1. Client logo This document may not be reproduced or distributed in any manner without the prior permission of MTM 20 th October 2015 │Contact jon.watts@mtmlondon.com │ Tel +44 (0) 20 7395 7510 The beginning of the end – or the start of something new? Opportunities and challenges for commercial broadcasters

2. 1 MTM is an international research and strategy consultancy. We help clients understand and respond to digital change Introduction Consumer insight Qual and quant research Content, brands, ads, technology Demand and pricing analysis Market and policy research Market and economic analysis Competitor benchmarking Market sizing and forecasting Strategy and growth Vision and strategic planning Opportunity assessments Commercial growth strategies Digital transformation Organisation/business process design Leadership coaching and support Implementation and action planning Service design User and market needs analysis Service and experience design Proposition development

3. 1.Setting the scene 2.Areas of opportunity 3.Key challenges Challenges and opportunities for broadcasters

4. 3 TV distribution is changing – from dumb terminals into connected devices Analogue TVs TV sets Set-top boxes TV sets Integrated apps Set-top boxes Connected sets Digital media streamers Gaming consoles Second-screens Digital TVs Networked devices 1. Setting the scene

5. 4 As a result, overall TV viewing is shifting, gradually – from TV sets (down 4.7%, YoY) to other screens (up 17%, YoY) 1. Setting the scene Source: (1) Thinkbox (2015) Overall, there was a decline in total TV viewing of 10 minutes, 30 seconds a day compared to 2013, a fall of 4.5%. This was entirely down to a drop in TV set viewing, which decreased by 4.7%. Viewing on other screens … grew year on year by 17%. In 2014, 88% of all TV set viewing was watched live compared to 89% in 2013.

6. 5 However, some demos are changing very fast – consumption is becoming more complex A non-linear world Age of reality A social soundtrack Rise of OTT services A new ‘golden age’ The impact of YouTube Millennial tastes 1. Setting the scene

7. 6 Broadcasters face growing competition from online video businesses – the competitive set is expanding 1. Setting the scene We genuinely believe we will come to think of this, and plan it inside a TV plan, as “The 5 th Channel”. A genuinely smart way to target and reach light TV viewers Chris Locke, Trading Director of Starcom MediaVest Group Ster RTL SBS BrandDeli TV The 5 th Channel AOL Originals Google Preferred Facebook Premium MS Yahoo Premium VOD Programmatic video

8. 7 As consumption changes, commercial broadcasters have access to new data sets, supporting new kinds of advertising Growth of connectivity and mobile Shift of time/activity online Proliferation of OTT services Syndication & distribution Sophisticated TV audience measurement Growth of social media 1. Setting the scene

9. 8 At a high level, digital data can be categorised into three broad categories 1. Setting the scene Traditional (+ multiplatform) measurement panels Commercial suppliers Bespoke research Media owners … … and advertisers Media owners … … and advertisers Digital services data Server data Registration Volunteered interactions Cookies and trackers Volunteered interactions Cookies and trackers Social interactions Digital networks Devices and networks Third-party Internal data sources - Panels

10. 9 For broadcaster sales houses, advanced data strategies are a strategic priority 1. Setting the scene vs. High reach, with limited relevance Data verifiable through measurement panels High reach and high relevance due to a variety of targeting options Data contaminated by high levels of online fraud

11. 1.Setting the scene 2.Areas of opportunity 3.Key challenges Digital data – challenges and opportunities for broadcasters

12. 11 The proliferation of data is clearly creating many different opportunities for broadcasters Data opportunities 6. Testing/optimisation 1. Personalisation 2. Mar-comms 4. Advertising 3. Insight and innovation5. Content acquisition 2. Areas of opportunity

13. 12 Good data clearly supports the development of new TV and video ad products – a range of complementary options 2. Areas of opportunity Broadcast Non-addressable Broadcast Non-addressable Multiple segments Targetable Multiple segments Targetable Direct Addressable Direct Addressable Relevance Targeted messaging Relevance Targeted messaging Reach Generic messaging Reach Generic messaging

14. 13 Let’s explore the experiences of two leading UK broadcasters, leveraging data to deliver new ad products Using Dynamic Ad Insertion to deliver addressable advertising Using personal registration data to support sales of VOD advertising This results in incremental revenue of between 30% to 55% depending on the ad product, compared to current VOD prices. By enabling advertisers to better target their campaigns, Sky AdSmart opens TV advertising to brands who may previously have thought TV too broad a medium. 2. Areas of opportunity

15. 14 Historically, Channel 4 sold ads on its online video platform in genre packages 55+ 45-54 35-44 25-34 16-24 MenWomen Factual Lifestyle Entertainment Comedy 2. Areas of opportunity

16. 15 In 2014, Channel 4 began selling demographically targeted ad packages on its online video offer, 4OD (now, All4) ABC1 ABC1 Female ABC1 Male 16-34 16-34 Female 16-34 Male 2. Areas of opportunity

17. 16 The packages were tested intensively – using big data and survey research, plus anonymous data matching 10,000 surveyed 11 million registered 4oD users 1 st Party registration data Survey data Viewing data Household size Income Modelled social grade with 80-100% accuracy Audited by PWC 2. Areas of opportunity

18. 17 2. Areas of opportunity The results were compelling – greater efficiency and better brand awareness – attracting significant price premiums We’re continually improving the effectiveness of advertising on 4oD for our agency and client partners. Following these impressive results from our first commercial data initiative, our next steps are to look at interest-based and behavioural targeting which will enable advertisers to target categories such as food, health and technology.” Gill Whitehead, Director of ATI, C4

19. 18 Sky has a long track record of investment in innovation – as its platform has matured, advertising has become a priority 2. Areas of opportunity

20. 19 Developing AdSmart has been challenging – 6+ years to develop and launch People Systems and processes Technology Business case 2. Areas of opportunity

21. 20 The new offer has been built on advanced data and measurement – viewing, targeting and results Demographics Interests Product preferences Ratings 2. Areas of opportunity

22. 21 In many markets, the business case for TV platform-based ad products will depend upon gaining share and new clients 2. Areas of opportunity

23. 1.Setting the scene 2.Areas of opportunity 3.Key challenges Digital data – challenges and opportunities for broadcasters

24. 23 The TV industry landscape is complex – making coordination, alignment and rapid progress difficult 3. Key challenges

25. 24 Measuring consumption across a growing number of different devices is complicated – and will become more complex Constantly changing device and on-demand service landscape Very wide range of services, growing fragmentation Challenging technical integration of measurement tools Little understanding of how many people are watching particular screens BARB’s Project Dovetail - on- demand services covered by TV Player report (beta): 3. Key challenges

26. 25 Technical integration is complex – we are a long way away from unified video ad market SSPs / exchanges Media owners / publishers Agencies / advertisers DSPs Ancillary services – fraud detection, visibility, analytics, audience and real-time data Programmatic video is developing in the online market, but it’s being driven by agencies, big tech businesses and intermediaries. It’s very difficult to integrate these new buying platforms into traditional TV systems – to link into broadcaster TV inventory management and ad insertion systems. There are big regulatory issues, around compliance – which are really hard to automate – and then there are lots of complex rules about ad placement. We’re a long way away from a unified programmatic TV and video market. 3. Key challenges

27. 26 Integrating various different audience data sets is a complex and time-consuming task 10,000 surveyed All4 users 11 million registered All4 users Survey data (social grade, interests, spending, HH composition) 1 st party registration data Viewing data Household size Income 1 st party registration data Viewing data + Modelled social grade with 80-100% accuracy (audited by PWC) Viewing data requires correlating with factors that matter to advertisers before it becomes valuable 3. Key challenges

28. 27 Lots of broadcaster data is not that valuable, due to low volumes and limited range and richness vs. Low volume – large no. of registered users, but majority is low frequency Few different variables – e.g. views, programme type, genre, duration Limited value to advertisers beyond volume and targeting data High volume – large no. of people with regular interactions Rich data – large no. of items, promotions, shelf and store position, shopping history High directly-measureable value 3. Key challenges

29. 28 As broadcast content is distributed across more platforms, the availability and quality of data are becoming more uneven It is increasingly difficult for broadcasters to form a holistic view on their content consumption as their content is increasingly distributed across multiple platforms Pay TV platforms Mobile devices Video aggregators Smart TVs 3. Key challenges

30. 29 Broadcasters need to acquire and develop new skills and capabilities to take advantage of emerging opportunities Most current consumer insight teams are focused on overnights and bespoke research However, leading broadcasters are setting up strong data-focused analytics teams, with the following skills: –programming –statistics and predictive analytics –data management 3. Key challenges

31. 30 Thank you!

32. 31 Jon Watts Director 020 7395 7518 jon.watts@mtmlondon.com MTM 20-22 Shelton Street London WC2H 9JJ United Kingdom