sony picture television - wikileaks market entry... · sony pictures television . 10202 west...

September 2012

Sony Picture Television Crackle China Market Feasibility Assessment

© 2012 KPMG Advisory (China) Limited, a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.

As China’s GDP continues to grow rapidly, it is emerging as 1 of the largest markets in most product areas

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Table of Content

Executive Summary 1

How We Can Help 3 Our Differentiating Factors 4

The Journey 2

Appendix 5



Chris Manolillo Senior Vice President Sony Pictures Television 10202 West Washington Blvd Culver City, CA 90232 Dear Chris, Proposal to provide support for the China market entry feasibility assessment We are delighted to have been invited to prepare a proposal to demonstrates how we can assist you with your China market entry feasibility assessment i.e. support the expansion of your TV and Crackle networks (please refer to the TV Network China Market Feasibility Assessment Proposal for the details of our tailored TV network end-to-end China approach). We are very excited by this opportunity and enclose our proposal for your consideration.

It is essential that Sony Picture Television’s (“SPT”) advisors have a clear understanding of your industry, plus an in-depth knowledge of your business and the relevant financial risks. KPMG has provided professional consulting services to many key players in the TMT industry in China. Through years of providing professional services to a number of multinational and PRC TMT industry clients, we have gained a thorough understanding of the trends, profitability structure, internal and external financial environment, and key management concerns within the industry. KPMG is committed to providing SPT with the best possible service. With this in mind, we have assembled a core team of our highest quality and experienced people, all located in China, to work with you. We have also used our tried and tested market entry & expansion methodology to customize a practical phased approach. The focus on the project is not only on market study, but providing on-the-ground intelligence to recommend implementable practical solutions to you.

We believe that our value proposition will drive the significant benefits that can be achieved as a result of this program. Specifically, we feel that the following are straightforward, yet critical key differentiators for KPMG on this project: • Local China resources with end to end capability; • We understand the TMT industry; • We have the relevant experiences as shown in our credentials; • We have an extensive network and tools for research & interviews; • Collaborative working style • We are known within the industry for getting the job done; The details of our value proposition and customized approach that we will present to you in this proposal also represents value for money, combining appropriate levels of experienced staff, project governance and flexibility with significant discounts to our scale rates. We trust this demonstrates our commitment to you as we work together to deliver a successful strategic market entry initiative within SPT. We are committed to the continuation of building a trusted and professional advisor relationship with you and are enthusiastic about this opportunity to further demonstrate this. We look forward to continuing to serve SPT and welcome the opportunity to discuss our proposal with you. In the meantime should there be any aspects of this proposal which you would like to discuss further, please do not hesitate to contact me directly on +86 21 2212 3602. Ning Wright Management Consulting, Technology, Media and Telecommunications (“TMT”) China Partner-in-Charge Email: [email protected] Tel: +86 21 2212 3602

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KPMG 50th Floor, Plaza 66 1266 Nanjing West Road Shanghai, China

Telephone +86 (21) 2212 2888 Fax +86 (21) 6288 1889 Internet www.kpmg.com.cn



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Our value proposition

Integrated Solution An integrated solution combining our in-house SMEs, delivery team and Centre of Excellence to deliver practical on-the-ground insights to Crackle

Process&

Systems Excellence

Management Systems

HighPerforming

Teams

PeopleCentered

Approach to Lean Process

&Systems

Excellence

Management Systems

HighPerforming

Teams

PeopleCentered

Approach to Lean

Customised Approach A customised study approach that addresses the both macro-level market overview and micro-level company business needs together with market entry strategies

On-the-ground Intelligence Leverage on KPMG China’s strong relationships with national and local government, key industry stakeholders to obtain in-depth understanding of market trend and other MNC’s business strategy

Drives Benefits for Sony KPMG tailored approach and analysis, incorporating with MNC research, local partners and regulators, providing SPT with in-depth understanding of China online content industry for precise and better positioning within the Chinese market

Strong Government Relations and Experience

Selected entities across the PRC government have named KPMG as a strategic partner to undertake key initiatives related to the development and execution of past and current Five Year Plans

KPMG Media and Entertainment Client Credentials in China

Engagement Partner • 17 years experience advising

organizations in the media & entertainment sector on market entry & expansion

• Ning is the China Technology, Media & Telecommunication (“TMT”) Sector Partner-in-charge

Ning Wright Partner

Engagement Manager • 10 years of delivering market

expansion and government strategic planning projects to organizations in China

• Led several media and entertainment projects for global leading companies

Jackson Wong Senior Manager

Our Tailored Delivery Approach Our Experience Our Local Resources

Key Media and Entertainment Projects

Our value propositions

Will Zhao Manager

Engagement module leader • Nine years consulting experience in

strategic planning projects including market entry and expansion

• Led several strategic planning, and operating model design projects for leading MNCs

Domestic TV network

Market study &

expansion strategies

• Market overview and benchmark

• Recommendations on industry best practices and expansion strategies

Provincial capital city in North

China

Strategic planning for a city

• Benchmarking existing media & entertainment industry with leading practices

Domestic film and TV production

Investment

opportunities & CDD

• Define the M&A investment strategy and identified potential partners as market entry method

Market expansion SME • Nearly 20 years work experience

across Asia Pacific, Europe and North America on market entry strategies

• David is the KPMG Asia Pacific’s lead representative to the Global Business Transformation Council, designed to pool insights and capabilities for our global clients most mission-critical transformation projects

David Frey Partner



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Our solution to your requirements

Your requirements / vision What we will do What you will get

Your vision is… To enter China and capitalize on the

booming Chinese media and entertainment industry

To distribute online contents through own and/or other distribution channels / platforms

To build a growth-led and sustainable business in China

Specifically you need support to… Leverage on China knowledge to identify

market access and entry opportunities and challenges in the China market

Understand how other online content distributors have managed to operate in China despite of the heavy regulations in place

Identify potential online content network / channels

Provide advice and recommendations to Crackle on launching initiatives for a China market entry

Identify concrete market entry opportunities

To deliver this project… We will conduct interviews and

researches with government officials, SOEs, POEs, and MNCs key stakeholders to identify market demand, regulations & policies, revenue breakdown and trends for online content distribution and the associated concerns

We will also conduct company assessments on online content distributors to understand their China value proposition and the associated business & revenue models

We have taken your requirements and split the project into 3 modules to target the respective work streams:

We will help you to achieve your requirements using a pragmatic and logical approach that is based upon having successfully performed this type of work in the past

Our deliverables will consist of…

Market Study & Opportunity Analysis China online content distribution landscape ‐Market size and overview – overall business models & revenue

breakdown, coverage, regions, segments, content & audience preference, and growth projections

‐Company assessments on other online content distributors in China – key players, profile, value proposition, content & user features, profitability & revenue model, channel to market

‐Emerging trends – business model & technology evolution

Government Regulations & Policies Industry governance and compliance ‐Regulations on establishments of foreign online content distributors

in China – approval process, requirements, policies, joint venture, collaborations / partnerships

‐Regulations on distribution of foreign online contents in China - domestic content production, content requirements, channels

‐Exceptional cases in the past and potential grey areas ‐ Indication of potential regulation trends

Feasibility Assessment Opportunity assessment for Crackle in China ‐ Identifying Crackle’s value proposition & internal capabilities ‐Opportunities – by verticals, by customer segment, by services;

access to the Chinese market, potential market opportunity and accessible market opportunity

‐Potential risk & challenges and key requirements associated with the opportunities identified, if any

‐High-level go-forward plan as per the opportunities identified

1

2 Government Regulations & Policies

Feasibility Assessment 3

Market Study & Opportunity Analysis

1

2

3



Table of Content

The Journey 2 How We Can Help 3 Our Differentiating Factors 4

Executive Summary 1

Appendix 5

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In the coming years through 2014, the Chinese online video market revenue is estimated to increase at a CAGR of 66% to reach $3.6 billion in 2014

Market Overview

• Chinese online video market - 325 million online video viewers in China as of 2011

- China's online advertising revenue accounted for 67.8% of the total online video market in 2011

- Copyrights distribution revenue accounted for 13.1% of the total online video market in 2011

- 322 online video websites with license are approved by SARFT for legal content distribution and sharing since the beginning of 2011

• Industry trend - The prices to purchase domestic & foreign TV series /

movies copyrights have increased tremendously due to market / consumer demand

- Sohu.com Inc, Tencent Holdings Ltd and iQiyi.com (the online video branch of Baidu Inc) have launched a Video Content Cooperation alliance to increase purchasing power.

• Regulation & policy: - Government is paying increasing attention to fighting

piracy, which has encouraged websites to purchase legit copyrights of TV series and other contents

Online Video Market ($US Billion, 2009 – 2014)

0

5

2009

0,3

+66%

E2014

3,6

E2013

2,8

E2012

2,0

2011

1,0

2010

0,5

0

5

+71%

E2014

2,6

E2013

2,0

E2012

1,4

2011

0,7

2010

0,3

2009

0,2

7

$US

Bill

ion

$US

Bill

ion

Sources: China Statistical Yearbook 2011; Datamonitor; AM Mindpower Solutions; KPMG analysis

Advertising Revenue of Online Video Market ($US Billion, 2009 – 2014)



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We can provide you an end-to-end service for your growth undertaking, including tax advisory, recruitment, legal support and management consulting that are provided by our Global Solutions Group headed by KPMG with our partner in a law, investment and talent search firm

We have organized a team of senior leaders experienced in strategic planning, financial modeling, merger & acquisition and business transformation in China.

Our value proposition

Market study Objectives & vision

Entry strategy

Location selection

Investment feasibility

Given your current needs, we have customized our approach, focussing on China market study & entry method identification. . .

What? How? Who?

Operations setup

Government regulation &

policy

Customer requirements

& demand analysis

Feasibility assessment

Financial model and investment feasibility

Market program

roll-out and product

pilot testing

Partner selection and government negotiation

Market study & opportunity

analysis

Delivery & sales model –

Target Operating

Model

The focus on the project is not only on market study, but providing on-the-ground intelligence to implement practical solutions



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Table of Content

How We Can Help 3 The Journey 2

Our Differentiating Factors 4

Executive Summary 1

Appendix 5



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We have customized our approach focusing on collaborative solutions with Crackle from market assessment and opportunity analysis to feasibility assessment

Sample key issues

KPMG Approach

Key stages

Deliverables


■ What is the overall landscape for the online content distribution industry in China

■ Who are the key foreign online content distributors with similar industry background and what are their key successful factors?

■ How did the foreign online content distributors manage to enter China amid the web of regulations?

■ What are the suitable China entry methods for Crackle in terms content distribution and revenue generation?

■ Conduct a market assessment including the industry size, segments, trends, content/audience preferences and trends, revenue breakdown, emerging business models and development paths

■ Conduct interviews and benchmark domestic key players and foreign online content distributors to identify their China market value proposition

■ Perform company assessments on the key online content distributors in China to identify: − Technology advancements & capabilities − Distribution channels, key user feastures, platforms − Revenue streams − Advertisement models − Foreign content procurement policies − Product portfolio

■ Key successful factor analysis

Government Regulations & Policies

■ What are the existing regulations & policies that are governing the industry?

■ Based on the regulations & policies, what is currently allowed and not allowed for foreign online content distributor to establish their presence in China?

■ What kind of foreign contents are allowed to be carried on distribution websites and what are the associated requirements to air these contents?

■ What are the major risks and challenges faced with foreign online content distributors in China?

■ Evaluate existing government regulations & policies and industry planning on foreign investments for online content distributions

■ Identify the specific content-compliance requirements to legally distribute foreign contents in China through online platforms

■ Leverage KPMG’s Government Focus Group to conduct interviews with relevant central/regional governments agencies

■ Outline the future potential regulation development directional changes

■ Market overview

■ Business/ revenue model analysis for online content distributors in China

■ KPMG capability requirements & maturity framework – infrastructure, & network channel, talent and marketing assessment

■ Industry regulations & policies analysis

■ Risk & mitigation approach

■ Potential key development direction changes

Feasibility Assessment

■ Based on the output of module 1 & 2 and Crackle’s internal capabilities, what should Crackle do to best position themselves in terms of distribution channels and revenue generating models?

■ What is the overall prioritized distribution channels and business model that Crackle should develop for the short/long-term?

■ Conduct an internal capability assessment to understand Crackle’s considerations, concerns, visions, technical capabilities, product portfolio, marketing strategy on a global context and for the China market

■ Based on the output from the previous modules to evaluate the feasibility of the entry method in-line with current regulations and Crackle’s internal capabilities

■ Prioritize the potential feasible distribution channels and the associated revenue generating models as per module 1 & 2

■ Identify preliminary ideal partners for collaborations (JV, direct licensing, M&A targets) as applicable

■ Internal capability assessment report

■ High-level recommendations on feasible business model and China entry strategy

■ High-level going-forward plan

The proposed work approach will consist of four stages spanning approximately 8 weeks 2 1 3



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KPMG tailored approach (1/3)

2 Feasibility Assessment

3

Market Study

Sample Deliverables

Objectives • Conduct interviews with industry key stakeholders • Perform independent market assessment including current landscape and projections • Conduct company assessments on key online content distributors in China to understand their business & revenue models

Detailed activities

Interviews and site visit (please refer to page 30 in the Appendix for our Interview Program) • Conduct interviews with industry SMEs and online content distributors to grasp market dynamics and identify business models and

emerging trend Market assessment • Analyze and identify through primary & secondary research for the following areas pertaining to online content distribution and the

associated channels: − Overall business models, regions and segments − Industry landscape, key players revenue breakdown, emerging trends, emerging business & revenue models − Audience preference, production content categorization, future content trends and technology evolution − Quantify market size and growth forecast

Case study development • Leverage on KPMG’s TMT SMEs and Centre of Excellence to conduct online distribution company specific assessments in China including:

− Company profile, history, development paths − Collaboration partnerships / alliances and strategic joint ventures − Platform technology capability and advancement − Local production content and imported foreign content product portfolio − Profitability and revenue model (i.e. pay-per-view and/or ad-supports, average CPM) − Foreign content procurement terms (i.e. direct one time licensing and/or gain-share) − Distribution methods (i.e. own network and/or through other online platforms) − Key capability requirements framework – infrastructure, & network channel, talent and marketing assessment

Workshop with key stakeholders • Collect feedback and confirm emerging trends and opportunities

Tools • Market assessment toolkit & market maturity assessment • SWOT analysis • Top-down and bottom-up market sizing tool • Centre of Excellence database tool

Key inputs from Crackle

• Agree on emerging trends and initial opportunities • Stakeholder availability


2

Company Research


1



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Objectives • Identify current regulations & policies governing foreign investments in the industry • Identify the specific content-compliance requirements to legally distribute foreign contents in China through online platforms • Conduct interviews with regulatory governing bodies

Detailed activities

Government regulations & policies assessment • Analyze and identify through primary & secondary research for the existing government regulations & policies around online content

distributions for foreign online content distributors establishment and operations in China Interviews (please refer to page 30 in the Appendix for our Interview Program) • Conduct interviews with government officials (central, provincial and city-level), industry associations and industry experts /SMEs to

understand policies, regulations and approval process around foreign online content distributors’ establishments and operations in China. Specifically, we will focus on the following: − Ownerships and the associated shareholding caps − Joint ventures − Collaborations / partnerships − Establishment of domestic content production − Requirements on the distribution of foreign content (subtitles, censorships, etc.) − Content licensing to other online platforms − The role of central government in dictating the guidelines − The roles of provincial and city-level government around the local approval process − Exceptional cases − Grey areas − Potential future regulatory development directions

Workshop with key stakeholders • Confirm proposed opportunities • Collect feedback and concerns

Tools • Government Focus Group • Centre of Excellence database tool

Key inputs from Crackle

• Raise key concerns and strategic objectives of Crackle • Stakeholder availability



3 Sample Deliverables


1

Interviews

Government Policies & Regulations



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Objectives • Assess feasibility of identified market entry method • Prioritize the feasible distribution channels based on short/long-term opportunities • Identify high-level Crackle China market entry development plan

Detailed activities

Internal capability assessment • Conduct interviews with Crackle management to obtain understandings for their global and China:

− Considerations, concerns, visions − Investment budget − Technical capabilities − Product portfolio − Marketing strategy

Feasibility assessment • Conduct assessments of identified distribution channels through the case studies from module 1 against the government regulations &

policies in module 2 and Crackle’s internal capability assessment • Evaluate the feasibility of the identified distribution channels/models for Crackle to adopt and utilize based on the abovementioned

assessments • Prioritize the potential distribution channels/models as per lessons learned and shot/long-term opportunities Opportunity analysis • Complete detailed analysis of each opportunities as per the industry best practice and feasibility utilizing market study, case study and

feasibility assessment and provide high-level recommendations for short/long term wins • Identify preliminary ideal partners for collaborations and JVs as applicable • Potential risks associated with the opportunities, if any Development roadmap • Provide a going-forward plan / next step action items for Crackle to capitalize on the opportunities Workshop with key stakeholders • Conduct workshop with Crackle stakeholders to obtain feedbacks and buy-in

Tools • Feasibility assessment model • Management Dashboards

Key inputs from SPT • Key information on Crackle internal capability • Stakeholder engagement

Sample Deliverables


1 Government

Regulations & Policies


3

Competitive Assessment High-Level Roadmap

Company Research

Government Policies & Regulations



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KPMG China Management Consulting Tool Suite Project team structure

Steering Committee

TBD Partner: Ning Wright

Crackle KPMG

Project Management Group

TBD Senior Manager: Jackson Wong

Crackle KPMG

Market Assessment & Opportunity Analysis

TBD Module Lead

Crackle KPMG


TBD Module Lead

Crackle KPMG

Feasibility Assessment

TBD Module Lead

Crackle KPMG

Module Lead

Expert Panel

• Partner: Herman Cheung (TMT SMEs) • Partner: David Frey (Market Expansion Specialist)

KPMG SMEs

Independent KPMG Support Teams

Global Solutions Group* (“GSG”) Center of Excellence* (“CoE”)

KPMG China

*Please refer to slide 29 and 30 in the Appendix for additional details on the GSG and CoE



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KPMG China Management Consulting Tool Suite Project timeline

Stee

ring

Com

mitt

ee

KPM

G P

roje

ct

Team

Kick-off Check point Closing meeting

Market Study & Opportunity Analysis ■ Primary and secondary desktop & database research on online content distribution

industry including sizing and trends ■ Leverage on past TMT strategic projects and local network to provide direct ramp-up to

online content distribution company assessments ■ Key interviews with industry SMEs and online content distribution companies to grasp

market dynamics and identify key verticals and emerging trend

1

Feasibility Assessment ■ Conduct Crackle’s internal capability assessment through interviews with Crackle management ■ Identify potential partners ■ Conduct assessments on identified market entry channels ■ Evaluate the feasibility of the identified distribution channels/models for Crackle ■ Formulate recommendations and provide high-level going-forward plan

3

Workshop Status update Status update

1w 8w 7w 6w 5w 4w 3w 2w

Government Regulations & Policies ■ Identify and analyze existing government regulations & polices through desk top research ■ Conduct interview regulations & policies including:

− Central government − Provincial and city government − Industry associations − Industry experts / SMEs

2

Status update

Sony

Pro

ject

Te

am



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Table of Content


The Journey 2 How We Can Help 3

Executive Summary 1

Appendix 5



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KPMG China Management Consulting Tool Suite KPMG China Our network of offices span across China, providing on-the-ground support to our clients

• KPMG has more than 1200 full-time dedicated Advisory professionals in China and Hong Kong

• In-depth sector knowledge with industry-specific solutions

KPMG Advisory China

KPMG in China

• Established in 1984, KPMG has more than 9,000 professional staff including over 298 partners in thirteen offices across China

• The firm has a balanced local and multinational client base

• We have a balanced mix of expatriate and local staff, all fluent in English and many with overseas experience

• We provide multidisciplinary services include audit, tax and advisory

• KPMG has more than 400 industry consultants focusing on performance and technology in China and Hong Kong

• KPMG Centre of Excellence is based in Shanghai with proven market research capabilities and information database on international and domestic organizations in China

KPMG China Management Consulting

• KPMG has more than 1200 full-time dedicated Advisory professionals in China and Hong Kong

• In-depth sector knowledge with industry-specific solutions

Early Commitment to the Chinese Market

• In 1992, KPMG was the first international accounting firm to be granted a joint-venture license in China



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KPMG China Management Consulting Tool Suite We know your business Distinguished clients and deep industry experience

Our industry specialized strategy is reflected in our strong market share. …

It is essential that Sony’s advisors have a clear understanding of your industry, plus an in-depth knowledge of your business and the relevant financial risks. KPMG member firms provide professional consulting services to many key players in the TMT industry.

Through years of providing professional services to a number of multinational and PRC TMT industry clients, we have gained a thorough understanding of the trends, profitability structure, internal and external financial environment, and key management concerns within the industry.

Our strong credentials and experience in the media and entertainment industries would help us understand your needs better and be a more effective advisor.

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KPMG China Management Consulting Tool Suite Our experience and credentials: Recent media & entertainment industry experience and credentials (1/2)

Industry planning evaluation and assessment ■ A Chinese first-tier city has engaged KPMG to assist them in the media & entertainment industry planning

evaluation and assessment ■ Global and China industry analysis including value chain, technology innovations, company issues & challenges

and best practises, identification of gaps for development and design the improvement plan. We also assisted the city to identify potential US investment partners including film funds, movie production companies and movie distributors

■ The strategy has been successfully implemented and has also attracted movie MNCs to establish their presence in the city

Commercial & financial due diligence ■ The largest domestic online content distributor has engaged KPMG to perform commercial & financial due

diligence of an industry peer ■ We have conducted primary & secondary research including identification and analysis of key business activities

of comparable business and interviewed with industry contacts. Through our research, we have concluded key forecast assumption reflecting the target’s current business, financials and operations

■ The results of the study were well received by the client to be used to form the M&A strategy and execution

Market assessment and expansion strategies ■ A domestic TV station has requested KPMG’s assistance in conducting a TV broadcasting industry landscape

analysis and provide recommendations on market expansion strategies ■ We utilized KPMG’s tool suite to conduct primary & secondary research on the market landscape in China, as well

as covering the related regulatory issues as part of the market trend. Our work also included interviews with major domestic TV broadcasting players through our client base network. Through the interviews, we were able to validate our primary & secondary research results and gained insightful knowledge to industry best practices for benchmarking

■ We have successfully provided insightful recommendations on best practices and market expansion strategies to our client in airing their contents through other domestic channels across China



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KPMG China Management Consulting Tool Suite Our experience and credentials: Recent media & entertainment industry experience and credentials (2/2)

Market assessment and expansion strategies ■ A global film and TV studio is looking to expand their network, production and distribution capabilities in China ■ A comprehensive market sizing, segmentation, go-to-market strategy, government regulations and in-depth

customer surveys were conducted to ascertain the short-term and long-term opportunities in the market ■ The subsequent second phase of the project was to conduct a list of potential strategic partners and the deal

value proposition to be approached with domestic partners

Corporate restructuring ■ A local domestic TV broadcaster is looking to redefine the operational strategy; to be more market-facing, control

internal costs and streamline organization structure ■ Developed the business case, market competitiveness benchmarking to support the corporate restructuring and

the change management program ■ Assisted the client to embark on corporate-wide organization structure design; which includes the development of

the five-year organization growth strategy, role & headcount allocation, roles & responsibilities and JD definition, job classification & banding alignment, prepared the approval documents for global board, hold training & workshops and managed the transition & implementation

Investment feasibility & financial modeling ■ A TV broadcasting entity part of an integrated global media conglomerate has engaged to ascertain the

investment feasibility of the investment plan; which included identification of investment opportunities and developed the financial modeling

■ Key assumptions, industry benchmarking inputs, sensitively analysis were conducted for several investment opportunities to be presented and approved by the global board of directors

■ We have successfully combined the industry and financial experience to support the client. Further, we have successfully built a strong finance team for our client in supporting their day-to-day operations



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Case study Market entry strategy for a leading media entertainment investment group

Our client, a U.S studio backed media and entertainment investment group and a local PE fund would like to capitalize on the booming market in China and identify potential opportunity for its investment. As an initial stage, KPMG helped these two parties to collectively identify opportunities and define fund strategy

• Conduct industry experts including industry associations, peer companies, both municipal and provincial level government bodies etc

• Addressing and summarize practical solutions for the market entry

What are the entry barriers?

Market Landscape: -Film -Television -Exhibitions & Shows -Theme parks

Which sector shall be considered?

• Analysis of the entire U.S and China market of cultural, media and entertainment related industry for further developments

• Analysis of value chain to identify the most feasible area of investment

Value Chain analysis: -Script writing -Pre-production -Production -Distribution -Etc…

What the market has said…

Nevertheless, KPMG team has understood…

“No direct foreign investment is allowed to formulate a media and entertainment fund in China. ”

As quoted by several official legal documents

4 major foreign funds has been established… 20bln USD worth of assets are raised… …..

KPMG has conducted 30 – 40 interviews with key stakeholders and peers to identify the pragmatic solution for the two parties to proceed



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Case study Market entry strategy for a leading media entertainment investment group

One of the critical stage of this project is to build up a solid financial model including key assumptions, sensitivity analysis and the practical market entry model to articulating the returns & risks of the investment for the stakeholder commitment and also for a further project implementation

What is the entry model? What are the benefits?

• Conduct internal capability analysis to identify the readiness of the team • Analysis of peer practices with selective companies to understand the

best practices, issues and challenges per each type of the operating models

• Expert interviews regarding the potential business value for each of the entry model

The development of ideal market entry model

• Conduct key stakeholder interview to capture project assumptions • Analysis of business case with scenarios based profit and return • Define partner selection criteria by using funnel approach • Execute partner selection per long list • Clinch the project via negotiation and signing of the MOU

Business case : -Key assumptions -Projected investment -ROI/ ROE -DCF

MOU Signing: -Due diligence -Partner selections -Site visit -Negotiations -Etc…



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Go-to-Market Strategy Potential Opportunity Industry Insight & Competitor Analysis

A holistic study on external environment, competitions and internal capabilities… • Detailed competitor analysis • Key market buying

requirements • Key market selling strategy &

success factors

Key capabilities of products and the associated market segmentations/target audience • Industry regulations and

specialization of requirements • Product pipeline as per the

demand for the China market

Innovative and creative Marketing and promotional campaigns… • Branding • Marketing campaign • Marketing channel • Promotion events

Case study The main strategic pillars that KPMG has contributed to support the strategic design



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CV – Ning Wright, Media & Entertainment China Partner-in-Charge

Name Ning Wright

Position Technology, Media and Telecommunications (TMT) China Partner-in-Charge

Education and qualifications

■ Bachelor of Economics, Kingston University, United Kingdom ■ Affiliate Member of the Business Continuity Institute

Experience ■ Ning Wright is the Partner-in-Charge for Technology, Media and Telecommunications . She has over seventeen years of experience advising organizations in sectors such as media, advertising, entertainment, technology and telecommunications on market entry & expansion, post-merger integration, target operating model, organization design and program management. She has worked in USA, Europe, Middle East and Asia Pacific regions.

■ Ning is the China Lead Partner for a global diversified electronics & technology and media conglomerate organization in China. She has advised these clients on a number of projects which included target operating model design, market study, post-merger integration and market expansion

■ She has advised a number of government bodies at the provincial and municipal level, technology zones and corporate clients on market entry & sizing and site selection which includes cost & benefit modelling, cost comparison, analysis of infrastructure, cost, talent, business environment & social environment

■ Ning has assisted a large technology organization in China to outline the investment & entry strategy; which included leading the senior executives through strategic planning workshops, negotiation with potential partners and government and assisted in the client’s internal business case to be presented to be Board of Directors

■ She has led a large government project for a municipal government to develop the media & entertainment industry totaling $1B; which included the strategic formulation of vision & goals, key subsides and business model with potential investors and led a delegation of investors from the US to China

■ She has represented KPMG China in signing a Memorandum of Understanding with the Ministry of Commerce on the “Thousand Hundred Ten” project aiming to promote China’s shared services & outsourcing industry. In addition, Ning has been advising China’s central and city level government officials in shaping the shared services & outsourcing industry in China. Ning has been invited as speaker and trainer in a number of key events in China and overseas on a number of topics which includes outbound & inbound media & entertainment industry trends and investment strategies



25

CV – David Frey, Market Entry & Expansion SME

Name David Frey

Position Partner, Management Consulting


■ MA, International Relations, Johns Hopkins University, School of Advanced International Studies

■ BA with Distinction, University of Kansas, USA, Phi Beta Kappa

Experience ■ David has nearly 20 years work experience across Asia Pacific, Europe and North America working with MNCs and SOEs in a variety of industries and functions. He is KPMG Asia Pacific’s lead representative to the Global Business Transformation Council, designed to pool insights and capabilities for our global clients most mission-critical transformation projects. David now focuses the majority of his time on China market entry and expansion to assist MNCs in optimizing their business performance in China. He is the lead Partner for Management Consulting Services in Beijing for KPMG. Under his leadership, KPMG has successfully facilitated the China market entry and expansion of several leading foreign multinationals from the US and Europe

■ David’s core specialty areas are global business strategy, business transformation, and performance improvement. He has significant experience in Asia market entry, business planning and financial modeling, and the alignment of strategy and operations (people, processes and technology)

■ In the area of China market entry, David has worked closely with foreign multinationals to develop successful strategies to enter and expand in the Chinese market. For example, he has assisted a leading US nuclear power company to evaluate opportunities in China and execute a market entry strategy for the client by facilitating negotiations with local partners and assisting expansion of local operations. As further examples, he has assisted the Global CFO of a large German light manufacturing company to re-launch its China strategy and is assisting the CEO of a large US education company to develop a strategy aligned to China’s Five-Year Plan, while identifying potential SOE JV or alliance partners to support strategy execution

■ David is a frequent speaker on the challenges for multinationals in operating in China and across Asia Pacific, having managed teams and projects in China, Thailand, Singapore, Taiwan, Korea, Malaysia, and Vietnam



26

CV – Jackson Wong, Project Manager - TMT specialist

Name Jackson Wong

Position Senior Manager, Management Consulting


■ Master of Business Administration, Rutgers Business School, USA ■ Bachelor of Business Administration, University of British Columbia, Canada ■ Certified Six Sigma Green Belt

Experience ■ Jackson has over 10 years of consulting experience delivering market expansion and government strategic planning projects to organizations in China. He has a strong background in market entry & expansion, industry planning, investment feasibility and partner identification. The relevant projects are:

■ Media & entertainment corporate strategy: Advised a global media conglomerate on market expansion which included the development of the comprehensive strategy to re-launch the client’s China business, which was approved by the Central Managing Board in HQ. Recommendations spanned areas of sales, marketing, government relations, partnering, employee morale and personnel/leadership.

■ Outbound investment strategy: Advised a Chinese media & entertainment organization on outbound investment strategy; which included global and regional market overview on competitive analysis, market segmentation, consumer requirements analysis and channel options. In addition, recommended the potential segments to enter, identified potential partners and the entry method. A investment feasibility report was put together to ascertain the return on investment and potential risks which were presented and agreed by the Board of Directors.

■ Market expansion & growth strategy: Advised a global technology conglomerate on growth strategy; which included analysis of current business portfolio investments in China and developed the exit & re-investment strategy, conducted market study analysis of emerging sectors, analyzed the potential synergies with current business portfolio and defined the product portfolio and go-to-market strategy

■ Industry strategic planning on media & entertainment: Advised a western city in China to develop the media & entertainment industry to establish the city as a international metropolitan city; which included external market environment & opportunities analysis, competitive analysis & internal city capability analysis, formulation of the city’s strategic positioning & service portfolio, key capabilities required to change and location planning of the sub-sectors

■ Media & entertainment investment promotion & investor attraction: Assisted the provincial government to define the investment promotion & marketing program strategy to attract potential investors for the key industries in the cities; which included the development of marketing materials, formulated the detailed financial model & roadmap, value proposition of the cities and the investor attraction term sheet and then executing investment promotion events in Europe and US



27

Name Will Zhao

Position ■ Manager, Management consulting


■ MBA, Strategy and Finance, Solvay Business School, Belgium ■ Bachelor in Economics from Nyenrode Business School, the Netherlands ■ PMP certified (Project Management Professional )

Experience ■ Will has over 9 years of advisory experience specifically in the areas of strategic planning, go to market strategy, operating model design, program management, organization restructuring, change management as well as process optimization. He specializes in consumer markets, financial service and automotive. He is a Manager of KPMG’s management consulting practice in China

■ JV setup : Advised a global Luxury auto company to throughout its JV negotiation and finalization stage covering 6 workstreams. It embraces of project communication both between JV partners and also internally within Steering committee. In addition was responsible for development key project related documents, prepare project feasibility study, negotiation support and interim organization setup. Will is also involved in government relationship building on behalf of client with the JV partner.

■ Industry planning: Advised Chinese regional government regarding the development strategy. Conduct market intelligence study to capture the market dynamics and the best practices. Executed the gaps analysis to for the government taking into consideration of its internal capability and the local economical factors. Developed the overall industry planning and zone planning strategy for the government. The entire project scope also covers the design and development of marketing and advertising strategy for inbound investment and cross country campaign and the arrangement of overseas promotional road shows.

■ Tiered city expansion: As project manager for a leading pan-Asian financial institution on its China market expansion. The project embraces defining and developing market expansion strategy, development of business case, project pilot and validation. During the course the project, Will also assisted in terms of design the communication mechanism towards various government ministries, cross company communication plan and also project training material for new operation setup.

■ Prior to joining KPMG, Will was Senior Project Manager within American International Assurance, where he has led and worked on several market expansion and partner selection negotiation projects

CV – Will Zhao, Project Module Leader



28

Table of Content

Appendix 5

The Journey 2 How We Can Help 3

Executive Summary 1




29

We will leverage on the KPMG’s Interview Program to obtain exclusive insights to the TV broadcasting industry and major MNCs and domestic players

OUR WORK PROCESS

We will utilize our network and client base in conducting an interview program as part of our Market Study and Competitor Analysis modules An interview-based approach which is proven to be effective and efficient to assist you in understanding the market dynamics that impact your strategic decision

We suggest to conduct around 10-15 interviews for this project. Examples of interviewees include: ■ MNC & Domestic broadcasting companies ■ Industry Associations ■ Industry Government Regulation Bodies Additionally, KPMG will also leverage our “tool suite” including Global Solutions Group, Center of Excellence, Government Focus Group and Circle of Experts as indicated on slide 29 and 30 in the Appendix section to further validate and/or enhance the accuracy of information/insights gather as part of the Market Study and Competitor Analysis modules

KPMG Approach



30

KPMG China Management Consulting Tool Suite With over 20 years of experience and extensive network coverage, we developed a tool suite for a direct ramp-up to outline key entry strategy & operations follow-up

Description Key inputs to this project

Centre of Excellence

Key Enablers

▪ China emerging market database - Key market growth trends - Capital inflows & outflows data - Transaction volumes and financials

Global Solutions Group

Circle of Experts

Government Focus Group

“Dataroom of the Market”: Centre of Excellence is a research unit within KPMG China with the expertise and capability to provide market & company-level research, government policies and regulation as well as market segmentation analysis reports ▪Mature industry specific modeling, comprehensive database of

MNC / SOE / POE including Japanese trading companies and SMEs in China

“Pulse of the Market”: Provides solid track record of key capital & workforce flows and market trends ▪Monthly GSG Senior Executive roundtable meeting on China

growth trends (GSG alliance and client network) ▪ China emerging market thought leaderships and reports

“Experts of the Market”: Circle of experts are composed of two groups: Internal Steering Group – composed of KPMG vertical SME (across Audit, Tax, Advisory) and External Expert Network – with extensive knowledge for interviews and insight inputs from MNC, SOE, POE ▪Monthly Internal Steering Group meeting to share industry

developments and projects ▪ Quarterly External Expert Network seminars ▪ Industry Experts Committee

“Engine of the Market”: Specialized KPMG member committee to form relationships with regional governments and approval departments to understand the policy and regulatory changes and overall government’s initiatives on emerging industries ▪ Inbound & outbound investment summit ▪ Strategic planning meetings with the government’s ‘emerging

industry development’ office in key regions in China

▪ Industry specific database ▪Market size and growth report ▪ Customized research report ▪ Key company profile

▪ China 12th five year plan report ▪ China investment & tax alerts ▪ New emerging market study ▪ Government regulation and policy

white papers

▪ Panel of experts interviews ▪ Industry insights ▪ Target company validation ▪ China – US –intelligence sector

reports



31

KPMG China Management Consulting Tool Suite Our projects are supported by our global CoE in Shanghai, China and India

KPMG Centre of Excellence (CoE) has six key focus areas: Primary and secondary research

Benchmarking

Database of market intelligence covering key sectors

Global client support

Knowledge management

Thought Leadership program support

Global Client Support

CoE

Benchmarking

Primary & secondary research

Established database

Knowledge Management

Thought Leadership

This provides us several advantages: Unifying our project team to form a virtual extended team

Building a specialized Research and Analytics team to support project delivery

Providing reliable and high quality data on real time basis such as market and company intelligence

Acting as a backbone to increase KPMG’s presence and visibility to in the market expansion and target operating model



32

In China, KPMG has developed a unique platform to address end-to-end needs across business strategy, branding, talent, legal and commercial negotiation

KPMG is the leader of the alliance

An integrated service offering to assist multi-national corporations entering or seeking expansion in China and Chinese companies expanding into new markets abroad

GSG draws lessons from many years of collective market experience in China and in all global markets to address a wide range of corporate challenges

Unique alliance provides a seamless “one-stop-shop” to address those challenges that confront nearly all multi-nationals operating in China, as well as the issues that limit Chinese companies’ effectiveness as they expand abroad

• Legal strategy • Compliance • Restructuring

• Sales, marketing and brand strategy

• Localized marketing collateral

• Public relations • Investment feasibility & financial

modeling, location selection • Business strategy and performance

improvement • Commercial, financial, &

operational due diligence • Tax optimization, compliance and

risk management • Overall project management,

leadership & integration

In China, KPMG, Ogilvy, Jones Day, MRI and Ascension Capital Group have developed a joint service offering that is designed to assist multinational corporations as they enter or expand operations in China.

• Executive recruitment • Human resources

advisory • Human capital

development

• Government relations • Commercial

negotiations



33

KPMG China Management Consulting Tool Suite KPMG is a trusted national, provincial and municipal investment advisor

Changsha

Hangzhou Hefei

Qingdao Zhengzhou

Changzhou China Investment

Select entities across the PRC government have named KPMG as a strategic partner to undertake key initiatives related to the development and execution of past and current Five Year Plans

Navigating sensitive media and entertainment oriented industries is critical to have the support of governing bodies throughout China on a national, provincial and municipal level

■ KPMG’s strong industry expertise, deep local knowledge, and vast global networks have enabled KPMG to have the continued support from central and local governments, where KPMG provides assistance for industrial planning and targeted FDI promotions, including:

− The State Council’s Development Research Center (DRC) selected KPMG as special strategic advisor to the Macroeconomic Policy Department, supporting initiatives to develop and finance China’s infrastructure

− KPMG has been engaged by provincial and municipal governments to assist in strategic outbound and inbound investment initiatives, including investment environment reports and periodic updates for Changsha, Changsha County, Hefei, Zhengzhou, Changzhou, Hangzhou and Qingdao

− KPMG has advised multiple Central/Provincial Government departments and State Owned Enterprises (SOEs) within China on global developments in cloud computing

− China’s Ministry of Commerce (MOFCOM) has selected KPMG as a strategic advisor to support development of IT outsourcing initiatives. KPMG helped identify 21 focus cities for priority investment and developed a global supply chain to facilitate expansion of China’s IT outsourcing industry

© 2012 KPMG Advisory (China) Limited, a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. The KPMG name, logo and “cutting through complexity” are registered trademarks or trademarks of KPMG International.

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