Illustrative Crackle Valuation September 2013
Illustrative Valuation ($ in thousands) Based on comparable companies and comparable transactions we have determined that a 3.0x 4.0x revenue valuation is appropriate for Crackle implying a valuation range of $166mm $222mm Recent valuations of Hulu and discussion with bankers support our 3.0x multiple while comparable companies and operating metrics support our 4.0x multiple FY14 Revenue (1) Uniques (2) Streams (2) ($mm) (mm) (mm) US $46.4 12.9 22.9 Canada 1.9 0.6 1.5 Australia 0.2 0.1 0.2 Latam 7.0 3.3 5.0 Total $55.5 16.9 29.5 FY14 Revenue Multiple 3.0x 3.5x 4.0x Enterprise Value ($mm) $166 $194 $222 Implied EV/ Unique $10 $11 $13 Note: Analysis excludes the UK business. (1) Based on latest MRP available. (2) Based on the April Cross Platform Overview for the US, Canada and Australia. Latam uniques and streams based on March 2013.
Public Trading Comparables ($ in millions) Publicly traded international video platform providers trade close to 4.0x CY13 revenue The most relevant comps to Crackle are Netflix and Youku Tudou Akamai Technologies, Blinkx, Brightcove and Limelight Networks are video services and content delivery providers and not as relevant to Crackle Enterprise Value / Revenue EBITDA Enterprise Market LTM FY14E FY15E LTM FY14E FY15E Value Capitalization International Video Platform Providers Netflix, Inc. 4.5x 4.0x 3.4x NM NM NM $17,893 $18,473 Akamai Technologies, Inc. 6.0 5.5 4.8 16.3x 12.8x 11.1x 8,871 9,401 Youku Tudou Inc. 10.7 7.7 5.2 NM NM NM 4,178 4,720 Blinkx plc 4.2 3.7 3.1 NM 22.6 16.3 838 897 Brightcove, Inc. 2.9 2.5 2.2 NM NM NM 282 313 Median 4.5x 4.0x 3.4x 16.3x 17.7x 13.7x $4,178 $4,720 Mean 5.7 4.7 3.7 16.3 17.7 13.7 6,412 6,761 Source: CapIQ.
Description of Comparables Company Description Netflix Internet television network with more than 37 million members in 40 countries and more than one billion hours of TV shows and movies per month, including original series Akamai Technologies Provides content delivery and cloud infrastructure services for accelerating and improving the delivery of content and applications over the Internet in the United States and internationally Youku Tudou Internet television company in China; Offers an online video content library consisting primarily of professionally produced content, including television serial dramas, movies, current event reports, variety shows, and music videos Blinkx Internet media platform that connects digital consumers with advertisers through professionally generated content Brightcove Provides cloud-based solutions for publishing and distributing professional digital media Limelight Networks Provides content delivery and related services to deliver media files, such as video, music, games, and software, or live streaming of corporate or entertainment events Source: Company website and CapIQ.
Comparable Transactions The comparable transactions below are viewed on an EV/unique basis and represent transactions of various web content platforms going back 6 years The average EV/Unique is $16 If the Deadline Hollywood Daily, Hollywood Reporter and Tech Crunch transactions are excluded based on date and relevance, the average EV/Unique would be $11 EV EV / Announced Target Buyer ($mm) Unique Users Unique 8/ 6/ 12 Bleacher Report Turner $175 10.0 $18 11/ 14/ 11 Babble Media Disney 43 4.0 11 5/ 31/ 11 Flixster Warner Bros 75 12.0 6 3/ 4/ 11 Clicker CBS Interactive 26 2.5 10 2/ 6/ 11 Huffington Post AOL 315 25.0 13 9/ 28/ 10 Tech Crunch AOL 40 1.5 27 12/10/09 The Hollywood Reporter, Billboard and Ad/ Brand/ Media Week E5 Global Media Holdings 70 4.0 18 6/ 23/ 09 Deadline Hollywood Daily MMC 14 0.5 28 Mean $95 7.4 $16 Median $56 4.0 $15 Source: HitFix Fall 2012.
Description of Targets Company Description Bleacher Report Delivers digital sports content Babble Media Online magazine for parents Flixster Operates as an online movie community enabling users to share movie reviews and movie ratings Clicker Internet video directory and search company aimed to be the TV Guide for all full episodes of programs available to watch on the Web Huffington Post Online news aggregator and blog; offers news, blogs, and original content and covers politics, business, entertainment, environment, technology, popular media, lifestyle, culture, comedy, healthy living, women's interests, and local news Tech Crunch Online provider of information related to start-up companies, people, and investors for technology companies and transactions The Hollywood Reporter, Billboard and Ad/ Brand/ Media Week Delivers news on movies, television, music, technology, business, style and culture, awards, and videos Deadline Hollywood Daily Offers news, calendar, music, bars and clubs, eat, stage, art and books, blogs, classifieds, and slideshows online Source: Company website and CapIQ.
Multi-Channel Network Precedent Transactions The average valuation per thousand views for MCNs is $82; if the Revision3 transaction is excluded, the average valuation per thousand views is $51 Valuation or cost per view may not be a relevant metric for Crackle given the difference in content quality and length of views Most Recent Investment Round/Acquisition Company HQ Employees Monthly Views (mm) Channels Subscribers (mm) Date Type Amount ($mm) Valuation Per Valuation Thousand ($mm) Views Investors/Acquirers Maker Studios Culver City, CA 340 4,000 60,000 260 9/ 12/13 Investment $26 N/ A N/A Canal+, Astro, SingTel Innov8, Lakestar, Northgate Capital, and existing investors Blip New York, NY 50 330 5,000 N/A 9/ 6/ 13 Acquisition 10 10 $30 Maker Studios Tastemade Santa Monica, CA 18 50 N/A N/A 8/ 16/13 Investment 10 N/ A N/A Raine Ventures, Redpoint Ventures BroadbandTV Vancouver, CA 51 800 7,800 100 6/ 26/13 Investment 36 71 88 RTL Group Fullscreen Culver City, CA 160 2,500 10,000 150 6/ 17/13 Investment 30 110 44 Chernin Group, Comcast, WPP Machinima Los Angeles, CA 150 2,200 N/A 200 5/ 21/13 Investment 35 190 86 Google, Redpoint Ventures, MK Capital StyleHaul Los Angeles, CA 40 300 3,150 76 5/ 14/13 Investment 6 N/ A N/A RTL Group (Majority owned by Bertelsmann) DeFranco Creative Los Angeles, CA 25 50 N/A 3 5/ 13/13 Investment N/A N/ A N/A Revision 3 (subsidiary of Discovery Communications) AwesomenessTV Los Angeles, CA N/A 800 55,000 14 5/ 1/ 13 Acquisition 33 33 41 DreamWorks Animation MiTu Culver City, CA N/A 60 520 5 12/ 12/ 12 Investment 3 N/ A N/A Chernin Group, Machinima CEO Allen DeBevoise, Advancit Capital, Shari Redstone s VC firm, Code Advisor Base79 (1) London, UK 75 540 800 20 11/ 14/ 12 Investment 10 25 47 Chernin Group Big Frame Culver City, CA 20 150 N/A N/A 6/ 7/ 12 Investment 3 3 20 Anthem Venture Partners, Daher Capital, DFJ Frontier, LaunchPad LA, New World Ventures, The Media Farm, Social Starts Revision 3 San Francisco, CA 50 100 27 N/A 5/ 3/ 12 Acquisition 30 30 300 Discovery Communications Mean $82 Median 46 (1) Evolution Media Capital (subsidiary of CAA) made an investment in Base79 on July 4, 2013. Financial terms of the transaction were not disclosed.
Other Considerations In June, Hulu was rumored to be for sale with bids in the range of $1.4bn $2.1bn which included the additional immediate investment required The purchase price range implies 2.0x-3.0x revenue of $700mm Hulu is reportedly no longer for sale; its current owners, 21st Century Fox, Disney and NBCUniversal, have decided to invest $750mm into the business France Telecom Investment in Dailymotion in May 2013 was at 2.5x revenue The Providence sale of Hulu interests to other current shareholders in October 2012 was at 2.9x revenue Discussions with investment banks have indicated 2.0x-3.0x revenue valuations seen on the market for companies similar to Crackle For digital properties growing faster organically (which double or triple revenues every year, for example the Annoying Orange property), valuations are at 4.0x-5.0x revenue