SPECIAL REPORT VIEWER WATCH 2018

‘New Media?’ No Longer The television industry is adjusting to its maturing digital dilemma

BY GEORGE WINSLOW @GeorgeWinslow

MULTICHANNEL NEWS began publishing its annual Viewer Watch Special Report in 2006 with an eye of how to make money from video content or craft toward seeing how the changing use of video was transforming the TV business. It is extraordinary what consumer-pleasing products are now central. has happened in the ensuing years to digital media, which was long referred to by executives as “emerging” Given the difficulties many face in turning those and “new media.” old problems into newfound profits, we hope that Early on, they debated some issues that now seem quaint. Should cable networks put their content this report will once again help readers understand online? Was it wise to sell their content to Netflix? Why would anyone watch video of dubious quality the major trends that will impact their businesses in streamed over the internet when they could view it on a beautiful, large TV in this emerging video standard 2018 and beyond. called high-definition? As usual, we are indebted to many people who Often the discussion veered into apocalyptic terrain. Will Google Fiber wreck the pay TV sector? How helped with this report. In addition to the executives fast will cord-cutting destroy the cable industry? Or, alternatively, just how quickly will young people return at pay TV operators, networks, OTT players and to the pay TV fold as they get older and presumably wiser? research firms who generously gave of their time, Over time, discussions of the power — or poverty — of new media have thankfully disappeared. In many research companies also contributed their transcribed interviews with 22 TV executives and researchers for this 2018 report, the phrase “new media” insights and data. Among those, we’d particularly appears not at all — and for good reason. Heading into the New Year, Magna Global was predicting that like to thank Frank N. Magid Associates, Horowitz the digital media ad spend would exceed TV advertising revenues by more than $30 billion in 2018 and Research, Magna Global, PwC, Nielsen and SNL n that it would hit $105 billion in 2019, slightly more than the $101 billion PwC is predicting consumers will Kagan for sharing their data with us. spend on pay TV subscriptions. And those trends make many of the central business and economic issues that have long been the obses- Contributing writer George Winslow compiled the data, con- ducted the interviews and wrote the articles for this report. sion of this report more relevant than ever. If new media has passed into a mature media, the old questions Thinkstock

8 MULTICHANNEL NEWS JANUARY 8, 2018 multichannel.com Why TV’s Golden Age Isn’t a Gilded One As viewers and advertisers shift to streaming, expect the disruption to continue apace

IN YET ANOTHER SIGN that digital media has firmly come of age, digital advertising is expected to hit $95.2 billion in 2018, easily eclipsing the $64.0 billion that will be spent on TV. And the digital advertising industry is expected to hit $124.6 billion by 2021 — just three years from now — more than doubling the TV advertising market, according to forecasts from Magna Global. “The economy is doing well, the stock market is high and consumer confidence is good, so total ad sales are coming in high- er than expected,” Magna senior analyst of market intelligence Michael Leszega said. “But when you look closer at the various media, the outlook is not as good. More than 100% of the gain is coming from digital media, and traditional media are declining more than expected.” Video streaming has also firmly established itself as a mass-market phenomenon. Consulting giant PwC predicts total over-the-top/streaming revenue from subscription video-on- demand and transactional viewing will hit $15.3 billion in 2018, while Magna estimates the digital video ad spend will vacuum up another $11.3 billion. That combined total of $26.6 billion exceeds the $23.1 billion PwC expects will be spent on cable Illustrating the rapid growth of streaming video usage, Roku reported that its active accounts hit 16.7 million in the third network advertising. quarter of 2017, up 48% from a year ago, and that streaming hours were up 58% year-over-year to 3.8 billion. “Streaming SVOD services, OTT video … are all part of the way consumers watch video and now a major part of the business,” Howard Horowitz, president and founder of Horowitz Research, said. more like digital companies, with next-generation set-top boxes and video offer- Maturity also brings new responsibilities and some thorny problems. ings, such as Comcast’s X1 platform. “There is so much great content being produced inside and outside of pay TV,” Fake Data? Comcast Cable vice president of entertainment services Daniel Spinosa said. “So For one, data on digital media usage has its downsides, to be sure. In addition our No. 1 focus has been to bring all that content together” with the cloud-based to the hue and cry over charges that digital media platforms such as Facebook and X1 platform that allowed the operator to offer Netflix, YouTube, Pandora and Twitter had endangered democracy by profiting from the proliferation of “fake other OTT content on the same platform as its pay TV lineup. news” in 2017, ad agencies and advertisers also launched pointed critiques of ex- Similar thinking can be found at Atlantic Broadband. Heather McCallion, isting digital measurement and some of the entrenched business practices of both vice president of programming at the Quincy, Mass.-based operator, said its 2013 Google and Facebook. decision to launch the next generation of the TiVo platform has allowed Atlantic In 2017, those complaints prompted a number of major brands to pull ads to launch OTT apps such as Netflix and offer greatly improved search, she said. from Google’s YouTube after reports of their ads showing up alongside extremist “As customers’ perception of a traditional video product dramatically changed, videos; both Google and Facebook also came under fire for the accuracy of their we had to rethink our view of the video product,” she said. data. Separate reports from Pivotal Research Group and the Video Advertising Bureau (VAB) claimed Facebook had greatly overstated the reach of its ads. Flanker Brands The VAB report noted that Facebook metrics showed its ads reach more people Some operators have also capitalized on the rise of OTT video by launching in every state than the actual population of those states. their own virtual MVPDs, such as Dish Network-owned Sling TV and DirecTV Meanwhile, there were some encouraging signs that more traditional TV Now from AT&T’s DirecTV. players were taking major steps to better compete with digital media, improving “With Dish and Sling, we basically have a product for everyone,” Sling vice ad sales measurement and digital products for dissatisfied pay TV subscribers and president of product marketing and management Jimshade Chaudhari said, revamping their technical infrastructures. allowing Dish to reach consumers who want a traditional pay TV experience with On the ad side, “TV is battling back against Google and Facebook with new satellite TV and cord-cutters with Sling. studies showing the effectiveness of TV,” Jane Clarke, CEO and managing direc- Hulu’s expansion from a library of on-demand offerings to include live chan- tor of the Coalition for Innovative Media Measurement (CIMM), said. “They’re nels has also tapped into growing consumer demand for streaming media, vice saying we can show some of the same data for TV that digital can.” president of product Richard Irving said. “We have seen a 98% increase in signups Multichannel video programming distributors are also working to operate since we launched the live product,” he said, along with greater usage. “Since the

multichannel.com JANUARY 8, 2018 MULTICHANNEL NEWS 9 SPECIAL REPORT VIEWER WATCH

launch of the fall season, with the Pivotal Research Group senior new network programing and research analyst for advertising football, we seen a 70% increase in Brian Wieser said. “You have viewership of live content.” what I suspect is a perpetual CBS Interactive reported that weakness and that is something use of CBSN, its 24-hour stream- the industry needs to be thinking ing news service, was up 35% in about.” the first three quarters of 2017, Other problems stem from the CBSI president and chief operating economics of streaming media. officer Marc DeBevoise said. The Major players are report- jump was particularly notable given ing rapid increases in the use the record-breaking news audiences of streaming video in the third since the 2016 presidential election. quarter. In the third quarter of OTT services are exposing 2017, Roku reported that its active younger viewers to established TV accounts hit 16.7 million, up 48% The cloud-based X1 platform has allowed Comcast to more quickly upgrade its offerings and offer a greatly brands. SVOD service CBS All from a year ago. Streaming hours improved user interface, which the operator says has boosted usage of VOD and electronic sell-through. Access, which has more than 2 were up 58% year-over-year, to 3.8 million subscribers, has an average billion. viewer age of 43; the average age of CBSN viewers is 38. Researchers such as Nielsen are also reporting big spikes in usage. “Adults are “The two products are really younger than the typical audiences and, in that watching about the same amount of video as they had in the prior year, about respect, it strengthens us for the future,” DeBevoise said. six hours a day, but there is a shift in how that video is being accessed,” Nielsen executive vice president of client solutions and audience insights Sara Erichson More of the Same said. The success of some operators and programmers in streaming video doesn’t About 60% of U.S. homes have an SVOD service, Erichson noted. “For mean the age of digital disruption is over, though. the first time, more homes have an SVOD service than a DVR, which is a real “No one likes to hear this, but the pace of disruption is just accelerating,” milestone,” she noted. Magid Advisors president Mike Vorhaus said, citing survey data showing 6.1% In contrast, Nielsen data shows a decline in the amount of time spent with of pay TV subscribers intend to cancel their video subscription in the next 12 traditional live and on-demand TV viewing by viewers 2 and older, from 29 months and not get a new one, up from 1.9% in the 2011 survey. “That’s the hours and 18 minutes a week in second-quarter of 2016 to 27 hours and 44 highest percentage we’ve seen,” he said. minutes in Q2 2017. Others agree that the decline in pay TV subs is accelerating, but disagree The rise of streaming has been good for some OTT providers, such as about what that might mean. “The first quarter, second quarter and the third Netflix, which had a market cap of around $82 billion in mid-December. But its quarter all had rates of decline that were higher than a year earlier,” SNL Kagan profits remain skimpy. “Netflix has everyone in a tizzy,” Leichtman said. “It has research director Ian Olgierson noted. “We haven’t seen those kinds of losses a market cap bigger than Time Warner. But does that model actually work for before. We’re plowing new ground here.” another company? I think it is a very challenging model.” However, SNL Kagan doesn’t include virtual MVPDs like Sling TV in its These changes are also putting stress on the economics of programmers and pay TV subscriber count. producers. “If we don’t include those virtual MVPDs, it creates a more dramatic Todd Supplee, a partner with PwC’s Entertainment & Media practice, decline and a very different narrative about the industry’s future,” Leichtman said that on the production side, “the growth of OTT and streaming ser- Research Group president and principal analyst Bruce Leichtman said. Magna, for instance, predicts there will be only 74.7 “ million traditional pay TV homes in 2021. But add that As customers’ perception of figure to its forecast of 28.9 million virtual MVPD sub- a traditional video product scribers, and the total count of 103.6 million households in 2021 is actually higher than the 100.9 million total dramatically changed, we had pay TV subscriber count reported in 2012. ” Even so, the economics of the industry are worri- to rethink our view. some. — Heather McCallion, VP of programming, Atlantic Broadband “This is certainly the golden age of TV and con- tinues to be,” Horowitz said. “But the finance guys are saying, ‘We aren’t seeing that. We are pulling our hair out on how we can make vices are generating new demand for content,” with Amazon expected to money on our business models.’ ” spend about $4.5 billion in 2017 and Netflix planning to spend $8 billion on content in 2018. But the proliferation of these services accelerates ongoing Big Brand Woes audience fragmentation, making it harder for networks to build brands or One big factor is the health of the TV ad market. “The top 200 advertisers fund new content. n that are 90% of network spending and 60% of all TV are struggling right now,” “The whole cost model of production has to change,” he said.

10 MULTICHANNEL NEWS JANUARY 8, 2018 multichannel.com Virtual MVPD Sling TV has that strategy in the last few years,” he said. “That worked to be on as many has meant a big shift in the way we approach platforms as possible, infrastructure, so that we can react quickly to this including the Chromecast app. quickly changing landscape.”

It’s Hard to Make Things Easier Achieving those goals isn’t easy, given the scale and complexity of major programmers’ operations. Discovery, for example, has more than 420 linear networks and publishes to more than 380 different nonlinear platforms. Each year, the company takes in about 3,000 hours of new content that must be versioned for 220 countries around the world. To simplify those operations, Discovery has already completed its “On Ramp” project, which allows it to get content from producers and process it in the cloud using Amazon Web Services (AWS). The company has also moved all of its U.S. linear networks to native cloud infrastructure with AWS. Notable progress can also be found at pay TV operators. During a lengthy interview, Phil McKinney, president and CEO of CableLabs, ticked off a long list of initiatives helping the cable Putting Consumers industry transform their infrastructures. These range from the transition to IP and cloud-based technologies, which are allowing op- erators such as Comcast to launch next-generation First With Digital interfaces on the X1 platform, to the close alliances CableLabs is setting up with consumer electronics Under mounting pressure to revamp their offerings, programmers companies and Silicon Valley firms that are bring- ing new technologies into the industry. and distributors take measures to improve the viewing experience One particularly important area is increased bandwidth to enable a host of new services. “Im- proved broadband is a critical foundation for the fu- THE TV INDUSTRY’S EFFORTS to adapt to new consumer habits have ture of our business,” said Heather McCallion, vice evolved for many years. Yet much remains to be done right now, particularly in president of programming at Atlantic Broadband, which has rolled out 1 Gigabit- the areas of measurement, designing consumer friendly products and building per-second service in two markets and is working on DOCSIS 3.1 upgrades. technical infrastructures for the digital age. DOSCIS 3.1 infrastructures will let operators handle broadband speeds of 10 Progress in those areas will be particularly important in 2018, given the signs Gbps downstream and 1 Gbps upstream, with even more bandwidth in the pipe- that the basic glue holding together the pay TV industry is melting, with subscrib- line. CableLabs, for example, has developed technologies that use coherent optics er losses accelerating and more programmers launching their own over-the-top to dramatically speed up existing hybrid fiber coaxial networks with no need to lay services outside the multichannel ecosystem. down new fiber or dig up old infrastructure. Underlying this transformation is new technology for operations. “We are very focused on the idea that we have to make our content available literally anytime Counting on Measured Progress and anyplace,” Diane Tryneski, HBO executive vice president, technology, and Another major issue is measurement. “The industry has to get to the point chief digital officer, technology, said. “That is a real change and the tech that -sup where it has reliable syndicated cross-platform measurement, but at the moment ports that has to be very different than it used to be.” we still don’t have it,” Turner chief resource officer Howard Shimmel noted. To do that, HBO has embraced cloud and internet protocol technologies and Cary Meyers, senior vice president of fan and media intelligence at ESPN, adopted workflows that allow the programmer to quickly respond to new business highlighted the importance of better measurement by citing recently released data opportunities. “The fact that we aren’t siloed means that we are seamlessly deliv- from the first seven weeks of the Nielsen Total Live Audience service. ering content to anywhere, whether it’s TV everywhere, HBO Go or one of our Between Sept. 25 and Nov. 12, the addition of out-of-home and streaming affiliates’ platforms,” she said. viewing to traditional viewing numbers meant that ESPN’s ratings were up among Discovery Communications senior vice president of technology strategy and millennials aged 18-34 by 28% in primetime over ESPN’s traditional viewing. architect Brinton Miller said he sees the same advantages and prospects. “Dis- “We can now see that the millennials that have been missing from [traditional] covery has been very focused on getting our content on every screen and every ratings are in fact viewing our programming in large numbers,” Meyers said. platform, from [multichannel video programming distributors] to social or what- Overall, the new data from millennials — who account for 46% of the stream- ever the next big thing that comes around will be and we have been executing on ing of ESPN programming — boosted ratings for college football by 16% and for

multichannel.com JANUARY 8, 2018 MULTICHANNEL NEWS 11 SPECIAL REPORT VIEWER WATCH 2018

Monday Night Football by 13%. Spinosa argues that the improved inter- A number of other major face of their X1 platform has helped boost programmers have also made VOD consumption by 30% year-over-year great strides in cobbling togeth- and that it has allowed them to build a suc- er a more complete picture of cessful electronic sell-through business. total viewing across platforms. Atlantic Broadband’s next-generation For example, Shimmel noted, TiVo platform has also paid off in subscrib- Turner has ramped up its big er retention, Heather McCallion, the oper- data capabilities and analytics ator’s vice president of programming, said. by combining its own digital After purchasing a system in Connecticut consumption data with more that had been losing video customers for traditional measuremements to years, the new TiVo platform and bundling document cross-platform view- strategy quickly turned things around. “For ing. Turner recently signed up the first time in that market in many years for Nielsen’s new SVOD ratings we actually grew subscribers,” she said. and has also been working with Hulu and other SVOD services are bringing in voice commands to help users “Usability is a major driver in everyone’s 21st Century Fox and Via- quickly search and find content. future success,” added Howard Horowitz, com to form Open AP to help president and founder, Horowitz Research, standardize the definition. But who also stressed the importance of building Shimmel said he was still frustrated by the lack of industry progress toward objective programming packages that appeal to consumers at different stages of their life. third-party syndicated ratings. “We have to make it easier for advertisers,” he said. Comcast’s Spinosa agreed. As part of an effort to attract younger consumers, One issue has centered on Nielsen’s SDKs, which are required for the new the MSO launched Xfinity on Campus and then Internet Plus, which is now measurement systems to work. “These SDKs are difficult to implement and you are turning into Instant TV. “It gives them an entry point to the ecosystem that gives missing a bunch of networks that haven’t turned them on,” said Jane Clarke, CEO them the content they love,” he said. “But it also allows them to buy up into other and managing director, Coalition for Innovative Media Measurement (CIMM). elements, getting premium networks, Netflix and ultimately buying into bigger Sara Erichson, executive vice president of client solutions and audience insights and bigger platforms as they migrate from young millennial to having a family.” at Nielsen, disagreed, noting that “SDK implementation has improved substantial- ly over the past year. … There is a lot of implementation and trialing of products Interfacing With Consumers going on behind the scenes.” Finding the sweet spot with improved interfaces and better program offer- Other promising developments include work on new standards. In the fall of ings is also key to the increasingly competitive virtual MVPD space. “There are 2017, the Media Rating Council issued standards for digital measurement and in a lot of these other services that are just creating and replicating the model you saw 2018 they will be tackling the larger issue of creating a standard for cross-platform in traditional pay TV on a different delivery mechanism,” Jimshade Chaudhari, vice measurement, noted George Ivie, executive director and CEO at the MRC. president of product marketing and management at Sling TV, said. “We are offering “There are a lot of big issues to be solved, but we are doing a ton of heavy lift- a la carte packages that are as granular as you can get in our industry so they can pick ing and I think there is hope,” Ivie said. “We are making progress.” and choose the channels and genres that are most important to them.” Sling has also worked to improve navigation, with a universal search engine Confusion Still Reigns that includes both the live content from the over-the-air broadcast networks and Improving the consumer experience is another major area of focus for many on-demand content. companies. Todd Supplee, a partner with PwC’s Richard Irving, vice president of product at Entertainment & Media practice, noted that rapid Hulu, also stressed the importance of the user proliferation of choice and high quality TV pro- “ experience. “Our goal is to create a decidedly gramming is making it harder for consumers to find The industry has unique experience and a deeply personal one,” the content they want. he said, with a better interface, better search “There is a lot of confusion among consum- to get to the point and personalization\ and voice recognition. ers,” he said. The recentPwC Content Discovery FuboTV has worked to differentiate its survey, for example, found that 62% of respon- where it has reliable offerings by focusing on sports and Spanish-lan- dents complained of struggling to find something guage content, head of content acquisition and to watch and that consumer frustration with the strategy Ben Grad noted, though it does offer a way they access programming is actually higher syndicated cross- wide array of other programming. among streaming-only consumers, with pay TV Last September, the young service hit subscribers reporting less annoyance. platform measurement, 100,000 subscribers, with more to come, and Many companies hope to attract subs by Grad said he likes where things are headed. solving these problems. “We see a real opportunity but at the moment we “One of the biggest things impacting the in the idea of bringing all this [OTT and pay TV] consumption of video is just the fragmentation content together and making it easier for consum- ” and diffusion of viewership,” he said, making the ers,” Daniel Spinosa, vice president of entertain- still don’t have it. pay TV bundle less valuable — and boosting the — Howard Shimmel, chief research officer, Turner n ment services at Comcast Cable, said. popularity of services such as FuboTV.

12 MULTICHANNEL NEWS JANUARY 8, 2018 multichannel.com The Multichannel TV Landscape Estimates of traditional pay TV subscribers continue to fall, with Magna Global now predicting there will be about 74.7 million traditional pay TV homes in 2021, a drop of 23 million since 2016. Magna also predicts rapid growth in virtual MVPDs, though — they should hit 28.9 million subs by 2021.

Total Satellite Subs Total Multichannel Households 34 33.7 33.6 33.1 33.4 (Millions of U.S. homes) (Millions of U.S. homes) 31.9 30.2 28.3 34 33.7 33.6 33.1 33.4 26.3 3434 33.733.7 33.633.6 33.1 33.4 100.9 100.7 100.5 31.9 24.3 33.1 33.4 31.9 99.4 97.7 30.2 34 33.7 33.6 33.1 33.4 31.9 30.2 28.3 31.9 30.2 28.3 100.9 100.7 100.5 94.0 26.3 30.2 28.3 26.3 99.4 24.3 100.9100.9 100.7100.7 100.5100.5 99.4 28.326.3 24.3 97.7 89.7 99.4 97.7 26.3 24.3 100.9 100.7 100.5 97.7 24.3 94.0 84.9 99.4 94.094.0 97.7 89.7 79.9 94.0 89.789.7 84.9 84.9 74.7 89.7 84.9 79.9 84.979.9 79.9 74.7 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 79.9 74.774.7 74.7 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 20122012 20132013 20142014 20152015 20162016 20172017 20182018 20192019 20202020 20212021 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021

Total Telco Video Subs 13.0 13.0 (Millions of U.S. homes) 11.8 11.4 10.5 10.0 13.0 13.0 9.4 13.013.0 13.013.0 11.8 11.4 11.811.8 11.4 10.5 8.2 13.0 13.0 11.4 10.5 10.0 9.4 7.0 10.010.0 11.8 11.4 10.5 9.4 5.8 10.5 9.4 8.2 10.0 9.4 8.28.2 7.0 8.2 7.07.0 5.8 7.0 5.85.8 5.8 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 20122012 20132013 20142014 20152015 20162016 20172017 20182018 20192019 20202020 20212021 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 Total Cable Subs (Millions57.1 of55.2 U.S. homes) 53.8 53.2 52.9 51.7 50.1 28.9 57.1 48.4 57.1 Virtual MVPDs 55.2 53.8 46.6 57.1 55.255.2 53.8 53.2 52.9 51.7 44.6 28.9 53.8 53.253.2 52.952.9 51.7 28.9 50.1 22.2 57.1 55.2 51.7 50.150.1 (Millions of U.S. homes) 28.9 48.4 46.6 53.8 53.2 52.9 48.448.4 46.6 28.9 44.6 51.7 50.1 46.6 44.6 15.322.2 48.4 46.6 44.6 22.2 44.6 22.2 22.2 9.0 15.3 15.315.3 15.3 4.3 9.0 9.09.0 0 0 0 0.6 1.6 9.0 4.3 4.34.3 2012 2013 2014 2015 1.62016 2017 2018 2019 2020 2021 1.6 0 0 0 0.6 00 00 00 0.60.6 1.6 4.3 0 0 0 0.6 1.6 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 20122012 20132013 20142014 20152015 20162016 20172017 20182018 20192019 20202020 20212021 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 20122012 20132013 20142014 20152015 20162016 20172017 20182018 20192019 20202020 20212021 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 SOURCE: Magna. Actual homes from SNL Kagan for 2012-2016; projections for 2017 to 2021 by Magna. Virtual MVPDs include Sling TV, DirecTV Now, Playstation Vue, Hulu with Live TV and YouTube TV.

multichannel.com JANUARY 8, 2018 MULTICHANNEL NEWS 13 SPECIAL REPORT VIEWER WATCH 2018

The Multichannel Business Given ongoing subscriber losses, PwC has revised downward its estimates for U.S. subscription fee revenue growth: It now predicts growth will remain relatively flat at $100.8 billion in 2018 and sees only a modest increase to $101.1 billion by 2021. But total broadband access spending will continue to see healthy growth, rising to $59.9 billion in 2021.

U.S. TV Subscription Revenue Cable Network Advertising $ billions $ billions 101.0 101.1 99.1 101.1101.1100.9100.9100.8100.8100.8100.8101.0 101.1101.1 101.1 25.2 96.2 99.1 23.823.8 24.524.5 25.2 94.294.2 96.2 21.821.8 22.322.3 23.123.1 20.620.6 21.121.1 101.1 100.9 100.8 100.8 101.0 101.1 101.1 18.318.3 18.618.6 99.1 24.5 25.2 96.2 101.1 100.9 100.8 100.8 101.0101.0 101.1 101.1101.1 22.3 23.1 23.8 94.2 99.199.1 101.1 100.9 100.8 100.8 101.1 21.1 21.8 23.8 24.5 25.225.2 94.2 96.296.2 20.6 21.8 22.3 23.1 23.8 24.5 94.2 18.3 18.6 20.6 21.1 21.8 22.3 23.1 18.6 20.6 21.1 18.318.3 18.6

20122012 20132013 20142014 2015201520162016 20172017 20182018 2019201920202020 20212021

2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 20122012 20132013 20142014 20152015 20162016 20172017 20182018 20192019 20202020 20212021 Total Multichannel System Advertising4.9 4.94.9 5.05.0 5.05.0 4.74.7 4.74.7 4.84.8 4.84.8 4.9 4.3$4.3 billions4.34.3 5.0 4.8 4.9 4.9 5.0 4.7 4.7 4.8 5.0 5.0 20122012 20132013 20142014 2015201520162016 20172017201820182019201920202020 20212021 4.3 4.3 4.8 4.8 4.9 4.94.9 5.0 5.0 4.74.7 4.74.7 4.8 4.8 4.9 4.34.3 4.34.3 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 Fixed2012 Broadband2013 2014 2015Access2016 Spending2017 2018 58.9201959.559.5202059.959.92021 2012 2013 2014 2015 2016 57.0201758.158.1201858.92019 2020 2021 $ billions 55.657.0 53.7 55.6 53.7 20122012 20132013 20142014 2015201520162016 20172017 20182018 2019201920202020 20212021 51.351.3 58.9 59.5 59.9 57.0 58.1 46.946.946.9 55.6 58.9 59.559.5 59.959.9 46.9 53.7 57.0 58.158.1 58.9 55.6 57.0 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 51.3 53.7 55.6 51.3 53.7 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 46.9 46.9 51.3 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 46.946.9 46.946.9 30.2 28.729.529.5 30.2 26.6 27.127.1 27.927.9 28.7 Total Multichannel25.225.2 25.825.8 26.6 Advertising 22.6 22.9 22.6$ billions22.9 30.2 28.7 29.5 26.6 27.1 27.9 30.2 25.2 25.8 27.9 28.7 29.529.5 30.2 22.6 22.9 25.8 26.6 27.127.1 27.9 28.7 25.225.2 25.8 26.6 22.622.6 22.922.9

20122012 20132013 20142014 2015201520162016 20172017 20182018 2019201920202020 20212021 20122012 20132013 20142014 2015201520162016 20172017201820182019201920202020 20212021 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 20122012 20132013 20142014 20152015 20162016 20172017 20182018 20192019 20202020 20212021 SOURCE: PwC, Global entertainment and media outlook: 2017–2021. Preliminary data for 2016; projections for 2017 to 2021.

14 MULTICHANNEL NEWS JANUARY 8, 2018 multichannel.com Spotlight on Advertising Digital advertising first surpassed the TV ad spend in 2016, and Magna predicts that it will hit levels at more than double the TV ad spend by 2021, when digital will hit $124.6 billion versus $57.4 billion for TV.

Total Digital Video Advertising Total TV Advertising $ billions $ billions

66.1 67.1 20.5 66.1 67.1 64.0 63.6 63.9 61.9 64.0 64.0 63.6 63.9 64.0 20.5 62.2 17.6 61.9 62.2 17.6 59.0 57.4 59.0 57.4 14.4 66.1 67.1 14.4 64.0 63.6 64.0 20.5 66.1 67.167.1 11.3 20.5 63.9 61.9 62.2 11.3 64.0 63.6 66.163.9 61.9 64.0 9.0 20.5 9.0 17.6 64.0 63.6 63.9 61.9 64.0 62.2 7.0 17.6 59.0 57.4 59.0 62.2 17.6 7.0 14.4 59.0 57.4 5.5 14.4 5.5 57.4 3.0 4.1 14.4 3.0 4.1 11.3 2.4 11.3 2.4 9.0 9.0 11.3 7.0 7.0 9.0 5.5 2012 2013 2014 2015 20167.0 2017 2018 2019 2020 2021 2012 20133.0 20144.1 2015 2016 2017 2018 2019 2020 2021 5.55.5 2.4 3.0 4.1 4.1 2.42.4 3.0 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021

Total Social Media Advertising 39.5 39.5 $ billions 35.3 35.3 31.5 31.5 27.5 27.5 39.5 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 22.4 39.539.5 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 22.4 35.3 16.4 35.3 16.4 31.5 31.5 35.3 27.5 11.0 31.5 27.527.5 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 11.0 22.4 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 7.0 22.4 7.0 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2.3 3.9 22.4 Total Digital Advertising 2.3 3.9 16.4 16.416.4 $ billions 11.0 2012 2013 2014 11.02015 2016 2017 2018 2019 2020 2021 2012 2013 20147.0 2015 2016 2017 2018 2019 2020 2021 124.6 7.0 11.0 124.6 2.3 3.9 3.9 7.0 114.6 2.3 3.9 114.6 2.3 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 105.0 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 105.0 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 124.6 95.2 124.6124.6 95.2 114.6 84.7 114.6114.6 84.7 105.0 105.0 100.7 100.7 72.4 105.0 72.4 95.2 95.2 Total Mobile Advertising 88.4 88.4 95.2 76.1 84.7 76.1 59.9 84.7 $ billions 59.9 84.7 63.6 63.6 100.7 49.6 49.6 72.4 50.2 100.7100.7 50.2 88.4 42.8 72.472.4 88.4 42.8 76.1 36.6 36.2 88.4 36.6 59.9 36.2 59.9 76.176.1 63.6 59.9 22.3 63.6 49.6 22.3 49.6 13.1 63.6 42.8 13.1 50.2 49.6 3.4 7.1 50.2 36.6 7.1 36.2 42.842.8 50.2 3.4 36.636.6 36.236.2 22.3 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2012 2013 201413.1 2015 2016 2017 2018 2019 2020 2021 22.322.3 7.1 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 13.113.1 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 3.4 3.4 7.1 7.1 3.4 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021

SOURCE: Magna. Actual data from 2011-2016; projections for 2017 to 2021.

multichannel.com JANUARY 8, 2018 MULTICHANNEL NEWS 15 SPECIAL REPORT VIEWER WATCH 2018

The Content Game PwC predicts strong growth for the electronic home video sector, with electronic video rentals growing from $11.4 billion in 2017 to $15.7 billion in 2021. Revenue from sports media rights will increase to $22.7 billion in North America by 2021.

Total Electronic Video Rentals Electronic Home Video 4.9 Physical Home Video $ billions 4.94.74.9 $ billions Sell-Through 4.74.54.7 $ billions 4.54.34.5 4.34.3 4.9 12.7 4.0 4.7 4.9 12.712.7 15.7 4.04.0 4.5 4.7 11.7 15.714.815.7 4.3 4.5 11.711.7 14.814.8 3.54.3 12.7 13.6 3.53.54.0 12.7 10.4 13.612.713.6 15.7 4.0 11.7 10.410.4 12.712.7 14.815.7 11.7 9.3 11.4 14.8 3.52.9 10.4 9.39.3 11.411.4 13.6 2.92.93.5 8.1 12.713.6 10.4 8.1 8.1 10.012.7 9.3 10.010.0 2.92.3 9.3 7.1 8.511.4 2.32.32.9 7.1 7.1 8.58.5 11.4 8.1 6.1 7.410.0 8.1 6.1 6.1 7.4 7.4 10.0 2.31.7 7.1 5.3 6.4 1.7 1.72.3 7.1 5.35.3 4.6 6.46.4 8.5 6.1 4.64.6 7.4 8.5 1.2 6.1 4.0 4.4 1.2 1.21.7 5.3 4.04.0 4.44.46.4 7.4 1.7 5.3 6.4 4.6 1.2 4.6 4.0 4.4 1.2 4.0 4.4

2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 20122012201320132014201420152015201620162017201720182018201920192020202020212021 20122012201320132014201420152015201620162017201720182018201920192020202020212021 20122012201320132014201420152015201620162017201720182018201920192020202020212021

2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 Total North American Sports Business 78.5 North America Sports Media Rights 76.578.578.5 $ billions 71.9 74.176.576.5 $ billions 69.371.971.974.174.1 22.7 67.369.369.3 78.5 22.721.822.7 63.667.367.3 76.5 78.5 21.021.821.8 60.263.663.6 71.9 74.1 76.5 20.121.021.0 56.460.260.2 69.3 71.9 74.1 18.4 19.120.120.1 22.7 53.556.456.4 67.3 69.3 18.418.419.119.1 21.8 22.7 53.553.5 63.6 67.3 21.0 21.8 60.2 63.6 16.3 20.1 21.0 56.4 60.2 14.616.316.318.4 19.1 20.1 53.5 56.4 14.614.6 18.4 19.1 53.5 12.3 16.3 12.311.612.3 11.611.6 14.6 16.3 14.6 12.3 11.6 12.3 11.6

2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 20122012201320132014201420152015201620162017201720182018201920192020202020212021 20122012201320132014201420152015201620162017201720182018201920192020202020212021

2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021

SOURCE: Revenue for home video from PwC, Global entertainment and media outlook: 2017–2021. Preliminary data for 2016; projections for 2017 to 2021. Sports data from PwC, At the Gate and Beyond: Outlook for the Sports Market in North America through 2021, December, 2017.

16 MULTICHANNEL NEWS JANUARY 8, 2018 multichannel.com OTT and Gaming: A Closer Look Revenue from subscription and transactional video services will jump from $13.6 billion in 2017 to $18.8 billion in 2021 while video game revenue will grow to $28.2 billion by 2021, according to PwC.

Transactional Internet VOD Revenue Total Internet Video $ billions $ billions 18.8 18.8 17.7 18.8 4.7 4.8 4.4 4.5 17.7 18.8 4.7 4.8 16.4 17.7 4.1 4.7 4.8 4.4 4.5 3.7 4.4 4.5 16.4 17.7 4.1 4.8 15.3 16.4 4.1 3.7 4.5 4.7 3.1 15.3 18.8 4.4 15.3 3.7 16.4 3.1 4.1 13.6 2.6 17.7 3.7 4.7 4.8 3.1 13.6 15.3 2.6 4.4 4.5 2.1 2.6 16.4 3.1 4.1 13.6 2.1 2.6 11.9 1.6 2.1 11.9 13.6 15.3 1.6 3.7 2.1 3.1 11.9 1.6 11.9 1.6 2.6 9.8 9.8 13.6 2.1 8.2 9.8 9.8 11.9 1.6 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 8.2 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 6.7 8.2 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 6.7 8.2 9.8 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 6.7 6.7 4.4 4.4 8.2 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 4.4 4.4 6.7 Virtual Reality Revenue 5.0 $ billions 5.0 4.4 4.4 5.0 4.4 5.0 3.7 4.4 3.7 4.4 3.2 3.2 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 3.7 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 3.7 5.0 3.2 3.2 4.4 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 1.7 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 1.7 3.7 3.2 SVOD Revenue 1.7 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 1.7 0.4 0.4 $ billions 14.0 0 0 0 0 14.0 0 0 0 0 0.4 0.4 1.7 13.1 20120 20130 20140 20150 2016 2017 2018 2019 2020 2021 13.1 14.0 20120 20130 20140 20150 2016 2017 2018 2019 2020 2021 14.0 11.9 11.9 13.1 2012 2013 2014 2015 20160.4 2017 2018 2019 2020 2021 13.1 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 14.0 0 0 0 0 10.9 10.9 11.9 11.9 13.1 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 9.6 10.9 9.6 10.9 11.9 28.5 28.5 8.2 9.6 27.6 8.2 9.6 10.9 26.5 27.6 25.1 26.5 25.1 28.5 23.3 28.5 8.2 Video Game Revenue 23.3 27.6 6.7 8.2 21.0 26.5 27.6 6.7 9.6 21.0 25.1 26.5 25.1 $ billions 18.8 18.8 23.3 23.3 28.5 5.5 16.6 5.5 6.7 8.2 16.6 21.0 27.6 6.7 14.2 15.2 21.0 14.2 15.2 18.8 25.1 26.5 4.6 18.8 4.6 5.5 16.6 23.3 5.5 16.6 6.7 14.2 15.2 21.0 14.2 15.2 4.6 18.8 2.8 4.6 2.8 5.5 16.6 14.2 15.2 2.8 4.6 2.8

2.8 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 SOURCE: PwC, Global entertainment and media outlook: 2017–2021. Preliminary data for 2016; projections for 2017 to 2021. The total internet video figures from above include SVOD and transactional, but do not include internet video advertising.

multichannel.com JANUARY 8, 2018 MULTICHANNEL NEWS 17 SPECIAL REPORT VIEWER WATCH 2018

The Emerging Platform View About 42% of users still select TV as their primary digital platform, versus 11% for mobile phones and 25% for computers, according to recent survey data from Frank N. Magid Associates, which also reports increased interest in live streaming video and virtual reality technologies.

Top Platforms for Entertainment Most Popular Sources for Online Video (Respondents asked to name only (Online users age 18-64) YouTube 70% 2011one platform) 44% FacebookYouTube 42% 2011 YouTube 70% 70% 2011TELEVISION 44%44% Netflix 42% FacebookYouTubeFacebook 42% 42% 70% 20172011 42%44% Instagram 22% 20112011 FacebookYouTubeNetflixYouTubeNetflix 42% 42% 70% 70% 2011 44%44% YouTubeHulu 20% 70% 2017 2017 42%42%44% InstagramFacebookInstagramFacebookNetflix 22% 22% 42% 42% FacebookTwitter 15% 42% 2017 InstagramNetflixHulu 42% 42% NetflixNetflixHulu 20%22%20% 42% 42% 2017 Snapchat 14% 201120172017 42% InstagramInstagramTwitterYouTubeHulu 15% 20%22% 22% 70% 42%44% InstagramVevoTwitter 6% 15%22% SnapchatFacebookTwitterHulu 14%15% 20% 42% 2011 32% SnapchatTwitchHuluHulu 6% 14%20% 20% SnapchatTwitterVevoNetflix 6% 14%15% VimeoTwitterTwitterVevo 6% 6% 15% 15% 42% 2017LAPTOP2011 OR PC 32% SnapchatTwitchVevo 6% 14% 2011 42%32% DailyMotionSnapchatInstagramSnapchat 6% 14% 14% 22% 32% VevoTwitch 6% 20172011 25% VimeoTwitchVevo 6% VimeoHuluVevo 6% 6% 20% 2011 32% DailyMotionTwitchVimeo 6%6% 201120172011 25% 32% TwitchTwitterTwitch 6% 15% DailyMotionDailyMotionVimeo 6%6%6% 2017 2017 25% SnapchatVimeo 6% 25% DailyMotionNetflixVimeo 6% 6% 14% 51% 2017 25% DailyMotion 6% 2017 25% Amazon PrimeDailyMotion VideoVevo 6%6% 29% Netflix 51% 20112017 25% 32% HuluTwitch 6% 20% 4% AmazonMost PrimeHBONetflix VideoNow NetflixPopular SVOD 12%Services 29% 51% 2011 Vimeo 51% SMARTPHONE Amazon(% Prime of Netflixonline VideoHulu users age6% 18-64 who have20% the service) 51% AmazonYouTube PrimeNetflix Red Video 8% 29% 29% 51% 2011 4% Amazon PrimeDailyMotionHBO Video NowHulu 6% 12% 20% 29% 2017 25% AmazonCBS Prime All Access VideoNetflixHulu 5% 20% 29% 51% 20172011 4% 11% YouTubeHBO HuluNowRed 8% 12% 20% 2011 4% Amazon PrimeHBOHulu NowVideo 12% 20% 29% 2011 4% CBSYouTube AllHBO Access Now Red 5% 8% 12% 2011 4% HBO NowHulu 12% 2017 11% FacebookCBSYouTubeYouTube All Access Live Red Red 5% 8% 8% 20% 45% YouTubeYouTubeHBO Red Now 8% 44% 20112017 4% 11% CBSCBS All All Access AccessNetflix 5%5% 12% 51% FacebookCBSInstagram All Access Live 5% 28% 45% 2017 2017 11%11% YouTubeTwitter Red 8% 19% 2017 11% AmazonFacebook PrimeYouTube Live Video 29% 44%45% CBSSnapchatInstagram All Access 5% 17% 28% VIDEO GAME CONSOLE FacebookFacebookYouTubeTwitch Live LiveHulu 12% 20% 44%45% 2017 11% FacebookInstagramTwitter Live 19% 28% 45% 45% 20112011 4% 6% LivestreamSnapchatYouTubeHBOYouTube Now 10% 12% 17% 44% 44% PeriscopeInstagramYouTubeTwitterTwitch 9% 19% 44% InstagramInstagram 12% 28% 28% FacebookYouTubeLivestreamYouNowSnapchatTwitter RedLive 6% 8%10% 17%19% 28% 45% 2011 6% TwitterTwitchTwitter 12% 19% 19% PopularityCBSPeriscopeUStreamSnapchat AllYouTube Access of4% Live5% Streaming9% 17% Video Platforms 44% 20172011 6% 8% LivestreamSnapchatSnapchatInstagramTwitch 6% 10%12% 17% 17% 2017 11% (% PeriscopeofYouNow TwitchmonthlyTwitch live streaming video12% viewers age 18-64) 28% 2011 LivestreamUStream 4% 9%10% 12% 6% LivestreamYouNowTwitter 6% 10% 19% 2011 20172011 6%6% 8% LivestreamPeriscopeSnapchat 9% 10% 17% FacebookPeriscopeUStreamPeriscopeYouNow Live 4%6% 9% 9% 45% 2017 8% YouNowTwitch 6% 12% UStreamLivestreamYouNowYouTube 4% 6% 10% 44% 20112017 6% 8% UStreamInstagram 4% 2017TABLET 8% UStreamPeriscope 9% 28% 2017 8% YouNowTwitter 6% 19% Snapchat 17% 2011 2% UStream 4% 2017 8% Twitch 12% 2011 2% 6% Livestream 10% 2011 Periscope 9% 20172011 2% 8% YouNow 6% UStream 4% 2011 2% 201720172011 8%8% 2011 2017SOURCE: Magid Media2% Futures 2017. Based on a nationally representative8% online survey of 2,400 consumers age 18-64; data was collected from May 24 to June 11, 2017. 2017 8% 2011182017 MULTICHANNEL2% NEWS JANUARY 8, 2018 multichannel.com 2017 8%

2017 8% 2011 2%

2017 8% The Multichannel, Multidevice World While 82% of 18-to-34-year-olds still have a multichannel subscription, 91% of these young adults have an SVOD service, and even more than half of Americans age 50 and older are SVOD subscribers, according to Horowitz Research.

Electronic Devices and Services (Among viewers of TV content)

Multichannel subscriptions SVOD penetration DVR High-speed internet access at home Multichannel subscriptions SVOD penetration DVR High-speed internet access at home

Multichannel subscriptions18-34 82% SVOD penetration 18-34 91% DVR 18-34 50% High-speed internet access18-34 at home 95% 18-34 82% 18-34 91% 18-34 50% 18-34 95% Total 18+ 35-49 85% Total 18+ 35-49 80% Total 18+ 35-49 53% Total 18+ 35-49 95% Total 18+ Total 18+ Total 18+ Total 18+ Total 18+ 35-49 85% Total 18+ 35-49 80% Total 18+ 35-49 53% Total 18+ 35-49 95% 82% 50+18-34 82%80% 72% 50+18-34 51% 91% 50% 50+18-34 47%50% 88% 50+18-34 79% 95% 82%Total 18+ 50+ 80% Total72% 18+ 50+ 51% 50%Total 18+ 50+ 47% Total88% 18+ 50+ 79% 35-49Children in HH 85%86% Children35-49 in HH 80%88% 35-49Children in HH53% 58% Children35-49 in HH 94%95% Children in HH 86% Children in HH 88% Children in HH 58% Children in HH 94% 82% 50+ 80% 72% 50+ 51% 50% 50+ 47% 88% 50+ 79%

Children in HH 86% Children in HH 88% Children in HH 58% Children in HH 94% Able to stream video to TV Able to stream video to TV Handheld with video capability Smartphone with video capability fromAble toany stream device video to TV withAble gameto stream console video to TV Handheld with video capability Smartphone with video capability from any device with game console Able to stream video to TV Able to stream video to TV Handheld with video capability Smartphone with video capability from any device 18-34 94% with game console 18-34 80% 18-34 99% 18-34 97% 18-34 94% 18-34 80% 18-34 99% 18-34 97% Total 18+ 35-49 90% Total 18+ 35-49 66% Total 18+ 35-49 96% Total 18+ 35-49 92% Total 18+ Total 18+ Total 18+ 35-49 90% Total 18+ 35-49 66% Total 18+ 35-49 96% Total 18+ 35-49 92% 80% 50+18-34 62% 94% 54% 18-3450+ 26% 80% 91% 50+18-34 80% 99% 86% 50+18-34 73% 97% 80%Total 18+ 50+ 62% 54%Total 18+ 50+ 26% 91% 50+ 80% 86% 50+ 73% 35-49Children in HH 90%95% Children35-49 in HH 66%80% Total 18+ 35-49Children in HH 96%99% Total 18+ Children35-49 in HH 92%95% Children in HH 95% Children in HH 80% Children in HH 99% Children in HH 95% 80% 50+ 62% 54% 50+ 26% 91% 50+ 80% 86% 50+ 73%

Children in HH 95% Children in HH 80% Children in HH 99% Children in HH 95% Video capable tablet/ Uses a cable to connect computer, Uses a cable to connect computer, Any video capable tablet/e-reader iPad e-readerVideo capable other tablet/than an iPad laptop, tablet or cellphone to TV set Any video capable tablet/e-reader iPad e-reader other than an iPad laptop, tablet or cellphone to TV set Video capable tablet/ Uses a cable to connect computer, laptop, tablet or cellphone to TV set Any video capable tablet/e-reader18-34 71% iPad 18-34 44% e-reader other than an18-34 iPad 44% 18-34 66% 18-34 71% 18-34 44% 18-34 44% 18-34 66% Total 18+ 35-49 74% Total 18+ 35-49 43% Total 18+ 35-49 51% Total 18+ 35-49 56% Total 18+ Total 18+ Total 18+ Total 18+ Total 18+ 35-49 74% Total 18+ 35-49 43% Total 18+ 35-49 51% Total 18+ 35-49 56% 63% 18-3450+ 48% 71% 35% 18-3450+ 22% 44% 42% 18-3450+ 33% 44% 50% 18-3450+ 34% 66% 63%Total 18+ 50+ 48% 35%Total 18+ 50+ 22% 42%Total 18+ 50+ 33% 50%Total 18+ 50+ 34% 35-49Children in HH 74%83% Children35-49 in 43% HH 49% Children35-49 in HH 51% 59% Children35-49 in HH 56% 64% Children in HH 83% Children in HH 49% Children in HH 59% Children in HH 64% 63% 50+ 48% 35% 50+ 22% 42% 50+ 33% 50% 50+ 34%

Children in HH 83% Children in HH 49% Children in HH 59% Children in HH 64% Stream from Blu-ray/DVD player Stream from smart TV Stream from stick or box to TV Stream from Blu-ray/DVD player Stream from smart TV Stream from stick or box to TV

Stream from Blu-ray/DVD18-34 46% player Stream from smart TV18-34 51% Stream from stick or18-34 box to TV 53% 18-34 46% 18-34 51% 18-34 53% Total 18+ 35-49 43% Total 18+ 35-49 50% Total 18+ 35-49 47% Total 18+ 35-49 43% Total 18+ 35-49 50% Total 18+ 35-49 47% 37% 18-3450+ 25%46% 42% 50+18-34 30% 51% 39% 18-3450+ 23% 53% 37% 50+ 25% 42% 50+ 30% 39% 50+ 23% Total 18+ Children35-49 in HH 43% 51% Total 18+ Children35-49 in HH 50% 55% Total 18+ Children35-49 in HH 47% 50% Children in HH 51% Children in HH 55% Children in HH 50% 37% 50+ 25% 42% 50+ 30% 39% 50+ 23%

Children in HH 51% Children in HH 55% Children in HH 50%

SOURCE: Horowitz Research, State of Pay TV, OTT and SVOD, 2017

multichannel.com JANUARY 8, 2018 MULTICHANNEL NEWS 19 SPECIAL REPORT VIEWER WATCH 2018

The Multicultural, Multimedia Universe Hispanics have embraced digital video in a big way, with 79% having an SVOD service, versus 72% of the general market and 87% of Hispanics reporting that they can stream video to the TV, according to Horowitz Research.

Total Ethnic Groups and Video Technologies KEY:TotalTotalTotal African-AmericanTotal (% of urban viewers of TV content who have the device or service) African-AmericanAfrican-AmericanAfrican-American African-American Asian Asian AsianAsianAsian Hispanic Multichannel subscription Multichannel subscriptionSVOD subscription SVOD subscription DVR HispanicHispanicHispanicHispanic MultichannelMultichannelMultichannel subscription subscriptionsubscription SVODSVODSVOD subscription subscriptionsubscription DVRDVRDVR DVR 82 82 72 72 5050 828282 86 727272 73 50505050 868686 81 737373 71 36 505050 818181 87 717171 79 363636 49 878787 797979 494949 Able to stream video High-speed Internet Handheld with video capability to TV from any device

88 91 Able to stream video 80 AbleAbleAble to toto stream streamstream video videovideo High-speed Internet Handheld88 with video capability 89 to TV from any device 83 High-speedHigh-speedHigh-speed Internet InternetInternet HandheldHandheldHandheld with withwith video videovideo capability capabilitycapability tototo TV TVTV from fromfrom any anyany device devicedevice 90 93 82 888888 86 919191 90 80808087 88 89 83 888888Able to stream video to 898989 838383 90TV with game console Stream from smart TV Stream from stick or box to TV82 909090 939393 828282 868686 54 909090 42 39878787 58 39 36 Able to stream video to 47 50 46 AbleAbleAble to toto stream streamstream video videovideo to toto TV with game console Stream63 from smart TV 53 Stream from stick or box to TV45 TVTVTV with withwith game gamegame console consoleconsole StreamStreamStream from fromfrom smart smartsmart TV TVTV StreamStreamStream from fromfrom stick stickstick or oror box boxbox to toto TV TVTV 54 545454 Stream from Blu-ray/DVD Player Tablet424242 iPad 393939 58 39 63 36 585858 37 393939 35363636 64 4747 37 5050 30 464646 4747 5050 69 51 34 53 6363 535353 65 40 4545 6363 45 4545

Stream from Blu-ray/DVD Player Tablet iPad StreamStreamStream from fromfrom Blu-ray/DVD Blu-ray/DVDBlu-ray/DVD Player PlayerPlayer TabletTabletTablet iPadiPadiPad 636363 35 373737 353535 646464 30 373737 303030 6969 5151 3434 6969 5151 3434 40 656565 404040 454545

SOURCE: Horowitz Research, State of Pay TV, OTT and SVOD, 2017

20 MULTICHANNEL NEWS JANUARY 8, 2018 multichannel.com Cord-Cutting Close-Up

A recent survey from Magid notes that the intention to cut the cord has reached0 record levels, at 6.1%, while Magna expects the number of cord-cutters to hit 27.1 million by 2021.

Cord-Cutters Reasons“I don’t for watch Cutting enough TVthe to makeCord it worth it” (Millions of households) 27.4 (% among very likely cord-cutters) 22.2 2014 42% “I don’t watch enough TV to make it worth it” 17.1 “I don’t watch enough TV to make it worth it” 12.4 27.4 2017 29% 22.2 27.4 42% 8.0 22.2 2014 “I don’t watch enough TV to make it worth it” 42% 2.7 4.4 17.1 2014 N/A N/A 1.7 12.4 17.1 27.4 2017“I am satisfied with what I can receive29% over the air” 8.0 12.4 22.2 20172014 29% 42% 2012 2013 2014 20154.4 2016 20178.0 2018 201917.1 2020 2021 1.7 2.7 4.4 2014 29% 48% N/A N/A 1.7 2.7 12.4 “I am satisfied2017 with what I can receive over the air” N/A N/A 8.0 “I am satisfied with what I can receive over the air” 2012 2013 2014 2015 20162.7 20174.4 2018 2019 2020 2021 2017 27% 2012N/A 2013N/A 20141.7 2015 2016 2017 2018 2019 2020 27.62021 2014 48% Cord-Nevers 25.1 26.3 “I2014 am satisfied with what I can receive over the air” 48% 21.3 22.6 23.8 * (Millions18.32012 19.5of2013 households)19.0201420.12015 2016 2017 2018 2019 2020 2021 2017"I can watch the TV shows and movies27% I like on the Internet” 27.6 20172014 27% 48% 25.1 26.3 27.6 21.3 22.6 23.8 25.1 26.3 2014 27% 44% 18.3 19.5 19.0 20.1 21.3 22.6 23.8 "I can watch2017 the TV shows and movies I like on the Internet”* 18.3 19.5 19.0 20.1 26.3 27.6 "I can watch the TV shows and movies27% I like on the Internet”* 23.8 25.1 2017 20.1 21.3 22.6 2014 "I can watch the TV shows and movies I like on the44% Internet”* 201218.3201319.5201419.02015 2016 2017 2018 2019 2020 2021 2014 44% 2017“I am satisfied with online streaming27% options on my TV 20172014 27% 44% from services like Netflix, Hulu”* 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 “I am satisfied2017 with online streaming options on27% my TV “I2014 am satisfied with online streaming options on my TV 40% SOURCE:2012 Magna.2013 Actual numbers2014 for 2011-2016;2015 projections2016 for2017 2017-2021.2018 2019 2020 2021 from services like Netflix, Hulu”* from“I2017 am services satisfied like with Netflix, online Hulu” streaming* options27% on my TV 2014 from services like Netflix, Hulu”* 40% 6.1 2014 40% 2017“It's too expensive” 27% Planning to Cut the Cord 5.7 20172014 27% 40% (% of pay TV subs ages 18-64 who say they are very likely to cancel their 2014 34% 6.1 2017 27% subscription in the next 12 months and not get another one) 6.1 “It's too expensive” 5.7 “It's2017 too expensive” 25% 5.7 6.1 2014 34% “It's2014 too expensive” 34% 5.7 2017 “I can watch the TV shows and movies I like25% on DVD” 3.8 20172014 25% 34% 26% “I can watch20142017 the TV shows and movies I like on DVD” 25% “I can watch the TV shows and movies I like on DVD” 3.8 2017 18% 2.9 3.8 2014 “I can watch the TV shows and movies I like on26% DVD” 2.7 2014 26% 3.8 “I have entertainment options on 18%the Internet”* 2.2 2.9 2017 2014 18% 26% 1.9 2.7 2.9 2017 2.7 2014 18% 46% 2.9 “I have entertainment2017 options on the Internet”* 2.2 “I have entertainment options on the Internet”* 1.9 2.2 2.7 2017 17% 2014 “I have entertainment options on the Internet”* 46% 1.9 2.2 2014 46% 1.9 2017 Combined2014 OTT reasons17% 46% 2017 17% 2014 76% Combined2017 OTT reasons 17% 2011 2012 2013 2014 2015 2016 2017 Combined OTT reasons 2017 61% 2014 Combined OTT reasons 76% 2014 76% 2011 2012 2013 2014 2015 2016 2017 2011 2012 2013 2014 2015 2016 2017 2017 2014 61% 76% 2017 61% 2011 2012 2013 2014 2015 2016 2017 * Options included in the combined OTT reasons 2017 61% SOURCE: Magid Media Futures 2017. Based on a nationally representative online survey of 2,400 consumers ages 8-64; data was collected from May 24 to June 11, 2017.

multichannel.com JANUARY 8, 2018 MULTICHANNEL NEWS 21