Disruptions in the TV business

1. The video markets prospects February 2008 IDATE Contacts Gilles FONTAINE [email_address]

3. New drivers on the video content market

4. The video content market so far TV by far the major market segment. Direct paiement = 70% of commercial income The growth challenge: Growth rate under 4%; TV growing faster than DVD and theatres Subscription growing faster than advertising

6. Time spent and advertising

7. Reviewing the TV video market key drivers: audience Daily TV audience in Europe Eurodata TV/EAO TV time on the TV set is stagnating, no evidence that Europe will catch-up US daily viewing But…multichannel television increases television time But…PVR increases TV programming time, other terminals yet to be included in metrics But…Mobile TV conforts personal viewing and opens up nomadism

8. Reviewing the TV video market key drivers: from audience to advertising Negative driver: below the line ad spending gaining market share vs above the line Positive driver: TV increases market share vs other traditionnal media, better resist vs internet

9. Reviewing the TV video market key drivers: from audience to advertising But audience fragmentation is not a winning game ! Viewing share of top channels constantly decreasing as multichannel television develops Advertising not proportionate to audience Strong premium for leading channels due to higher CPM in prime time Will not transfer to other TV channels ? TV ad share/Audience share ratio

10. Reviewing the TV video market key drivers: from audience to advertising Major FTA channels refocusing to consolidate mass media position, increasingly relying on events (Reality TV, sport…) France: Top 20 programs

11. Packaged premium the strongest pay market segment

13. Reviewing the TV video market key drivers: consumers willingness to pay DTT: 15-20 channels 0 € IPTV, FTA sat 30-70 channels 0 -10 € Pay Satellite, cable 100 channels 30-40 € Tarif #channels Low end pay-tv threatened by free/near to free multichannel DTT and IPTV services Premium pay-TV may prove a stronger model, based on exclusivity and premium programming

14. The new deal

17. Internet video is both TV content and original content TV content, either available as stand alone, simulcast or catch-up TV Specific content, only available on the Web Back catalogue content either demonetized or broadcast by niche channels Internet video content: On demand UGC Simulcast VOD premium Catch-up High VOD catalogue Low Web TV Linear Value per program

22. First evidences: telcos follow different paths Market approach Strategic imperatives for ROIC optimization Value added application provider Enhanced connectivity provider Primarily allocating resources to the proliferation of applications targeting niches and short-lived opportunities to increase customer base and/or revenue per customer. Network no longer considered a strategic asset and outsourced to reduce invested capital base. Maximizing utilization of best-of-breed network to enable economies of scale, at the lowest possible cost per Mb provisioned. Revenues generated from leased capacity of enhanced connectivity. End user service creation and commercialization left to 3rd party providers. Converged services integrated operator Leveraging owned fixed and mobile networks to offer truly converged and seamless multimedia-rich premium services in addition to over the top content.. Incremental revenues by targeting the premium digital content opportunity and tight cost control through converged IP network architectures. Converged services integrated operator 1 2 3 Revenues Invested capital Likely candidates Operations Network 1 3 Customers & services Value added application provider Converged services integrated operator 2 Enhanced connectivity provider Opex