DEVELOPMENTS IN THE UK TELEVISION MARKET September 2002

2 Contents Digital TV Programming and Audiences Business Economics Focus on ITV

3 Take-up of digital television compared with other home technologies Source: ITC Digital TV’s strong initial growth is, in part, a result of the move to switch existing subscribers from analogue to digital packages - in 1998 analogue multichannel TV had achieved penetration of some 25% Year After Launch Penetration (% of households) Colour TV Sets VCR PC Satellite Digital TV 1998-June 2002

4 Source: Company literature Pay TV take-up by platform UK Multichannel Pay-TV Penetration, Quarter 2, 2002 Platform Households (‘000s) % of UK TV households Analogue Cable 1,4175.8% Digital Satellite 6, % Digital Cable 2,0268.3% Total9, % UK Pay-TV Growth, Total analogue multichannel ITV Digital* Sky Digital Digital Cable Millions of subscribers Q2Q4Q2 Q3Q1Q4Q2Q3Q1Q4Q3Q * Please note: ITV Digital went into Administration on 27 March 2002 and ceased trading on 1 May, therefore we have only included subscriber numbers up to 31 March As no figures were publicly available for subscribers as of this date, ITV Digital subscribers were assumed to be equal to the latest figures released (i.e. for Q4, 2001).

5 Quarterly growth in digital pay-TV subscribers -40% -20% 0% 20% 40% 60% 80% 100% Digital Analogue multichannel Total multichannel Q1 Q2 Q3 Q4 Q2Q3Q Source: Company literature

6 Range of available digital basic packages (Satellite & Cable) More than 20 channels, mostly free to air NTL £20 Telewest £15 Sky £10 More than 20 channels, mostly free to air  Please note: prices for NTL and Telewest packages include phone line rental; installation charges are applicable for all three platforms More than 14 channels, mostly free to air Channels included: Cost: Channels included: More than 40 channels £23 £18.50 £13 4 ‘themed’ packs (Variety; News & Documentary; Kids & Music; General Entertainment) each offering more than 50 channels 4 ‘themed’ packs (Popular mix, Knowledge, Kids/music, Lifestyle pack), each offering some 25 channels Some 44 channels £21.50 More than 70 channels £26 £25.50 £16 More than 70 channels Source: Company literature

7 Contents Digital TV Programming and Audiences Business Economics Focus on ITV

8 Issue of ITC licences Source: ITC estimates Issue of ITC licences and total number of licensed programme services, Net licences issued in year (all services) Total programme services Note: The negative figure for net licences issued in 2000 reflects the replacement of many regional cable licences with fewer national licences.

9 Audience share in all homes by channel, Source: BARB Q Q3Q4Q Q2Q3Q4Q Q2Q3Q4Q Q2 % BBC1 BBC2 ITV1 C4 C5 Other

10 Audience share in multi-channel homes by channel, Source: BARB Q Q3Q4Q Q2Q3Q4Q Q2Q3Q4Q Q2 BBC1 BBC2 ITV1 C4 C5 Other %

11 Average weekly audience reach (3 minutes consecutive) by channel, all homes, Source: BARB Q Q3Q4Q Q2Q3Q4Q Q2Q3Q4Q Q2 BBC1 BBC2 ITV1 C4 C5 %

12 Viewer profiles by type of television received Profile of viewers by type of service and age, Q Profile of viewers by type of service and social class, Q Source: BARB ABC1C2DE 58% 42% Analogue terrestrial homes 57% 43% Multi- channel homes 60% 40% All homes Children Analogue terrestrial homes 50% 25% 18% 7% Multi- channel homes 22% 37% 28% 13% All homes 35% 32% 23% 11%

13 Hours viewed per household per day by social class, Source: BARB Q Q Q Q Q All Homes ABC1C2DEAll Individuals Multichannel Homes ABC1C2DEAll Individuals %

14 Hours viewed per household per day by age, Source: BARB All Homes Children Multichannel Homes Children % Q Q Q Q Q2 2002

15 Contents Digital TV Programming and Audiences Business Economics Focus on ITV

16 Sources of UK television revenue... Source: ITC Components of television revenue in 2001 Net Advertising Revenue 44%£3.4 billion Sponsorship1%£84 million Sale of goods4%£312 million Other5%£382 million BBC licence fee spent on TV 21%£1.7 billion Subscription Revenue 25%£2.0 billion...and trend in share of main components, % 10.0% 20.0% 30.0% 40.0% 50.0% 60.0% NAR Sponsorship Subscription Sale of goods Other BBC licence fee spent on TV

17 0% 10% 20% 30% 40% 50% 60% 70% 80% Channel 3 incl GMTV Channel 4 incl S4C Channel 5 Cable and Satellite and other UK TV Net Advertising Revenue by channel over time... Source: ITC

18 PQR Cash Bids Tender payments by Channel 3, Channel 5 and Additional Services licensees, Note: The drop in total tender payment in 1999 reflects the renewal of some Channel 3 licences. The increase in PQR in this year reflects the policy decision that more emphasis be given to the PQR component of tender payments. The Broadcasting Acts 1990 and 1996 require that certain kinds of licence are awarded by the ITC after a process of competitive tender. Licences awarded in this way are required to make additional payments to the Treasury (via the ITC). Additional payments are in two parts. The first is a percentage, set by the ITC, of qualifying revenue (PQR). The second part is the cash bid, which on renewal is set by the ITC. This is index-linked and payable annually. Source: ITC £ million, nominal prices

19 Contents Digital TV Programming and Audiences Business Economics Focus on ITV

20 The ITV licensees Grampian Scottish Ulster Border Tyne Tees Yorkshire Granada Central Anglia HTV Carlton/LWT Westcountry Meridian Channel

21 The ITV licensees - ownership structure ITV Scottish Media Group Carlton GroupGranada Group Anglia Border Granada LWT Meridian Tyne Tees Yorkshire Central Carlton HTV Grampian Westcountry Scottish Ulster Channel

22 Source: BARB Audience share by region, ITV1 compared with BBC1, Q ITV1 BBC Border Ulster North East Wales Yorkshire North West Scotland Midlands London West East of England South & South East South West %

23 Source: BARB Audience share for regional news programmes by region, ITV1 compared with BBC1, Q % Border Ulster North East South & South East West London Midlands Scotland Yorkshire North West East of England Wales South West ITV1 BBC1

24 Original programmes (including repeats) as a percentage of total output (hours) by channel Source: ITC; Channel 4 Annual Report ITV, Channel 4 and Channel 5 all have requirements in their licences to produce a set amount of original programming each year. Note: Channel 4’s original programming target was only introduced as a licence requirement in 1998; prior to this the figures were reported in Channel 4’s Annual Report. Achieved in 2001 ITC Licence Requirement ITC Licence Requirement for original programmes and actual performance, 2001 % Original programmes as a percentage of total output, % ITV Channel 4 Channel 5 65% 81% ITV 60% 69% Channel 4 55% 58% Channel 5

25 Source: ITC ITV, GMTV, Channel 4 and Channel 5 all have requirements in their licences to commission a set amount of programming from independent producers each year. ITC Licence Requirement for independently produced programmes and actual performance, 2001 Qualifying independents as a percentage of total qualifying output, Qualifying hours commissioned from independent producers as a percentage of total qualifying output by channel Achieved in 2001 ITC Licence Requirement % ITV Channel 4 Channel 5 25% 31% ITV 25% 61% Channel 4 25% 73% Channel 5