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U.S. DISTRIBUTION LANDSCAPE June 3, 2010. Overview Affiliate Sales Objectives Organizational Structure Consolidating Landscape Shifting Dynamics Economic.

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Presentation on theme: "U.S. DISTRIBUTION LANDSCAPE June 3, 2010. Overview Affiliate Sales Objectives Organizational Structure Consolidating Landscape Shifting Dynamics Economic."— Presentation transcript:


2 Overview Affiliate Sales Objectives Organizational Structure Consolidating Landscape Shifting Dynamics Economic Model Foreign Language Feeds New Platforms Affiliate Marketing

3 Affiliate Sales Objectives Secure carriage of networks on all distributor platforms Generate revenue by charging per subscriber license fees Maximize value of content on new media platforms Long-term relationships Expand our networks as technology evolves SD HDTV 3-D Non-linear content Long & Short Form

4 Organizational Structure

5 Distribution Organizational Structure Distribution National Accounts and Field Sales Digital Media and Affiliate Marketing Sales Operations

6 National Accounts and Field Operations National Accounts Negotiate with corporate programming teams of large and mid-size affiliates to secure long term contracts oExecute deals for linear, HD, VOD and broadband services oLicense fees, packaging, legal terms, etc. Field Sales Work with cable affiliates to drive bottom up interest oSecure local deals Negotiate distribution deals with small affiliates

7 Digital Media and Affiliate Marketing Digital Media Identify and evaluate new business opportunities in the advanced media space (e.g. VOD, broadband, iTV, mobile, etc) Provide deal input to National Accounts with traditional video distribution partners for ADM Negotiate digital media and technology deals (e.g., Fox Mobile, Black Arrow, Ensequence etc.) oLicense fees, packaging, legal terms, etc. Affiliate Marketing Work with affiliates to drive strategic promotional opportunities for our portfolio of networks Oversee contractual marketing commitments, multiplatform promotions and local ad sales partnerships Develop and distribute all marketing communications and materials

8 Sales Operations Oversee deal and MFN compliance Handle departmental budget, including re-forecasting efforts Work with finance on payment issues Manage deal renewals for small affiliates

9 Consolidating Landscape

10 Consolidating Distributor Landscape 15 Years AgoToday Future 15+ Significant companies8 companies Further consolidation DecentralizedCentralized - 2-3 cable ops Minimal consolidationConsolidation - Telco/Satellite Cable – 85%Cable – 65% Centralization Satellite – 15%Satellite – 30% Telco – 5% FUTURE? 5 Big Programmers / 5 Big Distributors

11 Consolidating Distributor Landscape COMCAST-24MM DIRECTV-18MM Time Warner/Brighthouse-13MM DISH-12MM 65MM 75% of all Multichannel subscribers

12 Distributor Competition CABLE SATELLITE TELCO

13 Programmer Consolidation NBCU DISNEY (ABC) CBS FOX USAESPN Showtime FOX SYFYESPN 2 Movie Channel FOX Movies CNBCESPN U CBS College Sports FOX News MSNBCESPNews FOX Business OXYGENESPN Classic NAT GEO BravoESPN Deportes NAT GEO Wild CNBC IIDisney Channel FOX Soccer Disney XD FX -----------------------------ABC Family SPEED SOAPnet AETNABC News Now A&E History---------------------------------- Lifetime Lifetime Movie NetworkAETN Bio History InternationalA&E Crime & InvestigationHistory Military HistoryLifetime Lifetime Real WomenLifetime Movie Network History en EspanolBio History International --------------------------------Crime & Investigation Military History COMCASTLifetime Real Women History en Espanol GOLF Versus Style E! Regional Sports Nets

14 AETN Portfolio Merger with Lifetime provides increased opportunities in negotiations Emerging nets portfolio is a primary focus Integrated portfolio deals will take several years A&ELIFETIME HISTORYLIFETIME MOVIE NETWORK BIOLIFETIME REAL WOMEN HISTORY INTERNATIONAL CRIME & INVESTIGATION MILITARY HISTORY HISTORY en ESPANOL Now ONE Portfolio

15 Shifting Dynamics

16 Contract Negotiation Three Big Issues Rates – Extremely contentious Packaging - Subscriber guarantees ADM (Alternate Distribution Method) Contracts usually long-term Approximately 5+ years

17 Retransmission Consent Nets born out of retransmission consent 1990S oFOX – FX oNBC – MSNBC oLifetime (Hearst) – LMN, LRW oDisney/ABC – ESPN 2, SOAPnet oScripps – HGTV, FOOD Cash for carriage – completely changing dynamics

18 Retrans For Cash As the value of retrans increases, it becomes an ever more powerful negotiating tool. On the flip side, it is becoming increasingly complicated to extract it from deals. Additional note – Broadcast signals delivered digitally effective June 2009 2007200820092010 Per sub fee not generally paid $0.20 – 0.30 Up to $0.50 Could it top $1.00?

19 Sports Rights Sports programming is a key driver of distribution and license fees ESPN Commands highest license fees of any network in the U.S. Monetizes content on all platforms DirecTV NFL Sunday Ticket is a key acquisition and retention tool since it is exclusive to DTV TBS Recently acquired rights to the NCAA tournament with CBS Plans to use this as a driver for higher license fees RSNs Trying to use exclusivity to gain competitive advantage

20 Non-linear Platforms DIGITAL Content providers are focused on growing revenue via new platforms Traditional distributors are trying to limit what content providers can do in the new media space These distributors are pushing for expanded rights to put content on any platform for no incremental license fees Authentication has been the most high profile initiative for these distributors

21 Economic Model

22 Cable Network Model Affiliate revenue creates insurance against bad economy because the $$$ are contracted for many years Participate in upside of economy with Ad Sales growth Promotion and awareness through BB – Limited incremental revenue (at this time)

23 Foreign Language Feeds

24 Distributors are interested in importing foreign feeds of networks Dish and DirecTV have traditionally offered the most foreign language feeds and, as such, have attracted many multicultural subscribers Cable companies are now trying to compete Languages vary in interest among cable providers Spanish is most pervasive Other languages of interest are Filipino, Portuguese, Russian, Hindi and Chinese

25 Foreign Language Feeds: Packaging and Pricing On average, distributors currently carry programming in approximately 18 languages Each language has anywhere from one to 11 channels that are sold in bundles Pricing varies by network/bundle and currently ranges from $6.99 - $25.99 There is increasing interest in offering these feeds or portions of these feeds via broadband

26 New Platforms

27 VOD Introduced in 2002 oAll Ad supported nets feared participation due to potential provision of Ad revenue All nets bullish today More real estate with Programming Ad Sales revenue oC3 measurement if full Ad load oReduced Ad load oDynamic Ad Insertion Original programming and short form content

28 iTV Value to AETN Increased Ratings and Sustained Brand Engagement Advertising T-Commerce Opportunity Cable – 10M homes growing to 50M Satellite – 21M homes growing to 30M Telco – 5.5M homes Applications This Day in History DISH Network – L Frame DIRECTV Widget Lifetime, A&E, History Web to TV History Store Widget

29 Broadband/Authentication Programmer Perspective ADM Restrictions suppress value and stifle competition New Revenue and Distribution Advertising Sales Promotion and Marketing Brand Extensions and Licensing Distributor Perspective Cord Cutting is killing the video business Authentication protects the dual revenue stream model Distributors are the Base of the Pyramid

30 Mobile Growth Opportunity for AETN Content Over 225M mobile phones in the US Smartphone penetration growing at double digit rates Wireless devices are transforming into all purpose media devices with a focus on personalizing and managing content Products OnDemand Video 30 hours per month (10 hours each from A&E, History and Lifetime) Top series aired within week of linear air WAP, Personalization Products, Games Distribution Partners Verizon VCAST Fox Mobiles BitBop Ongoing discussions with several others

31 Affiliate Marketing Return on Investment Contractual commitments with our distributors Media Value Multiplatform Linear (HD, Local Ad Sales) VOD Broadband Content to Market Content Tap Into Unused Inventory Power of Editorial Balance Brand and Distribution Objectives

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