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910M84 BLUE ORB: A COMPANY IN TRANSITION Michael R. Bowers and Peter McAlindon wrote this case solely to provide material for class discussion. The authors do not intend to illustrate either effective or ineffective handling of a managerial situation. The authors may have disguised certain names and other identifying information to protect confidentiality. Richard Ivey School of Business Foundation prohibits any form of reproduction, storage or transmission without its written permission. Reproduction of this material is not covered under authorization by any reproduction rights organization. To order copies or request permission to reproduce materials, contact Ivey Publishing, Richard Ivey School of Business Foundation, The University of Western Ontario, London, Ontario, Canada, N6A 3K7; phone (519) 661-3208; fax (519) 661-3882; e-mail cases@ivey.uwo.ca. Copyright © 2010, Richard Ivey School of Business Foundation Version: (A) 2010-10-27 A HOT DAY IN JUNE “Well, it’s a pretty clear-cut decision. Either we pay FightWare $25,000 to run the video game competition for us, or we do the whole thing ourselves, on the cheap,” said Mike Bowers, chief marketing officer (CMO) at Blue Orb. “I’m not sure it is that clear cut at all,” Pete McAlindon said. Dr. McAlindon was the founder and chief executive officer (CEO) at Blue Orb. The two of them comprised the whole of the company’s marketing team. In June 2009, Pete and Mike were considering a video game competition as the starting point for a new marketing campaign to re-launch the SwitchBlade Pro, a software program designed to make playing video games more enjoyable and comfortable. Video game competitions were becoming increasingly popular with gamers (avid, active players) as a way of demonstrating their skills and as a social event. Gaming competitions took place in one day or over several days. Video game competitions started as single-site events, usually run through ad hoc local area networks (LANs). While LANs were still quite popular, increasing access to high-speed Internet allowed competitions played through the web to attract more gamers. Internet-hosted events allowed gamers to compete from anywhere in the world. At a competition, individuals or teams of gamers competed against each other in the simulated video world created for the game. Prizes for winning a competition ranged from cash (sometimes thousands of dollars), to computer hardware, to t-shirts. Perhaps the most important prize was recognition by others of the winner’s superior skills. Boasting and trash talking to friends and foes were important elements in the social context of gaming. Clubs, teams and “clans” had formed around the globe, with some focused on playing only one game, and others playing a variety. Intercollegiate competitions were becoming common. The most popular game was World of Warcraft (known as WoW) by Blizzard, though the Call of Duty franchise was also frequently played in competitions. A variety of websites had sprung up as fan sites and communities. These sites ranked players, reviewed games and accessories and provided social forums. Many gamers now made a lucrative living playing video games competitively.

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Blue Orb’s PC software, called SwitchBlade Pro, allowed gamers to play PC video games with a game controller without having to manually configure the controller. SwitchBlade Pro automatically programmed the controller to play a specific game and included Blue Orb’s patented typing technology called the Texter. The Texter technology allowed gamers to type using only the two joysticks on the controller. Communicating through text messages made the gaming experience more enjoyable because gamers could communicate with teammates or “trash talk” their competitors. Results from several recent focus groups at Blue Orb had shaped the following points of differentiation: playing PC games with a game controller made playing the games easier and the experience more relaxing, comfortable, enjoyable, nostalgic and, in many instances, more competitive. Gamers were able to play without being hunched over a keyboard and mouse, with fingers splayed across the keys. With SwitchBlade Pro, gamers could relax on a couch and play games using skills they had developed on video game consoles, like Playstation 3 or Xbox 360. Exhibit 1 illustrates the initial value proposition for SwitchBlade Pro. THE FIGHTWARE PROPOSAL Pete continued discussing this dilemma: “The decision as to whether we outsource the competition to another company or run it in-house is just part of a larger vision regarding the best way to market SwitchBlade Pro. Are competitions the best way to get the word out, or are there other, more effective means of using social media to convince gamers to try our product? Are we being too hasty in not even looking at traditional methods of promotion? How do we get all of these ‘pieces’ to fit, so that we get the biggest impact in the market? What’s our strategy and, most importantly, how do we implement it effectively with almost no money?” Pete and Mike pushed back from the conference table at the Blue Orb offices, where they had just finished a call with William Hall (Bill), CEO of FightWare. The purpose of the call had been to go over the FightWare proposal to run a gaming competition for Blue Orb, featuring the SwitchBlade Pro software. Bill had explained the details and had been able to handle all the questions posed by Mike and Pete. The FightWare proposal was all-inclusive. Bill offered to solicit well-known gamers, handle registration, set up the match play, establish the rules and administer the event. Administration would be no small feat. FightWare proposed running a national competition over the Internet, so a robust network anchored by a secure and fast server would be a critical element for fair, unbiased play. FightWare would have administrators and judges monitoring the competition to adjudicate disputes and watch for cheating. Finally, FightWare would tally and verify the results. Blue Orb would then announce and reward the winners. It was apparent that FightWare had the track record and competency to deliver on the proposed agreement. Bill had also made it clear that FightWare was looking for a long-term strategic partnership with Blue Orb. He felt there was a compatibility of corporate cultures and a similar history between the companies. Bill indicated that the pricing of the proposal, given the level of service provided, indicated an ambition for the two companies to grow together. Bill and the marketing team at Blue Orb thought that if the initial competition for SwitchBlade Pro went well, competitions would become a key part of the marketing effort at Blue Orb and that, consequently, Blue Orb would become a long-term customer. Bill also saw opportunities to leverage industry contacts at the two companies into mutually beneficial relationships. SwitchBlade Pro was offered as a $1.99/month or $19.95/year subscription and was downloaded from the company’s website (www.switchbladepro.com). The four most popular controllers were supported

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“blades” or controller configurations for twenty-two of the most popular games available, and more blades were under development. The subscriber revenue model was a change from the model for SwitchBlade, which was offered as a free download and configured for just one game. As of March 1, 2009, Blue Orb had more than 1,100 subscribers and 15,000 registered users from its previous freeware version of the program. Pete said, “I think we agree that SwitchBlade freeware with revenue generated from advertising on-site is no longer a viable model. We have to convert free downloads to subscriptions. We know when gamers use SwitchBlade they like it. But how do we get the word out?” “I think SwitchBlade Pro has to be sold, not advertised. We have a lot of anecdotal evidence that when gamers play with it, they like it. But it is hard to communicate the value of the software in traditional promotional formats,” Mike responded. “We have to create a community of advocates for SwitchBlade Pro. We need authentic voices telling other gamers about SwitchBlade Pro.” “You know my board of directors is getting impatient. They think the fastest way to hitting our numbers is a big bang approach: advertise to millions, attract hundreds of thousands and convert thousands into customers,” Pete said. “We still have several thousand users of the freeware from the one advertising initiative we did with Xfire (free software that allowed integrated communication while playing games; see www.xfire.com).” Mike said, “That might work for free software but to get people to pay for it, they have to see demonstrated value. We need a whole social media campaign. Right now, all we have are a couple of pretty lame videos posted to YouTube. We need a community website and Facebook, MySpace, and Twitter pages. We need the website to be more interactive. We need better technical and customer support. We need help in setting up and moderating the sites. We need to develop a tight, concise ‘pitch’ to the gamers. We have all these pieces swirling around. We have to pick a starting point and go from there. I think we need a competition to create some buzz around SwitchBlade Pro. The preparation and results from the competition will give us content. We can post the content to YouTube and our own website. It will give us something to talk about on Facebook and Twitter. That’s why I think a competition is the place to start.” Pete said, “Well, assume we start with a competition, featuring SwitchBlade Pro. Right now it’s late June. We have to hire marketing staff, get the online store up and running, develop the promotional materials and organize the contest; all by mid-September.” “That’s why the FightWare proposal is so attractive,” said Mike. “Bill said they can run a national competition, providing a turnkey operation, and can meet our deadlines. All we have to do is recruit the participants, find sponsors and do our part with promoting the contest. Oh, and pay them $25,000. Do we have $25,000?” “The short answer to your question is no. But I can likely get it from one or two of our investors,” countered Pete. “But is this the best use of our money? Aren’t we better off learning how to run a competition ourselves? We can partner with local gaming clubs, run a competition for maybe $5,000 and put the difference into customer support or web development. The FightWare competition can deliver only 32 players, nationally known gamers, but still only 32. If we work with local clubs we can run a LAN competition and we might be able to get a couple of hundred gamers involved. We would learn how to run competitions, so we could build this into our ongoing marketing effort. We could develop our own team of gamers. Once we have some idea of what is involved in hosting a competition, we can go back to Bill and FightWare and be able to use them more effectively.”

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HISTORY OF THE COMPANY Blue Orb Inc. started as Keybowl Inc. in 1994 after the completion of Pete McAlindon’s dissertation at the University of Central Florida. The name “Keybowl” was derived from the dissertation’s core technology and the company’s first product called the orbiTouch Keyless Keyboard, a no-finger-motion, no-wrist- motion keyboard designed using two inverted cereal bowls. The dissertation research caught the attention of the National Science Foundation in 1995. From 1996 to 2003, the National Science Foundation funded more than $650,000 of research on the Keybowl/orbiTouch to determine how useful, or not, it would be for people who had little or no use of their hands and/or fingers. Two patents were issued and the stage was set to continue to develop products around this new method of typing. The orbiTouch was launched in 2003 and had since won several prestigious industry awards. As a full-sized keyboard, it required use of both hands to type. It became immediately obvious that two thumbs controlling two small joysticks could be used to type using exactly the same orbiTouch technology. Functional prototypes of the technology were developed, ranging from desktop keyboards for people with little or no use of their hands to game controllers, military applications and cell phones. Exhibit 2 shows an illustration of the orbiTouch. In addition to being the founder, Pete McAlindon was the CEO of Blue Orb and had been successful at attracting a group of angel investors to fund the company. Pete reported to a board of directors, composed of some of the most influential angels. The board had approved the move to the video game industry but was becoming disgruntled with the pace of the company’s transformation. A marketing campaign in support of the freeware version of SwitchBlade had been started in October 2007. A mix of magazine ads, gaming website ads, expos and word-of-mouth strategies was developed and launched. The goal was to reach as many gamers as possible who fit the targeted demographic. The freeware/advertising-based revenue model for SwitchBlade did not achieve its goal, so the change to a subscription-based model occurred in October 2008. Exhibit 3 shows the events, and their dates, that contributed most to the SwitchBlade user base’s growth. Indicated in the table is information on each event, the approximate date that it occurred, the cumulative number of downloads for both the free and paid versions of SwitchBlade, and the promotional expenses and revenue for the month in which the event occurred. Exhibit 4 shows the complete mix of the promotional efforts, their associated total costs and revenue generated from these efforts for the month of May 2009. Total costs were composed of direct costs associated with running the ads or engaging in the event and indirect costs which included ad design, personnel time and computer use and server bandwidth for the campaigns. Revenue at event sixteen (May 2009) was allocated across the mix of advertising efforts. Revenue for the month of May 2009 was the result of the collective previous marketing efforts conducted by Blue Orb. The monthly revenue was based on one of two sources: 1) ad revenue with the free version, or 2) paid subscription revenue. The effectiveness rating was computed by dividing the revenue received in May 2009 from each marketing type by its total cost. In June 2009, Blue Orb had virtually no money in the bank. The company had the equivalent of three full- time employees, none of whom was taking a salary. The employees included the CEO, the chief marketing officer (CMO), a half-time office manager and a half-time programmer. Mike Bowers had come to the management team of Blue Orb as interim chief marketing officer and his tenure with the company was for three months. His job was to build the foundation for the marketing effort as the company moved forward and to create a marketing campaign resulting in improved market traction within a three-month window. Pete thought he would be able to raise roughly $25,000 in funds to launch a marketing campaign.

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COMPANY MARKETS The orbiTouch remained in production but the market was small and not easily accessed. The video game market by comparison was huge, with excellent growth characteristics. Blue Orb’s exit strategy for SwitchBlade Pro was to be acquired or to license the technology. THE THREE MARKETS FOR SWITCHBLADE PRO The company served three basic markets in the video gaming industry: 1) The video gamers who wished to play their favorite PC games using a game controller instead of a keyboard; 2) Hardware and software companies (channel partners) looking for ways to increase their PC gaming user base, which was currently keyboard and mouse driven; and 3) Advertisers looking to put their brands in front of Blue Orb’s users mainly through advertising on the www.switchbladepro.com website. Developing the first market, the video game customer, would enable entry to the other two markets. As such, Blue Orb’s focus was on the video gamer. Blue Orb found its customers through download sites and video game software and hardware companies that were looking for convenient ways to increase their sales and/or improve their brand. Blue Orb’s ambition was to negotiate with several hardware and software companies to add its SwitchBlade Pro software to their offerings to help increase Blue Orb’s sales and user base. Initial discussions with potential channel partners were positive, but the hardware and software companies viewed an installed base of 10,000 subscribers as a minimum before they would become seriously interested. Their reasoning was that 10,000 paying customers indicated market acceptance and that the SwitchBlade Pro software was not “buggy.” MARGIN CHARACTERISTICS Revenues were generated from monthly and annual SwitchBlade Pro subscriptions and ad sales on the www.switchbladepro.com website. SwitchBlade Pro software was digitally downloaded and ads developed and delivered electronically by the client were to be run through the SwitchBlade Pro website as electronic images. As such, both Blue Orb’s subscriptions and ad sales had very high margins at 90 per cent and could scale up in volume without significant infrastructure cost increases. MARKET SIZE AND MARKET NEED Video games were played one of three ways: on a PC using a keyboard and mouse, on a console (e.g. Microsoft Xbox 360, Sony Playstation 3 and Nintendo Wii) using a game controller, or on a portable, self- contained unit (e.g. Nintendo DS and Sony Playstation Portable or PSP for short). Many gamers wanted the console (i.e. Xbox 360 and Playstation 3) experience when playing their PC games. That experience was one in which a gamer used a game controller and played with greater comfort, and as a result competed better. Game consoles offered a simple way for gamers to load a game quickly and begin to play. Playing a PC game with a controller required many more steps to offer the same level of convenience and game play as playing on a console. Blue Orb’s flagship product, SwitchBlade Pro, removed many of those steps by pre-configuring the controller to be used to play PC games. SwitchBlade Pro brought the game console experience to PC gaming.

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The worldwide video game market grew to more than $40 billion in 2008 and was projected to grow 9.1 per cent annually. Growth in the U.S. video game industry is illustrated in Exhibit 5. Video game sales declined by eight per cent in 2009 to 379.3 million units. While Japan only suffered a two per cent decline, video game sales in the United States dropped by seven per cent. Industry analysts attributed this to the shrinking Playstation 2 software market, which saw a 57 per cent decline in 2009. PC gaming made up roughly 25 per cent, or $10.7 billion, of the overall market in 2008. This number included retail sales, online revenue, digital distribution and relevant ad sales. Retail sales in the PC gaming industry also experienced declines, with revenues down 23 per cent in 2009. According to the DFC report “Online Game Market Forecasts” for 2008, the fastest growing segment of the PC gaming market in 2008 was digital distribution/virtual item sales. “Our analysis clearly shows incredible growth in online PC gaming, proof that this industry is far stronger than anyone has reported,” said Randy Stude, president, PC Gaming Alliance. “Today’s consumers shop where they live — online.” Though sales were down in 2009, industry experts predicted an increase in sales in 2010. According to Michael D. Gallagher, president and CEO of the Entertainment Software Association, “December 2009 sales broke all industry records and underscores the incredible value consumers find in computer and video games even in a down economy.” He further added, “I anticipate these solid numbers to continue upward through 2010 with a pipeline of highly- anticipated titles.” Broadband access and affordability was driving adoption of online gaming for both PC and console gaming. Massively multiplayer online (MMO) PC games like World of Warcraft had demonstrated very large user adoption with more than 12,000,000 players and revenue growth primarily through monthly online fees. Flat panel TVs were also beginning to move the PC experience away from the desk and into the living room. In addition, because the graphics and game play of both PC and consoles games were comparable, the PC gaming experience was beginning to intrude upon the console experience, which was already, typically, part of the living room experience. With 60 per cent of console gamers playing PC games and 73 per cent of PC gamers playing console games, SwitchBlade Pro was well positioned to bring game controller use to PC games. In 2008, an estimated 72 per cent of U.S. heads of households played video games. Video game use time was also increasing. World of Warcraft players averaged 21 hours per week of play. The gaming market had also expanded beyond the traditional stereotype of 18 to 34-year-old males to encompass a much broader age range and an increasing percentage of women playing games. Women now made up more than 40 per cent of the casual gaming market. According to the NPD, a leading market research firm, of the 174 million gamers making up the total market in the United States, 17 per cent were classified as “Console Gamers,” nine per cent were classified as “Avid PC Gamers” and 14 per cent were classified as “Online PC Gamers” for a console and PC gamer market of 70 million. Of the 70 million console and PC video game players in the United States, 60 per cent or 42 million played both PC and console games and had a preference for playing with a game controller. These 42 million gamers represented SwitchBlade Pro’s target market. More than 24 million of the gamers in this target market already played online PC games (e.g. World of Warcraft). The majority of them were male, 18 to 45 years old, and played video games an average of eight hours a week. They were competitive and spent an average of nearly $1,000 dollars per year on video games and a total of more than $30,000 from 18 to 48 years of age.1

1 GameStrata, 2008.

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COMPETITION Microsoft, Sony, Logitech and Mad Catz dominated the market for game controllers. Their business model success depended on driving margin from investments in hardware innovation, and new differentiating hardware features. While they had software that enabled their controllers to be used with PC games, the software was designed to provide basic functionality. The user had to figure out how best to program the controller for use with a particular game. This process was so time consuming and arduous that many gamers gave up. SwitchBlade Pro took the guesswork out of the process by offering game-specific, ready- to-use controller configurations. Moreover, the SwitchBlade Pro Texter system provided controller-based in-game messaging and was part of Blue Orb’s patent portfolio. To offer this capability, competitors would need to license it from Blue Orb and add it to their software — or more logically, partner with Blue Orb for a fully integrated offering tailored to their hardware. THE BLUE ORB MARKETING PLAN Mike Bowers, the CMO at Blue Orb, had drafted a new marketing plan. The plan was considered a “work in process.’’ As of June 2009, elements of the plan were in development and implementation had not yet occurred. In fact, the video game competition being considered by Mike and Pete would represent the first step in executing the plan. The primary goal of the marketing plan was to increase revenue. This goal was to be achieved using a two- pronged strategy: customer acquisition and creating an attractive market for Blue Orb’s advertising partners. Customer acquisition was to be attained through product partnerships, online gaming competitions, community development and the utilization of advertising media. CUSTOMER ACQUISITION THROUGH PARTNERSHIPS A SwitchBlade Pro media kit was being assembled. Elements of the plan included web banners, logos, text links and demos (rich media). Partners would use these materials to advertise the SwitchBlade Pro product at no cost. Potential partners who should benefit from adoption of SwitchBlade Pro software included game publishers, online retailers, video game fan sites and hardware manufacturers. Partners earned a fee for each customer referred that registered and downloaded the SwitchBlade Pro software. CUSTOMER ACQUISITION THROUGH GAMING COMPETITIONS Video gaming was competitive by nature. Gamers were competitive. They earned respect, prestige and sometimes money by being a top-ranked player of a particular game. They also had very strong opinions on how best to play games; PC gamers were adamant about playing with a keyboard and mouse; console gamers insisted on a game controller. Because SwitchBlade Pro brought the controller/console experience to PC gaming, a natural competition had begun between the traditional means of playing PC games, with a keyboard and mouse, and playing them with a controller. To take advantage of this opportunity, Blue Orb was to develop a competition whereby gamers competed against one another using either a keyboard and mouse or a game controller. A scoreboard would be developed that would highlight each gamer’s name, their ranking and the type of input device used.

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The purpose of the competition was twofold. First, gamers using SwitchBlade Pro should have a more comfortable, enjoyable and competitive experience in the competition. This should translate into more subscriptions. Second, the competition provided a venue for the creation of a SwitchBlade Pro community of activist customers. CUSTOMER ACQUISITION THROUGH COMMUNITY DEVELOPMENT The community was to be managed and encouraged to create positive “buzz” in the larger gaming world regarding SwitchBlade Pro. Community members were to be sent product update information, exclusive offers and community newsletters. They were to receive expedited registration and privileges in future competitions and be constantly encouraged to invite a friend to download SwitchBlade Pro. The community should be networked through a variety of social media including Facebook, Twitter and blogs. The growth of the community should also be appealing to Blue Orb’s advertising partners. CUSTOMER ACQUISITION THROUGH THE UTILIZATION OF ADVERTISING MEDIA A variety of non-traditional advertising media and channels had recently been developed in response to customers migrating to the Internet in search of entertainment and information. Blue Orb intended to employ the following advertising channels: SwitchBlade Pro would be advertised through online ad networks such as AzoogeAds and Adteractive. These companies promoted their “offer” to their network, including content, email, incentive and search publishers. Benefits to using these companies included no up-front cost, pay for performance, easy termination of campaign and access to large-volume publishers. In terms of affiliate programs, Blue Orb was to launch an affiliate program on Commission Junction or Linkshare. Blue Orb would gain access to tens of thousands of publishers who promoted software and entertainment products on a pay-for-performance basis. As for targeted media buys, Blue Orb anticipated buying advertising on targeted gamer sites or sites that shared demographic traits with SwitchBlade Pro users. Run of Network (RON) advertising would be placed on large networks (e.g. www.advertising.com and www.valueclick.com). For search engine marketing and optimization, Blue Orb had partnered with Right Brain Media to develop a search engine optimization and marketing program. The partnership was ongoing. ADVERTISING PARTNERSHIPS The advertising revenue model should fit well for companies seeking to reach the community built around the SwitchBlade Pro product. Blue Orb was to provide advertising impression opportunities on the www.switchbladepro.com website, where its users should go for the latest game updates, contests, support, tips and techniques, and to interact with other SwitchBlade users. The online media market represented $22 billion of the annual advertisement spending, which made it the fastest growing media advertising segment.2 The reason why online advertising was a potentially successful market was because of the results it had been delivering. Research by Nielson Entertainment showed that average brand familiarity had 2 www.emarketer.com/Reports/All/Emarketer 2000442.aspx?src=report2 home, accessed August 13, 2008.

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increased by 64 per cent due to in-game advertisements. Brand rating had increased by 37 per cent. Average purchase consideration had increased by 41 per cent; average advertisement recall had increased by 41 per cent; and average advertisement rating had increased by 69 per cent. In 2006, companies had spent $370 million placing advertisements in all gaming platforms ranging from game-related websites to in-game advertisements.3 The other reason why online advertisement was important was that PC gamers were playing online games for an average of eight hours per week. JUMPING ON THE CAROUSEL As Pete and Mike sat around the table that June afternoon, it dawned on them that they were at a pivotal point in the company’s history. Blue Orb was transitioning from a research-oriented organization to a retail software company. The board of directors was getting impatient. Money was virtually nonexistent and talented technical people at the company were turning to other employment opportunities. The company’s very limited resources needed to be deployed away from product development to revenue- generating activities. A marketing team needed to be assembled. Sales and customer support infrastructure and processes needed to be either created or made more robust. Promotional themes and copy needed to be developed in support of the value proposition. The proper promotional methods had to be created. Pete turned to Mike and said, “It is time to jump on this spinning carousel. We have to move forward. Please set up a meeting with Chris at DragonLAN (president of a local gaming club) for later this week, and let’s get back to Bill at FightWare with a decision by early next week.” Mike’s response was, “Will do. In the meantime we have interviews for the marketing interns set for tomorrow. I need to work on the messaging for SwitchBlade Pro, set up additional focus groups and revise the marketing plan. What to do and where to start? See you tomorrow.” Pete and Mike both realized that in the next few days several decisions had to be made, both tactically and strategically. Tactically, some of the issues that had to be settled included whether or not a video game competition was the right start to the marketing plan. If so, should the administration of the competition be outsourced? Strategically, was the social media/community development marketing strategy proposed by Mike the right path for Blue Orb? Pete and Mike were aware that the future of the company was riding on the right decision. There was no margin for error and no coming back from a mistake.

3 Data Park Associates.

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Exhibit 1

THE INITIAL VALUE PROPOSITION FOR SWITCHBLADE PRO

 

 

 

 

 

 

 

 

 

Source: Company files.

Exhibit 2

THE ORBITOUCH KEYLESS KEYBOARD

Source: Company files.

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Exhibit 3

SIGNIFICANT EVENTS IN THE HISTORY OF SWITCHBLADE

Event Event No.

Date Number of Downloads (cumulative)

Version Expenses Revenue

Launch of SwitchBlade PRO Beta

1 October-07 Free

World of Warcraft Blade Released

2 October-07 22,000 Free $15,000 $200

Xfire Partnership Created 3 November-07 38,000 Free $15,000 $600 SwitchBlade 2.0 Released 4 April-08 42,000 Free $10,000 $1,500 Double Fusion Ad Agreement Announced

5 April-08 48,000 Free $10,000 $2,800

Call of Duty 2 and 4 Blades Released

6 May-08 57,600 Free $5,000 $3,200

Half Life 2 Blade Released 7 June-08 62,208 Free $7,000 $3,600 Alienware “Gaming Giveaway” Launched

8 June-08 67,185 Free $7,000 $3,600

Age of Conan Partnership Announced

9 July-08 72,559 Free $7,000 $4,200

SwitchBlade 3.0 Released 10 August-08 78,364 Free $7,000 $4,800 GCDC Video Game Conference Attendee

11 August-08 86,984 Free $5,000 $6,000

Warhammer Co-marketing Agreement Announced

12 August-08 96,552 Free $5,000 $6,500

110,000 DOWNLOADS OF FREE VERSION

13 September-08 110,070 Free $5,000 $7,000

Paid SwitchBlade PRO 1.0 (Paid Version) Released

14 October-08 800 Paid $7,500 $5,912

Blade Builder Software Announced

15 December-08 1,108 Paid $6,500 $8,188

Twenty-four Games Supported

16 May-09 1,625 Paid $800 $12,009

Total $112,800 $70,109 Note: The low expense for May 2009 was the result of a non-typical event by a vendor and should not be recognized as a downward trend. Given current levels of operations, expenses were expected to remain in the $6,500-7,500 range per month. Source: Company files.

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Exhibit 4

EFFECTIVENESS OF PROMOTIONAL ACTIVITIES

Note: *Revenue for May 2009 divided by Total Cost. Source: Company files.

Exhibit 5

HISTORICAL GROWTH IN THE VIDEO GAME INDUSTRY

Source: NPD, 2008.

Promotional Type Total Cost (TC) Revenue (for May 2009) Effectiveness Ratio* Online Ads $34,500 $1,801 0.05 In-game Ads $16,500 $1,801 0.11 Gaming Magazines $21,250 $240 0.01 Gaming Expos $19,950 $1,201 0.06 Social Media $7,700 $1,201 0.16 YouTube Videos $7,581 $600 0.08 Reviews $1,400 $600 0.43 Gamer Sponsorship $6,650 $1,801 0.27 Word of Mouth $2,200 $2,762 1.26 Total $117,731 $12,007

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