Project Blue Opportunity to Invest in Australia's Leading
Total Page:16
File Type:pdf, Size:1020Kb
Strictly Private and Confidential Project Blue Opportunity to invest in Australia‘s leading on demand platform 24 MAY 2013 Strictly Private and Confidential EXECUTIVE SUMMARY Media consumption habits and technologies are experiencing fundamental structural change. Hoyts, with its existing powerful movie consumer touch-points, will leverage these developments to create a new high growth business model in the Australian home entertainment / TV channel, in partnership with Studios Significant untapped Hoyts has the The standalone Business structure on demand revenues resource, skills and business case is in Australia assets to succeed attractive • High per capita • Leading, trusted • Extensive EST, tVOD and • Hoyts is seeking traditional media entertainment brand — sVOD content offer investment in its Stream consumption No. 1 cinema brand in (through Studio and Kiosk business of up • Pay-TV only 25-30% of Australia partnerships) will be to 49% homes; EST, tVOD and • Deep customer base of attractive to consumers • Seeking investment from sVOD all undeveloped movie lovers and active • Broad device coverage up to 3 Studios based on DVD renters (Kiosk) and clear development cash equity investment • Strong loyalty program roadmap and revenue share and ‗single CRM‘ system • Low cost customer content supply acquisition and delivery arrangements model returns value to • Dual returns to Studios consumers and Studio — incremental content partners revenues and equity • 15-20% EBITDA margins upside, while creating a at scale new sustainable channel in the Australian and New Zealand markets 1 Strictly Private and Confidential VALUE CHAIN The entertainment value chain is evolving. Hoyts provides the opportunity to accelerate growth in new channels and growth in the overall value chain for studio partners • Hoyts Exhibition, Stream and Kiosk are uniquely placed to drive additional value through the entire lifecycle of content • Hoyts operates in the growth areas of the entertainment value chain • Opportunity to reverse the growing trend of piracy through a compelling digital proposition • Hoyts Stream offers the ability to monetise TV content currently not broadcast in Australia 2 Strictly Private and Confidential LINKING TOGETHER OF HOYTS EXHIBITION & HOME ENTERTAINMENT Hoyts will be well positioned to distribute relevant content through all windows powered by an embedded CRM Single View of the Customer 3 Strictly Private and Confidential AGENDA 1. Market readiness 2. Customer value proposition 3. Opportunity size 4. Business model 5. Competition and sustainable advantage 6. Market, sales and partners 7. Platform 8. Executive team 9. Next steps 4 Strictly Private and Confidential MARKET READINESS The Australian market is primed for a credible, Netflix-style market entrant to secure significant share of the untapped on demand video market 1. The consumption in the 2. The technology is ready for 3. The on demand market is 1 home entertainment market 2 mass-market on 3 primed for rapid growth are very strong demand services Consumers are migrating from physical Australia has a very high per capita Broadband take up is now at 73% DVDs to digital video entertainment, consumption of DVD purchases and Average caps are now at 50-200Gb creating a significant tVOD / EST rentals with $211 per household pa opportunity FOXTEL only has 27% penetration, leaving over 70% HHs with no subscription service, creating a significant sVOD opportunity Home entertainment spend per household per month ($A) 2012 Broadband Penetration 2012 Pay-tv penetration 2012 (excl. premium pay-tv) 88% 85% $19.30 90% 90% 73% 75% $12.90 $11.30 54% 27% Australia UK US Australia US UK Canad Australia UK Canada US a 5 Strictly Private and Confidential CUSTOMER VALUE PROPOSITION Hoyts Stream will offer customers a critical mass of movie and TV titles, across devices, from a highly trusted entertainment brand PRODUCT MARKETING Deep, Rich, Fresh Content Trusted Entertainment Brand Strong blockbuster led EST and tVOD Hoyts is the dominant cinema brand across Australia and New Zealand ‘Pockets’ of sVOD exclusivity and aVOD capability Research shows strong trust and affinity Critical mass of circa 5,000 movie / TV sVOD titles across Exhibition and Home Entertainment and 2,500 tVOD / EST titles at launch… Roadmap to reach all devices Deep Customer Database Web Hoyts will market the service to more than 2.6m entertainment loving customers through Mobile: iOS phones and tablets; Android its channels and loyalty programme TV: Smart TVs; Blu-ray; Playstation, XBox CRM ‗Single View‘ of the customer An Engagement-Driven Approach Marketed Aggressively Excellent UI and UX (search, metadata, etc.) Hoyts Stream will invest more than $80m over five years in marketing and customer Innovative sVOD / tVOD / physical bundles acquisition to build a market leading position Full social media integration and Cross-promotion through theatres and kiosks personalisation of content 6 Strictly Private and Confidential OPPORTUNITY SIZE The rapidly growing sVOD, tVOD and EST markets will be worth circa A$1.5bn by 2020 Total home entertainment market (A$m) Projected Hoyts market share 2020 4,766 4,783 4,668 4,708 4,754 sVOD Market tVOD Market EST Market 4,606 4,573 4,602 4,633 577 Total = A$760m Total = A$473m Total = A$245m 724 649 883 802 967 1,054 226 1,237 1,144 266 A$91m A$46m 308 A$248m 351 (~33%) (~20%) (~20%) 395 442 490 A$512m A$382m A$199m 540 591 (~67%) (~80%) (~80%) 2,503 2,532 Other 2,559 Hoyts 2,584 2,607 • We expect the Australian sVOD market to reach 25% 2,627 penetration of HHs by 2020. In the US, Netflix alone has already 2,645 2,662 reached this 25% figure 2,608 245 • We are targeting one third of this market by revenue — 226 FOXTEL and Telstra as well positioned to compete in the sVOD 208 473 179 429 market, but they will be wary of cannibalising their premium base. 388 153 325 If FOXTEL‘s premium subscriptions and revenues do get eroded 128 105 267 more quickly, then this represents upside for Hoyts 216 665 760 69 85 170 467 567 • We expect the tVOD and EST market to reach parity with the 254 363 6 94 130 13 137 DVD market by 2020. In the US, the combined tVOD and EST 2012 2013 2014 2015 2016 2017 2018 2019 2020 market is already at 63% of the size of the DVD rental market • We are targeting 20% of this market by revenue — iTunes DVD Retail Revenue Premium Pay-TV Revenue tVOD Revenue will also remain a significant player in these markets (circa 65- 70% of the US market) DVD Rental Revenue EST Revenue sVOD Revenue • Upsides to the opportunity exist by expansion into New Source: Venture Consulting, AHEDA, PWC, NPD Zealand, linear broadcasting and aVOD 7 Strictly Private and Confidential BUSINESS MODEL Hoyts is developing a low cost business model that will maximise returns to content owners and equity partners EFFICIENT COST STRUCTURE Conceptual revenue and cost structure • Low Customer Acquisition Costs through utilising the Revenue Kiosk existing customer base of the Kiosk business and Hoyts Cinemas EST • Low delivery costs — as compared to satellite / cable delivery networks • Low head office costs — utilising existing Kiosk sVOD business and leveraging staff from the Hoyts Cinema Business until the new joint venture reaches generates tVOD meaningful revenue SUSTAINABLE BUSINESS MODEL — Cost MAXIMISING RETURNS Other • Targeting 15-20% EBITDA margin at scale Overhead • Variable content cost maximising return to content owners Delivery • Efficient cost structure maximising equity return to shareholders Marketing Content 8 Strictly Private and Confidential COMPETITION & SUSTAINABLE ADVANTAGE Only Hoyts can combine exhibition and home entertainment across brand, content, pricing, marketing, customer data and CRM, maximising returns to studio partners Deep, Full Affordable Low Cost rich, Tier 1 Strategic Lifecycle Deep Trusted to the Potential Full Value Delivery fresh content Device Marketing CRM & customer entertainment mass market players Positioning vs. Hoyts Chain Structure content offered agnostic Plan Data database brand market HOYTS Foxtel Fear of cannibalisation More expensive offerings Telstra, T-Box Traditionally focused on product over customer experience. Must be Telstra Bigpond customer Fetch TV Reliance on telcos for customer acquisition. Must be Optus or iinet customer Quickflix No cash, losing money, poor platform and content, opportunity missed? Apple TV, No subscription base, no focus iTunes on marketing to the local market JB HiFi Now, Lack of focus on VOD Video EZY, business leaves service under- Woolworths resourced 9 Strictly Private and Confidential STRONG ESTABLISHED BRAND REACH & CUSTOMER BASE Hoyts is planning a strategic, integrated marketing launch campaign that uses existing channels — including our 750,000 loyalty members — to drive take-up efficiently • Hoyts has broad and deep entertainment-based We will engage extensively and customer interactions 750k directly with loyalty members to every day members upsell streaming • Leading cinema exhibitor 1.1m in Australia and New We will use EDM to promote the registered Zealand service to our registered customers membership • Network of 53 cinemas and 437 screens • Owns Val Morgan, 1.8m monthly We will use every web visit to drive awareness / engagement Australian‘s dominant unique web visits and to encourage trial cinema screen advertiser Extensive in-cinema • National kiosk network marketing including ‗Hoyts 2.2m unique cinema customers lounges‘ that allow interaction • Strategically