Apresentao do PowerPoint

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RealNetworks April 15th, 2000
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RealNetworks April 15th, 2000
Chantal Yearwood Luiz Gustavo Saito Makoto
Yokoo Paulo Passoni
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Our message is
RealNetworks should combine its technological
expertise and content aggregation power with
strategic alliances to enhance the ecosystem
model and consolidate its presence in the growing
streaming media worldwide
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Executive Summary
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Agenda
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Agenda
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The Streaming Chain
Broadband
14K
56k
Content producing will result in conflict with
media companies
Different music formats Platform war
28-36K
Source Nielsen/NetRatings
Media Companies Servers
Streaming server software
Internet infrastructure
Streams Advertising
Client software and/or Organizer
End Consumer
Microsoft Platform War Linux, Sun
Rich-Media trend Internet will mimic real life
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Ecosystem highly leveraged by alliances
Real Broadcast Network deal with DoubleClick.
Examples Buick, Gap, Intel, and 800.com

• Music Universal Music Group, BMG and Sony
• Aggregators Yahoo
• Content providers CNN, ESPN, ABC, FoxNews and
  AOL
• E-commerce amazon.com, Cdnow.com, NetRadio.com
  and Spinner.com

Advertising
Content aggregation
Non-proprietary Juke box vs. proprietary
RealPlayer technology
Consumer Software
Narrow and broadband software infrastructure

• Infrastructure ATT, Exite_at_Home, Cable and
  Wireless, Enron, Deutsche Telekom, GTE and Sprint
• Application Tools 150 soft vendors such as
  Intel, SGI, Sun, Lotus and Macromedia

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Core Business Streaming media Catalyst
The Ecosystem concept is key to the Business Model
Business assets

• 350k hours of streaming media creation per week
  (100k 2 yrs ago)

Software/Streaming technology development to the
end consumer
Content aggregation, NOT creation

• 85 of available streaming media files are in
  RNs format

• 100 million unique users

• Technology Leader several Awards as the best
  product

Advertising revenues as a result of increasing
traffic

• Dynamic management that understands this market

• Streaming media is critical to the WWW

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RealNetworks Dilemma Which business model?
Microsofts cash and networking power may result
in a lost battle for technology standard
Leverage on Reals strategic alliances, becoming
the major hub for streaming tech and content.
Yahoo core business is content aggregation
Real.com is more vibrant than Broadcast.com
Software Fees
Website traffic revenues through content
aggregation and tech innovations to end consumers
(JukeBox)
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Agenda
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Competition Overview
Players
Threats
How to overcome
Software RealPlayer RealJukeBox

• RealNetworks
• Microsoft
• Apple

Microsoft is a very strong competitor with
monopoly position in PC OSs
RealNetworks can capitalize in its Ecosystem and
key partnerships
Content Aggregation Real Guide

• RealNetworks (13th)
• Yahoo Broadcast
• MediaPlayer.com (42nd)

Yahoo internet reach can Leverage its streaming
aggregation business
Continue to deliver a more vibrant product
worldwide
Content Producer Take5

• RealNetworks
• Large bricks-and-mortar media companies

Media Companies eminent conflict
Turn Take5 into a content hub fed by third parties
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Agenda
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Choosing Target Markets

• Decision criteria
• Demographic and Economic information
• GDP per capita
• Total population
• Telephone Penetration
• Internet current user base (1999)
• Internet projected user base for 2003
• Political Environment

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Demographic Economic Data
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Demographic Economic Data
Index(GDPGDP growth 5yrTelephone
Penetration)/1,000
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Internet Users (in millions)
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Internet Users (in millions)
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Primary Target Markets
China Fastest growth in the world, 2nd largest
market by 2003 Japan Huge market with high
disposable income
UK, France, Germany Italy Fast growth,
relatively simple implementation and high
disposable income
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China

• Demographics (source Strategis Group)
• High level of education among target audience
• 35 college degree, 45 university degree
• Higher than average income
• Dominance of single males
• 71 of internet users are males
• 69 of males are singles
• Short-term content aggregation strategy
• Focus on this audience, providing i.e. sports,
  news, career orientation
• Political Environment
• Xenophobic, but willing to receive foreign
  investments (paradox)
• Entry strategy
• Increase ties with China.com and other local
  content providers
• Look for local partners for sales, content
  aggregation and customer support ? both for
  political, cultural and economic reasons

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Agenda
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Whats Involved in Localizing Content?
Drive to improve the breadth and quality of the
products and services it offers in order to
provide a durable platform for growth in
international markets

• RealNetworks employs 650 in Seattle
• Dynamic Management

Software
US Localization Strategy Staff 12 led by Webster
Asia Manager
Europe Manager Strategic Alliance
Content
China
Japan
UK
German
France
Italy
Strategic Alliances
Improve Partnerships
Editor
Editor
Editor
Editor
Operator
Operator
Operator
Operator
Editor
Corp. Sales
Corp. Sales
Corp. Sales
Corp. Sales
Operator
Corp. Sales
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Increasing International Revenues result in
positive cash flows.
CAGR
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the idea is that this business model is
scalable.
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Agenda
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RealNetworks Business Portfolio
Star
?
Advertising through content aggregation
E-Commerce
Wireless Handhelds
Services
Potential Growth
Software fees (Client/Server)
Cash Cow
Dog
Market share to largest competitor
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Key Drivers in the Streaming Industry
Consumer Expectation
Internet will Mimic real life (1)
Provide the consumer a rich media experience
Increasing Broadband Penetration
Technology
Increasing Digital Music market
Wireless and Handheld enable
Music Industry different patterns
Revenue Sources
Advertising Revenues
New tech incorporation
MA activity (Stock is Currency!!!)
(1) Mary Meeker, Research Analyst
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Opportunities for the Future
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Agenda
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APPENDICES
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Who are our competitors today?
Competitive scenario in the Client Server
streaming software marketx
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Delivery channels
Media Value Chain
Rich-Media?

• Internet
• Print
• Audio
• Video

• Info processing and selection

• Raw info gathering

• News Movies creation

• Customers

• Advertising

RealNetworks Value Chain

• Internet delivering

• Media Company

• News, movies, music business

• End customer

Delivery Value Chain

• End Customer

• Decoder and/or organizer

• Streaming software

• Media company servers

• Internet Structure

• Streams Advertising

• AOL
• TCI
• MSN
• PSINET
• Earthlink
• ATT

• RealNetworks
• Microsoft
• Apple

• RealNetworks
• Microsoft
• Apple
• DoubleClick

• Cisco
• Lucent
• Nortel
• Nokia
• Erickson
• ATT
• MCI

• Microsoft
• Apple
• RealNet

• AOL/TW
• Disney
• ABC
• NBC
• News Corp
• Dow Jones
• Bloomberg
• ESPN

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About the Other Countries

• Japan, France, UK, Germany Italy
• Build on existing local structures
• Look for partners for sales, content aggregation
  and customer support

• Switzerland, Scandinavian Countries, Netherlands,
  Singapore
• High incomes and high Internet penetration, but
  small populations (remember that content
  aggregation costs are not necessarily lower
  because of smaller population)

• Latin America, Spain, Korea, Russia
• High Internet growth and sufficient income per
  capta, however they are not as promising as the
  chosen target markets

• India, Thailand, Philippines
• Despite fast Internet growth, infrastructure and
  income are still restrictions in order to achieve
  critical mass

chart
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Rationale behind Partnerships

• Benefits
• Partners understand the local markets
• They help to avoid or minimize political issues
• RealNetworks may share its costs with them

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Measuring the return of Guide and Take5
Ways of measuring return on an investment
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Why RealNetworks wont become a Netscape?
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RealNetworks Strenghts

• Huge User Base (gt100mm)

• Superior Technology (Awards)

• Flexible product to new stream standards

• Highly leveraged Ecosystem

• First Mover Edge

• Brand Recognition

• Successful International entering (Japanese)

• High Mkt Cap can be used for further acquisition

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RealNetworks Threats

• Content creation causes conflicts with its
  current partners

• Microsoft
• War for industry standard
• MSFT can leverage its products through networking
  and bundling
• Is better positioned for International expansion
• The Company already has handheld software that
  can be used to adapt Media Player

• Different Audio standards (I.e. MP3)

• Search engines as alternative guides

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RealNetworks Opportunities

• International Market is relatively unexplored

• Broadband and new complex streaming tech demand
  (rich-media)

• Provide and aggregate streaming content

• Develop handheld market

• Important new corporate market (cost reduction
  opportunity, conference call)

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RealNetworks Weaknesses

• No clear definition on core business

• Therefore, lack of focus

• Lack of qualified personnel, specially outside of
  US

• Lack of knowledge in foreign countries, besides
  Japan

• No handheld devices software

• Relatively low cash power compared to main
  competitor

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Forecasted Income Statement
Increasing Asian Revenues
Increasing Advertisement Revenues
A cash generating company
Increasing net income
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Market Data
Asia will become the largest market
Digital Music is a big business
The Companys Market Cap reflect this awesome
potential
Advertising dollars are real
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Alternative Business Models

• As today

• Give up software (core so far)

• Give up content

• Become a content producer

• Partner with MSFT rivals (Sun)

• Outsource aggregating

INITIALS
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How to deal with talent shortage in US and abroad?
US Seattle
Concentrate all software localization in
Seattle Bring language/cultural experts (in which
international expansion is essential) to
headquarters
Promote foreign students recruiting in schools
all over America
Hire from software houses that have experience
with software localization
Content Aggregation Must cater to local needs
in both cataloging and developing proactive
aggregation LOCAL EXPERIENCE
Abroad
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Presentation Directory
How to enter
Core Business
International Expansion Investments
The Streaming Chain
Rationale behind partnerships
Ecosystem
RealNetworkscore business
Expansion Organization
Get Noticed in Foreign Markets
Industry
International Pricing Strategy
RealNetworksdilemma
Business alternatives
Foreign Markets
Industry Drivers
Choosing Criteria
Our Message
New Ventures
DemographicEconomic Data
Summary
Value Chain
DemographicEconomic Graph
Key Success Factors
Internet Users Data
Competition
Internet Users Graph
BCG Portfolio Analysis
Primary Target Markets
Competition Overview
China
Competition in the Server Client
Other Countries
Becoming Netscape?
International Pricing
Financials and other
SWOT Analysis
Forecasted Income Statement
RealNetworks Strengths
Market Data Analysis
RealNetworks Weaknesses
Calculating return in Guide and Take5
RealNetworks Threats
Talent Problem
RealNetworks Opportunities
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Creative Ways to Get Noticed in Foreign Markets
Major Events Coverage
Music Concerts
Interviews with celebrities
Sports Broadcast
Religious Events
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International Pricing Strategy
Tradeables
Non-Tradeables
Server Software Its possible to be sold
directly to clients at lower prices than from the
website.
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Key Success Factors
First Mover Advantage
Helps create a de facto standard
Huge Client Base
Leverage dominance in the server markets
Technology Leadership
Promotes client and server dominance through
continuous product improvements
Alliances

• With content providers increases adoption by end
  and business users
• With streaming professionals helps creating an
  industry support for the product
• With other technology providers helps creating a
  standard and increase influence in platform.

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Internet access Dial-up or Cable?
China TV penetration 251 PC penetration
India Huge access to cable
WebTV may be very successful there
RealNetworks should make a provision for
streaming technology over Web enabled
appliances that access the Internet through cable