Professional Documents
Culture Documents
Silverwood Partners Strategic Analysis - Media Technology (NAB 2011)
Silverwood Partners Strategic Analysis - Media Technology (NAB 2011)
Investment
t t Bankers
B k
Strategic Industry Analysis
32 Pleasant Street
Sherborn, MA 01770
www.silverwoodpartners.com Member FINRA and SIPC
Leading Media Technology Investment Bank
Selected Media Technology Engagements
Firm is highly active in media technology M&A transaction flow
Firm has worked with leading media technology companies – advising or selling
companies to some of the premier companies in the industry
Evolving Media Ecosystem
Netflix:
First‐Run
First Run Rights
Rights
2 2011E Revenue(1):
Facebook: $1.3 Billion
M i Di t ib ti
Movie Distribution (1) Citi Investment Research and Analysis
(1) Citi Investment Research and Analysis
US Pay TV Subscribers – Cord‐Cutting?
Q1 10 Q2 10
Q1 10 Q2 10 Q3 10 Q4 10
Q3 10 Q1 11 Q2 11
Q4 10 Q1 11 Q2 11
3 481K ‐216K ‐119K 65K
? ? Source: SNL Kagan
Pause and Reassess 3D
“I think there was confusion about 3D early” – Brian Dunn CEO, Best Buy
Despite hype, sales of 3DTVs far below expectations (Source: CEA)
6 “Reality may finally be coming to 3D expectations.” – WSJ 1/2/11
“3D is not a category, it is not a product, it is a feature” – Gary Shapiro, CEA
7 ?
2009 2010 2011
“KIT plans to release news regarding this larger
8 t
transaction by the end of Q1 or in early April.”
ti b th d f Q1 i l A il ”
Upcoming “[KIT] anticipate the larger target being in the
Acquisition? vicinity of $50 million of total revenue”
Increased Private Equity Activity
9 Transaction announced on 6/27/10 Transaction announced 3/15/11
EExpect Additional
Addi i l
Near‐term
Closed on 1/1/11 – substantial activity Values business at 5.0x trailing Announcements
(asset sales or acquisitions) to follow? revenue
Comparison of Market Value Comparison of Valuation
Enterprise Value/Revenue Multiple
“New Media” “Old Media”
60
6.0x
2.1x
$300 Billion $308 Billion
Source: Business Insider Source: CapitalIQ
Number of Cord‐Cutters Worldwide
How Viewers watch Favorite Shows
How Viewers watch Favorite Shows S
Source: Informa Telecoms & Media, Feb, 3, 2011
I f T l & M di F b 3 2011
Source: Deloitte “The State of the Media Democracy”
18,000
Rest of World 16,075
Mobile Devices & 20% 16,000
Video Game Consoles 7% North America
14,000
58% Europe
Online 12,000 11,189
19%
Asia‐Pacific
Thousands
19% 10,000
DVD
19% 7,457
2010 8,000
On‐Demand TV
On‐Demand TV 20%
17% 2007 6 000
6,000 4,499
32% 4,000 2,553
Time‐shifted TV 1,193
25%
2,000
Live TV 74%
74% 0
2010 2011 2012 2013 2014 2015
0% 20% 40% 60% 80%
COMPLEMENTARY COMPETITIVE
21 32 110
1
2 100 9
1
57 45 9
9 16
5
1
1
34
25 30
116
8 24
7
53 33
18
8 1
23
Source: CapitalIQ,
CapitalIQ Company filings,
filings (1) Company Press Release Relevant Business Unit Performance
Relative Market Impact We are here
Source: Silverwood Partners
File‐Based Infrastructure
Industrry Revenue
HD Transition
Digital Mandate Mobile Technology
3D Web distribution
Expansion Contraction Stabilization Macroeconomics
2004 2005 2006 2007 2008 2009 2010 2011 2012
September 2009 April 2010
• Profitable for 17 consecutive years; 80%
market share in traditional linear color
correction market
• Da Vinci Resolve typical average sale
price of $200,000 – $500,000
• Some configurations ran as high as • Most powerful system less than
$800,000 $150,000
Work flow Revenue flow
Charts sourced from Devoncroft Partners Big Broadcast Survey 2009 – 2011
MORE Important in 2011 LESS Important in 2011
Multi‐platform content delivery Transition to HDTV operations
IP networking and content delivery
IP networking and content delivery File‐based
File based / tapeless workflows
/ tapeless workflows
Improvements in compression efficiency
Video on demand
Move to automated workflows
Targeted advertising
Targeted advertising
Centralized operations
3D TV
Transition to 5.1 channel audio
Analog switch‐off Outsourced operations
Outsourced operations
Transition to 3Gps Reduction in carbon emissions
Work flow Revenue flow Source: Devoncraft Partners
Top reasons cited for importance of multi‐platform content delivery
100% 4% Other
9% Achieve competitive advantage in market place
6% Retain consumer eyeballs
75%
Make sure my content and brand is
32%
available on all distribution platforms
50%
Incremental
Revenue
25% 49% Provides potential for new revenue streams
Provides potential for new revenue streams
Source: Devoncroft Partners; Big Broadcast Survey 2010
0%
US Local Broadcast TV Revenue Outlook
Source: BIA/Kelsey, Borrell Associates, Inc.
Growth Expectations: Web Revenue as % of TV Advertising Revenue
2014 versus 2010
TV Advertising
Web Revenue
Revenue
100% ‐2.7%
2.7%
Engineering Decision Strategic Decision
al
Norma
Stable, predictable Social Business Strategy
business model Business Media Impinging
Model
N
on Technologygy
Technology sourcing based
Technology sourcing based Migration N
New
on better, faster, cheaper Devices
Growth of Online Video vs. Ad Spending (US)
Source: comScore
Existing US
Opportunity
US Online Advertising vs.
g Newspaper Advertising
p p g
Newspaper* Online
$50.0
$40.0
$40 0
USS Billions ($)
$30.0
$20.0
$10.0 Online Surpasses
Newspapers
$0.0
* Includes Online and Print
Source: comScore, IAB, PWC, Newspaper Association of America
Historically Isolated Industries
Video Technology
Video Technology Advertising Technology
Advertising Technology
Reducing production costs Adjusting business model to new
Automating operations advertising environment
Increasing quality of user Building efficiency on how advertising
experience is bought and sold
Expanding content distribution
p g Maximizing revenue through
to new media outlets increased monetization, optimization
Measuring advertising effectiveness
Investor Sentiment Indicator
Apr. 2011
Sept. 2010
Apr. 2010 Source: Based relevant tradeshow investor conversations by Silverwood team
$60B
$55B
Sept. 2010 Apr. 2011
p
DivX Shareholder Return 1/1/09 to 2/18/11
Source: CapitalIQ, SEC Filings
4/9/2010 2/25/2011
Raised: 230.0M; Enterprise Value: $1.14M Secondary offering raising $71 million
Enterprise Value/Revenue Multiple: 5.3x Enterprise Value/Revenue Multiple 3.5x
12/7/2010
12/7/2010
Secondary offering raising $110.4 million
Raised: $202.9M; Enterprise Value: $1,293.0M Enterprise Value/Revenue Multiple: 3.4x
Trades at 82x Revenue
10/5/2010
1/25/2011
Secondary offering raising $31.2 million
Raised $151M; Valued at $1.5B Trades at 10x trailing 12 month revenue
Trades at 8x Revenue and 40x EBITDA
4/13/2010
1/26/2011
Raised $1.6B Secondary offering raising $100 million
Trades at 3x Revenue and 13x EBITDA Trades at 3x trailing 12 month revenue
Jan. 2009 Designs and sells monitor & analysis, test & measurement,
and video transport systems.
Jun. 2009 Provider of video compositing solution “Nuke” used in the
post‐production of professional feature films.
Mar 2010
Mar. 2010 Manufacturer of KVM,DVI and camera extenders, digital
Manufacturer of KVM,DVI and camera extenders, digital
cross‐point video switches, and secure console servers.
Apr 2010
Apr, 2010 Optical transport solution provider delivering a platform
for next‐generation cable services.
Well‐known supplier of a variety of broadcast equipment
Dec. 2010 throughout the video production workflow
Provider of video compositing solution “Nuke” used in the
Mar. 2011 post‐production of professional feature films.
Source: Public filings, IABM data
Trading at varied multiples
Trading at varied multiples Trading at strong multiples
Trading at strong multiples Trading at strong multiples
Trading at strong multiples
Need to buy revenue – very Ability to pay highly strategic Aggressively pursuing
little organic growth in industry price acquisitions of technologies
Acquisitions more Slow‐moving given size of solving key customer problems
cost‐effective than R&D organization and lack of Ability to pay prices separate
Few companies with capital to dedicated focus on industry from economics of business
offer substantially cash Often acquisitions of industry Expansive perspective given
consideration participants grow out of
p p g fundamental shift in
partnerships advertising technology
Tinderbox
Occurred frequently during 2009 given industry disruption
Strength of industry recovery has increased alternatives for
g y y
Product Line smaller businesses
Purchases Valuations have improved making transactions a challenge
from buyer perspective
Challenging transactions to complete given inherent
Equity complexities
Merger Increasingly attractive option to improve commercial
positioning of business
iti i fb i
Aggressively pursuing acquisitions
Interest in media technology stems from disruptions in media
Private Equity ecosystem and fragmentation of vendors
Sponsored Lack of easily identifiable organic growth opportunities
requires an acquisition driven strategy
2.0x – 5.0x
1.0x ‐ 2.0x
<1.0x
* Multiples refer to Enterprise Value / Revenue
p p
Company
Company Passing $10, $20, $50MM in sales; selling on
Passing $10 $20 $50MM in sales; selling on
Less than $10M in sales
Size combination of growth and EBITDA level
Strong profitability if operating in mature space;
Consistently cash flow negative – no expectation of
Profitability profitable or approaching profitability if in
near‐term profitability
rapidly growing segment
Addressable Products have narrowly focused use case for Technology applicable to larger video use cases
Market broadcasters and post‐production facilities (military, medical, enterprise)
Product
Work flow – product is a cost of doing business; Revenue flow – driving incremental revenues,
Value
focus on efficiency is inherently limited unlimited ability to add value
Proposition
Product Hardware focused products requiring expensive Software differentiated products with lower‐
Positioning direct sales model touch sales model
Concentrated in either the high‐end customer
No consistent focus of customers resulting in a
Customers
Custo es or low‐end customer –
o o e d custo e sa sales resources
es esou ces
scattered sales and support model
d l d d l
efficiently allocated
Sale process poorly timed with industry and market Sale process well‐timed with industry and
Timing
trends market trends
5.0x+
3.0 ‐ 5.0x
1.0 ‐ 3.0x
<1.0X
Source: Capital IQ
Source: VideoNuze, Silverwood Analysis
VideoNuze, Silverwood Analysis
Source: VideoNuze, Silverwood Analysis
VideoNuze, Silverwood Analysis
• Media technology executive involved with the broadcast industry for over 25 years
Graham Sharp • President of xtranormal,
xtranormal provider of intuitive movie
movie-making
making tools
• Director of Media Asset Capital, a full service media consultancy
Senior Industry Advisor
• Director with AV3 software, a creative software developer and vendor
Silverwood Partners
• Served as EVP & GM of Avid's Video division; US liaison to IABM
• Held executive positions with Post Impressions, Discreet Logic and Dynatech
N ith the
Neither th information
i f ti nor any opinion
i i expressed d herein
h i constitutes
tit t an offer,
ff or an invitation
i it ti to t make
k an offer,
ff t buy
to b or sellll any securities
iti or any
options, futures or other derivatives related to such securities. Silverwood, its partners, members, officers, employees, contractors, referral sources or
members of their families may have a long or short position in any securities of the companies mentioned in this Strategic Analysis or in related
investments. As an investment bank, Silverwood may be actively seeking to be retained by, may actually be retained by or may have in the past been
retained by any of the companies mentioned in this Strategic Analysis. In addition, Silverwood personnel may have in the past provided services to
certain companies mentioned in this report when employed by other firms. Furthermore, consultants to or referral sources for Silverwood, or former
p y
employees of Silverwood with continuing g compensation
p arrangements
g with Silverwood,, mayy have,, or mayy have clients with,, p
positions in securities
referenced in this Strategic Analysis. For information on recent investment banking relationships between Silverwood and the companies mentioned
in this Strategic Analysis, please contact: Chief Compliance Officer, Silverwood Partners LLC, Silverwood Farm Place, 32 Pleasant Street, Sherborn,
MA 01770.
Silverwood does not (i) guarantee the accuracy, timeliness, completeness, or correct sequencing of the information contained herein, or (ii) warrant
any results from the use of the information contained herein. This Strategic Analysis has been prepared as of the date indicated and may become
unreliable because of subsequent market or economic circumstances.
circumstances
IN NO EVENT WILL SILVERWOOD, ITS PARTNERS, MEMBERS, OFFICERS, EMPLOYEES, CONTRACTORS, REFERRAL SOURCES AND
RELATED PERSONS, OR OTHER PERSONS TRANSMITTING THIS STRATEGIC ANALYSIS BE LIABLE TO THE USER OR ANYONE ELSE FOR
ANY CONSEQUENTIAL, INCIDENTAL, SPECIAL, OR INDIRECT DAMAGES (INCLUDING, BUT NOT LIMITED TO, LOST PROFITS, TRADING
LOSSES, INVESTMENT LOSSES AND DAMAGES THAT MAY RESULT FROM THE USE OF THIS STRATEGIC ANALYSIS OR FOR OMISSIONS
OR INACCURACIES IN THIS STRATEGIC ANALYSIS) EVEN IF ADVISED OF THE POSSIBILITY OF SUCH DAMAGES. THIS DOCUMENT IS
NOT A “RESEARCH REPORT” AS DEFINED BY NASD RULE 2711 OF FINRA.
FINRA EFFECTIVE AS OF THE DATE HEREOF OR AS AMENDED.
AMENDED AS A
CONDITION TO USING THIS STRATEGIC ANALYSIS, THE USER EXPRESSLY WAIVES ANY CLAIM THE USER MAY HAVE AGAINST
SILVERWOOD, OR ANY OTHER PERSON WITH RESPECT TO THIS STRATEGIC ANALYSIS.
THERE IS NO WARRANTY OF MERCHANTIBILITY, NO WARRANTY OF FITNESS FOR A PARTICULAR USE, AND NO WARRANTY OF NON-
INFRINGEMENT. THERE IS NO WARRANTY OF ANY KIND, EXPRESS OR IMPLIED, REGARDING THIS STRATEGIC ANALYSIS OR THE
INFORMATION CONTAINED HEREIN.