L O S A N G E L E S S A N F R A N C I S C O N E W Y O R K In Reel Time Financial Review of the Media Services Industry

I.I. IntroductionIntroduction

II.II. Transaction News & Reviews

III.III. Selected Hadley Partners Transaction Announcements

IV.IV. Transaction Reviews: Harmonic to Acquire Omneon Kudelski Acquires OpenTV

V. Welcome to our Blog!

VI. RelevantRelevant PublicPublic CompanyCompany ValuationsValuations andand PerformancePerformance

VII. OverviewOverview ofof HadleyHadley Partners,Partners, IncorporatedIncorporated

2301 Rosecrans Avenue, Suite 4160, El Segundo, CA 90245 www.hadleypartners.com Spring 2010 David Hadley President (310) 643-7090 [email protected] I. Introduction

In Reel Time

Dear Readers,

We are pleased to provide you with our Spring 2010 issue of In Reel Time, an original publication by Hadley Partners, Incorporated (HPi) for business owners, senior managers and institutional investors. Our mission is to provide analysis, relevant financial information and insightful commentary on the media services marketplace.

In defining media services we seek to include companies that support the content ecosystem. Our landscape now extends to seven sub-sectors: (i) systems (hardware and software); (ii) services; (iii) wireless services and applications; (iv) production, post-production and visual effects; (v) measurement and auditing; (vi) publishing libraries; and (vii) consumer-facing businesses.

Businesses (both within and outside media services), investors and consumers have watched our world get whipsawed. Yet the media world continues to be one of the economy’s areas of opportunity, filled with both good news and bad. Box office receipts are up; DVD sales are down. One million iPads were sold in the weeks following its release; Veoh, almost $100 million invested into, was sold for a pittance and incorporated into Qlipso; Avatar has unleashed a flurry of interest in 3D; we don’t have enough theater capacity to meet the 2010 3D release calendar. 1 Even the IPO calendar has picked up and we discuss a few such filings herein. And the sector has been active. Indeed, in the best tradition of Hollywood, we had to leave some transactions on the cutting room floor to edit this issue down.

As we sit here writing our spring introduction the stock market has officially entered a correction after months of soaring. Lending remains strained (especially in the middle market) and politics is increasingly inserting itself into our lives. What to believe?

What do we know? That spring follows winter, every year. Sometimes it melts snow earlier than expected, replacing it with the first blooms of bright flowers. Other years winter lingers, chilling us all. Our media services perch is a nice vantage point from which to view the world. Sure, traditional media businesses have to confront real challenges keeping up with new technologies. But those technologies have also brought new opportunities and a larger sector overall. Consumers are spending ever more time consuming media (now if only everyone in the value chain could get paid).

In March our blog went live (http://www.hadleypartners.com/InReelTime/). So far traffic has been strong; we appreciate your interest. In it, we’ve addressed some of the topics touched on above and throughout this newsletter. With the activity level and excitement driving our sector these days we wanted the capability to address related topics in an ongoing and timely manner. Comments and suggestions are always welcome.

David Hadley Megan Jones (310) 643-7090 (310) 321-7110 [email protected] [email protected] II. Transaction News and Reviews February: LensVector took in $30 million, bringing total capital raised to $50 million. IVP led the round, joining existing investors Menlo Ventures, Samsung, SVB, Mitsui and Recent notable mergers, acquisitions and financings in the Kodak. LensVector has created optical technology that can media services sector which we have arranged by sub-sector: shape, steer and focus light without mechanical movement. That means it can create sharp autofocus images with a SYSTEMS (Hardware & Software) non-moving lens. The technology can be used in mobile phones, laptops, camcorders and other consumer electronics. May: Tektronix (TEK) acquired Mixed Signals, which had raised around $7.3 million from Palomar Ventures and February: Motorola (MOT) completed its acquisition of RRE Ventures. Tektronix is a leading provider of digital BitBand, an Israel-based provider of broadband video content monitoring solutions. The acquisition will accelerate management and delivery systems, specializing in VOD for Tektronix’s ability to provide next-generation video testing IPTV. According to Motorola the purchase of BitBand will and monitoring, particularly in the realm of IP video. complement its existing on-demand product line, which includes content management and streaming servers for May: Harmonic (HLIT) agreed to acquire Omneon for $274 centralized on-demand networks. Late last year, Motorola million. Please see details on page 7. also acquired SecureMedia, a company that specializes in digital rights management for IP video networks. April: Avid acquired Euphonix, a manufacturer of large- format digital audio consoles and recording equipment. The February: (GOOG) closed its acquisition of video acquisition allows Avid to deliver a broader range of audio- company . As profiled in our and video-control surfaces and consoles to its customers, from previous issue, Google had agreed to acquire On2 in August independent professionals to high-end broadcasters, across 2009 for $106.5 million. Google increased its price to roughly both audio and video applications. $133 million after pushback from On2 stockholders. In April it was reported that Google intended to open-source VP8, 2 April: Cisco Systems (CSCO) closed its $3.3 billion cash On2’s most recent . acquisition of Tandberg after receiving requisite anti-trust clearances in March. Tandberg enhances Cisco’s position in December: Gizmoz merged with Daz 3D. Gizmoz allows the video conferencing industry. people to use its technology to create 3D-realistic avatar heads from photos of themselves. Meanwhile, Daz 3D makes vir- April: RealD, provider of stereoscopic 3D technologies, filed tual bodies. The idea behind combining the two companies a registration statement for an IPO of up to $200 million. For is to tackle a new market altogether: the burgeoning economy commentary on RealD and the filing please see our blog post within virtual worlds, social networks and online video games. dated April 20. Existing investors, led by Benchmark, Highway 12 Ventures and Columbia Capital, put an additional $5.3 million into April: Ankeena Networks, provider of online video delivery the new company. Previously, Gizmoz had raised $12.8 infrastructure solutions, was acquired by Juniper Networks million and Daz 3D had raised $4 million. for consideration reported to be just less than $100 million. Ankeena had been backed with $31 million from VC’s December: U.S. investor Symphony 3D Holdings acquired including Mayfield, Clearstone and Trinity. Its content South Korean company MasterImage and renamed it Master delivery platform supports the distribution of video across Image 3D. Master Image 3D has supplied over 1,000 3D mobile devices, PC’s and televisions. theater systems to exhibitors in 36 countries since 2004, and also enables 3D viewing on more than 300,000 mobile devices. March: Avaak, a company that develops video monitoring Total capitalization of the company is $15 million; acquisition and networking products, raised $10 million in Series B consideration and growth capital were not broken out. funding led by Qualcomm, with existing investors Trinity, InterWest Partners and Leapfrog Ventures participating. SERVICES This brings Avaak’s total funding to $17 million. Avaak recently launched its Vue system, which lets users use May: Content delivery platform Limelight Networks webcams to monitor their homes or businesses via the (LLNW) acquired ad platform EyeWonder for $110 million. Internet or a mobile device. Consideration included $62 million cash, 12.7 million LLNW common shares and potentially an additional 4.9 LLNW March: Digital Cinema Implementation Partners, or DCIP, million shares in 2011 depending on performance. EyeWonder completed a $660 million financing to fund the installation of helps interactive agencies and content publishers create, build, 14,000 digital cinema screens across North America. DCIP track and optimize rich media and interactive video advertising is a joint venture owned by exhibitors AMC, Cinemark and campaigns. Limelight also recently acquired video ad insertion Regal. This financing was intended for 2008 but was delayed firm Kiptronic in May for an estimated $12 million. by the downturn in the capital markets. The transaction included $445 million in bank debt led by J.P. Morgan and April: Edgecast raised $10 million led by Menlo Ventures. $135 million in junior debt. The three JV partners provided The company has raised a total of $20 million since 2007, $80 million in equity. counting Steamboat Ventures, Mark Amin (Vice Chairman Also in March, significant owners of Cinemark took $182 of CinemaNow) and Jon Feltheimer (CEO of Lionsgate) as million of their chips off the table. Madison Dearborn, Syufy investors. EdgeCast, which has been profitable since the fourth Enterprises, a trust affiliated with chairman Lee Roy Mitchell quarter of 2009, competes with other CDNs to help websites and other insiders sold shares amid investor enthusiasm for around the world deliver multimedia (i.e. music, video, live digital cinema and 3D. stream, etc) to the end user.

February: Encoding.com raised $1.25 million from Meta- April: Google (GOOG) acquired Episodic, an online video morphic Ventures and angels. The company provides online hosting platform. Episodic’s technology will be folded video encoding services on a SaaS basis for customers into YouTube, and its staff will join the larger company. including MTV Networks, WebMD, Nokia and MySpace. Episodic’s publishing suite lets users manage and measure video content, and use the platform’s monetization services. February: IVT, a SaaS company which supports live and on- This year, Google has also acquired online photo editor demand corporate video webcasts, raised $5.5 million from , Microsoft Office collaboration tool DocVerse, iPhone Syncom Venture Partners, Barshop Ventures and previous email app reMail and social search startup . investors Monitor and Tudor. Customers include Accenture, 3 AT&T, Cisco and IBM. April: 3Crowd, a startup that provides management tools for cloud-based services, raised $6.6 million in Series A financing December: NCR Corp. (NCR) acquired DVDPlay, an from Canaan Partners and Storm Ventures. 3Crowd’s tools operator of DVD rental kiosks. DVDPlay had raised around give enterprises greater control over content delivery and other $30 million from several VC firms. In 2009 NCR also cloud services, enabling them to use multiple services at once. acquired TNR Holdings, the second largest DVD kiosk operator in the U.S. after Red Box, and is using the Block- buster brand for this business. March: KIT Digital (KITD), a leading global provider of IP- based video asset management services for enterprise clients, December: WideVine Technologies raised $15 million, acquired privately-held Multicast Media for approximately bringing its total capitalization since its founding in 1999 to $18 million in cash and KITD stock. This transaction over $80 million. WideVine offers video service providers continues a string of acquisitions, following the purchases of digital content delivery and DRM solutions. Major customers Narrowstep, Visual Connection, Morpheum, Kamera, The include NetFlix, BlockBuster, Sonic Solutions and Feedroom and Nunet. KIT Digital has also raised $70 million BestBuy (forthcoming). Liberty Global, Samsung Ventures in two public equity offerings in 2010. and (reportedly) Echostar are participants in the December round; the company has numerous institutional backers. March: The Orchard (ORCD), a leading independent music distributor, executed a merger agreement to go private. The WIRELESS SERVICES & APPLICATIONS company’s largest stockholder prior to the agreement, hedge fund Dimensional Associates, agreed to acquire the 58% of April: Nokia (NOK) acquired MetaCarta, and said it will use the shares it didn’t own for $2.05 per share. The Company MetaCarta’s technology in the areas of local search and other distributes music through 660 digital and mobile storefronts in services. MetaCarta’s solutions enable companies to bridge 75 countries as well as at retail. For the year ended December the gap between content and maps. MetaCarta also has a 2009, the company generated revenue of $62 million and had partnership with Microsoft to deliver map-based local news a net loss of $18 million. within the Microsoft Vine service. March: Nokia (NOK) also acquired Novarra, a company and Hula Post). Core Business Credit is providing an $8 that develops mobile web browser technologies. Nokia, which million line to support the transaction. HPi owns a modest makes its own browser, will integrate Novarra’s. During equity stake in Telecorps. 2009, Nokia bought a number of companies including Plum, Cellity and Bit-Side. May: NEP Broadcasting, a portfolio company of American Securities and the nation’s leading provider of teleproduction March: RoundBox , a provider of mobile broadcast software, services for live events, acquired Premiere Entertainment, a acquired the assets of Jacked, a provider of media interactivity production company that specializes in live and taped broad- solutions. RoundBox has raised $43 million in funding. casts for the web. The company’s services will allow NEP Jacked had raised nearly $8 million from Core Capital, clients to expand their Internet reach. Gabriel Venture Partners and Provenance Ventures. March: Image Metrics (IMGX.OB) went public and raised $8 January: Good Technology acquired CloudSync for an million in a reverse merger transaction. The company’s software undisclosed sum. Both companies enable corporate customers allows game developers and film and TV producers to create to manage their employees’ mobile devices – laptops, smart- realistic human faces and expressions. Image Metrics was phones, tablets – and related data. Good Technology also founded in 2000 and had previously been capitalized with recently acquired Intercasting, a mobile social networking $14 million. Clients include Activision-Blizzard, Electronic connectivity company. Arts, Sega, Take Two Interactive and Warner Brothers. The company generated $4 million in revenue in the year ending December: Flurry and Pinch Media announced that they September 2009 and is growing rapidly. were merging to create the biggest (in terms of user base) mobile analytics platform on the market. As a combined January: AOL (AOL) acquired StudioNow in a cash/stock/ company, Flurry and Pinch Media analytics services will be earn-out transaction totaling $36.5 million. As we profiled running on more than 80% of all iPhone, iPod, iTouch and in 2008, StudioNow has built an online marketplace where Android handsets worldwide. Pinch Media had received freelance editors, videographers and other creative profes- 4 seed funding from Union Square Ventures and First Round sionals help clients create video. The Company was backed Capital; Flurry had raised $3.5 million from Draper Fisher by Claritas Capital and Clayton Associates. AOL will use Jurvetson and Borealis Ventures. In January 2010 the StudioNow’s technology platform and its network of 3,000+ combined company raised $7 million. creatives to produce professional video, both for AOL produc- tions and for its advertising and content partners. December: Nuance (NUAN) acquired SpinVox for $102.5 million in cash and stock. SpinVox transcribes voicemails to AUDIENCE MEASUREMENT & AUDITING text so they can be indexed and searched, and has a number May: The Nielsen Company acquired GlanceGuide, a video of mobile carrier customers in Europe. Nuance is a speech analytics firm. GlanceGuide provides its customers with host- recognition company and will integrate SpinVox into its ed services that deliver analytics on how users consume video platform. SpinVox raised $100 million a year prior to its sale online, and Nielsen immediately integrated GlanceGuide’s at a valuation of $500 million and was reportedly having offerings with its own online video measurement tools. difficulty refinancing debt at the time of this transaction.

April: BlackArrow, a provider of advertising solutions PRODUCTION, POST-PRODUCTION & VFX for new TV platforms like VOD, DVR, mobile and online video, raised $20 million in third-round funding. Pay TV May: Prime Focus is shutting down its post work in Holly- middleware provider NDS led the round, and numerous wood and will only be doing 3D work in that location. They existing investors joined in. BlackArrow’s Advanced are keeping their New York office open for dub work. Advertising System allows content providers to manage ad campaigns across multiple platforms, and also offers the May: An affiliate of Telecorps acquired Laser Pacific from ability to tailor-fit ads to the content the viewer is watching. Eastman Kodak. Telecorps is a portfolio company of H.I.G. Capital, and has completed several acquisitions in the April: Imagespan, whose LicenseStream platform offers post-production and equipment rental space since 2007 content publishers a way to track and charge for the use of their (including Wexler, Coffey Sound, PostWorks, Orbit Digital pictures and videos online, hired a new CEO (Kurt Garbe) and raised growth financing. The company said the sum raised option to invest $55 million more by 2011. Previously, the was under $5 million. Existing investors Bertelsmann Digital site had raised almost $13 million in 2008 and late 2007. The Media and CityLight Capital participated but previous capital will be used to expand geographically, particularly in investor Ackerley Partners did not. ImageSpan has raised Japan, China, Korea and India. more than $14 million to date. February: GameFly, the Netflix of games, filed for an IPO February: Open Text (OTEX), the enterprise content man- and plans to raise $50 million. It will trade on the NASDAQ agement company, bought content analysis startup Nstein under ticker symbol GFLY. GameFly reported revenue of Technologies for $34 million. Nstein’s Text Mining Engine about $47 million in the third quarter of 2009, compared to helps businesses centralize, understand and manage content $39 million a year earlier. Operating profit for the quarter was through semantic and text analysis. Last year, Open Text about $6 million. The company’s backers include Sequoia and bought 3D interface innovator Vizible. Tenaya Capital. The company has a library of 7,000 games and more than 334,000 subscribers. January: Quantcast, an analytics firm specializing in data February: Clicker, a search engine for online television about how to expand audiences for digital advertising, content, closed an $11 million Series B funding round led received $27.5 million from Cisco, Polaris, Founders Fund by JAFCO Ventures, with existing investors Benchmark and Revolution Ventures. Total raised to date is $53 million. and Redpoint participating. The new round brings Clicker’s The funds will be used to build out its Quantcast Media total funding to $19 million. Clicker doesn’t store content on Program, a marketplace to buy and sell advertising space based its servers, but instead makes searching online content easier. on real-time measurement. Clicker’s index includes over 600,000 full length TV episodes spanning 10,000 shows. December: The Nielsen Company agreed to sell its theater ticket sales data unit (Nielsen EDI) to Rentrak Corp. (RENT). February: Wal-Mart acquired Vudu, a provider of software The deal reportedly was valued at $15 million in cash. for on-demand movie access via HD TVs and Blu-ray 5 players. Vudu previously raised around $21 million in VC PUBLISHING LIBRARIES funding from Benchmark and Greylock.

May: Private equity fund Terra Firm, EMI’s shareholder, January: Virtual world platform Metaplace closed its site agreed to invest another £105 million ($156 million) in the on Jan. 1, making 70,000 virtual worlds disappear from company to stave off an acceleration of Citigroup’s £3 billion the Internet. in debt. December: Digital music start-up Imeem sold for less than $1 million, disappointing its VCs and record label Warner CONSUMER FACING Music, which had invested (Warner also invested in Lala, which was acquired by Apple). April: The Veoh saga ended when Israeli start-up Qlipso acquired Veoh’s assets out of Chapter 7. Copyright litigation December: Hollywood Media (HOLL) agreed to sell its with Universal Music Group proved too costly and distracting, Broadway ticketing division to Key Brand Entertainment even though Veoh had won a summary judgment. Veoh had (producer and distributor of live entertainment) for been backed by Time Warner and Michael Eisner among $45 million. The transaction consists of $21.6 million in cash others, and had operated an Internet television service in the and assumed liabilities, $8.5 million in seller debt, up to $14 U.S. and around the world. Qlipso bought Veoh’s assets to million in earn-out consideration and a 5% interest in the to integrate Veoh’s television audience and infrastructure with division. After the transaction closes, Hollywood will retain Qlipso’s interactive platform and social networking strategy. its ad sales division (including CinemasOnline in the UK), No financial terms were disclosed but the purchase price sure- its 26.2% interest in MovieTickets.com, its IP division and ly wasn’t close to the approximately $70 million in venture contingent payments from both Broadway Ticketing and its funds that went into Veoh. Qlipso is backed by Jerusalem previously sold Hollywood.com property. Venture Partners. December: LiveNation (LYV) and Ticketmaster (TKTM) February: Streaming video site Ustream raised $20 million got Competition Commission approval and their merger from SoftBank for a 13.7% stake. Softbank also received the finally closed.

III. Selected Recent Hadley Partners Transaction Announcements

6 IV. Transaction Review

In each of our issues, we highlight a few significant transactions technological capabilities in providing comprehensive to illustrate how financial, strategic, operating, competitive and digital video infrastructure, from content acquisition other factors are affecting enterprise value. We welcome your through workflow through delivery. The increasing questions and comments. distribution of video across multiple platforms and devices continues to spur growth in companies that support Please also visit our blog at http://www.hadleypartners.com/ such distribution. Continued consolidation is likely as InReelTime/ for periodic transaction reviews. players try to increase the breadth of the solutions they can provide customers. Harmonic to Acquire Omneon Harmonic has 97 million shares outstanding, so Omneon On May 6, 2010, Harmonic (HLIT) announced that it shareholders will own approximately 15% of the combined would acquire privately held Omneon for $190 million in company at closing. cash and approximately 17.1 million shares of its common stock. With Harmonic’s stock closing at $6.70 prior to the announcement, the transaction implied an enterprise value Valuation – Harmonic Agrees to Acquire Omneon of $274 million (after deducting $32 million of Omneon (at announcement) cash). HLIT’s closing price on May 17 implied a $258 Omneon million enterprise value. Both company boards have Purchase Price: $274 million approved the transaction and 66% of Omneon’s sharehold- Revenues 2009 (year ended Dec.2009): $105 million 7 ers have agreed to a lock-up. The acquisition is expected to close in Q3 2010. Revenue Multiple: 2.9x

Harmonic designs, manufactures and sells video systems that enable service providers to deliver broadcast and on-demand services. The company offers video processing products, Kudelski SA Acquires OpenTV principally video encoders, transcoders and multiplexers, as well as management control software. Key customers On March 26, 2010, Kudelski SA, a Swiss provider of include broadcast, cable, Internet, mobile, satellite and content-protection and other digital TV technologies, telecom service providers. 2009 revenue was $560 million. completed its acquisition of OpenTV Corp. (OPTV). OpenTV’s stock was delisted and the company became a Omneon provides media servers and storage systems that wholly-owned subsidiary of Kudelski. maximize workflow productivity and on-air reliability for the production, distribution and management of digital OpenTV is a leading provider of pay TV middleware and media. Customers include media, broadcast and pay advertising solutions. The company licenses its technology television companies around the world. For the year principally to set-top-box manufacturers, TV manufactur- ended December 31, 2009, Omneon’s revenues were ers and video network operators to enable them to offer approximately $105 million (67% outside the U.S.). No single enhanced program guides, HD services, VOD, personal customer represented over 10% of revenue. The company video recording, home networking and interactive and raised approximately $95 million in venture funding over addressable advertising. The Company’s software has been twelve years with Accel as its lead investor. deployed in 133 million digital set-top-boxes by operators in 96 countries including BSkyB and DISH Network. A The combined company will serve over 2,000 customers significant competitor is NDS, in which News Corp. across 100 countries. The acquisition expands Harmonic’s owns a stake. V. Welcome to our Blog!

Kudelski has been chasing OpenTV for a while. In January We’ve gone multi-media! In March, Hadley Partners 2007 Kudelski gained voting control of OpenTV when it launched our In Reel Time blog as a companion to this acquired Liberty Media’s supervoting shares in the newsletter (http://www.hadleypartners.com/InReelTime/). company, but that stake only represented a 32% economic While the newsletter has always covered a lot of ground, interest. In February 2009 Kudelski offered $1.35 per share we can’t publish it often enough to do this dynamic sector for OpenTV’s remaining shares, but a special committee justice. Hence a blog and its real time capabilities (subject of OpenTV’s board rejected that offer as inadequate. In to the FINRA requirement that all posts be reviewed and October 2009 Kudelski initiated a tender for all outstanding approved before they’re posted). shares at $1.55 per share, which represented a 17% premium to the previous closing price. We have already written on a wide range of subjects. Within the investment banking basics category we have addressed The implied enterprise valuation at $1.55 per share was when to sell your company or go public, venture capital and $105.6 million, which represented 7.2x LTM EBITDA. the current state of that industry, angel investors and general However, Kudelski paid $132 million for Liberty Media’s fundraising. 32% stake in 2007, so its all-in cost to acquire the company was significantly higher. Within media services itself we have covered RealD’s IPO filing, industry shows (NAB, ShoWest, Digital Hollywood and The Cable Show), Michael Lewis’ book The Big Short, Valuation – Kudelski acquires OpenTV content, 3D, media and technology business models and how they’re evolving and music libraries. We even posted a 8 Equity Value: $214.1 million video about technology in media through history. Cash (November 4, 2009): $108.9 million We’ve learned a lot. What comes next? Well, more feedback Minority Interest: $0.4 million would be great - either on the blog comments option or via Total Enterprise Value: $105.6 million email. Would guest bloggers be a good idea? More videos? Music (legal downloads only!)? Would readers prefer more LTM Revenue (ending 9/30/09): $117.7 million investment banking basics or more media services posts (or both!)? Any topics in particular? Revenue Multiple: 0.9x

Should we grab a Flip and start interviewing people? LTM EBITDA (ending 9/30/09): $14.6 million EBITDA Multiple: 7.2x On the lighter side, Megan’s favorite finding was the (much covered on other blogs) video of a shark attacking an air- plane (http://www.youtube.com/watch?v=SXiExCuHZDg). Her latest blog post was on quality. Feel free to email us after watching the video and tell us whether it makes the grade.

http://www.hadleypartners.com/InReelTime/

V. Relevant Public Company Valuations and Performance

COMPARABLE MEDIA SERVICE COMPANIES ($ in millions, except per share data) Price Market Enterprise Last Twelve Months 52-Week Prices Company 5/17/2010 Cap. Value Revenue EBITDA Margin High Low

Systems (Hardware & Software)

Avid Technology, Inc. (AVID) $14.88 $565.9 $491.7 $633.3 ($1.9) nm $17.99 $10.81 0.8 x nm Video editing, storage and management tools DivX, Inc. (DIVX) 7.24 238.1 102.5 75.2 (0.3) nm 8.90 4.55 1.4 x nm Video compression, security and distribution tools Dolby Laboratories, Inc. (DLB) 64.23 7,286.2 6,515.2 799.8 407.9 51.0% 69.72 34.14 8.1 x 16.0 x Audio technologies DTS, Inc. (DTSI) 34.10 593.0 514.1 82.2 26.9 32.7% 36.18 23.70 6.3 x 19.1 x Audio technologies Harmonic, Inc. (HLIT) (a) 5.84 566.0 298.2 341.0 23.6 6.9% 7.27 4.77 0.9 x 12.6 x Video processing products RealD, Inc. (RLD) tbd tbd tbd 645.3 14.5 2.2% nm nm tbd tbd Stereoscopic 3D technologies SRS Labs, Inc. (SRSL) 9.72 141.8 108.1 27.6 3.6 12.9% 10.05 5.85 3.9 x 30.2 x Audio technologies Systems (hardware & software) Mean $1,565.2 $1,338.3 3.6 x 19.5 x 21%

Services

Cinedigm Digital Cinema Corp. (CIDM) $2.19 $63.8 $311.2 $78.2 $36.9 47.2% $3.24 $0.81 9 4.0 x 8.4 x Digital cinema distribution & management DG FastChannel, Inc. (DGIT) 40.62 1,153.5 1,202.0 203.7 84.2 41.4% 43.22 16.39 5.9 x 14.3 x Digital distribution of advertising & other content Limelight Network, Inc. (LLNW) 4.13 364.5 215.6 134.6 1.4 1.1% 5.78 3.17 1.6 x 148.8 x Digital distribution of content National CineMedia, Inc. (NCMI) 18.92 816.1 1,644.3 391.8 188.5 48.1% 20.23 11.03 4.2 x 8.7 x Digital content distribution network The Orchard Enterprises, Inc. (ORCD) 2.00 12.8 15.3 62.3 (2.6) nm 3.49 1.05 0.2 x nm Digital music publisher & distributor Services Mean $482.1 $677.7 3.2 x 45.1 x 34%

Wireless Services & Applications

NeuMedia, Inc. (MNDL.OB) 0.30 12.0 35.0 $39.8 $0.6 1.5% 0.90 0.21 Publisher and distributor of content via SMS, mobile 0.9 x 57.3 x Nextwave Wireless Inc. (WAVE) 0.37 58.1 758.0 60.2 (23.3) nm 1.45 0.28 Owns 65% of Packetvideo Corp. (DoCoMo owns 35%) 12.6 x nm Wireless Services & Applications Mean $35.0 $396.5 6.7 x 57.3 x 2% Measuring & Auditing

Arbitron Inc. (ARB) $32.66 $869.3 $925.3 $382.4 $82.5 21.6% $33.52 $14.87 Radio media & marketing services 2.4 x 11.2 x comScore Inc. (SCOR) 17.50 542.6 465.2 133.3 18.6 13.9% 19.58 10.18 Digital marketing intelligence services 3.5 x 25.1 x Rentrak Corp. (RENT) 25.16 265.4 227.2 88.4 4.5 5.1% 26.00 9.70 Movie and pay TV information services 2.6 x 50.4 x

Measuring & Auditing Mean $559.1 $539.3 2.8 x 28.9 x 14%

V. Relevant Public Company Valuations and Performance

COMPARABLE MEDIA SERVICE COMPANIES ($ in millions, except per share data) Price Market Enterprise Last Twelve Months 52-Week Prices Company 5/17/2010 Cap. Value Revenue EBITDA Margin High Low

Production, Post-Production & VFX

Ascent Media Corp. (ASCMA) $29.06 $405.9 $89.3 $442.9 $20.8 4.7% $30.61 $22.05 0.2 x 4.3 x Post-production and network services Point.360 (PTSX) 2.15 22.6 31.5 40.2 (1.2) nm 2.45 0.87 0.8 x nm Post-production services Rainmaker Entertainment Inc. (RNK) (b) 0.35 6.1 8.9 16.0 (2.6) nm 1.20 0.29 0.6 x nm Animation and other post-production Technicolor S.A. (TCH) (c) 0.81 212.4 2,892.7 5,057.7 730.9 14.5% 1.47 0.54 0.6 x 4.0 x Post-production, distribution & network services & technologies Production, Post-Production & VFX Mean $161.7 $755.6 0.5 x 4.1 x 10%

Consumer Facing

Hollywood Media Corp. (HOLL) $1.15 $35.8 $24.3 $103.4 ($1.3) nm $1.76 $0.98 Live theatrical ticketing, movie ticketing & hollywood.com 0.2 x nm IMAX Corp. (IMAX) 19.60 1,245.0 1,261.5 210.2 49.6 23.6% 21.30 6.52 IMAX movie technologies, content & theaters 6.0 x 25.4 x Live Nation, Inc. (LYV) 13.43 2,321.3 3,291.1 4,419.1 165.8 3.8% 16.90 3.98 Live music company & next-generation music studio 0.7 x 19.9 x RealNetworks Inc. (RNWK) 3.94 532.9 197.7 550.1 (17.9) nm 5.41 2.44 Digital media & music offerings and software 0.4 x nm 10 Sonic Solutions (SNIC) 12.57 383.4 327.1 110.2 4.7 4.2% 14.02 1.34 Roxio digital media services 3.0 x 70.1 x

Consumer Facing Mean $889.1 $1,124.3 2.1 x 38.5 x 20%

(a) Pro forma revenue for non-reflected impact of acquisition of Scopus Video Networks, Ltd. (b) Rainmaker Entertainment is traded on the Toronto Stock Exchange (c) Technicolor S.A. is traded on the NYSE Euronext Exchange All Currencies converted into USD as of 5/17/2010

S&P 500 27% Nasdaq Composite 38% Systems (Hardware & Software) 40% Services 33% Wireless Services & Applications -9% Production, Post-Production & VFX 2% Measuring & Auditing 90% Consumer Facing 240% 300% 300%

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-50% -50% May-09 Jun-09 Jul-09 Aug-09 Sep-09 Oct-09 Nov-09 Dec-09 Jan-10 Feb-10 Mar-10 Apr-10 May-10 Hadley Partners, Incorporated 2301 Rosecrans Avenue, Suite 4160 El Segundo, CA 90245

VI. Overview of Hadley Partners, Incorporated

Hadley Partners is a boutique investment bank. With our experienced team of Wall Street veterans, we offer the following services to emerging-growth companies:

Mergers and Acquisitions Advisory Financial Advisory

• Sales of businesses, or significant • Joint ventures/strategic business subsidiaries/operations partnerships • Purchases of businesses • Leveraged buyouts/management • Consolidations/industry “roll-ups” buyouts/recapitalizations • Transaction sizes $15 - 250 million+ • Debt financings • Non-transactional advisory and consulting services

Private Placements of Equity Restructuring Advisory

• Institutional Private Equity • Family business restructurings • Venture Capital • Debtor advisory • Early rounds (after founders, “friends • Creditor/investor advisory & family” rounds) • Portfolio advisory (for significant • Transaction sizes $5 - 50 million+ institutional investors)

Our managing directors have worked on dozens of transactions for an aggregate value in excess of $50 billion, and each of them has more than 10 years of investment banking experience. We have completed transactions with a large number of middle market and emerging growth companies. We also have strong relationships with an extensive network of investing institutions that look to our firm for investment opportunities.

Not only does our firm bring Wall Street experience to each assignment, but we understand that Hadley Partners, Incorporated needs to go further for you than bulge bracket firms will go for their clients. We know that you don’t have the depth of resources that larger companies do, and you need more from your investment banker. We are prepared to provide that level of service.

For more information please contact: Megan Jones Hadley Partners, Incorporated (310) 321-7110 [email protected]