Investor Relations Presentation
December 2010
This presentation contains forward-looking statements within the meaning of the Private Securities Litigation
Reform Act of 1995, about Atrinsic (“ATRN”) and its affiliates. Forward-looking statements are statements that are
not historical facts. Such forward-looking statements, based upon the current beliefs and expectations of ATRN's
management, are subject to risks and uncertainties, which could cause actual results to differ from the forward-
looking statements. The following factors, among others, could cause actual results to differ from those set forth in
the forward-looking statements: general economic conditions; geopolitical events and regulatory changes;
requirements or changes adversely affecting the businesses in which ATRN is engaged; demand for the products
and services that ATRN provides, as well as other relevant risks detailed in ATRN's filings with the Securities and
Exchange Commission. The information set forth herein should be read in light of such risks. ATRN assumes no
obligation to update the information contained herein.
Adjusted EBITDA presented for all periods is a non-GAAP financial measure. Refer to “Supplemental Disclosure
regarding Non-GAAP Measures,” presented in the Company’s most recent quarterly earnings release, available at
http://www.atrinsic.com/press/press-release/38, and filed with the Securities & Exchange Commission on Form 8-
K, for additional information regarding Adjusted EBITDA and other non-GAAP financial measures presented
herein.
Forward Looking Statement
Atrinsic’s Business
We have a recurring revenue, subscription-
based direct-to-consumer business model
Recognizable and relevant entertainment
brand in Kazaa
We offer alternative billing capabilities
Our focus is on digital music in the rapidly
growing mobile space
Direct-to-Consumer Subscriptions:
Kazaa Entertainment
We are a top ten search agency according to
(2010)
We offer advertisers an integrated service offering
across paid search, SEO, display, affiliate marketing,
business intelligence and brand protection services
We work with all facets of advertisers, large and
small, to acquire customers and expand markets
Interactive Agency/Affiliate Network:
Atrinsic Interactive
We are a best-in-class search agency that
owns/operates a top-tier affiliate network
Focus
To build and sustain a large and profitable subscriber base and a growing and engaged
audience
Atrinsic Interactive’s Business Mission
To become the largest, independent search marketing agency
To become a top five affiliate network
To leverage our multi-channel marketing expertise and technology to drive advertisers’ results
Direct-to Consumer Subscriptions: Kazaa
Deliver entertainment content to our customers anywhere, anytime, and on any device in a
manner our customers choose
Atrinsic Snapshot
We currently have 217,000 paying subscribers
(3Q 2010) across our entertainment products
We have approximately 64,000 Kazaa
subscribers (3Q 2010)
Ticker: ATRN (ATRND until 1/3/10)
Exchange: Nasdaq Global Market
Average Daily Volume: 38,000 shares
Shares Outstanding: 6.3 million
Recent Market Cap: $11 million
Cash (3Q 2010): $4.2 million (additional
$2.7MM in cash tax refunds
after quarter end)
Working Capital: $6.0 million
Total Debt: $0
3Q 2010 Revenue: $9.2 million
2010 Revenue (YTD): $32 million
Auditors: KPMG LLP
We are a top ten search agency according to
(2010)
We will have approximately 60 employees,
transitioning to a single location in NY by 1Q
2011
As a result of restructuring and focus, we
expect to achieve fixed operating expense cost
savings of between 30% to 50%
ARPU of $5.74 across all of our subscription
products (3Q 2010)
Due to improvements in churn and higher rates
of subscriber acquisition, we expect 10%
month-over-month growth in Kazaa subs
Atrinsic Interactive
We are a top ten search agency according to
(2010).
We offer advertisers an integrated service offering
across paid search, SEO, display, affiliate marketing,
business intelligence and brand protection services.
We are focused on targeting and maintaining clients
that participate across the agency services, including
search and affiliate marketing.
FEATURED CLIENTS
CROSS CHANNEL REPORTING
The Atrinsic Affiliate Network uses state of the art
business intelligence tools for brand protection and to
identify common publisher violations.
The paid search team utilizes highly intelligent search
tools to drive sales at the lowest cost for advertisers.
Our multi-channel path to conversions enables us to see
the entire conversion funnel across any online marketing
channel. We have the ability to take the proverbial black
box out of the conversion flow.
Atrinsic Affiliate Network
Representing an evolution in affiliate marketing platforms, our platform offers a
full- service solution while maintaining the highest level of brand protection.
Using our affiliate network, we create mutually beneficial, easy partnerships for
advertisers and publishers to drive website traffic and customer acquisition.
Our Network is low-risk, yet high-reward. Our software increases transparency
between publishers and advertisers, giving both parties access to higher
quality data.
Through the use of comprehensive reporting, trademark monitoring and
proprietary business intelligence tools, our team is able to identify
opportunities and flag potential issues before they become brand destructive.
ADVERTISERS
We hope that in the future, Kazaa will be one of our largest advertisers on the
Network.
On October 13, 2010, we amended our existing Kazaa marketing agreements with Brilliant Digital in exchange
for 4,161,430 shares of our common stock. We also entered into an agreement to acquire all of the assets of
Brilliant Digital that relate to the Kazaa digital music subscription business for an additional 7,125,665 shares.
In connection with our acquisition of the Kazaa assets, in November, 2010, we announced that we are
undertaking a restructuring of our existing operations, and of the Kazaa business that Brilliant Digital is engaged
in, to reduce certain operational expenditures and to improve efficiencies in product development and sales
and customer acquisition outcomes for the Kazaa digital music service. As a result of the restructuring, we
expect to be able to achieve fixed operating cost savings of between 30%-50%.
Acquisition of Kazaa
We are acquiring all of the assets associated with the Kazaa business, including the Kazaa trademark and
associated intellectual property (kazaa.com, etc.), as well as a content management system, a content delivery
platform and customer service platform, and licenses with rights’ holders. We are also assuming certain limited
working capital liabilities.
We expect that our special meeting, where stockholder will vote to approve the Kazaa acquisition will be in the
first quarter of 2011.
The Kazaa digital music service is our principal premium direct-to-
consumer subscription product.
Subscription Products
We currently have 217,000 paying subscribers across all of our products.
Because we are proficient in multiple billing platforms, we are able
to create subscriber acquisition efficiencies.
Ringtone.com, billed to a user’s mobile device, allows consumers to
download premium ringtones.
Our casual game subscription services have a broad selection of
popular digital games, including top-rated games Zuma™, Diner
Dash®, and World Series of Poker® Pro Challenge.
Kazaa Screenshots
Kazaa Screenshots
Kazaa Digital Music Service
Potential to become one of the premier music subscription services
by revenue and subscribers
Unlimited access to millions of CD quality tracks
Pay one monthly fee to download unlimited music files and play that
music on up to five computers/devices
Download unlimited ringtones to a mobile phone
Subscribers are billed through a credit card, landline or mobile device
Royalties are paid to the rights’ holders for licenses to the music utilized
by this digital service
Access to streaming, unlimited downloads
With expansion, we have an opportunity to extend into other
entertainment related products and services
We are also developing a multi-tiered pricing strategy based on variable
features and access
2009 Worldwide Digital Music Sales of $4.2 billion
2009
Worldwide Digital Music Revenue &
Penetration (in billions)
Large and growing market for digital music. Digital music represents
about 27% of total market and is growing at double digits (IFPI).
In the U.S., digital music adoption is even greater, accounting for
40% of music sales (IFPI).
Digital Music Market
Subscriptions and mobile business models are key growth sectors
within the market. These sectors correspond to the focus of Kazaa.
Overall U.S. music sales hit 1.5 billion units in 2009 – the second
year above 1.5 billion (Nielsen SoundScan).
In 2009 there were 1.2 billion digital track downloads in the U.S.
(Nielsen SoundScan).
Mobile Internet usage is expected to eclipse desktop Internet usage
within three years (Morgan Stanley Research).
Music subscriptions grew rapidly in 2009 and accounted for more
than 5% of all digital sales (IFPI).
27%
73%
Revenue from digital channels
Revenue from traditional channels
Mobile Internet Penetration
Mobile devices are rapidly beginning to dominate the Internet. It is expected that the Internet will be mostly
accessed via mobile devices by 2014 (Morgan Stanley Research).
Mobile Devices to Dominate the Internet
The convergence of Internet usage and mobile devices is expected to expand the market for on demand
streaming music.
2008
2009
2010
2011
2012
2013
2014
33%
35%
40%
44%
46%
47%
51%
67%
65%
60%
56%
54%
53%
49%
How Will the Internet be Accessed?
Mobile
Desktop
The Final (Efficient) Frontier
There is no one correct answer, rather there is a frontier of efficient marketing spending – described as the
highest life time value LTV that can be achieved for a given subscriber acquisition cost (SAC)
Solving an Optimization Problem: What should we pay for a subscriber?
By improving the product, modifying pricing, billing efficiently, reducing churn and increasing utilization, we
can maximize LTV, given a level of SAC
By validating leads, monitoring our marketing channels, engaging in SEO and better SEM practices, and
utilizing alternative marketing approaches, we can minimize SAC, given a level of LTV
L
T
V
eCPA
LTV Optimization
You are here
You are here
We are focused on cost-effectively acquiring customers through multiple
online distribution channels: Affiliate marketing, search, social media,
display, email/SMS and organic/SEO.
A Disciplined Approach to Marketing
Multi Channel, Disciplined Approach. Focused on ROI
We also have a network of our own media, consisting of music, games
and lifestyle web sites and proprietary content to attract consumers.
We are disciplined marketers. We are constantly optimizing marketing
spend with respect to number of subscribers, revenue and costs.
We employ a comprehensive data strategy to validate and enhance our data
using a highly advanced data validation platform to improves targeting and
billability.
Merchandizing and Content
Kazaa is a fully licensed digital music subscription service. We pay rights’ holders royalties on tracks
downloaded or streamed. Our subscribers have access to millions of tracks.
In conjunction with our product roadmap, we are continually enhancing and improving Kazaa to offer users
improved functionality and better search capabilities.
As subscribers browse, search and listen to music, Kazaa provides users with detailed information on
tracks or albums, along with popular rankings and music charts and other rankings.
We are implementing a comprehensive communications strategy, including employing email and SMS to
communicate with our users in a relevant way to improve retention and to encourage utilization.
Kazaa presents its content in a variety of customized and personalized formats, including allowing users to flag
and access favorite tracks, build and edit playlists and also to see recently played tracks.
Utilizing proprietary preference and rankings technology, Kazaa offers radio features, which are automatically
generated playlists generated around individual tracks, and provides intelligent recommendations based on
listener habits and user preferences.
Our merchandizing strategy is geared towards improving customer retention and increasing LTVs.
We are employing social media to advertise to other Facebook users what a Kazaa user is listening to and are
developing off site streaming .
Product Roadmap
Other short term product development includes optimizing Kazaa for
mobile viewing and usage, providing a download player with side loading
and greater merchandizing capability.
On an ongoing basis, we continue to enhance and improve the user
experience through preference engine improvements and search
capabilities and GUI modifications.
Our product strategy is focused on increasing retention and LTVs and reducing churn
As a result of these ongoing improvements, we already see increased
utilization and access.
Medium term product development initiatives include mobile applications to
enable subscribers to stream and download music on the iPhone and iPad
and on mobile devices with Android, Blackberry and Windows Mobile 7
operating systems.
Proficiency in Multiple Billing Platforms
Billing & Pricing
We create customer acquisition efficiencies relative to traditional
direct marketers, who may only offer a single billing modality –
credit cards. Thus, we are able to expand our potential customer
base, attracting consumers who prefer not to use a credit card.
We own 36% of The Billing Resource, LLC (“TBR”), one of only a
handful of local exchange carrier fixed-line billing aggregators in
the United States.
In addition to agreements with multiple aggregators who have
access to U.S. carriers – both wireless and landline – for billing,
we also have an agreement in place with AT&T Wireless to distribute
and bill for our services directly to subscribers on its network.
BILLING PARTNERS
Pricing Strategy
In conjunction with the rollout of our Kazaa mobile product and
mobile apps, we are constantly testing and incorporating alternative
price points to maximize retention and LTV
Kazaa now offers a mobile phone-billed $9.99 per month product and
is developing multi-tiered pricing to deliver different value
propositions for all market segments.
Billing Alternatives
We have approximately 217,000 subscribers and today
subscriptions represents approximately 50% of our
revenues. Approximately 35% of subscribers billed on
mobile, 41% billed on telephone land lines and 24% billed
by credit card.
41%
24%
35%
3Q 2010 Billing Breakdown
LEC
CC
Mobile
Operating Leverage
High variable cost structure and relatively low fixed costs, allows us to respond to market
conditions
Significant variable cost component in our business model improves operating leverage (increasing predictability
and transparency). Cost of media, or subscriber acquisition expense, as a percentage of revenue, is expected to
fall over time.
57%
43%
Expenses YTD 2010
Variable
Fixed
Long Tails
Long subscriber tails are a benefit of our recurring revenue business model
Initial “investment” in new subscribers results in short term loss, but then the recurring revenue
stream turns profitable and then continues to pay back.
$(20)
$(15)
$(10)
$(5)
$
-
$5
$10
$15
$20
Month 1
Month 2
Month 3
Month 4
Month 5
Cumulative Subscriber Gross Profit
See For Yourself
Check it out yourself and monitor our
progress. And download unlimited
tracks for a low monthly fee.
Go to Kazaa.com and subscribe to our digital music service
Did I mention we are a top-ten
search agency according to
(2010)?
Quarterly Financial Highlights
(in millions)
For the Quarter
1Q '10
2Q '10
3Q '10
Total Net Revenue
12,200
$
10,814
$
9,180
$
Cost of Sales
(7,344)
(6,009)
(4,589)
Gross Profit
4,856
4,805
4,591
Operating Expenses
(7,422)
(8,662)
(7,706)
EBITDA
(2,566)
(3,857)
(3,115)
At Quarter End
1Q '10
2Q '10
3Q '10
Cash and cash equivalents
12,475
$
7,268
$
4,249
$
Working Capital
12,597
8,609
5,964
Total Debt
-
-
-