the epic channel july 16, 2012 draft july 13, 2012 draft for discussion only
TRANSCRIPT
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The Epic Channel
July 16, 2012
DRAFT July 13, 2012
DRAFTFOR DISCUSSION ONLY
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• Epic is a “green field” channel focused in Indian mythology folk lore and history– Build a brand rooted in India’s past– Brand will stand for enlighted evocative entertainment and experiences
• Target male audience that are currently under-served in India
• Structured as a startup with management contributing sweat equity
– Management lead by Mahesh Samat, former CEO Disney India– Management to have 20% ownership (Samat 12%, key executives 8%)– Exit in [5] years at market valuation
• Sony deep water mark is $23M over a 3 year period; an IRR of 25% and NPV $14M– Impact to FYE13 EBIT is ($3.5M)
• Contingent upon digitalization rolling out in November 2012, EPIC channels would launch in FYE14
Executive SummaryDRAFT
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• Digitalization provides the opportunity to target content at more segmented audiences
• There is market gap as currently there are no male skewing entertainment channels
– Opportunity to carve out a segment of viewers from GEC and news channels
• Mahesh Samat, the former CEO for Disney India, will lead the management team on a startup format which reduces risk to MSM/Sony
• Leverages MSM advertising sales, distribution and back office
• Natural entry into the digital space / broadens MSM portfolio into new areas of media
The OpportunityDRAFT
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• Indian mythology, folk lore and history– Many stories, many myths, long history that have not been exploited– Content philosophy: an entertaining look at history and mythology with investigative stories– Few key fictional programs for broader appeal
• After the first launch campaign, avoid mass media and use digital viral elements to spread awareness
• Initially in English / Hindi followed by language dubs in Tamil / Telugu
• Channel will target male audience and be positioned for young adults– Draw audience from GEC but more importantly from news channels– Reach new television audiences that currently do not consume television
Channel Content / StrategyDRAFT
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Summary FinancialsDRAFT
Epic channel FYE13 FYE14 FYE15 FYE16 FYE17 FYE18 FYE19 FYE20 FYE21 FYE22 FYE23
Revenue
- Subscription 0.0 2.0 3.8 5.5 7.3 8.7 10.5 11.8 13.3 14.5 16.9
- Adsales 0.0 1.7 6.1 11.6 14.5 17.3 20.2 23.8 27.6 31.8 35.5
Total revenue 0.0 3.7 9.9 17.1 21.8 26.0 30.7 35.6 40.9 46.4 52.4Growth rate % 169% 72% 28% 19% 18% 16% 15% 13% 13%
Production 2.2 10.9 7.6 8.3 9.1 9.6 10.4 11.1 11.5 13.2 15.2
Marketing 0.0 3.1 1.3 1.1 1.3 1.4 1.6 1.7 1.9 2.1 2.3
Affiliate 0.0 0.9 1.1 1.3 1.6 1.7 1.8 1.9 2.0 2.1 2.2
Staff cost 0.7 2.1 2.3 2.7 3.2 3.5 3.8 4.1 4.4 4.5 4.9
Overhead 0.2 0.6 0.9 1.1 1.3 1.5 1.6 1.8 1.9 2.1 2.2
Transponders 0.0 0.5 0.5 0.5 0.5 0.5 0.5 0.5 0.5 0.5 0.5
Other Technical 0.2 0.5 0.5 0.5 0.5 0.5 0.5 0.5 0.5 0.5 0.5
IS 0.2 0.2 0.2 0.2 0.2 0.3 0.3 0.3 0.4 0.4 0.5
Total Cost 3.5 18.6 14.4 15.7 17.7 19.0 20.4 21.9 23.0 25.4 28.3Growth rate % -23% 9% 13% 7% 7% 7% 5% 10% 11%
Operating Income (3.5) (14.9) (4.5) 1.3 4.1 7.0 10.3 13.8 17.9 21.0 24.1 OI / Revenue -404% -45% 8% 19% 27% 34% 39% 44% 45% 46%
Headcount 12 32 34 40 44 44 46 49 53 56 58
All figures at US$ MM @ fx55
NPV @ 14% ($MM): $14.3IRR: 25%
Deep Water Mark: (22.9)
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Risk and Mitigation
Risk Mitigation
Digitalization does not proceed as expectedDelaying start of any significant expenditure until Phase I of digitalization is rolled out on November 1, 2012
Programming does not resonate with the target audience
Experience management team with a proven track record that is fully aligned to succeed
Cost inflation in production of content Leverage MSM relationships to keep costs in line
Management turnoverManagement is part owner with a phased vesting for retention
DRAFT
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Next Steps
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• Seek approval from Investment Committee and SPE Board
• Complete and execute long form documents / employment agreements
• Submit filings and obtain regulatory approvals
DRAFT