A venture capital perspective in investing in entertainment and media content. Presentation at EARS2016 conference.

1. What Makes
Media and Entertainment a Good
Investment
Timo Argillander
@timoargillander @iprvc
EARS Helsinki 25 Aug 2016

2. Agenda
1. IPR.VC Background
2. The Opportunity
3. Venture Capital Approach for Content
Financing

3. 1. IPR.VC Background

4. Background: IPR.VC Fund I
Venture Capital fund
specialized in media content
20 m€ total commitments
Investors ("LPs") pension
insurance companies and
other institutional investors
Launched Sept 2015, final
closing June 2016
Management company
IPR.VC Management

5. We Invest in…
Film
Feature films with major
potential for international
breakthrough
TV
TV series and formats in
potential genres that fit
broadcast and on-demand
Animation
Animation characters and
stories that expand to TV,
games and merchandise
Games
Games with credible
business models and cross-
platform IP content
Internet
Entertainment and other
internet services with
credible business model
Miscellaneous
Music, literature and other
forms of content

6. We Invest in…
IPR.VC Fund I
(operative)
IPR.VC Fund II
(planned 2018-)

7. IPR.VC’s Mission
1. To enable content companies to
create international success stories
2. To prove that IPRs make a good
investment

8. 2. The Opportunity

9. Opportunity: Digital to Account for
50% of Media Revenues in 2018
As competition in existing
industries has become fierce,
IPRs in media and
entertainment provide new
source of growth
Internet is hitting hard the
legacy media companies while
providing major opportunities
for new entrants
2015: Disney invested in Vice
Media with 4 bn$ valuation
2015: Activision Blizzard
acquired Swedish game
developer King for 5.9 bn$

10. IPR Comes with Benefits
Scalability
Liquidity
In digital channels cost per users near zero

11. Value Shifts from Tech to Content
“Build the tools” “Create value”“Serve all” “Serve best”“Enable” “Own the best
IPR”
Media Platforms
Monetize the audience Monetize the content
Start-ups overserved Start-ups underserved
Value in
uniqueness and
emotions
Value in best media tech
Media IPR

12. 3. Venture Capital Approach to Content
Financing

13. Venture Capital is Hit-Driven
Business
• The usual story:
–1/3 make great profit
–1/3 bring money back, but no profit
–1/3 lose all of our money
Credits for the Model: Artturi Tarjanne

14. How much profit is enough for the
best one-third?
(1/3x0 + 1/3x1 + 1/3x5) x 0.8 = 1,6 -> IRR ~10%
(1/3x0 + 1/3x1 + 1/3x7) x 0.8 = 2,1 -> IRR ~16%
(1/3x0 + 1/3x1 + 1/3x10) x 0.8 = 3 -> IRR ~24%
Credits for the Model: Artturi Tarjanne

15. Investing in Equity vs. Product
Investing in Equity
• Ownership based on
company valuation
• Dilutations over time
• Exit: sale of ownership or
IPO in 4-5 years
• Profits from raising
valuation
Investing in Product
• Share of profits based on
share of cost budget
• No dilutations
• Exit: royalty-based
income during IP lifetime
• Profits from product sales
success
• Shorter investment time
a major benefit!

16. What Makes a Content IP
a Good Investment?
• Quality, attractiveness and originality of the
content
• Potential audience size for the content
• Credible international
roll-out plan, potential
for a major break-
through
• Short time-to-market
• Committed team with
both creative and
business ambitions
Tom of Finland movie, premiere Feb 2017

17. From Production Company
to IPR Developer
Production company IPR developer
Work is based on projects (“work-
for-hire”)
Work is based on long-term
developing, scaling and monetizing
IP rights
Customers pay for the project Customers pay for license to use the
content
Focus on business customers Focus also on consumers
Key competence is to manage
production projects and freelance
networks
Key competence is to develop and
monetize IP rights
Revenues are generated mostly on
domestic markets
Revenues are generated mostly on
international markets

18. What Makes
Media and Entertainment a Good
Investment?
Fast growing need for content IPs
Scalability of digital content
Fast capital rotation of investments

19. Contact information
IPR.VC MANAGEMENT OY Mannerheimintie 20 B, 6th Fl. FI-00100 Helsinki
Tanu-Matti Tuominen
tanu-matti@ipr.vc
Tel +358 500 593001
Jarkko Virtanen
jarkko@ipr.vc
tel: +358 40 547 6945
Timo Argillander
timo@ipr.vc
Tel. +358 400 448079