DEVELOPMENTS IN THE UK TELEVISION MARKET December 2002

2 Contents Industry Figures Digital TV Programming and Audiences Focus on ITV

3 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

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

5 PQR Cash Bids Tender payments by Channel 3, Five 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

6 Contents Industry Figures Digital TV Programming and Audiences Focus on ITV

7 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 - by 1998 analogue multichannel TV had already achieved penetration of some 25% of households Colour TV Sets VCR PC Satellite Digital TV 1998-Sep Year after launch Penetration (% of households)

8 Source: Company data Pay TV take-up by platform UK Multichannel Pay-TV Penetration, Quarter 3, 2002 Platform Households (‘000s) % of UK TV households Digital Cable 2,0378.4% Digital Satellite 6, % Analogue Cable % Total9, % * 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 UK Pay-TV Growth, Analogue multichannel ITV Digital* Sky Digital Digital Cable Millions of subscribers Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3

9 How people are watching free-to-air digital television, Q Sources: Estimates for iDTVs are provided by Intellect, all other figures are ITC estimates Sky FTA Churn 317,000 (20%) We estimate that 25% of Sky’s ex-subscribers still use the set top box to obtain FTA channels Sky FTA Viewers 230,000 (15%) More than 200,000 households are estimated to have taken advantage of Sky's £100 FTA box offer before it was withdrawn in early it is being re-introduced in early 2003 Ex-ITV Digital 600,000 (37%) We estimate that 600,000 of ITV Digital’s ex-subscribers now use the set-top box to receive Freeview services iDTV 308,000 (20%) The number of iDTV sets is beginning to show significant growth FTA DTT Adaptors 120,000 (8%) A small number were using set top boxes provided by manufacturers such as Pace - following the launch of Freeview this number is expected to increase rapidly

10 Quarterly growth in pay-TV subscribers Digital Analogue multichannel Total multichannel Source: Company data -40% -20% 0% 20% 40% 60% 80% 100% Q1 Q2 Q3 Q4 Q3Q Q3

11 Range of available digital basic packages (Satellite & Cable) More than 20 channels, mostly free to air NTL Telewest £15 Sky £12.50  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 £19.50 £18.50 £15.50 More than 20 channels, mostly free to air 4 ‘themed’ packs (Popular mix, Knowledge, Kids/music, Lifestyle pack), each offering some 25 channels Some 44 channels £21.50 More than 70 channels £25.50 £18.50 More than 70 channels Source: Company literature, January 2003 £25.50 More than 70 channels

12 ADSL NTL Telewest ‘000s ,000 1,200 Q2Q3Q4Q2Q3Q Q Source: Company literature Growth in broadband internet subscribers , , , , , ,000 1,046,000

13 Contents Industry Figures Digital TV Programming and Audiences Focus on ITV

14 Audience share in all homes by channel, Source: BARB % BBC1 BBC2 ITV1 C4 Five Other Q Q4Q Q2Q3Q4Q Q2Q3Q4Q Q2Q3 (CAGR) (-2.8%) (-8.0%) (15.5%) (2.8%) (-1.6%) (2.4%)

15 Audience share in multi-channel homes by channel, Source: BARB BBC1 BBC2 ITV1 C4 Five Other % Q Q4Q Q2Q3Q4Q Q2Q3Q4Q Q2Q3 (CAGR) (3.9%) (-1.6%) (-6.8%) (1.8%) (2.4%) (-1.1%)

16 Audience share in analogue terrestrial homes by channel, Source: BARB Five BBC1 BBC2 ITV1 CH Q1Q2Q3Q4Q1Q2Q3 % 2002

17 Average weekly audience reach (3 minutes consecutive) by channel, all homes, Q Q4Q Q2Q3Q4Q Q2Q3Q4Q Q2Q3 % BBC1 BBC2 ITV1 CH4 CH5

18 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 Children ABC1C2DE Analogue terrestrial homes 59% 41% Multi- channel homes 56% 44% All homes 60% 40% Analogue terrestrial homes 50% 25% 18% 7% Multi- channel homes 22% 36% 28% 14% All homes 35% 30% 23% 11%

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

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

21 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.

22 Contents Industry Figures Digital TV Programming and Audiences Focus on ITV

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

24 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

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

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

27 Original programmes (including repeats) as a percentage of total output (hours) by channel Source: ITC; Channel 4 Annual Report ITV, Channel 4 and Five 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 Five 65% 81% ITV 60% 69% Channel 4 55% 58% Five

28 Source: ITC ITV, GMTV, Channel 4 and Five 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 Five 25% 31% ITV 25% 61% Channel 4 25% 73% Five