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WAN 2.0Clive Dickens, CDO

Dan Stinton, Head of Digital

3 February, 2016Version 3

Current Status

Digital Growth Markets

New Digital Strategy

Key Financials

Recommendation

FY15 FY16 FY17 FY18 FY190

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BearBaseBull

The FY19 revenue gap (from FY15) is forecast to be $36m, but this could be as large as $119m.

Base Case: • Based on current• Revenue -3.6% to -6%

CAGR• EBITDA Decline -12.6%

CAGR

Bear Case (continuation of 15) • Based on Prior Year trends• Revenue Decline -11.0%

CAGR• EBITDA Decline -17.1%

CAGR

Bull• Revenue Decline -2.9%

CAGR• EBITDA Decline -9.6% CAGR

$36m

$119m

EBITDA ($m)

Bull 76.0 68.7 62.1 56.2 50.8

Base 76.0 66.5 58.1 50.8 44.4

Bear 76.0 63.0 52.3 43.3 35.9

Source: WAN management, KPMG

Revenue ($m)

Peer publishing digital revenue analysis

Source: Company Reports, SWM Analysis, IBIS World, Media Briefing April 2014*News.com.au is the only source of NewsCorp Video Streams used as the basis for the assumption of video revenue

Digital Revenue as a % of Total

Printand Digital Revenue

Video Revenue as a % of Total Digital Revenue

Market Share(Digital Peer

Group Revenue)

The Guardian (UK) 37% (2014) - -

New York Times (US) 24% (2015) - -

News.com* 16% (2015) 25% (2015) 44%

Fairfax 14% (2015) 3% (2015) 33%

Daily Mail (UK) 10% (2015) - -West Australian Newspaper 3% (2015) 12% (2015) 7%

Yahoo!7 - 20% (2015) -

APN - - 5%

DEFEND PRINT AUDIENCES &

REVENUEPARTNER

FOR SCALE

INVEST IN ADJACENT EMERGING MARKETS

Defend print audiences and revenue:Limit the publication of content online to protect print audiences and maximise circulation.

Invest in adjacent emerging marketsLeverage existing print advertiser relationships to grow digital revenue in adjacent verticals.

Partner for ScaleLeverage partnership with Yahoo7 to minimise dev costs and utilise Yahoo’s investment in publishing tech.

= $5.7m*FY16

WAN current digital strategy

Source: SWM Analysis, Note: *represents FY16 6-6 Net Revenue Forecast for WAN Digital

WAN has experienced a 36% year on year decline to a 520K monthly unique audience.

Source: Nielsen Answers, December 2015

Dec-14 Jan-15 Feb-15 Mar-15 Apr-15 May-15 Jun-15 Jul-15 Aug-15 Sep-15 Oct-15 Nov-15 Dec-150

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perthnow (Brand) WAtoday.com.au (Brand) thewest.com.au (Custom roll-up)

Current Status

Digital Growth Markets

New Digital Strategy

Key Financials

Recommendation

CY15:$1.1bnCY19e:$3.7bn

CAGR:+34.9%

CY15:$508mCY19e:$1.1bn

CAGR:+17.6%

CY14:$176mCY19e:$608m

CAGR:+28.1%

So Mo VoAustralian

Social Media

AustralianMobile Native +

Display

Australian Digital

Video (AVOD only)

The opportunity is to focus on growth markets.

Source: Morgan Stanley, IAB, PwC 2015, eMarketer April 2015, CitiGroup 2015

Mins/Day

2012 2013 2014 2015 2016 2017 2018 2019 -

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Australian Time Spent Watching Online Video

Time Spent Watching Online Video Time Spent Watching online Video (Mobile) Time Spent Watching online Video (Desktop)

27% CAGR

28% CAGR

26% CAGR

AU online video consumption increasing rapidly

Source: Zenith Optimedia Online Video Forecasts (2015), Roy Morgan Australian Multimedia Report (2015)Note: 2018-2019 management estimate

Video Class-I (ex-Video) Class-II Native only Class-II ex Native Content Match (Google)

Display Others-20%-10%

0%10%20%30%40%50%60%70%

57%

2%

48%

-14% -12%

37%

Y!7 FY15 vs. FY16 Budget

Series1

Yield Analysis: video increasing vs. display decliningPre-Roll Inventory has increased more than four-fold 2014-2015 and is +38% up Q1 to Q2 (CY2015)

Mobile Pre-roll inventory has sky rocketed with growth of over 167% from Q1 to Q2 (CY2015).

Mobile CPMs are up 11% Q1 to Q2

Video Inventory is growing YoY where other display streams are in decline or stagnant

Source: Tube Mogul Q2 2015 Quarterly Update Australia and New Zealand, Adexchanger (2015), Y!7 Internal Mgmt. Data

Digital video is also fastest growing ad segment

2010 2011 2012 2013 2014 2015 2016 2017 2018 20190

1,000

2,000

3,000

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5,000

6,000

7,000

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9,000

2,2302,692

3,138

3,9294,470

5,0405,678

6,411

7,256

8,223VideoClassifiedsDisplaySearch

CY15-19CAGR

Comments

28% Video: Fastest growing segment

8% Classifieds: Dominated by few large players

10% Display: Driven by volume, yield decreasing

15% Search: Dominated by Google Search

$m

Online video/ FTA 0.9% 1.7% 2.4% 4.0% 4.6% 6.0% 7.3% 9.4% 12.0% 15.8%Online video/Internet advertising 1.7% 2.4% 2.9% 3.9% 3.9% 4.5% 5.0% 5.6% 6.4% 7.4%

Source: PwC Outlook 2015, SWM analysis

Integration of 7 Perth and the West Australian creates a unique advantage to leverage the TV, video and publishing assets to establish a short-form video production hub.

Access to 7 content, including locally produced news and current affairs and international video feeds minimises content costs.

Recent people investments and agile developments mean we are ready and able to take back tech stack platform operations.

WAN is placed to win video news nationally and expand verticals to reach new audiences.

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WAN is uniquely positioned for short-form video growth

Current Status

Digital Growth Markets

New Digital Strategy

Key Financials

Recommendation

“Delivering engagement

and value for WAN through focusing on

powerful video storytelling”Source: SWM

Step-change in digital capability

and technology

Four pillars of the new WAN digital strategy

Audience and revenue growth through

short-form video

Social distribution of content

and advertising

Leverage reach to grow

brand and product portfolio

The Yahoo7 agreement is becoming expensive.

No user data Glacial product evolution Adops issues

FY16 FY17 FY18 FY19Gross Revenue $7.8m $9.1m $13.8m $19.2m Video $0m $1.1m $3.5m $5.8m Display and Native $7.8m $8.0m $10.3m $13.4m

Yahoo7 Share $3.96m $5.01m $7.59m $10.56mDevelopment/Tech Expenses ($3.69m) ($4.86m) ($6.13m) ($7.59m)

WAN Benefit ($0.27m) ($0.15m) ($1.46m) ($2.97m)

✗ ✗ ✗

Deliver a step-change in digital capability

• Recruit experienced internal development team

• Multichannel publishing platform

• Totally reimagined mobile applications for iOS and Android

• Membership-based data strategy

• New product management focus

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Product and content vertical roadmap

Feb 2016Launch of The Game, targeting national

AFL audience.

June 2016Launch of

new national

short-form video travel

vertical.

Sep 2016Acquisition

of PerthNow, move to number one in

market.

Nov 2017Launch of

mobile application for iOS and

Android.

Jan 2017Launch of new multi-

channel publishing platform.

July 2017Launch of

new national, video-

driven millennial

brand.

New short-form video production team

Head

of V

ideo

Video Producer (x4): 40+ Videos/MonthProduction of short-form content, ranging from News to direct

to mini chat shows that utilise the Seven virtual studio.

Video Editor (x8): 100+ Videos/MonthUtilise Existing content feeds from Channel 7 to produce five

short-form stories per day, ranging from news to celebrity gossip

Outsourced Video Producer (x5): 80+ Videos/MonthWork with external short-form video producers to buy content for syndication, ranging from news to user generated content with the potential to go viral.

Branded Content Producer (x4): 8+ Videos/MonthEstablish a branded content studio to produce video for clients

to be distributed across our respective social channels.

Existing WAN Journalists (x35): 15+ Videos/MonthWork with the existing traditional journalists to produce

one video per week utilising smart-phone cameras

Content produced for virality beyond news

Epic: Big production pieces with potential to be sold around the world (e.g. Sunday Night world record basketball shot).

In House: Instant direct analysis on camera and filmed in the WAN newsroom to mini chat shows that utilises 7 Perth’s Virtual Studio (e.g. Movies with Mark)

Opportunistic: Buzz feed-style viral videos (e.g. Mildura magpie).

Sweeper: Editors based in Perth and all Channel 7 offices scan unused content and repackage (e.g. news, celebrity, reality plus international content).

External: Purchase third-party content (e.g. Geraldton shark) User generated: Republish social video (e.g. Perth train lifters).

Branded Content: Commercial creative hub (at $15,000 per video)

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• Increase the social team to ensure adequate coverage after-hours

• Launch more vertical pages to build large niche audiences to increase revenue

• Redirect marketing spend to increase vertical “likes”

• Publish more content in Facebook’s native video player to build audience

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Likes Follows

1,836k 70k

882k 127k

624k 557k

537k 386k

452k 137k

338k 88k

161k 97k

223k 39k

88k 55kSource: Facebook/Twitter (August, 2015)

Increase social referrals from 20% to 50% of traffic by:

Social distribution of content and advertising

WA makes up 9% of the national online audience

WA IP

AU IP

• AFL: WAN has some of the most well respected football journalists in Australia, including Shayne Hope, Mark Duffield and Nick Rynne, yet only 50% of WAN’s AFL coverage is published online.

• Travel: Led by Travel Editor Stephen Scourfield, WAN produces a large volume of travel content with national appeal.

• Seniors: Catering to its print audience, WAN produces a large volume of content for a seniors.

• Millennials: Once WAN’s video production team is established it will produce more short-form video content than any other Australian publisher.

WAN must leverage its reach, technology and content to launch new brands and make acquisitions that cater for a national audience beyond news and current events:

Source: Nielsen Answers, December 2015

Current Status

Digital Growth Markets

New Digital Strategy

Key Financials

Recommendation

Key transformation financialsFrom

(FY15)To (FY19e)

WAN gross video ad revenueas % of Total AVOD Market

$1.0m 0.8%

$8.0m 1.3%

Digital gross revenueas % of total digital newspaper market

$8.7m 1.8%

$35m 5.5%

Digital gross revenue as % of WAN Total Revenue

$8.7m 3.2%

$35m 16.6%

WAN digital EBITDA as a Percentage of WAN Total EBITDA

$1.6m 2.0%

$14.1m 31%

WAN Video Revenue (FY16 to FY19)as a Percentage of WAN Digital Revenue

$1.0m 12.3%

$8.0m 39.4%

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Source: PwC Outlook, SWM analysis

Current Status

Digital Growth Markets

New Digital Strategy

Key Financials

Recommendation

Implement a short-form video content strategy by investing in the establishment of a new video production team and leveraging SWM owned and operated video assets.Establish development team to build a best-in-class multi-channel publishing platform.Launch best-in-class native iOS/Android applications for phone/tablet for video consumption.Launch new content verticals driven by social and mobile to reach a national audience.Exit the current publishing agreement with Yahoo7 while still representing Yahoo7 in WA.Purchase PerthNow as part of the Sunday Times acquisition and implement video lead and content driven digital strategy as outlined.

Recommendation1

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The Game: Your home for AFL tipping and fantasy

Launching 25 February