Destiny Media Tech Inc (DSNY)

[sevted]

To Our Shareholders, Customers, Partners and Employees:
I am pleased to report on our progress for Destiny Media Technologies, Inc. for fiscal 2012 and first
quarter 2013. Our annual general meeting will be held at the Metropolitan Hotel on February 28th,
2013 at 10 AM and we look forward to meeting those of you that are able to attend. For those that
cannot attend, please consider signing up as a member of our shareholder list to receive our latest
updates by email at http://dsny.com/join-ir. Our latest news releases are available online at
http://dsny.com/latest-news.
Revenues for the year were $3,983,789. Play MPE® continues to show expanded use in Europe and
amongst US independent record labels showing revenue growth of 14% (to $1,617,015) and 20% (to
$761,147) respectively. These gains were masked by a decline in the Euro relative to the US dollar,
declines in Australia and the absence of a non-recurring revenue amount in 2011. Modest gains were
seen in Canada and New Zealand. Clipstream® legacy revenue was $164,213 compared to $176,205 in
2011. Operating expenses grew by 2%, with a 21% increase in R&D spending offset by 23% decline
in G&A and a 15% decline in sales and marketing costs. Income from operations was $719,678.
First quarter numbers are expected to be available online on January 14th at http://dsny.com/fin-reports.
The company has two business units, Clipstream® and Play MPE®, which facilitate playerless
streaming and secure digital distribution.
Destiny has been developing streaming solutions since 1995, when it launched the world’s first internet
radio software. In 1999, we launched Clipstream® playerless streaming video using the Java
capability available in computer based web browsers. This legacy solution is still being marketed to
the market research industry for video questionnaires and is responsible for 5% of our revenue. In
2013, we plan to phase this technology out and replace it with a very exciting and disruptive
technology we are calling Clipstream® G2.
Clipstream® G2 will play video on all modern web browsers whether they are on computers, tablets,
smart phones or internet enabled TV's. Viewers will not need to install or configure player software
and publishers will no longer require separate streaming servers or multiple video formats. With
reduced bandwidth and infrastructure, publishers can reduce the need for content delivery networks.
Because a single format plays everywhere, there is no need for transcoding. Content delivery is
currently a $3 billion annual spend and, absent our technology, transcoding was expected to reach total
costs of $1.6 billion by next year.
Without Clipstream® G2, there is no single solution for video delivery across a large number of
devices. Adobe is phasing out non-desktop support for Flash and already the iPad and Android will not
support it. The proposed alternatives, such as H.264 and WebM are not widely supported in the public.
Recent stats show that 84% of browsers will play Clipstream and that is expected to improve rapidly as
Page 2
IE 10 launches and IE 8 is phased out.
http://caniuse.com/#feat=canvas
Only 62% can play H.264, the most widely adopted alternative format.
http://caniuse.com/#feat=mpeg4
H.264 is based around a consortium of patents which require the payment of patent royalties. It is
being phased out and replaced by H.265. H.265 will not be backwards compatible and is not supported
by any browsers today. Google has announced that it will phase out support for H.264.
The second most widely distributed format, WebM, is only at 54%.
http://caniuse.com/#feat=webm
During the year, the company filed seven patents claiming priority to August 2011 around the next
generation Clipstream® G2 engine. The solution is in final development and prototype versions of the
technology are available for testing at http://dsny.com/g2/showcase.php. We expect to release
commercially in Q3.
The Play MPE® system, which currently generates 95% of our revenue is actively used by the four
major record labels (UMG, Sony, EMI and Warner) and over one thousand independent labels to
securely deliver their prelease music, music videos, album graphics, marketing materials and meta data
to trusted recipients, such as radio stations. We charge the labels a transaction fee and currently
provide the system for free to recipients. The system is completely automated and therefore high
margin. Label staff digitize and upload content and provide data entry and are able to share assets with
sister companies around the world.
Recipients are able to access music through a choice of a number of applications. They can reach
content through our integration with third party systems such as the BBC or Mediabase, or through
custom standalone Windows, Mac and Direct to Web applications developed by Destiny. Dedicated
versions for the iPhone, Android, Blackberry, iPad and Tablet are expected to begin rolling out this
quarter.
Real time statistics for Play MPE® are available at http://dsny.com/mpe%20stats.
We feel we have the foundations in place to become a much bigger company in the years ahead and we
appreciate the support from our stakeholders. I welcome questions and constructive criticism at
[e-mail] or [phone] x222 and look forward to hearing from you.
Sincerely,
/s/ Steve Vestergaard
Chief Executive Officer