Digital Distribution: The Key to a Multi-Platform Strategy September 2007 , Barcelona

1. Digital Distribution: The Key to a Multi-Platform StrategySeptember 2007,Barcelona Dr Guy Bisson Screen Digest

2. This presentation: The problem for broadcasters New TV value chain The studio/content owners view On-line/Broadband TV Mobile TV Traditional Questions: What are the main factors to bear in mind when implementing a multi-platform strategy? What platforms are becoming important? What results can we expect from each platform? How will on-demand platforms affect other audiovisual platforms? Some issues! Economic/business model barriers Rights issues Content issues This presentation

3. The problem is well understood • Since 2000, the growth of cable, IPTV and free-to-air DTT boosted penetration and therefore viewing share of alternative channels everywhere • In the long term, the top 5 historic incumbents may converge towards the remaining share of the US networks, that is now below 50% Top five channels Total multichannel And even pay TV subscriber growth is flat….

4. The multiplatform options Digital TV: traditional platforms, including IPTV Trational ‘plus’: Hybrid Online: access to content on open Internet via PC or enabled devices Mobile: content on the move through mobile handsets (either OTA or sideloaded) Games consoles: controlled network delivery via games platforms Retail: DTO 4

5. Aggregate Distribute New television value chain On-demand introduced new business models for aggregators New media has led to massive expansion of platform opportunities Technology providers leveraging control of delivery to get involved in all segments of value chain Revenue share € Internet Mobile On-demand Produce Content Content Content content Platforms Viewer studio sales IPTV TV channels Cable/DTH € pre-finance, commission, barter Multiple platforms support range of viewing devices and ‘situations’ Programme acquisition Revenue share common on the Internet and on-demand now being tried for content acquisition Platforms increasingly act as aggregators Revenue share

6. Retail revenues: significant role in value chain Major studio net revenues from each UK release window (2005) Revenues /£m

7. Major Studio deals now in double figures as digital distribution gains strategic importance …

8. Online video rocketing due to free TV and UGOV 8

9. But, how do you make money? Most built on ‘exit strategy’ model Everybody scrambling after advertising pie Subscription doesn’t really work Premium content sales – not a natural marriage Technology licensing – very few UGOV services have technology to license Content licensing – most UGOV sites don’t own the content on their sites But UGOV does have it uses as part of an intergrated strategy

10. Revenues come from premium/traditional TV content

11. Online TV: characteristics Much TV content is perceived by viewer to be ‘low value’ consumed casually and on a non-ownership basis no expectation from consumer to pay for viewing (free) exception for a few high value premium shows/programmes and sports Subscriptions only come into play for premium service packages TV content lends itself to digital exploitation Quality less of an issue than movies Length of time Core revenue model for broadcast is B2B (advertising driven) and thus ‘free to consumer’ 11

12. Business model trends Ad-funded free content (in catch-up window) Already the biggest revenue generator Customers are already used to watching TV for free Online slant towards 16-34 age groups downloading seen solid but not spectacular growth Early adoption driven by the iPod (1 day after transmission) PC-to-TV link has been problematic Driven towards premium content and ownership Subscription works in niche areas Sport and special interest Combined ‘entertainment’ propositions not really viable on the web 12

13. While digital retail (& rental) is ‘device driven’ 13

14. Online video advertising issues How do you make money? UK CPMs = £40 on average for in-stream advertising (10x TV rates) Equates to 8p per view in gross revenues on x2 ads per view But subject to deductions: Delivery costs: 2p-3p per hour Storage costs: 6p per month per hour programme Both subject to file sizes (c. 750Kbits/s) Advertising is increasingly shaping up as a “volume proposition” – can Europe offer that volume? P2P solutions may provide an answer Reduce delivery cost But requires volume usage to function effectively Must be careful not to take proposition out of open web scenario 14

15. Mobile TV activity on the rise: 69 services sharing €170m in 06

16. Side-loading Unicast (one to one) 2.5G 2.75G 3G 3G+ Content owner Operator Broadcast (one to all) DVB-H DMB MediaFLO ISDB-T DAB MBMS Operator Content owner Video-to-mobile distribution models

17. Europe will generate almost €2bn in 2011

18. Case studies: the platform Core business = subscription model Sky Anytime on PC/Mobile Value-added ‘free’ service to Sky premium subscribers Launched January 2006 1m+ total (free) movie downloads in 12 months Expanded movies to VoD rental in December 2006 And DTO and TV content in 2007 ‘Lost’ – series 3 Building ad model into system Tying into multiplatform: Sky Mobile TV, Sky Broadband 18

19. Case studies: The commercial broadcaster • ITV catch-up on-line • On-line streaming content (advertising supported) • On-line content syndication of original programming for on-demand and retail • Embracing social networking (Friends Reunited) • Online games as revenue stream (deal with PartyGaming) • Mobile portal for clips, news information • Local and regional Websites • Programme specific portals

20. Case studies: the hybrid opportunity Top-Up TV Launched 2004. Pioneered DTT ‘piggy-back’ strategy. The others Since been followed by BT Vision (2006), Setanta Sports (2006 on Freeview), Sky (2007/8?) • Key points: • Top-Up moved from subscription pay TV strategy to subscription on-demand using push PVR. • BT Vision uses IPTV technology for broadband back-channel = true VOD movies, entertainment, sport • Setanta filling space of premium top-up service with Premiere League soccer + other sports content • Sky eager to expand pay TV service to DTT using current space allocated to its free channels

21. Perspective: Strong growth in mobile/on-line TV Charts shows market value in terms of revenue for North America

22. …but dwarfed by traditional pay TV Charts shows market value in terms of revenue for North America

23. Old technology still holds promise 110m European DTT homes by 2012 of which 45% primary TV set Source: Screen Digest TV Intelligence

24. Produce Free TV €€ Pay TV €€€ Cinema €€ Video €€€€ T5> T4> T1> T2> T3> Business models converge on single window TV LOG JAM! Licensing by technology/business model is increasingly irrelevant Stakeholders expanding into all areas of value chain DVD Dist. DVD Dist. Broadcasters stakeholders mobile mobile Internet Internet mobile Internet IPTV Internet IPTV Cable/DTH Theatres DVD Dist. Cable/DTH Broadcasters Content On-demand € content Viewer subscription content rental New media windows generate lowest revenue Exhibition rental Advertising PPV retail retail PPV download subscription Business models Advertising Similar expansion of business models All media rights for given time window seen as one solution, but economic barriers currently too great PPV

25. Aggregate Production Platforms Distribute Finally: Challenges for full exploitation Platforms ask aggregators to organise new media rights and independently act as aggregators in new media space Power struggle Aggregators see new media as a platform by-pass and want mobile, Internet and other new media rights. Distributors want all media rights to protect their traditional value chain. Producers place high value on new media rights Internet Mobile On-demand Content Content Content content Viewer sales Producer/studio TV channels Cable/DTH IPTV Viewer currently denied anytime, anywhere access Platforms and broadcasters still hold market power in most content negotiations Content owners juggle Deal-or-no-deal economics Library content needs new contracts

26. Thank you www.screendigest.com guy.bisson@screendigest.com