1.

Market Study

2.1 Market Definition

Our market is at the crossroads between music and technology. Indeed, our main markets
are the legal music download and the access to the broadcast of streaming music.

We’ll generally focus our market on Europe although some of our potential competitors are
well established in the USA, none of them is very famous in France or other European
countries. Therefore we will probably start our activity focusing on the European market. It
will make the choice of companies to advertise and also the concerts scheduling easier."

2.2 Markets specifications

2.2.1 Music Download Market

During the past two years, there have been many movements in this market. Indeed, 12
companies operating in this market have disappeared, either due to judicial liquidation,
either due to fusion with other companies.

For examples, GarageBand merged with iLike, MusicGiants and LostTunes were forced to
close, etc.

Nevertheless, during the last two years, there was a big increase of the numerical market,
essentially due to the massive apparitions of independent music labels.

The market is growing steadily without compensating the actual physical market losses. In
the first half of 2010: 

42.5 M €, an increase of 26.9% in value compared to 2009, representing 10.5% of the total
market value of recorded music. 

This turnover, which expresses a public contract, does not include all the revenues of music,
and financial flows related to minimum guarantees for the termination of the portion of
advertising revenue for streaming or subscriptions to premium offerings, recently proposed
segment market. For example, Deezer announced 20000 Premium subscribers at the end of
the first half of 2010. 
This market is overwhelmingly directed to the web because users, who download from their
Smartphone, download in fact on a web platform.

The latest estimates of the Nielsen Music firm, on the evolution of the digital market in the
first half of 2010, in Europe and the USA, show a positive trend in the markets in Europe and
a stagnant U.S. market, which is a worrying sign for iTunes because it is its main market.

The development in the U.S. is heavily constrained by a lack of digital distribution networks
and a lack of competition which was attended by the music industry.

So, our software will be included in a growing European market; we will first deploy our
product in Europe.

The graph below shows the evolution of both physical and numerical music purchases in
Europe:

However, even if the figures are quite good and interesting, we must consider the evolution
of the illegal download.

Here is a schema representing the percentages of illegal download users in France, in 2009:
37% of interviewed people were between 15 and 24 and the rest were between 35 and 49
years old.

Those figures are impressive, since at least 20% of the interviewed people practice the illegal
downloading.

This chart shows the online music categories comparing 2 years of the same month, the
most categories are streaming while the least part is P2P download.

In this chart we can see performance-rights distributions in different regions. Europe took
the most part which means the performance-rights are very important and are well
respected by people in Europe.
 2.2.1 Streaming Market

Even more dynamic than the internet download, streaming (online listening) and
subscription packages start to generate significant revenues. The market for streaming
music, where sites like Deezer or Jiwa are positioned, has a growth of 318%, which means 5
million of euros. Those incomes are equivalent to those of Internet and mobile
subscriptions, up 130%.The exploding mobile subscriptions (+ 409%), € 2.6 million, higher
than Internet subscriptions.

The graph below represents the incomes of streaming and subscriptions, in millions of Euros
for France:
Red: Streaming

Blue: Mobile Subscriptions

Yellow: Internet Subscriptions

The graph below represents the evolution of the streaming incomes, in millions of Euros,
from year 2007 to year 2010 for France:

Online sales of music increased by 28.7% in first quarter 2010 compared to the same period
in 2009, reaching 23.1 million Euros. By comparison, the physical market rose only 4.3% to
105.5 million Euros. The download, represents half part of the digital market, to 12.5 million
(50.5%). Streaming saves only about $ 2.6 million of revenue and grew by 103.8%.