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					                                                     PayPlay Business Plan
                                                              Confidential




              PayPlay Business Plan
                 Monetize and Promote Your Content




                       Version 1.97 Confidential




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Content

Executive Summary ............................................................................................................................................. 4

1         Product ....................................................................................................................................................... 6

    1.1        PayPlay.com – Payplay core DRM technology http://www.payplay.com/ ............................................ 6

    1.2     PayPlay distribution and marketing portals ........................................................................................... 6
      1.2.1    PayPlay.FM http://www.payplay.fm/...................................................................................................... 6
      1.2.2    PayPlay.TV http://www.payplay.tv/ ....................................................................................................... 6

    1.3        Current status ....................................................................................................................................... 7

    1.4        Objectives ............................................................................................................................................. 7

2         Background ................................................................................................................................................. 7

    2.1        Company ............................................................................................................................................... 7

    2.2        Industry ................................................................................................................................................ 7

    2.3     Strengths and Weaknesses .................................................................................................................... 9
      2.3.1     Strengths ........................................................................................................................................... 9
      2.3.2     Weaknesses ....................................................................................................................................... 9

    2.4        Challenge and Opportunity .................................................................................................................... 9

    2.5        Core Competencies and Competitive Advantage .................................................................................. 11

3       The PayPlay offering ................................................................................................................................. 12
      3.1.1   Workflows .........................................................................................................................................14

    3.2        Product Pipeline .................................................................................................................................. 15

    3.3        PayPlay Access .................................................................................................................................... 15

    3.4     PayPlay Action ..................................................................................................................................... 16
      3.4.1    Business model..................................................................................................................................17

    3.5     Long-term Opportunites ...................................................................................................................... 18
      3.5.1    PayPlay Replay – Syndication Marketplace ............................................................................................18
      3.5.2    PayPlay Enterprise Solutions – White labeling services ............................................................................18

4         Strategy .................................................................................................................................................... 19

    4.1     Targets ................................................................................................................................................ 19
      4.1.1    Content Owners .................................................................................................................................19
      4.1.2    Distribution .......................................................................................................................................20
      4.1.3    Consumers ........................................................................................................................................20
      4.1.4    Advertisers........................................................................................................................................20

    4.2        Organization ........................................................................................................................................ 20

5         Competition .............................................................................................................................................. 21

    5.1     COMPETITIVE ANALYSIS ..................................................................................................................... 22
      5.1.1   PayPlay vs. iTunes .............................................................................................................................22
      5.1.2   PayPlay vs. Google Video ....................................................................................................................22

    5.2        Portals - Audio Content ....................................................................................................................... 23

    5.3        Portals going into video content space ................................................................................................ 23

6         Finances .................................................................................................................................................... 25


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    6.1     First 18 months ................................................................................................................................... 25
      6.1.1     Financials ..........................................................................................................................................25

7         Company management.............................................................................................................................. 26

    7.1     Elliot Goykhman .................................................................................................................................. 26
      7.1.1     Skill set ............................................................................................................................................26

    7.2     Alexander Aghassipour ........................................................................................................................ 27
      7.2.1    Skill set ............................................................................................................................................27

    7.3       Henrik Werdelin................................................................................................................................... 28




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EXECUTIVE SUMMARY

                                                        “Forget squeezing millions from a few megahits at the top of the charts. The
                                                        future of entertainment is in the millions of niche markets at the shallow end of
                                                        the bitstream.”
                                                        Chris Anderson, “The Long Tail”

                                                        Google, eBay and Amazon all make most of their sales outside of the head of
                                                        the tail. “Millions *of long tail content+ niche markets” became possible due to
                                                        lower cost in digital content production, acquisition, storage and distribution,
                                                        fueled by rapidly advancing search methods, P2P networks, tagging, social
                                                        software, RSS and blogs.
New content types, distribution methods and growing long tail content market pose new challenges for the content owners:
                    monetize valuable content
                    protect investment and copyright
                    retain full control of the terms and pricing
                    determine own distribution method
                    monitor pay and cash flow
                    market and promote the content

                          PAYPLAY’S MISSION IS TO:
                           supply content owners with the best tools for selling digital content
                           provide the most flexible mechanisms for marketing and promotion
                           facilitate social network integration with MySpace, ACIDplanet, etc.
                           enable creative incentive-driven distribution via enthusiasts, fans and agents
                           become the #1 brand for medium and long tail content sales

The ability to widely distribute pay media on the Internet in a more direct, less expensive fashion is fueling a $3B+ global
marketplace. Companies like iTunes, Napster, CinemaNow and others have generated revenues and market awareness for
online digital media. But for the average business, the tools and technology required to enable pay media are too
expensive and inflexible. Numerous businesses suffered significant loss of revenues choosing poor security solutions to
protect their digital media or spending time and resources developing their own pay media solutions.
PayPlay’s Digital Rights Management System fused with payment clearinghouse capability, provide the end-to-end turnkey
service – security, billing, management and sales tools necessary to turn digital content into cash – instantly secure, market,
monetize and monitor media distribution for PCs, handheld devices, Xbox 360s, IPTVs, cell phones and other Microsoft
PlaysForSure devices.
                             1
Selected use examples :
          Offer Pay-Per-View content on websites, filesharing networks, communities and blogs
          Protect subscription website media content
          Sell paid access to live internet broadcasts or podcasts
          Create advertising revenue opportunities for free use of paid content
          Collect email addresses, polls or surveys in exchange for access to content
          Deliver monetized content via data CDs and data DVDs

PayPlay is a high volume, low-priced transaction business. The revenue stream comes from consumers or advertisers. For
Content Owners there is never an up-front fee, as PayPlay charges no setup fees or monthly expenses.
                                                                                                           2
For content owners our business model is very simple to understand – 15% of every transaction .


1
    For more examples of PayPlay use, please refer to Exhibit A
2
    25% for content hosted and promoted via PayPlay Leverage (payplay.fm), see below
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“If you don’t make money, we won’t make money”




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1       PRODUCT

1.1       PAYPLAY.COM – PAYPLAY CORE DRM TECHNOLOGY                      http://www.payplay.com/
PayPlay.com is a combined Digital Rights Management encryption service and clearinghouse, enables content owners, our
clients, to:
      Encrypt video and audio content
      Define strictly enforced rules for content use, incl. pricing
      Prepare content for safe distribution via web, P2P, email, etc.
      Accept payments with all major credit cards
      Monitor revenue and adjust pricing in real time

PayPlay licenses support all common pay-media business models, including:
     Pay-Per-View
     Rental
     On Demand
     Buy
     Subscription

PayPlay DRM services are accessible to content owners online and via a downloadable application, which is critically
important for signing large files or numerous smaller files, avoiding uploading files to the web server.

1.2       PAYPLAY DISTRIBUTION AND MARKETING PORTALS

1.2.1      PayPlay.FM       http://www.payplay.fm/
PayPlay.FM is a downloadable audio (hence FM) media directory - a search tag enabled portal, fully connected to the
largest global P2P networks. Content owners can leverage the portal and its supporting applications to sell their digital
media without incurring web design or hosting charges.

PayPlay.FM charges artists represented on the portal a fee of 25% of every transaction, compared with a lower self-service
fee of 15% of www.payplay.com. Optionally, granting PayPlay Leverage exclusive distribution rights could lower transaction
fees.

The portal will soon feature non-monetary content licensing, when either a consumer is asked to perform an action before
a license is issued, or advertiser pays for the license and the license is issue as sponsored by the given advertiser. Actions
can include, but are not limited to:

          Playing an advergame
          Signing up for a newsletter
          Filling out a survey
          Viewing an ad (various formats supported, incl. broadcast).

In cases of action-based non-monetary content licensing business model is based on traditional ad revenue share or
sponsored ad insertions, the difference being the focus on action metrics instead of traditional click metrics.


1.2.2      PayPlay.TV       http://www.payplay.tv/
PayPlay.TV, a downloadable video pay media directory, search tag enabled portal, fully connected to the largest global P2P
networks, built on the same technology as PayPlay.FM is schedule to debut 4Q 2006.

                  We work to continually increase our clients’ revenue options by building services that
                  complement our core service offering. Maximizing our clients’ revenue maximizes ours.



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1.3         CURRENT STATUS

PayPlay is owned by its principal 3 founders – Elliot Goykhman, Alexander Aghassipour and Henrik Werdelin, all
experienced entrepreneurs with proven track records. The company is presently completely self-funded, no external debt
or outside investment has been taken. All software rights and IP are owned 100% by PayPlay.

Currently PayPlay operates exclusively in the United States market, catering for local content owners, consumers and
advertisers.

            PayPlay.com live since February 2006. http://www.payplay.com/
            PayPlay.FM live since April 2006, and includes over 600,000 PayPlay protected downloadable tracks.
             http://www.payplay.fm/
            PayPlay.TV is scheduled for launch 4Q 2006, and will include several hundred independent films in cooperation
             with Film Baby, the largest independent film distributor.

Extensive marketing and PR campaign is planned for 3Q 2006.

1.4         OBJECTIVES

Short term
Build strong sales/marketing organization, solid partnerships within the content industry, secure critical mass of content to
generate publicity, name recognition and reputation. Process over 100,000 transactions per month. Prepare for first round
investment.

Long term
Become market leader for content owners looking for a full service digital content monetization platform, capture large
consumer audience, processing in excess of 5 million premium content transactions per month by mid-2008 with a sound
profit margin.

2      BACKGROUND

2.1         COMPANY

PayPlay system development started in 2004 and got established in 2005 as a Delaware Limited Liability Company by its
three founders.

The founders have an impressive track record in the new media business, all with successful startups in their portfolio. The
team has already collaborated extensively on other projects for several years.

Elliot Goykhman (EG) is a 47.5% shareholder, CEO
Alexander Aghassipour (AA) is a 37.5% shareholder, CTO
Henrik Werdelin (HW) a 15% shareholder

Please refer to section 7 for full resumes of the three founders.


2.2         INDUSTRY
Today, major label content is mainly distributed by portals such as iTunes, Yahoo and MSN. The controversial alternative to
these are the more than 130 file sharing (P2P) networks, mostly illegal, with 3.6 billion files downloaded per month
                                                                  3
(compare with 1 billion tracks bought from iTunes over 3 years ). But a host of other distribution points outside of the
established industry are available:




3
    Apple
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       48% have used sources other than peer-to-peer networks or traditional paid music/video services to download
        files. Beyond MP3 players, email and instant messaging, alternative sources include music and movie websites,
        blogs and online review sites

Compare this with the fact that the percentage of downloaders who have tried paid services has grown from 24% in 2004 to
43% in 2005. Online paid content capped $1.8B US revenue in 2004 per OPA.

The established portals retail mostly music. Contrast this with the file format mix on four major P2P networks:

       Video: 62%
       Audio: 11%
       Other: 27%

90 million TV shows is downloaded every month on Kazaa alone.

(sources: copyrightassembly, YANKEE Group, CacheLogic and itfacts.biz)

Thus, “heavy” content is on the rise fuelled by broadband and maturing consumer media players. As an example of MS
DRM based devices, take a look at the forecast for Windows Media Center Edition (WMCE). July 2005, WMCE shipments
accounted for more than 40% of all desktop shipments in retail (US).




(Source: Current Analysis)

Other examples of Microsoft Media DRM enabled devices proliferating are Xbox 360 and portable players, including mobile
phones (smartphones).

Niche/long tail content owners
Bypassing major label content, long tail dynamics dictate an emerging market of professional rights owners of medium to
long tail type content – our target:

       Independent labels
       Production companies
       Private creative producers
       Novelty/viral marketing
       Event organizers
       Niche communities

Technology enablers & distribution structure
Dominated by the traditional music/video value chain paradigm, though exclusively online, technology enablers such as
iTunes, Yahoo and MSN still occupy the same position as traditional entertainment retailers.


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Google has recently moved into the emerging long tail content space with Google Video, but enforces use of Google as a
fixed distribution channel with no branding options, and few business model options.


2.3       STRENGTHS AND WEAKNESSES

2.3.1      Strengths
PayPlay DRM is based on Windows Media Digital Rights Management system, a proven platform to protect and securely
deliver content for playback on computers, portable devices, and network devices. The same technology is the foundation
of Yahoo! Music, Napster, URGE, Wal-Mart, CinemaNow and MusicMatch.

To provide consumers with even greater access to protected audio and video PayPlay DRM supports a wide range of
business models, including, but not limited to:
     Direct License Acquisition
     Indirect License Acquisition
     Subscription Services
     Purchase and Download Single Tracks
     Rental Services
     Video-on-Demand and Pay-Per-View


2.3.2      Weaknesses
Protected Windows Audio and Windows Video formats are not compatible with MacOS and UNIX operating systems.

iTunes software and iPod hardware do not support protected Windows Media files. Currently Apple is not licensing FairPlay
to other companies, but pending recent legal proceedings, PayPlay’s technology and staff are well positioned to review
FairPlay and integrate it into PayPlay’s core service, should FairPlay become available for licensing and contain the features
necessary to provide the functionality and protection customers have come to expect from PayPlay.

2.4       CHALLENGE AND OPPORTUNITY

Several trends can be observed in the content market space:

          Users are moving to post filtering services (blogs, RSS, social networks, tagging, P2P) instead of pre-filtering
           (traditional content aggregators). Increased usage of Search/Find/Obtain (SFO) – fuelled in no less part by Google’s
           “To organize all the world’s information and make it universally accessible and useful” – further empowers this
           shift from the monolithic portals.
          Increased proliferation of next generation content (incl. user generated content), gaining traction in both usage
           and users. The Long Tail is growing longer by each day.
          Increased usage of premium online content
                o Short-Form video – YouTube, JibJab, AtomFilms, news items, sporting events, TV-like sitcoms and other
                     programming.
                o Long-Form video – MovieLink and other distributors, made-for-Internet movies.
                o Very low-priced downloadable digital content (including the likes of ring tones and iTunes), assisted by
                     easy-to-use payment systems (from the likes of mobile operators and PayPal), is generating billions in
                     revenue.
          The new content types add inventory opportunities for advertisers, and the market is looking for business models
           and infrastructure for pairing and value chaining these content types with ads.




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                 L ong Tail of C ontent C hanges C ompetitive
                 Business Model

           C onsumers                      S uperenablers                    P roviders

                                           Infrastructure :         Owners of premium copyrighted
                                           Bandwidth, storage,      content - movies, music, TV
                         C onsumers        content mgmt,            programs, radio shows
                        subscribe to       security/DR M
                             content
                        Viral sharing
                       and discovery      Business support :
                           of content     Transaction support,      The long-tail theory suggests
                                          auditing, billing and     that the power of many smaller
                         C onsumers       collection, customer      content providers can outweight
                              access      service, marketing,       larger incumbent providers
                             content      ad insertion
                          supported
                              by ads
                                                                   First movers
                                            Interface :
                                            S earch, discovery,    Emerging content enterpreneurs -
                        P2 P sharing                               podcasts, Vblogs, new interactive
                             services       sharing, P2 P
                                            enablement             shopping content


Figure 1. Gartner "The Second Internet Revolution Begins", November 2005

Thus, the traditional market dynamics are being challenged and will undergo paradigmatic changes within the next 5 years.
In a market that is still early in evolution and structurally immature, Content Owners will need a platform that:

       Protects and monetizes content without being tied to a specific portal or distribution channel, enabling true super
        distribution and synchronization with SFO usage patterns.
       Ensures control of content, even after distribution “in the wild”.
       Offers sophisticated branding options at transaction.
       Provides timely and easily understood business models, e.g. pay-per-use, rentals, subscriptions or ad/action
        inventory. And the possibility of switching between models on the fly for already distributed content.
       Provides robust micropayment options and reporting.
       Is DRM protection scheme compatible with the widest use of media players available, incl. portable devices.
       Is cost-effective.

This is the PayPlay proposition. We cover the full DRM value chain, making it quick and easy to protect and monetize
inventory by

       Massively lowering the barrier of entry for use of industry strength DRM technology (”just like the big players”).
       Removing any upfront investment, always being transaction based.
       Offering real-time earnings reports and control of license policies, enabling true dynamic pricing.
       Providing easy subscription model implementation, supporting the trend for content merchants to move to
        services instead of products. Digital content is not a product a consumer owns, but a service that the consumer
        leases.
       Freeing value from the massive volume of content sitting stagnant – cost-effective.

With PayPlay, Content Owners distribute content freely while still retaining full control. Compared to media service
providers – e.g. white labeling services - our value/service proposition is:

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          Low 15% commission including credit card processing. No fixed minimum transaction fee, facilitating
           micropayments.
          Freedom of choice for distribution, increasing consumer “touch points”. Container is the media file, not the player
           or portal, enabling a wide range of distribution points and syndication possibilities. The media player is not tied to
           the portal.
          Brand enforcement at the transaction, not on the media player or necessarily at the download point
          No additional downloads for the consumer
          Permitting consumers to send copy-protected digital media files to their friends, ensuring control in a super
           distribution environment
          Outlet via the brandable PayPlay Access media portal (free of charge), or via Content Owner’s own distribution
           points – or both. The PayPlay online portal also offers optional seeding to P2P networks. Granting the PayPlay
           portal exclusive distribution rights, lowers the transaction even more
          PayPlay will offer auxiliary services such as action licenses and syndication options, boosting revenue opportunities
           even further


2.5       CORE COMPETENCIES AND COMPETITIVE ADVANTAGE
The combination of video/audio content protection, choice of distribution, dynamic business modeling and action licenses,
carves a unique niche in the market.

We believe that the time is right for our service offering, with an early-mover advantage in this market. Entry barrier is
relatively low – get in and establish a platform, while growing in tandem with the market.




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3   THE PAYPLAY OFFERING




Figure 2. PayPlay Value Chain.

Open for Business
PayPlay licenses support all common pay-media business models, including Pay-Per-View/Rental, Buy (On demand) and
Subscription.

       Pay-Per-View/Rental
            – Content is available through a single payment (e.g. $5.95) for a limited duration (e.g. 24 hours or 1
                 viewing).
       Buy (On demand)
            – Content can be purchased for ownership by the consumer, i.e. without time or count restriction on
                 viewing of the purchased content. Content can be played by a variety of devices.
       Subscription
            – Consumers have access to all related content without purchasing additional licenses. When the time limit
                 is up, the consumer cannot view the content unless a new subscription license is purchased, thus
                 extending the subscription period.




Attractive Revenue Share Model
Sign-up is free – PayPlay’s business model is revenue sharing, with a 15% transaction fee.

Profitable Micropayments
Negotiated merchant account deal allows PayPlay to handle transactions with no minimum fee, profitably offering
micropayments.

Broad Support
PayPlay leverages industry standard Microsoft Windows Media™ DRM technology, reaching the largest install base,
                                                             ™
spanning Microsoft Media Player, Winamp, and all PlaysForSure devices. Online stores such as URGE, Napster, Yahoo!,
Wal-Mart, CinemaNow and MusicMatch have all licensed Microsoft’s DRM technology.




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Microsoft is a leader in the development of next-gen DRM solutions, forming the Next-Generation Secure Computing Base
(NGSCB) group. Our architecture makes it very easy to plug-in future DRM technologies, making sure we always offer the
technology with the highest penetration and relevancy.

Copy-proof and share-proof. No Pay, No Play.
The first time a consumer attempts to play a PayPlay protected file, a license acquisition window appears, collecting
payment based on the owner-defined price and license rules.




Once a file is encrypted, it stays protected. Content remains secure copied to another device, downloaded or even
distributed through a file sharing system.

We want to sell it – make it easy!
You just heard you missed one of the greatest golf shots in the history of the game. You want see it and you are happy to a)
pay to watch it or b) view an ad in front of the footage. You just want to watch it…

                                        C ontent / R ights Owners




   User searches for content                 S earch E ngines                    User gets content




                       C ontent owners receive payments via payment mechanism or ad
                          Payment Mechanism              Advertisements S uch as




Concept example: Morgan Stanley, Oct 2005



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3.1     WORKFLOWS

PayPlay operates in two modes – Content Owner mode and Consumer mode.

The Content Owner interacts with the service either online or via a downloadable packager client, handling the content
encryption and license usage term profiles:


3.1.1    Content Owner Process




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3.1.2    Consumer process
The consumer interacts with PayPlay via the Content Owner branded payment screen directly in the player application:




Each file has a Unique License, or multiple files can share a license (applicable for e.g. music albums or subscription models)


3.2     PRODUCT PIPELINE

Our platform is a fully scalable Service Oriented Architecture (SOA) and can serve as basis for a wide range of product
enhancements and ventures. We will be focusing on three services within the next 18 months – The core service, PayPlay
Action and PayPlay Access.


3.3     PAYPLAY ACCESS




Figure 3. PayPlay Access value chain.

PayPlay Access is a downloadable media directory - a search tag enabled portal, fully connected to the largest global P2P
networks.

The portal grants Content Owners without existing distribution channels the opportunity to instantly establish a turn-key
audio/video storefront, without incurring additional web design or hosting charges.

Content Owners with existing distribution points can take advantage of the portal as part of their overall distribution mix.

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Granting PayPlay Access exclusive distribution rights lower owner’s transaction fee even further. Branded sub portal
services are available for an additional fee.

PayPlay Access is scheduled for launch April 2006, and will include over 500,000 PayPlay protected downloadable tracks
from over 70,000 independent musicians, featuring:
     Superior sound quality 192kbps
     Windows Media DRM-protected content
     Market lowest per-track price of 79 cents
        Due to very competitive credit card processing setup and strategically positioned collocated servers (for low
        bandwidth expenses)

  Washington Post, February 2005 – “Downloading: The Next Generation”

  Contrary to what some online music executives believed at the outset of the pay-to-download
  business, the depth of the catalog has a direct impact on business. In a 2003 interview,
  RealNetworks' Richard Wolpert questioned the need for a digital service to have millions of tracks in
  its catalog, saying, "Eighty to 90 percent of the songs people download [on free services] are the
  same couple hundred songs."

  After nearly two years of watching his own customers, Wolpert jettisoned that supposition. "Catalog
  does matter," Wolpert said, noting that the company's customers download 90 percent of
  RealNetworks' million-song catalog every month. That monthly figure remained steady even as the
  company doubled its catalog.

  "In digital there is a 'long tail' of tracks that will sell," Sony's Thomas Hesse said. "There is a great
  opportunity here to go even deeper in the catalog. People will actually find this stuff." Added EMI's
  Ted Cohen, "The whole promise of this unlimited digital shelf is playing itself out."




PayPlay Access provides community services such as
     Read and post reviews
     Rate tracks and albums
     View charts
     View user-generated lists similar albums and moods of albums
     Receive special offers and discounts

3.4    PAYPLAY ACTION
Online advertising audio/video inventory remains in its early stages. Online advertising is like early TV and cable — viewers
are out of sync with revenue (ad dollars).

PayPlay Action seeks to monetize what has up to now been not monetizable, i.e. the free downloading of songs and music
videos. Broadband penetration has passed 50% in the USA and advertisers are migrating to the internet to take advantage
of rich media opportunities which are being created for the first time - as evidenced by the surge in advertising revenue,
which is up 26% this year alone, and is expected to reach $12.0 billion plus in 2005, and over $15.0 billion in 2006.

PayPlay Action is a unique service in the interactive audio/video content space, pairing tagged content with relevant action
based advertising – thus enabling the industry to reconnect with their lost audience via rich media.

Contrasted to PayPlay purchase licenses, a PayPlay Action license requires the consumer to perform an action before a
license is granted. When the user attempts to playback protected audio/video, a pop-up window (the license acquisition
window) contains the required action to be performed, e.g.:

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       Sign up for a newsletter
       Do a survey
       Enter a promotional Flash game
       Watch a video ad. Broadcast format, streamed




Figure 4. PayPlay Action value chain

The action is located independently of the PayPlay Action service.
Upon completion of the action, the license is issued silently to the user, enabling immediate playback. Usage terms are
defined as with purchase licenses – subscription, action-per-view, rental etc.

Content Owners can easily convert existing purchase licenses to action license - and vice versa for already distributed
content.

PayPlay Action provides industry standard metrics statistics for advertisers, i.e. impressions/actions completed/conversions.
For Content Owners, the standard PayPlay stats are available, including all revenue data in real-time.

PayPlay Action will match up advertisers and content in a context sensitive matter: Content Owner tags the content and the
PayPlay Action engine matches advertiser actions accordingly.

3.4.1   Business model

       Advertisers: place your actions on our participant content
       Content Owners: monetize your content with our advertisers

This scenario is identical to the traditional banner model: advertiser/agency – network – publisher, with PayPlay being the
network, and the Content Owner the publisher. Advertiser and Content Owner can be identical. PayPlay ad transactions are
not click based but action based (ppa instead of ppc, as utilized by e.g. Google AdSense), ensuring a higher quality of
response.

Action types:

       Non-interactive
       Interactive, but no personal information required
       Personal information required

Inventory is price differentiated according to Action type and length, with 50/50 revenue split between PayPlay and the
Content Owner.

As an example, surveys are typically worth $2-$10.

Online publishers association key findings 2005 – video content
     Most videos are viewed in their entirety
     Ads are noticed and acted upon
     Videos tend to be found through random surfing
     Viewers would like to watch more if sites more effectively exposed their video content and added variety

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3.5       LONG-TERM OPPORTUNITES

3.5.1      PayPlay Syndication Marketplace
Distributors looking for content can sign-up and syndicate PayPlay enabled audio/video, splitting the revenue with the
Content Owner. Thus, PayPlay pairs Content Owner and publishers/distributors while taking care of the full revenue chain,
including consumer transactions. Simply lift our content and place it in your distribution stream - instant replay!

This service is currently outside the 18-24-month operational scope.

3.5.2      PayPlay Enterprise Solutions – White labeling services
Our initial market research showed that there is a big demand for large content owners to use and exhibit PayPlay service
as their own. White labeling services and consulting and integration services are the only non-product based revenue
option in the plan, and capitalizes on the accumulated DRM and licensing expertise in the company.

          DRM related projects sales and consulting
          Skinned hosted solutions
          Enterprise, turn-key, in-house for media corporations/publishers
               – Multiple editor types – e.g. manager/packager
               – Integrates with media asset management systems/CMS/Portals, encoding applications, payment systems
                    etc




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4       STRATEGY

Three groups need to be targeted and activated for the service to succeed - 1) Content Owners to use the service, 2)
distribution channels to be in place and 3) consumers to be willing to pay for premium content. PayPlay Action additionally
targets advertisers.


4.1       TARGETS

4.1.1      Content Owners
Examples of content providers targeted by PayPlay

          Production companies
                – Cleared back-catalogue of content
                – New shows where the production company keeps the rights for online distribution
                – Distance learning
          Private creative producers
                – Niche bands/movie makers
                – Audio/video Bloggers (podcasts)
                – Other user generated content
          Novelty/viral
                – Current events
                – Sports
          Event organizers (incl. live webcasts)
                – Conferences
                – Lectors
                – Parties
          Niche communities
                – School plays
                – Interest groups

We will reach our direct clients by:

          Phase 1
               o     Excite potential partners and users of the system
               o     Get showcase launch partners
          Phase 2
               o     Launch PR campaign towards opinion makers
               o     Bloggers
               o     Podcast and Vblog community
               o     Specialists
          Phase 3
               o     Industry press
               o     Front cover disk stories (e.g Future publishing)
               o     Editorial placements
               o     Articles and press about the service (angle podcast/long tail)
          Phase 4
               o     Key partners identification
               o     Video editing companies
               o     Vblog and podcast sites
               o     ISPs/ASPs



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4.1.2      Distribution
As mentioned previously, a central feature of PayPlay is choice of distribution. We do not lock the Content Owners to any
one distribution channel. Super distribution opens up many new and innovative (viral) distribution platforms, including:

          Peer-to-peer (P2P) networks and clients
                o Examples: BitTorrent, Shareaza, Morpheus, RazorPop, eDonkey, Kazaa, eMule, Gnutella, LimeWire.
          Mail
          Instant Messengers
                o Examples: ICQ, MSN, AIM, Google Talk, Skype
          User web sites, ftp sites, including blogs, review/rating aggregators and social applications.
          CD/DVD – e.g. a $2 movie on the cover of a magazine.

PayPlay offers a channel presence with our PayPlay Access service, providing a download portal and automated P2P
seeding. Additionally we will seek partnerships with niche portals and P2P/Bittorent seeds.

4.1.3      Consumers
Ideally, consumers are not aware of using PayPlay. Their touch points are the various distribution points, not a single
branded portal. We do not market PayPlay protected content directly, but take advantage of the emerging SFO usage
patterns, as described in the summary.

4.1.4      Advertisers
PayPlay Action provides advertisers with a unique opportunity to tie listening to a popular song or viewing exclusive video
to performing an action, specified by the advertiser, such as filling out a questionnaire, signing up for a newsletter or simply
watching an ad. This new captive audience opens new possibilities never before seen in advertising.

4.2       ORGANIZATION
PayPlay is a sales/marketing driven organization, and staffing will reflect this. PayPlay focuses currently on establishing a
strong sales department, with account representatives with experience in one or more areas of media, TV, film, music, and
advertising sales.

Staffing
          Sales
          Partners
          Marketing/branding
          Product management
          Technical support
          Sales support

Legal
          PayPlay’s legal advice, compliance, agreement and contract drafting is handled by Reed Smith




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5   COMPETITION

                  Client focus   100% online    Pricing          Portal/   Ad            Accepting
                                 setup                           store     /action       credit cards
                                                                                         (vs. prepayment or
                                                                                         token accounts)
                                                        1)
ActiveDRM         Small          Yes            Fixed            Yes       None          No
           2)
Brightcove        Large/         No, project    N/A              N/A       N/A           Yes
                  Label/TV
                                                        1)
BuyDRM            Medium         No, project    Fixed            No        None          Yes
                                                200$/mo
                                                           1)
DRMNetworks       Medium         No, project    Fixed            No        None          Yes
                                                        3)
                                                299$/mo
Entriq            Medium/        No, project    N/A              No        None          Yes
                  Large
                                                        1)
EZDRM             Small          No             Fixed            No        None          No
Google            Broad range    Yes            Per              Yes       None          Yes
                                                            3)
                                                transaction
                                                      1)
Instant DRM       Small          Yes            Fixed            No        None          No
MediaKey          Medium/        No, project    N/A              No        Promotion     Yes
                  Large
                                                        1)
Vidlock           Small/         Yes            Fixed            No        Ad            No
                  hobby

1) Fixed monthly fee + one-time setup + per-transaction charge
         Fixed monthly fees range from $19.95 for 5,000 licenses to 99$ for 100,000 licenses
         Per-transaction charge: 1.9% - 2.9% + $0.30 USD per transaction for credit card/PayPal
2) Brightcove has generated a lot of hype in the industry, but has not yet debuted. Expect the company to present an IPTV
based ad inventory platform.
3) Promotion available - $99 / month for the first 3 months


                  Client focus   100% online    Pricing          Portal/   Ad            Accepting
                                 setup                           store     /action       credit cards
                                                                                         (vs. prepayment or
                                                                                         token accounts)
PayPlay           Broad range          Yes         Low per         Yes        Yes              Yes
                                                 transaction               Ads, Action




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5.1         COMPETITIVE ANALYSIS

There is no market leader and no direct competitor has a visible brand in the field.
Competitors with a small/medium client focus (long tail) appear amateurish and a few even have broken online demos and
very old press releases.

Compared to our direct competitors, our USP’s are:

            Always transaction based fees, 15% all inclusive
            No upfront investment
            Micropayment friendly
            Online setup, no project fees incurred, but still flexible in regards to branding and business models available

Google Video and Apple’s iTunes have some functionality that overlaps with that of PayPlay, and though neither Google,
nor Apple represents direct competition to PayPlay, the following sections highlight some competitive advantages of
PayPlay.

5.1.1        PayPlay vs. iTunes

                                             Apple iTunes                   PayPlay
Solution                                     Spending time and money        Long tail
                                             securing top performers and
                                             music labels
User-generated content                       No                             Yes
Supported devices                            1 (iPod)                       100+ (PlaysForSure™)
Supported software                           iTunes                         Windows Media Player,
                                                                            Winamp, Real Player,
                                                                            Musicmatch Jukebox
Distribution channels                        iTunes                         PayPlay Access, Web, Portals,
                                                                            blogs, P2P, CDs, DVDs
P2P Support                                  No                             Yes
Music quality                                128kbps                        192kbps
Cost for Song                                $0.99                          $0.77
Cost for Album                               $9.99                          $7.77

5.1.2        PayPlay vs. Google Video

                                             Google Video                   PayPlay
Solution                                     Long tail                      Long tail
User-generated content                       Yes                            Yes
                                                  4
Supported devices                            None                           100+ (PlaysForSure™)
Supported software                           Google Video                   Windows Media Player, Winamp
Distribution channels                        Google Video                   PayPlay Access, Web, Portals,
                                                                            blogs, P2P, CDs, DVDs
P2P Support                                  No                             Yes
                                                 5
Security                                     Low                            Industry grade
Video quality                                Low bitrate                    Any (up to DVD quality)
Transaction fee                              30%                            15%




4
    Google Video supports Video iPod and Sony PSP only for free content
5
    Can be bypassed just by sharing username/password combination
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5.2     PORTALS - AUDIO CONTENT


                                           Apple iTunes           Napster              Rhapsody          Yahoo! Music
Est. Online Music Market Share
Pay-per-song market                            85%+                    ~1-2%                 ~5%               NM
Online subscription market                      NM                     ~10%                 ~50%               NM
Business model                             Pay-per-Song           Subscription/        Subscription/     Subscription/
                                                                  Per Song             Per Song          Per Song
Cost for Song / Album                        $0.99/$9.99           $0.99/$6.95+         $0.89/$8.99        $0.79/NM
Cost for Subscription (monthly)                   NM               $0.99/$6.95+         $0.89/$8.99           $6.99
Number of Songs Available                     1.5 million            1 million            1 million         1 million
Number of Songs Downloaded                   400,000,000
Number of Subscribers                                               400,000+             1,000,000
File Technology                            Protected AAC             WMA                MP3, WMA,            WMA
                                                                                       unprotected AAC
Number of compatible Devices                   iPod only               75                    100              13
Inception of Service                              2003                2000                  2001             2005
2004 Revenue                                     $220M               $46.7M               $266.7M             NM
2004 EPS                                     break even /            ($1.43)               ($0.14)            NM
                                               slight loss
Stated Business Goal                          Break Even              Profit               Profit            Profit
Source: Morgan Stanley “Internet Advertising Trends”, July 2005




5.3     PORTALS GOING INTO VIDEO CONTENT SPACE


                      Apple                 AOL                   Google               MSN               Yahoo!
Browsers              None                  Firefox, IE or        Firefox or IE        IE                Firefox or IE
supported                                   Safari
Media Players         iTunes,               Windows               Google       Video   Windows           iTunes,
Supported             Quicktime             Media Player          Player               Media Player      Windows
                                                                                                         Media Player
Platform              Mac, Win              Win only              Win only             Mac, Win          Mac, Win
DRM                   Apple FairPlay        MS DRM                Google DRM           MS DRM            MS DRM

Three different DRM technologies makes difficult to actually have content play on every single device – a trend that is even
more outspoken for mobile devices. Portals want to lock in users, giving compatibility issues. Apple is using its iPod
dominance to try to gain power in the living room; Microsoft is using its dominance in the living room to get traction in the
non-PC world. Note that none of the portals are offering video downloads as yet.

Last but not least is the amount of user-content. Google and Yahoo! are playing with the long tail, hoping that user-
generated content will help them fill some of the pipeline.




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Pricing schemes are as follows:

                  Apple              AOL                Google             MSN                Yahoo!
Browsers          No                 Yes                Yes                Yes                Yes
supported
Media Players     $1.99 per show     Yes, as part of    Yes, variable      Yes,               Yes,
Supported         for       video    AOL                (based on what     $19.95/month       $6.99/month
                  downloads          subscription       provider wants     subscription       subscription
                                                        to charge)                            music videos

In this space, two different business models collide: on one side, companies are looking to offer advertising supported
content and charge a premium for some of the content. The business model on the premium content is also divergent from
player to player: Apple is looking at a fixed per unit price, while AOL and Microsoft are looking at an all you can eat price for
a larger fee. Yahoo! is looking primarily to the advertising supported model as the way to go. Google, on the other hand, is
going to try to create a marketplace based on variable rates, and will probably use something similar to an “AdSense for
Video” type of program to subsidize their own free content.




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6       FINANCES


6.1      FIRST 18 MONTHS

6.1.1     Financials
Sales projected for the first 18 months are projected as follows:

Assumptions                         Price       Rev Share
Single file licenses                   $1.00          15%
Subscription licenses                $10.00           15%
Action licenses                        $1.50          50%

Content Secured                   0-3 mths      3-6 mths      6-12 mths    12-18 mths     Total
Files protected                     500,000       100,000        300,000       800,000    1,700,000

Licenses Issued                   0-3 mths      3-6 mths      6-12 mths    12-18 mths     Total
Single file licenses                  10,000      100,000        400,000     1,400,000   1,910,000
Subscription licenses                  1,000       10,000         50,000       500,000     561,000
Action licenses                            -        5,000         50,000       500,000     555,000

Revenues                          0-3 mths      3-6 mths      6-12 mths    12-18 mths      Total
Single file licenses                  $1,500      $15,000        $60,000      $210,000     $286,500
Subscription licenses                 $1,500      $15,000        $75,000      $750,000     $841,500
Action licenses                           $-       $3,750        $37,500      $375,000     $416,250
Earnings                              $3,000      $33,750      $172,500     $1,335,000   $1,544,250

Thus, 1.9M unique files and 141.000 subscriptions in projected transactions within an 18 month active service window.
These are conservative figures, compared to other existing portals.




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7       COMPANY MANAGEMENT

The 3 founders of PayPlay have an impressive proven track record in the New Media business, and all have successful
startups under their belt. The team has already collaborated extensively on projects for several years.

Together, the founding team covers most of the competencies for a strong, committed and professional management
team. The team is active in New York, London, Copenhagen and Ukraine, suitably positioned for a global presence (Skype –
87% of usage outside N. America).


7.1       ELLIOT GOYKHMAN
Leader, strategist, entrepreneur.
Successfully launched and managed several technology start-ups.
Lead design and development on multi-million dollar projects.

ELRO Corporation / ELRO.com – New York, NY
CEO
Dec. 97 – Present
     Spun off an Internet design company from a strictly consulting business of Tsunami Computing
     Led the company from the inception, through the rapidly changing market, successfully taking over 4 technology
         firms to become one of the leading web design companies in the US.
     Built an impressive portfolio of clients, including but not limited to: Bank of Hawaii, Barclays Capital, Carlsberg,
         CNN, Discovery Channel, Griffin Technology, LEGO, NYFIX, Nike, Yahoo!, Space Adventures, T-FAL, and many
         others.
     Established a 30-people strong professional team of designers, programmers, artists, illustrators, 3D-modelers,
         management and support staff.

Tsunami Computing Inc. / TSUNAMI.com – New York, NY
Systems Implementation, Database Consulting, Training
President
Feb. 96 – Feb. 03
     Built a strong computer consulting firm from a one-person consulting practice securing an impressive list of clients,
         including but not limited to: Deutsche Bank, JP Morgan Chase, Pershing, Lazard Freres, DLJ, Merrill Lynch, and
         others.
     Determined business strategy, forged partnerships, established corporate financing, conducted contract
         negotiations.

7.1.1      Skill set

          Strong background in team building, project management and technology.
          10 years of hands-on experience launching and leading technology companies.
          10 years of experience in transactional brokerage systems development and support.
          16 years of software development experience in Windows and UNIX environments.
          9 years of full life cycle experience developing commercial web sites (100+).




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7.2       ALEXANDER AGHASSIPOUR

As founder and president of the largest and most successful web-based consultancy agency in Denmark - coupled with an
academic background - Alexander can communicate and participate competently on all levels; executive, creative and
technical.

Araneum A/S – Copenhagen/London
Founder
1995-2002

          Found and head Araneum A/S in 1995, a web agency and IT consultancy dealing with the web and other digital
           channels, growing to more than 110 employees and presence in UK (Tripledash Ltd)
          Araneum is the most award winning agency in Denmark – winning several design and technology awards, Danish
           as well as internationally, and is featured in Wired. Esther Dyson joins as investor and member of the advisory
           board.
          In 2002 TietoEnator Consulting acquires Araneum A/S. TietoEnator is a Nordic IT services company, employing
           close to 14.000 people.

Technical University of Denmark
Master of Science, Digital Image Processing
1993

2002 to present Alexander has been busy working with various free agent assignments, incl.

          Carlsberg and Tuborg - e-strategy; a platform for branding and content, global and local markets.
          A.P. Moller-Maersk (the world’s largest shipping company) - corporate design
          Ministry of Economic and Business Affairs – eGovernment
          Various startups – advisor

7.2.1      Skill set

          System development and technology strategy; N-tier architectures/SOA, best practices and methodology
          Information architecture and user studies (usability)
          Concept and design. Creative development and profiling
          Business strategy
          Senior project management
          Staff and hiring




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7.3       HENRIK WERDELIN

MTV International
VP, Strategy & Product Development
2005 - Present

          Responsible for vision, strategy and development of digital products for all of MTV Networks channels worldwide
           (US excluded).
          Includes managing the international R&D group, concepts and products development and assist local regions with
           strategy development for MTV Network channels (MTV, Nicklodeon, VH1, Comedy Central and GameOne),
           managing games development, broadband and mobile product roadmap, GameOne international development
           and international acquisitions etc.

MTV France/GameOne/MTV Games Europe
Creative Managing Director
2003-2004

          MTV France/GameOne: Working at the same level as the Managing Director being responsible for all content and
           creative sides of the business for the two main channels in France; MTV France and GameOne. The work was
           focused on creating a new strategy for the business (marketing, branding, on air and online) as well as initiating
           new business opportunities (etc. Launched ADSL channel on Free, launching a new game website (gameone.net).

Tripledash ltd - UK
Chief Strategic & Creative Officer (Co-founder)
2000 – 2002

          Tripledash was created by Claus Mathisen (ex- JP Morgan) and Henrik with the vision of creating an agency that
           developed new platform products and strategies for media companies. Tripledash employed in the summer of
           2001 30 people and had offices in Denmark and England.
          Clients include MTV, Disney, Egmont, BBC Explorer, Coca-Cola




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