MSM India

OTT Joint Venture Investment OverviewSeptember 5, 2013

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Executive Summary MSM has an opportunity to invest in a new joint venture company (JVCo) being formed with Network18

Media & Investments Limited (Network18) to own and operate in.com, an over the top online video (OTT) platform

– One-stop entertainment portal that includes movies, TV series, original series and user generated videos from 3 of the top 5 Hindi GEC’s (SET, SAB, Colors)

– Available on all digital platforms both within India and to Indian expats globally

– Balanced revenue model with SVOD, TVOD and advertising Network 18 is an Indian media and entertainment company with operations in TV, internet, film, e-

commerce, magazines and mobile content including:– Several news channels including CNBC-TV18, CNBC Awaaz, CNN-IBN

– A joint venture with Viacom which owns several entertainment channels including Colors, MTV, SONIC, Comedy Central, VH1, Nick, Nick Jr. and Nick Teen

– A joint venture with A+E Networks which owns HistoryTV18

– Network18 currently owns in.com and will sell the site to JVCo for $5M MSM proposes to acquire a non-controlling 26% equity stake in JVCo with a maximum capital commitment

of $9.2M before licensing fees based on the Proposed Business Plan – Capital commitment will be partially offset with license fees MSM will receive for its contributed content with a net

capital commitment of $4.2M

– Under the Proposed Business Plan, the key financial metrics to JVCo and to MSM are as follows:

Key Financial MetricsDiscount Rate of 12%, Terminal Value Exit at 15x EBIT JVCo MSMDeepwater ($36.7) ($4.2)Post-Tax NPV $17.9 $14.8Post-Tax IRR 34% 85%

Notes: 1. FX rate based on MRP rate of 60.2 INR/USD

2. Assumes transaction closes on October 1, 2013

3. MSM Perspective includes fees received for licensed content

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Strategic Rationale

Opportunity for MSM to participate in a large content aggregator

– MSM and Network 18 are two of the biggest broadcasters in India

– Network 18 also brings with it the Viacom 18 channels (Colors, MTV) and its movie library

– A&E network adds to the content mix with Entertainment content from its History, Bio channels

The most progressive television content on one platform, making it an attractive proposition for digital audiences

– With content from SET, SAB and Colors, the platform has 3 of the top 5 Hindi GECs but also content that appeals to young urban youth that make up the digital audience

– MTV is one of the most popular youth and music channels in the country

– The ETV bouquet of channels adds regional content flavor to the content mix

in.com brand is an established brand having high recall value

– Advertising: Leverage the brand of in.com

– Domain Value: A simple but high recall domain name best suited for a mass OTT

Revenue share protects MSM’s downside

– Founding partners to receive 70% share of the founding partners allocation in the content cost pool on the basis of viewership

– With 2 of the top 5 GECs, MSM expects to start with a 50% viewership

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Summary of Proposed Deal Structure and Material Terms MSM proposes to acquire a non-controlling 26% equity stake in JVCo with a maximum capital

commitment of $9.2M based on the Proposed Business Plan – Deal assumes Network18 will own the remaining 74% of JVCo however A+E Television Networks could make a 15% -

20% investment in JVCo and reduce Network18’s stake

– Network18 has an option to sell an additional 15% stake in JVCo to another potential partner with MSM’s express written consent

JVCo has a proposed Initial Term of 5 years– JVCo shareholders may sell their stakes in JVCo after the Initial Term subject to a ROFR by the remaining shareholders

– JVCo will have a Board of 7 directors with 2 directors selected by MSM

– JVCo will acquire the domain name ‘in.com’ from Network18 for a value of $5M

JVCo has set a minimum total capital investment (cap) of INR 214 crores ($35.5M)(1) during the term Each shareholder is obligated to fund it’s percentage interest up to, but not more than, the cap

Additional capital requirements not to exceed a cap will be met through a) non-convertible loans through banks or b) existing shareholders who are entitled, but not obligated, to contribute capital on a pro-rata basis with shareholder interests adjusted accordingly

TBD if MSM does not participate, neither MSM’s equity stake or voting rights will be diluted. Parties will agree to funding options and mechanisms in the long-form agreement which will not dilute MSM’s shareholding

Network 18 (w/possible A&E investment)

JVCo 26%74%

MSM

Note: FX rate based on MRP rate of 60.2 INR/USD

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Proposed JVCo Business Plan

FY14 - FY18

USDm FY14 FY15 FY16 FY17 FY18 Total

REVENUES

Subscriber Revenue 0.3 1.8 4.9 11.3 18.8 37.1

Net Advertising Revenue 0.6 3.2 9.4 21.4 40.1 74.7

Other Revenue 0.4 2.1 5.2 10.3 17.6 35.6

TOTAL REVENUES 1.3 7.1 19.5 43.0 76.5 147.4

EXPENSES

Content Cost 1.8 6.4 13.8 26.1 44.0 92.1

Technical 0.9 2.9 7.6 12.0 14.7 38.1

Marketing 1.9 3.8 4.0 3.7 3.4 16.8

Payment Fees 0.1 0.4 1.0 1.6 2.3 5.3

Personnel 0.9 1.9 2.2 2.5 2.7 10.2

General & Administrative 0.3 0.8 1.3 2.1 3.4 7.9

TOTAL OPERATING EXPENSES 5.8 16.3 30.0 47.9 70.4 170.4

EBITDA (4.5) (9.2) (10.5) (4.9) 6.1 (23.0)

Depreciation & Amortization 0.9 1.8 1.8 1.8 0.9 7.3

EBIT (5.4) (11.0) (12.3) (6.8) 5.2 (30.4)

Taxes - - - - 1.1 1.1

NET INCOME (5.4) (11.0) (12.3) (6.8) 4.1 (31.4)

NET CASH FLOW (7.2) (11.9) (11.1) (6.4) 2.9 (33.8)

CUMULATIVE CASH FLOW (7.2) (19.2) (30.2) (36.7) (33.8)

Fiscal Year Ended March 31

Notes:

1. FX rate based on MRP rate of 60.2 INR/USD

2. Assumes transaction closes on October 1, 2013

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Financial Impact to MSM

MSM Perspective – EBIT Impact During Proposed Business Plan Period

MSM Perspective - Cash Flow Impact During Proposed Business Plan Period

Cumulative Cash Flow Breakeven Expected by FY17

To determine the impact to MSM’s investment earnings, license fees for content contributed by MSM was included

FY14 - FY18

USDm FY14 FY15 FY16 FY17 FY18 Total

MSM EBIT IMPACT

MSM Share of Net Income (1.4) (2.9) (3.2) (1.8) 1.1 (8.2)

MSM License Fees 0.1 0.9 2.7 5.8 10.8 20.3

INCREMENTAL ANNUAL EBIT TO MSM (1.3) (2.0) (0.5) 4.1 11.8 12.1

Fiscal Year Ended March 31

FY14 - FY18USDm FY14 FY15 FY16 FY17 FY18 TotalMSM CASH IMPACT

MSM Share of Net Cash Flow (1.9) (3.1) (2.9) (1.7) 0.8 (8.8)

MSM License Fees 0.1 0.9 2.7 5.8 10.8 20.3 INCREMENTAL ANNUAL CASH FLOW TO MSM (1.8) (2.2) (0.2) 4.1 11.5 11.5 CUMULATIVE CASH FLOW (1.8) (4.0) (4.2) (0.0) 11.5

Fiscal Year Ended March 31

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Next Steps

SPE internal reviews and approvals

Non binding Term sheet signature with Network 18

Long form agreement discussions with Network 18 and signatures

FIPB Approvals (if required)

Prepare for launch