January 2013 Industry Overview

January 2013
Industry Overview
To Our Colleagues and Friends attending NAMM 2013
We look forward to meeting with you in Anaheim this week at the 2013 NAMM Show, and sharing our
views on the industry and hearing your valuable perspectives.
From a financial perspective 2013 is off to strong start. In 2012 we saw building momentum in the M&A
and capital finance arenas, in general and within our business. We announced the sale of our client
Radiant Grid to Wohler, and in December the $7m private growth equity financing of our media
networking client Sohonet by investor FF&P Partners, both London based firms. At present we are actively
engaged in a range of transactions involving M&A, capital formation, and “dual track” processes where our
client seeks to choose from the most favorable option from either a sale or capital raise. Our current
clients include leaders in broadcast, advanced audio solutions, video transport and advanced asset
management, and are located in the US (on both coasts) and in Europe.
Our NAMM presentation which follows provides up to date information on M&A and growth capital
transactions in the audio and digital media markets. We highlight the performance of the major publicly
held players in the media content lifecycle. We also discuss important current trends in the audio
segment.
Feel free to contact us during NAMM Show or afterwards to discuss your growth capital or strategic
planning questions.
Best,
Ethan E. Jacks
John C. Bowen
Courtney Spencer
Roland MacBeth
Managing Partner
MediaBridge Capital Advisors
ethan@mediabridgecap.com
617.592.2739
Managing Partner
MediaBridge Capital Advisors
john@mediabridgecap.com
617.921.0075
Managing Partner
CRX Partners
courtney@crxpartners.com
201.320.7713
Managing Partner
CRX Partners
roland@crxpartners.com
617.592.2739
MEDIABRIDGE
2
MediaBridge Senior Team
 Our principals have advised on more than 30 mergers and acquisitions in the media sector worldwide, comprising an
aggregate transaction value of over $1 billion. Led by Ethan Jacks and John Bowen, our team has 50+ years of experience in
media technology with unmatched expertise in the film, video, audio, broadcast, Internet, and new media markets.
 Extensive investment banking, corporate executive and legal experience
 Most recently drove Covington Associates’ expansion into the digital media and technology sectors
 Avid Technology Senior Executive (EVP Corp Development/M&A,CLO, CFO) from ‘99 to ’06. Led the
Company in its most significant period of growth. Managed 12 strategic acquisitions, doubling the
Company’s revenue to $1B and growing market cap from $400M to $2.5B
 20+ years of experience in traditional and new media tech and 10+ years in venture capital and high tech
Ethan Jacks
 Corporate development, finance, and legal background; BS and MBA from MIT and its Sloan School of
Management; J.D., Georgetown University Law Center
 Extensive investment banking, equity research and operational IT experience
 Most recently led Covington Associates’ expansion into the digital media and technology sectors,
representing both privately held and publicly traded companies
 VP Equity Research at FAC Equities covering digital media technology, networking hardware and software,
and enterprise software companies. Previously at Sybase, McDonnell Douglas, and Digital Equipment Corp.
 Author of three significant industry research reports on media technology and CDN markets
 10+ years of experience in traditional and new media technology, and 20+ years of IT Industry experience
John Bowen
 BS Mechanical Engineering, Digital Systems concentration from University of New Hampshire;
MBA from Babson College
MEDIABRIDGE
3
Senior Advisors – CRX Partners
 Courtney Spencer and Roland MacBeth serve the media technologies industries as strategic and business development
consultants. Both have played key roles in the M&A efforts of media technology companies, held key executive positions
with consumer electronics and pro audio/broadcast firms, and consulted for some of the best-known companies in the
electronics business.
 CRX and MediaBridge work to provide the best combination of strategic and transaction expertise to the professional and
consumer audio/video markets
 30+ years of executive experience in professional, broadcast and commercial audio
 Senior VP Business & Professional Group Americas (Allen & Heath, Calrec, D&M Pro), D&M
Holdings
 Full time consultant, D&M Holdings (M&A and post acquisition integration focus)
 VP/GM, Professional Audio, Sony Broadcast & Professional
Courtney Spencer
 30+ years of executive experience in consumer, pro, and commercial AV
 Past and present consulting clients include: Gold Peak, Phoenix Gold, D&M Holdings, Mitek,
Pioneer Electronics, Terk, Audiosource, KLH, DASH Navigation, XM Satellite Radio, Cerwin-Vega,
Carver, Gibson
 President - Phoenix Gold International
 Senior Vice President of KLH Audio and Vice Chairman KLH Europe
 Executive Director of Sales and Marketing - Cerwin-Vega
Roland MacBeth
MEDIABRIDGE
4
Senior Advisors





30+ years experience in the media industry
Current member of the Digital Media Strategy team as Cisco Systems
Former Corporate Fellow and member of founding team at Avid Technology
Former Chief Strategy Officer at Signiant
Academy Award and two-time Emmy recipient for scientific and technical invention





25+ years experience in Technology, Media, Education, and Healthcare
Chief Marketing Officer at Health Dialog and QuantiaMD
10 years advising Universities and diverse healthcare industry players
15 years at Forrester Research in both Research and Marketing executive roles.
Graduated from Harvard University with a degree in Economics
Tom Ohanian
Mary Modahl
 Strategic advisor specializing in the evolution of the global IT market.
 Co-founded or lead several technology companies as Chairman or CEO including Reva Systems
(acquired by ODIN) and Xedia Corporation (acquired by Lucent).
 Awarded “CEO of the Year” by Massachusetts Telecommunications Council
 Served on the Board of Directors for many venture-backed startups and industry consorita
 Graduate of Imperial College, London and an Associate of the Royal College of Science
Ashley Stephenson
MEDIABRIDGE
5
Senior Advisors
Jenny Young du Pont
 Consultant in Private Equity and Hedge Fund industries
 In-house lawyer at Plymouth Rock Assurance in Boston, MA focusing on corporate acquisitions
and commercial real estate
 Lawyer at Sidley & Austin, focusing on debt-derivatives and secured lending transactions.
 Served on the Boards of a variety of nonprofits, providing strategic advice and guidance on
fundraising and development, financial, and governance matters
 A.B. from Princeton University and a J.D./M.S.F.S. magna cum laude from Georgetown University
Angelo Santinelli
 20+ years experience in business development, strategic planning, M&A, IPO, private equity, and
international operations
 Founder of Dakin Management, a consultancy focusing on small and mid-size businesses
 Former Partner at North Bridge Ventures, covering communications, wireless and software
 Former Senior Executive at Shiva Corporation, contributing to a successful IPO, several
acquisitions, and a rapid growth phase
 Adjunct Lecturer at Babson College and former Senior Lecturer at MIT Sloan
 Graduate of Fordham University with an MBA from Harvard Business School
 20+ years in the entertainment industry including award-winning work as an editor, producer,
and director
 Director of Digital Media and Technology at the University of Southern California’s School of
Cinematic Arts
 Worked on numerous feature films including the Academy Award winning Harlan County, U.S.A.
(1976), Arthur (1981), and Visions of Light (1992)
Meri Weingarten
MEDIABRIDGE
6
Transactions
Transaction Closed During Employment with: * Covington Associates; ** Silverwood Partners; *** Avid Technology
MEDIABRIDGE
7
Audio Markets Overview
M&A – First Half 2012
Select Audio Transactions
Date
Jan-12
Jan-12
Feb-12
Mar-12
Mar-12
Mar-12
Mar-12
Apr-12
May-12
May-12
May-12
May-12
May-12
Jun-12
Jun-12
Jun-12
Jun-12
Target Name
PlayOn
AWAL UK Limited
SoniVox
R2M Music (Certain Assets)
A-Line Acoustics
Setlist.fm
Imagine Research
SRS Laboratories
mSpot
Cream Holdings
Cull.TV
Redmatica
Instinctiv
Trident Microsystems, MAP-Xtm Audio
Product Line
Turbosound
Industrial Acoustics
We7 (91%)
Value
Acquirer Name
EMI Music France S.A.
Kobalt Music Group Ltd.
Numark
BMG Rights Management
Atlas Sound LP
Live Nation Entertainment
iZotope
$148 DTS, Inc.
Samsung Electronics
Live Nation Entertainment
Twitvid
Apple
SoundCloud
($MM)
$1
-
CSR Plc
MUSIC Group Macao
AEA Investors
Tesco plc
Audio Product Line
Source Capital IQ, Press Releases, Public Filings
MEDIABRIDGE
9
M&A – Second Half 2012
Select Audio Transactions
Date
Jul-12
Jul-12
Jul-12
Jul-12
Jul-12
Jul-12
Aug-12
Sep-12
Sep-12
Sep-12
Sep-12
Oct-12
Oct-12
Nov-12
Dec-12
Dec-12
Dec-12
Dec-12
Target Name
Avid, M-Audio and AIR Division
MOG
Spin Media
Rexly
IMM Sound
Nimbit
Auracle Music
Bleuel Electronic
SoundField
CSS Studios
EMI Group
Ratas Music Group
McIntosh Laboratory
KMP Holdings
Liquid Spins
Audiogalaxy
B&S
AudioGo
Value
Acquirer Name
$13.9 inMusic (Numark)
$14 Beats Electronics
Buzz Media
Live Nation Entertainment
$26.8 Dolby Laboratories
Presonus
Ole MusicBox
Sennheiser
TSL Professional Products
Empire Investment Holdings
$1,929 Universal Music Group
Sony Music Entertainment
Fine Sounds
$18 KT Music Corporation
$10 Max Sound Corporation (MAXD)
Dropbox
$13 Buffet Crampon
Blackstone Audio
($MM)
Source Capital IQ, Press Releases, Public Filings
MEDIABRIDGE
10
Growth Capital 2011-2012
Select Audio Transactions
$20-200m
$10-20m
$5-10m
$0-5m
Source Capital IQ, Press Releases, Public Filings
MEDIABRIDGE
11
Audio M&A 2011 - Select Transactions
Value
Date
Target Name
Jan-11
Feb-11
Feb-11
Feb-11
Feb-11
Apr-11
Apr-11
Apr-11
Apr-11
May-11
Jun-11
Jun-11
Jun-11
Jun-11
Jul-11
Jul-11
Aug-11
Aug-11
Aug-11
Sep-11
Sep-11
Sep-11
Sep-11
Nov-11
Dec-11
Dec-11
Dec-11
Pend
The Reamp company
Informationsteknik
3dB Research
SAE Institute
Pelika Business Music Oy
Summit Audio Inc.
BlueHaze
Astro Gaming, Inc.
Rockustics, Inc.
Native Instruments
DEI Holdings, Inc.
MySpace, Inc.
Shinwa International
Intelix
MWM Acoustics, LLC
Yellow Tools (Assets)
Naim Audio Ltd.
Kungsbacka 57 AB
Beats Electronics (51%)
Dynamic Hearing Pty
Free Field Technologies
Coffey Sound
Workplace AV Systems Division
Loewe AG
The Stanton Group
DiGiCo UK Limited
BigChampagne
FAB Enterprise
($MM)
$3
$293
$10
$11
$114
$35
$137
$19
$300
$5
$78
$15
Acquirer Name
Radial Engineering Ltd
Shure Incorporated
Harman International
Navitas Limited
Mood Media Corporation
Blue Microphones, Inc.
XIX Entertainment
Skullcandy, Inc.
MSE Audio Group
Management Buyout
Charlesbank Capital Partners, LLC
Specific Media, Inc.
JVC KENWOOD Holdings, Inc.
Liberty AV Solutions
Harman International Industries Inc.
MAGIX AG
Focal-JMlab S.A. (nka:Focal & Co.)
Skullcandy, Inc.
HTC America
Wolfson Microelectronics
MSC Software Corporation
Trew Audio
AVI Systems
LaCie SA
Gibson Guitar Corp.
ISIS Equity Partners
Live Nation Entertainment
Wizzard Software Corporation
Workplace AV Systems
Kungsbacka 57
Source Capital IQ, Press Releases, Public Filings
MEDIABRIDGE
12
Trends to Watch
Music and Audio 2012-2013
1.
Emerging Mobile Tools: Mobile devices, including the iPad, are being increasingly utilized as replacements for, or
extensions of, traditional user interfaces. Companies are also creating surprisingly powerful DAW and other music
and sound-related apps for these platforms, competing with desktop solutions, if only at the entry level at this stage.
As mobile platforms and software develop, many companies will place increasing emphasis on the very large hobbyist
customer population.
2.
Beyond Tablets and Desktop Studios: Larger format touchscreen products and other virtual work surface innovations
will likely revolutionize the UI, while growing computational power, software innovations and AI will provide
unprecedented processing power and ease-of-use. Meanwhile, some leaders in today’s DAW market are showing
signs of vulnerability to attack from innovative competitors.
3.
Music and Sound Creation Tools: Advances in sampling continue to narrow the gap between real and sampled
instruments, while breakthroughs in synthesis and hybrid sampling technologies are facilitating the creation of an
entirely new palette of instrumental sounds, and providing remarkable new tools for sound designers.
4.
Consumer Audio: Following a period of apparent declining interest in sound quality in an age dominated by mobile
music consumption, the dynamic growth of high-quality premium-priced headphones has pushed sound quality back
to greater prominence, especially with young music listeners. Led by artist-endorsed brands like Beats by Dr. Dre and
Soul by Ludacris, US headphone sales are approaching $1B/year. Other directional indicators include improved music
encoding on the Amazon MP3 and the iTunes Stores (made practical by cheaper/larger storage).
5.
Social Media: VC funding increasingly requires a social media story; companies are creating products as a means to
build a social network, especially for the consumer music industry. Social media has also become a core music
promotion and distribution channel, putting go-to-market tools in the hands of musicians themselves.
MEDIABRIDGE
13
Publicly Traded Media Technology Companies
Market Capitalization – Large Cap (In $MM)
Adobe
January
2004
January
2007
January
2010
January
2013
$8,998
Akamai
$1,755
Autodesk
Cisco
Ericsson
$34,391
$2,853
Naspers
$1,523
Panasonic
Sony
$35,744
$36,017
$43,572
$47,450
$187,495
$23,310
$66,308
$8,547
$10,060
$6,493
$175,623
$18,787
$4,558
$5,991
$32,130
$14,673
$35,390
$33,905
$33,031
$23,818
$15,634
$13,369
$140,363
$18,802
$7,092
$8,426
$111,574
Adobe
Akamai
Autodesk
Cisco
Ericsson
Naspers
Panasonic
Sony
Enterprise Value
EV / Revenue
EV / EBITDA
$16,772
3.8x
11.4x
$6,626
5.0x
12.5x
$7,207
3.1x
15.2x
$82,916
1.8x
6.3x
$27,327
0.8x
7.3x
$25,544
5.2x
29.1x
$28,162
0.3x
5.5x
$19,036
0.3x
5.6x
Share Price
% 52 Week High
$37.98
98%
$39.96
94%
$37.50
88%
$21.02
99%
$10.21
95%
$61.78
95%
$6.61
76%
$12.78
63%
Source Capital IQ
MEDIABRIDGE
14
Publicly Traded Media Technology Companies
Market Capitalization – Mid Cap (In $MM)
Belden
Demand
Media
Dolby
Evertz
EVS
Harman
RealD
$126
January
2004
Rovi
TiVo
Yamaha
$3,880
$1,273
$652
$1,388
$562
$5,156
$1,754
$844
January
2007
$817
$3,651
$1,148
$6,723
$1,070
January
2010
$797
$3,102
January
2013
$1,054
$2,607
$2,627
$1,167
$768
$3,115
$926
$5,730
$2,079
$4,301
$545
$1,768
$1,495
$2,024
$3,366
Belden
Demand Media
Dolby
Evertz
EVS
Harman
RealD
Rovi
TiVo
Yamaha
Enterprise Value
EV / Revenue
EV / EBITDA
$2,666
1.4x
11.3x
$655
1.8x
10.1x
$2,330
2.5x
5.7x
$954
2.9x
9.3x
$741
3.9x
7.9x
$3,066
0.7x
7.2x
$531
2.4x
11.2x
$2,429
3.6x
11.4x
$1,044
3.7x
-11.1x
$1,696
0.4x
6.5x
Share Price
% 52 Week High
$47.07
99%
$9.02
72%
$30.42
66%
$16.45
94%
$58.27
95%
$49.62
94%
$10.89
71%
$16.49
44%
$12.07
93%
$10.57
98%
Source Capital IQ
MEDIABRIDGE
15
Publicly Traded Media Technology Companies
Market Capitalization – Small Cap (In $MM)
Avid
January
2004
Brightcove
$1,553
DTS
Envivio
$386
Harmonic
JVC
Kit Digital
$493
Vitec Group
VIZRT
$228
$35
January
2007
$1,640
$387
$554
$421
$263
$241
$282
$502
$223
$113
January
2010
$560
$541
$649
$524
$128
$59
January
2013
$317
$335
$354
Enterprise Value
EV / Revenue
EV / EBITDA
Avid
$258
0.3x
15.0x
Brightcove
$282
3.7x
NM
DTS
$253
2.5x
8.6x
Share Price
% 52 Week High
$8.17
65%
$12.24
48%
$21.50
66%
$500
$481
Envivio
-$4
NM
NM
Harmonic
$322
0.6x
7.4x
JVC
$889
0.2x
3.1x
Kit Digital
$112
0.5x
NM
Vitec
$614
1.1x
7.6x
VIZRT
$151
1.1x
5.8x
$2.18
22%
$4.27
63%
$3.47
70%
$2.25
18%
$11.69
99%
$3.36
78%
Source Capital IQ
MEDIABRIDGE
16
Publicly Traded Media Technology Companies
Market Capitalization – Small Cap (In $MM)
Avid
Brightcove
DTS
Envivio
Harmonic
JVC
Kit Digital
Vitec Group
VIZRT
$11
January
2004
$1,599
$325
$645
$273
$272
$78
January
2007
$1,520
$426
$624
$458
$273
$112
January
2010
$508
$511
$615
$458
$51
January
2013
$292
$256
$334
$277
$235
$24
$606
$505
$422
Avid
Brightcove
DTS
Envivio
Harmonic
JVC
Enterprise Value
EV / Revenue
EV / EBITDA
Kit Digital
Vitec
VIZRT
$220
0.4x
29.6x
$231
2.8x
-23.9x
$283
2.8x
11.6x
-$10
NM
1.2x
$414
0.8x
10.6x
$837
0.2x
3.0x
$8
0.0x
-0.3x
$533
0.9x
6.7x
$159
1.2x
6.3x
Share Price
% 52 Week High
$7.49
59%
$9.20
36%
$17.84
56%
$1.90
19%
$5.23
77%
$3.62
82%
$0.39
3%
$9.84
84%
$3.53
81%
Source Capital IQ
MEDIABRIDGE
17
Publicly Traded Media Distribution Companies
Market Capitalization (In $MM)
Charter
Comcast
EchoStar
Netflix
Pandora
$79,256
$84,233
$101,846
$90,715
$108,985
$32,879
$86,867
$47,277
$121,409
Sirius
Time Warner
Verizon
$91,077
$3,703
January
2010
$1,645
$2,726
$2,608
$46,870
$7,966
$3,110
$5,508
$1,796
$16,455
$106,151
January
2013
Verizon
$5,766
$1,555
January
2007
Time Warner
$3,353
$1,605
January
2004
Sirius
Charter
Comcast
EchoStar
Netflix
Pandora
Enterprise Value
EV / Revenue
EV / EBITDA
$20,860
2.8x
7.9x
$151,786
2.5x
7.7x
$4,060
1.3x
6.7x
$5,110
1.4x
34.9x
$1,715
4.5x
-69.4x
$18,333
5.6x
17.0x
$63,965
2.2x
9.2x
$218,869
1.9x
6.9x
Share Price
% 52 Week High
$78.83
95%
$40.27
100%
$35.59
100%
$99.17
74%
$10.56
41%
$3.16
99%
$49.93
99%
$42.54
87%
Source Capital IQ
MEDIABRIDGE
18
Publicly Traded Content Owner Companies
Market Capitalization (In $MM)
CBS
Discovery
Lions Gate
News Corp.
Scripps
Viacom
Walt Disney
$429
January
2004
$50,766
$29,229
$24,711
$1,100
January
2007
$72,358
$8,976
$13,231
$7,483
$644
January
2010
$72,830
$17,971
$36,452
$25,684
$24,327
$8,844
$2,650
January
2013
$57,069
$29,188
$63,945
$94,187
Enterprise Value
EV / Revenue
EV / EBITDA
CBS
$30,664
2.1x
9.0x
Discovery
$27,913
6.3x
14.2x
Lions Gate
$4,028
1.9x
103.8x
News Corp.
$69,556
2.1x
10.3x
Scripps
$10,188
4.5x
9.8x
Viacom
$36,659
2.6x
8.9x
Walt Disney
$107,594
2.5x
9.8x
Share Price
% 52 Week High
$40.42
95%
$67.72
99%
$18.14
98%
$27.26
99%
$59.02
89%
$57.88
98%
$52.34
98%
Source Capital IQ
MEDIABRIDGE
19
Global Reach, Vertical Depth
Ethan E. Jacks
Managing Partner
MediaBridge Capital Advisors
ethan@mediabridgecap.com
617.592.2739 (m)
Roland MacBeth
Managing Partner
CRX Partners
roland@crxpartners.com
805.660.9135 (m)
John C. Bowen
Managing Partner
MediaBridge Capital Advisors
john@mediabridgecap.com
617.921.0075 (m)
Courtney Spencer
Managing Partner
CRX Partners
courtney@crxpartners.com
201.320.7713 (m)
20