QUICKFLIX (QFX) INVESTOR BRIEFING October 2012 Disclaimer This - - PowerPoint PPT Presentation

QUICKFLIX (QFX) INVESTOR BRIEFING

October 2012

Disclaimer This presentation contains references to certain plans of the Company which may or may not be achieved. The performance and operations of the Company may be influenced by a number of factors, uncertainties and contingencies many of which are outside the control of the Company and its Directors and

• management. The Company makes no undertaking to subsequently update or revise the forward looking

statements made in this presentation to reflect events or circumstances after the date of this presentation.

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COMPANY OVERVIEW

INTRODUCING QUICKFLIX

#1 online movie and TV company now with streaming.

• Australia and New Zealand’s only online DVD

rental and subscription streaming service.

• Listed on the Australian Stock Exchange

(ASX:QFX) since 2005.

• Over 110k paying subscribers and $20m run rate

revenue (annualised). 59% YOY growth to June 2012.

• 28% of subscribers (over 30k) have opted for

streaming since launching in November 2011 in Australia and March 2012 in NZ.

• TimeWarner’s HBO 16% strategic investor.
• Head office in Sydney. Operational centres in

major Australian cities.

Quickflix added streaming to Apple iPad and iPhones in May 2012.

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COMPANY MILESTONES

In 2012, Quickflix transformed from a DVD-only to a DVD plus streaming business.

2004 Launched

• nline DVD

rental Jun 2005 Listed on ASX 1,000 subscribers Sep 2011 Consolidated BigPond Movies DVD 2006 Expanded national

• perations

Nov 2011 Launched streaming in Australia Feb 2012 100k paying customers Mar 2012 HBO 16% invests $10M May 2012 Streaming to iPhone & iPad Dec 2010 50k paying customers Mar 2012 Launched streaming in NZ Dec 2011 Streaming to PC, Mac, Sony Bravia TV & PS3 Apr 2012 Streaming to Samsung, Panasonic smart TV

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BUSINESS OVERVIEW

Online DVD Rental and Streaming

LEADING POSITION IN ONLINE ENTERTAINMENT

Content

Negotiated deals with major studios and in discussions to expand

Distribution / device availability

Broad digital distribution platform / available via the widest range of devices

Online streaming products

Developed and launched both subscription (SVOD) and transaction/pay-per-view (TVOD). Development underway for new / premium products

First to market and early success building streaming base

Systems (UI/App) in place, marketing and branding to build awareness, early success

Significant and growing DVD base

Profitable DVD by mail business provides access to over 55,000 titles including early release windows and upsell to online streaming

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QUICKFLIX ‘POST’: ONLINE DVD RENTAL SUBSCRIPTION

Achieving scale with continued growth.

• Quickflix offers the largest range of any movie service in Australia - over 55,000 movie and TV

show titles including latest release immediately after the cinema window.

• Large, loyal customer base providing a positive profit contribution
• Shipping over 0.5 million discs per month and with improving operating efficiencies.
• Large content asset of over 1 million discs to monetise from growing subscriber base.
• Subscription plans bundled with unlimited streaming offered at $24.99 per month (4 DVDs plus

unlimited streaming) and $29.99 per month (unlimited DVDs 2-at-a-time and streaming).

• Physical DVD stores under pressure from high cost of rent and labour. The long term trend of

store closures is driving Quickflix online DVD growth.

• Online DVD rental expected to grow for several the next years with streaming overtaking to

drive our next growth wave.

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QUICKFLIX ‘PLAY’ STREAMING

Catalyst for the next wave of growth.

• First ever subscription streaming in Australia providing unlimited access to movies for affordable monthly

subscription of $14.99.

• Pay-per-view latest release streaming launched in March 2012.
• Subscription Video On Demand content deals with Sony Pictures, Warners Bros, NBCUniversal, MGM,

HBO, BBC and ITV.

• Now available on PCs, Macs, Sony Bravia connected TVs and Blu-ray players, Sony PlayStation 3,

Samsung and Panasonic connected TVs, Samsung Galaxy Smartphone, Apple iPad and iPhone. Coming soon to Xbox.

• Addressable market today is the 65% of households with connections speeds of 1.5 megabytes per

second or better. NBN will increase our addressable streaming market through improving connectivity in rural and regional Australia.

• Delivery costs of streaming are significantly lower than online DVD generating future improvement in

contribution margin.

• Service launched in New Zealand in March 2012.

SECURED POSITIONING IN RANGE OF CONNECTED DEVICES

Direct to lounge room or on the go.

Launching in October 2012

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CONTENT AVAILABILITY WINDOWS

A combination of DVDs, SVOD and TVOD provides access to most home entertainment windows and comprehensive range.

Cinema PayTV TVOD

IPTV (TVOD, SVOD)

DVD & Blu-ray (all titles) Home entertainment windows TVOD

IPTV (TVOD, SVOD)

DVD & Blu-ray (all titles) PayTV TVOD

IPTV (TVOD,SVOD)

TVOD IPTV (TVOD)

Typical movie release windows 55,000+ titles 2,000+ titles 2,000+ titles

TVOD- Transaction Video On Demand (or Pay-Per-View) SVOD- Subscription Video On Demand IPTV- Internet Protocol Television

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OFFERING SUBSCRIPTION AND PAY PER VIEW

Options to “Post” and “Play”

• Subscriptions

– DVD/Blu-ray (“Post”) – Streaming (“Play”) – Bundled (“Post & Play”) – Premium streaming (coming soon)

• Pay per view streaming

– New release rental – Pay to own (coming soon)

• Pre-paid gift vouchers

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AUSTRALIAN MARKET OVERVIEW

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20 600 1,300 2,800

Quickflix subscription DVD & Blu-ray rental DVD & Blu-ray retail PayTV subscription

Revenue (A$M)

8.5 million HH; 90% with DVD player; 65% with broadband of 1.5 megabytes per second or better

THE AUSTRALIAN MARKET

Opportunity for Quickflix in a less competitive marketplace than U.S.

• On Netflix penetration levels today,

Quickflix would represent 24% of households or 2 million customers.

• Online DVD rental growing rapidly with

streaming the next catalyst for growth.

• Australian market is less competitive

than U.S- low penetration of PayTV; no Amazon, Netflix or Hulu. No Blockbuster online service.

• PayTV (Foxtel/Austar) has only 30%

penetration, no growth and high ARPS.

• Video store closures accelerating/

audiences fragmenting from free to air.

HOME VIDEO RENTAL MARKET

• PwC estimate that the
• verall home video rental

market will decline at a CAGR of 1.1% to 2016

• The significant decline in in-

store rental (-9.5% CAGR) is

• ffset by the growth in online

DVD rental and digital downloads (+32.9% CAGR)

• DVD sales have declined
• ver the past 5 years over

twice as faster a rate than the decline in rentals (source: AHEDA)

Australian Home video rental revenues ($m) – PwC June 2012

200 400 600 800 1000 1200 1400 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 In-store rental Online DVD + digital download CAGR 07-16

• 9.5%

32.9%

• 1.1%

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• 20.0

40.0 60.0 80.0 100.0 120.0 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 Retail Rental 200 400 600 800 1000 1200 1400 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

DVD SALES AND VOLUMES

• PwC estimate that the

DVD sell through market was worth $1.1bn in 2011

• They estimate that

total sell through spending will decline at a CAGR of 11.1% to 2016

• DVD wholesale sales

to retail (sell through) and rental have declined significantly since their peak in 2007 reflecting the popularity of online rental and the decline

• f the bricks-and-

mortar DVD rental store

Sell through spending (ex music video) ($m) – PwC June 2012 DVD wholesale volumes (‘000s) - AHEDA

CAGR 12-16 CAGR 07-11

• 7.4%
• 16.5%
• 8.5%
• 11.1%

CONNECTED DEVICES

• Over 50% of

households have at least one device capable of being connected for IPTV

– Excludes computers and mobiles for OTT VOD

• CLSA estimate that

Australia will have 26.9m Smart TVs by FY21, achieving 100% penetration of households

– 10m TV households – Average 2.7 TV’s per household

IPTV capable devices (% of households) – PwC survey, June 2012 Smart TV sets, shipments and HH penetration ($m) – CLSA, July 2012

10 20 30 40 50 60 At least one Connectable TV Connectable games console Set-top box Not sure Other 10 20 30 40 50 60 70 80 90 100 5 10 15 20 25 30 FY11 FY12F FY13F FY14F FY15F FY16F FY17F FY18F FY19F FY20F FY21F Smart TV sets (LHS, m) % TV shipments as Smart TVs Smart TV HH penetration

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TV AUDIENCES TO SHIFT TO IPTV

• CLSA forecast that

IPTV will account for a 40% share of TV audiences by FY2021

– CLSA’s definition of IPTV includes: Live/linear OTT, catch- up TV and online VOD

• Significant decline in

Free TV viewing is expected - CAGR of - 7.9%

• Modest rise in

Subscription TV - CAGR of +3.9%

Average audience per day (m) – CLSA, July 2012

5 10 15 20 25 30 35 40 45 0.2 0.4 0.6 0.8 1 1.2 1.4 1.6 FTV (LHS) STV (LHS) IPTV (LHS) IPTV share (%) CAGR 07-11 3.9%

• 7.9%

1.7% 53.4%

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COMPETITOR ANALYSIS

Market leader with best in sports content and strong movie and TV offer. High ARPU (c. A$100) to protect. Set top box (STB) –based (IQ). Foxtel-lite plus movies. Limited to Telstra broadband subscribers. STB based. Low cost IPTV solution (linear + VOD). Wholesale – bundled with broadband via select ISPs. STB based. Well funded competitor with brand recognition & reach. TVOD movies and TV series. Confined to own ecosystem. Well funded competitor with brand recognition & reach. Currently only offering TVOD movies but potential to expand offering.

Australia’s only online DVD rental and subscription streaming service. Lower cost offering than Foxtel. Profitable ramp-up with DVD subscriber base. Broadest range of availability across devices

– Not limited to own hardware. – Negotiated key hardware provider access.

Large addressable market

– ISP agnostic, versus T-Box & Fetch.

Building SVOD and TVOD content rights.

Announced streaming to start in 2013 Pay per view in Q1 with streaming later in 2013 Adds to Kiosk and Cinema offerings

• No direct Netflix-like competitors in Australia
• Quickflix competitors - some are constrained by technology or

legacy business; others are not prioritizing Australia due to market size.

US TREND UNDERSCORES OPPORTUNITY IN AUSTRALIA

Pathway for Quickflix is significantly de-risked through success of Netflix.

• Australia is lagging US by 3+ years

– High speed broadband penetration now catching up. – Etailing is taking off. – Video store closures beginning to accelerate.

• Growth is accelerating in line with the Netflix experience

– Market rationalising to a single active player. – Digital streaming launch timed with explosion of connected devices.

QUICKFLIX STRATEGY FOR GROWTH

QUICKFLIX TODAY: PLATFORM ESTABLISHED

• Significant investment of more than $50M to date to establish the

business:

– Investment in DVD. – Investment in streaming. – Investment in marketing. – Investment in start-up losses.

• Profitable DVD subscription service

– Over 100k subscribers. – In FY12, $15M revenue and $4.6M contribution after service costs.

• Streaming service launched in FY12 and scaling.
• Operating losses driven by investment in growth and streaming start-up.
• Subscriber growth provides the path to profitability.

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PLATFORM READY FOR GROWTH

Quickflix has developed its platform and is positioned to capture growth.

• Australian market is lucrative and underpenetrated.

– Pay television is only 30% penetrated and ARPUs are A$100 (excludes BB). – VOD/streaming market is early stage and there is minimal competition. – QFX is positioned to capture share during the land grab phase.

• Quickflix’s platform in place to capture growth in VOD/streaming.

– Content agreements, distribution/devices, User Interface all in place.

• Quickflix is the only independent player/device agnostic.

– Pure player model with no need to cannibalise existing revenues. – Accessible by 100% of Australian homes.

• Only online DVD player.

– $1.6b retail and rental market with long tail.

• Flexible business model.

– No capex required with set top boxes. – Variable cost structure. – Ability to manage pace of growth. – Profitable core business (pre growth marketing).

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20,000 40,000 60,000 80,000 100,000 120,000 140,000 Trialists Paying Customers*

LEADERSHIP POSITION TO DRIVE LARGE SUB BASE

Quickflix will pursue continued aggressive acquisition of customers.

• Over 110k paying

subscribers and $20m run

• rate. 59% YOY growth to

June 2012.

• 12% household penetration

would equate to 1 million customers & $200 million revenue p.a.

• Netflix-like penetration

would equate to over 2m customers & $400 million revenue p.a.

• Further growth opportunities

in NZ and SE Asia markets.

• Subject to additional

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BOARD & CEO.

Expertise in entertainment, media & technology.

Susan Hunter Non-Executive Director, Company Secretary Chartered accountant with over 17 years’ experience in the corporate finance industry. Company Secretary of Quickflix and several Australian Stock Exchange listed companies. Stephen Langsford Executive Chairman, Founder Successful information technology entrepreneur. Background in funds management & finance and internet startups. Simon Hodge Executive Director, Co-Founder Investment banking and corporate advisory background across a range of high growth industries. Former COO and MD of Quickflix. Justin Milne Deputy Chairman, Non-Executive Director One of Australia’s leading internet and digital media

• executives. Formerly Group Managing Director of Telstra

BigPond, Australia’s largest broadband network provider. Christopher Taylor Chief Executive Officer Over fifteen years experience in media & entertainment executive roles in Australian & NZ. Lead the media business

• f Telstra and launched Australia’s first pay-per-view OTT

streaming service. Henry McGee Alternative Non-Executive Director (HBO) President, HBO Home Entertainment, the DVD and digital program distribution division of Home Box Office. Director

• f the Digital Entertainment Group, for fostering new

technologies amongst content owners.

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KEY EXECUTIVES

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investors@quickflix.com.au