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

2. This presentation 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

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% Total multichannel Top five channels And even pay TV subscriber growth is flat….

4. 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 Hybrid

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

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

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

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

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. 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’

12. 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

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

14. 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

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

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

17. Europe will generate almost €2bn in 2011

18. 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

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

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

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

27. Subscription-based services control the market

28. 28 Catalogue VoD ~7-8 years after broadcast Free TV Cable networks (2-3+ years) Off-network Syndication (3-5+ years) Series season DVD September after initial broadcast Episode repeats 3-6months after initial broadcast First run VoD Day after broadcast Episode airs Day 1 Broadcast Network Free Internet catch-up Internet DTO Broadcast Network Retailers and ecommerce Various cable network Internet VoD O&O Stations, Other affiliates, Independents Cable/IPTV PPV Mobile PPV US TV Windows

29. 29 Online revenues still tiny compared to physical <$50m in 2006. Still only $2bn by 2010