Key Trends presentation on the EU audiovisual market. Pay TV, commercial TV, public TV and Home Entertainment and their evolution the past 5 years. SVOD and TVOD and the impact of digital business models on the traditional EU TV market.

1. Key Trends from the
Audiovisual Markets and Regulation
Strasbourg, 16.3.2017
#KeyTrends2017
WIFI – COE-Guest
Christian Grece -Analyst

2. Key Trends in the Audiovisual Market
Strasbourg, 16.3.2017
#KeyTrends2017
WIFI – COE-Guest
Christian Grece
On-demand and TV Analyst

3. The EU audiovisual market in 2011-2015
0
20
40
60
80
100
2011
2012
2013
2014
2015
24,8
Public funding
25,9
28,9
Advertising TV
30,8
30,5
Pay TV
34,6
7,4
DVD/Blu-ray
4,9
Public funding Ad TV Pay-TV SVOD TVOD DVD/Blu-ray
OBS, Warc, IHS,
Ampere Analysis
EUR 92,2 billion
EUR 99,1 billion
CAGR +1,8%
 Overall slight market growth (except physical video)
 So, is everything healthy on the EU AV market?
TVOD EUR 1,2
SVOD EUR 1,7
TVOD EUR 0,6
SVOD EUR 0,03

4. TV viewing – Evolution 2013-2015
in minutes, linear and catch-up TV viewing, all individuals 4 years and Young adults
19 18
12 11 11
6
3 3 2 1 1 1
-2 -2 -2 -3 -3
-5 -5 -6 -7 -7 -7
-12
-15 -16
-20
-15
-10
-5
0
5
10
15
20
25
PL GR LV SI HR BG CY AT DE CZ SK EE FR IE BE FI HU SE NL LT ES IT DK RO PT GB
All individuals (4+)
EurodataTV Worldwide
24
12
5 3 2
-4
-7 -7 -8 -10 -12 -12 -13 -14 -14 -15 -16 -16 -17
-20 -21 -23 -24
-27 -28
-33
-40
-30
-20
-10
0
10
20
30
CY SI PL AT CZ LV SK LT GR DE FI HU BG HR SE ES FR IE BE IT NL PT GB EE DK RO
Young adults
Different definition by country

5. Challenges facing the ecosystem
• Linear TV viewing: Viewing time of younger generations is falling
 Audience fragmentation but total time spend with media is increasing
• Pay TV: overall revenues growth but subscribers gains?
Co-existence with SVOD services (for now?) for pay TV distributors
Importance of Live events, Sports and premium content for pay TV business model
• Advertising TV: increasingly challenged by online advertising
Shift from mass advertising to individualised & targeted advertising
• Public funding: Pressure on public budgets
 Audience fragmentation + loss of public audience market share
• Home entertainment: Massive decline in value as consumption shifts to the online space
Consumers’ preferences shift to access over ownership
Losses on the physical market not compensated by TVOD revenues

6. Pay TV: Total revenues still growing….
2011
2012
2013
2014
2015
CABLE
10,4
CABLE
CABLE
10,7
SAT
14,8 SAT
SAT
16,3
IPTV
3,8 IPTV IPTV
6.2
Pay DTT 1.5 Pay DTT
Pay DTT 1.4
EUR 30,4 billion
EUR 34,6 billion
Ampere Analysis

7. …but subscribers growth mainly comes from IPTV (telcos)
Pay TV subscriber yearly growth rates 2012-2015, in %
CABLE
-1.0%
CABLE
-1.1% CABLE
-2.8%
CABLE
-1.4%
SAT
2.3%
SAT
1.7%
SAT
2.6% SAT
0.9%
IPTV
12.8%
IPTV
10.2%
IPTV
12.6%
IPTV
9.7%
PAY DTT
-4.8%
PAY DTT
-10.1%
PAY DTT
-4.6%
PAY DTT
-1.9%
2012 2013 2014 2015
 Without IPTV (telcos), pay TV lost 3 million subscribers between 2011 and 2015
 Revenues growth no longer comes from linear pay TV services but additional digital
services (and broadband access for pay TV distributors)
 Pay TV channels (not distributors) will have to adapt to new consumer expectations
Ampere Analysis

8. SVOD uptake is fast…
26,4 million subs & EUR 1,7 billion revenues in 2015
0.7
3.1
7.3
16.0
26,4
36.9
121.9
383.0
874.8
1 703,9
0
5
10
15
20
25
30
0
200
400
600
800
1,000
1,200
1,400
1,600
1,800
2011 2012 2013 2014 2015
SVOD Subs EU 21 SVOD Rev EU 21
Ampere Analysis

9. ..which could lead to a Netflix/Amazon oligopoly?
Who is going to capture SVOD revenues?
Forecast of W. Europe SVOD subs 2015-2021
millions of sub
Others
17,5
31,7%
Amazon
11,5
20,9%
Netflix
26,1
47,4%
Oligopoly 2021?
8.5 9.7 12.0
17.53.3 4.0
5.7
11.5
12.4
19.1
21.4
26.1
0
10
20
30
40
50
60
2015 2016 2017 2021
Others Amazon Netflix
W. Europe - Market share SVOD services 2021
% of total subs
Digital TV Research

10. Advertising TV: Growth in 2014 and 2015 but surpassed by online for the first time
at EU level
TV advertising revenues still below 2007 level, increased competition with online players for ad budgets
19.0
33.4
28.9
30.8
0
5
10
15
20
25
30
35
40
2011 2012 2013 2014 2015
EU 28 - Internet advertising EU 28 - TV advertising
15%
13%
14%
19%
-4%
5% 6%
-10%
-5%
0%
5%
10%
15%
20%
2012 2013 2014 2015
EU 28 - Internet advertising EU 28 - TV advertising
Warc

11. Looking closer at country-level, growth 2011-2015?
Compound annual growth rates 2011-2015 TV advertising, in %/year
17%
12%
10%
9% 8% 8% 8% 8%
3% 3% 3%
2% 2% 1%
0%
0%
-2% -2% -2% -2% -2% -2% -2% -3%
-3%
-5%
-6%
-10%
-15%
-10%
-5%
0%
5%
10%
15%
20%
SI HU BG MT AT SK PT GB DE EE IE LV PL GR BE LT NL SE RO FR HR CZ FI ES DK LU IT CY
Warc
8 EU markets strong
growth
representing ad
revenues of
EUR 10,9 billion in
2015
6 EU markets
moderate/stagnant growth
representing ad revenues
of EUR 6,7 billion in 2015
14 EU markets moderate/strong
decline
representing ad revenues of
EUR 13 billion in 2015

12. Public funding remains stagnant, at best
Evolution of EU Public funding in EUR million and yearly growth rates in %, 2011-2015
1.1%
1.9% 1.8%
24,791 25,075 24,936 25,419 25,888
0%
10%
20%
0
5,000
10,000
15,000
20,000
25,000
30,000
2011 2012 2013 2014 2015
-0,6%

13. Home Entertainment market revenues 2011-2015
Physical market disappearing,value loss not compensated by TVOD gains
7 427
DVD/Blu-ray
(Retail+Rental)
4 905
629
TVOD (Retail+Rental)
1 253
0
1,000
2,000
3,000
4,000
5,000
6,000
7,000
8,000
9,000
2011 2012 2013 2014 2015
Physical (Retail+Rent) TVOD (Retail+Rental)
Loss EUR -1,9 billon
-24% in 5 years
EUR 8 B
EUR 6,1 B
IHS, Ampere Analysis

14. - Audience fragmentation coupled to an increase in total media consumption
 Towards an attention oligopoly?
 Who will benefit from the shift of content consumption to the online space?
- Future of Discovery of content
Towards a ‘discovery’ oligopoly of a few platforms and services?
- Which companies will capture value created?
- Need of consolidation for EU players to compete with global platforms?
Reach, Scale and size matters in the online world
- Future of content financing?
Increased pressure on budgets & Increased competition for content acquisition
Outlook & Challenges