Visual aid for Rob Aitken's SXSW 2016 presentation "The Future of TV" How soon can I stop paying for TV, and what services should I be subscribing to in the future? This talk will address these questions, as well as discussing the future of TV, given the recent changes in consumer demand, programmer distribution, cable offerings and the introduction of new smart devices. This will include an overview of TV economics, comparing them to more recent trends to understand how the industry may evolve. We'll also take a look at other disrupted media sectors to understand how consumer preferences and content creation costs could affect how the TV landscape evolves.

1. The Future of Television
Approaches to change in a transforming environment
July 2015
Robert Aitken – Deloitte Consulting
SXSW 2016 Panel Picker Teaser Content and Presentation Proposal

2. Why change?

3. - 3 -© 2015 Deloitte Touche Tohmatsu. All rights reserved.
DRAFT – For Discussion Purposes Only
Digital disruption has destroyed the value of many traditional media companies.
Those that have survived have embraced digital…
• Cars.com owned by Belo, Gannett, McClatchey,
Graham Holdings, and Tribune in 1998
• Gannett purchased remaining in 2014 valuing
cars.com at $2.5B
• Belo: $112M; McClatchy: $90M (market cap);
Graham: $250M for WP; Gannett: $1.6B (not
including cars.com); Tribune: $635M
Newspapers
• Four major labels have a 25% stake in Spotify
• Spotify has a current valuation of $8B - $9B
• Universal Music Group: $5B; Sony Music:
$4.3B; Warner Music: $3B
Music
• Netflix streaming contributes $250M in profit vs.
$100 for DVD business
• Blockbuster closed all stores, partnered with
Dish to offer Blockbuster @home but closed in
2014 and now operates Blockbuster OnDemand
• Hollywood Video no longer exists
Home Video
Each of these industries has declined by 30-35% over the last decade

4. - 4 -© 2015 Deloitte Touche Tohmatsu. All rights reserved.
DRAFT – For Discussion Purposes Only
…many leading video providers have started to embrace disruption

5. A view on how programmers are
adopting to change

6. Programmatic for Linear TV

7. 7
Viewers
DSPs, SSPs, and ad serving companies will likely lead the (r)evolution to programmatic buying but they
acknowledge technology and process changes are still required
Programmatic buying involves more players than the traditional process
Distributors Measurement
“What is considered
programmatic in the
digital world…is not
taking place in the
TV world.”
“We’re hitting the tipping
point where TV and Nielsen
can no longer ignore the
shortcomings of their
measurement…At this
moment in time, you’ve got
TV data and Digital data,
but they don’t line up.”
“Programmatic will be in the
MVPD space [local ad] before
the National [ad] space.”
“The combination of automation, data and
compliance ensures publishers are
maximizing the value of their inventory while
at the same time helping advertisers better
reach their target audiences.”
"From an advertiser's
perspective, this will
be a very seamless
process, with one
piece of software
involved instead of
multiple from their
standpoint."
Opportunity
or Threat?
Threat
Can lower cost of
sales; Concern is
disintermediation
(losing their
importance in
ecosystem)
Opportunity
Can expand
capabilities to better
serve programmatic
value chain
Opportunity /
Threat
Increase local
inventory CPMs and
reduce cost of sale /
Premium inventory
CPM erosion
Threat / Opportunity
Threatens traditional
measurement
companies relevance /
Develop new products to
serve market
Ad ManagementAdvertiser
s
Opportunity
Business model
dependent on
adoption
DSPs Programmers
“Dipping our toes in programmatic, but
there are sales channel and ad
category issues, plus we are protective
of our inventory…DAI VoD, C3+, is
bigger opportunity.”
Threat /
Opportunity
Fear commoditization
of inventory and CPM
erosion / Can lower
cost of sales
Source: Interview feedback
Agencies
“[We are] giving all TV
advertising stakeholders the
ability to speak a common
language.”
SSPs
Opportunity
Business model
dependent on
adoption
Sample
Companies

8. 8
Programmatic adoption will evolve across three dimensions: technology, inventory types, and VoD vs. linear
Programmatic means different things to different people
Adoption Curves for Programmatic Linear TV Advertising
Data-enabled
buying
Automated
trading
(RTB with
DAI)
• Integrating behavioral, demographic and purchasing data into a
single buying platform to enable the purchasing of TV
advertisements. Supported by manual execution
• Real-time bidding (RTB) with automated fulfillment across all linear
and STB VoD platforms
Adoption
TimeToday
Illustrative
VoD-only Adoption
VoD and Linear Adoption
Key
Source: Deloitte analysis, interview feedback
TechnologyCapabilities
Inventory Type Remnant PremiumMid-Tier
Unsold or low CPM Avg. CPM Premium CPM
What We Heard: Adoption Predictions
“Large national advertisers with large ad
departments can use these systems to help with ad
sales, but that’s likely at least 10 years out from
mainstream.” – Broadcast Affiliate
“If we’re only talking about automation and data,
within 5 years, 50% of TV spend will be done
programmatically.” – Ad Technology Company
“Don’t believe programmatic adoption is going to
surge very much in the next couple of years.”
– Cable Network
“I just don’t see this business changing in the next 3
years from the phone to a display and keyboard.”
– Broadcast Affiliate
“Too many decisions have to happen in the cloud in
real-time, we’re at least 5 years out.”
– Ad Technology Company

9. Addressable Advertising

10. 10
Viewers
Players recognize the value but also understand the technology and process constraints
Addressable support exists but broader adoption required in order to reach scale
Programmers Ad Servers Distributors Measurement
“We believe this will be a
massive advertising
category…The folks who are
doing addressable campaigns,
every time a brand runs a
campaign they can prove the
return on investment.”
“Mentioned addressable STB during the 2014/15
UpFronts – received a lot of advertiser
excitement, especially from large advertisers who
want to buy local and political campaigns.”
“[Addressable helps us to] unify the
platforms. So the ad community has a
way to look at cross-platform
monetization”
“For advertisers that have been
waiting for scale in the
addressable space…we’re at
the tipping point.”
Threat / Opportunity
Time-consuming and difficult
process; prefer nielsen-based
buys / New product to sell or
bundle with premium inventory
Opportunity
Business model depends on
adoption; increased demand
for services is driving revenue
and creating new opportunities
Threat / Opportunity
Reduces reliance on
measurement products /
Provides opportunity to create
new offering
Opportunity
Addressable buys may help
drive CPMs
Advertiser
s
Opportunity
Provides way for MVPDs to
increase inventory value; STB
data becomes more valuable
Opportunity
or Threat?
Source: Deloitte analysis, Interview feedback
Agencies
Sample
Companies

11. Linear vs. Digital

12. 12
Distribution approaches vary but all segments are maintaining a focus on linear, see
digital as complementary, and agree, “content first!”
“Trying to make great programs
people want. If your content is
not desirable, your content is
not desirable.”
Opportunity
or Threat?
Opportunity
Unified selling across
platforms and properties;
digital syndication
opportunities
Broadcast Networks
“TV players are just now
starting to grasp digital.”
“Are just our TV shows enough
to engage consumers on an ad-
based or mobile platform? No.”
“Linear remains the main
focus and main
marketing driver – digital
is about how to extend
the experience.”
“Growth business is IP,
however vast majority of
dollars come from linear.”
“Do Broadcasters look at
digital as replacing linear? Not
ever. Not in 3 years, not in 10
years…there’s no money…”
“Broadcast groups are
expanding the hours of news
produced despite the fact that
fewer people are watching
local news (linear).”
“Affiliates are spending a lot of
time and money on tools that
break down the walls of a
production room…moving
production out into the field.”
Cable Networks Broadcast Affiliates
Threat
Digital platforms
threatening viewing;
not replacing traditional
revenue streams
Opportunity / Threat
More windows for
monetization / Concerns
over OTT competitive
offerings
Viewers
Advertiser
s
“Want to be everywhere without
cannibalizing linear … we will
continue to expand on digital
where it makes sense.”
TV Technology ProvidersStudios TV Programmers Distributors
Source: Interview feedback
Sample
Companies

13. 13
When asked about “approach to digital” answers prefaced with, “In this window...”
Source: Deloitte analysis, Nielsen, interview feedback
Original air date
Day 0
EST / Rental /
STB VoD
1-8 days after airing
Premium /
OTT SVoD
1-30 days after VoD
Syndication
1-3 months after season
Prime Time
Time
Shifted
Ad Spend
Viewership & Ad Spend by Genre
“Content is skewing towards “glorified news, i.e.,
talk shows, lifestyle, cooking.”
– Broadcast Technology Provider
10% 4% 4%
News
“Everyone wants sports rights they are just
very expensive.” – Industry Analyst22% 8% 29%
Sports
41% 58% 35%
Drama
$6.8B
Spend on programming
by HULU, Netflix, and
Amazon in 2015
16% 14% 17%
Reality
“…it’s not just cable networks…there hasn’t been a
new breakout reality show on broadcast TV since The
Voice launched in 2011.” – Entertainment Weekly
11% 16% 15%
Sitcom
“Capturing downstream windows of
revenue is key – everything off-network
and non-linear is important.”
– Cable Network Executive
“Digital syndication revenues
have created an enormous
short-term opportunity for us.”
– Cable Executive
Content genre determines monetization opportunities. Drama, sitcoms and reality (entertainment)
benefiting from STB VoD and OTT SVoD viewing. Other genres focusing on original air date
Illustrative Content
Windowing Structure

14. Summary

15. 15
In the near-term, “digital experiences” are highest priority, linear programmatic will
be used to sell select inventory, and addressable is a developing technology
Source: Deloitte analysis, interview feedback
Over the next 2-3 years, Networks will
focus on programmatic to fulfill STB
VoD inventory. Affiliates will use
programmatic to reduce cost of sales,
potentially increasing CPMs
• Fear of CPM erosion will prevent
premium inventory from shifting to
programmatic platforms
2
Rationale Based on Market Feedback
How do programmers view advanced advertising and digital technologies? How do
they plan to incorporate these technologies going forward?
Over the next 2-3 years, programmers
will use digital as a complementary
experience. Larger companies working
to create cross-platform advertising
products and support systems
• Limited but growing revenue
opportunities with digital
• Using cross-platform as way to
achieve broader set of marketing
objectives
1 Linear vs. Digital Programmatic Buying
Over the next 2-3 years, addressable
advertising experimentation will reside
with the MVPDs. Programmers will
adopt once proven – both technically
and economically
3 Addressable Advertising
• Technology & operations challenges
still real
• Questions remain about the economic
value proposition
“Linear remains the main focus
and main marketing driver –
digital is about how to extend the
experience.” – Cable Network
“Dipping our toes in programmatic,
but there are sales channel and ad
category issues, plus we are
protective of our inventory…DAI
VoD, C3+ is bigger opportunity.”
– Cable Network
“You can’t do addressable
advertising when the technology,
business model and relationships
are not in place.”
– Broadcast Affiliate

16. 16
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17. About Deloitte
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