Future of TV Mindshare

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THE FUTURE OF TV

We’ve talked to a lot of people…

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Sir Martin Sorrell

Mark Thompson

Alan Yentob

Peter Bazelgette

David Elstein Daniel Ek

Claire Enders

Steve Ballmer Mathew Horsman

Esther DysonTroy James Surowiecki

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> 4 trends shaping the UK TV market

Strong linear TV brands will

prosper

Pay will re-shape the TV industry

The TV ad model will change – but

slowly.

Social media will fuel the blockbuster.

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prosper



slowly.


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We love TV.

Over 4 hours a day spent watching TV.

> Strong linear TV brands will prosper

Time Use, 2010

TV

TV viewing hasn’t changed over last 20 years.

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In fact, hours viewing has increased over the last couple of years.


But the pace of technological adoption has quickened


44

66

799

101010

1212

1414

15

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Social Media

No of years to reach 50% penetration

TV on PCAudio on PC

DVDsDigital TV

BroadbandHDTVDTRsDAB

3GColour TV

CD PlayersRadioVCRs

MultichannelTVMobiles

Traditional AV

Digital AV

Web content

1986

1988

1975

1923

1986

1967

2002

2001

2001

2000

1998

1997

2001

1999

2005

2006

UK LAUNCH

Source: O&O

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We have over-estimated our appetite for new ways of watching TV (self-scheduling)…Sky+ usage is 15-20% on average – significantly less than 30%+ that was predicted. No evidence of greater use over time.


Sky + timeshifted viewing by years of ownership (%)

Source: SkyView

1717161615

0

5

10

15

20

25

30

2 31 5+

Number of Years of Sky+ Ownership

4

% timeshifted viewing

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… & the significance of online video viewing


Source: Comscore

56% of all online video viewing is porn

19 mins a day of online video, but 80%+ is porn + YouTube (UGC) - neither of which is likely to become mainstream.

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70% of video viewing will still be to linear TV

Non-linear viewing will nearly treble to 90mins pd, but viewing to

the linear schedule will remain dominant.


14

281

31%

Live

DTR timeshiftTV VOD

Online Video

2020

193

1929

40

2010

259

223

2 19

Estimated video viewing by type 2010-2020 (f), minutes

Source: BARB / Comscore / Mindshare estimates

As content choice increases, channel brands’ navigation role will be more

important

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Strong channel brands will gain share in a VoD world.Distribution of revenue – traditional vs emerging media.


Revenue

Top Bottom

‘The big head’

‘The sagging middle’

‘The Long Tail’

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prosper



slowly.


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Blockbuster content has held up well in the digital era

-35

-30

-25

-20

-15

-10

-5

0

91-95

81-85

71-75

61-65

51-55

41-45

31-35

21-25

11-15

1-5

TV Viewing Figures by rank (% change 2000 – 2010 )

The top 5 programmes have lost fewer viewers over the past 10 years than the rest of the top 100

> Social media will fuel the blockbuster

UKUS*

Source: BARB / Nielsen* 2001-09

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New forms of access help maintain the viewer-programme relationship

VOD & online video allow additional opportunities to view

Broadcaster player on device

Aggregator player on device

TV platform player

Online aggregator

TV platform web player

Broadcaster site


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Social media ‘chatter’ helps big content get bigger


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Second screen consumption is the driver of Social TV


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Social communities provide ready fanbase for launching content

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Social features enhance the viewer experience to sustain viewing


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prosper



slowly.


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Subscription is already the dominant source

of TV fundingSubscription has risen by c6%pa+

over last five years, whereas advertising has fallen by c2%pa

> Pay will re-shape the TV industry

0

1000

2000

3000

4000

5000

2004 2005 2006 2007 2008 2009 2010

Other

BBC Licence Fee (TV)

Advertising

Subscription

TV Industry Revenue (£m) 2004-2010

Source: Ofcom

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The value of a subscriber continues to grow…

Added TV functionality (PVRs, HD etc) and triple-play bundling have increased the value of a subscriber.


541

492

444421

394

250

300

350

400

450

500

550

2006 2007 2008 2009 2010

8.2%

Source: BSkyB company reports, Dec year end

Sky Annual ARPU (£) 2006-2010

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…making content that drives penetration increasingly valuable

If moved to Pay, ITV’s content could drive significant Pay penetration


11

18

7

6

ITV Digital

All ITV 24

4

Much more likely More Likely

Likelihood of subscribing to Pay TV if ITV’s content migrated to Pay (% agreement, non-Pay HHs)

Source: GfK / BoA Merrill Lynch Global Research 2010

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Also offering more diverse income for ITV


Pay TV operators likely to pay strategic premium for ITV content

ML estimate £200m pa revenue upside by 2016

Estimated Revenue mix for ITV Wholesale model(£m, 2008-2015E)

0

500

1,000

1,500

2,000

2,500

3,000

2008 2009 2010

Ad Revenues

2014201320122011

Content

2015

Subscription

Other

Source: GfK / BoA Merrill Lynch Global Research 2010

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The ‘ARPU hole’ will start to be filled in


# of viewers

ARPU

Where is the pay-lite TV model?

‘Over-the-top’ access through connected TVs & YouView will help growth of pay-lite

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prosper



slowly.


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The TV ad market will evolve slowly

Advertising will become a smaller source of revenue for the TV industry. New advertising revenue streams will be constrained.

Subscriptions

Advertising

Public Funds (BBC)

Other

2020 (f)

17

49%

24%

17%10%

2010

12

41%

30%

23%

6%

AddressableContent

Spot

2020(f)

100

155

80

TV industry revenue £bn, real terms 2009 -2020 (f)

> The TV ad model will change – but slowly

Advertisers will become increasingly involved throughout the value chain

Content funding will grow but within limits

Challenges

Transaction costs

Suitability (genre / advertiser)

Risk for advertiser

Demonstration of ROI


Platform owned data

3rd Party integrated data

Eg Experian

Eg DemographicsViewing habitsStated preferences

ITV (VOD / Linear)

Car insurance up for renewal

Home insurance up for renewal

ITV (VOD / Linear)

Pre roll / linear break

Pre roll / linear break

Price comparison site Home execution

Price comparison site Car execution

Addressable advertising is the bigger opportunity> The TV ad model will change – but slowly

But a combination of factors will constrain the growth of addressable advertising

Creative

Data AnalysisTrading

Production

- Creating tailored TV content cost efficiently

- Speed of production

Implementation

- Market power of platform owners

- Integration of data across platforms

Messaging

- Tailoring messaging across multiple segments

- How explicit should understanding of past behaviour be?

Targeting

- Balancing mass reach with precision targeting

- Ability to select targets & messaging dynamically


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prosper



slowly.


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Thanks

Business

Future of TV Mindshare