ASX code: MEG

Business and operations update

Date: 28 February 2011

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an innovative and progressive digital media group of companies managed for growth

mcm entertainment group is focused on creating and growing digital media value for shareholders , customers and staff

our companies create, manage and deliver digital media for media, marketers and consumers

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MCM Entertainment Groupstructure

digital media contenta provider of advertiser funded and cash content for radio, TV, online and mobile

FY2010 HY2011Revenue $20.30m $10.02mEBITDA $3.04m $0.831mNPAT $1.79m $0.417m

100%

digital media softwarea provider of media streaming technology to online media publishers for a licence fee

FY2010 HY2011Revenue $0.14m $0.21mEBITDA ($1.41)m $(1.026)mNPAT ($1.15)m $(0.839)m

100%

digital marketing servicesa fee for service provider of digital strategy, design and development for marketers

FY2010 HY2011Revenue $2.84m $1.18mEBITDA $0.19m $(0.47)mNPAT $0.08m $(0.36)m

100%

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MCM Entertainment Groupcompany snapshot

Board of Directors

Julien Playoust Chairman

Anthony McGinn Chief Executive Officer, Executive Director

Michael Burgess Finance Director, Executive Director

Vincent Donato Non-Executive Director

Greg Smith Non-Executive Director

Andrew Metcalfe Company Secretary

Current key statistics

Ordinary shares on issues 15 February 2011 71.8m

Last share price 15 February 2011 $0.15

Market capitalisation 15 February 2011 $10.8m

Current staff numbers

MEG/Corporate 14

MCM Media 52

igloo 16

movideo 12

Top 5 Shareholders at 15 February 2011

Name Units %

Mr Anthony McGinn 18,726,449 26.06

Mr Michael Gudinski 15,402,121 21.44

ABN Amro Clearing (Next) 13,776,287 19.17

ABN Amro Clearing (Custodian) 5,645,860 7.86

Milford Cove Pty Ltd 4,485,597 6.24

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MCM Entertainment Groupfinancial summary

ActualActualActualActual Actual Actual Actual Actual ActualActualActualActual ActualActualActualActual

HY2011HY2011HY2011HY2011 FY2010FY2010FY2010FY2010 FY2009FY2009FY2009FY2009 FY2008FY2008FY2008FY2008

RevenueRevenueRevenueRevenue

MCM Media 10,020,450 20,301,025 18,854,051 17,943,194

igloo 1,179,428 2,837,955 631,556 0

movideo 211,115 135,170 91,000 0

TOTAL REVENUETOTAL REVENUETOTAL REVENUETOTAL REVENUE 11,410,99311,410,99311,410,99311,410,993 23,274,15023,274,15023,274,15023,274,150 19,576,60719,576,60719,576,60719,576,607 17,943,19417,943,19417,943,19417,943,194

EBITDAEBITDAEBITDAEBITDA

MCM Media 831,138 3,040,545 2,092,353 762,569

igloo (475,350) 189,917 (52,411) 0

movideo (1,026,244) (1,405,855) (594,551) 0

unallocated 64,888 13,362 (392,054) (319,730)

GROUP EBITDAGROUP EBITDAGROUP EBITDAGROUP EBITDA (605,568)(605,568)(605,568)(605,568) 1,837,9691,837,9691,837,9691,837,969 1,053,3371,053,3371,053,3371,053,337 442,839442,839442,839442,839

NPATNPATNPATNPAT

MCM Media 416,636 1,787,278 1,113,762 (316,555)

igloo (359,629) 83,806 (71,952) 0

movideo (838,620) (1,151,941) (519,342) 0

unallocated (3,222) (64,213) (501,793) 0

GROUP NPATGROUP NPATGROUP NPATGROUP NPAT (784,835)(784,835)(784,835)(784,835) 654,930654,930654,930654,930 20,67520,67520,67520,675 (316,555)(316,555)(316,555)(316,555)

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MCM Entertainment Groupbalance sheet

31 Dec 30-Jun

2010 2010

$ $

Current assets

Cash and cash equivalents 155,569 649,166

Trade and other receivables 4,985,542 4,443,881

Deferred production expenditure 334,351 218,720

Prepayments 280,219 181,092

Total current assets 5,755,681 5,492,859

Non-current assets

Deferred tax assets 851,833 595,547

Property, plant and equipment 1,523,009 1,475,186

Intangible assets and goodwill 1,793,263 1,915,796

Total non-current assets 4,168,105 3,986,529

TOTAL ASSETS 9,923,786 9,479,388

CONSOLIDATED

31 Dec 30-Jun

2010 2010

$ $

Current liabilities

Trade and other payables 2,337,880 2,580,485

Unearned revenue 1,028,766 701,058

Interest bearing liabilities 1,565,845 56,192

Provisions 162,183 502,543

Total current liabilities 5,094,674 3,840,278

Non-current liabilities

Interest bearing liabilities 75,782 106,895

Provisions 238,113 232,163

Total non-current liabilities 313,895 339,058

TOTAL LIABILITIES 5,408,569 4,179,336

NET ASSETS 4,515,217 5,300,052

EQUITY

Oridnary Shares 4,940,113 4,940,113

Share based payments reserve 106,100 106,100

Retained earnings/(accumulated losses) (530,996) 253,839

TOTAL EQUITY 4,515,217 5,300,052

CONSOLIDATED

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MCM Entertainment Groupfy2011 outlook

MCM Entertainment Group> currently assessing all opportunities for growth, including strategic acquisitions to enhance scale for MCM Media and igloo

MCM Media> increased expenditure in product research and development

> increased investment in key staff

⁻ Head of Radio and Online Content; Head of Online Commercial Sales; Expansion of Online Sales Team; Head of Television and Events

> key account sales materially down year on year

> total MCM Media revenue flat year on year

igloo > restructure of management and staff in the first half year costing approximately $150k

> first half revenue down, but expecting uplift in sales and margin in second half of FY2011

movideo > gain in market share through client wins Asia Pacific (Channel 10, South China Morning Post and AMP Malaysia)

> investment in customer acquisition with Singapore based Asia Pacific Business Development Manager

> investment and expansion into China through local office and infrastructure set up with new VP China to recruit local sales and support team

> $2m investment planned into continued product enhancement, sales staff and strategic marketing into Asia Pacific and China

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MCM Entertainment Groupgroup revenue trend

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a leading Australian media entertainment production and distribution company

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MCM Mediadigital media content

Content Creator and Producer Content Creator and Producer Content Creator and Producer Content Creator and Producer radio, online, television and mobile

National Sales Team National Sales Team National Sales Team National Sales Team Sydney and MelbourneSydney and MelbourneSydney and MelbourneSydney and Melbourne

20 strong team pitching to media agencies and national clients selling sponsorship packages, paid advertising and content integration into a broad stable of national media programme brands

Broadcasters and Syndication Broadcasters and Syndication Broadcasters and Syndication Broadcasters and Syndication PartnersPartnersPartnersPartners

RadioRadioRadioRadioAustereo, ARN, Southern Cross Media,

DMG Australia

TVTVTVTVNine Network, GO, Seven Network,

Network Ten, [V]

OnlineOnlineOnlineOnlineninemsn, yahoo7, News Digital, APN

MobileMobileMobileMobileOptus

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MCM Medialisten watch engage

listen > 8 national radio shows totalling over 35 hours of content each week

> some of Australia’s biggest radio talent (Kyle & Jackie O, Andrew G, Jono & Dano, Barry Bissell, Johanna Griggs, Brendan Jones and Amanda Keller)

> a combined network of 220 subscribing radio stations

> weekly cumulative audience of over 4 million listeners*

watch> over 1,000,000 unique browsers per month viewing mcm content online**

> over 7 million audio and video streams per month

> growing catalogue of multi platform television shows including the critically acclaimed ‘Live at the Chapel®’

> Australia’s first monthly Cinema show ‘Coca-Cola Hoyts Insider’

> programming supplied to the Optus mobile phone network each week

engage> 28 years of production expertise

> multiple media touch points with expertise across radio, online, television, mobile and events

> access to in demand talent and content with studio facilities in Sydney, Melbourne and Los Angeles

> bespoke event and online video ad production

* Source: Nielsen Radio Advisor, Survey #6 2010 ** Source: Nielsen Netratings December 2010

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MCM Mediaradio – key statistics

trusted brands with heritage

over 35 hours of radio shows and content produced each week

for 28 years MCM Media has been the dominate radio production and syndication business in Australia

MCM Media prides itself on its long term and solid broadcaster relationships built on a foundation of consistently delivering extraordinary product and exceptional service

MCM Media provides radio content to over 200 radio stations throughout Australia

in return for that content, MCM Media receives advertising time from the radio stations

> MCM Media’s National Sales Team then offers that commercial air time for sale to national advertisers

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From top left: Brendan Jones and Amanda Keller; Kyle and Jackie O; Jono and DanoFrom bottom left: Barry Bissell; DJ Havana Brown; Andrew G; Johanna Griggs

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MCM Mediaonline – key statistics

two national entertainment based websites, take40.com and thehothits.com. Both sites rank consistently in top 5 of their category*

free premium quality audio and video streaming on demand on an advertiser funded basis

MCM Media is licensed to stream online music on demand by the 4 major record labels, many independents and APRA/AMCOS

access to a growing catalogue of over 16,000 high quality music videos free to stream

Unique Unique Unique Unique VistorsVistorsVistorsVistors(UVs)(UVs)(UVs)(UVs)

take40.comtake40.comtake40.comtake40.comhothits.comhothits.comhothits.comhothits.com

DENDENDENDEN

* Source: Nielsen Netratings October 2010

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MCM Mediadigital entertainment network

part of MCM Media’s online offering

built on the MCM Media developed video management platform, movideo, the DEN brings the MCM Media syndication concept to the internet

the DEN has become the dominant music supplier online in Australia with over 30 major publishers and the network is growing

business model is MCM Media provides a ‘music window’ to major sites and portals delivering the technology, music rights and advertising sales

DEN partners include Yahoo7Music, ninemsn, Channel [V], News Digital

over 7 million streams per month and with its limited advertising inventory model, the DEN is consistently sold out in advance

model driven by video advertising and supplemented by display advertisingFor

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From top left: Lady GaGa, Good Charlotte; Kei$haFrom bottom left: Powderfinger; Kaiser Chiefs; All American Rejects

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MCM Mediatelevision and events

MCM Media operates its own television studio and editing facilities in both Melbourne and Sydney

scope of activities now include:> ad funded content supporting major ad campaigns for MCM Media clients

> shooting and producing audio visual content for MCM Media’s websites and The DEN

> production services on a commission basis for sponsors and entertainment industry clients

> MCM Media’s Sydney TV Studio facility sales and hire

> development of new programming to supply the growing demand from multichannel FTA TV and the expanding Pay TV channels

> branded content for social media distribution

> content production services for igloo’s clients

> multi media platform events

MCM Media’s television output is growing:> around 20 television events have been produced over the last 18 months involving such brands as KIA, Mastercard,

Blackberry, Australian Federal Government (Health Department), and Sony Playstation

> content has been broadcast on 7, 7Two, Nine, Go!, Ten and Channel [V]

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MCM Mediagrowth opportunities

increasing scale in radio production and syndication> through greater research and programme/talent development

> via new nationally networked products for traditional and new digital radio

expansion of television production activities with new products> adding more events to the current list of shows

> new nationally networked programmes for traditional free and pay TV plus new digital and pay channels where there is an increasing demand for new and cost efficient content

> exporting successful formats

expansion of DEN model in Australia and internationally> securing more DEN affiliates within the Australian market, thereby increasing Unique Visitors and thereby attracting

incremental video advertising revenue

> exporting the DEN model into new markets, such as the Europe and Asia (where there is a demand)

> new content verticals for the DEN beyond music

increasing scale through strategic and complimentary acquisitions within the online and mobile content industry

expansion of skill and capabilities in the merging social media environment

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a digital agency that plans, designs, builds and maintains digital solutions for major marketers

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igloodigital marketing services

igloo is a digital agency that creates websites and mobile solutions for marketers

with a 15 year pedigree, igloo was purchased by MEG in 2008

igloo specialises in digital strategy, design and development

currently 16 staff operating out of MEG’s Melbourne office

igloo’s business model is fee for service and it is positioned to the’ big brand’ quality end of the market

clients include Mazda Australia, Crown Casino, Open University, Quit Victoria, Hardie Grant Publishing, Windsor Smith, Cancer Council Australia, MCM Media and movideo

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igloogrowth opportunities

igloo is currently a Melbourne based agency with a solid client base

with a growing market demand for digital strategy and assets, igloo is working to more than double its client billings in Melbourne and is actively seeking to expand into the Sydney market

expansion into Sydney can be through organic means or via a strategic acquisition or partnerships

social media marketing and social media content are becoming a key driver of growth in digital services and igloo is positioning itself favourably for this phenomenon with the support of the considerable production resources of MCM Media

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an end to end online video management platform designed for the media industry throughout Asia

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movideobusiness model/plan

movideo is an Online Video Platform (OVP) developed by MCM Media over a 6 year evolution within its online business. In 2009, MEG realised it has an asset that could be monetised outside of MCM Media> in early 2010 MEG refined movideo to be an end-to-end scalable enterprise Software as a Service (SaaS) video solution,

enabling clients to manage, deliver, measure and monetise media content for streaming over the internet to PC’s, TV monitors, tablet computers and smart phones

> movideo provides comprehensive real-time and historical analytics on user behaviour and content usage (utilising the valuable Camify technology developed by MEG in 2008 and 2009)

> the business model is simple – movideo customers pay a monthly licence fee based on the volume of user streams they generate each month, plus they pay monthly to store their digital media files with movideo

> revenue growth is driven both by acquiring new customers and by customers delivering more streams to their users, plus growth in customer library storage

> cost base is computing infrastructure, the product development team and sales, marketing and customer service

after considerable research, movideo was launched in July 2010 with a focus on two defined market segments across one major and fast growing geographic region> media/entertainmentmedia/entertainmentmedia/entertainmentmedia/entertainment (TV, radio, press, content owners, new media, content aggregators and sports clubs/codes)

> digital agencies digital agencies digital agencies digital agencies (web developers servicing marketing, government, education, not for profit and corporate clients)

> movideo will service the media/entertainment market directly and engage digital agencies as Value Added Resellers (VARS) for the secondary market

> the geographic focus is Asia (including China) Asia (including China) Asia (including China) Asia (including China) due to its later emergence (behind North America and Europe) and the lack of competition

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movideothe movideo model

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movideogrowth opportunities

continue to roll out the sales and marketing resources contemplated in the business plan> the global OVP market according to Accustream’s report 3/10 is forecast to be worth US$480 million in 2010 and is

projected to grow by 48% in 2011 and 37% in 2012

> to expand the movideo business within its defined markets as fast as possible. The product is very ‘sticky’ as it influences workflows, digital strategies, and it integrates with other suppliers and provides business intelligence. So, over time movideo can grow with its customers and the market’s use of video

current activity> China operation is now set up with movideo subsidiary in Beijing and sales team is being recruited

> VP of China was engaged in January 2011 and is currently setting up infrastructure and aiming for first deal by September 2011

> aggressive Asia Pacific business development; pursuing the acquisition of customers in both the mature and less mature markets by locking in high volume media accounts with a mix of price incentive and superior service

movideo is now well placed to take advantage of the well publicised growth in video usage online by> natural growth in streaming from current clients

> aggressive client acquisition

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the summary

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MCM Entertainment Groupthe summary – the opportunity

MCM Media > core and traditional businesses well placed to take advantage of expanding media landscape:

⁻ radio

⁻ online and online video

⁻ television content and media events

> investing in all areas for growth

> research and development

> key staff - radio/online/TV

igloo > expanding client base and expanding into new markets; building strength through scale

> social media and media content leadership opportunities

movideo> comprehensive and proven SaaS product developed and deployed successfully into the fast growing online video market

> very focused market strategy provides a competitive advantage

> annuity based revenue streams provide a new and consistent sales stream for MEG

> sales growth from existing clients and new clients

> business plan has monthly profit achieved in mid FY2013For

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a group that builds and supports independent businesses in their own digital media and marketing space

a group that facilitates each business leveraging each other to create a competitive advantage and a potent sum of all parts

a group that spans media, technology and marketing and knows how to create powerful customer solutions by fusing this mix of competencies and resources. Importantly any one of the three verticals of mcm’s business can lead, or follow, depending on the customer’s needsF

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