1. Our Environment and Outlook 2011 M ichel Tremblay - Johanne Charbonneau May 26, 2008

2. Challenge Us - May 20082 Overview 1.The World We Live In 2.Media Trends 3.Our Financial Picture 4. Outlook 2011

3. Challenge Us - May 20083 1.The World we live in Surrounded by Mega Players A $12 billion industry with a handful of highly integrated players –$ 5 billion in transactions in 2007 –5 key players left in radio –Conventional television: 3 key players –Quebecor dominates all facets of the French market –Rogers, Shaw/Star Choice, Bell ExpressVu and Videotron account for 75% of all subscribers We have few friends among these…but we have a very unique role

4. Challenge Us - May 20084 1.The World we live in Culture not a Gov’t Priority … Nevertheless, our $60 million was renewed for 2 years… –Ends this year in 2008-2009 Recent report of Heritage Committee on the mandate of CBC/Radio-Canada –Very supportive, largely unanimous, actionable, could bring a new era… –Supports the concept of an MOU with Canadians –We have urged Government to act –Will depend on Governments’ response at the end of June

5. Challenge Us - May 20085 1.The World we live in New Platforms Exploding New platforms are exploding and programming costs escalating –We must meet the needs of Canadians –Being there when they want, on the platforms they choose to use. …but there are significant resource implications…

6. Challenge Us - May 20086 1.The World we live in A Flat Appropriation …which has declined by $428 million since 1990 How will we sustain our activities and our growth? CBC|Radio-Canada’s Parliamentary Appropriation: 1990-2007 (Dollars in millions and in 2007 constant dollars)

7. Challenge Us - May 20087 1.The World we live in …and Advertising Revenue is Weakening Advertising is vital to the operations of our television networks –It represents 50% of CBC Television’s budget and 40% of Télévision de Radio-Canada’s And like other conventional broadcasters, CBC/Radio- Canada’s advertising revenue has weakened CBC|Radio-Canada’s Advertising Revenues: 1990-2007 (Dollars in millions and in 2007 constant dollars)

8. Challenge Us - May 20088 1.The World we live in CRTC: Making Important Decisions CRTC is dealing with issues that will have a lasting effect on us and the industry… –Cable and Satellite Carriage Rules and Subscriber Fees 90% of Canadians subscribe, carriage is key Subscriber fee needed to deal with declining advertising dollars and preserve our revenue base –The Canadian Television Fund Our guaranteed envelope of 37% is at risk Worth $100 million to CBC/Radio-Canada Government will decide –Will oversee the transition to Digital TV by 2011 –Will deal with our licence renewal in Fall 2009

9. Challenge Us - May 20089 1.The World we live in In Effect, Most Canadians already pay to receive TV Source: BBM/Neilsen Media Research TV Subscribers Off-air TV is in decline

10. Challenge Us - May 200810 1.The World we live in Analog off-air TV viewers will be forced to choose a new TV platform in 2011 Consumer Intentions when Analog OTA TV Channels are Shut-Off Analog OTA TV Households % 34% will subscribe to TV 30% don’t know what they’ll do 19% will buy a digital OTA TV receiver 16% will go without TV

11. Challenge Us - May 200811 1.The World we live in Subscription revenue is the Future Subscription revenues are now, by far, the most important source of revenue in the Industry

12. Challenge Us - May 200812 2.Media Trends Television Usage Usage of TV has remained strong, despite the growth of the Internet and other platforms …but content on demand is growing Weekly Per Capita Hours Of Viewing To Television All Persons 2+, 1987-1988 to 2006-2007

13. Challenge Us - May 200813 2.Media Trends Consumers want content on-demand Innovation EmergingExpanding Decline Maturing 3%15%67%100% PVR (10%) Internet TV (14%) VOD (7%) Several platforms are being adopted to meet on-demand needs. DVD Recorder (18%) Adoption and Use of Video Technologies, Canadians 18+

14. Challenge Us - May 200814 2.Media Trends Canadians are adopting PVRs … PVR Penetration Households %

15. Challenge Us - May 200815 2.Media Trends Francophones are using VOD more than Anglophones Watched VOD in the Past Month Households* % Many prime time programs from TVA are available for free and on-demand to Vidéotron cable customers * Only digital cable and telco TV subscribers have access to VOD.

16. Challenge Us - May 200816 2.Media Trends The amount of time spent watching TV from the Internet is minimal Viewing of TV on the Internet represents less than 1/100th of total TV viewing time (Less than 15 minutes a week)

17. Challenge Us - May 200817 2.Media Trends But young Canadians are starting to watch some TV from the Internet… * On a TV set or TV obtained from the Internet. Generally, survey estimates of TV usage are based on self-reporting which tends to underestimate use. AnglophonesFrancophones 12.8 Average Weekly Per Capita Hours of Television Viewing by Generation Y Adults 18-27 years (hours) 11.6 11.7 11.7

18. Challenge Us - May 200818 2.Media Trends Very few Canadians watched video on cell phones 65% of Canadians own a cell phone, but: –Only 2% of Canadians watched video on their phones* –Very few cell phone users (less than 1%) watched television shows specifically* * In the past month

19. Challenge Us - May 200819 2.Media Trends Video MP3 Players are also being adopted, but not used frequently 9% of Anglophones and 6% of Francophones have a Video MP3 Player Video MP3 Players have the largest hard drives, so they are not necessarily being adopted to watch video (e.g. for more music storage capacity) Penetration of MP3 Players Adults 18+ % 29 34 19 24 AnglophonesFrancophones

20. Challenge Us - May 200820 2.Media Trends HDTV sets are in high demand… HDTV Set Household Penetration % This high level of growth reflects increased consumer demand for larger screen sizes, the aesthetics of new TVs (e.g. thinner) and the decline in HDTV prices

21. Challenge Us - May 200821 2.Media Trends …but only half of HDTV set owners have an HDTV receiver DVD Players and subscription to a TV service are the most popular sources of digital content for HDTV set owners. Content Sources Among HDTV Set Owners HDTV Set Owners %

22. Challenge Us - May 200822 2.Media Trends Usage of Radio …however, the usage of radio is on a downward trend But our radio services achieve record-levels in audience share Weekly Per Capita Hours Of Listening To Radio All Persons 12+, 1988 to 2007

23. Challenge Us - May 200823 2.Media Trends A number audio choices have reached significant penetration thresholds … Innovation EmergingExpanding Decline Maturing Conventional radio use (91%)* 3%15%67%100% Satellite Radio* (7%) Downloading Music* (17%) Podcasting* (11%) Streaming Radio* (16%) MP3 Player (31%) * Past month use Adoption and Use of Audio Technologies, Canadians 18+

24. Challenge Us - May 200824 2.Media Trends Time spent with satellite radio and MP3 Players are particularly high … Satellite Radio Satellite radio has in excess of 1 million subscribers in Canada Satellite radio listeners spend 11 hours listening to the service in addition to their radio use MP3 Players Nearly one-third of Canadian adults own an MP3 player MP3 player listeners spend over 6 hours listening to it in addition to their radio use

25. Challenge Us - May 200825 2.Media Trends Broadband Internet has become commonplace at home Type of Home Internet Connection* Canadians 18+ %

26. Challenge Us - May 200826 2.Media Trends Most people use the Internet daily 71 81 Last Reported Usage of the Internet Adults 18+ %

27. Challenge Us - May 200827 2.Media Trends Social Networking is Booming Social networking sites permit members to create on-line social networks They provide tools for social networks to communicate (e.g. e-mail, chat, voice) and share (e.g. photos, file sharing) Social networking sits are challenging web portals (e.g. Yahoo!) as the place for news, information and entertainment on- line

28. Challenge Us - May 200828 2.Media Trends The Number of Social Networkers has Doubled in a Year The Internet has become an important social space where people can chat with friends, meet new people, and express themselves Visited a Social Networking Site* Past Month Internet Users 18+ % * Past month use

29. Challenge Us - May 200829 2.Media Trends Despite the hype, only a small amount of Internet time is spent accessing TV or radio TV Time Spent On-Line Internet Users 18+ % RADIO*OTHER INTERNET ACTIVITIES * AM/FM Radio streamed or podcasted The Internet is primarily used for communicating, socializing, reading, shopping, researching, etc. The Internet is primarily used for communicating, socializing, reading, shopping, researching, etc.

30. Challenge Us - May 200830 1.As at March 31, 2007, CBC/Radio-Canada’s assets totalled $1,592 M. –Short term: cash, investments, inventory, accounts receivable, etc. –Long term: property, equipment, long-term investments, etc 2.For that same period, CBC/Radio-Canada’s liabilities amounted to $1,622 M. –Short term: accounts payable, employee related liabilities, etc. –Long term: employee future benefits, bonds payable, etc. 3.Resulting in a negative equity of $30 M. 4.March 31, 2008 results are currently being audited and will be available this summer. 3.Our Financial Picture Financial Situation at March 31, 2007

31. Challenge Us - May 200831 3.Our Financial Picture Sources of Operating Revenue 2008/09 Total Revenues: $1,765 M

32. Challenge Us - May 200832 Réseau de l'information 9.3% French Radio 18.8% radio- canada.ca 1.8% French Television 70.1% English Television 70.8% cbc.ca 1.2% Bold 0.5% English Radio 18.4% Newsworld 9.1% Support Components 19.6% Media Related 7.9% English Services 43.7% French Services 28.8% 3.Our Financial Picture 2008-09 Operating Budget Allocation English Services French Services

33. 33 (in millions of $) 3.Our Financial Picture Miscellaneous Revenues – 1999/2000 to 2008/09 (excluding Newsworld and RDI)

34. Challenge Us - May 200834 3.Our Financial Picture Reinvestment of Self-generated Revenues and other Efficiency Initiatives since 2000/01 86.0 39.1 182.0 76.9 0 50 100 150 200 250 300 Permanent budget allocationsOne-time budget allocations Excludes funding allocated on a pay-back basis. (in millions of $) $268.0 M Media Components $116.0 M Support Services *

35. 35 Three-Year Capital Plan: $324.4 M 3.Our Financial Picture Capital Investment Plan

36. Challenge Us - May 200836 3.Our Financial Picture Financial Risks 1.HDTV and Accelerated Coverage Program (ACP) Funding Pressures 2.Funding Concerns 3.Consolidation, fragmentation and emerging platforms 4.Canadian Television Fund

37. Challenge Us - May 200837 4.Outlook 2011 Traditional TV and radio platforms will still be the principal mediums for consumers

38. Challenge Us - May 200838 4.Outlook 2011 Virtually all Canadians will subscribe to TV Source: CBC/Radio-Canada estimates based on BBM/Neilsen Media Research and MTM Share of TV Households by Technology Platform Two-thirds of analog OTA households will subscribe to TV by 2011 OTA will shrink to 4% households OTA TV Telco TV Satellite Digital Cable Analog Cable

39. Challenge Us - May 200839 4.Outlook 2011 A third of TV household with have HDTV receivers Source: CBC/Radio-Canada estimates based on BBM/Neilsen Media Research and MTM Share of TV Households by TV Reception Picture Format Two-fifths (42%) of TV households will have an HD receiver One-quarter (26%) of TV households will stay with analog cable HD Digital SD Digital Analog

40. Challenge Us - May 200840 4.Outlook 2011 Even more consumers will be using personal audio platforms Outlook 2011: Reach of Personal Audio Adults 18+ % Platforms that are mobile will continue to grow Streaming radio has already matured Source: CBC/Radio-Canada estimates based on MTM

41. Challenge Us - May 200841 4.Outlook 2011 A sizeable portion of the TV audience will be using time-shifting technologies Outlook 2011: Reach of Personal TV Adults 18+ % PVRs will move into the mainstream Cable VOD will increase in popularity Younger Canadians will increasingly use the Internet to get some of their TV Source: CBC/Radio-Canada estimates based on MTM

42. Challenge Us - May 200842 4.Outlook 2011 Internet use will continue to grow

43. Challenge Us - May 200843 4.Outlook 2011 Outlook 2011: Challenges How do we sustain our core radio and TV services? How can we access new subscriber revenues? What is the best way to serve HDTV audiences? How do we adjust to platform fragmentation? What are the revenue opportunities from new platforms? How will we cope with a distribution duopoly? At what level should we interact with audiences? How can we increase our relevance to Canadians in a changing media landscape?