The Leader in Software Value Management Page 1 Software Best Practices 3 Practical Strategies for Increasing Revenue Daniel Greenberg VP Worldwide Marketing Macrovision

The Leader in Software Value Management Page 2 Best Practices Overview of 3 Revenue Strategies Strategy 1: Value Pricing Strategy 2: Feature Segmentation Strategy 3: Piracy Prevention Summary Feature Segmentation Piracy Prevention Value Pricing

The Leader in Software Value Management Page 3 “Pricing is the Biggest Lever Affecting Profitability.” Average economics for ISVs between $100 million and $10 billion in sales Raising price by 1%… …increases profit by 7% Operating Profit COGS SalesFixed Costs* McKinsey & Co., Oct “ 1% effective increase in pricing delivers an additional 7% increase in earnings on average.” Feature Segmentation Piracy Prevention Value Pricing

The Leader in Software Value Management Page 4 Piracy Prevention Value Pricing Feature Segmentation Current Revenues If You Can’t Raise Your Price…. Raise Your Deal Size …Or Market Potential Feature Segmentation Piracy Prevention Value Pricing Sales Raising price by 1%…

The Leader in Software Value Management Page 5 Increase Your Revenue Potential Throughout Your Product’s Lifecycle Time or Product Maturity $ Revenue IntroductionGrowth Early Maturity Late Maturity Decline + Your Current Revenue Line + Offer Value Pricing + Offer Feature Bundles +Protect Against Piracy Feature Segmentation Piracy Prevention Value Pricing

The Leader in Software Value Management Page 6 Overview of 3 Revenue Strategies Strategy 1: Value Pricing Strategy 2: Feature Segmentation Strategy 3: Piracy Prevention Summary Feature Segmentation Piracy Prevention Value Pricing Best Practices

The Leader in Software Value Management Page 7 Many Companies Set Pricing for One Market Segment.… Medium UsageLight Usage $ Revenue & Leave Significant $ Behind Potential revenue Current revenue Heavy Usage Feature Segmentation Piracy Prevention Value Pricing

The Leader in Software Value Management Page 8 Many Companies Set Pricing for One Market Segment.… & Leave Significant $ Behind Medium UsageLight UsageHeavy Usage Feature Segmentation Piracy Prevention Value Pricing

The Leader in Software Value Management Page 9 Many Companies Set Pricing for One Market Segment.… & Leave Significant $ Behind Light Usage Medium Usage Heavy Usage Feature Segmentation Piracy Prevention Value Pricing

The Leader in Software Value Management Page 10 Are You Leaving Money on the Table? Light Usage Medium Usage Heavy Usage extra Feature Segmentation Piracy Prevention Value Pricing

The Leader in Software Value Management Page 11 Does Your Pricing Enable You to Penetrate All Customer Segments? Light Usage Medium Usage Heavy Usage extra Feature Segmentation Piracy Prevention Value Pricing

The Leader in Software Value Management Page 12 Usage 100% 10% HeavyMediumLight Does Your Pricing Enable You to Penetrate All Customer Segments? Light Usage Medium Usage Heavy Usage extra Feature Segmentation Piracy Prevention Value Pricing

The Leader in Software Value Management Page 13 Different Users Have Different Usage Usage 100% 10% HeavyMediumLight Feature Segmentation Piracy Prevention Value Pricing

The Leader in Software Value Management Page 14 LockedFloatingUsage Licensing $100/pc/year$300/floating user/year$5/user-day Pricing Offer Different Prices for Different Usage Patterns… and Your Customers Will Buy More Usage 100% 10% HeavyMediumLight Feature Segmentation Piracy Prevention Value Pricing

The Leader in Software Value Management Page 15 “FLEXnet is helping us to remain competitive in the market, and we can now relate and adapt to our customers’ needs more quickly and effectively.” Gary Dransfield Commercial Manager Aveva Engineering Pricing Case Study ChallengeSolution Customers don’t want to pay large upfront fees for software. Customer don’t know exactly how many seats are required in a given quarter (demand is hard to forecast) Introduced FLEXnet Utility Pricing Customers pay for the time they use the product. Customers have flexibility to deploy on as many seats as required without publisher intervention Feature Segmentation Piracy Prevention Value Pricing

The Leader in Software Value Management Page 16 Overview of 3 Revenue Strategies Strategy 1: Value Pricing Strategy 2: Feature Segmentation Strategy 3: Piracy Prevention Summary Piracy Prevention Feature Segmentation Value Pricing Best Practices

The Leader in Software Value Management Page 17 $ Revenue Many Companies Build Products for One Market Segment.… And Leave Significant $ Behind Potential revenue Current revenue LiteStandard Premium Piracy Prevention Feature Segmentation Value Pricing

The Leader in Software Value Management Page 18 Example: Studio Artware Market Many Potential Users – Novice  Professional – Lite User  Heavy User – Consumer  Corporate User – Price Sensitive  Price Indifferent Only 1 User Buys Today Product Many Features – Oils – Watercolors – Acrylics – Canvas size – # of Colors supported – # of Paintings that can be worked on at a time All Features Available in 1 Package Today Piracy Prevention Feature Segmentation Value Pricing

The Leader in Software Value Management Page 19 Studio Artware “Software for all your graphics needs” Piracy Prevention Feature Segmentation Value Pricing Example: Studio Artware License by Product Components

The Leader in Software Value Management Page 20 Studio Artware “Jr” Edition “Pro” Edition FingerpaintsWatercolorsOils “Standard” Edition Piracy Prevention Feature Segmentation Value Pricing Example: Studio Artware License by Product Components

The Leader in Software Value Management Page 21 Studio Artware “Jr” Edition “Pro” Edition FingerpaintsWatercolorsOils Related Products SketchSculpt “Standard” Edition Piracy Prevention Feature Segmentation Value Pricing Example: Studio Artware License by Product Components

The Leader in Software Value Management Page 22 Studio Artware “Jr” Edition “Pro” Edition FingerpaintsWatercolorsOils Related Products SketchSculpt Canvas Size # of Colors # of Concurrent Paintings “Standard” Edition Piracy Prevention Feature Segmentation Value Pricing Example: Studio Artware License by Product Components License by Usage Metrics

The Leader in Software Value Management Page 23 Studio Artware “Jr” Edition “Standard” Edition “Pro” Edition FingerpaintsWatercolorsOils License by Product Components License by User Site License Disconnected Network User Networked User Single User Related Products SketchSculpt License by Usage Metrics Canvas Size # of Colors # of Concurrent Paintings Piracy Prevention Feature Segmentation Value Pricing Example: Studio Artware

The Leader in Software Value Management Page 24 “We’re now maximizing revenue through flexible, feature-driven pricing and packaging. Thanks to the FLEXnet platform we’ve been able to create a license model that closely matches how our customers perceive the value of our products.” Chandra Shekar Program Manager Software Licensing Nokia Feature Segmentation Case Study ChallengeSolution Different customers needed different feature sets Too expensive to stock multiple versions of products Using flexible licensing Nokia “turns on & off” features for different customer segments Piracy Prevention Feature Segmentation Value Pricing

The Leader in Software Value Management Page 25 Overview of 3 Revenue Strategies Strategy 1: Value Pricing Strategy 2: Feature Segmentation Strategy 3: Piracy Prevention Summary Feature Segmentation Piracy Prevention Value Pricing Feature Segmentation Piracy Prevention Value Pricing Best Practices

The Leader in Software Value Management Page 26 $ Revenue Prevent Unlicensed Use…. …And Convert Into Paying Customers Manager Admin Executive Potential revenue Current revenue Feature Segmentation Piracy Prevention Value Pricing

The Leader in Software Value Management Page 27 $30 Billion of Software Is “Pirated” (IDC & BSA) Worldwide Piracy Rate = 33% Feature Segmentation Piracy Prevention Value Pricing

The Leader in Software Value Management Page 28 Most Enterprises Are Not Tracking License Compliance “Do you track software compliance?” N = 99 Source: IDC’s Future of Software Licensing Study, 2004 No Yes Feature Segmentation Piracy Prevention Value Pricing

The Leader in Software Value Management Page 29 Feature Segmentation Piracy Prevention Value Pricing Anti-piracy: Easy Way to Grow Revenues

The Leader in Software Value Management Page 30 Overview of 3 Revenue Strategies Strategy 1: Value Pricing Strategy 2: Feature Segmentation Strategy 3: Piracy Prevention Summary Feature Segmentation Piracy Prevention Value Pricing Best Practices

The Leader in Software Value Management Page 31 Increase Your Revenue Potential Throughout Your Product’s Lifecycle Time or Product Maturity $ Revenue Introductio n Growth Early Maturity Late Maturity Decline + Your Current Revenue Line + Offer Value Pricing + Offer Feature Bundles +Protect Against Piracy Feature Segmentation Piracy Prevention Value Pricing

The Leader in Software Value Management Page 32 New Sales Next Steps: Executing on the 3 Strategies 1. Prioritize your strategies 2. Identify key team members 3. Add FLEXnet to your application 4. Collect revenue! Your ApplicationFLEXnet Functionality Piracy Protection Creative Pricing Flexible Packaging Streamlined Operations Automated Updating End User Mgt. Tools & Reporting + Feature Segmentation Piracy Prevention Value Pricing Current Costs Current Sales OperationsSales New Costs

The Leader in Software Value Management Page 33 Time or Product Maturity $ Revenue IntroductionGrowth Early Maturity Late Maturity Decline + Your Current Revenue Line + Offer Value Pricing + Create Feature Bundles +Protect Against Piracy Pricing & Licensing Applications + Modules Pricing & Licensing Applications + Modules Key to Implementation: Separate Your Business Model From Your Application Feature Segmentation Piracy Prevention Value Pricing

The Leader in Software Value Management Page 34 QUESTIONS? On 500,000,000 desktops … 90%+ of market 100 of top 100 ISV’s use our technology 70,000+ customers 700+ patents worldwide in licensing & DRM Make your software smarter Feature Segmentation Piracy Prevention Value Pricing

BACKGROUND ON MACROVISION

The Leader in Software Value Management Page 36 Macrovision FLEXnet Publisher™ enables software and hardware vendors to increase revenue and reduce operational costs by flexibly pricing, packaging, protecting, and updating their product offerings. It is a core element of FLEXnet, the industry’s only Software Value Management (SVM) platform. SVM solutions bridge the gap between pricing and packaging software on the developer side and purchasing and managing that software on the enterprise side. Over 50,000 software publishers and hundreds of Fortune 1000 companies use Macrovision technologies for Software Value Management, which include FLEXnet license management and software updating solutions and the InstallShield® suite of software installation and application packaging tools.

The Leader in Software Value Management Page 37 Partial List of Macrovision’s 70,000 Customers

The Leader in Software Value Management Page 38 OUR CORE COMPETENCY: Get a Great Return on Our Investment Our Core Competency Industry Standard Platform Benefits Extreme Flexibility R&D $110 million invested in R&D 580 person-years invested 15 years of development Proprietary Technology 700+ Patents Worldwide in Licensing & DRM Patent for Concurrent Licensing & Borrowing Proven in Real World Battle-tested on millions of desktops 4 FLEXenabled apps launched every second

The Leader in Software Value Management Page 39 INDUSTRY STANDARD: Our Market Leadership Secures Your Future + Our Core Competency Industry Standard Platform Benefits Extreme Flexibility Major corporations require their software to be “FLEXenabled” Launching new chip (Prescott) in Spring ’04 Pre-production version not compliant with Macrovision licensing Intel, at great expense, changed chip Sun ships new OS, Solaris 9.0, in 2002 Not compliant with previous versions of Macrovision licensing Sun changes operating system

The Leader in Software Value Management Page 40 PLATFORM BENEFITS: Freedom to Choose the Best Options Our Core Competency Industry Standard Platform Benefits Extreme Flexibility Broadest possible range of capabilities “One-stop shopping" for all needed capabilities Large community of FLEXnet providers More than could be provided by any one vendor Much more than you could build yourself! The safest choice: Lowest risk to implement Certification program ensures that "everything just works" Modular platform architecture means new capabilities can easily be added whenever needed Platform standards ensure that systems will interoperate seamlessly now and in the future

The Leader in Software Value Management Page 41 EXTREME FLEXIBILITY: Unparalleled Market Agility Our Core Competency Industry Standard Platform Benefits Extreme Flexibility Change pricing, licensing & packaging at any time, without changing your software 1000’s of license models supported 25+ platforms (Windows, UNIX, Mac, Java, etc.) Supports the entire software license lifecycle: – Demo and Evaluation – Initial purchase – Incremental purchases (through multiple channels) – Version upgrades Licenses can be sent via multiple means – Web, , phone, FAX or paper certificate – Also using automated license installation technology