Crackle and Digital Networks Strategy

September 2007

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Digital Networks Strategy

Build multiple channels under the Crackle “networks” brand

• Aligns resources (technical, marketing, programming) behind a single, leading brand

• Necessary to create scale in light of market consolidation (e.g., NBCU / Fox JV; multiple brands integrating with Spike.com)

• Provides “option value”…creating scale and efficiency while preserving upside potential– Sub brands (e.g., Funny Bone) incubated under Crackle networks– Hit channels can be spun-out as their own networks brands

• Original short-form content will be developed exclusively for our channels/networks– Creates opportunity for differentiation and builds brand value

• Premium content distributed on networks, along with 3rd party sites– Broad distribution maximizes profits until we reach scale– Model proven out by major studio competitors

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Competitive Landscape

Studios are now supporting only those owned digital channels that have potential to reach scale

Supported Digital Channels

• Both ABC.com and ESPN.com are strong channels with scale

• Sub brand ‘dotcomedy’ failed miserably

• Launching JV with Fox

• Sub brand ‘Inner tube’ failed miserably

• Switching to CBS.com

• Strong focus on MySpace (master brand)

• Launching JV with NBCU

• Last holdout for “multi brands”; consolidating multiple web native brands (e.g., iFilm) under Spike.com

Comments

hulu

hulu

Parent Failed / Consolidated Digital Channels

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Crackle Network Structure

UGVYour favorite feature length, contemporary classic films across all major genres

• Episodes from the heyday of sit-coms

• Outrageous shorts and busted pilots

• Originals by contemporary comedians

Classic hard-hitting action TV series and original takes on today’s favorite action movies and stars

Favorite retro TV shows told in in 4-6 minute “minisodes”

• Extensive library of much-loved shows

• Appeals to today’s “bite sized” video consumption

• SPE’s 3,500+ feature library

• Popular TV format (Tuner, USA, etc) embraced by audiences but not yet digital

• Demand for short-form, original comedy exploding online

• SPT’s “middle tail” comedy is hard to find

• Deep action-themed library

• Key young male demo also early adopter of digital technology

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Short Form Strategy

New short-form content will be developed exclusively for our Crackle network of channels

• Original content be the kept exclusive to our channels

– Competitors are using proprietary content to build their own brands

– Proving possible to attracting high quality talent / content for a new launch window (e.g., Ed Zwick launching “Quarterlife” on MySpace)

– As a relatively unknown site, Funny of Die drove 30MM streams of “The Landlady” by keeping it exclusive

• All content must be funneled into the master brand in order to reach scale

– Veoh raised another $25MM with a goal of creating high quality content

– Our budget can be competitive, but only if used to develop content shared across under a common network brand and vision

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Original Content Distribution

All content goes through a channel; all channels live under the master brand, which will be distributed directly and through virtual MSOs

Content Channels Network Direct

Virtual MSOs

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Premium Content

• Premium content will continue to be distributed through owned digital networks and 3rd party sites

3rd Party Streaming

• In discussions for expanded ad-supported distribution using ABC branded player

• Hulu will extend ad-supported distribution

• Discontinuing iTunes in Dec (betting on hulu)

• Wide developing broad distribution for TV shows using 3rd party players

• Hulu will extend ad-supported distribution

• Leveraging wide distribution of owned (Viacom) and non-owned sites

3rd Party Downloads CommentsAsset Owned Sites

[Coming Soon]

hulu

hulu

• Benefit from scale of market leaders (e.g., iTunes) until Crackle reaches scale

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Next Steps / Issues to Address

Technology & Infrastructure

Syndication

Organization

• Hosting / bandwidth – generally sufficient at Crackle’s current levels, conduct more detailed review

• DRM –implement DRM for premium content• Geofiltering – implement by end of October

• Existing partners – extend Crackle syndication deals to AXN/Funnybone/Minisodes and vice versa

• New partners – approach new partners about carrying Crackle as a network with sub-channels

• Management – define roles and reporting relationships for senior management in digital organization

• Content – combine existing short-form programming teams into a single organization