Video Trends Report Q1 2015

Home , Bright House Networks

Q1 • 2015 VIDEO TRENDS REPORT Consumer Behavior Across Pay-TV, VOD, PPV, OTT, Connected Devices, and Content Discovery Q1 2015 VIDEO TRENDS REPORT

Introduction

Each quarter, Digitalsmiths seeks real consumer opinions Digitalsmiths has conducted this survey since 2012, to uncover key trends facing Pay-TV providers, content enabling the company to monitor, track and identify key Survey Demographics owners, and consumer electronics manufacturers. trends in consumers’ viewing habits and their opinions Consumers’ genuine, unbiased perspectives and feedback of Pay-TV providers, emerging technologies, connected are influential in driving continuous improvements to devices, TV Everywhere apps, and content discovery Q1 2015 Survey Size: Digitalsmiths Seamless Discovery®, the industry’s leading features such as personalized recommendations. So far, 3,144 Consumers personalized content discovery platform, and Seamless 2015 has proven to be one of the busiest years yet for new Insight™, which delivers the reporting and analytics Over-the-Top (OTT) and Over-the-Air (OTA) services being Geographic Regions: necessary to optimize content discovery. The findings are launched, posing an even greater threat to the Pay-TV United States, Canada shared for the same reason Digitalsmiths uses them, in landscape. In addition to key quarter-over-quarter (q/q) hopes other industry players leverage the information to and year-over-year (y/y) trends, the Q1 2015 Video Trends Age of Respondents: improve and develop video applications and features to Report covers many new topics spanning: 18+ Years of Age enhance the overall TV viewing experience offered today. ¨¨ Consumers’ awareness and adoption of new video PAY-TV PROVIDER services such as Sling TV and Sony PlayStation™Vue This survey was conducted in Q1 2015 by a leading third- ¨¨ New questions around consumers’ sentiment Who is your current cable/satellite service provider? party survey service. Digitalsmiths analyzed the results. toward à la carte Pay-TV channel packages and the Digitalsmiths conducts this survey on a quarterly basis and monetary value they place on their most desired publishes a report evaluating and analyzing key trends DISH Network channels across the Pay-TV industry. The importance of this survey Bell Verizon Videotron TELUS ¨¨ New awareness and usage metrics around revenue- is to track consumer trends over time, offering Pay-TV Mediacom providers real, unbiased feedback regarding consumers’ MTS Rogers generating Pay-Per-View (PPV) content, and tips to behaviors, perception of the industry and views of new drive more purchases technology hitting the market. SaskTel Charter ComcastBright House Networks Cablevision Cox Suddenlink Time Warner Cable AT&T U-verse GoogleTV Shaw DIRECTV Cogeco Cable

2 Q1 2015 VIDEO TRENDS REPORT

SWITCHING PROVIDERS Pay-TV Providers Have you switched cable/satellite providers in the last three months? Q1 2015 Viewer Loyalty is Declining, Cord-Cutting is Growing 5.7% Q1 2014 YES +2.0% In Q1 2015, 7.7% of respondents answered they switched providers in the last three 7.7% y/y months, a 2.0% increase y/y. Additionally over the course of the next six months, a total of 15.3% of respondents said they plan to either switch (3.1%), change (7.4%), or cut 94.3% NO service altogether (4.8%), and 32.4% are on the fence and might need to be enticed to 92.3% stay. Added together, 47.7% of respondents need immediate attention to save them from cord-cutting, cord-cheating, or switching providers. Unfortunately, the percentage Do you plan to change cable/satellite providers in the next six months? of those who plan to switch, change or cut is up 1.7% y/y and 3.5% since Q1 2013. However, of the 32.4% of on-the-fence respondents, 44.0% said they would stay if their 3.1% YES, planning to SWITCH to an online app or provider released new functionality that made it easier to find something to watch, a MAYBE rental service instead of a cable/satellite service 6.1% y/y increase. These results demonstrate respondents’ loyalty to their Pay-TV provider 7.4% YES, planning to CHANGE cable/satellite providers is dwindling, but functionality to improve the experience is welcomed with open arms. YES 4.8% YES, planning to CUT cable/satellite service The good news is many North American Pay-TV providers are making conscious efforts Q1 2015 to improve the overall subscriber experience with new user interfaces being rolled 32.4% MAYBE out on set-top boxes, tablets, and other mobile devices. Digitalsmiths will continue to monitor the launch of new interfaces as well as content discovery enhancements to YES (SWITCH, CHANGE, CUT) Q1 2014 Q1 2013 NO identify any positive effects these changes have on the previously mentioned stats. +1.7% over 1 yr While a big portion of Q1 2015 respondents might be teetering on the idea of leaving +3.5% over 2 yrs their current Pay-TV provider, a metric equally important to monitor is overall satisfaction. Though a large population answered “Satisfied” (55.9%) or “Very Satisfied” (19.9%) when If YES would you consider keeping your existing service if your asked to rate the value of their cable/satellite provider, 24.2% responded “Unsatisfied,” provider released new functionality that made it easier for you to find something to watch? an increase of 2.0% y/y and the highest since Q2 2013 results. The top reason for (For example, if you had shows recommended to you based on dissatisfaction was “Increasing fees for cable/satellite service;” however, it is important to your interests so it is easier to find something you “want” to watch on TV.) note that while “Bad channel selection” was the fourth most selected answer choice, it is still high at 33.8 percent. Q1 2015 Q1 2014 +6.1% 37.9% say 44.0% say y/y

3 Pay-TV Providers Q1 2015 VIDEO TRENDS REPORT

VALUE How would you rate the level of value you are receiving Q1 2015 Q1 2014 What does an unsatisfied subscriber mean for from your cable/satellite service provider? Pay-TV Providers? 19.7% Very Digitalsmiths believes unsatisfied subscribers tend to spend little time watching Satisfied 19.9% TV (watch the same shows on a regular basis) and have low engagement with their cable/satellite platform (typically leverage set-top box only). Pay-TV providers 58.1% Satisfied should consider identifying subscribers based on usage and/or satisfaction and 55.9% then group them accordingly. This process enables Pay-TV providers the ability to surface and promote content, features and services to each group differently, based 22.2% Unsatisfied on one’s level of engagement and satisfaction. For example, video providers could 24.2% +2.0% y/y focus on educating unsatisfied subscribers on the functionality available to assist with finding new content they may like, or content similar to what they typically If UNSATISFIED, why do you feel you’re not getting enough value from watch. This can be done through More Like This Recommendations, or sponsored your provider? (Choose all that apply.) promotions within their cable/satellite platform. What should be avoided is spamming the unsatisfied, unengaged subscribers with non-targeted revenue- generating promotions that they would never purchase, such as PPV events or Increasing fees for 71.7% cable/satellite service newly released VOD titles. This type of blanketed marketing could only increase subscribers’ frustration with their cable/satellite provider. Increasing fees for 46.4% Internet service Acknowledging that Pay-TV providers have high goals for selling revenue- Poor customer service 38.1% generating content and services, Digitalsmiths believes it is the very satisfied and Q1 2015 satisfied subscribers to whom Pay-TV providers should test and deliver targeted, Bad channel selection 33.8% personalized promotions for revenue-generating content. A targeted approach ensures subscribers are aware of content that is similar to their viewing preferences across premium channels, PVOD, and PPV and in turn should result in higher Poor Internet service 32.5% conversion rates.

Poor cable/satellite service 29.4%

Other (please specify) 13.8%

4 Pay-TV Providers Q1 2015 VIDEO TRENDS REPORT

Unfortunately in Q1 2015, the number of respondents who increased their Pay-TV ¨¨ Added Services: Premium Channels, Internet, High Definition (HD) services (18.4%) was offset by the number who decreased their services (18.2%). Note: 37.7% of respondents have access to premium channels, and the most popular Obviously a positive result would have recorded more people adding than removing, were HBO and Showtime but here are the top services both added and cut: ¨¨ Terminated Services: Reduced level of cable/satellite service, Premium Channels, Premium Sports Packages

SERVICE ADJUSTMENT Have you adjusted your level of cable/satellite service in the last 12 months? Premium Channels 36.4%

(e.g. HBO, Cinemax, etc.)

Increased/Added Services 18.4% Internet 32.3% High Definition (HD) 30.2% Q1 2015 Stayed the same 63.4% What service(s) did you ADD? DVR 24.2% Decreased/Removed Services 18.2% Phone 18.4% New/Upgraded equipment 14.5% (e.g. DIRECTV Genie or DISH Hopper) Premium Sports Package(s) 14.3% PREMIUM CHANNELS Other (please specify) 13.9% Do you pay for any of the following premium channels? (Choose all that apply.)

HBO 23.5% Q1 2015 Reduced level of cable/satellite service 45.2%

Showtime 16.1% Premium Channels 44.1% (e.g. HBO, Cinemax, etc.) A Movie Channel/Network 13.1% Premium Sports Package(s) 17.2% 13.6% Sports Package(s) 13.0% Phone What service(s) DVR 10.7% Cinemax 10.5% did you CUT ? Cut cable/satellite service totally 8.2% Starz 9.1% Internet 7.5% None 62.3% New/Upgraded equipment (e.g. DIRECTV Genie or DISH Hopper) 3.8% Other (please specify) 2.6% Other (please specify) 7.3%

5 Pay-TV Providers Q1 2015 VIDEO TRENDS REPORT

New Packages and OTT Services Could Disrupt Pay-TV BILL AMOUNT The high cost of Pay-TV service is one of the contributing factors resulting in changes in How much is your total monthly bill from your cable/satellite provider for all major services the industry. According to Q1 2015 survey results, 59.8% of respondents are spending used such as TV, Internet, and phone (not including video-on-demand/movie purchases)? over $100 a month with their cable/satellite provider. Additionally, in the first quarter of 2015, a number of new OTT offerings hit the market that target subscribers who Q1 2015

are unsatisfied due to the high cost of their existing Pay-TV service, or who only watch 23.2% 20.2% 17.0%

a few linear TV channels. The industry has zeroed in on these services as the first that 16.4% 15.3% could really disrupt Pay-TV. 7.9%

Sling TV, PlayStation Vue, and Verizon have launched or announced plans to launch $126– $101– $76– $51– Internet-based, linear TV packages, or what is commonly referred to as “skinny $151+ <$50 $150 $125 $100 $75 packages.” While there has been a considerable amount of news around these services, a true à la carte service allowing consumers to choose their channels — rather than packages targeted to particular interests — has yet to be seen. 59.8% are spending over $100 a month

Therefore, new to the report are a number of questions about awareness of new OTT offerings, as well as respondents’ desire for more of an à la carte service, and what How does your current cable/satellite bill compare 42.3% MORE than 12 months ago channels they most prefer. Over half, 55.7%, of respondents, are familiar with one or to what you were paying 12 more of these OTT services that provide live TV: CBS All Access, Hulu Plus, PlayStation months ago? Q1 2015 38.3% SAME AMOUNT Vue, Sling TV. This high level of awareness reinforces the fact that the marketing of these services is resonating with respondents, which poses a huge threat to Pay-TV 19.4% LESS than 12 months ago providers. Before now, cord-cutters were consumers who could live without linear TV, and cord-cheating (further defined on page 15) was occurring because many still wanted live/linear TV. However, with the introduction of Sling TV and Sony’s PlayStation OTT SERVICES Vue, will cord-cutting accelerate? Are you familiar with any of the below TV services? (choose all that apply.)

Q1 2015 CBS All Access 10.5%

Hulu Plus 51.0%

PlayStation Vue 11.4%

Sling TV 11.9%

None 44.3%

6 Pay-TV Providers Q1 2015 VIDEO TRENDS REPORT

Digitalsmiths Explores Preferences for Pay-TV

Channel Packages Analytical Commentary When asked about an à la carte option, 81.6% of respondents said they would like to select only the channels they want to watch, rather than to sign up for one of the One question Digitalsmiths felt important to investigate was, of the respondents who large pre-set channel packages that are commonly offered today. The results show answered “yes” they are overwhelmed by the number of channels offered to them, the respondents are very interested. The survey presented the respondents who is this group more inclined to use an à la carte or skinny-packaged-type service? The were interested in an à la carte service with a list of over 75 popular channels that are answer is “yes” at a rate of 89.0 percent. This is greater than the 81.6% of the general typically included in Pay-TV services and asked them to pick their ideal channel line-up. population of respondents who answered they would like to pick only the channels On average, respondents chose 17 channels to make up their ideal lineup. Next, the they watch.* survey asked respondents what is the most they would pay for this ideal lineup? The average price was $38 a month. Among this ever-changing landscape, Digitalsmiths feels Pay-TV providers need to take a proactive stance and accelerate cross-platform video discovery efforts to ensure Additionally, the top channels selected by this group were ABC, Discovery Channel, subscribers watch more channels and content they were not aware of previously. CBS, NBC, and the History Channel (see chart on page 8 for a full list of channel Once subscribers become aware and engaged with new channels and content, it will rankings). Digitalsmiths finds the high demand for the Discovery Channel (ranked become a much tougher decision to cut the cord. second) to be very interesting, but even more shocking is ESPN, which ranked twentieth. ESPN is some of the highest-priced content compared to other channels *This difference is statistically significant, at 95% confidence, using a chi-squared test. and is likely more expensive than the Discovery Channel.

The numerous changes taking place in 2015 might force Pay-TV providers to think

creatively and offer different structures in their packages. Pay-TV providers might consider offering a lower-priced option, excluding content such as ESPN, to appeal to On average, respondents chose 17 channels to make up those who may not be interested in sports. Could so-called “skinny packages” increase “ satisfaction for the on-the-fence subscribers who watch 20 or fewer channels out of “ their ideal lineup. Next, the survey asked respondents the 200+ offered? While à la carte packages will not appeal to all Pay-TV subscribers, what is the most they would pay for this ideal lineup? with the addition of new services entering the landscape, it is important to keep a The average price was $38 a month. pulse on consumers’ sentiments towards this type of offering.

7 Pay-TV Providers Q1 2015 VIDEO TRENDS REPORT

CHANNEL PACKAGES When purchasing cable/satellite service you often choose from pre-set channel packages. Would you like the ability to make your If YES which channels would you be interested in including in your TV package? (choose all that apply) own package by selecting ONLY the channels you WANT to watch? 70% NO YES 60%

18.4% 81.6% 50% 40% 30% 20% TOP 20 CHANNELS 10% 0 E! 66.7% FX FYI IFC TLC TBS BET PBS ION CBS TNT Syfy FOX VH1 ABC NBC HSN QVC TCM HBO MTV CNN Fuse AMC ESPN Reelz Spike truTV Bravo HGTV WE TV Fusion Sprout Nick Jr. MSNBC The CWThe Oxygen Velocity TV Land Lifetime TeenNick Univision Disney Jr. Ovation TV ABC Family Telemundo Adult Swim Adult Nickelodeon FOX Sports 1 FOX NFL Network Golf Channel USA Network MLB Network Animal Planet Animal WGN America Food Network Food Travel Channel Travel Tennis Channel Tennis ENCORE Action ENCORE Disney Channel History Channel Comedy Central Comedy Esquire Network Esquire Cartoon Network Hallmark Channel Discovery Channel FOX News Channel News FOX 58.9% 57.8% 57.7% 51.0% 50.1% NBC Sports Network The Weather Channel Weather The FOX Business Network FOX The SportsmanThe Channel National Geographic Channel Geographic National CMT (Country Music (Country Channel) CMT OWN (Oprah Winfrey Network) Winfrey OWN (Oprah 62.0% 47.0% 46.8% 43.0% 42.9% 42.5% 39.9% 39.9% 38.9% 37.9% 37.5% 37.4% 36.8% 35.7%

IDEAL COST OF CHANNEL PACKAGE

What is the MOST you would be willing to pay, per month, for the channels you selected?

Q1 2015 FX TLC TBS PBS CBS TNT FOX ABC NBC HBO AMC ESPN HGTV 23.5% 18.4% 17.4% Animal Planet Animal Food Network Food History Channel Comedy Central Comedy 15.5% 11.3% 4.9% 5.2% 3.8% Discovery Channel The Weather Channel Weather The

$10– $21– $31– $41– $51– $61– $71– National Geographic Channel Geographic National $81+ $20 $30 $40 $50 $60 $70 $80

8 Q1 2015 VIDEO TRENDS REPORT

TV VIEWING TV Viewing Habits On average, how many hours a day do you watch TV? <1 hour 6.5% While the bulk of this survey is aimed at understanding consumers’ sentiments toward their Pay-TV providers as well as emerging features and services, it is important to keep a 1-2 hours 21.0% pulse on respondents’ overall viewing behavior. According to the Q1 2015 survey results: 2-3 hours 24.6% ¨¨ 45.6% of respondents watch 1 to 3 hours of TV per day. 3-4 hours 17.6% ¨¨ 51.3% of respondents watch 2 hours or less live TV per day. 4-5 hours ¨¨ 69.0% of respondents watch 2 hours or less of recorded TV per day. 10.3%

¨¨ 46.4% of respondents channel surf 5 to 20 minutes per day, but growth is 5+ hours 12.5% flat y/y and q/q, which is important when tracking the effects of content Not on a discovery implementations. regular basis 7.5% Q1 2015

VIEWING LIVE TV VIEWING RECORDED TV CHANNEL SURFING On average, how much of your daily TV watching is live On average, how much of your daily TV viewing time is On average, how much time a day do you spend searching TV accessed from your channel guide (not DVR’d or spent watching shows that you have recorded/DVR’d? (channel surfing) or scrolling through the guide looking for recorded shows)? something to watch? <1 hour 26.4% <1 hour 42.4% <5 minutes 29.9%

1-2 hours 24.9% 1-2 hours 26.6% 5-10 minutes 29.4% 10-20 minutes 2-3 hours 17.2% 2-3 hours 13.4% 17.0% 20-30 minutes 8.1% 3-4 hours 11.1% 3-4 hours 5.3% 30-40 minutes 3.7% 4-5 hours 5.3% 4-5 hours 1.9% 40-50 minutes 1.6% 5+ hours 7.6% 5+ hours 2.9% 60+ minutes 2.8% Not on a Not on a 7.5% regular basis 7.5% I do not watch TV 7.5% regular basis on a regular basis Q1 2015 Q1 2015 Q1 2015

9 TV Viewing Habits Q1 2015 VIDEO TRENDS REPORT

When it comes to TV viewing habits, Digitalsmiths feels it is crucial to monitor subscribers’ interactions with the NUMBER OF CHANNELS channels offered to them for two reasons. First, Pay-TV providers have invested a lot of resources to develop new devices, platforms, user experiences, and features such as video recommendations to help subscribers easily find Do you feel overwhelmed by the number of channels available to you, and listed in your guide? content anytime, anywhere. Secondly, with the pressure of these OTT/OTA services hitting the market, it is imperative to make sure subscribers are engaged with as many channels as possible in order to increase the perceived value of +1.8% over 1 qtr; +3.3% over 1 yr; +4.3% over 2 yrs their existing Pay-TV services. Here is an overview of how respondents feel regarding the channels offered by their current cable/satellite service: Q1 2015 33.4%

Q4 2014 31.6% ¨¨ 33.4% are overwhelmed with the number of channels available to them, an increase of 1.8% q/q, 3.3% y/y, and YES 4.3% over Q1 2013 survey results. Q1 2014 30.1%

¨¨ Of the channels offered to them, 81.7% of respondents watch between 1 and 10 channels, an increase of 3.0% Q1 2013 29.1% q/q and 1.2% y/y. • Of those respondents, a large amount (39.7%) watch only 5 channels or fewer.

NUMBER OF CHANNELS Of the channels offered to you, how many channels do you typically watch, on average? 3.2% 3.2% 8.1% 8.6% 16.6% 9.5% 5.1% 6.5% 1.4% 19.5% 0.7% 3.8% 0.4% 0.8% 5.7% 0.5% 0.4% 0.5% 0.4% 5.1% 3.1% 3.3% 6.7% 8.7% 14.3% 10.2% 5.6% 5.8% 1.9% 19.1% 0.6% 4.3% 0.7% 0.6% 5.7% 0.8% 0.3% 0.6% 0.4% 7.3% 2.2% 3.0% 7.2% 9.2% 16.3% 10.3% 5.3% 6.6% 1.6% 18.8% 0.6% 4.6% 0.5% 0.7% 6.0% 0.3% 0.4% 0.6% 0.5% 5.3%

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20+

39.7% watch 5 channels or less Number of Channels Q1 2015 Q4 2014 Q1 2014 1-10 Channels: +3.0% q/q, +1.2% y/y

10 TV Viewing Habits Q1 2015 VIDEO TRENDS REPORT

Despite these numbers, the recent efforts of many North EASY TO DISCOVER CONTENT VARIETY OF CHANNELS American Pay-TV providers to improve content discovery is not going unnoticed, since 60.0% of respondents Do you feel it is easy to find something you “want” to Do you feel you watch the same channels over and watch on TV? over again? can now easily find something they want to watch. It is impossible to please an entire subscriber base; however, it +3.6% over 1 qtr; +3.3% over 1 yr; +6.7% over 2 yrs is important to not lose focus on the 40.0% who answered “No,” especially since this audience grew 3.6% q/q, 3.3% Q1 2015 40.0% y/y and is up 6.7% over Q1 2013 survey results. NO YES Q4 2014 36.4% NO 14.0% Q1 2015 86.0% Q1 2014 36.7%

Q1 2013 33.3%

11 Q1 2015 VIDEO TRENDS REPORT

Revenue-Generating Pay-TV Content Video-on-Demand Offerings

In Q1 2015, the number of respondents who do not rent from Q1 2013. Of the 30.2% of respondents who have of their PVOD catalog, a 10.9% increase over Q1 2013 movies from their cable/satellite provider’s PVOD offerings leveraged their cable/satellite providers’ PVOD offerings, results. Digitalsmiths believes the increase in overall remains high at 69.8%; however, there is a consistent 24.4% made between 1 to 3 purchases, but 2 purchases purchases, and the positive discovery experience over trend which shows respondents are ordering more had the largest increases of 1.6% q/q and 2.1% y/y. Q1 2013 survey results demonstrates Pay-TV providers’ PVOD rentals than in previous years. There was a 2.5% y/y recent efforts are paying off through increased subscriber increase in the number of respondents who purchased Another positive result in Q1 2015 is that 47.9% of engagement (positive sentiment with discovery) and 1 or more pieces of PVOD content and an 8.7% increase respondents are pleased with the discovery experience satisfaction (based on purchases).

PVOD PURCHASES PER MONTH PVOD CATALOG DISCOVERY How many VOD purchases does your household make on average, each month? (Movies purchased from on-demand Do you feel it’s easy to find a movie you will enjoy in the stations provided by your cable/satellite provider. Does NOT include Netflix, Redbox, iTunes, etc.) VOD catalog provided by your cable/satellite provider? PVOD Purchases per Month 69.8% 69.3% 0 72.3% +10.9% over 2 yrs 78.5%

12.7% 25.9% 14.0% Q1 2015 47.9% 26.2% 1 13.2% 10.7% 8.7% +1.6% q/q, +2.1% y/y Q1 2015 7.1% 38.6% 2 6.6% Q1 2013 37.0% 24.4% 5.4% Q4 2014

3.0% Q1 2014 3.8% 3 3.3% EASY NOT EASY N/A 2.1% Q1 2013 2.3% 2.5% 4 1.6% 1.3% 1 or more VOD purchases: +2.5% over 1 yr; +8.7% over 2 yrs 1.5% 1.3% 5 1.4% 0.7% 2.0% 2.0% 6+ 1.6% 1.3%

12 Revenue-Generating Pay-TV Content Q1 2015 VIDEO TRENDS REPORT

Pay-Per-View Purchases PPV EVENTS With the increasing pressure on Pay-TV providers to increase engagement and drive Do you ever rent Pay-Per-View Events from within your cable/satellite service? For example, Average Revenue Per User (ARPU), Digitalsmiths feels it is important to keep a pulse on boxing events, or UFC fights. (NOT MOVIES) some of the highest-priced content available for purchase, PPV events. Therefore, new to the Q1 2015 survey is a series of questions to track respondents’ engagement with PPV offerings. YES 10.9% In Q1 2015, 10.9% of respondents answered they purchase PPV events from their cable/satellite service, and the bulk of this group (69.7%) ordered between 1 to 4 PPV NO Q1 2015 events each year. The next logical question becomes, how are consumers familiarizing 89.1% themselves with PPV offerings? And, are Pay-TV providers’ promotions working? When asked how respondents become aware of upcoming PPV events, the top three answers were:

1. “Promotions during TV shows the respondent watched” 2. “Friends/Word of mouth” If YES how many Pay-Per-View events do you purchase each year? 3. “Ads in the channel guide” For example, boxing events, or UFC fights. (NOT MOVIES)

Q1 2015

Key Takeaway 20.9% 18.5% 16.0%

Since the top method in which respondents found out about PPV events was 14.3% promotions within TV shows, how can Pay-TV providers take this a step further? Today, 9.8% it is all too common for Pay-TV providers to market content to their entire subscriber 7.3% 4.2% 2.8% 2.7% 2.1% base in the same way, but why is this the case when providers have access to a wealth 1.4% of personalized data? For example, to market an upcoming PPV fight, a provider could leverage content recommendations in conjunction with subscribers’ viewing habits to 1 2 3 4 5 6 7 8 9 10 11+ promote the event to current and past viewers of The Ultimate Fighter TV show. Purchases

13 Revenue-Generating Pay-TV Content Q1 2015 VIDEO TRENDS REPORT

Key Takeaway cont’d PPV EVENTS While industry-leading content discovery platforms should provide data on subscribers who viewed The Ultimate How are you made aware of, or hear about upcoming Fighter, finding other relevant subscribers may be a bit more difficult. In order to find others with similar interests, Pay-TV Pay-Per-View events? (choose all that apply) providers need a content discovery platform with robust analytic capabilities which enables the ability to easily build The TV Shows you and deliver multivariate tests for promotions on any type of content, subscriber behavior or demographic, device, watch promote it 52.6% product and more. For example, a Pay-TV provider looking to drive subscribers to purchase PPV events could have conducted the following multivariate tests prior to the recent Mayweather/Pacquiao boxing match to identify the Friends/ 49.5% Word of mouth type of content subscribers watch that could also be interested in the fight, and what time of day results in the most purchases. Ads in the 38.3% channel guide Multivariate Component 1: Genre - Promote the Mayweather/Pacquiao PPV fight in the Similar To

Recommendations to viewers who watch the following types of shows (each being its own test): Promotions included 17.8% in your bill • Action • Crime • Romance • Urban • Adventure • Horror • Science Fiction • Live Action Email promotions 15.7% about the event • Comedy • Mystery • Thriller Q1 2015 Other 3.8% Multivariate Component 2: Time of Day - Promote the Mayweather/Pacquiao PPV fight during the following blocks of times to identify the time blocks that result in the most purchases:

• 8:00AM to 12:00PM • 12:01PM to 6:00PM What are Multivariate A/B Tests? • 6:01PM to 12:00AM Multivariate testing uses the same concept as A/B testing, but incorporates additional variables and Conducting these tests not only indicates which promotion performs the best (in this case, results in the most shows how different groupings of these variables purchases of the PPV event), but also ensures subscribers see personalized promotions for relevant content based on perform. As in an A/B test, the audience is split their preferences or previous viewing habits. Specifically, the above multivariate example uncovered the time of day between different combinations, but a multivariate that these promotions resonated best; for fans of some shows this may be earlier in the day, while for fans of other test measures the effectiveness each combination, shows it may be later in the day. Finding those combinations becomes critical to understanding what will generate positive or negative, has on the ultimate goal. This the best lift and should be sent to the remaining, larger audience. This also allows the ability to segment out those allows you to find the ultimate combination in a subscribers not interested in the PPV fight, so this group can be excluded when promoted to the remainder of the dramatically faster timeframe. subscriber base.

14 Q1 2015 VIDEO TRENDS REPORT

Over-the-Top Trends and Cord-Cheating Out of the gate, 2015 has been a busy year for new OTT services targeting “cord-cutters” and “cord-cheaters.” Cord-cheating, a phenomenon Digitalsmiths began tracking in Q2 2013, refers to the trend by cable/satellite subscribers who seek on-demand video content, and now linear TV, from third-party and OTT services as an alternative to their Pay-TV providers’ offerings. Cord-cheating spans a variety of delivery models, including streaming subscription services such as Netflix and pay-per-rental services such as Redbox® kiosks.

Below is a breakdown of the adoption, usage, and spend for monthly Below is a breakdown of the adoption, usage, and spend for other OTT and subscription OTT Services (see charts on page 16): third-party pay-per-rental services (see charts on page 17):

¨¨ In Q1 2015, 54.4% of respondents said they leverage monthly subscription ¨¨ 39.2% of respondents use OTT/third-party rental services such as Redbox Kiosks, services such as Netflix and Hulu/Hulu Plus. iTunes®, Amazon Prime Instant Video, etc. ¨¨ Of the respondents who leverage monthly subscription services, 51.8% spend • Note: The Q1 2015 survey did include a new answer choice for Google Play™, $6 to $11 per month. but for comparison purposes, removing the 5.3% who selected that answer • However, it is important to note the $9 to $11 category saw growth of 2.5% choice, these services saw increases of 2.8% q/q and 6.0% y/y. y/y and 6.1% over Q1 2013 results. ¨¨ Of the respondents who use these services, 41.5% spend between $3 and $11 –– Secondly, the $12 to $14 category saw growth of 2.2% y/y and 4.2% per month, up 7.3% over Q1 2013 survey results. over Q1 2013 results. ¨¨ The largest group (38.0%) watches 1 to 5 hours of content from these services ¨¨ The largest group of respondents, 33.1%, watch 1 to 5 hours of content on these per week. subscription OTT services. • There was 2.3% q/q growth in respondents who watch 15 to 30+ hours, which demonstrates respondents are watching more and more through these non-Pay-TV services.

15 Over-the-Top Trends and Cord-Cheating Q1 2015 VIDEO TRENDS REPORT

MONTHLY SUBSCRIPTION OTT SERVICES

Do you use any of these monthly subscription services for movies or TVs? (Choose all that apply.) On average, how many hours per week do you watch content on these Amazon Prime (free movies) subscription services? CBS All Access <1 7.9% Hulu/Hulu Plus Hr 10.6% Q1 2015 18.9% 11.4% 46.4% 45.6% Netflix 1–5 33.1% Hrs PlayStation Vue 36.0% 1.8% 2.0% 1.6% 1.0% Blockbuster 5–10 22.2% Hrs 20.2% Sling TV

None 10–15 12.6% Hrs 12.1%

7.7% 15–20 How much do you spend each month on subscription services (Netflix, Hulu, Blockbuster)? Hrs 6.6%

3.4% 20–25 +2.5% over 1 yr Hrs 2.8% +6.1% over 2 yrs +2.3% q/q 2.2% 25–30 Hrs 2.0% +2.2% over 1 yr Q1 2015 Q1 2014 Q1 2013 30.1% 37.5% 27.7%

over 2 yrs 3.0% +4.2% 30+

Hrs 2.6%

21.7% 19.2% 15.6% 6.6% Rarely 11.4% 11.1% 25.8% 6.3% Q1 2015 9.3% 7.9% 6.6% 6.4% 6.2% 4.3% 9.0% 6.8% 4.8% Q4 2014 3.0% 2.6% 3.4% 2.4% 1.4% 0.9% 2.3% 2.8% 4.7% 1.9% 2.1% 4.7% 1.3% 0.9% 1.2% 0.8% 1.6% 1.2% 0.7% Never 0.8%

$1– $3– $6– $9– $12– $15– $18– $21– $25– $28– $30+ N/A $2 $5 $8 $11 $14 $17 $20 $24 $27 $30

Dollars Spent

16 Over-the-Top Trends and Cord-Cheating Q1 2015 VIDEO TRENDS REPORT

PAY-PER-RENTAL SERVICES

Do you rent from any of these pay-per-rental services including purchases ONLY on Amazon, Best Buy’s CinemaNow, iTunes, On average, how many hours per Redbox kiosks, Vudu? (choose all that apply) week do you watch content on these subscription services? +2.8% q/q; +6.0% y/y * * Excludes Google Play Amazon Prime <1 16.8% Instant Video Hr

Best Buy’s CinemaNow Q1 2015 15.8% 9.0% 18.4% 5.3% 60.8% 1–5 38.0% iTunes 1.1% 2.7% 2.6% Hrs

Redbox Kiosks 5–10 9.8% Q4 2014 10.0% 7.3% 17.3% 68.9% Hrs Vudu 1.5% 2.1% 2.2% YouTube Movies (paid) 10–15 3.2% Hrs Google Play Q1 2014 9.1% 6.4% 15.6% 72.1% 15–20 2.4% None 0.8% 1.4% 1.5% Hrs

20–25 1.5% Hrs Q1 2015 How much do you spend per month renting movies from these pay-per-rental services? 25–30 0.3% Hrs +7.3% over 2 yrs 30+ 0.8%

Q1 2015 Q1 2013 26.3% 37.6% Hrs

Rarely 20.9% 20.3% 14.1% 14.1% 12.0% 11.0% 10.8% 10.2% 9.3%

5.5% 4.6% Never 6.3% 4.6% 2.7% 1.8% 1.9% 3.1% 3.8% 0.8% 1.2% 0.8% 1.1% 1.5% 0.9%

$1– $3– $6– $9– $12– $15– $18– $21– $25– $28– $30+ N/A $2 $5 $8 $11 $14 $17 $20 $24 $27 $30

Dollars Spent

17 Over-the-Top Trends and Cord-Cheating Q1 2015 VIDEO TRENDS REPORT

Why are OTT and third-party pay-per-rental services so enticing to cord-cheaters? The WHY USE OTT SERVICES top reasons respondents gave for using these services were “convenience,” “cheaper cost,” and “the ability to watch certain TV shows and whole seasons.” Additionally, Digitalsmiths Why do you use these 3rd party rental and/or monthly subscription services such as Amazon Prime Instant Video, iTunes, Netflix, Vudu, CinemaNow, Blockbuster, Redbox, believes one main contributing factor to this growth is the number of supported devices YouTube? (choose all that apply) that consumers can leverage to watch video content. Now, consumers can use devices such as the TiVo Roamio™, Roku®, smartphones, tablets and gaming consoles to access 27.1% Q1 2015 Netflix, Amazon Prime, VUDU, and more. Lastly, as mentioned previously in the Pay-TV Ability to watch on iPad®/Tablet 24.3% 23.1% Provider section of the report, there is a high awareness of the new OTT services that Q4 2014 offer live/linear TV, and this is a metric we will continue to monitor in effort to see if this 18.1% Q1 2014 Ability to watch on smartphone awareness converts to an increase in usage of these services in the future. Currently, 15.8% 12.9% 55.7% of respondents are familiar with one or more of these OTT services that provide live/linear TV: CBS All Access, Hulu Plus, PlayStation Vue, Sling TV. 47.0% Ability to watch certain 43.0% TV shows & whole seasons 42.7%

60.1% Convenience 57.0% 59.0%

51.1% Cheaper 47.3% 48.1%

38.0% Better selection 31.3% 36.4%

31.9% Easier to find what you’re looking for 28.3% 29.7%

14.1% No cable/satellite services 14.0% 14.2%

7.8% Other 5.4% 5.0%

18 Q1 2015 VIDEO TRENDS REPORT

VIDEO CONTENT ON IPADS/TABLETS Connected Devices Do you watch any of the following video content on your iPad/tablet? (Choose all that apply.) In Q1 2015, 81.4% of respondents own a tablet or smartphone, an increase of 2.5% q/q Live TV Shows and 5.4% y/y. Today’s consumers are leveraging more devices than ever to view video Reruns/Previous Seasons of TV Shows 26.9% content both in the home and outside the home. It is important for Pay-TV providers to

24.3% Movies keep a pulse on which devices are the most commonly used and for what type of content. News 19.4% Below is a snapshot for iPad®/Tablets, smartphones, TV-oriented/Wi-Fi-enabled devices, 20.0% 20.1% Sports Clips

and gaming consoles: 19.1% 21.2% 21.4% Sporting Events ® TV Show Previews, Movie Previews 8.3%

iPad /Tablet 6.0% 11.4% 12.4% ¨¨ 52.4% of respondents own an iPad/tablet, which increased 3.8% q/q and 4.4% y/y. Of Q1 2015 these respondents, 60.4% watch video content on these devices, a 2.0% growth y/y. 7.1% Q1 2014 5.4% ¨¨ The top-viewed content was movies, TV show previews and/or movie previews/ trailers, and episodic reruns of TV shows/previous seasons of TV shows. ¨¨ In Q1 2015, the bulk of respondents (48.0%) watched two hours or less of content on their tablet per week. However, respondents are watching more content than ever 60.4% watch content on iPads/Tablets: +2% y/y on tablets, based on the fact 2 to 5+ hours grew 5.2% y/y.

On average per week, how often do you watch TV shows, TABLET & SMARTPHONE OWNERS movies, or video content on your iPad/Tablet? Q1 2015 Q1 2014 Do you own an iPad/tablet, or a Smartphone? (Choose all that apply.)

52.4% YES, I own an 32.9% 2-5+ Hours: +5.2% y/y iPad/Tablet 48.6% Tablet/Phone 28.5% 48.0% Owners: 19.5%

+2.5% q/q 18.3% 16.3% YES, I own a 68.4% +5.4% y/y 15.2% 12.1% 65.6% 11.1% smartphone 9.1% 8.1% 7.0% 5.5%

63.6% 4.6% 4.7% 3.1% 4.1%

18.6% NO, I do not own NONE 21.1% either device Never Rarely >1 1–2 2–3 3–4 4–5 5+ 24.0% Q1 2015 Q4 2014 Q1 2014 Hours per Week

19 Connected Devices Q1 2015 VIDEO TRENDS REPORT

Smartphones VIDEO CONTENT ON SMARTPHONES Do you watch any of the following video content on your smartphone? ¨¨ 68.4% of respondents own a smartphone, which increased 2.8% q/q and 4.8% y/y. Of these (Choose all that apply.) respondents, 39.5% watch video content on this device, a 4.8% y/y increase. Live TV Shows ¨¨ The top-viewed content on smartphones was news, movies, and TV show previews and/or movie Reruns/Previous Seasons of TV Shows previews/trailers. Movies 14.4% 13.1%

¨¨ In Q1 2015, 31.5% watched 2 hours or less of video content per week on their smartphone. However, 15.6% News 14.4% 15.3% 13.6% those respondents who watch 2 to 5+ hours per week increased 4.5% y/y, substantiating that more 12.7% 13.2% Sports Clips video content than ever is being consumed on mobile devices.

12.3% Sporting Events 9.8% 6.1% TV Show Previews, Movie Previews TV-Oriented Devices and Gaming Consoles 3.8% Q1 2015 6.1%

In addition to tablets and smartphones, consumers have a wealth of other devices to 4.1% access video content. With new devices emerging, it is important to know what services Q1 2014 consumers are using since these potentially pose yet another threat to Pay-TV providers. A substantial group of respondents (42.5%) use a TV-oriented Wi-Fi-enabled device, an increase of 4.8% q/q and 8.1% y/y. Additionally, all of the devices listed saw positive q/q increases, but the most owned TV-oriented, Wi-Fi-enabled devices were a Blu-ray™ player, smart TV, and Apple TV®. 2015 has also been a busy year for the gaming industry, with the launch of the Sony On average per week, how often do you watch TV PlayStation Vue and the announcement of the Xbox One™ OTA* solution. In Q1 2015, shows, movies, or video content on your smartphone? 49.3% of respondents own a gaming console, which has grown 7.3% since Q1 2013. Of those respondents, 20.9% purchase video content each month, an increase of 4.1% y/y. Q1 2015 Q1 2014 40.9% 36.9%

Monitoring the gaming audience is vital, given the portability of the device and the ease 2-5+ Hours: +4.5% y/y of use. In only a few clicks, consumers can access TV and videos on these devices. For 22.1% 19.7% example, imagine a college student who moves to NYC for a summer internship and can 18.9% 22.9% access his or her favorite content through a portable gaming console rather than having to set up a new account with a cable/satellite provider. Another example is a vacationing 9.4% 8.3% 5.3% 3.0% 2.8% 1.9% 2.6% 2.1% family stays in a hotel that does not have their favorite TV channel, but they can simply 2.0% 1.2% plug in their gaming console to access their recordings through the device’s cloud-based DVR functionality. While the gaming audience might represent a younger demographic, Never Rarely >1 1–2 2–3 3–4 4–5 5+ it is commonly used by future Pay-TV subscribers, so it is important for Pay-TV Providers to offer compelling services to this group, as well. Hours per Week

*http://techcrunch.com/2015/04/08/xbox-one-gets-over-the-air-tv-powers-in-the-u-s-and-canada/ 20 Connected Devices Q1 2015 VIDEO TRENDS REPORT

TV-ORIENTED DEVICES GAMING CONSOLES Do you have any of the following connected devices (Wi-Fi enabled devices)? Do you own any of the following gaming stations? (Choose all that apply.) (Choose all that apply.) Nintendo Wii™ 24.9% Q1 2015 13.0% 25.4% Wi-Fi-enabled Blu-ray Player 11.3% Q1 2015 Q1 2013 11.9% Q4 2014 Sony PlayStation, PlayStation 2, 22.8% 12.9% PlayStation 3, PlayStation 4 15.3% Smart TV 10.3% Q1 2014 8.8% 22.0% Xbox 360, Xbox 1 49.3% own a gaming console: 8.4% 16.8% Apple TV 7.6% +7.3% over 2 yrs 7.7% Nintendo Wii U 5.3% 8.0% 1.8% Roku Streaming Player 7.0% 6.1% Sony PSP® 4.6% 4.6% 7.9% Google Chromecast™ 7.3% 5.0% None 50.7% TV-Oriented Device Owners: 58.0% 3.0% +4.8% q/q; +8.1% y/y Amazon Fire™ TV Stick 2.4% 1.7% N/A Other 1.7% 2.2% Roku Streaming Stick 1.2% 0.6% TiVo Roamio/ 1.9% TiVo Roamio Plus/ 1.3% 0.6% On average, how many movie/TV show purchases do you

TiVo Roamio OTA

make each month from your gaming device? 1.4% Boxee TV 1.0% 0.5% Q1 2015

79.1% 83.2% Q1 2014 7.0% N/A 6.7% Google TV 3.9% 2.3%

57.5% 7.0% 4.4% I don’t own any of these 62.3% 2.2% 2.3% 65.6% 2.1% 1.5% 0.4% 0.5% 1.1% 0.5% 0.5% 0.2% 0.6% 0.3% 0.2% 0.1% 0.1% 0.0% 2.9% Other 2.4% 0 1 2 3 4 5 6 7 8 9 10+ 2.5% Purchases

20.9% purchase 1 or more: +4.1% y/y

21 Q1 2015 VIDEO TRENDS REPORT

TV Everywhere It is evident consumers are using more devices than ever to view video content, but use their TV Everywhere apps weekly, a 5.4% increase y/y, there is a sizeable audience is the usage of these devices resulting in positive awareness, adoption, and usage of (54.6%) that has downloaded the app(s) but is not engaged. Pay-TV Providers’ TV Everywhere offerings? In Q1 2015, 42.3% of respondents are aware In addition to tracking TV Everywhere apps, Digitalsmiths continues to track TV Network their cable/satellite provider offers the ability to watch content on smartphones and/or Apps that focus on providing content to consumers. Although access to these apps is tablets. More important is the positive growth in awareness of 5.1% y/y and 16.0% often gated and requires a cable/satellite subscription, Pay-TV providers should take since Q1 2013. note of which apps are most adopted, and most used to ensure their own apps offer the While the number of respondents who have downloaded their cable/satellite providers’ same superior experiences. In Q1 2015, 29.9% of respondents accessed one or more TV/ TV Everywhere app(s) is not huge at 24.9%, there was positive growth of 3.5% y/y. TV Network Apps. The top services were ABC, Hulu, CBS, and WatchESPN. However, of However, with so much time and resources invested into these offerings, the real the respondents who answered they have one or more TV Network app(s) downloaded, question becomes, are subscribers utilizing these services? While 45.4% of respondents 76.5% rarely or never use it.

TV EVERYWHERE APP AWARENESS

Does your cable/satellite provider offer an app(s) that allows you to watch TV/movies on devices such as a smartphone or an iPad/tablet?

DON’T KNOW DON’T KNOW DON’T KNOW 44.8% 49.9% 52.5%

Q1 2015 Q1 2014 Q1 2013

NO NO NO 12.9% 12.9% 21.2% +5.1% over 1yr YES YES YES +16% over 2yrs 42.3% 37.2% 26.3%

22 TV Everywhere Q1 2015 VIDEO TRENDS REPORT

TV EVERYWHERE APP USAGE TV NETWORK APPS Do you have your cable/satellite service provider’s app downloaded on your iPad/tablet Do you have any of the following TV Network Apps downloaded on your tablet? or smartphone? (Choose all that apply.)

24.9% +3.5% y/y Q1 2015 YES 21.4% Q1 2014 6.5% ABC 2.8% ABC Family 2.6% A&E 3.1% BBC 61.2% 3.2% CBC 5.7% CBS NO 2.6% Discovery Channel 66.8% 3.3% Disney 3.5% FOX 3.3% FOX News 2.3% FOX Sports Q1 2015 13.9% 6.1% Hulu 5.4% HBOGo N/A 1.4% MSNBC 11.8% 4.5% NBC 2.9% NBC Sports 2.7% Showtime 2.6% The CW 2.6% Turner (CNN, TNT, CN, TBS, etc.) If YES how often do you use your cable/satellite provider’s app (days per week)? 5.5% WatchESPN 70.1% None 3.4% Other Days per Week Q1 2015 7 9.7% 6.1% Q1 2014 6 2.5% How often do you use these TV Network Apps? 1.4% Days per Week 5 4.1% 5.0% 7 5.4% Q1 2015

4 5.5% 6 1.1% 4.2% 45.4% use apps weekly: +5.4% y/y 5 1.9% 3 7.2% 6.3% 4 1.6% 7.8% 2 3 3.5% 7.9% 2 4.4% 1 8.6% 9.1% 1 5.6% 40.7% <1 >1 21.3% 44.2% 0 55.2% 0 13.9% 15.8%

23 Q1 2015 VIDEO TRENDS REPORT

Content Discovery: Search, Recommendations, and More In Q1 2015, respondents’ frustration when trying to find something to watch did respondents answered they are “always” or “sometimes” frustrated. There are numerous decrease slightly year-over-year, but there is still a large population (61.8%) who get methods in which content discovery can improve subscribers’ ability to find content frustrated “always” or “sometimes” when trying to find something to watch on TV. When to watch, and Q1 2015 survey results saw positive outcomes for both video search browsing for something to watch with multiple members in a household, 72.0% of and recommendations.

FINDING SOMETHING TO WATCH How often do you get frustrated when Do you ever have trouble finding Would you like your channel guide to show you what’s on/available based on your trying to find something to watch on TV? something to watch that multiple preferences/viewing interests first? members of your household will enjoy? +5.5% q/q; +1.8% over 1yr; +5.6% over 2 yrs

10.4% ALWAYS 11.7% ALWAYS Q1 2015 52.3% 38.7% 3.1% 5.9%

Q4 2014 46.8% 44.8% Q1 2015 Q1 2015 SOMETIMES 5.5% SOMETIMES 2.9% 51.4% 60.3% Q1 2014 50.5% 43.6% 4.2% 1.7% NEVER 25.4% 26.2% NEVER Q1 2013 46.7% 48.3% 12.8% N/A 2.9% 1.8% N/A 2.1%

YES NO I do not have cable/satellite I do not have cable/satellite service, but this feature service, and this feature WOULD persuade me WOULD NOT persuade me into adding cable/satellite to add cable/satellite service service again again

24 Content Discovery: Search, Recommendations, and More Q1 2015 VIDEO TRENDS REPORT

Recommendations Q1 2015 survey results reflected the efforts many Pay-TV providers made throughout demonstrates the demand is evident and growing with increases of 4.1% q/q, 3.5% y/y, last year with recommendations having a positive effect on the subscriber experience. and 13.1% since Q1 2013. Adding to demand, when survey participants were asked if Awareness of content recommendations is up, with 21.5% of respondents answering they would like their channel guide to show what is available based on interests, 52.3% “yes,” their cable/satellite provider makes recommendations based on their interests, an answered “yes” — an increase of 5.5% q/q, 1.8% y/y, and 5.6% since Q1 2013. increase of 5.7% y/y and 13.4% since Q1 2013. Another positive metric is 90.1% of respondents felt their recommendations are “always” Additionally, of the 71.8% of respondents who answered their provider does not or “sometimes” accurate. make recommendations, 39.4% would like personalized recommendations, which

RECOMMENDATIONS Does your cable/satellite provider make recommendations of TV shows and movies to you based on your interests, If YES do you feel the If NO would you like to have TV shows and movies recommended past viewing habits, etc. (personalized to you)? recommendations are to you (and personalized to your likings)? accurate/relevant? YES +4.1% q/q; +3.5% over 1 yr; +13.1% over 2yrs +5.7% over 1yr 21.5% Q1 2015 +13.4% over 2yrs 13.8% ALWAYS Q1 2015 39.4% 60.6% 15.8% Q1 2014

8.1% Q1 2013 Q4 2014 35.3% 64.7% 76.3% SOMETIMES

Q1 2014 35.9% 64.1%

Q1 2013 26.3% 48.5% 23.3% 9.9% NEVER YES NO DON’T KNOW

25 Content Discovery: Search, Recommendations, and More Q1 2015 VIDEO TRENDS REPORT

SEARCH Search Do you ever type in a TV show, movie title, or topic into a search box to find something to watch in your cable/satellite guide? In Q1 2015, utilization of content search functionality is up, with 48.5% of respondents stating they type a YES 50.5% 52.9% 55.2% 65.0% TV show/movie into a search box to find something NO to watch. Usage of search saw positive growth, with N/A increases of 2.1% q/q, 4.3% y/y, and 14.4% since Q1 2013. Q1 2015 Q4 2014 Q1 2014 Q1 2013 Additionally, respondents seem satisfied since 83.8% answered search results are “accurate.” +2.1% q/q +4.3% over 1yr 48.5% 46.4% 44.2% 34.1% +14.4% over 2yrs While usage and accuracy are improving, it is important to keep a pulse on why consumers are not leveraging search 1.0% 0.7% 0.6% 0.9% more frequently. The top three reasons were:

1. “I only watch a few channels, so no need to search.” If YES do you feel the search results are accurate?

2. “I am not interested in searching for TV Shows/Movies.” YES NO 3. “Search is not offered by my cable/satellite provider.” 83.8% 16.2% One key result to highlight is the respondents who chose “Search is not offered by my cable/satellite provider” saw If NO why don’t you use the search functionality offered to you? (Choose all that apply.) an increase of 3.4% q/q and 1.7% y/y. Therefore, the two I only watch a few channels 34.7% audiences on which Pay-TV providers may wish to focus 32.5% so no need to search are the 50.5% of respondents who do not use search, and 34.2% those who answered, “Search is not offered by my cable/ I am not interested in searching 21.5% 25.9% satellite provider.” Search is not only offered by most Pay- for TV Shows/Movies 22.4% +3.4% q/q; TV providers, but it is also a common feature within other 21.4% Search is not offered by my +1.7% y/y consumer electronics products. As a result, Digitalsmiths 18.0% cable/satellite provider believes the adoption rate should be higher, and Pay-TV 19.7% providers need to educate subscribers on where and how 19.2% Takes too much time 17.1% Q1 2015 they can leverage search capabilities. 20.1% Q4 2014 18.7% Q1 2014 I do not know how to use 20.8% the search feature 21.0%

3.9% Other 5.1% 5.3%

26 Content Discovery: Search, Recommendations, and More Q1 2015 VIDEO TRENDS REPORT

Social Discovery In this report, Social Discovery is broken into two categories: those who post on social However, a much larger population (31.0%) chooses to watch a TV show or movie based networks (e.g., Twitter and Facebook) about video content, and those who are persuaded on its buzz level on social networks, an increase of 2.1% q/q, 1.7% y/y, and 12.4% since by the social buzz a piece of content receives. According to Q1 2015, only 14.8% of Q1 2013. respondents answered “yes” they post about what they are watching on social networks.

SOCIAL DISCOVERY & BUZZ Do you post about what you’re watching on social networks such as Twitter, Facebook, etc.? Do you ever choose to watch a TV show or movie because of all the buzz it’s getting on Facebook, Twitter, and other social networks?

Q1 2015

14.8% YES

72.2% NO +2.1% q/q; +1.7% over 1 yr; YES +12.4% over 2 yrs 13.0% N/A

Q1 2015 31.0%

Q4 2014 28.9%

Q1 2014 29.3%

Q1 2013 18.6%

Sports Discovery SPORTS DISCOVERY Do you have trouble finding your favorite sports teams’ games, or do you ever miss With more and more sports-focused networks being launched, it is becoming sporting events because it’s on a channel that is far down in your channel guide? increasingly difficult for viewers to find their favorite sporting events on TV. In Q1 2015, 34.3% of respondents answered they “always” or “sometimes” have trouble finding their favorite sporting event. Due to the large monetary investment by Q1 2015 4.1% 30.2% 48.3% 17.4% video service providers to offer this content, it is imperative to ensure sports are also included in discovery features, such as recommendations or curated lists targeted to Q4 2014 3.8% 28.7% 51.8% 15.7% subscribers who like to watch sports.

Q1 2014 3.2% 29.2% 54.0% 13.6%

ALWAYS SOMETIMES NEVER N/A

Click here to learn more about Digitalsmiths Seamless Discovery® and Seamless Insight™ platforms.

About Digitalsmiths Digitalsmiths, a wholly-owned subsidiary of TiVo Inc. (NASDAQ: TIVO), provides industry-leading solutions in the area of personalized content discovery for video service providers, content providers and consumer electronics manufacturers. Digitalsmiths Seamless Discovery® enables personalized search, recommendations, social discovery, mood discovery, sports discovery, and a business console that instantly connects consumers to the most relevant movies, TV shows and live events, on multiple screens. Digitalsmiths Seamless Insight™ delivers the reporting and analytics necessary to optimize content discovery, deliver targeted content promotions, monitor and improve customer engagement and increase ARPU. The company is guided by the belief that consumers should not have to work to find relevant content—the content should find them. Digitalsmiths serves customers across a variety of media channels and devices, including AT&T, Bright House Networks, Charter, DISH Network, DIRECTV, Foxtel, FOX Sports, Sharp Electronics, Time Warner Cable and Verizon. To learn more visit www.digitalsmiths.com

© 2015 Digitalsmiths. All rights reserved. Digitalsmiths, the Digitalsmiths logo, Seamless Discovery, Seamless Insight, TiVo, the TiVo logo, and TiVo Roamio are trademarks or registered trademarks of TiVo Inc. or its subsidiaries worldwide. All other company, product and brand names, logos and trademarks are the property of their respective owners.