The Business of Broadcast & Media

The Business of Broadcast & Media Global Trends – Focus on APAC Peter White, IABM CEO Asia-Pacific TV distribution - Forecast Number of TV households in APAC region expected to increase from about 900 million in 2018 to 970 million in 2024

• APAC’s Pay-TV sector is vibrant, with both subscribers APAC TV households by distribution platform (million) (+68 million) and revenues (+US$ 2.35 billion) forecast to rise during the next 5 years, while the 2018 2019 2024 growth will be slower-than-expected due to many 350 cable subscribers in China converting to OTT • China and India combined will account for 80% of 300 APAC’s roughly 680 million Pay-TV subscribers by 2024 250 • IPTV (subscription-based services provided by e.g. telecom operators) is expected to grow significantly 200 adding over 80 million subscribers between 2018 and 2024, rising to 272 million 150

• The majority of IPTV growth in the APAC region will 100 originate from China with an additional 40 million Million households subscribers by 2024, followed by India with about 30 50 million new subscribers • Digital cable subscriptions will be flat overall, and 0 China is expected to lose 25 million cable subscribers Analog Analog Digital cable Pay satellite FTA satellite Pay IPTV Pay DTT FTA DTT between 2018 and 2024 terrestrial cable TV TV TV TV TV Source: Digital TV Research, IABM

Top countries by number of Pay-TV subscribers US Pay-TV subscribers by platform (million) (million) Analog cable TV Digital cable TV Pay IPTV Pay satellite TV

2017 2023 120 Pay-TV penetration continues to decline in the US due to the 400 China (33%) and India (16%) combined are forecast to high costs related to Pay-TV subscriptions vs. OTT services. have nearly half of the world’s total Pay-TV subscribers by 100 350 2023. The US will be the biggest loser in terms of Pay-TV 300 subscribers, going down by 10 million subscribers. 80

250

60 200

150 Million subscribers

Million subscribers 40 100

50 20

0 China India USA Russia Germany Japan Mexico South Brazil 0 Korea 2010 2017 2023 Source: Digital TV Research, IABM

APAC Pay-TV subscribers by country (000s) APAC Pay-TV penetration rate of TV households

Total: ~630 million 2018 2017

New Zealand

2018 Singapore

Hong Kong (of China)

Australia

Malaysia Total: ~ 610 million Total average: 57% Philippines

Indonesia 2017 Thailand

Taiwan (of China)

Vietnam 0 100,000 200,000 300,000 400,000 500,000 600,000 Japan China India South Korea Japan South Korea Vietnam Taiwan (of China) Thailand Indonesia India Philippines Malaysia Australia Hong Kong (of China) China Singapore New Zealand 0% 20% 40% 60% 80% 100% 120% Source: Asia Video Industry Association (AVIA), Media Partners Asia (MPA)

• Asia-Pacific region is the world’s third-largest IPTV economy after North Number of TV households in APAC with a Pay-IPTV America and Western Europe, with China Telecom being the largest subscription (2018-2024*) IPTV operator globally by subscriber base 300 • In APAC, other major IPTV providers include KT Corporation 272 (South Korea) and Sky Perfect JSAT Corporation (Japan) • China alone accounts for about 80% of all IPTV households in the APAC 250 region, thanks to China Telecom’s fast expansion over the past few 217 years 200 189 • In terms of IPTV subscription revenue, South Korea leads with US$2.3 billion (2017), followed by Japan’s US$1.4 billion and China’s US$1.2 billion 150 • In 2017, China had APAC’s lowest IPTV ARPU (average revenue per user) at US$0.92 per month because China Telecom and 100 China Unicom have both marketed IPTV as a promo service add- on to fixed broadband services. In comparison, IPTV ARPU was Number of TV households highest in New Zealand at US$49.24 50 • Many governments (e.g. Australia, New Zealand, Singapore, Malaysia) are funding fiber rollouts to support the IPTV market in the long term 0 2018 2019* 2024* Source: Digital TV Research, Asia Video Industry Association (AVIA)

Emergence of online video platforms (home and mobile broadband, IPTV/OTT): Pay-TV operators launching their own SVOD services, rolling out Android set-top-boxes (STB) and shifting to IP-based distribution and STB integration with OTT operators.

Pure direct-to-home (DTH) satellite segment declining: DTH satellite operators struggle, while bundled service operators with IPTV and high speed internet continue to grow in countries such as Indonesia, Malaysia and India where customers are shifting to packages with broadband and OTT.

Increasing investment in online video content: Premium entertainment and sports growing at a significant pace.

Emergence of telcos as content distributors and aggregators of video services: Telcos actively investing in video content, distribution, e-commerce and gaming across Asia-Pacific.

Source: Asia Video Industry Association (AVIA)

@THEIABM www.theiabm.org IABM Copyright 2019 Asia-Pacific OTT market continues to boom OTT TV and video revenues by country in APAC Legal SVOD OTT penetration per capita in APAC (US$ million, 2018-2024*) (2018) 30,000 40%

35% APAC region has some of the highest rates of 25,000 video piracy in the world. For example, th 30% Singapore ranks 9 in the world for the most number of visits to piracy sites per capita, 20,000 according to Asia Video Industry Association’s 25% study.

15,000 20% US$ millionUS$ 15% 10,000

OTT penetration/capita (%) penetration/capita OTT 10% 5,000 5%

0 0% China Japan South Australia India Others Korea 2018 2019* 2024*

Source: Digital TV Research, Media Partners Asia (MPA)

Internet Mobile internet Mobile payment

802 million users 778 million users 650 million users (57.7% of total (98.3% of total (46% of total population) internet users) population)

Population: 1.42 billion

262 million 55 275 million million users (89%) users (95.3%) users (20.2%) Population: 327 million Source: US Census Bureau, CNNIC, Statista

Technology mix - China Technology mix - India Technology mix - US 2G 3G 4G 5G 2G 3G 4G 5G 2G 3G 4G 5G

2025 2025 2025

2017 2017 2017

Source: GSMA 2018. Note: Share of mobile connections by technology

Number of AI startups by country in 2018 AI market size in China - Growth forecast 1,600 (2015-2020, US$ billion) 16 1,400 1,393 14.3 1,200 14

1,000 12

10.2 800 10

600 8 Number of of startups Number 383 362

400 Billion US$ 6.2 245 6

200 131 113 109 106 82 55 45 42 39 35 28 27 26 26 22 19 4 3.4 0 2.1 1.6 Italy

India 2 Israel Spain Brazil China Japan Russia France Finland Canada Sweden Australia Germany Singapore Switzerland South Korea Netherlands 0 United States United

United Kingdom 2015 2016 2017 2018 2019 2020

Sources: Roland Berger, CMN, CISTP

Source: SCMP

@THEIABM www.theiabm.org IABM Copyright 2019 4K/UHD adoption globally China continues to lead in 4K/UHD adoption 4K TV shipments forecast by region (2015-2020) 50,000 Nearly 100 million 4K/UHD • China will continue to dominate the 4K/UHD TV market, with 42% of all TV sets were sold in 2018, 45,000 TVs in 2017 shipped with 4K panels. By 2020, 4K TV shipments in China and the number is expected are expected to reach 44 million units – the same as North America to double by 2022. 40,000 and Western Europe combined Better visual experience, • In the US, the adoption of 4K/UHD is driven by Pay-TV operators 35,000 availability of 4K content, differentiating their offerings and terrestrial broadcasters who are affordable pricing of 4K sets increasingly adopting the new ATSC 3.0 standard. In South Korea, the 30,000 driving demand globally. adoption of ATSC 3.0 has catalyzed 4K/UHD adoption at terrestrial 25,000 broadcasters OTT operators such as Netflix and Amazon already offer 4K/UHD 20,000 • Shipments (000s) content in several countries 15,000 • China will dominate 8K shipments as its early-adopting consumers are seeking new features and as pricing of 8K sets becomes more 10,000 affordable 5,000 • While Japan is planning 8K broadcasts from 2020, currently shipments in Japan remain constrained by consumer preferences for screen sizes - too small to support even 4K 2015 2016 2017 2018 2019 2020 • In 2018, the FIFA World Cup and the Wimbledon tennis championships China North America were covered in 4K/UHD Western Europe APAC (excl. China, Japan) Latin America Eastern Europe Middle East and Africa Japan Source: IBC365, IHS Markit

@THEIABM www.theiabm.org IABM Copyright 2019 In January 2019, China successfully carried out Latest 4K/UHD initiatives in China its first test of 4K UHD video transmission using CCTV China launched 4K channel at the end of 2018 5G-based network

In October 2018, China In December 2018, Shanghai Media Group (CMG) Oriental Pearl’s BesTV and launched its first 4K TV Insight TV signed a distribution channel, CCTV 4K Ultra HD deal for 4K UHD content

2018 2019

• The new channel broadcasting • Shanghai Oriental • China’s first test of 4K UHD video 18 hours per day and is available Pearl’s BesTV platform transmission used 5G-based network in in 13 municipalities and and Insight TV (4K UHD Shenzhen provinces including Beijing, content provider) signed • This enabled 4K/UHD live broadcasting Shanghai and Guangdong a distribution deal in a separate Shenzhen studio during • CMG also upgrading its giving Shanghai Oriental the 2019 Spring Festival Gala Pearl’s viewers access to production and broadcasting • China Media Group (CMG), China systems to fully support 4K/UHD, a wide range of Insight Mobile, Huawei already launched the with the roll-out happening in TV’s popular shows in first national-level 5G new media stages between 2019 and 2021 4K/UHD format platform in December 2018

Source: CTGN, Broadband TV News

Digital Warfare More companies launch DTC offerings in increasingly competitive market

Digital Inflation Shifts in Buying Trends Growth in content and number of platforms increases complexity • From Media Company to Media Factory • From Transactions to Partnerships (and BIY) • From Hardware to Software (and Cloud) Digital Speed • Increasing Importance of Data (and AI) • Decreasing Importance of Immersive Formats Media companies increasingly streamline their operations to be quicker

Sources: IABM

@THEIABM www.theiabm.org IABM Copyright 2019 Digital Warfare New DTC offerings More Media Companies Go Direct! • Disney launched ESPN+ in 2018 and set to launch Global Subs: Pay-TV vs. SVOD Disney+ this year 1200 • Apple set to unveil its streaming service this year after 1$bn investment in 2018 1000 • WarnerMedia to launch a streaming service this 800 year 600 • BBC and ITV to launch joint UK streaming service Million Subs this year 400 • BBC and Discovery to launch joint streaming service focused on wildlife programming 200

• TF1, Télévisions and M6 removing content from 0 Netflix and Amazon after 2018 streaming launch 2017 2018 2019 Pay-TV SVOD

Sources: IABM, Digital TV Research

More Media Companies Go Global Implications • Disney launched ESPN+ in 2018 and set to launch Disney+ this year. Planning to expand Hulu and Disney+ internationally TV Exports Rise Data from the UK, France and even • Apple to launch a global SVOD service emerging content markets like Turkey points to double digit growth • WarnerMedia to launch a global streaming service this year • Comcast plotting a global streaming service following Sky acquisition Scale & Complexity Scale needed for global services. Added • BBC and Discovery to launch joint global streaming complexity in making it work, from content service focused on wildlife programming localization to rights management • Discovery to launch global streaming service focused on golf

Sources: IABM

Alliances Focus on Revenue-Generating Activities Investment in Tech Suppliers Following Similar Pattern

OTT Many joint DTC initiatives in Europe – France (Salto), UK (Britbox), Spain (LOVEStv), Germany (Joyn). Broadcasters also vouching to collaborate on streaming tech

Advertising Rise in number of collaborative initiatives to increase audience size and improve addressability (European Broadcast Exchange, Blockchain Insight Platform, Sky/Virgin partnership, Project OAR, RTL/Prosieben partnership)

Is More Consolidation Coming to Europe?

• Canal+ bought Pay-TV operator M7 for $1.1bn at the European media companies like end of May 2019 us need to join forces if we are to continue to compete, or even • Mediaset bought 9.6% in ProSiebenSat.1 for $380m at just resist, in terms of our the end of May 2019 European cultural identity, eventual attacks by the global • Market is very fragmented, more could happen as giants European broadcasters search for scale Pier Silvio Berlusconi, • Consolidation and collaboration aim to address cost of Mediaset Deputy Chairman & CEO competing with FAANGs on ad revenues, streaming and May 2019 content

Sales & Profits in the Broadcast & Media Industry 15%

13%

11%

-1%

-3%

-5% H2 2017 H1 2018 H2 2018 Sales Change Profit Change Sources: IABM

Sales & Profits – Broadcast vs. FAANGs Current Market Capitalization

30% 3,000,000,000

25% 2,500,000,000

20% 2,000,000,000

15% Sales Change 1,500,000,000 10% Profit Change

Thousands USD 1,000,000,000 5%

500,000,000 0%

-5% 0 Broadcast FAANGs Broadcast FAANGs Sources: IABM

Number Of Original Scripted Series In The US The FAANGs Double Down on Media

500

450 Given the success of Hulu so far

400 in terms of subscriber growth and the relative brand strength 350 and other things too like 300 demographics, we think there’s 250 an opportunity to increase investment in Hulu notably on 200 the programming side 150 Investment up Bob Iger, Disney CEO 100 Nov. 2018 50 by over 40% 0 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

Sources: IABM, Variety, MSCI, Statista

Sources: IABM

Content Divide

Content Supermarkets Netflix, Amazon, DAZN and now Disney offering a varied slate of content

Niche Providers Rise of niche OTT offerings by emerging players and existing broadcasters

Sources: IABM

Our strategic purchase of BAMTech [The new offering will be funded Efficiencies allowed us to enter this arena quickly through] incremental efficiencies and effectively, as evidenced by our within the WarnerMedia successful launch of ESPN+ six months operations, consolidating resources BIY ago. More than 1 million users have already subscribed. And we continue from sub-scale D2C [direct-to- to see impressive growth. consumer] efforts, library content, and technology reuse Bob Iger, Disney CEO AT&T’s SEC Filing Nov. 2018 Oct. 2018

Sources: IABM, Multichannel News

Multi-Platform Content Delivery 4K/UHD Production/Delivery [The iPlayer] is the way IP infrastructure people will consume the Media Asset Management File-Based Workflows BBC in the future. We need Social Media Broadcasting more content there and for News Operations longer. This is no longer a Remote Production Upgrading Operations to HDTV catch-up service… it’s a Cloud-Computing destination Cyber Security Big Data Analytics & AI Tony Hall, Director General, BBC Back Office Systems Dec. 2018 Programmatic Advertising VR Production/Delivery

Sources: IABM, Financial Times

• An increasing share of broadcast and media Growth Parallel Markets vs Broadcast and Media technology suppliers’ customer base comes from a Gaming non-media background Security Monitoring eSports • These markets have radically different needs Mobile/Telecom compared to broadcast and media, requiring Signage suppliers to adapt their marketing and selling Sports practices Marketing/Media Corporate • According to IABM’s Supply Trends Survey 2019, Education/Training 71% of respondents said that broadcast and media Worship was a stable or declining segment, while all the Government / Military non-media segments were reported as high- growth: • Gaming (100% of respondents saying it is a Broadcast & Media growing trend) 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% • Security Monitoring (92%) • eSports (91%) Growing Stable Declining Sources: IABM, Vendors asked which parallel markets they serve are growing

Global eSports audience growth eSports enthusiasts by region in 2019 (in million people, 2017-2022*) 700

600

15% 500

400 12%

300 57%

16% 200 Number of people (million)

100

0 2017 2018 2019* 2022*

Occasional viewers eSports ethusiasts APAC EU North America Rest of the world

Source: NewZoo Global Esports Market Report 2019

Top Factors Influencing Technology Purchase Top 3 Priorities in Content Chain Management 0% 20% 40% 60%

Makes us more efficient Total cost of ownership Optimize Makes us more agile resource utilization and

Cutting-edge technology avoid effort duplication

ROI Installation support Predict Interoperable with other products unknown variables and events After sales services & support

Reputation of vendor Vendor roadmap Gather Vendor's understanding of needs data on content, rights, Personal relationship with vendor operations, audiences Availability of training

Sources: IABM

We are not looking for BIY products anymore, we Through acquisitions and are looking for internal SW development partnerships where Digital Speed product development is Need to do things quickly and effectively driven by our in multi-platform requirements world Partnerships European broadcaster responding to our Buying Trends Survey Through increased collaboration with suppliers Sources: IABM

40% Produce 35% Create 30% Manage 25% Connect 20%

15% Publish

10% Support 5% Consume 0% Monetize It will increase It will increase It will stay the It will It will significantly (by 0-10%) same decrease (by decrease Store (by > 10%) 0-10%) significantly (by > 10%) 0% 10% 20% 30% 40% 50% 60% Sources: IABM

Cloud – Adoption Tracker UP from 37% Cloud – Top Application Areas

Sources: IABM

Cloud – Top Challenges Cloud – Preferred Deployment Model

Sources: IABM

AI – Adoption Tracker UP from 13% AI – Top Application Areas

Sources: IABM

AI – Top Challenges AI – Preferred Deployment Model 0% 10% 20% 30% 40% 50% 60%

Leverage cloud service provider's AI capabilities

Leverage specific AI functionalities in vendor's solution

Internal deployment/recruitment

Specialist AI platform

Other

Sources: IABM

NASCAR moves 500,000 hours of content archive (18-petabyte) AI – Preferred Deployment Model in the cloud 0% 10% 20% 30% 40% 50% 60%

Leverage cloud service provider's AI capabilities We started to digitize six or Leverage specific AI functionalities in seven years ago. We are vendor's solution jumping into machine learning to automate processes and add metadata Internal deployment/recruitment Steve Stum, NASCAR VP Operations and Tech Production June 2019 Specialist AI platform

Other

Sources: IABM

IP – Adoption Tracker 45% Efficiency Driver

40% Efficiency-boosting activities like remote production continue to drive 35% IP deployments 30% 25% Quality Driver 20% 69% of respondents want to go UHD with IP or hybrid SDI-IP 15%

10%

5% New Facilities Major upgrades driven by new 0% 2018 NAB 2018 IBC 2019 NAB facilities so far We are already doing it today Very likely Likely Unlikely Very unlikely

Sources: IABM

UHD – Adoption Tracker 25% The HDR Factor HDR the preferred enhancement, most companies still want to marry 20% HD with enhancements

15% Production: Infinite Content High priority for production and post companies for future-proofing content 10% and sell to Amazon/Netflix ($20bn)

5% Distribution: Limited Content Limited content distribution aside from Pay-TV and OTT operators. Major 0% events as driver of spending 2017 NAB 2017 IBC 2018 NAB 2018 IBC 2019 NAB

Sources: IABM

VR – Adoption Tracker 12% Sports: The Silver Lining Almost all initiatives in Sports where 10% VR provides attractive consumer experiences 8% Monetization 6% Most initiatives have not been monetized. Lack of clarity around 4% business models is major hurdle

2% Complexity Production complexities coupled 0% 2017 NAB 2017 IBC 2018 NAB 2018 IBC 2019 NAB with costs of deployment/storage other constraints VR Linear (VR)

Sources: IABM

Each link of the chain maps to specific investment areas

Sources: IABM

Suppliers’ Business Sentiment

80% Monetize & Consume 70% Broadcasters investing more in 60% Monetize & Consume as they

50% move direct-to-consumer. This is to establish relationships with 40% consumers and monetize them effectively 30%

20% Publish 10% In Publish, 67% of suppliers say that their customers are focusing 0% Create Produce Manage Publish Monetize Consume Connect Support Store investment on internet distribution

Positive Business Sentiment Reliance on Hardware

Sources: IABM

Software revenues 10% (subscriptions) 5%

Software revenues 0% (permanent licences) -5%

-10% Software revenues (on- demand) -15% -20%

Hardware revenues -25% -30% H1 H2 H1 H2 H1 H2 H1 H2 H1 H2 0% 20% 40% 60% 80% 100% 2014 2014 2015 2015 2016 2016 2017 2017 2018 2018 Will increase Will stay the same Will decrease Sales Growth Profit Growth Sources: IABM

80.00% 70%

70.00% 60% 60.00%

50.00% 50% 40.00%

30.00% 40%

20.00% 30% 10.00%

0.00% 20%

10%

0% Increased in the last six months Stayed the same in the last six Reduced in the last six months months

Hardware revenues Software revenues Hardware revenues Software revenues

Sources: IABM

30% 80% 70%

60% 25% 50%

40% 20% 30%

20%

15% 10%

10%

0% H2 2016 H1 2017 H2 2017 H1 2018 H2 2018 Hardware suppliers Software suppliers

Sources: IABM