1. DEVELOPMENTS IN THE UK TELEVISION MARKET June 2002

2. 2 Contents Technology in the home (How do people get digital TV?) Programming and Audiences (Who is watching what?) Economics (How are broadcasters financed?) Focus on ITV

3. 3 Take-up of digital television compared with other home technologies Source: ITC Year After Launch 0 10 20 30 40 50 60 70 80 0123456789 Colour TV 1969-1978 VCR 1980-1989 PC 1884-1993 Satellite 1987-1996 Digital TV 1998-2001 Penetration (% of households)

4. 4 Source: Company literature. Pay TV take-up by platform UK Multichannel Pay-TV Penetration, Quarter 1, 2002 UK Pay-TV Growth, 1999 - 2002 * Please note: As no figures are publicly available for subscribers as of 31 March 2002, ITV Digital subscribers are assumed to be equal to the latest figures released (i.e. for Q4, 2001). We have not allowed for churn, return of STBs or conversion to the other platforms. ITV Digital went into Administration on 27 March 2002. Total analogue multichannel ITV Digital Sky Digital Digital Cable Millions of subscribers 0 2 4 6 8 10 12 Q1 1999 Q3Q1 2000 Q3Q1 2001 Q3Q1 2002 Platform Households (‘000s) % of UK TV households Analogue Cable 1,5166.2% Digital Satellite 5,88724.4% Digital Cable 2,0288.3% Digital Terrestrial 1,263*5.2%* Total10,69443.9%

5. 5 Take-up of various home entertainment equipment Source: ITC, the Public’s View 2001 Base = All Viewers

6. 6 Number of television sets in the home Source: ITC, the Public’s View 2001 Base = All respondents 24% 1 35% 2 24% 3 12% 4 6% 5+ % of individuals Number of TV sets

7. Increased bandwidth enhances applications Current UK Broadband Connections, March 2002 Source: Company literature. 0-50 Kbps 100-500 Kbps 2 Mbps 10 Mbps Bandwidth GPRS/Modem E-mail; Instant messaging; Basic web browsing; e-commerce. EDGE/3G/ADSL/ Cable modem (current) Video conferencing; Fast internet access; File sharing; CD-quality audio; Real-time gaming Cable modem (future)/ADSL Full motion video Fibre Multiple video streams 125,900 Telewest 183,300 NTL 170,000 ADSL

8. 8 Contents Technology in the home (How do people get digital TV?) Programming and Audiences (Who is watching what?) Economics (How are broadcasters financed?) Focus on ITV

9. 9 Issue of ITC licences, and programme services available in digital households by genre Source: ITC estimates Issue of ITC licences and total number of licensed programme services -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. Programme services by Genre, 2002 0 20 40 60 80 100 120 140 160 180 Sport Film Kids Music Factual Home Shopping Entertainment Local Other (Unclassified)

10. 10 Content available via basic multi-channel TV “The TV channels I receive at the moment give me all the choice I want” From: The Public’s View 2001 10.00-10.30 BBC1BBC2ITV1C4C5 6.00-6.30 6.30-7.00 7.00-7.30 7.30-8.00 8.00-8.30 8.30-9.00 9.00-9.30 9.30-10.00 PM BBC Choice UK Gold ITV2Sky 1 US DramaNewsUS Comedy Comedy Film FactualSoap Drama Light Entertainment A selection of the content available with a basic package CBBC* *BBC Choice commences broadcasting at 7pm. Prior to this, CBBC uses the spectrum. Note: This is a representative schedule only, based on a week in January 2002. 73% All homes 81% Multichannel 85% Digital multichannel % Agree

11. 11 Audience share in all homes by channel, 2001-2002 % 0 5 10 15 20 25 30 35 BBC1BBC2ITV1Channel 4Channel 5Other % Q1 2001 Q2 2001 Q3 2001 Q4 2001 Q1 2002 Source: BARB

12. 12 Audience share in multi-channel homes by channel, 2001-2002 Q1 2001 Q2 2001 Q3 2001 Q4 2001 Q1 2002 0 5 10 15 20 25 30 35 40 45 BBC1BBC2ITVCH4CH5Other % Source: BARB

13. 13 Average weekly audience reach (3 minutes consecutive) by channel, all homes, 2001-2002 Source: BARB Q1 2001 Q2 2001 Q3 2001 Q4 2001 Q1 2002 % 0 10 20 30 40 50 60 70 80 90 100 BBC1BBC2ITVChannel 4Channel 5

14. 14 Viewer profiles by type of television received Children 16-34 35-54 55+ Profile of viewers by type of service and age, Q1 2002 Profile of viewers by type of service and social class, Q1 2002 ABC1C2DE Analogue terrestrial homes Multi- channel homes All homes 58% 42% 58% 42% 60% 40% Analogue terrestrial homes 51% 27% 15% 7% Multi- channel homes 22% 35% 28% 14% All homes 36% 31% 22% 11% Source: BARB

15. 15 Hours viewed per household per day by social class, 2001-2002 Source: BARB Multichannel HomesAll Homes Q1 2001 Q2 2001 Q3 2001 Q4 2001 Q1 2002 0 0.5 1 1.5 2 2.5 3 3.5 4 4.5 5 ABC1C2DEAll IndividualsABC1C2DE All Individuals

16. 16 Hours viewed per household per day by age, 2001-2002 Q1 2001 Q2 2001 Q3 2001 Q4 2001 Q1 2002 Source: BARB 0 1 2 3 4 5 6 Children16-3435-5455+Children16-3435-54 55+ All HomesMultichannel Homes

17. 17 Contents Technology in the home (How do people get digital TV?) Programming and Audiences (Who is watching what?) Economics (How are broadcasters financed?) Focus on ITV

18. 18 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

19. 19 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

20. 20 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

21. 21 Contents Technology in the home (How do people get digital TV?) Programming and Audiences (Who is watching what?) Economics (How are broadcasters financed?) Focus on ITV

22. 22 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

23. 23 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

24. 24 The ITV licensees Grampian Scottish Ulster Border Tyne Tees Yorkshire Granada Central Anglia HTV Carlton/LWT Westcountry Meridian Channel

25. 25 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

26. 26 Source: BARB Audience share by region, ITV1 compared with BBC1, Q1 2002 ITV1 BBC1 0 5 10 15 20 25 30 35 Border Ulster HTV Wales North East Yorkshire Scotland North West London Midlands HTV West East of England South & South East South West

27. 27 Source: BARB Audience share for regional news programmes by region, ITV1 compared with BBC1, 2001 % 0 5 10 15 20 25 30 35 40 45 50 Channel Border Ulster South & South East Scottish Grampian Yorkshire North East East Midlands Wales South West London North West West ITV1 BBC1