will not copy, record or otherwise attempt to reproduce or re-transmit this information to any other person (other than as mentioned in the succeeding sentence). Distribution of this information to any person other than the person to whom this information was originally delivered and such person’s directors, partners, officers, employees and representatives is unauthorized and any reproduction of these materials, in whole or in part, or the divulgence of any of their contents is prohibited.

This Presentation has been prepared to assist the Recipient in making its own evaluation of a potential Transaction and the Presentation does not purport to contain all the information that the Recipient may require. This Presentation is not intended to provide and should not be relied upon for accounting, legal, regulatory or tax advice or investment recommendations. The Recipient should conduct its own analysis or other verification of the data set forth or referred to in the Presentation as the Recipient deems necessary and consult the Recipient’s own accounting, legal, regulatory and tax advisors in order to make an independent determination of the suitability and consequences of an investment in the Transaction.

No member of the Company or any of its respective directors, officers, employees, financial advisors or agents has independently verified the accuracy or completeness of any of the information contained in the Presentation. The financial projections contained herein have been prepared for illustrative purposes only and nothing contained herein shall be construed as giving any form of recommendation or legal, investment or other advice of any kind to the Recipient or any other person. It is also recognized and understood that such financial projections are related to future events and that actual results may vary from the projected results and that such variations may be material. Past performance is not indicative of future results.

This Presentation shall not be deemed an indication of the state of affairs of the Company, historically, in the future or on the date hereof. No representation or warranty, expressed or implied, is made by the Company, or any of its respective directors, officers, employees, financial advisors or agents as to the fairness, accuracy or completeness of the information, projections, forecasts and opinions contained in this Presentation, and no liability whatsoever is accepted by any such person in relation to any such information, projection, forecast or opinion. Further, no representation or warranty, expressed or implied is made by the Company or any of its respective directors officers, employees, financial advisors or agents as to the achievement or reasonableness of any projections, forecasts, estimates or other statements about the future or prospects of the Company contained in the Presentation and no liability whatsoever is accepted by any such person in relation to any such projection forecast, estimate or statement.

The Presentation is not intended to, nor will it, form the basis of any agreement in respect to any proposed investment in the Transaction and the Recipient will be required to acknowledge in any such agreement that it has not relied on or been induced to enter such agreement by any representation or warranty, save as expressly set out therein.

This Presentation does not constitute an offer or invitation to the Recipient or any other person to invest in the Transaction. Furthermore, this Presentation does not constitute an offer to sell or a solicitation of an offer to buy any security and may not be relied upon in connection with the purchase or sale of any security. Any offers and sales will be made only in accordance with applicable securities laws and pursuant to definitive documentation related to such offers and sales. Any securities that are offered and sold have not been and will not be registered or otherwise qualified for an offer to the public under the U.S. Securities Act of 1933, as amended (the “Securities Act”), or any applicable securities laws of any other jurisdiction. Such securities are not and will not be approved or disapproved by the U.S. Securities and Exchange Commission, any state securities commission or any other United States or other regulatory authority in any other jurisdiction, nor have any of the foregoing authorities passed upon or endorsed the merits of any offering or the accuracy or adequacy of this document.

Any securities that are offered and sold will be offered and sold in reliance on the exemption from the registration requirements provided by section 4(2) of the Securities Act and the regulations promulgated thereunder, including Regulation D and analogous provisions of certain state securities laws. Any offering will be available only to “accredited investors” (as defined in Regulation D under the Securities Act) in transactions that comply with the requirements of section 4(2) of the Securities Act. This Presentation must not be acted upon or relied upon by persons who are not accredited investors.

The information contained herein supersedes any prior versions hereof and will be deemed to be superseded by any subsequent versions or disclosure documents. By reviewing this material the Recipient represents that it is a person into whose possession the material can be lawfully delivered in accordance with the laws of the jurisdiction in which the Recipient is located.

Disclaimer


3For Sony Use Only

I. Executive SummaryII. The Break Media PlatformIII. Infrastructure OverviewIV. Growth Opportunities and Financial Performance

Table of Contents


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I. Executive Summary


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Break Media Overview

Founded in January 2005 Leading creator, curator, publisher, distributor and monetizer of

digital content Category leader in comedy, video and young men Core content and publishing competencies have driven growth

into one of the web’s largest independent digital media platforms Headquartered in Los Angeles with offices in New York, Chicago,

San Francisco, Dallas, Detroit, Toronto, London and Shanghai 219 full-time employees

Management Team

Company Overview Consumer Brands

Name Position Previous Experience

Keith Richman Chief Executive Officer Co-founder and VP of OnePage (acquired by Sybase) Co-founder and Director of Business Development for Billpoint (acquired by Ebay) Corporate Planning at Disney

Andy Doyle Chief Financial Officer Chief of Staff to the CEO at Activision-Blizzard VP, Business Unit Head of Finance at Activision-Blizzard VP at Summit Partners

David Subar Chief Technology Officer CTO at Oversee.net

Andrew Budkofsky EVP Sales and Partnerships SVP of Sales for PodShow, VP of Sales for Court TV (now TruTV) Director of Interactive TV Sales at Microsoft

Jonathan Small SVP Editorial and Programming Executive Editor at Stuff and Glamour magazines

Huan Le SVP Business Development VP of Business Development at Charter Communications Senior Manager of Corporate Development at AOL

Andy Tu VP Marketing Sales Strategy at AOL


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Leading end-to-end independent platform in online video, the fastest growing segment in digital advertising

Premier provider of digital content through valuable portfolio of owned and operated properties with distinct editorial tone

Massive scale – ~75 million monthly uniques with 2.6 billion+ video streams in the last 12 months 1

Unique content creation and curation capabilities through editorial expertise, internal creative studio and acquisition team

Ability to deliver industry leading video advertising solutions through proprietary technology platform

Significant off-platform video reach with additional growth opportunities in social, mobile and over-the-top

Proven digital advertising monetization capabilities and expertise

Well-respected brand and management team

Company Highlights

1 Source: comScore as of March 2011.

1

2

3

4

5

6

7

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Advertising Format 2009 2010 2011 2012 2013 2014 CAGR

Video $1,020 $1,420 $1,970 $3,030 $4,070 $5,710 41%Search 10,698 12,374 13,437 14,793 15,670 16,771 9%Banner Ads 5,061 5,477 5,845 6,533 7,035 7,373 8%Lead Generation 1,451 1,531 1,632 1,769 1,892 2,033 7%Sponsorships 383 402 422 445 471 501 6%Rich Media 1,505 1,576 1,632 1,708 1,760 1,815 4%E-mail 292 276 288 311 319 330 2%Classifieds 2,254 1,958 1,795 1,861 1,902 1,960 (3%)Total $22,664 $25,014 $27,021 $30,450 $33,119 $36,493 10%

Break Media Market BackdropExplosive Growth in Online Video Advertising

Avg. Daily Unique Viewers (mm)

Viewing Sessions (bn)

Videos Per Viewer

Hours Per Viewer

+24% +18% +11% +19%

Online/Mobile video is becoming increasingly significant for both consumers and advertisers.

Consumer Behavior: People are increasingly watching video online and via mobile devices Original Programming: Digital studios are creating high-quality entertainment at cost efficient price points Discovery: Massive amounts of content available; curation is required Distribution: OTT providers, web portals, social networks are all in need of more content Monetization: Marketers are continuing to follow eyeballs and shift spend to digital

Growth in Total U.S. Online Video Market 1 U.S. Online Advertising Spend by Format 2

1 Source: comScore as of April 2011.2 Source: eMarketer as of 2010.

Key Trends in Digital Video

69.085.8

Apr-10 Apr-11

4.75.5

Apr-10 Apr-11

170.5 189.2

Apr-10 Apr-11

12.414.8

Apr-10 Apr-11


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Men’s Significant advertiser demand for audience but limited inventory from traditional media outlets on all platforms (e.g. Comedy

Central, GQ, etc.) Break Media is a recognized category leader in providing content to users and solutions to advertisers Men are the primary influencer in automotive, investing, beverage, electronics, sports, and home improvement verticals 1

Potential windfall from sports league work stoppages (e.g. NFL and NBA)

Comedy Highly attractive advertiser vertical Lack of dominant consumer brand creates opportunity to grow significant new multi-platform brand Short-form video content is ideal for web, mobile and OTT and is easy to syndicate through other properties High-margin and scalable content profile with library value

Attractiveness of Break Media’s Core VerticalsBreak Media is a Leading Player in the High-Growth, High-Value Men’s and Comedy Verticals

1 Source: Jacobs Media, “Marketing to Men: A Survey of the Role of Men in the Shopping & Decision-Making Process,” April 2011.

In addition to being a leader in video, Break Media has also established leadership positions in other key verticals


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$170.6

$452.8

$0.0

$200.0

$400.0

$600.0

2001 2011E

Gro

ss A

d Re

venu

e ($

mm

)

$3.05

$5.03

$0.00

$2.00

$4.00

$6.00

2001 2009

CPM

($)

Key Trends in the Men’s Vertical

Cable Network Economics – Spike TV 1

Spike TV has above average gross ad revenue and competitive CPMs

Discretionary Spending by Gender - Representative Categories 3

Male Audience Most Requested by U.S. Online Video Advertisers 2

“It's a beautiful time to be a man -- or at least to market to men -- as personal-care marketers rev up for what looks to be the biggest array of product launches for men in nearly a decade and maybe ever.” – Jack Neff, Advertising Age, March 2010

Case Study: Men’s Personal-Care Market 4

Blue chip consumer products companies are increasingly focused on the men’s personal-care market ($2.1 billion as of 2010; expected to grow to $2.8 billion by 2012 according to Nielsen)

Dove Men+CareOld Spice Axe Excite

Select Advertising Campaigns and Commentary

In 2010, the audience that online video advertisers requested the most within the male demographic was the 18-34 age group

Avg. of all cable networks ($ mm) $99.0 $139.5 Avg. of all cable

networks ($) $4.07 $5.13

1 Source: Kagan Economics of Basic Cable Networks 2010 Edition. 2 Source: eMarketer as of February 2011.3 Source: Bureau of Labor Statistics Consumer Expenditure Survey, 2008-2009.4 Source: Advertising Age, “Male Call: Marketers Jump on Men’s Grooming Trend,” March 8, 2010.

5%

8%

38%

22%

12%

0% 5% 10% 15% 20% 25% 30% 35% 40%

12-24

18-24

18-34

25-54

35-64

$1,939$1,603

$727$521 $369

$1,275$1,092

$634

$234 $269

$0

$500

$1,000

$1,500

$2,000

$2,500

Food Away from Home

Vehicle Purchases

(Net Outlay)

Audio / Visual Equipment and

Services

Alcoholic Beverages

Fees and Admissions

2008

-200

9 Av

erag

eA

nnua

l Exp

endi

ture

($)

Single Males Single Females


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$5.41

$7.29

$0.00

$2.00

$4.00

$6.00

$8.00

$10.00

2001 2009

CPM

($)

8%

8%

9%

10%

10%

14%

19%

27%

0% 5% 10% 15% 20% 25% 30%

CNN

TBS

Nickelodeon

Food Network

Comedy Central

History

Discovery

ESPN

% of Respondents

$244.0

$534.1

$0.0

$200.0

$400.0

$600.0

$800.0

2001 2011E

Gro

ss A

d Re

venu

e ($

mm

)

88.3% 81.5% 73.8% 70.5% 67.8% 62.8%

0.0%20.0%40.0%60.0%80.0%

100.0%

Jackass 3-D The Hangover

Part II

Bridesmaids Grown Ups Little Fockers

Just Go With It

Mar

gin

(%)

Key Trends in the Comedy Vertical

Cable Network Economics – Comedy Central 1

Comedy Central has above average gross ad revenue and CPMs

Trends in the Digital Distribution of Comedy 3

Margin of Select Comedy Films Released in the Last 12 Months (%) 2 Most Desired Cable Channels (Ad-Supported) 4

Total Est. Budget ($ mm)

$20.0 $80.0 $32.5 $80.0 $100.0 $80.0

$99.0 $4.07 $5.13$139.5Avg. of all cable

networks ($ mm)Avg. of all cable

networks ($)

Consumers have a strong desire to view comedy content across all comedy platforms

Comedy films can be highly profitable due to low cost of production

Comedy is being increasingly piloted online as its value in the syndication market grows− South Park Digital Studios, a JV between Trey

Parker / Matt Stone and Comedy Central, offers content online on a straight-to-the-fans basis

− In May 2011, Jerry Seinfeld launched an online platform offering three comedy shorts per day ranging from 30 seconds to two minutes in length

− In May 2011, Pandora added to its archive 10,000 clips by more than 700 comedians, including Chris Rock, Dane Cook and Mike Birbiglia

1 Source: Kagan Economics of Basic Cable Networks 2010 Edition.2 Source: Box Office Mojo as of June 2011. Margin based on worldwide lifetime gross.3 Source: Mashable, “Jerry Seinfeld Puts His 30 Years of Comedy Online,” May 6, 2011 and New York Times, “Pandora Internet Radio Service to Offer Large Archive of Comedy Clips,” May 4, 2011.4 Source: paidContent.org, “Which TV Channels Can’t Cord-Cutters Live Without?,” December 6, 2010. Represents channels that must be available online for subscription cancellation.


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II. The Break Media Platform


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High-quality content acquisition, generation and curation capabilities Successful in-house video

production studio creating hundreds of videos monthly Ability to create relevant,

must-see content in ad-supported verticals Infrastructure and ability to

scale to any new channel

Content

Proven Ability to Build and Monetize Audiences and Content

34th largest domestic property 1

~75 million global monthly unique visitors 1

13th largest online video publisher & 4th largest video ad network 1

Ability to identify and aggregate large, targeted audiences

Scale and demo provide unique marketplace offering Full service suite of custom

solutions Strong, loyal brand relationships

with increasing annual commitment Enhanced offering through

network, which increases reach and supports larger campaigns

Monetization

Audience

1 Source: comScore as of March 2011.

Audience

Content Monetization


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Highly Scalable Model With Immense Growth PotentialSignificant Growth Opportunities Identified and In Process

Audience

Continued investment in product and addition of social features Vigorously pursue mobile and OTT

platforms Increase brand awareness and exposure Leverage platform to localize content in

high growth international markets Further drive audience to properties

through demand-driven content

Monetization

Expand advertising sales force Capitalize on newly developed verticals Increase exposure with broad-reaching trade campaign Further invest in video-related, ad-focused technology

Content Turbocharge profitable production of high-quality original content Increase investment in content acquisition Syndicate existing library through new channels Diversify into new and underpenetrated verticals Acquire additional brands and / or properties


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Massive Reach and Scale(Uniques in 000s)

Source: comScore as of March 2011. 1 Represents monthly unique visitors.2 Represents monthly unique viewers. 3 Represents potential reach of video advertising network. Includes traffic from both content and advertisements.

U.S. Internet Properties U.S. Video Publishing Properties U.S. Video Advertising Networks Video Publisher Uniques 2

1 Google Sites 143,6052 BrightRoll 68,7813 AOL, Inc. 60,3124 Yahoo! Sites 60,1315 Tremor Media 58,7926 Viacom Digital 55,1287 Microsoft Sites 55,1168 ADAP.TV 54,2309 VEVO 54,07810 FACEBOOK.COM 49,23711 Turner Digital 44,52212 SpotXchange 41,33913 Break Media 35,45414 BBE 34,99115 NBC Universal 31,62916 TubeMogul 28,78117 CBS Interactive 28,19418 Hulu 28,17219 Undertone 26,43720 Fox Interactive Media 22,141

Significant reach breeds immediate relevance for advertisers

One of the largest independent web properties Top 30 properties represented largely by social,

search and commerce brands and tend to serve consumers of text and not video

Property Uniques 1

30 Superpages.com 34,74331 YellowBook Network 34,50432 LINKEDIN.COM 32,07933 Wal-Mart 31,73434 Break Media 31,34935 iVillage.com 30,84736 AT&T Interactive 29,11637 YELP.COM 28,71638 WeatherBug Property 28,703

Break Media is Larger Than :

Leading independent content provider 6 year history in online video has led to meaningful,

difficult to duplicate reach numbers Scale allows company to syndicate out content,

critical for creating profitable content and intellectual property

Scale allows company to fulfill large video buys, critical for relevance to traditional TV advertisers

Company is in elite position to compete for dollars as only top few networks get RFP’d

Video Ad Network Uniques 3

1 Tremor Media 144,6952 Google Display 143,0183 BrightRoll 122,3574 Break Media 119,6625 YuMe 109,9536 BBE 107,1987 Digital Broadcasting 104,5648 SpotXchange 98,7879 TubeMogul 93,84010 Advertising.com 89,70511 Tidal TV 80,37412 Firefly 59,83913 Joost 58,09614 Collective 51,07715 Touchstorm Editorial 31,401

Audience

= advertising network / syndicator


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Property Video Views (000s)Youtube.com 13,379,679Hulu 2,093,329VEVO 481,693ABC Television 295,441FACEBOOK.COM 284,183Break.com 125,829MySpace 108,798ESPN.com 106,991Disney Online 99,885Fox.com 77,287The Weather Channel 31,464IGN.com 29,566Comedycentral.com 17,874Collegehumor.com 8,075

BreakBreak is the #1 Humor Brand Across Multiple Platforms

30 million+ global monthly unique visitors (up 64% YoY) 1

#1 domestic humor property with over 125 million monthly video views 2

Offers original, licensed third party and user-generated content alongside a distinct editorial voice

Hundreds of thousands of mobile application installs

Plans to grow into a broad comedy channel leveraging extensive content sources

425,000 subscribers and over 420,000 weekly e-mail subscribers 3

Overview Monthly Unique Visitors 1

User Experience Competitive Landscape – Select Properties 2

1 Source: Google Analytics as of April 2011.2 Source: comScore as of March 2011.3 Source: As per Company management and Youtube.com as of May 2011.

18,800,141

30,852,123

0

10,000,000

20,000,000

30,000,000

40,000,000

Apr-10 Apr-11

Audience


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2,437,832

4,728,882

0

1,500,000

3,000,000

4,500,000

6,000,000

Apr-10 Apr-11

MadeManIn Less Than Two Years, MadeMan Has Grown Into One of the Largest Men’s Lifestyle Sites

Reaches nearly 5 million global monthly unique visitors –nearly 100% growth YoY 1

Established as a “Guy’s Guide to Winning at Life”

Verticals covered include health and grooming, cars, gear, gadgets and travel

Larger than Maxim, Esquire and GQ 2

Increasingly becoming a platform for original video content

1 Source: Google Analytics as of April 2011.2 Source: comScore as of March 2011.

Overview Monthly Unique Visitors 1

User Experience Growth Strategy

Focus on original video content theme of "Winning at Life"

Continued investment in expert-driven, service-oriented editorial and video

Build consumer awareness through relevant PR and celebrity columnists

Redesign of Chickipedia – celebrity / actress brand within site

Further roll out of freelance network content throughout site

Capitalize on growth trends in the market for men’s personal-care and grooming products

Audience


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GameFrontIn Less Than Twelve Months Since Acquisition, GameFront Has Become a Leading Gaming Site

Reaches over 7 million global monthly unique visitors 1

GameFront is a leading independent voice for tips, tools, downloads, reviews and news

Reviews frequently quoted in game trailers and game descriptions

Leading file / patch download site with over 5 million monthly downloads 2

Creating over 400 monthly instructional walk-through videos for mobile and other distribution 3

1 Source: Google Analytics as of April 2011.2 Source: Internal Company statistics.3 Source: As per Company management.

Overview April 2011 Traffic Metrics 1

User Experience Growth Strategy

Further establish credibility, voice and relationships within the gaming industry

Focus on original video content theme of "Being a Better Gamer"

Continued investment in diversified gaming content with focus on PC and console gaming

Roll out of freelance network content throughout site

7,128,528

37,901,587

0

10,000,000

20,000,000

30,000,000

40,000,000

Global Monthly Uniques Page Impressions

Audience


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Audience Characteristics

Gender

Age

Where they spend their time and money

Gaming Movies Sports Beverage

Men’s Fashion Personal Care Beverage TV / Film Gaming

Gaming Movies Sports

Technology / Electronics TV / Film

Clothes Sports Film Beverage

Gaming Mobile Electronics

49%51% 46%54%

Secured Coveted Audience Across Multiple PropertiesCategory Leader For the 18-34 Male Demographic

Source: comScore as of March 2011 and Nielsen @Plan Release 4, 2010.

70%

30%

66%

34%

84%

16%

69%

31%

85%

15%

51%49%

Male

Female

18-34

Other

Audience

56%44% 52%48%

81%

19%

66%

34%


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Unique Insights Drive Audience Development

Audience Insights Content Insights

Marketer Insights Distribution Insights

6+ years of audience data In-house audience research

capabilities (Guyde Report) Large male-focused audience and

research panel through which content concepts can be tested

History of creating thousands of pieces of video and editorial content Dashboards provide real-time

feedback on audience trends Long established editorial tone and

credibility

6+ years of knowledge and expertise in facilitating virality Understanding of what content works

across different platforms and channels (O&O, video network, YouTube, Facebook)

Strong marketer relationships drive ability to invest in premium content Extensive experience in marrying

content and advertising Ability to create tent pole events

appealing to audiences and marketers

Audience


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25% 2Direct:

Search:

Strength of Content and Brand Drives Organic Traffic

O&O Visits by Source – April 2011

1 Source: Google Analytics as of April 2011.2 Includes web and mobile / iPad traffic.3 Source: As per Company management.

30%

21%

24%

CPCCost per

1000 VisitorsRevenue per 1000 visitors ROI

$0.03 $30.00 $80.00 167%

$0.04 $40.00 $90.00 125%

$0.05 $50.00 $100.00 100%

$0.06 $60.00 $110.00 83%

Indicative ROI Analysis – 1st Time Visits

Top 5 Referral Properties 3

CPC / SEM:

Referral:

April 2011 1

Audience


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Positioned to Meet Consumers Across PlatformsAs Consumption Patterns Have Changed, Break Has Evolved to Deliver Leading Consumer Experiences on New Platforms

Over 46 million global monthly uniques 1

Category Leadership

Over 2.6 billion streams in the last 12 months 2

Over 100 million monthly page views, 10 million monthly video views and 7 million monthly visits 1,3

Coming Soon…

Break Media’s channels available on multiple platforms

OTT / Connected TVsMobileVideo SyndicationO&O Sites

1 Source: Google Analytics as of April 2011.2 Source: comScore as of March 2011.3 Includes iPad traffic. Page views include both content and advertising.

Break Content Distribution ChannelsInception Future

Audience


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Leveraging Video Strength to Grow Audience on New Platforms

Views by Channel – April 2009 vs. April 2011 1

84%

8% 6%

65%

23%

5%

April 2009 April 2011

1 Source: comScore and Google Analytics.Note: Figures not drawn to scale.

Break Media has capitalized on new distribution opportunities, rather than succumb to disintermediation

8%

Audience


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5.0

7.0

9.0

11.0

13.0

15.0

0.0

20.0

40.0

60.0

80.0

100.0

120.0

Oct-10 Dec-10 Feb-11 Apr-11

Video Views (m

m)Pa

ge V

iew

s (m

m)

Page Views Video Views

10.8

Off-Platform Represents a Massive Growth Opportunity

Monthly YouTube Video Views (mm) 2

Mobile Overview Break.com’s Mobile Platform Growth is Significant 1

Coming Soon…

Mobile traffic growing significantly monthly, delivering nearly 11 million video views, more than 7 million total site visits and over 100 million page views 1

Break Media can currently deliver customized advertising solutions through our iPhone Application, Android Application and iPad offerings

Mobile Platforms

1 Source: Google Analytics as of April 2011. Includes iPad traffic. Page views include both content and advertising.2 Source: Break Media’s Youtube.com Channels Report as of March 2011.

Audience

106.1

73.7

5.7

+44%

+87%

35.028.5 31.5 31.0 34.0 32.8

36.7 36.0 34.238.2

42.348.5 50.9

46.5 49.0

0.0

10.0

20.0

30.0

40.0

50.0

60.0

Jan-10 Feb-10 Mar-10 Apr-10 May-10 Jun-10 Jul-10 Aug-10 Sep-10 Oct-10 Nov-10 Dec-10 Jan-11 Feb-11 Mar-11


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Deep Industry Expertise Enables Superior Content GenerationContent

Content Team With Considerable Industry Experience Break Media Features

Break Media's Content is Created by Top Talent Across The Country

Source: As per Company management.

25 full-time and 11 part-time content creators dedicated to creating original content for Break Media owned properties

Proven history of identifying web talent and content trends

Feature content includes breaking stories (MMA steroid scandal) and exclusive celebrity interviews (Judd Apatow, Joseph-Gordon Levitt)

Managing editor Jonathan Small is the former executive editor of Stuff magazine

Studio location in Los Angeles allows for access to top new talent “before they are stars”


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Content Respected By Our Users, Our Clients and The MediaContent

Creator of Content with a Consistent and Unique Voice Representative Media Outlets That Feature Break Content

Select Trailers Featuring GameFront / Screen Junkies Reviews

National media outlets respect Break Media as a tastemaker



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In-house Video Content Buying Team In-house and Freelance Writing TeamsIn-House Original Video Group

Ability to Generate Profitable Content at ScaleBreak Media Creates, Acquires and Licenses Original Content Through Multiple Channels

Video Editorial

Creates entertaining and engaging short-form video

Audience success led to partnerships with leading brands to co-produce series

Acquired HBOLabs in 2009 to gain access to talent and library

On track to produce thousands of videos in 2011

Vertically-focused, passionate experts serve as editorial leads within their respective genre

Ability to leverage freelance community to provide demand-driven content based on anticipated traffic generation

Relationships with thought leaders to provide quality contributed editorial

“Plugged in” to audience interests and industry players across variety of topics

Finds successful videos across the web with proven viewership

Licenses or acquires worldwide rights at favorable rates

Establishes relationships with consistent content creators to open pipelines for continued acquisition

Over 2,200 cleared videos since inception

Evergreen monetization

Content


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Viral / One-off Videos Original Series Branded Entertainment

Rationale Builds Break Media brand Drives traffic to web site Promotes FB likes and YouTube subs

Builds audience loyalty Attracts blue-chip sponsors Creates original intellectual property

Generates large dollar campaign buys Provides showcase pieces of content

Annual Episode Volume

30 – 40 produced 100 – 200 acquired

500 – 1,000 300

Illustrative Cost per Video

$200 – $5,000 $75 – $1,000 $1,000 – $15,000

Payback Metrics Immediate 30 – 60 days Immediate

Examples

In-house studio allows testing of wide range of concepts including virals, series and branded content

Each concept associated with specific value driver – revenue, traffic, brand or client relationship

Given existing strength in distribution, Break is able to recoup production / acquisition costs quickly

Volume of content created also allows for development of talent – on-air, directing, producing, etc.

Comprehensive Approach to Video

For the WinWe Are LeBronGeek and Gamer Girls AT&T Life Without Mobile Captain Morgan Birthday


Content

Break Media’s Video Capabilities

Newsfeed


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Ability to Pilot Concepts Before Making Significant Investment

Concept Ideation Process – Case Study

Break Media identifies a growing trend of popular videos related to geek culture which is under-represented editorially

Content includes UGC viral videos and editorial content related to various nerd-friendly topics, e.g. World of Warcraft, Comic-Con and original Nintendo

Break Media develops cost-efficient original content targeting this audience

Break Original “Geek Culture” video shorts‒ Geek and Gamer Girls‒ Tonight I’m Frakking You‒ Cartoon Fails

3 originals received over 4 million views across Break.com and YouTube

Distributed editorially on outlets including Kotaku, Holy Taco and Geek.com

Over 75k Facebook likes Over 15k MP3 downloads of

original songs on Gamefront.com

Leveraged newly engaged audience by forming partnership with actor Zack Levi (NBC’s Chuck) to sponsor his “Nerd Machine” adjacent to Comic-Con in San Diego

Zack will create original video content to drive awareness of the event and invite his friends to participate

Break created advertiser packages surrounding the digital content and on-site event

Identify Create Distribute Expand and Profit

Content


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Among the most complete set of advertising solutions in the digital marketplace Full suite of services for marketers

– Integrated campaigns offering opportunities for deep engagement– Scalable opportunities offering mass reach and frequency– Partnership opportunities on branded / original content– Direct marketing opportunities – Custom research opportunities

Break SolutionsOffers Marketers a Full-Service Suite of Solutions and Innovative Ways to Engage the Audience

Break Media’s Competitive Advantages

Significant Reach &

Attractive Demo

Multiple Consumer

Touch PointsQuality Content

Creative and Commercial Sales Force

In-Stream Video

Proprietary Technology

Rich Media

Editorial Integration

In-House Original

Production Transparency

34th largest

domestic property; 13th

largest video publisher; ~75 million+ monthly uniques 1

Unique insight into 18-34 male demo

Significant views from social sharing / embeds, Mobile / CE and YouTube channels

Successful track record in identifying, creating and distributing high-quality content

#1 in advertiser satisfaction 2

Creates maximum impact for advertisers

Apex platform allows for highly customized campaigns at cost effective rates

Multiple ad formats, including homepage takeovers, video rolls, hover units, banners and more

Features such as advertorials which bridge the gap between content and advertisements

Creative Lab expected to produce thousands of videos in 2011

Partnerships with leading online brand protection and measurement companies

1 Source: comScore as of March 20112 Source: Advertiser Perceptions 2010 Advertiser Intelligence Report.

Monetization

Break Media’s position is highly defensible and difficult to replicate


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World Class Marketers Leverage the Break Media Platform

Top 20 Break Media Advertisers 1

1 Based on FY 2010 revenue.

Monetization


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Advertiser FY 2007 FY 2008 FY 2009 FY 2010 YTD Bookings 1

Advertiser #1 - $152 $1,091 $3,231 $1,546Advertiser #2 700 952 1,875 1,687 722Advertiser #3 100 125 479 1,632 697Advertiser #4 237 608 707 1,539 356Advertiser #5 63 325 384 1,333 447Advertiser #6 457 381 336 1,288 995Advertiser #7 695 1,107 878 1,138 233Advertiser #8 50 186 741 1,018 642Advertiser #9 - - 345 835 - Advertiser #10 - - - 800 - Total $2,301 $3,838 $6,835 $14,502 $5,638% of Total 30.5% 25.8% 34.8% 38.5% 26.9%

100% rebuy rate among top clients since 2007 Growth within audience, product capability and original production have led to consistent partnership

investment across client roster. Average investment has grown 3x since 2007

Strong, Loyal Brand RelationshipsHighly Favorable Rebuy Rates with Increasing Annual Commitment

Historical Advertising Revenue – Top 10 Advertisers ($ 000s)

Monetization

Source: As per Company management.1 As of April 30, 2011.


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Entertainment29.6%

CPG23.3%

Consumer Electronics

14.5%

Gaming7.9%

Beverage7.4%

Automotive5.5%

Other11.9%

Entertainment30.3%

CPG18.5%

Consumer Electronics

11.3%

Gaming10.4%

Beverage7.1%

Automotive4.1%

Other18.2%

Broad Customer BaseAdvertiser Relationships Span All Verticals

Historical Advertising Sales by Product Category


Monetization

FY 2010 Q1 2011


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Branded Content Overview


Monetization

Brands’ respect for our content and knowledge of online video audience lead them to approach Break Media to create content for their campaigns

Providing branded content allows Break Media to:- Act as creative partner with brands / agencies rather than as a vendor- Achieve larger ad commitments and meaningful first time commitments- Create “content” showcases that brand managers share within the company fueling further interest

Examples of Branded Content

$450k program Campaign to promote new line of laptops and tablets Creating four original videos, two parody music videos and

two "how to avoid zombie" videos which ties into their planned TV campaign

Partial sponsorship of new Break Media tent pole “The Nerd Machine” at Comic-Con International

Expected flight: July 2011 – September 2011

$800,000$600,000 $500,000 $400,000$400,000

First Time Advertising Purchases of Select Advertisers

$500 – $800k program Multi-episode branded entertainment program Distributed through custom video units created by Break Media Increased program investment from $500k to $800k to add

additional episodes as well as user submitted video contest Contest encouraged users to submit videos which demonstrated

a “better way” to perform an everyday task


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Respected Global Sales Organization

Break Media Advertising Metrics Awareness 2 Satisfaction 3

Score Relative to Average 28% 137%

Advertising Perceptions 1

Break Media ranks #1 in advertiser satisfaction

Lower than average rating in advertiser awareness indicates room for growth

Global Presence

Unique Market Research Highly Efficient Sales Force 4

Monetization

Headquarters

Satellite Office

Headquartered in Los Angeles with offices in New York, Chicago, San Francisco, Dallas, Detroit, Toronto, London and Shanghai

1 Source: Advertiser Perceptions 2010 Advertiser Intelligence Report.2 Represents index of percent considering advertising with media brand in the next six months. 3 Represents index of percent rating satisfaction with media brand 7-10 on a 10-point scale. 4 Represents sales force headcount for North America only. Excludes sales support staff and managers. Headcount as of May 31, 2011.

Break Media has built an efficient sales force over the last 5 years

Platform growth and scale have enabled sales team to increase average campaign size and customer loyalty

5 710

1417

0

10

20

2007 YE 2008 YE 2009 YE 2010 YE 2011 YTD

Sales force headcount


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III. Infrastructure Overview


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Corporate Structure 219 Full-Time Employees as of Q1 2011

Admin Business Development Sales Marketing Content

43 Employees

Keith Richman, CEO

Engineering and

Technology

Huan Le, SVP Business

Development

Andrew Budkofsky,

EVP Sales and Partnerships

Andy Tu, VP Marketing

Jonathan Small, EVP

Editorial and Programming

Acquisitions / Distributions

Break Studios

Editorial / Creative Labs

4 Employees

2 Employees

33 Employees

Gaming

Gaming (US)

Gaming (Shanghai)

6 Employees

39 Employees

Finance

HR and Other

6 Employees

5 Employees

Marketing, Research and

PR

Design

SEO

6 Employees

2 Employees

3 Employees

Sales, Support and Other 1

Integrated Marketing /

Ad Ops

Break Media Performance

36 Employees

17 Employees

5 Employees

IT

Development, Production and Other

5 Employees

40 Employees

Andy Doyle, CFO

Network

Account Management

2 Employees

Publisher Development

2 Employees

Source: As per Company management.1 Includes domestic and international sales force, sales support team, managers and other sales staff.


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Highly Flexible Technology

Plug-in architecture allows for quick addition of ad products and features Ad rules accelerate

development of precise targeting of ads to consumers and properties In-house ownership increases

flexibility and decreases cost

All properties are built around central data feeds that allow us to rapidly put our products on multiple platforms such as Facebook, iPhone, iPad and the web without requiring content re-encoding As we change our data feeds,

all of the platforms are automatically updated We can mix and match to

present device-appropriate information (e.g. iOS versus Android)

Architecture allows addition or deletion of specific content based on data feeds CMS abstracts data feeds from

presentation Cache allows for quick delivery

of presentation

Platforms include iPhone, Android, Blackberry, WinPhone 7, Roku, Samsung and Boxee Break.com currently rolled out

– GameFront and Screen Junkies will soon be available Presentations are native for

every platform, giving the user an organic and compelling experience in each environment

Apex Data Feeds Consumer Websites Mobile / PF / Facebook

Web Sites

Apex

Ads

Mobile and Platforms

Data FeedsCo

nten

t


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Easily create, traffic and track custom ad units across any web property and platform Custom units allow for greater brand awareness at high CPMs Ability to have employees create and track high value units like video roll – expandable banner with videos Ability to respond quickly to marketplace with critical units such as Brand Selector Live campaigns include Sony, Rent a Wheel and more

Break Media’s Apex Ad Server addresses the challenges of today’s ad marketplace and creates a flexible platform for adapting to the future, allowing:– Rapid creation of custom ad units– Low cost video ad serving– Low cost campaign and custom ad tracking– Flexibility to offer new ad products in video

marketplace, such as CPE and CPV– Multi-platform support across web, mobile and CE

devices– Core base of technology needed for advanced brand

protection and targeting needs

Apex Advertising Platform

Custom Ad Creation: Tabs and In Video Units

Overview Key Differentiating Factors

Cost Savings– Break Media saves significant capital by running video

ads and custom trackers through Apex Flexibility

– Can create new types of ads, integrate ad data suppliers, optimization technologies

Brand Protection and Targeting– The investment in Apex leaves Break Media well

positioned to develop further capabilities critical for success in the online space


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Dynamic publishing environment allows for any-time publishing

Caching of content prevents slow, computation-heavy processes for delivery of site to users

Integration with CDNs puts videos on the edge, decreasing delivery time and capital costs

Tiered architecture allows for delivery onto any platform: Web, iPhone, Android or CE

Break Architecture Optimized for Video Delivery / Dynamic Updates

CDN

Xcode(media transcoding)

www.break.com service.break.comupload.break.com

my.break.com

Foundry Loadbalancers

Web(static content)

IIS(static content)

Email

CMS

Utilities

App(dynamic content)

ASP .NET MVC

Memcache

Service Layer

Data Layer(Nhybernate ORM

ADO .Net)

DB

Varnish


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Any-time content publishing allows Break Media to respond to any trending Internet topic

Highly-optimized use of WordPress reduces development cost while providing customized user experiences

Abstraction of ad delivery from content allows ability to create unique ad units targeting to individual users while not requiring new code

Sites scale to increased volumes seamlessly, requiring no additional code (only servers)

WordPress Sites Architected for Rapid Textual Content Delivery

www.gamefront.com files.gamefront.comuploads.gamefront.com

Foundry Loadbalancers

Memcache Memcache

CDN

DBDB DB

WordPressNetwork Sites File Meta Services File Upload/MgmtServices

CMS CMS

Files Info Plugin

CMS

Files Meta Data Layer (Zend MVC)

Data Layer

File Service Layer (Zend MVC)

Transcoding Service

Data Layer

DB

Filesnetwork(doom3.gamefront.com

halflife2.gamefront.com…)


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IV. Growth Opportunities and Financial Performance


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OriginalContent

Cost per Episode $600 $8,038 $75 $1,000 $600

Value Creation

$100k ad buy

$660k ad buy

1mm+Views

$750k+ ad buy

Expands Verticals

Break Media is Poised to Take Advantage of Significant Growth Opportunities in the Core Business

Audience and Engagement Content

Overview of Core Growth Opportunities

Monetization Mobile and Off-Platform opportunities

Increase focus on social to drive continued growth, audience engagement, improved registration funnel and data collection

Offer greater personalized content experiences

Invest in the “gamification” of content with rewards for frequent site visitors and contributors

Leverage existing platform to localize content in high growth international markets: UK; Australia; Western Europe

Invest in traffic that generates positive ROI

Ramp up creation of original series for distribution on Break properties, YouTube and our network

Create original intellectual property at high volumes

Ability to replicate past success in multiple video formats

Significantly enhanced Break.com mobile to enable increased content delivery with more social functionality (iOs, Android)

Rollout of specific mobile app for each O&O property

CE deals already in place to distribute Break.com onto TVs

Expand sales staff to take advantage of massive scale in distribution

Sell expanded audience segments in new verticals

Ability to improve ad targeting through rich audience dataset

Integrate eCommerce capabilities into platform

Further invest in video-related, ad-focused technology

Increase brand and trade exposure through campaigns and conference sponsorships


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Financial model represents management’s base case projections through 2012E

Historical and projected financials reflect Break Media’s existing core business lines only

– Model includes the development of a new content vertical slated for Q2 2012

– Model excludes the impact of the Company’s gaming initiative and Modern Man joint venture

– Model excludes use of proceeds from a potential Q4 2011 fundraise and potential acquisitions

Projected financials utilize “top-down” forecast for traffic and revenue for individual business lines

– Traffic forecast segmented by specific sources of traffic (i.e. direct, organic, referral)

– Revenue forecast includes detailed assumptions for ad unit types, sell-through percentages and RPM rates for business lines including O&O properties, Publisher Network, Video Network, Mobile, YouTube, Break Performance and Licensing

– Management also forecasts revenue across business lines by geography (North America and Rest of World)

Cost forecast includes detailed headcount schedule by function

Independent “bottoms-up” analysis used by management to substantiate assumptions used in forecast model

Financial Model Methodology


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Extraordinary Revenue Growth

($ in millions)

Revenue

Adjusted EBITDA 1

Source: As per Company management.Note: Historical and projected financials only reflect existing U.S. core business lines. Excludes gaming initiative and ModernMan joint venture.1 Adjusted EBITDA excludes customer list amortization, content amortization, Break Studios amortization, acquisition / gaming expenses and stock-based compensation.

$2.9 $7.5$14.9 $19.6

$37.7

$56.7

$92.5

$0

$20

$40

$60

$80

$100

2006A 2007A 2008A 2009A 2010A 2011E 2012E

($1.1) ($2.4) ($1.8)

$0.4 $1.1 $2.9

$14.7

($5)

$0

$5

$10

$15

$20

2006A 2007A 2008A 2009A 2010A 2011E 2012E


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Detailed Financial Overview($ in millions)

Historical and Audited Income Statement

Source: As per Company management.Note: Historical and projected financials only reflect existing U.S. core business lines. Excludes gaming initiative and ModernMan joint venture.1 Adjusted EBITDA excludes customer list amortization, content amortization, Break Studios amortization, acquisition / gaming expenses and stock-based compensation.

Fiscal Year Ended December, 2006A 2007A 2008A 2009A 2010A

Revenue $2.9 $7.5 $14.9 $19.6 $37.7% Growth 170.9% 156.8% 97.1% 32.2% 91.8%

Cost of Sales 1.4 2.2 3.2 3.7 12.7Gross Profit $1.5 $5.3 $11.6 $16.0 $25.0

% Margin 51.8% 70.4% 78.2% 81.4% 66.3%

Operating Expenses $2.7 $8.2 $13.8 $15.9 $26.8% of Revenue 93.2% 108.2% 93.0% 81.0% 71.0%

Adjustments 1 0.1 0.5 0.4 0.4 2.9Adjusted EBITDA ($1.1) ($2.4) ($1.8) $0.4 $1.1

% Margin NM NM NM 2.2% 3.0%


46For Sony Use Only

Detailed Financial Overview (continued)($ in millions)

Projected Income Statement

Source: As per Company management.Note: Historical and projected financials only reflect existing U.S. core business lines. Excludes gaming initiative and ModernMan joint venture.1 Adjusted EBITDA excludes customer list amortization, content amortization, Break Studios amortization, acquisition / gaming expenses and stock-based compensation.2 Represents global monthly uniques for all O&O properties. Fiscal year end represents average of fiscal quarters.3 Represents RPM for Break property (North America). Fiscal year end represents average of fiscal quarters.4 Represents sales force headcount for North America only. Excludes sales support staff and managers. Fiscal year end represents average of fiscal quarters.

2011E 2012E FYEQ1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 2011E 2012E

Revenue $9.3 $13.5 $15.5 $18.3 $14.8 $22.1 $27.1 $28.6 $56.7 $92.5% Growth (15.0%) 45.1% 14.2% 18.5% (19.3%) 49.3% 22.5% 5.6% 50.4% 63.3%

Cost of Sales 3.9 4.9 5.3 6.5 5.1 7.6 9.3 9.8 20.5 31.8Gross Profit $5.4 $8.7 $10.2 $11.8 $9.7 $14.5 $17.7 $18.8 $36.1 $60.7

% Margin 58.3% 64.1% 66.0% 64.4% 65.8% 65.5% 65.5% 65.8% 63.8% 65.6%

Operating Expenses $6.9 $8.3 $8.8 $9.7 $9.5 $11.3 $12.6 $13.2 $33.7 $46.6% of Revenue 73.6% 61.6% 56.7% 52.8% 64.0% 51.2% 46.6% 46.1% 59.4% 50.3%

Adjustments 1 0.2 0.1 0.1 0.1 0.1 0.1 0.2 0.2 0.5 0.5Adjusted EBITDA ($1.3) $0.4 $1.5 $2.2 $0.3 $3.3 $5.3 $5.8 $2.9 $14.7

% Margin NM 3.1% 10.0% 12.2% 2.3% 14.8% 19.5% 20.2% 5.2% 15.9%

Summary Drivers / Key MetricsAverage Monthly Uniques (millions) 2 46.0 47.6 50.3 54.1 57.3 60.8 64.6 68.7 49.5 62.9Home Page Takeover RPM 3 ~$25.00 $25.00 $25.50 $26.01 $26.53 $27.06 $27.60 $28.15 $25.50 $27.34Video Page Run of Site RPM 3 ~$7.45 $7.45 $7.52 $7.60 $7.68 $7.75 $7.83 $7.91 $7.52 $7.79Sales force headcount 4 17 20 21 24 25 27 29 31 21 28Direct Revenue / Salesperson $1.57 $1.66


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$2.9

$1.6

$2.6

$2.4 $0.2

$2.9 $0.4

$1.6 $14.7

$0.0

$4.0

$8.0

$12.0

$16.0

2011E Adj. EBITDA

O&O Audience Growth

O&O RPM Growth

Direct Video Publisher Network

Mobile YouTube Other 2012E Adj. EBITDA

2011E-2012E EBITDA Bridge($ in millions)

2011E-2012E EBITDA Bridge

Source: As per Company management.Note: Historical and projected financials only reflect existing U.S. core business lines. Excludes gaming initiative and ModernMan joint venture.1 Adjusted EBITDA excludes customer list amortization, content amortization, Break Studios amortization, acquisition / gaming expenses and stock-based compensation.2 Includes contribution from Break Performance, remnant, licensing and other revenue.

1 12


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Break Media’s mission is to create, distribute and monetize the most compelling digital media content for a global audience across all platforms

To accelerate the realization of our goal, additional capital could be deployed in the following areas:– Grow advertising sales team– Aggressively invest in social, mobile and over-the-top product offerings– Ramp up content production and licensing– Pursue M&A opportunities– Create additional agency, advertiser and consumer awareness– Diversify into underpenetrated content verticals and expand internationally– Accelerate roll-out of Apex advertising platform– Invest in traffic that generates positive ROI

Opportunity to Deploy Additional Capital at High ROI


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Consumers worldwide are increasing time spent with digital content across multiple platforms

Video dollars have only just begun to move online, following consumer behavior patterns

Aggregating digital audiences requires deep expertise of current and emerging search, social media and mobile channels

Brands have limited opportunities to connect with online audiences at scale and allocate dollars to partners with reach

Creating profitable digital content is both an art and a science and has proven to be a significant challenge for most companies

Key Takeaways

Break Media has created a profitable new media company with massive reach, broad content creation and distribution capabilities and a highly efficient digital advertising sales infrastructure


50For Sony Use Only

The Raine Group Contact Information

For further information, please contact:

Craig CollarPartner

+1 (310) 987-7712 [email protected]

John SalterPartner


Ben SternbergExecutive Director+1 (310) 987-7707

[email protected]

Joe RavitchPartner


Colin NevilleAssociate

+1 (212) [email protected]

Michael KosdanAnalyst

+1 (212) [email protected]

Documents

Break Media - WikiLeaks · Break Media is a recognized category leader in providing content to users and solutions to advertisers Men are the primary influencer in automotive, investing,