L3Video Content Protection, Distribution & Monetization

“L3”

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“We help video content owners make more money and make it faster, by enabling secure, viral distribution worldwide.”

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Scenario Today

MPAA (Motion Picture Association of America) says Hollywood loses 40% of revenue ($4 billion) to Piracy

And Piracy is on the rise – a rock-solid solution is required

Content-Owners give their content to intermediaries losing up to 80% of potential revenue

Most try YouTube distribution – sometimes coupled with physical DVD shipping

Premium content (e.g. new movies and eLearning) limited to Ad-supported streaming sites (including YouTube) – No Pricing Power

Those who try to self-distribute spend significant amounts on bandwidth, servers and custom DRM solutions

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Market Friction

Content Owners Friction

Large

Small

    Revenue loss due to Piracy (at each step of distribution)

    Internet distribution is limited to streaming customers with robust bandwidth

    Giving up their rights in various geographies to distributors

    Inability to self-distribute and market content

    Inability to price variably in various geographies, thus limiting reach

    Cost of repurposing content for various devices and platforms

    Censorship requirements in different markets

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Market Friction

In simple terms Video rights owners have to either

Accept piracy of their content (from DVDs, YouTube, Tivo etc.)

Spend lots of money on Servers, CDNs, and eCommerce (> $5,000 per month)

Sell out to Netflix, Hulu and other such aggregators (and sacrifice their own brand)

OR

Use “L3”

The L3 Solution

The mission of Layer 3 Media’s (L3) is to smoothen the movie/video distribution chain through disruptive innovation Protect content owner’s interest

▪ Piracy-proof the content▪ Enable content monetization

Easy Content Accessibility to audiences globally▪ “Viral”/”Social” distribution (Build on current eco-system)▪ Computers, tablets, Mobile phones, TV – All devices▪ Enable value added services such as sub-titles to enable

intermediaries▪ Watch content free with relevant ads

Address ground realities of infrastructure▪ Download & Play or Streaming or Torrent or Physical distribution

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Cable TV/DTH

ePVR (Enhanced Personal Video Recorder)Enhanced Cell Phone

Cellular Network

Other Devices

L3 Content

Desktop Software

L3 is the world’s first

LEGAL TORRENT system

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More on L3

Viral distribution/Content Marketing

Rock solid copy-protection Easy Payment methods for

end customers (including “free-with-ads”)

A Cross-platform solution Scalable platform to address

Global demand of content Control for Content Owners

How it works

+ L3 =

+ or

L3Mobile TV Desktop

Owner

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Customers

Market Segments in order of focus Independent Film and documentary makers Small Studios and distribution companies in India and

other countries How-To video makers (Cooking, Musical Instruments,

Exercise videos etc.) Other Semi-Professional content (migrate from YouTube) Music Videos Large Film Distribution companies (including Netflix,

Hulu…) Formal eLearning distributors/creators Large Studios (Sony, Disney...)

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Industry/Market

Global market estimated at almost $1 trillion (TAM) and can be grown by this platform

Video creation and consumption rising due to lowered technology barriers

Recent SOPA and PIPA bills in the US Congress attest to how seriously business and government are taking threat of Piracy

Without protection, unfettered distribution cannot happen

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Addressable Market

Entertainment Piracy alone accounts for at least $6 billion worldwide ($4B Hollywood)

We can reduce this by 25% over 5-7 years giving us…

Expected share of market in 5-7 years of $2 billion (top-line collections) giving $200MM in revenue with margins over 75%

Long term, as this platform becomes mainstream, we can capture much more

Growth can only be explosive as adoption will be viral

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Management Background Anil Gupte

IIT Kharagpur alumnus Ran a Computer Aided Design Training and

Consulting business from 1989 to 1993 with Fortune 100 clients

Founded iCinema – one of the first streaming video sites ever (1997)

Morphed above into maxNetwork – a service oriented business model with better revenue/profit

Grew above business 680% from 2000 to 2004 then sold it

Introduced the first Personal Video Recorder in India (2006)

4 US Patents received + 1 more in pipeline

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Management Background Amit Abhyankar

IIM Lucknow Alumnus 12 years of experience in Media and Entertainment As MD of Outreach Motion Pictures has experience

of distribution across all platforms - Theatrical, Digital, Satellite and Home Video

Has worked as Executive Producer/Director and many other roles in all aspects of Film-making

As Founder/Director Outreach Media Services specialized in Management of Brands for Companies and Image for Individuals

Most recent film – “Jana Gana Mana” (Producer/Director) received Best Director and Best Film (Rural) in India (Maharashtra)

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L3 – External validation

Wipro Wharton Global Innovation Challenge – Category Winner

DST-Lockheed Martin India Innovation Growth – Winner

Economic Times Power of Ideas Competition – Winner (~$40,000 seed investment by CIIE, IIM Ahmedabad)

4 US Patents issued, 1 pending

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Competition (Direct)

  STREAMING

DOWNLOAD

ADS IN OFFLINE MODE

DRM VIRAL

SOCIAL DISTRIBUTI

ON

MARKETING COMPONENT

PRICING FLEXIBILI

TY

L3 Y Y Y Y Y Y Y Y

YouTube Y     Y    

Amazon Plus

Y Y Y      

Netflix Y          

Distrify Y Y Y

Hulu Y          

iTunes Y Y Y      

Roku Y          

Ooyala Y Y      

DTH (Satellite)

    Y      

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L3 – Competitive Advantage

L3 is the only secure, multi-pricing, download-cum-streaming-cum-torrent distribution model for video

Almost all our competitors can also become our customers

Fundamental differentiation – L3 content is protected before it leaves the content-owner’s hands

L3 is the only platform where ads can be dynamically inserted into content in online as well as offline mode

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Projected FinancialsYear 1 Year 2 Year 3 Year 4 Year 5         

TOTAL COLLECTIONS $ 1,403,764 10,450,755 63,729,440 191,188,321 382,376,642 Business Growth %   644% 510% 200% 100%

         Costs          

Q/Q Growth%       100% 100%Technology          

Outsourced Development          Tech Salaries $ 114,480 $ 576,630 $ 1,443,600 $ 2,196,000 $ 2,824,800 Recruitment Cost $ 67,294 $ 238,501 $ 391,507 $ 783,014 $ 1,566,029 Overheads $ 57,240 $ 208,315 $ 721,800 $ 1,443,600 $ 2,887,200

Professional Services          IP/Patents $ 45,000 $ 20,000 $ 20,000 $ 40,000 $ 80,000 Regulatory Compliance/Advice $ 7,000 $ 16,216 $ 31,544 $ 63,088 $ 126,175 Legal/Copyright/Compliance $ 32,000 $ 57,656 $ 112,156 $ 224,312 $ 448,624

Infrastructure          Servers/Hardware $ 8,000 $ 14,414 $ 28,039 $ 56,078 $ 112,156

Marketing          Content Sourcing $ 41,364 $ 205,636 $ 1,138,723 $ 2,277,447 $ 3,036,596 Viewers $ 349,230 $ 1,512,331 $ 1,134,602 $ 2,269,204 $ 5,673,010 Commission to Mktg Partners $ 35,094 $ 130,634 $ 318,647 $ 637,294 $ 1,274,589 Sponsorships/Promotions $ 138,000 $ 10,000 $ 80,000 $ 160,000 $ 320,000

Other          Transaction Fees $ 52,641 $ 391,903 $ 2,389,854 $ 4,779,708 $ 9,559,416 Contingency (FX and others) $ 47,367 $ 179,112 $ 390,524 $ 781,047 $ 1,562,094 Management cost $ 96,000 $ 172,969 $ 867,750 $ 1,735,500 $ 3,471,000

         TOTAL COSTS $ 1,130,710 $ 3,934,317 $ 9,068,746 $ 17,446,292 $ 32,941,688

         L3 REVENUE $ 348,302 $ 2,593,044 $ 15,812,568 $ 47,437,704 $ 94,875,407 Profit/Loss $ (788,152) $ (128,801) $ 6,749,454 $ 30,042,676 $ 62,001,544 Taxes - - 1,737,042 8,997,423 18,580,116 PAT 4,648,704 21,029,873 43,401,081

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Projected Financials (Summary)

Year 1 Year 2 Year 3 Year 4 Year 5

Collections 1,403,764

10,450,755

63,729,440

191,188,321

382,376,642

L3 Revenue 348,302

2,593,044

15,812,568

47,437,704

94,875,407

           

Marketing Costs 360,658

935,345

2,975,614

5,951,228

11,553,463

Personnel Costs 471,024

1,035,082

2,458,275

4,225,350

6,883,501

Other Costs** 104,772

500,613

2,647,872

5,295,745

10,591,490

           

Profit/Loss $

(788,152) $

(128,801) $

6,749,454 $

30,042,676 $

62,001,544

** Primarily Transaction Fees

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Deal Summary

Equity funding of ~$1.1 Million needed

20% equity offeredEstimated Year 5 PAT~$45 Million Estimated Company valuation in

year 5 $900 Million (PE = 20) or higher

Investors ROI estimated to be 180X in five years (earlier exit possible)

Thank You!

Contact:Anil Gupteag@layer3media.com+91 9370131365

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Appendix(Additional Details)

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L3 Technology

Distribution on DVD, Internet and other media in a single format

No need for separate process or format for Internet distribution, Broadcast or DVD/CD

“Morphing” copy-protection A unique key & algorithm required on each machine, so

that even if one “pirate” cracks the encryption, the “crack” cannot be reused

Also, algorithms and keys keep changing to create a moving target for pirates

Patented technology

L3 Video File

Cable TV/DTH

ePVR (Enhanced Personal Video Recorder) Internet

Internet

Peers

Physical Media

Servers

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Value added services

Content owners or anyone else can add value to the L3 content Example: Subtitles in any language can be added to the

L3 file ▪ Expands the market exponentially▪ Incremental revenue for such value added service is tracked

separately and goes back to the entity that built the value-added feature

And we will have a little house with big windows

+ = Opportunity

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Benefit to the content owner… 1/3

Monetize content Extra revenue with not much incremental cost Significantly lower risk of piracy

Global customer reach Access established, new and uncharted geographies

A vibrant distribution channel More efficient than all existing distribution networks Most cost efficient Peer to peer virally distributable Through any media Can also be hosted on L3 owned sites

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Benefit to the content owner… 2/3

Content ownership remains with owner Don’t have to sell the internet rights Owner can place it on any medium and send it

anywhere Secure the content before its distributed

Superior encryption with L3 patented technology

Gives complete pricing flexibility to content owners Maximize returns through dynamic pricing

▪ Content not selling well in one market can be re-priced to make more attractive

Complete control on pricing ▪ Expands the market by creative pricing

Can block any geography

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Benefit to the content owner… 3/3

Assured collection Payments received through Credit

Cards, Net Banking, PayPal L3 is no extra cost for content owners

Owner uses the “free” L3 software to encrypt and distribute content from any source

Users/audience pay a transaction fee to L3 “Not new” content can also be

monetized If broadcast rights sold, one can still earn

money from Internet or DVD distribution No lawyers and accountants involved Save cost and time

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Benefit to the consumers Increased availability and access to content End customer finally has the ability to decide

what kind of experience he/she wants Choice of watching on computer or TV

▪ Internet downloaded content can be watched on TV or computer

Choice of watching with ads or without ads Choice of paying or not paying

▪ No ads or with ads Choice of how much violence/sex to be shown Choice of passing on the download to others without

piracy guilt▪ Torrent, USB, CD, DVD etc.

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Benefit to advertisers

Pay only if Ads play Micro-targeted advertisements

Age Sex Geography Time of the year/day

New ads on re-runs Detailed reporting

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Benefit to the industry

Wider distribution and quicker break-even Encourages Content-creators to experiment

Good content once produced will continue to accrue rewards perpetually

More expression of art Reduced dependence on distribution channels