Bounce Networks Overview

3/20/01

The Personal Digital Media Network Company

Bounce Networks Proprietary & Confidential
 Bounce Networks Business Overview

Mission
• Simplify and Empower Personal Entertainment

Strategy
• Create the Personal Entertainment Networking market
through aggressive partnerships

Tactics
• Deliver the world’s first Personal Entertainment Platform
• Partnerships with leading CE and PC companies
• Entertainment-optimized wireless technology
• Bounce Connected Entertainment Service

Bounce Networks Proprietary & Confidential

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 Home Entertainment Environment
Entertainment media are in disarray

Today Unmet Needs

Devices: Standalone
c i t y : Connected

pl i without wires
S im
Physical VHS
Storage: tapes, CDs &
Centralized, no physical
copies required
DVDs
Access: Limited range of nc e:
content & locations
ve nie All media available

Con
anywhere
New content:
Physical On demand
Purchase
Customization:
t r o l:
Con
Difficult Reusable playlists

Bounce Networks Proprietary & Confidential

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 Bounce Wireless Personal Media Network
Enabling a vision through partnerships & technology

Bounce Box
Personal Media Server

OEM Partners Entertainment

Service

$ Music, Video,
Images &
Video Games
$
Wireless
Networking
802.11x, Bluetooth
Digital Rights
Management

Bounce Receivers
Bounce Auto Receiver

Bounce Networks Proprietary & Confidential

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 Bounce Service Overview
Personal Control of All Media Types
• Music, Video, Images, Video Games

Monthly Subscription Model

• Leveled plans with premium content options
$9.99 - $49.99 / month

Entertainment Center Optimized

• Designed for presentation on TV
• Available via PC

Simple Updates and Upgrades

• Bounce Media Cartridge comes preloaded
• Cost is included in monthly plans

Bounce Networks Proprietary & Confidential

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 Target Partners

• Billboard
• HBO Content
• MTV Content
Industry •Movie Studios
Packagers •Broadcast Networks
•TV Studios

Retail
Distribution

•Circuit City Service

•Good Guys/Virgin Distribution
Megastores
•Tower Records
•DirecTV
•AOL
•Warner Cable
Technology
Partners
OEM

WPP
•AOL Time Warner
Strategic
Advertising
•Wireless
•Codec
•STB Platform
Brands

•Newscorp •Sony
•MFG. •Harman Kardon/JBL
•Gannett
•Gateway

Bounce Networks Proprietary & Confidential

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 Intellectual Property
Bulk Content Load Process
1) Unique process of bulk-loading a custom selection of content
• Provides a clever solution to the initial loading of owned content
Digital Rights Management
2) Device-centric system for managing ownership & playback
rights.
• Enables availability of content anywhere within the Bounce Network
Enabling Wireless Technology
3) “Virtual Home Backbone” of wireless technologies
• Solves Bluetooth shortcomings in a networked environment. Translation
between Bluetooth and 802.11x for real-time communication between
two physically separated personal area networks
4) Individually addressable speaker drivers over wireless transport
• Allows for high-performance, low cost networked audio
• Includes time-synchronized signal to eliminate latency

Bounce Networks Proprietary & Confidential

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 Management Experience & Partnerships

Michael Rubin Consumer Electronics

• Founder / President and CEO:

Richard Weisman
• Sr. VP Engineering / Chief
Development Officer

Gerry Campbell
• Founder / VP Marketing

Craig Hagopian
• VP and GM Consumer
Services

Steve Suttles
• VP Platform Engineering

Reed Meseck
• Chief Architect
Consumer Services Consumer PC

Bounce Networks Proprietary & Confidential

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 Board of Directors
Rod Schrock, Board Member
Cox Communications Board Member, Panasas President and CEO,
AltaVista CEO, Compaq Computer Corporation Sr. VP and Group General
Manager Consumer Group
Gil Wachsman, Board Member
Formerly Musicland Group Vice Chairman (Acquired by Best Buy), National
Association of Recording Merchandisers (NARM) Board Member. Previously
Senior Vice President of Target and Kmart.

Bounce Networks Proprietary & Confidential

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 Competitive Offerings

•Ad hoc wireless

connectivity
Personal •Flexible digital rights
Entertainment management
Network
•Multiple media types

LAN

Local

Product Platform Service

Bounce Networks Proprietary & Confidential

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 Positioning
Only Bounce delivers a true Personal Entertainment solution

Entertainment
based

Yet to launch

PC-based

Low High

Convenience & Control of Digital Media

Bounce Networks Proprietary & Confidential

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 Market Potential in 2005
Bounce will be a player in a completely new market with enormous growth

Video On Demand $ 25
The Myers Report, 2000

Online Music Subscriptions $ 1.5

Jupiter, Spring 2000

Worldwide Internet Device Sales $ 73

Strategy Analytics, Aug 2000

Total Opportunity: $99.5 Billion

2005 US Broadband Households: 29 Million

Jupiter, Spring 2000

Bounce Networks Proprietary & Confidential

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 Market Sizing
Multiple service lines and exploding market growth drive subscriptions and fees

$34/sub

‘02 ‘03 ‘04 ‘05

Broadband into the home 13.3 18.5 23.8 28.8

Broadband digital media consumers % 36% 38% 44% 48%

Available Bounce Market 4.8 7.4 10.5 14.0

Expected Penetration 8% 9% 8% 7%
Yearly New Bounce Subs .4 .7 .8 1.0

Cumulative Bounce Subs* .37 1.0 1.4 1.9

Revenue Per Subscriber $15 $21 $28 $33

Total Revenues (in millions) $23 $147 $372 $633

Bounce Networks Proprietary & Confidential

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 Capitalization Sheet

Group Percentage Number of shares Dollars Raised Grant Type Vesting

Founders 50.000% 10,000,000 $ 40,000.00 Stock Purchase none
Employee SOP 40.225% 8,044,900 Option Reserved
Employees 8.500% 1,700,000 Stock Purchase 3 years
Consultants 0.276% 55,100 Option upon funding
Board Members 1.000% 200,000 Option 2 years

Total 100% 20,000,000 $ 40,000.00

Bounce Networks Proprietary & Confidential

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 Use of Proceeds

Cash-in $ 7,500,000
Deliverable: Production-ready Set Top Box, Central
Research and Development $ 2,805,495
office software rev 1.0
Salary, wages, benefits 2,460,495
Prototype, test and equipment 345,000 Timing: July, 2001
Marketing $ 2,079,438
Salary, wages, benefits 539,963
Usage: Market trials, market research, launch
Advertising, promotions, research 1,539,475 support
Timing: Through November, 2001
Operations and G&A $ 1,022,652
Salary, wages, benefits 400,326
Facilities, utilities, telco 171,875
Usage: Equipment and facilities until revenue
Leased equipment 115,701
Travel and Entertainment 265,750 Timing: November, 2001
Legal 69,000

Cash Reserves $ 1,592,416

Total $ 5,907,584

Bounce Networks Proprietary & Confidential

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 Why Invest in Bounce Networks?
• Disruptive product offering and market leadership strategy…

• with a highly scalable, extensible and profitable business model…

• in a nascent market with enormous potential…

• backed by an experienced, operational team with…

• a proven track record of creating winning partnerships…

• and a passion for consumer success!

Bounce Networks Proprietary & Confidential

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Bounce Networks Proprietary & Confidential
Technology

Bounce Networks Proprietary & Confidential

 Technology Partners

Wireless
• Atheros
• Radiata/Cisco
• Intersil
Codec
• Philips
• IBM
• Sony
Set Top Platform
• Philips
• IBM
• C-Cube
Manufacturing
• Mitac
• Arima

Bounce Networks Proprietary & Confidential

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 WPAN/WLAN Intercommunication
WPAN/WLAN
Data Access Point

Local WPAN
PPP over RFCOMM
Device #1

Local WLAN
PPP/IP

WPAN/WLAN
Remote WPAN
Data Access Point
PPP over RFCOMM

Remote Devices

Bounce Networks Proprietary & Confidential

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 Bounce Cartridge Bulk Load Process
1) 2) 3) Data Data Data

Customer- Bounce-
selected selected General data
data data
User
That information is
Customer identifies transferred
the content to be electronically to a
included in the bulk central office
load of data

6) Optionally, the
process is repeated The central office
in the future with creates a customized
additional loads of mass-storage device
data

4)
5)
Media Server

Customer inserts the

mass storage device
into the media server The mass storage device is
shipped to customer

Bounce Networks Proprietary & Confidential

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 Digital Rights Management
Breakthrough Consumer Value AND Content Security

Concept
• EONSTM Technology (Edge of Network Security)
• Open model – Ownership, Rental & Subscription

Consumer Benefit
• Music & movies are available to you where you want it
• Allows for access without ANY physical media
• Open sharing of content

Studio/Label Benefit
• Stimulated lifestyle usage of music, movies, etc.
• End-to-end encryption of copyrighted content
• Audited usage

Bounce Networks Proprietary & Confidential

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 Digital Rights Management #1
Content is encrypted from the Bounce Central office until analog output

Content

Content
Global Bounce Encryption

Central Internet
Office
802.11
Encrypted

UPS/FedEX

Content Encryption

Local Bounce Encryption

Bounce Networks Proprietary & Confidential

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 EONSTM Playback Overview
The media stream is protected throughout the process of playback

Usage Log
Encrypted to
Flash

.b Physical Protection

Encrypted 802.11x Bounce

MPEG Analog Out
Stream In Radio Decryption
D/A Converter

Global &
Personal Keys

Bounce Networks Proprietary & Confidential

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 Digital Rights Management: Usage Model
EONS works just like CDs, but better!
In-home
Listen to a CD in the
Activity home, possibly in
multiple locations
Current Model CD must be carried
from player to player
EONSTM ●Music is stored
centrally & is
available throughout
the house
●If the same song is
played concurrently,
a usage charge is
incurred
Bounce Networks Proprietary & Confidential
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In Auto Sharing
Take music from the Lend a CD to a
home to the auto for friend for listening
listening
Physical CD is Physical CD is
carried to auto, handed over &
music is not owner loses ability
playable in home to play it until
until it’s returned returned
●Chosen CDs can ●CD is “checked out” of
be loaded to auto owners collection
storage ●Owner incurs usage
●If the same song is charges for use of any
played concurrently, checked out tracks
a usage charge is -or-
incurred
●Owner gives a copy, but
retains ownership
●Friend incurs usage
charges, & can choose to
purchase
 Development Timeline
11.00 12.00 1.01 2.01 3.01 4.01 5.01 6.01 7.01 8.01 9.01

Marketing Req. Testing &

& Def. Trials

System Architec-
ture Overview

System Req.
& Def.

•.b Hardware Platforms – Server / Receivers /

Remote Hardware Development
•.b ASIC – Bridge Translator
•.b ASIC – .b DRM Decryption at time of playback

•.b Content Directory, Download, & Billing

Services
•.b Service Applications Software Development
•Embedded RTOS & Device Drivers (.b
Remote Control)

Bounce Networks Proprietary & Confidential

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 January 2002 Launch: Major Milestones
Q1 2001 Q2 2001 Q3 2001 Q4 2001 2002
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan

• Corporate Filings • OEM reference design • 3 music partner • Release candidate of

v. 0.5 commitments .b / bounce service
• Platform / Service
Architecture Design • Beta release plan for .b • Beta release of .b / • In home trials begin
(w/ DRM) bounce service
• Initial IP Protection • Launch plans finalized
• .b silicon partner • Marcom agencies
• Sr. Management LOI • Bounce team @ 80
• Business Plan Final
selection selected L
• R&D team @ 40
• OEM reference design A
• Detailed engineering v. 1.0
• 1-2 music
• OEM launch partners partnerships
• Additional strategic • .b / bounce service v. U
solidified • Marcom agency OEM partners added 2 spec finalized
• $10M A-round
funding
review
• $20 - $40M B-round • Movie and Video N
• R&D team @ 25 of financing initiated Game partnerships
initiated
• Market trials • R&D team @ 45 C
• Digital Rights
Management
defined • Retail partner • 5 music partner • Gold release of H
briefings begin commitments Bounce Networks
• Alpha version of .b
• R&D team @ 30 • B-round closes • Bounce team @ 90
• Move to Irvine
facility • R&D team @ 50

Bounce Networks Proprietary & Confidential

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Market Analysis

Bounce Networks Proprietary & Confidential

 Customer Cost Scenarios
Bounce costs less…

Traditional User Bounce User

Equipment Equipment
• 100 Disc CD Changer $150 • Bounce Box $399
• 2nd CD Player $100 • Bounce Receiver $150
• Personal Video Recorder $300 • Auto Receiver $299
• 2nd VCR $150
• 10 Disc Auto CD Player $350
Total Equip Cost $1050 Total Equip Cost $848

Additional fees/yr Additional fees/yr

• PVR Subscription $120 • Basic Bounce Subscription $262
• 3 Music channel Subscriptions $ 90 • 3-genre subscription Incl
(~40 songs/week)
• Locker Fee $120
• Locker Incl

Additional Fees $330 Additional Fees $262

Total Fees $1380 Total Fees $1110

Bounce Networks Proprietary & Confidential

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 Bounce Service Offerings
Blended Base Average Revenue Per User Target: $26
Over-usage estimated at 25% of ARPU: $6.50
Total Average Revenue Per User : $32.50
Plan Plan Goal/Target Audience Pricing Includes

Promotional Plan designed to be advertised
Target: 15% subscriber base
Bounce Baseline Plan in year 1
Target: 45% of subscriber base
Enhanced
Target: 20% of subscriber base
Professional
Target: 20% of subscriber base
$ 9.99 / Mth Entry Digital Media Cartridge
Remote Locker
$20 Activation Fee Software upgrades
Only Billed Annual $119.88 Entertainment D.B.
Ala Carte Usage $0.50 Personal Top 40 Songs
$ 19.99 / Mth Promotional Plan Plus:
Digital Media Cartridge
$20 Activation Fee PVR w/ 30 hrs. of recording
Waived with Annual Commitment 3 Genre Collections
Ala Carte Usage $0.30
$ 29.99 / Mth Bounce Plan Plus:
Digital Media Cartridge
PVR w/ 30 hrs. of recording
3 Genre Music Collections
1 Genre Movie Collections
Ala Carte Usage $0.25 25 Ala Carte Music Selections
$ 49.99 / Mth Enhanced Plan Plus:
Dual Digital Media Cartridge
PVR w/ 30 hrs. of recording
2 Genre Movie Collections
5 Genre Music Collections
Ala Carte Usage $0.25 50 Ala Carte Music Selections

Bounce Networks Proprietary & Confidential

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 Market Environment
High Growth + Point Solutions – Leading Technologies = Chaos

Phenomenal growth of devices, By 2005…

• 122M broadband devices in US homes (Forrester, Nov 2000)
• 1 Billion Bluetooth devices worldwide (Cahners In-Stat, 2000)
Proliferation of “Point” entertainment solutions
• Home MP3 players/jukeboxes
• Cable/Satellite set-tops
• Internet radios
Nascent personal entertainment service market
• AOL, MSN & traditional are expected to enter the market in 2002
• MP3.com & Napster evolving, yet limited to music
• Emerging services from ZapMedia, Simple Devices & Full Audio
No clear leader in home networking technologies
• Many emerging offerings (802.11B, HomeRF, HomePNA, Bluetooth,
Ethernet, FireWire, USB)
• Competing framework standards (OSGi, UPnP)

Bounce Networks Proprietary & Confidential

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 Digital Music Opportunity
Subscriptions & single-song purchases will become common

$1,800 28% 30%

$1,600
22%
25%
$1,400
$1,200 20%
15%
$1,000 $980
15%
$800
$600 $581 10%
7%
$400 3%
$278 5%
$63 $531
$200 1% $339
$5 $189
$34 $88
$0 0%
2000 2001 2002 2003 2004 2005
Subscription (in millions)
A la Carte (in millions)
Percentage of Online Sales that Are Digital

Source: Jupiter Internet Music Model, 7/00, (US only)

Bounce Networks Proprietary & Confidential

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 Broadband Growth
Broadband access to the Internet will continue to grow through 2005

35 36% 40%

30 31% 35%
26% 30%
25
25%
20 20%
20%
14%
15 29
15%
24
10 9%
19 10%
13
5 9 5%
5
0 0%
2000 2001 2002 2003 2004 2005
US Broadband Households
Percentage of US Online Households Using Broadband

Source: Jupiter Spring ‘00, (US only)

Bounce Networks Proprietary & Confidential

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 Paid Content is in a Growth Phase
Revenue Opportunity for Paid Content Will Grow, Mostly in Subscriptions
($ in millions) (in millions)
$1,600 40

Paid Content Households

Paid Content Revenues

$1,400 35
$1,200 30
$1,000 25
$800 20
$600 18.7 15
13.7
$400 10
9.3
$200 6.1 5
2.7 3.9
$0 0
1998 1999 2000 2001 2002 2003
Subscriptions Pay-per-View
Paid Content Households

Bounce Networks Proprietary & Confidential

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Competitive Environment

Bounce Networks Proprietary & Confidential

 Competitor Grid

Bounce Networks Proprietary & Confidential

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 The Entertainment Service “Sweet Spot”
•Owned content
•On-demand content
P •Premium subscriptions
C

On-demand
E
O
R
N
S
T
O
R
N
O
A
L
L

•Locker
•Wireless in-home
•Extensible to auto Ea
d
r ke sy
,f
two N CE SI
M le
xi
Ne N IE PL bl
e
ully VE
IC
IT •No PC required
F N Y
CO •Easy to add content
•Handles all media

Bounce Networks Proprietary & Confidential

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 Competitive Features
The closest competitors lack key features

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Convenience Simple ZapMedia
Convenience Devices
Lock er n n n y y y- na na na na y y n y
Wireless in-home y n n n y n n n n n na na na y
Auto Server n MusicBank
n n nFullAudio
n n n n n n na na na y
Platform-enabling n n n n y n n n n n na na na y
Broadband Napster na y n y na ? y n n y na na na y

Simple
Subscription y Simple
y y y y n na na na na n ? n y
HiFi quality y n n y n n n y n n n y n y
Requires PC n n n n y y n y n n y y y n
Easy-load of CDs na rip n rip n rip rip rip rip n rip y n y
Video n n n y n n+ n n n n n n n y
ZapMedia
DigMedia
Control Personal AudioRamp
Subscription Manager na n n n ?
Control y na na na na FullAudio
n n n y
On-demand content y n n y n y- na na na na n y y y
Content provider/format agnostic n y n y y n Napster
na na na na y y y y
Streaming y y y y y y n n n y na na na y
Internet Radio y y y n n y n n n y na na na n
CD Juk ebox n y n y n y y y y n na na na y
Simple

Bounce Networks Proprietary & Confidential

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 ZapMedia Comparison
ZapMedia offers a multifunction point solution while Bounce offers a
platform for personal and networked digital entertainment

Bounce ZapMedia

Platform Orientation
• OEM model Yes Yes
• Platform-Orientation
Enables device proliferation Yes No
Enables service proliferation Yes No
• Proprietary enabling technology Yes No
Hardware
• Entertainment server architecture Yes No
• Wireless networking Yes No
• Additional receivers Yes No
• Auto solution Yes No
• Web browser No Yes
• CD/DVD player OEM Option Yes
Service
• Locker service/Web storage Yes No
• Content subscription & pay-per-listen/view Yes Unknown
• Multi-device playlist management Yes No
• Content Portal No Yes

Bounce Networks Proprietary & Confidential

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 Distribution Channel Strategy
Multiple channel approach is key for successful distribution

Emerging market requires flexible partnership activities

• CE Retailers are primary channel
• Carriers provide incremental
distribution opportunities

es
• Bundles with new broadband

ic
rv
deployments

Se
es

es
ic

ic

n
rv
• Monthly billing options can defray

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consumer HW costs

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Retailer Retailer Retailer
Retail Channel .b .b .b .b .b
&.b &.b &.b

Cable MSOs .b .b .b MSO .b .b .b .b

RBOCs .b .b .b .b .b .b .b RBOC

Satellite Services .b .b .b Sat. .b .b .b .b

Bounce Networks Proprietary & Confidential

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Bounce Market

Bounce Networks Proprietary & Confidential

 The Market Sweet Spot
•Owned content
•On-demand content
P •Premium subscriptions
C

On-demand
E
O
R
N
S
T
O
R
N
O
A
L
L

$70 Billion
$1.5 Billion
•Locker $25 Billion digital
non-PC device
digital music
•Wireless in-home Market
market
video market
•Extensible to auto Ea
d
r ke sy
two N CE SI
M
,f
le
xi
Ne N IE PL bl
e
ully VE
IC
IT •No PC required
F N Y
CO •Easy to add content
•Handles all media

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 Partnership Business Model
Bounce Bounce Player Bounce Service Media Purchase
Server Gross Margin $ Split
Retail: $399 Retail: $149 Retail: $150
ConsumerGM$:
Revenue Split GM$:
$120 $ 45 GM$: $ 38

Total GM$: $203

Labels Retailer

Sales: $279 Sales: $104

Revenue
GM$: $ 21 OEM
Bounce GM$: $ 56
Retailer Share: $96
Bounce
Total GM$: $173

Licensing Media
Fees: $144 Sales: $112

Total Sales: $256

Bounce Networks Proprietary & Confidential

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 Rapidly Growing Subscriber Base and Fees
Multiple service lines and exploding market growth drive subscriptions and fees
2,000,000 $34/sub

1,800,000
$28/sub
1,600,000
‘02 ‘03 ‘04 ‘05
Broadband
1,400,000 into the home
Video Services
Added 2H ‘02 13.3 18.5 23.8 28.8
$21/sub 36%
Broadband
1,200,000
digital media consumers % 36% 38% 44% 48%
1,000,000
$15/sub
53%
Available Bounce Market
800,000
4.8 7.4 10.5 14.0
Expected
600,000
Penetration 8% 9% 8% 7%
147%
Yearly
400,000
New Bounce Subs .40 .7 .8 1.0

Cumulative
200,000
Bounce Subs* .37 1 1.4 1.9
0
2001 2002 2003 2004 2005

Average annual subscription fees

Year end subscriber

base

Bounce Networks Proprietary & Confidential

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 High Growth Revenues with Climbing Margins
Scalable business model with high-margin revenue streams drives dynamic growth

$700,000,000
37% GM
35% GM
$600,000,000 32% GM
29% GM
$500,000,000

71%
$400,000,000
Video Services
Added 2H ‘02
$300,000,000

$200,000,000 153%

$100,000,000
569%
$0
2001 2002 2003 2004 2005

Gross Margin

Annual Revenue

Bounce Networks Proprietary & Confidential

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