1. Digital Entertainment – Consumers’ Perspectives on Digital Rights Management (DRM) A Jupiter Multiclient Report Peter Sargent Psargent@jupitermedia.com February 2003

2. 2 © 2003 Jupiter Research a division of Jupitermedia Corporation Research Objectives Through collaboration with leading media companies and technology providers, Jupiter is providing research and analysis regarding: –Consumers’ preferences for the consumption of certain types of media and applications across both PC and non-PC devices, as they are packaged and restricted to meet with copyright mandates. –Which features or attributes of a media product/service drive the purchase decision and thus make for an effective pricing and bundling strategy. –Consumer price elasticity given certain copy and file sharing restrictions in accordance with copyright laws. –The best strategy for positioning and communicating these restrictions to end users so as to minimize losses of revenue or goodwill. Media companies and technology providers have been unable to reach common ground on a standard approach for implementing copyright technologies for media content and services.

3. 3 © 2003 Jupiter Research a division of Jupitermedia Corporation Overall Findings – Digital Music Online consumers believe that the terms of ownership and the freedom to copy digital music to other devices is more important than price. –Nearly twice as many consumers are willing to pay $17.99 for a CD that has unrestricted copy abilities versus a CD at only $9.99 that cannot be copied. Caution to content owners wishing to introduce copy restrictions at current prices. Online consumers consider the PC to be the central hub for the copying and porting of music. Online consumers are not interested in renting music.

4. 4 © 2003 Jupiter Research a division of Jupitermedia Corporation Overall Findings – Digital Movies Unlike music, price is the primary concern for online consumers when they consider movie purchases/ rentals. Online consumers see little advantage to longer rental agreements (7 days, 30 days) for their movies. Online consumers are willing to pay a premium for the ability to copy their movies, despite the fact that very few consumers can, or actually do, copy them today. Super Net Vets (5+ years online tenure) are less interested in movies on their PC, than the average online consumer. Despite less buying power, 18 to 24 year olds who use the Internet are no more price sensitive to purchasing/ renting movies than the typical online consumer.

5. 5 © 2003 Jupiter Research a division of Jupitermedia Corporation Audio

6. 6 © 2003 Jupiter Research a division of Jupitermedia Corporation High Level Findings - Music “Albums” Introducing copy restrictions to music products at current prices will dramatically affect sales volumes. –At $17.99 for a CD, 41% of online consumers will buy, given the freedom to copy. Only 10% would pay if the CD cannot be copied. –At $9.99 for a CD, 58% of online consumers were willing to buy, given the freedom to copy. Only 23% of consumers would pay if the CD cannot be copied. An album (CD or set of digital [MP3] files) at $17.99 will sell slightly better than an album at $12.99. Demand increases even more significantly when the price is dropped to $9.99. –The difference of $3 between a CD priced at $9.99 and one priced at $12.99 resonates with online consumers. Online consumers have been conditioned to assume that digital music files, once on their PC, can be ported to any playback device.

7. 7 © 2003 Jupiter Research a division of Jupitermedia Corporation High Level Findings - Music Singles At current pricing, Jupiter sees a market for single songs over the Internet. –Online consumers are more likely to purchase a song at 99 cents than they are a CD at $17.99. Consumers are still nearly as likely to purchase a song at $1.99 per song, as the CD at $17.99. Online consumers will not pay for single songs downloaded to their PC that cannot be copied to other playback devices. –47% of respondents would pay 99 cents for such a song, provided it can be copied. Only 17% are interested if the song cannot be copied. Online consumers who also Rip or Burn CDs and those that pay to access music online show greater willingness to purchase music on CDs or via the PC, than most online consumers. File sharers are as likely to purchase digital music as the greater online audience.

8. 8 © 2003 Jupiter Research a division of Jupitermedia Corporation Means of Purchasing Music Source: Jupiter/The NPD Group, Inc. Custom Media Survey (12/02), n = 892 (US only) Question: In what ways have you, yourself purchased music, either online or offline, in the last 6 months? (Select all that apply) Percentage of Online Users

9. 9 © 2003 Jupiter Research a division of Jupitermedia Corporation Music Spending Source: Jupiter/The NPD Group, Inc. Custom Media Survey (12/02), n = 892 (US only) Question: How much have you, yourself spent (purchased or rented) for music during the past 3 months? Percentage of Online Users

10. 10 © 2003 Jupiter Research a division of Jupitermedia Corporation Conjoint Analysis – Assessing Music Products Product conditions under evaluation: Media Source Terms of Rent/Own Copy AllowancePrice "Album" on a CDYou own it Can be copied to multiple home devices (PC, disc, and portable device) $17.99 Can be copied to Disc (CD, DVD) $12.99 "Album" downloaded to your PC Rented for 30 days Can be copied to a portable device $ 9.99 Can be copied to your PC hard drive $ 1.99 Single Song downloaded to your PC Rented for 7 days Cannot be copied $ 0.99

11. 11 © 2003 Jupiter Research a division of Jupitermedia Corporation Sample Conjoint Card - Music Introduction: Record labels are trying to improve the quality and availability of their music while still controlling their distribution. This survey is designed to understand how you prefer to listen to your music and how much you value the ability to copy and store your music collection. AttributesLeft ChoiceRight Choice Media Source (You pay for…) Album downloaded to your PC Album on a CD Terms of Rent/Own: You Own It Copy Allowance:Cannot be CopiedCan be copied to your PC hard drive Price:$9.99$12.99 You pay for music in one of two scenarios… Given the following choices, what might you do? (Select one) o Would choose the offer on the left o Would choose the offer on the right

12. 12 © 2003 Jupiter Research a division of Jupitermedia Corporation Copied to multiple devices Album on a CD Album downloaded to your PC Single Song downloaded to your PC You Own it Rented for 30 days Rented for 7 days Copied to your PC hard drive Copied to a Disc Copied to a portable device Cannot be copied $17.99 $12.99 $9.99 $1.99 $0.99 Media Source Terms of Rent/Own Copy Allowance Price 17%32%28%22% Importance : Purchasing Preferences for Music Source: Jupiter/The NPD Group, Inc. Custom Media Survey (12/02), n = 892 (US only)

13. 13 © 2003 Jupiter Research a division of Jupitermedia Corporation CDs are Preferred, Copy Allowance Influences Take Rates Albums: Singles: Source: Jupiter/The NPD Group, Inc. Custom Media Survey (12/02), n = 892 (US only)

14. 14 © 2003 Jupiter Research a division of Jupitermedia Corporation A Premium Paid for Copy Allowance Source: Jupiter/The NPD Group, Inc. Custom Media Survey (12/02), n = 892 (US only)

15. 15 © 2003 Jupiter Research a division of Jupitermedia Corporation Little Market Opportunity for Rented Music Source: Jupiter/The NPD Group, Inc. Custom Media Survey (12/02), n = 892 (US only)

16. 16 © 2003 Jupiter Research a division of Jupitermedia Corporation Singles Versus Albums Source: Jupiter/The NPD Group, Inc. Custom Media Survey (12/02), n = 892 (US only)

17. 17 © 2003 Jupiter Research a division of Jupitermedia Corporation Electronic Music Activities by Connection Speed Percentage of Online Users Source: Question: In which of the following ways do you, yourself use music electronically? (Select all that apply) Source: Jupiter/The NPD Group, Inc. DRM Survey (12/02), n = 892 (US only) Broadband Dial-up

18. 18 © 2003 Jupiter Research a division of Jupitermedia Corporation Electronic Music Activities by Connection Speed cont. Percentage of Online Users Source: Question: In which of the following ways do you, yourself use music electronically? (Select all that apply) Source: Jupiter/The NPD Group, Inc. DRM Survey (12/02), n = 892 (US only)

19. 19 © 2003 Jupiter Research a division of Jupitermedia Corporation Electronic Music Activities by Connection Speed cont. Percentage of Online Users Source: Question: In which of the following ways do you, yourself use music electronically? (Select all that apply) Source: Jupiter/The NPD Group, Inc. DRM Survey (12/02), n = 892 (US only) Broadband Dial-up

20. 20 © 2003 Jupiter Research a division of Jupitermedia Corporation Means of Purchasing Music by Online Tenure Source: Jupiter/The NPD Group, Inc. Custom Media Survey (12/02), n = 892 (US only) Question: In what ways have you, yourself purchased music, either online or offline, in the last 6 months? (Select all that apply) Percentage of Online Users

21. 21 © 2003 Jupiter Research a division of Jupitermedia Corporation Electronic Music Activities by Online Tenure Percentage of Online Users Question: In which of the following ways do you, yourself use music electronically? (Select all that apply) Source: Jupiter/The NPD Group, Inc. DRM Survey (12/02), n = 287 (Super Net Vets: 5+ yrs), n = 237 (Net Vets: avg. tenure [2-5 yrs], US only)

22. 22 © 2003 Jupiter Research a division of Jupitermedia Corporation Electronic Music Activities by Online Tenure cont. Percentage of Online Users Question: In which of the following ways do you, yourself use music electronically? (Select all that apply) Source: Jupiter/The NPD Group, Inc. DRM Survey (12/02), n = 287 (Super Net Vets: 5+ yrs), n = 237 (Net Vets: avg. tenure [2-5 yrs], US only)

23. 23 © 2003 Jupiter Research a division of Jupitermedia Corporation Online Spend by Online Tenure Source: Jupiter/The NPD Group, Inc. Custom Media Survey (12/02), n = 892 (US only) Question: How much have you, yourself spent (purchased or rented) for music online during the past 3 months? (Note: this includes all digital music downloaded, streamed, or purchased at an online store) (Select one) Percentage of Online Users

24. 24 © 2003 Jupiter Research a division of Jupitermedia Corporation 28% are samplers 35% are CD burners or rippers 71% use dial-up 36% are file sharers Source: Jupiter/The NPD Group, Inc. Music Survey (8/02), n = 165 (18-24 year olds, US only) 18 to 24 Year Olds 41% are considered Super Net vets Affinity for bundled products is very similar to the overall online population (see slide 27). 59% own a portable CD player, 11% own an MP3 player; 58% own a CD burner

25. 25 © 2003 Jupiter Research a division of Jupitermedia Corporation 18-24 Year Olds Consume Music for Free Percentage of Online Users Source: Source: Jupiter/The NPD Group, Inc. DRM Survey (12/02), n = 892 (US only) Question: In which of the following ways do you, yourself use music electronically? (Select all that apply)

26. 26 © 2003 Jupiter Research a division of Jupitermedia Corporation …And Are Willing to Try Numerous Ways to Gain Music Percentage of Online Users Source: Source: Jupiter/The NPD Group, Inc. DRM Survey (12/02), n = 892 (US only) Question: In which of the following ways do you, yourself use music electronically? (Select all that apply)

27. 27 © 2003 Jupiter Research a division of Jupitermedia Corporation But Online Music Spending is Low Percentage of Online Users Source: Source: Jupiter/The NPD Group, Inc. DRM Survey (12/02), n = 892 (US only) Question: How much have you, yourself spent (purchased or rented) for music online during the past 3 months? (Note: this includes all digital music downloaded, streamed, or purchased at an online store) (Select one)

28. 28 © 2003 Jupiter Research a division of Jupitermedia Corporation As Is Offline Music Spending for 18-24 Year Olds Percentage of Online Users Source: Source: Jupiter/The NPD Group, Inc. DRM Survey (12/02), n = 892 (US only) Question: How much have you, yourself spent (purchased or rented) for music offline during the past 3 months (in physical stores, etc)? (Select one)

29. 29 © 2003 Jupiter Research a division of Jupitermedia Corporation Copied to multiple devices Album on a CD Album downloaded to your PC Single Song downloaded to your PC You Own it Rented for 30 days Rented for 7 days Copied to your PC hard drive Copied to a Disc Copied to a portable device Cannot be copied $17.99 $12.99 $9.99 $1.99 $0.99 Media Source Terms of Rent/Own Copy Allowance Price 16%32%29%23% Importance : Purchasing Preferences for Music – 18-24 Year Olds Source: Jupiter/The NPD Group, Inc. Custom Media Survey (12/02), n = 165 (ages 18-24, US only)

30. 30 © 2003 Jupiter Research a division of Jupitermedia Corporation Nearly one-half (47%) of file sharers have a household income of less than $35K Nearly one-half (46%) are ages 18 to 24 60% use dial-up 54% are male; 46% are female Source: Jupiter/The NPD Group, Inc. Music Survey (8/02), n = 129 (file sharers, US only) File Sharers More than half are considered Super Net vets

31. 31 © 2003 Jupiter Research a division of Jupitermedia Corporation Percentage of Online Users Question: In which of the following ways do you, yourself use music electronically? (Select all that apply) Source: Jupiter/The NPD Group, Inc. DRM Survey (12/02), n = 129 (file sharers), n = 892 (online respondents, US only) File Sharers’ Are Very Active with Electronic Music

32. 32 © 2003 Jupiter Research a division of Jupitermedia Corporation File Sharers’ Activity (cont.) Percentage of Online Users Question: In which of the following ways do you, yourself use music electronically? (Select all that apply) Source: Jupiter/The NPD Group, Inc. DRM Survey (12/02), n = 129 (file sharers), n = 892 (online respondents, US only)

33. 33 © 2003 Jupiter Research a division of Jupitermedia Corporation File Sharer’s More Often Purchase Music Online… Question: In what ways have you, yourself purchased music, either online or offline, in the last 6 months? (Select all that apply) Percentage of Online Users Source: Jupiter/The NPD Group, Inc. DRM Survey (12/02), n = 129 (file sharers), n = 892 (online respondents, US only)

34. 34 © 2003 Jupiter Research a division of Jupitermedia Corporation …As Well As Offline Percentage of Online Users Question: How much have you, yourself spent (purchased or rented) for music during the past 3 months? Source: Jupiter/The NPD Group, Inc. DRM Survey (12/02), n = 129 (file sharers)

35. 35 © 2003 Jupiter Research a division of Jupitermedia Corporation Copied to multiple devices Album on a CD Album downloaded to your PC Single Song downloaded to your PC You Own it Rented for 30 days Rented for 7 days Copied to your PC hard drive Copied to a Disc Copied to a portable device Cannot be copied $17.99 $12.99 $9.99 $1.99 $0.99 Media Source Terms of Rent/Own Copy Allowance Price 14%32% 22% Importance : Purchasing Preferences for Music – File Sharers Source: Jupiter/The NPD Group, Inc. Custom Media Survey (12/02), n = 129 (file sharers, US only)

36. 36 © 2003 Jupiter Research a division of Jupitermedia Corporation Source: Jupiter/The NPD Group, Inc. DRM Survey (12/02), n = 185 (burners/rippers, US only) Burners/Rippers 50/50 split of male, female 31% are ages 18 to 24; nearly 50% are ages 25 to 44 Two-thirds own a portable CD player and 12% own a digital audio player (MP3); 80% own a CD burner 76% use dial-up Like file sharers, nearly two-thirds have a household income <$50k. 36% make <$35k Like the total online population, one-third are Super Net Vets

37. 37 © 2003 Jupiter Research a division of Jupitermedia Corporation Burner/Rippers’ Are More Active Samplers of Online Music Percentage of Online Users Question: In which of the following ways do you, yourself use music electronically? (Select all that apply) Source: Jupiter/The NPD Group, Inc. DRM Survey (12/02), n = 185 (burners/rippers, US only), n = 892 (online respondents, US only)

38. 38 © 2003 Jupiter Research a division of Jupitermedia Corporation Burner/Rippers’ Look to Port Music to Mobile Devices Percentage of Online Users Question: In which of the following ways do you, yourself use music electronically? (Select all that apply) Source: Jupiter/The NPD Group, Inc. DRM Survey (12/02), n = 185 (burners/rippers, US only), n = 892 (online respondents, US only)

39. 39 © 2003 Jupiter Research a division of Jupitermedia Corporation More Burner/Ripper’s Will Purchase Music Online Question: In what ways have you, yourself purchased music, either online or offline, in the last 6 months? (Select all that apply) Percentage of Online Users Source: Jupiter/The NPD Group, Inc. DRM Survey (12/02), n = 185 (burners/rippers, US only), n = 892 (online respondents, US only)

40. 40 © 2003 Jupiter Research a division of Jupitermedia Corporation Burner/Rippers Spend Money for Music as Well Percentage of Online Users Question: How much have you, yourself spent (purchased or rented) for music during the past 3 months? Source: Jupiter/The NPD Group, Inc. DRM Survey (12/02), n = 185 (burners/rippers, US only)

41. 41 © 2003 Jupiter Research a division of Jupitermedia Corporation Copied to multiple devices Album on a CD Album downloaded to your PC Single Song downloaded to your PC You Own it Rented for 30 days Rented for 7 days Copied to your PC hard drive Copied to a Disc Copied to a portable device Cannot be copied $17.99 $12.99 $9.99 $1.99 $0.99 Media Source Terms of Rent/Own Copy Allowance Price 15%32%29%23% Importance : Purchasing Preferences for Music – CD Rippers/Burners Source: Jupiter/The NPD Group, Inc. Custom Media Survey (12/02), n = 185 (rippers/burners, US only)

42. 42 © 2003 Jupiter Research a division of Jupitermedia Corporation Source: Jupiter/The NPD Group, Inc. DRM Survey (12/02), n = 205 (samplers, US only) Samplers 50/50 split of male, female 23% are ages 18 to 24 and also 35-44; 28% are ages 25 to 34 62% own a portable CD player; 12% own a digital audio player (MP3); 58% own a CD burner 72% use dial-up One third have household income <$35 35% are Super Net Vets

43. 43 © 2003 Jupiter Research a division of Jupitermedia Corporation Sampler’s Are Also More Active with Music From Offline Sources Percentage of Online Users Question: In which of the following ways do you, yourself use music electronically? (Select all that apply) Source: Jupiter/The NPD Group, Inc. DRM Survey (12/02), n = 205 (samplers, US only), n = 892 (online respondents, US only)

44. 44 © 2003 Jupiter Research a division of Jupitermedia Corporation Sampler’s Activity with Electronic Music cont. Percentage of Online Users Question: In which of the following ways do you, yourself use music electronically? (Select all that apply) Source: Jupiter/The NPD Group, Inc. DRM Survey (12/02), n = 205 (samplers, US only), n = 892 (online respondents, US only)

45. 45 © 2003 Jupiter Research a division of Jupitermedia Corporation Sampler’s Accessing Free Online Music, then Purchase Question: In what ways have you, yourself purchased music, either online or offline, in the last 6 months? (Select all that apply) Percentage of Online Users Source: Jupiter/The NPD Group, Inc. DRM Survey (12/02), n = 205 (samplers, US only), n = 892 (online respondents, US only)

46. 46 © 2003 Jupiter Research a division of Jupitermedia Corporation Samplers’ Music Spending Percentage of Online Users Question: How much have you, yourself spent (purchased or rented) for music during the past 3 months? Source: Jupiter/The NPD Group, Inc. DRM Survey (12/02), n = 205 (samplers, US only)

47. 47 © 2003 Jupiter Research a division of Jupitermedia Corporation Purchasing Preferences for Music – Music Samplers Copied to multiple devices Album on a CD Album downloaded to your PC Single Song downloaded to your PC You Own it Rented for 30 days Rented for 7 days Copied to your PC hard drive Copied to a Disc Copied to a portable device Cannot be copied $17.99 $12.99 $9.99 $1.99 $0.99 Media Source Terms of Rent/Own Copy Allowance Price 17%32%28%24% Importance : Source: Jupiter/The NPD Group, Inc. Custom Media Survey (12/02), n = 205 (samplers, US only)

48. 48 © 2003 Jupiter Research a division of Jupitermedia Corporation CD Burners/Rippers and Online Samplers Are More Likely To Purchase “Albums” Albums: Source: Jupiter/The NPD Group, Inc. Custom Media Survey (12/02), n = 892 (US only) ; n=185 (burn or rip CDs, US only); n = 205 (samplers, US only); n = 129 (file sharers, US only) Greater Take Rates

49. 49 © 2003 Jupiter Research a division of Jupitermedia Corporation …As Well As Single Songs Downloaded to Your PC Singles: Single Songs: Source: Jupiter/The NPD Group, Inc. Custom Media Survey (12/02), n = 892 (US only) ; n=185 (burn or rip CDs, US only); n = 205 (samplers, US only); n = 129 (file sharers, US only) Greater Take Rates

50. 50 © 2003 Jupiter Research a division of Jupitermedia Corporation All Groups Below Are Consistently Willing to Pay A Premium for Copy Allowances Source: Jupiter/The NPD Group, Inc. Custom Media Survey (12/02), n = 892 (US only) ; n=185 (burn or rip CDs, US only); n = 205 (samplers, US only); n = 129 (file sharers, US only) Greater Take Rates

51. 51 © 2003 Jupiter Research a division of Jupitermedia Corporation Price Elasticity for Copy Allowance Source: Jupiter/The NPD Group, Inc. Custom Media Survey (12/02), n = 892 (US only) ; n=185 (burn or rip CDs, US only); n = 205 (samplers, US only); n = 129 (file sharers, US only) Greater Take Rates

52. 52 © 2003 Jupiter Research a division of Jupitermedia Corporation Digital Video

53. 53 © 2003 Jupiter Research a division of Jupitermedia Corporation High Level Findings – Movies Continue to restrict copying of DVDs and other digital movie files. As the technology develops, look to introduce copy-permitted movies at premium prices. Online consumers will pay for the freedom to copy as they see fit. –47% of online consumers were willing to pay $19.99 for the freedom to copy their DVD as they see fit. Only 41% of online consumers would pay just $9.99 ($10 less) for the same DVD, if it couldn’t be copied. Developing technology to ease the playback of movies via PC will encourage a niche market. A portion of online consumers will pay for such entertainment - demand exceeds current activity. –One-quarter of consumers said they were willing to pay $9.99 for a movie to be viewed exclusively on their PC. Yet, only 1% of those surveyed have paid to view movies off the Internet on their PC. –43% will pay $9.99 to port that movie from their PC to DVD, their TV, or a portable device. Continue to pursue online users ages 18 to 24 for advanced digital (including PC-based) movie services/products. They are no more price-sensitive than most online consumers.

54. 54 © 2003 Jupiter Research a division of Jupitermedia Corporation High Level Findings – Movies Do NOT specifically target consumers who have longer (5+ years) online tenure for PC-based movie viewing. Savvy users are quicker to acknowledge the inherent limitations of today’s technology and dismiss such services. Online consumers who either rent or purchase just one DVD per month show significantly greater interest in digital video than the more casual consumer. Jupiter believes that (given the technology) online consumers will purchase movies for viewing and storage exclusively through their TV. –37% of online consumers would pay $9.99 for a movie they could store on their TV. Dropping the price of DVD rentals from $5.99 to $3.99 will only result in a 10% increase in volume of rentals. Continue to offer movie rentals with terms from 3-7 days. Longer rental agreements will not spur greater consumer demand. –33% of online consumers would pay $5.99 to rent a DVD for 7 days. Just 34% would rent the same DVD for up to 30 days.

55. 55 © 2003 Jupiter Research a division of Jupitermedia Corporation General Video Activities Percentage of Online Users Source: Jupiter/The NPD Group, Inc. DRM Survey (12/02), n = 871 (US only) Question: In the last 6 months, which of the following activities have you, yourself done offline? This does NOT include adult-oriented content. (Select all that apply)

56. 56 © 2003 Jupiter Research a division of Jupitermedia Corporation Conjoint Analysis – Assessing Movie Products Product conditions under evaluation: Media Source Terms of Rent/Own Copy AllowancePrice Movie on a DVD You own itCan be copied to your PC hard drive. $24.99 Rented for 30 days Can be copied to Disc (DVD) $19.99 Movie ("downloaded" on to your PC) Rented for 7 days Can be copied to a portable device $9.99 Can be copied to multiple home devices (PC, portable device, TV, and DVD player) $5.99 Movie (Pay-per- view on TV) Rented for a single viewing Cannot be copied $3.99

57. 57 © 2003 Jupiter Research a division of Jupitermedia Corporation Sample Conjoint Card - Movies Introduction: Movie studios are trying to improve the quality and availability of their movies, while still controlling their distribution. This survey is designed to understand how you prefer to watch movies and how much you value the ability to copy and store your movie collection. AttributesLeft ChoiceRight Choice Media Source (You pay for…) Movie (downloaded to your PC) Movie on DVD Terms of Rent/Own: Rent for 7 DaysYou Own It Copy Allowance:Cannot be copied Price:$3.99$19.99 You pay for a movie in one of two scenarios… Given the following choices, what might you do? (Select one) o Would choose the offer on the left o Would choose the offer on the right

58. 58 © 2003 Jupiter Research a division of Jupitermedia Corporation Movie on a DVD Movie (downloaded on to your PC) Movie (Pay- per-view on TV) You Own it Rented for 30 days Rented for 7 days Rent it for a single viewing Copied to a portable device Copied to PC Hard Drive Copied to a DVD Copied to multiple home devices Cannot be copied $24.99 $19.99 $9.99 $5.99 $3.99 Purchasing Preferences for Movies Media Source Terms of Rent/Own Copy Allowance Price 16%24%17%43% Importance : Source: Jupiter/The NPD Group, Inc. DRM Survey (12/02), n = 871 (US only)

59. 59 © 2003 Jupiter Research a division of Jupitermedia Corporation Take Rates for Different Movie Concepts/Prices Source: Jupiter/The NPD Group, Inc. DRM Survey (12/02), n = 871 (US only)

60. 60 © 2003 Jupiter Research a division of Jupitermedia Corporation DVD is the Preferred Format Source: Jupiter/The NPD Group, Inc. DRM Survey (12/02), n = 871 (US only)

61. 61 © 2003 Jupiter Research a division of Jupitermedia Corporation Consumer Demand for Movies at Higher Price Points Source: Jupiter/The NPD Group, Inc. DRM Survey (12/02), n = 871 (US only)

62. 62 © 2003 Jupiter Research a division of Jupitermedia Corporation 30 Day versus 7 Day Rental – Won’t Matter to Online Consumers Source: Jupiter/The NPD Group, Inc. DRM Survey (12/02), n = 871 (US only)

63. 63 © 2003 Jupiter Research a division of Jupitermedia Corporation Movie Rentals – Consumer Price Elasticity Is Relatively High Source: Jupiter/The NPD Group, Inc. DRM Survey (12/02), n = 871 (US only)

64. 64 © 2003 Jupiter Research a division of Jupitermedia Corporation Consumers Associate Premium Value with the Ability to Copy Digital Movies, Even Though Few Actually Copy DVDs… Source: Jupiter/The NPD Group, Inc. DRM Survey (12/02), n = 871 (US only)

65. 65 © 2003 Jupiter Research a division of Jupitermedia Corporation …Downloaded Movies… Source: Jupiter/The NPD Group, Inc. DRM Survey (12/02), n = 871 (US only)

66. 66 © 2003 Jupiter Research a division of Jupitermedia Corporation …Or Pay-per-View Movies Source: Jupiter/The NPD Group, Inc. DRM Survey (12/02), n = 871 (US only)

67. 67 © 2003 Jupiter Research a division of Jupitermedia Corporation Take Rates for Single Viewings of Movies Source: Jupiter/The NPD Group, Inc. DRM Survey (12/02), n = 871 (US only)

68. 68 © 2003 Jupiter Research a division of Jupitermedia Corporation Video Activities Online by Connection Speed Percentage of Online Users Source: Question: In the last 6 months, which of the following activities have you, yourself done online? This does NOT include adult-oriented content. (Select all that apply) Source: Jupiter/The NPD Group, Inc. DRM Survey (12/02), n = 871 (US only)

69. 69 © 2003 Jupiter Research a division of Jupitermedia Corporation 71% use dial-up 45% rent or purchased at least 6 DVDs in the last 6 months Source: Jupiter/The NPD Group, Inc. Music Survey (8/02), n = 153 (18-24 year olds, US only) 18 to 24 Year Olds 41% are considered Super Net vets 18-24 year olds are less concerned over the price of movies purchased via DVD, pay-per- view TV, and PC (slide 69) 8% own a DVD burner; 24% own a DVD ROM (read only); 63% own a DVD player; 15% own a digital video camera

70. 70 © 2003 Jupiter Research a division of Jupitermedia Corporation Video Activities Online (by Age) Percentage of Online Users Source: Question: In the last 6 months, which of the following activities have you, yourself done online? This does NOT include adult-oriented content. (Select all that apply) Source: Jupiter/The NPD Group, Inc. DRM Survey (12/02), n = 871 (US only)

71. 71 © 2003 Jupiter Research a division of Jupitermedia Corporation Interest in Watching Video (by Age) Question: Which of the following are you interested in doing with digital video (e.g. movies, TV shows, your own video content)? (Select all that apply) Percentage of Online Users Source: Jupiter/The NPD Group, Inc. DRM Survey (12/02), n = 871 (US only)

72. 72 © 2003 Jupiter Research a division of Jupitermedia Corporation Interest in Editing Video (by Age) Question: Which of the following are you interested in doing with digital video (e.g. movies, TV shows, your own video content)? (Select all that apply) Percentage of Online Users Source: Jupiter/The NPD Group, Inc. DRM Survey (12/02), n = 871 (US only)

73. 73 © 2003 Jupiter Research a division of Jupitermedia Corporation Interest in Sharing Video (by Age) Question: Which of the following are you interested in doing with digital video (e.g. movies, TV shows, your own video content)? (Select all that apply) Percentage of Online Users Source: Jupiter/The NPD Group, Inc. DRM Survey (12/02), n = 871 (US only)

74. 74 © 2003 Jupiter Research a division of Jupitermedia Corporation Online Video Spending (by Age) Percentage of Online Users Source: Question: How much have you, yourself spent (purchased or rented) for movies online during the past 3 months? Source: Jupiter/The NPD Group, Inc. DRM Survey (12/02), n = 871 (US only)

75. 75 © 2003 Jupiter Research a division of Jupitermedia Corporation Movie on a DVD Movie (downloaded on to your PC) Movie (Pay-per-view on TV) You Own it Rented for 30 days Rented for 7 days Rent it for a single viewing Copied to a portable device Copied to your PC Hard drive Copied to a DVD Copied to multiple devices Cannot be copied $24.99 $19.99 $9.99 $5.99 $3.99 Media Source Terms of Rent/Own Copy Allowance Price 19%26%17%37% Importance : Purchasing Preferences for Movies – 18 to 24 Year Olds Source: Jupiter/The NPD Group, Inc. DRM Survey (12/02), n = 153 (18-24 year olds, US only)

76. 76 © 2003 Jupiter Research a division of Jupitermedia Corporation 22% are ages 18-24; 27% are ages 25-34; and 21% are ages 35-44 59% are male; 41% are female 10% own a DVD burner; 43% own a digital camera; 32% own a DVD ROM drive on their PC, 64% own a DVD player Nearly 33% use a broadband connection 43% have rented or purchased at least 6 DVDs in the past 6 months 45% of SNVs have a household income of $50K or more 33% of the online population in the US Source: Jupiter/The NPD Group, Inc. DRM Survey (12/02), n = 287 (Super Net Vets), US only) Super Net Vets (5 or more years of online tenure)

77. 77 © 2003 Jupiter Research a division of Jupitermedia Corporation Online Video Activities by Online Tenure Percentage of Online Users Question: In the last 6 months, which of the following activities have you, yourself done online? This does NOT include adult-oriented content. (Select all that apply) Source: Jupiter/The NPD Group, Inc. DRM Survey (12/02), n = 287 (Super Net Vets: 5+ yrs), n = 237 (Net Vets: avg. tenure [2-5 yrs], US only)

78. 78 © 2003 Jupiter Research a division of Jupitermedia Corporation Super Net Vets (SNV) Have the Tools Percentage of Online Users Question: In the last 6 months, which of the following activities have you, yourself done online? This does NOT include adult-oriented content. (Select all that apply) Source: Jupiter/The NPD Group, Inc. DRM Survey (12/02), n = 287 (Super Net Vets: 5+ yrs), n = 237 (Net Vets: avg. tenure [2-5 yrs], US only)

79. 79 © 2003 Jupiter Research a division of Jupitermedia Corporation SNVs are Even More Active with Offline Video Percentage of Online Users Question: In the last 6 months, which of the following activities have you, yourself done online? This does NOT include adult-oriented content. (Select all that apply) DVD Consumption Source: Jupiter/The NPD Group, Inc. DRM Survey (12/02), n = 287 (Super Net Vets: 5+ yrs), n = 237 (Net Vets: avg. tenure [2-5 yrs], US only)

80. 80 © 2003 Jupiter Research a division of Jupitermedia Corporation SNVs are Videophiles, Particularly for DVD Channel for Video Playback Question: How many movies have you, yourself purchased/rented/paid to see in the last 6 months? Average Number of Purchases or Rentals (last 6 months) Source: Jupiter/The NPD Group, Inc. DRM Survey (12/02), n = 287 (Super Net Vets: 5+ yrs), n = 237 (Net Vets: avg. tenure [2-5 yrs], US only)

81. 81 © 2003 Jupiter Research a division of Jupitermedia Corporation Video Interest by Online Tenure Edit View Question: Which of the following are you interested in doing with digital video (e.g. movies, TV shows, your own video content)? (Select all that apply) Percentage of Online Users Source: Jupiter/The NPD Group, Inc. DRM Survey (12/02), n = 287 (Super Net Vets: 5+ yrs), n = 237 (Net Vets: avg. tenure [2-5 yrs], US only)

82. 82 © 2003 Jupiter Research a division of Jupitermedia Corporation Video Interest by Online Tenure (cont.) Question: Which of the following are you interested in doing with digital video (e.g. movies, TV shows, your own video content)? (Select all that apply) Percentage of Online Users Share * Potential in Home Networking * * Source: Jupiter/The NPD Group, Inc. DRM Survey (12/02), n = 287 (Super Net Vets: 5+ yrs), n = 237 (Net Vets: avg. tenure [2-5 yrs], US only)

83. 83 © 2003 Jupiter Research a division of Jupitermedia Corporation SNVs Have Greater Video Spend Percentage of Online Users Question: How much have you, yourself spent (purchased or rented) for movies during the past 3 months? Offline Online Source: Jupiter/The NPD Group, Inc. DRM Survey (12/02), n = 287 (Super Net Vets: 5+ yrs), n = 237 (Net Vets: avg. tenure [2-5 yrs], US only)

84. 84 © 2003 Jupiter Research a division of Jupitermedia Corporation Movie on a DVD Movie (downloaded on to your PC) Movie (Pay-per- View on TV) You Own it Rented for 30 days Rented for 7 days Rent it for a single viewing Copied to a portable device Copied to your PC Hard drive Copied to a DVD Copied to multiple Home devices Cannot be copied $24.99 $19.99 $9.99 $5.99 $3.99 Purchasing Preferences for Video – Super Net Vets Media Source Terms of Rent/Own Copy Allowance Price 18%23%17%42% Importance : Source: Jupiter/The NPD Group, Inc. DRM Survey (12/02), n = 287 (Super Net Vets: 5+ yrs; US only)

85. 85 © 2003 Jupiter Research a division of Jupitermedia Corporation 25% are ages 18-24; 28% are ages 25-34; and 26% are ages 35-44 49% are male; 51% are female 11% own a DVD burner; 34% own a digital camera; 34% own a DVD ROM drive on their PC 30% use a broadband connection 43% are Super Net Vets with 5 + years of online tenure 36% have a household income of $50K or more 32% of the online population in the US Source: Jupiter/The NPD Group, Inc. DRM Survey (12/02), n = 283 (6+ DVDs consumed in past 6 months), US only) “Consistent” DVD Users (those who purchase or rent at least 6 DVDs in past 6 months)

86. 86 © 2003 Jupiter Research a division of Jupitermedia Corporation “Consistent” DVD Users Access More Online Video Percentage of Online Users Question: In the last 6 months, which of the following activities have you, yourself done online? This does NOT include adult-oriented content. (Select all that apply) Source: Jupiter/The NPD Group, Inc. DRM Survey (12/02), n = 283 (6+ DVDs in 6 months), n = 116 (6+ VHS in 6 months); n = 871 (total online respondents, US only)

87. 87 © 2003 Jupiter Research a division of Jupitermedia Corporation “Consistent” DVD Users are More Interested in Viewing Digital Video Question: Which of the following are you interested in doing with digital video (e.g. movies, TV shows, your own video content)? (Select all that apply) Percentage of Online Users Source: Jupiter/The NPD Group, Inc. DRM Survey (12/02), n = 283 (6+ DVDs in 6 months), n = 116 (6+ VHS in 6 months); n = 871 (total online respondents, US only)

88. 88 © 2003 Jupiter Research a division of Jupitermedia Corporation “Consistent” DVD Users are More Interested in Editing Digital Video Question: Which of the following are you interested in doing with digital video (e.g. movies, TV shows, your own video content)? (Select all that apply) Percentage of Online Users Source: Jupiter/The NPD Group, Inc. DRM Survey (12/02), n = 283 (6+ DVDs in 6 months), n = 116 (6+ VHS in 6 months); n = 871 (total online respondents, US only)

89. 89 © 2003 Jupiter Research a division of Jupitermedia Corporation “Consistent” DVD Users are More Interested in Sharing Digital Video Question: Which of the following are you interested in doing with digital video (e.g. movies, TV shows, your own video content)? (Select all that apply) Percentage of Online Users Source: Jupiter/The NPD Group, Inc. DRM Survey (12/02), n = 283 (6+ DVDs in 6 months), n = 116 (6+ VHS in 6 months); n = 871 (total online respondents, US only)

90. 90 © 2003 Jupiter Research a division of Jupitermedia Corporation …And Spend More Money Online for Video Products Percentage of Online Users Question: How much have you, yourself spent (purchased or rented) for movies online during the past 3 months? Source: Jupiter/The NPD Group, Inc. DRM Survey (12/02), n = 283 (6+ DVDs in 6 months), n = 116 (6+ VHS in 6 months); n = 871 (total online respondents, US only)

91. 91 © 2003 Jupiter Research a division of Jupitermedia Corporation Purchasing Preferences for Video - Consistent DVD Users Movie on a DVD Movie (downloaded on to your PC) Movie (Pay-per-view on TV) You Own it Rented for 30 days Rented for 7 days Rent it for a single viewing Copied to a portable device Copied to your PC Hard drive Copied to a DVD Copied to multiple devices Cannot be copied $24.99 $19.99 $9.99 $5.99 $3.99 Media Source Terms of Rent/Own Copy Allowance Price 17%25%17%40% Importance : Source: Jupiter/The NPD Group, Inc. DRM Survey (12/02), n = 281 (purchase or rent 6 DVDs in past 6 months, US only)

92. 92 © 2003 Jupiter Research a division of Jupitermedia Corporation DVD Lovers and Younger (18-24) Consumers are More Likely to Buy Each movie below is bought to own and cannot be copied: Generally Higher Take Rates DVDs Still Preferred

93. 93 © 2003 Jupiter Research a division of Jupitermedia Corporation Premium Value in the Ability to Copy Movies – Consistent Across Each Segment Generally Higher Take Rates

94. 94 © 2003 Jupiter Research a division of Jupitermedia Corporation Questions?