TV Everywhere & OTT

Preserving the Pay TV Model

March 2013

Executive Summary

• Cable/pay TV remains one of the great cash cows of the modern media and communications industries, but in a maturing market that faces a growing threat of disruption, real service innovation is needed

• Innovation is coming as content is being repurposed to support a growing array of digital services and parallel wireless and broadband networks are being synchronized to move content freely among all devices − Over-the-top (OTT) and TV Everywhere (TVE) services are now mainstream, and − The seamless movement of video between devices and turning the “second screen” into a useful adjunct of the television is becoming more real as consumers demand control of their media experiences • Software is fast becoming as important as content in determining the user experience, and there is no shortage of tech companies working to unbundle the content that sits at the core of the cable/pay TV business

• While Cable/pay TV have ample time to work on these issues, as evidenced by early advances, it is apparent that real and meaningful innovation must take a higher priority than it has previously • For SPT, a clear case can be made to support investment in our ‘digital’ infrastructure to ensure that we remain competitive, can adapt multiscreen solutions and support pay TV operation initiatives, thereby sustaining subscriber fees, keeping our brands cutting edge and offering what consumers want

2 Pay TV still Strong

• Pay TV satisfaction remains high among consumers − Reported 86% of U.S. pay TV consumers are satisfied with service(1)

• Despite rapid growth in OTT, pay TV still holds commanding revenue advantage

− OTT revenues are just 3% compared to pay TV

• Cord cutting has not yet impacted the pay TV subscriber base

Global Pay TV Subscribers(2) Subs (MM) Annual Growth 1,000 10% 900 9% 800 8% 700 7% 600 6% 500 5% 400 4% 300 3% 200 2% 100 1% 0 0% '08 '09 '10 '11 '12 '13 '14 '15 '16 '17

Global Pay TV Subs Growth

(1) “2nd Annual Online Video Survey,” Morgan Stanley Research February, 2012 3 (2) SNL Screen Digest Over-the-top (OTT) and TV Everywhere (TVE) Defined

• OTT: Services that ride on top of your Internet connection but have no relationship with an MVPD or the ISP that provides the connection • Variations of OTT services:  Standalone aggregators

• TV Everywhere: MVPD-controlled VOD on TV service  MVPD-hosted through website or mobile/tablet application

4 OTT Market Continues to Expand

• The U.S. OTT market continues to expand rapidly, with total revenues forecast to grow at a 24% CAGR through 2017 ‒ Global OTT market expecting a 29% CAGR over the same period ‒ Despite rapid growth, OTT represents low near-term risk to pay TV − Total OTT revenues are just 3% of pay TV, expected to remain below 10% through 2016

• Subscriber levels are approaching Pay TV, but the majority are non-paying − Of Hulu’s total 31MM estimated U.S. subs, 28MM-29MM subscribe to the free service − Over the long-term, with an appropriate mix of programming and pricing, OTT could pose a significant threat to traditional pay TV model

• Pay TV operators could avoid / lessen potential impact of OTT through improvements to and better marketing of TV Everywhere − Higher adoption rates of TVE would increase value to consumers and support the pay TV pricing

5 Global OTT Revenues 2012 to 2017 (figures in $ millions)

2012: 2012: $1,614 $95 2017: 2017: $7,174 $1,174 2012: $7,929 2017: $23,414

2012: $842 2017: $4,561 2012: 2012: $86 $0 2017: 2017: $807 $110

$11BN Growing to $37BN by 2017

Source: Informa Telecoms & Media 6 Global OTT Forecast

• Revenue is forecast to grow at a 29% CAGR through 2017 • Advertising is expected to remain the largest revenue category for the foreseeable future

($BN) Global OTT Revenue 40 $37

35 4.7 $30 30 4.3 25 $24 14.0 3.3 20 $18 9.5 3.1 8.0 15 $14 $11 2.5 6.0 10 $8 2.0 4.5 18.5 16.0 2.0 3.5 12.5 5 2.5 9.2 7.0 3.5 5.1 0 2011 2012 2013 2014 2015 2016 2017 Advertising Subscriptions Transactions

Source: Informa Telecoms & Media 7 Connected device growth • Expected growth in the number of connected devices will continue to provide opportunities for multiscreen services

U.S. (MM) Western Europe (MM)(1) 617 548

53 560 83 465 26 494 77 26 45 24 426 69 378 24 128 149 22 35 67 119 100 22 334 19 93 287 71 65 65 25 19 240 14 209 201 42 36 238 226 15 197 57 209 14 9 190 21 181 16 134 9 157 9 158 9 122 129 132 114 121 98 99 85 101 69 62 43 36 9 22 2011 2012 2013 2014 2015 2016 2011 2012 2013 2014 2015 2016

Tablets Smartphone Owners TV’s/Blu-ray Players Standalone SetTops Game Consoles (2) (3) (4) Source: SNL Kagan, September 2012. (1) Western European Smartphone forecast assumes ‘U.S. ‘10 – ‘11 growth rate of 35% applied to 2010 installed base and ‘12 – ’16 growth rates per Saffron Digital. (2) Includes the subset of TVs and Blu-ray players that are connected to the Internet. (3) Includes installed base of Internet-connected standalone set-tops designed for online video viewing such as AppleTV, Roku, Google TV, Boxee, standalone TiVo and other devices. (4) Includes the subset of game consoles that are connected to the Internet such as Sony PlayStation, Microsoft Xbox and Nintendo Wii. 8 TV Everywhere Use in the U.S.

• All six major U.S. MSOs offer some form of TVE services as an extension of their existing linear pay TV service

• Current usage remains low, as less than half of U.S. pay TV subscribers have tried the service

• Despite low usage to date, analysts expect TVE revenues to catch up and pass OTT in the near future as operators improve the consumer experience and implement more comprehensive marketing campaigns – In the next 2-4 years, U.S. TVE is expected to contribute an additional $12BN in annual revenue to U.S. TV ecosystem.(1) The majority (85%) of this amount is expected to result from additional advertising opportunities, while 15% will be from incremental pricing of new digital offerings • To realize these new revenue streams, operators and programmers must work together to: – Innovate their ecosystems and focus on the consumer experience – Reward teamwork and preserve the symbiotic nature of the business model – Consolidate nationally and internationally to effectively compete with the challenge of OTT(2)

(1) “TV Everywhere Could Create $12BN in Annual Revenue for TV Industry,” The Hollywood Reporter, Jan 20, 2012 9 (2) “TV Delivery Evolution: Hybrid TV, OTT and TVE,” September 2012 TVE is also Evolving

Network hosted Multichannel Operator Controlled

• 5MM+ mobile app downloads(1) (28MM subs) • ~5MM active users (21MM subs)

• Defensive tactic against standalone svcs • Aggressively securing rights from ntwks

• Testing web-only HBO GO svc in Nordics • Offers Streampix up-sell / bundle(2)

International • 36 operators in 20 int’l markets instituted TV Everywhere strategies by 2012 Roll-out

Next Generation • Operators considering moving niche linear channels to captive SVOD Strategies platforms (e.g., Streampix) to combat pure-play OTT providers

Financial • Debate surrounding financial contribution of various TV Everywhere initiatives Contribution and whether it will be incremental or cannibalistic

(1) Time Warner Q2 earnings call as of 8/11. (2) Streampix free to Comcast triple play and other select packages and includes +800 films and +1,500 TV episodes. 10 (3) Source: Needham Research, January 2012. U.S. TVE Players

Provider TVE Application / Website

Any Play, Streampix, Xfinity.com, HBO GO, Watch ESPN

TXC TV app, HBO Go, Watch ESPN

HBO GO, Turner App, epixhd.com

Optimum TV to GO, Turner App, HBO Go, Watch ESPN

Nomad, DirecTV Everywhere, HBO GO, Max GO

Dish remote Access, HBO GO, Max GO, Starz Play

Source: Morgan Stanley Media and Cable/Satellite December 11th, 2012 11 UK TVE Players

Provider TVE Application / Website

Sky Go

Virgin TV Anywhere

SVOD and TVOD through BT Vision+

STB available; apps currently in development

12 Latin America TVE Players and Penetration

Subscribers Moviecity Telecine DirecTV Country (in '000s) ESPN Play Play Muu HBO Go HotGo Play Fox Play Sports Premiere FC

Argentina 7,850 74.3% 12.3% --% --% 0.2% --% 28.4% 22.1% --%

Brazil 14,640 36.0% --% 35.6% 4.6% --% 6.1% --% --% 6.2%

Chile 2,130 55.3% 11.2% --% --% 0.2% --% 12.0% 12.0% --%

Colombia 4,110 39.6% 6.9% --% 2.1% 0.1% --% 13.8% 13.8% --%

Mexico 12,320 35.4% 5.3% --% --% 0.2% --% --% --% --%

Peru 1,250 78.5% 1.5% --% --% --% --% 10.1% 10.1% --%

Venezuela 2,950 72.9% 10.4% --% --% 0.1% --% 45.7% 45.7% --%

Total 45,250 47.3% 5.4% 11.5% 1.7% 0.1% 2.0% 10.0% 8.9% 2.0%

2.0%

8.9%

10.0% 2.0% 0.1% 47.3% 1.7% 11.5%

5.4%

ESPN Play Moviecity Play Muu HBO Go HotGo Telecine Play Fox Play DirecTV Sports Premiere FC 13 Source: “TV Everywhere in Latin America,” Dataxis, 2012 Case Study: HBO GO Nordic (OTT vs. TVE)

HBO Nordic launching in Denmark, Sweden, Norway and Finland this month • First stand-alone HBO GO service that does not require MVPD subscription • €10 per month for streaming only or as an add-on to standard pay TV subscriptions • Will compete with Netflix's planned service • Launch delayed, originally planned to go live in late 2012

14 Virtual MSO Sky has launched a TVE service offering to non-pay TV subscribers • Service does not require concurrent linear pay TV subscription first voluntary decoupling of TVE from traditional pay TV model • Sky Go offers four TVE packages ranging from $23-$60 per month, with additional amounts for ESPN • Content viewable on Android, iOS and PCs

Sky Go Package Details

Sky Entertainment Sky Sports & Entertainment 5 live channels All 6 Sky sports channels Additional channels on-demand 5 on-demand entertainment channels £15 per month 20 live channels (additional £13 per month for ESPN) £35 per month (additional £10 per month for ESPN)

Sky Movies & Entertainment Sky Movies, Sports & Entertainment 11 movie channels All 6 Sky sports channels Hundreds of movies on demand 11 Sky movie channels 20 live channels 5 on-demand entertainment channels £32 per month 20 live channels (additional £13 per month for ESPN) £40 per month (additional £10 per month for ESPN)

15 Second Screen Market Trends

U.S. Frequency of Use While Watching TV

• Second-screen activity is mainstream and here to stay Frequency Device ‒ More than 40% of U.S. viewers use a tablet / smartphone Tablet Smartphone while watching TV Daily 42% 40% Several times a week 24% 28% • Companion devices hold key to new revenue sources Several times a month 14% 11% Once a month or less 10% 7% Never 13% 12% Second-Screen Initiatives - U.S. and UK Partnered with four app developers in Oct 2011 to make apps available on its U-verse IPTV platform. Additional 3rd party apps have since been added, with AT&T encouraging developers nd AT&T to design new companion experiences for U-verse TV customers. Also offers its own-branded Most Common 2 Screen Activities apps for mobile devices and tablets  Social Networking The largest U.S. pay-TV operator is poised to introduce new services in a major second-screen play, after moving to patent new social-TV technology in Jan 2012. Already offers Xfinity-  Remote Control Comcast branded multiscreen services for tablets and smartphones and launched social-TV app U.S. Tunerfish in 2010  Content Discovery / TV Guide Partnered with app providers Miso and GetGlue to make their second-screen and social-TV  Video Playback DirecTV services available on its platform. Also offers its own basic social-TV app that provides access to Facebook and Twitter  Content Push to Main Screen Is preparing a new second-screen service, which will aim to provide the full companion experience, including advanced content-discovery, remote-control and social-TV features. Dish  E-commerce Dish Network already has a strong presence on tablets and smartphones with its current app and multiscreen services  Play-along Games Will implement new social and complementary-content functionality into existing apps  DVR Management BSkyB following partnership with social-TV startup Zeebox in Jan 2012 (acquired 10% stake in the company) UK Cable operator is readying a new Tivo app to provide content discovery, remote-control and Virgin Media social-TV functionality, among other features, for customers of its "next-generation" Tivo service

16 Source: Informa Telecoms & Media & Nielsen data International TVE

• Pacing behind the U.S. but select companies are taking the lead

SPT Channel Carrier

SPT Channel Carrier

SPT Channel Carrier

SPT Channel Carrier

17 Current TV Everywhere Availability

• The availability of TVE in Western Europe is second only to that of North America

North America Western Europe Eastern Europe 90% 66% 21% Asia /Pacific 9%

ROW 18%

18 Source: “TV Everywhere: Growth, Solutions and Strategies (2nd edition) – Europe and APAC,” Parks Associates, 2012 SPT Networks Revenue

• A Western Europe TVE initiative complements SPT Networks’ international revenue distribution ‒ India would be the logical choice based on revenue alone, but the higher level of technical infrastructure and TVE players makes Western Europe a more attractive market for a TVE initiative

EMEA 13% U.S. Asia Excl India 23% 12%

India 35% Latin America 11%

FY14 Budget data as of February 2013 19 Does not include new launches/new opportunities Broadband Subscribers

• The amount of infrastructure in place and broadband subscriber base makes the UK a more attractive market for a multiscreen initiative

Broadband Subscriptions per 100 People 70 62.3 60

50

40 32.7 30

20

10 1 1.9 0 UK India UK India

Fixed Broadband Mobile Broadband

20 Source: “The State of Broadband in 2012: Achieving Digital Inclusion for All,” United Nations Broadband Commission, 2012 TV Everywhere Forecast

• By 2016, more than 100MM pay TV subscribers in Western Europe will have access to TVE / multiscreen services offered by almost 100 MVPDs

Pay TV Subscribers with TVE Access Operators offering TVE Services 250 200

180 50 200 160 40 94 85 140 34 75 150 120 28 64 48 52 52 100 42 30 32 28 23 36 100 24 80 23 19 60 27 11 14 88 90 50 95 99 101 40 82 78 89 15 68 64 20 50 28 0 0 2011 2012 2013 2014 2015 2016 2011 2012 2013 2014 2015 2016

Western Europe Eastern Europe Asia Pacific

21 Source: “TV Everywhere: Growth, Solutions and Strategies (2nd edition) – Europe and APAC,” Parks Associates, 2012 Conclusion

• Multiscreen services, including TVE and OTT, have become mainstream and are here to stay • Thus far OTT growth has outpaced TVE, as MVPDs have not felt sufficient pressure from cord-cutting consumers to aggressively develop and market TVE ecosystems • However, increased consumer demand for control over content will continue to drive higher growth for both multiscreen solutions • The ability of TVE to integrate concurrent and independent use of platforms with traditional viewing and offer advertisers cross-platform campaign capabilities adds an amount of value that OTT cannot replicate, and gives TVE a significant competitive advantage

• After North America, Western Europe is by far the most attractive region for a TVE initiative, with advanced infrastructure, high broadband utilization, more than 60% TVE penetration and a strong forecast for TVE availability

• Programmers will need to be participatory in MVPD TVE campaigns and leverage the existing relationships to avoid deterioration of subscribers, fees and ad revenue. A strong, well-marketed TVE presence is the best way for programmers and operators to provide consumers with a multiscreen solution, while also: ‒ Adding value for both consumers and advertisers ‒ Supporting the pay TV pricing model ‒ Preserving the relationship between programmers and MVPDs ‒ Slowing the growth of OTT and still securing a place for SVOD

22 Appendix

• Major Competitor TV Everywhere Presence

• TVE initiatives by country – Western Europe

• TVE initiatives by country – Asia Pacific

• CDN Platforms

23 Major Competitor TV Everywhere Presence

• SPT’s major competitors have made significant progress with their multiscreen initiatives and have launched TVE offerings in Latin America, Western Europe, and Asia-Pacific region

24 TV Everywhere Initiatives – Western Europe (1/6)

25 TV Everywhere Initiatives – Western Europe (2/6)

26 TV Everywhere Initiatives – Western Europe (3/6)

27 TV Everywhere Initiatives – Western Europe (4/6)

28 TV Everywhere Initiatives – Western Europe (5/6)

29 TV Everywhere Initiatives – Western Europe (6/6)

30 TV Everywhere Initiatives – Asia Pacific (1/4)

31 TV Everywhere Initiatives – Asia Pacific (2/4)

32 TV Everywhere Initiatives – Asia Pacific (3/4)

33 TV Everywhere Initiatives – Asia Pacific (4/4)

34 CDN Platforms (1/2)

Company CDT/OTT Platform Devices Notable Customers • CloudTV is a cloud-based solution that includes a dynamic authoring platform (CASS™) Internet connected Cablevision, Time Warner and stitchable MPEG streaming technology devices such as PCs, Cable, Grande Comm., • Offers a customizable portal that combines broadcast and online video streams game consoles, and HBO, Showtime, CNN, Fox • Content is rendered as an MPEG video stream smart TVs • ARRIS Advanced Video Processing Solutions provide transcoding capabilities enabling Mobile, PC, TV Comcast, Time Warner multi-profile video encoding for mobile, PC and TV • Acquired BigBand Networks in 2011 ;Company has over 200 clients around the world

• Offers a TVE Solution Pack in partnership with Ping Identity, including authentication, PC, Smart TVs, Apple BSkyB, Sky Deutschland, content management, delivery, advertising, UI, and client player software iOS, Google Android, Sky Italia, Rogers • Includes support for transcoding, multi-bitrate streaming, DVR features, HTML 5, and Symbian S60, Palm social media webOS, Windows • Provides a range of analytics tools Mobile, and BBRY

• Content delivery solution supports mobile devices for both Live TV as well as VOD Internet connected Telecom Argentina, • The company offers a wholesale CDN solution for carriers devices and mobile Bouygues Telecom, • Software-based solution that uses off-the-shelf hardware (IBM is hardware partner) devices Iceland Telecom

• Cloud-based solution that handles content ingest, management, transcoding, and Smart TVs, Roku Verizon, Mediacom, and publishing for multiscreen delivery via VOD or linear TV players, gaming Bresnan • Includes advertising and social networking support consoles, STBs, mobile devices, tablets and laptops • CDN hardware and software solution STBs, smart TVs, PCs, Caiway, Comstar, Maxisat, • The D-VDN framework provides a full range of multiscreen capabilities, including on- game consoles and Iskon, KPN, Telekom demand TV and video functions such as nPVR, timeshift TV and VOD mobile devices Slovenije, Telia Sonera • Focus on QoE (Quality of Experience) • Irdeto MediaManager ingests content from any source, manages associated metadata PC, tablets, Al Jazeera, BSkyB, Netflix, and usage rules, and delivers it to any screen connected to the Internet smartphones, smart Telia, Telecom Italia35 • Irdeto ActiveCloak for Media handles DRM for multiscreen TVs 35 CDN Platforms (2/2)

Company CDT/OTT Platform Devices Notable Customers • The Kit Platform provides end-to-end video management capabilities Smart TVs, STBs, ABC, AP, AT&T, CNN, • KIT Connected Device Framework enables the creation of a broad range of experiences game consoles, Microsoft, MTV, NBC, Sky, that run natively across multiple devices tablets, and Vodafone, TWC smartphones • The Limelight Video Platform automatically detects the right device format and delivers Smartphones, Dreamworks, IFILM, transcoded video based on its specific player requirements tablets MSNBC • Integrates with existing publishing, content management, and advertising systems

• Massivision Suite™ tools enable build-out of multi-device video entertainment services, PCs, STBs, Xbox, BBC, Foxtel, Ch 5, Emirates manage and schedule content and get User Interfaces in place quickly as new consumer smartphones, & Virgin Air devices become available tablets, in-flight video • Ooyala Everywhere offers a modular approach with capabilities that include content Smart TVs, PCs, ESPN, MovieTicketscom, ingestion, management, transcoding, adaptive streaming mobile devices, TVGuide, Yahoo Japan, • With Personal Playback™, viewers can start watching a video on a TV and then switch to Roku, Boxee, Google Virgin Media a laptop or mobile on the go TV and PlayStation3 • Provides authentication and design of web portals for TV Everywhere offerings PCs and mobile Charter, Verizon • Provides design services, servers, and technologies to deliver video to multiple screens devices • Offers single sign-on/integration to allow subs with access to multiple content providers

• SyncTV cloud-based service can stream video over the Internet to a variety of platforms iOS, Android, NBC Universal HTC recently acquired 20% of SyncTV Windows Phone, Xbox, and smart TVs

• Includes content collection, managing partner relationships, managing subscribers, and Any connected Comcast, Time Warner enabling the business model device Cable, Rogers Cable, Cox, Cablevision

• Tvinci MediaHub capabilities include ingestion, setup of management and business rules, Smart TVs, mobile Orange analysis of content consumption, and end-user management devices, game 36 consoles 36