SOFTWARE & SERVICES 14 JULY 2009 WEB 2.O WEEKLY DAVID SHORE, CFA, MBA 416.860.6784 [email protected] Arun Thomas (Associate) 416.860.7666 PANDORA RAISES $35 MILLION POST ROYALTY AGREEMENT NEW ROYALTY AGREEMENT FOR WEBCASTING AND COPYRIGHT FIRMS SoundExchange, a non-profit royalty collecting organization associated with the Recording Industry Association of America (RIAA), agreed this past week to a new deal regarding royalty rates for webcasting. Under the new agreement, large commercial webcasters will pay up to 25% of their revenue to copyright holders – well below the 70% that could have been imposed under an earlier deal. While the deal was initially agreed to by three smaller Internet radio webcasters, Pandora Media, the third largest radio site (according to Alexa), also indicated that it would sign on to the agreement. Online Media companies lead financing: Two online media companies, Pandora (Internet Radio) and QuickPlay (Mobile Video), have secured the largest financing transactions thus far in July ($35 million and $12 million, respectively). Total capital raised so far in July is $66.1 million through eight transactions, averaging $8.3 million per transaction. June closed with $180 million in financing on 36 transactions. The averages for the months of May (excluding the Facebook transaction) and June were $6.4 million and $4.7 million, respectively. Financing Activity Last Three Months 4.7 8.3 6.4 0.0 20.0 40.0 60.0 80.0 100.0 120.0 140.0 160.0 180.0 200.0 May-09 (excl FB) Jun-09 Jul-09 (US$m) 0.0 1.0 2.0 3.0 4.0 5.0 6.0 7.0 8.0 9.0 (US$m) Total Average A weak price performance week: The companies in our universe had weak stock price performances over the past week (for stocks with prices greater than $1) (Figure 6), with 30 companies showing negative returns on the week. Gravity (NasdaqGM:GRVY) led the group with a 33% return, while GungHo (3765-OSE) had the worst return, dropping 26.4% in the week. This report has been created by Analysts that are employed by Research Capital Corporation, a Canadian Investment Dealer. For further disclosures, please see last page of this report. www.researchcapital.com Toronto 416.860.7600 Montreal 514.399.1500 Vancouver 604.662.1800 Calgary 403.265.7400 Regina 306.566.7550