1. DEVELOPMENTS IN THE UK TELEVISION MARKET September 2002

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

3. 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 0 10 20 30 40 50 60 70 80 0123456789 Penetration (% of households) Colour TV Sets 1969-1978 VCR 1980-1989 PC 1984-1993 Satellite 1987-1996 Digital TV 1998-June 2002

4. 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 6,10125.0% Digital Cable 2,0268.3% Total9,54439.1% UK Pay-TV Growth, 1999 - 2002 Total analogue multichannel ITV Digital* Sky Digital Digital Cable Millions of subscribers 1999200020012002 Q2Q4Q2 Q3Q1Q4Q2Q3Q1Q4Q3Q1 0 2 4 6 8 10 12 * 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 2002. 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. 5 Quarterly growth in digital pay-TV subscribers -40% -20% 0% 20% 40% 60% 80% 100% 20002001 2002 Digital Analogue multichannel Total multichannel Q1 Q2 Q3 Q4 Q2Q3Q4 1999 Source: Company literature

6. 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. 7 Contents Digital TV Programming and Audiences Business Economics Focus on ITV

8. 8 Issue of ITC licences Source: ITC estimates Issue of ITC licences and total number of licensed programme services, 1994-2001 -100 0 100 200 300 400 500 600 19941995199619971998199920002001 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. 9 Audience share in all homes by channel, 1999-2002 Source: BARB 0 5 10 15 20 25 30 35 Q2 1999 Q3Q4Q1 2000 Q2Q3Q4Q1 2001 Q2Q3Q4Q1 2002 Q2 % BBC1 BBC2 ITV1 C4 C5 Other

10. 10 Audience share in multi-channel homes by channel, 1999-2002 Source: BARB 0 5 10 15 20 25 30 35 40 45 Q2 1999 Q3Q4Q1 2000 Q2Q3Q4Q1 2001 Q2Q3Q4Q1 2002 Q2 BBC1 BBC2 ITV1 C4 C5 Other %

11. 11 Average weekly audience reach (3 minutes consecutive) by channel, all homes, 2001-2002 Source: BARB 0 10 20 30 40 50 60 70 80 90 100 Q2 1999 Q3Q4Q1 2000 Q2Q3Q4Q1 2001 Q2Q3Q4Q1 2002 Q2 BBC1 BBC2 ITV1 C4 C5 %

12. 12 Viewer profiles by type of television received Profile of viewers by type of service and age, Q2 2002 Profile of viewers by type of service and social class, Q2 2002 Source: BARB ABC1C2DE 58% 42% Analogue terrestrial homes 57% 43% Multi- channel homes 60% 40% All homes Children 16-34 35-54 55+ Analogue terrestrial homes 50% 25% 18% 7% Multi- channel homes 22% 37% 28% 13% All homes 35% 32% 23% 11%

13. 13 Hours viewed per household per day by social class, 2001-2002 Source: BARB Q2 2001 Q3 2001 Q4 2001 Q1 2002 Q2 2002 0 0.5 1 1.5 2 2.5 3 3.5 4 4.5 All Homes ABC1C2DEAll Individuals Multichannel Homes ABC1C2DEAll Individuals %

14. 14 Hours viewed per household per day by age, 2001-2002 Source: BARB All Homes 0 1 2 3 4 5 6 Children16-3435-5455+ Multichannel Homes Children16-3435-5455+ % Q2 2001 Q3 2001 Q4 2001 Q1 2002 Q2 2002

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

16. 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, 1995-2001 0.0% 10.0% 20.0% 30.0% 40.0% 50.0% 60.0% 1995199619971998199920002001 NAR Sponsorship Subscription Sale of goods Other BBC licence fee spent on TV

17. 17 0% 10% 20% 30% 40% 50% 60% 70% 80% 1995199619971998199920002001 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. 18 PQR Cash Bids Tender payments by Channel 3, Channel 5 and Additional Services licensees, 1993-2001 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 0 50 100 150 200 250 300 350 400 450 500 1994199519961997199819992000 2001

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

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

21. 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. 22 Source: BARB Audience share by region, ITV1 compared with BBC1, Q2 2002 ITV1 BBC1 0 5 10 15 20 25 30 35 40 Border Ulster North East Wales Yorkshire North West Scotland Midlands London West East of England South & South East South West %

23. 23 Source: BARB Audience share for regional news programmes by region, ITV1 compared with BBC1, Q2 2002 % 0 5 10 15 20 25 30 35 40 45 50 Border Ulster North East South & South East West London Midlands Scotland Yorkshire North West East of England Wales South West ITV1 BBC1

24. 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, 1995-2001 0 10 20 30 40 50 60 70 80 90 100 199619971998199920002001 % ITV Channel 4 Channel 5 65% 81% ITV 60% 69% Channel 4 55% 58% Channel 5

25. 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, 1995-2001 Qualifying hours commissioned from independent producers as a percentage of total qualifying output by channel Achieved in 2001 ITC Licence Requirement % 0 10 20 30 40 50 60 70 80 90 100 199619971998199920002001 ITV Channel 4 Channel 5 25% 31% ITV 25% 61% Channel 4 25% 73% Channel 5