ANNUAL REPORT 2011 Aspiro’s offices in Oslo, Malmö, Stockholm, Copenhagen and Berlin. Aspiro’s customers in Norway, Sweden, Denmark, Estonia, the UK, Germany, Portugal, Austria, Chile, the US, Mexico, Canada and the Netherlands. Contents This is Aspiro 3 Mobile Search 19 Definitions of Key Ratios 37 2011 in Brief 4 Discontinued Operations 20 Financial Statements, Group 38 A Statement by Gunnar Sellæg 5 Stock and Stockholders 21 Financial Statements, Parent 43 Business Concept, Vision and Goals 7 Corporate Governance Report 24 Accounting Policies 48 Market 9 Board of Directors and Auditors 28 Notes 52 Competence and Values 11 Management 29 Signatures, AGM and Financial Information 67 Operations 13 Directors’ Report 31 Audit Report 68 Music 15 Risk and Sensitivity Analysis 34 TV 17 Five-year Summary 36 Production: Aspiro/Flikk • Foto: Tonje Næss • Translation: Turner & Turner This document is essentially a translation of the Swedish language original. In the event of any discrepancies between this translation and the original, the latter will be deemed correct. This is Aspiro 3 This is Aspiro Aspiro is a leading streaming company with its primary focus on the WiMP music service and video services delivered to partners. WiMP is delivered direct to consumers and through partners such as operators and TV distributors. With WiMP, Aspiro is thinking globally but working locally, with editorial services and in-house teams tailoring the service for each country. Aspiro has 14 years’ experience of digital services and is a growth company with high ambitions. Services: TV and video Search services Music streaming streaming on mobiles Geography: Aspiro is present in Sweden, Norway, Denmark Music, Warner Music, EMI, IODA, The Orchard, the BBC, Disney and Germany, and delivers to customers worldwide. Channel, CNN, CNBC and Turner. Customers: Aspiro’s largest customers include corporations The company: Aspiro was founded in 1998 and is listed like Deutsche Telekom, Telenor, 3, TeliaSonera, Entel, Nextel on NASDAQ OMX Nordic Exchange in Stockholm, with ticker and Canal Digital. ASP. There are approximately 206,3 million shares, and as of 31 March 2012, market cap. was some SEK 297 m. Aspiro has Content vendors: Aspiro has agreements with content some 100 staff and sales in 2011 (for continuing operations) vendors in TV and music, including Universal Music, Sony were SEK 230.6 m. 2011 in Brief 4 2011 in Brief • Aspiro’s repositioning as a streaming company was • Aspiro’s music service more than tripled its paying user completed through the sale of the Mobile Solutions base in the year. business segment to LINK Mobility for NOK 22.9 m and • Aspiro has evolved from being a provider of mobile TV to the divestment of Miles Ahead. delivering video services for all types of display. • 25% sales growth overall, nearly 150% in Aspiro Music. Aspiro Music in 2011 Aspiro TV and Search in 2011 • The number of paying WiMP users increased from 100,000 to • In the second half-year, Aspiro achieved positive EBITDA in its 350,000 in the year. TV business segment, the result of cost control and efficient • WiMP was launched in Sweden, where Aspiro also signed a operations. distribution agreement with the operator Telenor. • Aspiro TV evolved from being a mobile TV company to • Aspiro signed an agreement with Canal Digital, involving delivering services for all types of display, from mobiles and 700,000 Norwegian customers receiving WiMP bundled with tablets to computers, Internet-enabled TV sets and gaming their TV subscriptions. consoles. • New WiMP clients launched for formats including Windows • Aspiro signed an agreement with NII Holdings in Latin America Phone 7, Nokia, the iPad and Sonos home music system. for delivering video streaming services in a number of countries. • Aspiro acquired Platekompaniet’s shares of jointly held • Aspiro extended its partnership with Telenor for new TV clients. Norwegian distribution company WiMP Music AS, and thus • Aspiro nominated for the Meffy Awards in the best TV and video holds 100% of WiMP on all markets. service category. • WiMP recognized as the world’s best music service at the Meffy • Sales in Mobile Search decreased significantly, tracking the Awards in London, and was nominated for a number of other market development. Aspiro focused on maximizing profitability awards. through efficient operations. Continuing Operations 2009-2011, SEK m Key Figures 2011 2010 Sales,OMSÄTTNING, SEK m MSEK EBITDA,EBITDA, MSEK SEK m Continuing operations 75 4 Net sales, SEK m 230.6 184.9 EBITDA, SEK m -18.8 -27.2 -2 Profit/loss after tax, SEK m -41.2 -119.5 50 Earnings per share, SEK -0.21 -0.62 -8 Average no. of employees 117 129 25 Cash and cash equivalents at end of year, SEK m 57.5 76.8 -14 Other key figures 0 -20 Equity/assets ratio, % 64 54 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 2009 2009 2009 2009 2010 2010 2010 2010 2011 2011 2011 2011 Return on capital employed, % -11.21 -54.24 Return on equity, % -12.06 -58.92 NettoomsättningNet sales EBITDA Cash flow from operating activities per share, SEK -0.18 -0.01 A Statement by Gunnar Sellæg 5 A Statement by Gunnar Sellæg In this interview, Aspiro’s CEO talks about the past year and initiatives going forward. How satisfied are you with Aspiro’s results for 2011? were positioned as the leader in mobile content services in I’m really satisfied. We focused the business and are now a the Nordics and Baltics. Aspiro was on the verge of a new, leading streaming company. We achieved growth in our Music momentous phase, namely evolving from a mobile content business segment consistent with our 150% target and tripled services distributor to become a consumer company in the number of paying users. Securing growth in TV didn’t go the digital entertainment sector. The boundary between as quickly as we had originally expected, but this segment the Internet and mobile telephony started to fade, and my still made good progress, and succeeded in achieving positive mission was to lead the company to its new position. Even EBITDA in the second half-year. We also finished the year with if a lot has changed since, we’re now very much a consumer a very brisk fourth quarter, with 43% growth in the company company in the digital entertainment sector, with our focus overall. on our proprietary music streaming brand, WiMP. Aspiro is now a completely different company to 5 years ago, and Is there one single event in the year that you’re we’re making good progress to becoming one of the most especially satisfied with? important global players. There were lots of events, but one of the most important for the company, and our fast-growing music service WiMP, Can you describe the process that occurred? was the agreement we entered with Canal Digital of Norway, In 2007, over 90% of Aspiro’s sales were from traditional which involves 700,000 Norwegian customers—one in every ringtones, mobile business solutions and mobile search three Norwegian households—getting WiMP packaged into services. Then, sales of ringtones and search services fell their TV subscriptions. This agreement wasn’t just important sharply because the market started demanding more for WiMP in Norway, but also our global expansion, because advanced services. We started to develop WiMP and saw that it gives us the size and a fantastic reference that we hope will our TV services were growing and started to evaluate the inspire more partners. disposal of our old services. In 2010 and 2011, we disposed of Mobile Entertainment with its ringtones, Miles Ahead with 2012 is the fifth year since you took over as Aspiro’s its gaming and Mobile Solutions with its mobile business CEO. What was Aspiro like five years ago? solutions, in that order. In that period, music and TV continued That’s right, I started as CEO on 1 March 2007, when we their robust growth, and this pair now represents over 85% of A Statement by Gunnar Sellæg 6 our sales. Because, these operations virtually didn’t exist five Our consistent aim is to inspire people to discover new and years ago, it is no exaggeration to say that Aspiro is an all-new old music. For our service to be the winner, we don’t think it’s company now. enough just to offer a search option for our full range, we’ve also got to present it in the best way, a bit like a good, old- «The future of our music and fashioned record shop. TV services looks very positive, What role is WiMP currently playing on the market? and it’s all about growth and WiMP has over 350,000 paying users, and as a result, is already one of the big players. Meanwhile, our profile and focus expansion now.» has got a lot of praise, we’ve won several awards in many consumer tests in all countries where we are present. In 2011, What was the situation at the beginning of 2011? we were rated as the best music service at the Meffy Awards Going into 2011, we were still in the midst of our repositioning in London, which we’re proud of. In Sweden, our recognition process. We had divested Mobile Entertainment, but still includes success in a major test by gadget magazine M3, held Mobile Solutions. WiMP had been in place for a while in and WiMP won its duels with competitors run by VG of Norway and Denmark, and we’d just launched with Portugal Norway, TV2 of Denmark, and the Danish and Swedish Mobil Telecom, under its brand.