Operators Survival Guide, Episode two: Show Me the Money

Haggai Barel @haggaibb

Deputy CEO @ViaccessOrca

The Marketplace

OTT Service Providers

Broadcasters

Content Creators

Pay TV Providers

Retention / Competition

Maximize Exposure

Expansion Security / Max. Revenue

Traditional

Social Networks

Technology Enablers CE Makers

Retailers

CE Sales / Margins Technology Advances

Maximize Reach Ongoing Sales

Non - Traditional

Users’ Behavior and Expectations

Users’ Behavior and Expectations

Users’ Behavior and Expectations

• Subscriber churn / retention

• Service adoption

• Premium services

• Content costs / licensing

• Business models

• Changing competitive environment

Operator Challenges in Today’s Market

Tour Guide

Engagement Model

Business Rules CAS / DRM Anti-Piracy Services

Engagement Model

EPG, PVR VOD / Catchup Self Service

Business Rules CAS / DRM Anti-Piracy Services

Engagement Model

Business Rules CAS / DRM Anti-Piracy Services

EPG, PVR VOD / Catchup Self Service

Social Profiles

Engagement Model

Business Rules CAS / DRM Anti-Piracy Services

EPG, PVR VOD / Catchup Self Service

Social Profiles

Cognitive Exploration Next Gen. Metadata Full Engagement

Engagement Model

User’s perspective

Business perspective

Engagement and Revenues

Monetization Strategies

While in the US majority of spending is on SVOD services, ad-supported services dominate OTT revenue in Europe

19% 13% 11%

29% 27% 24% 21% 20% 17% 18% 14% 12%

17% 22% 21%

11%

8% 7%

12% 11%

10% 23% 25%

22% 16%

13% 11%

13%

19% 18%

19% 41% 43%

14% 19% 22%

12% 15%

15% 21%

17% 16% 0.36%

1% 2%

50%

38% 38%

42% 40% 41% 37% 33% 39% 41%

52% 55%

64%

55% 56%

0.31% 0.24% 0.24%

3% 3% 4% 6% 7% 7% 4% 4% 5% 5% 3% 3%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

2011 2012 2013 2011 2012 2013 2011 2012 2013 2011 2012 2013 2011 2012 2013

US UK Germany France Italy

Public Broadcast

Advertising Revenue

SVOD Revenue

TVOD Revenue

EST Revenue

Source: Strategy Analytics' Digital Media Strategies -OTT Video Forecast

OTT Forecast: Share of OTT spending by Business Model- 2011-2013

Change in Penetration of TV Everywhere

81%

40%

12%

3% 2%

86%

53%

16%

7% 5%

90%

66%

21%

9%

18%

92%

72%

25%

10%

21%

0%

20%

40%

60%

80%

100%

North America Western Europe Eastern Europe Asia / Pacific ROW

% o

f P

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TV

Su

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V E

ve

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Mu

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erv

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rou

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he

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V O

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Availability of Multiscreen / TV Everywhere Services

July 2011

January 2012

July 2012

January 2013 (Est)

© 2013 Parks Associates

17% 18%

26%

0%

5%

10%

15%

20%

25%

30%

December 2010 November 2011 November 2012

% A

war

e o

f a T

V E

very

wh

ere

Serv

ice

fro

m t

hei

r P

ay T

V P

rovi

der

Awareness of TV Everywhere Service(Among BB HHs With Pay-TV Service)

Parks Associates Consumer Analytics© 2013 Parks Associates

Changes in Awareness

Western Europe OTT video spending is still a small fraction compared to US OTT video market

$0

$1,000

$2,000

$3,000

$4,000

$5,000

$6,000

$7,000

$8,000

US UK DEU FRA ITA

2011 2012 2013

Source: Strategy Analytics' Digital Media Strategies -OTT Video Forecast

OTT Forecast: Total OTT Video Spending- 2011-2013

$M

A Look at TV Everywhere Users

• Higher overall ARPU (for triple-play bundles)

• Likelihood to cancel service is not notably higher than for overall subscribers

• More likely to have reduced part of their pay TV subscription

• Higher overall spending on:

• DVD rentals and purchases (1.7x)

• Blu-ray rentals and purchases (1.7x)

• Video rental downloads (4x)

• Video purchase downloads (4x)

• Theater tickets (1.5x)

• OTT subscriptions (2x)

TV Everywhere User vs. Average Subscriber: Video Spending

20

TV Everywhere Users Average Pay TV Subscribers

Average age 38.5 44.7

Primary generations Gen X (42%)

Mil. / Gen Y (33%) Boomers (36%)

Gen X (35%)

Children at home 56% 36%

TV Everywhere User vs. Average Subscriber: Demographics

Similar in:

• Gender

• Income

• Education

• Marital status

• Home ownership

• Number of adults per HH

• Number of kids per HH (among HH with kids)

0% 30% 60% 90%

Premium sports package

Premium movie channels

DVR

HD Channels

% Subscribing to Service

TV Everywhere User Avg. Pay-TV Subscriber

Premium TV Subscriptions"Which of the following do you have with your TV service?"

(Among BB HHs With Pay-TV Service)

Parks Associates Consumer Analytics© 2013 Parks Associates

TV Everywhere User vs. Average Subscriber: Subscriptions to Premium Features

• Compared to average subscribers, TV Everywhere users spend fewer hours watching:

• Broadcast TV

• DVR recordings

• OTT services are second to broadcast TV as most often used source of content (followed by DVR recordings)

• TV Everywhere users spend more hours watching:

• DVDs

• Video-on-demand on TV

• Pay-per-view

• Video from online sources

TV Everywhere User vs. Average Subscriber: Viewing Quantity

• Average 2.6 more Internet-connected devices per household

• More likely to use a portable device for e-mail

• Twice as likely to update Facebook with a tablet

• 50% more likely to catch up on news and blogs via smartphone

• Over 85% use a device other than a TV to watch full length movies

TV Everywhere User vs. Average Subscriber: CE Environment

• Availability / cost of content

• Personalization of the experience

• Content discovery

• Second screen experiences

Trends Impacting Monetization

Monetization Opportunities

Bundling with existing packages

Monetization Opportunities

• New landscape / new options

• Most lucrative customers

• Spill-over into paid video

• Shift to more personal experiences

• Tight link between personalized offering and increased revenues

• Be prepared for some trial and error

• Step up and start experimenting

Conclusions

Thank you

Haggai Barel @haggaibb

Deputy CEO @ViaccessOrca