Global Digital Goods Opportunities

Global Digital Goods OpportunitiesSam Kwong, PayPal APAC Product Management

December 12, 2011 PeaceSoft Conference

Confidential and Proprietary

OUR AGENDA

• Global Highlights

• Look at the numbers

• Segment deep dive

Global Digital Goods Opportunities 2

Confidential and Proprietary 3

Highlights

Global Digital Goods Opportunities

Source: PWC Global Media and Entertainment Outlook 2011.

• Books and magazines on reading devices will see significant growth rates, tripling from $5.6B to $18.7B in 2015. Led mainly by North America consumers.

• Other media, mainly video from TV streaming subscriptions and movie downloads will almost double to 2015, also due to North America consumers.

• Digital Mobile(devices and smartphones) is expected to double from $22.5B to $48.4B. Majority of the growth is in reading devices followed by mobile gaming.

• APAC has expected to be the second biggest digital market at $53.3B in 2015. North America is forecast to be $82.9B and EMEA is $41.8B in 2015.

• Online gaming in APAC represents 1/3 of total digital revenues at $10B in 2011 and doubles to $19.2B in 2015.

• Mobile is significant in APAC too with games and music being the biggest. South Korea leads the way at $2.7B for 2015 in mobile gaming, followed by Japan ($2.1B) and China ($1.3B).


Highlights


Source: PWC Global Media and Entertainment Outlook 2011.

• EMEA digital market growths are mostly led by Germany, UK, France, Italy and Netherlands. The growths and market size are smaller than the US but will also focus on significant growths in media (music and video), devices (books & magazines), followed by mobile.

• The growth rates in Latin America for online media and games will not be much.

• Digital mobile will see the greatest growth in Latin America which has 100% mobile penetration. Devices is not expected to grow much in this market.

• Mexico and Brazil will lead the way mostly in mobile gaming.

• In Emerging markets where income brackets are lower, Android smartphones will see exponential growths and this is where PayPal can offer a solution for microtransactions and digital media.


OUR AGENDA






$10.3 $10.5 $10.7 $10.9 $11.4 $12.3

$2.3 $2.5 $2.7 $2.9 $3.0 $3.2 $7.5 $9.8

$12.3 $15.3

$20.1

$26.3 $12.4

$14.1 $15.8

$17.3

$19.1

$20.8

$2.5

$3.5

$4.6

$5.8

$7.3

$9.0

$4.3

$5.5

$6.8

$8.2

$9.5

$11.1

$-

$10.0

$20.0

$30.0

$40.0

$50.0

$60.0

$70.0

$80.0

$90.0

2010 2011 2012 2013 2014 2015

Mobile -Games, Music, Video, Software

Devices - Books & Magazines

Media -Newspaper, Music & Video

Software - SaaS and Downloads

Games - Online

Games -Console

6

Market Opportunity by Vertical


Digital Goods North America

US$ billions

$32$37

$42$46

$54

$63

2011-15 CAGR

19.1%

26.5%

10.2%

28.1%*

6.9%

$39.3B $45.9B $52.9B $60.4B $70.4B $82.9B

$15

$18

$20

$23

$26

$30

Source: PWC Global Media and Entertainment Outlook 2011, Juniper Research 2011 and PayPal analysis. * Software forecasts are based on Renta Software analysis in 2010. Note: Numbers might not add up due to rounding.

4.7%

15.9%TOTAL


$9.5 $9.8 $10.2 $10.6 $11.1 $11.9

$3.3 $3.6 $4.1 $4.7 $5.2

$5.7 $1.7

$2.6 $2.9

$3.1 $3.3

$3.3

$3.4 $4.0

$5.0 $6.1

$7.7

$9.3

$0.4

$0.7

$1.3

$2.3

$3.7

$5.2

$2.7

$3.5

$4.3

$5.2

$5.8

$6.3

$-

$5.0

$10.0

$15.0

$20.0

$25.0

$30.0

$35.0

$40.0

$45.0

2010 2011 2012 2013 2014 2015

Mobile - Games, Music, Video, Software




Games - Online

Games - Console

7



Digital Goods EMEA

US$ billions

$18$20

$22$25

$27$30

2011-15 CAGR

15.4%

65.4%

23.2%

6.1%

5.1%

$20.9B $24.3B $27.9B $32.0B $36.7B $41.8B

$4$5

$6

$9

$11

$15

Source: PWC Global Media and Entertainment Outlook 2011, Juniper Research 2011 and PayPal analysis. Note: Numbers might not add up due to rounding.

14.5%TOTAL

12.3%


$7.7 $7.7 $8.1 $8.6 $9.1 $9.8

$8.6 $10.1 $12.0

$14.3 $16.8

$19.2 $1.8

$2.5 $2.6

$2.5

$2.5

$2.4

$2.7 $3.0

$3.6

$4.1

$5.1

$6.1

$1.2

$1.4

$1.9

$2.6

$3.4

$4.3

$6.0

$7.2

$8.4

$9.6

$10.6

$11.4

$-

$10.0

$20.0

$30.0

$40.0

$50.0

$60.0

2010 2011 2012 2013 2014 2015





Games - Online

Games - Console

8



Digital Goods APAC

US$ billions

$21$23

$26 $30$34

$38

2011-15 CAGR

12.1%

32.2%

19.6%

-0.7%

6.2%

$28.0B $31.9B $36.7B $41.8B $47.5B $53.3B

$4

$4

$6

$7

$8

$10


17.4%

13.6%TOTAL


$0.6 $0.7 $0.7 $0.7 $0.7 $0.8

$0.1 $0.1 $0.1 $0.2 $0.2 $0.2 $0.1

$0.1 $0.1 $0.1 $0.1

$0.1

$0.1 $0.1

$0.2 $0.2

$0.2 $0.3

$-$-

$0.0 $0.0

$0.0

$0.1

$0.5

$0.5 $0.6

$0.7

$0.8

$0.9

$-

$0.5

$1.0

$1.5

$2.0

$2.5

2010 2011 2012 2013 2014 2015





Games - Online

Games - Console

9



Digital Goods Latin America

US$ billions

$0.9$1.0

$1.1 $1.1$1.2

$1.4

2011-15 CAGR

12.3%

N/A

20.9%

2.2%

12.0%

$1.4B $1.6B $1.7B $1.9B $2.1B $2.3B


4.2%

10.6%TOTAL


$7.5 $8.5 $9.6 $10.7 $11.7 $12.7

$2.9 $4.0

$5.0 $6.0

$7.0 $8.2

$1.9

$3.1

$4.0

$5.0

$5.2

$5.5

$1.1

$1.3

$1.6

$2.0

$2.7

$3.4

$4.0

$5.6

$7.9

$10.8

$14.4

$18.7

$-

$5.0

$10.0

$15.0

$20.0

$25.0

$30.0

$35.0

$40.0

$45.0

$50.0

2010 2011 2012 2013 2014 2015


Mobile - Video

Mobile - Music

Mobile - Software

Mobile - Games

10Global Digital Goods Opportunities

Global Mobile Market Opportunity

US$ billions

$17.6B* $22.5B* $28.0B* $34.4B* $41.0B* $48.4B*

2011-15 CAGR

34.9%

27.9%

15.4%

19.5%


10.6%

* Global Mobile includes both Mobile and Devices (e.g. electronic reading devices) ** Mobile Music is extrapolated based on Juniper Research numbers and PWC Online music growth.Source: PWC Global Media and Entertainment Outlook 2011, Juniper Research 2011 and PayPal analysis. Note: Numbers might not add up due to rounding.

21.1%TOTAL

**


OUR AGENDA






Gaming


• PC game will continue to deteriorate due to competitions from other sectors

• Console market will be sustained by gamers into new titles

• Online gaming market driven by increase in broadband penetration and continuing growth of micro transactions

• Mobile gaming is exploding due to the rapid adoption of smartphones. Asia (Japan and Korea) leads in spending on mobile games

• For the Facebook penetrated markets, Zynga has generally won the war on social games

• IP owners are starting to crack down on gold farming and 3rd party resellers


Publishing


• Online and eReader channels are seriously eroding newspaper and magazine print revenue in North America

• Online channels are gradually putting up pay walls to offset the loses in print revenue

• Other markets are forecasted to follow a similar path as North America, but on a delayed timeline

• eBooks market currently has a small base, but is the segment forecasted to grow the fastest

• Expanding eBook markets -> increase accessibility for consumer eBooks

• Educational eBook is an emerging segment that warrants significant opportunities


Music/Video


• Physical distribution is declining rapidly as the industry shifts to digital delivery

• Anti piracy efforts are starting to see results

• Pay per track/download model is thriving

• Subscription model is emerging, but minimal payout to artists in this model is starting to see backlash


OUR AGENDA




Sam [email protected]


Business

Global Digital Goods Opportunities