TV Content Traditional And Digital Syndication

EQU

ITY

RESE

ARC

H RBC Capital Markets, LLCDavid Bank (Analyst)(212) [email protected] Warmus (Associate)(212) [email protected]

Leo Kulp (Associate)(212) [email protected] Maral (Associate)(212) [email protected]

October 23, 2014

TV Content: Traditional And Digital SyndicationMedia And Entertainment Deep Dive Series: The Evolving TV ContentEcosystemWe Continue To See CBS, TWX, Fox and LGF as the Biggest Winners In What Remains A GrowingDemand Environment For TV Content Across Both Linear and SVOD Distribution Platforms — Whilethe traditional "mega deal" linear syndication pipeline offers less visible multi-year backlog visibilitytoday than it did a few years ago, the SVOD pipeline is subtly filling that backlog with more single season,single show deals. This single show model is also offering greater visibility into the sustainability of SVODcontent monetization as the economics of bulk library deals become less certain. While the contentmonetization landscape might become more opaque and difficult to model, it remains very healthy.

• CBS Studios, Warner Brothers Studios and 21st Century Fox studios continue to dominate thelandscape, while Lionsgate continues to become a bigger player. However, we view CBS’s TV studioand LGF’s studio as having greater ability to move the needle of their parent company’s, given the sizeof their TV content business relative to the broader business mix.

After Years of Deep Pipeline, Big-Cap Off-Network Syndication Deals Face Tough Comps — While therehave been a few major deals (Elementary for CBS and Person Of Interest for TWX's Warner Brothers in2015), the multi-year revenue visibility investors enjoyed a few years ago in traditional, linear syndicatedTV has diminished. Fewer linear syndication-friendly format shows are "breaking", and they are breakinglater.

But Demand for Linear Off-Network Content is as Robust as Ever Thanks to a Competitive Landscape —While we see players like TNT, AMC or A&E relying more on original content, others, like WGN America,are coming in with massive moves in linear TV off-network syndication spend. If smaller alternativenetworks aspire to get bigger (and they always do), the acquisition of premium off-network syndicatedcontent is generally the first chapter in the playbook.

SVOD Acquisition of Off-Network Programming Economics are Beginning to Look Like TraditionalLinear Syndication, But With Earlier Windows — We have migrated from "bulk" library deals to moreshow-specific acquisitions in the off-net SVOD (Amazon, Netflix and HuluPlus) ecosystem. We areseeing off-net programming acquisitions for multiple seasons, such as the Hulu/CBS Elementary deal,estimated at ~$1.5MM/episode for three seasons, or the Netflix/Sony Blacklist deal for ~$2MM/episodefor the one prior season, the current season, and future seasons. Amazon and Hulu purchased fourseasons of The Good Wife for a combined ~$2.0MM per episode.

Despite Original SVOD Content Ramp, Demand for Acquired Off-Network Programming is Deep —Netflix, Hulu and Amazon have undertaken massive ramps in original programming. That said, even asoriginal budgets increase in the hundreds of millions of dollars, we see no real slowdown in demand forpremium linear off-network TV content.

Emerging Players are Taking the Lead in SVOD Co-Production Deals — With the exception of Lionsgate,we don't see many traditional TV programmers playing in the SVOD original landscape meaningfully.Emerging players (i.e., Legendary, Electus, etc.) are more involved as co-producers with the SVODplatforms themselves. Further, SVOD original rights are becoming more restrictive, with limitations onancillary exploitation outside of "first run" windows for up to five to 10 years and lock-ups on territories,including where the first run SVOD platform has yet to even launch.

Priced as of prior trading day's market close, EST (unless otherwise noted).All values in USD unless otherwise noted.

For Required Conflicts Disclosures, see Page 73.

Table of Contents Key Investment Theme: Linear And SVOD Content Monetization ............................................. 3

Understanding Syndication Trends To Decode The Black Box Of Media Companies ................ 8

ABC Studios .............................................................................................................................. 27

CBS Studios ............................................................................................................................... 30

Lionsgate .................................................................................................................................. 36

Sony .......................................................................................................................................... 38

Twentieth Television ................................................................................................................ 41

Universal Television ................................................................................................................. 45

Viacom...................................................................................................................................... 49

Warner Brothers Television ..................................................................................................... 51

Digital Content Distributors ..................................................................................................... 57

Netflix Programming ................................................................................................................ 61

Amazon Programming .............................................................................................................. 64

Hulu Programming ................................................................................................................... 68

Appendix .................................................................................................................................. 70

TV Content: Traditional And Digital Syndication

October 23, 2014 2

Key Investment Theme: Linear And SVOD Content Monetization Off-network syndication of scripted shows to traditional and digital distributors continues to play a major role for much of our large-cap media universe. With respect to the studio and production businesses, CBS derives the vast majority of its revenue and profit from the production and distribution of television content (as opposed to theatrical film production). For Time Warner's Warner Brothers TV (WBTV) and 21

st Century Fox’s 20

th Century Fox

Studios, this figure is closer to 50%. For the smaller market cap Lionsgate, it is closer to 20%. The biggest driver of profit in the TV production business generally remains the syndication of network programming, primarily situation comedies and hour-long procedurals for linear platforms, and arc-based dramas in the Subscription Video-on-Demand (SVOD) market.

Procedurals & Sitcoms Rule The Linear Market; Serialized Dramas Dominate SVOD Just a few years ago, the only option for content syndication was off-network and only after 80-100 episodes had been produced. Procedurals such as CSI, Bones, and NCIS have performed well in this market, as have multi-camera male-audience-skewing situation comedies (e.g., The Big Bang Theory on TBS). However, with the array of SVOD options available today, there are multiple windows in which to syndicate content, including one-two seasons after first-window airing and even current season SVOD syndication. Interestingly, as consumers are prone to “binge watching” content via SVOD, serialized dramas that have not tended to syndicate well on an off-net basis are finding a higher probability of syndicating online (The Blacklist on Netflix or Under the Dome on Amazon).

New Buyers Are Emerging On Both Linear And SVOD Platforms, Promising To Drive Growth For Years To Come While the more traditional off-net syndicated-content buyers (TBS, TNT, USA, etc.) are entering a more mature phase, we see more linear platforms in the earlier phases of their development that aim to be top 10-20 players, such as WGN America or FXX. These new players are pouring huge dollars into the off-network syndication market (for example, (WGN/ION with Blue Bloods at $1.1MM/episode or FXX with The Simpsons at $650K/episode), driving new demand as more mature players shift slightly to originals. On the SVOD side, while Netflix appears to be entering a more mature phase on the program-acquisition side, other players at a less mature point in the cycle with respect to subscriber count, such as Hulu, are stepping up their spend in a big way. In other words, there always seems to someone who aspires to be a new major player as well as a need to defend incumbent position on all platforms. As long as this is the case, the demand for premium content should grow.

While Big Budgets Continue To Be Spent On Linear, Individual Shows On SVOD Now Command Commensurate Budgets To Off-Net Linear As Bulk Deals Fade As SVOD players have gained scale (and audience), investors have expressed concern that pricing for off-network TV content will suffer. In part, we believe this concern is warranted, as the price SVOD players appear willing to pay to renew “bulk” content deals is lower. With years of data now available, SVOD distributors are more aware of which components of the “bulk library” subscribers truly value, and are less willing to pay for marginal content. This has resulted in a lower “bulk” opportunity. However, our proprietary analysis suggests that Netflix, Amazon and Hulu are spending more money on one or two individual shows than they did in their initial bulk library deals. These show-by-show deals rival the traditional syndication market in scale. New Girl, for example, syndicated on Netflix for $900K/episode versus the ~$400K/episode MTV/TBS are jointly paying. Increasingly, even procedurals can be monetized in SVOD in a range fairly similar to that of linear off-net, as illustrated by CBS’s

With a more bifurcated syndication market – off-network and digital – monetization channels and new windows are evolving for both procedurals and serialized dramas


October 23, 2014 3

sale of Elementary to WGN and ION for $2.0MM/episode, which was similar to the $1.5MM/episode paid by Hulu.

The Syndication Market (Both Linear And SVOD) Has Historically Been Very Lumpy (And Thus Difficult To Model) TV studios may have many shows in first-run production that could take years to earn modest profits on first-run license fees. However, when even one of these shows reaches a total of ~80-100 episodes (or even fewer today), it can deliver all of its episodes to cable channels and local TV stations for off-network syndication, resulting in massive upfront revenue and profit recognition (with revenues easily reaching $1.0MM+/episode and margins upwards of +50%). However, investors (and studios) often are unaware of the pipeline for syndication because it is unclear whether any given show actually will stay on the air for four-five seasons, and if it does, what the demand in the off-network market would be. Similarly, studios are striking major SVOD deals for shows for four+ seasons of episodes (The Good Wife, Elementary, etc.), driving lumpy profitability upon completion of the target number of episodes.

The SVOD Market Has Opened Up To Shows With As Little As One Season Of Content, Allowing For Greater Visibility Of Revenue Associated Per Show, But Creating An Ever-Increasing Pool Of Revenue That Is Harder To Track In contrast to the traditional syndication models, some first-run shows are being sold into SVOD windows before they have even premiered in their first-run windows (Zoo or Gotham to Netflix, or Under the Dome and Extant to Amazon, for example). Some shows will be sold into SVOD somewhere between 20-40 episodes at substantial per-episode prices (The Blacklist was sold to Netflix at $2.0MM/episode during season 2).

With linear syndication, the mystery is whether the studio will be able to produce enough episodes to get to the monetization opportunity in one fell swoop, by keeping the show on the air for 80-100 episodes. With SVOD monetization, the difficulty in predicting revenue streams lays in estimating how long a show will stay on the air to monetize each individual season at a rate determined as early as season one in initial deals.

Exhibit 1 offers a snapshot of some of the syndication deals powering the SVOD syndication ecosystem across primary players Netflix, Amazon and Hulu. We took a few shows and calculated the estimated revenue impact of adding one season to SVOD. Our findings show Sony/UTV probably has the biggest opportunity with The Blacklist, whereby one additional season could generate $44MM in revenues. The Good Wife (CBS) and Gotham (WBTV) are not far behind at $40MM and $39MM, respectively. Elementary (CBS) could generate $36MM. While the total dollars per show might be smaller than the mega off-network linear syndication deals for five seasons, the total dollars associated with them, in aggregate, has become a needle mover. Measuring the needle move has become more difficult because tracking these individual SVOD window deals is getting harder as more and more of them occur.

Individual shows are syndicating on SVOD in a price range similar to off-net linear deals


October 23, 2014 4

Exhibit 1: Estimated Revenue Potential Of Select Shows Available On SVOD If One Additional Season Is Licensed

202

134

72 65 78

44 65 66 59

39 42 27 23 13 12 11 11 10

40

33

36 35 14

44 22 21

20 39 20

9 11 13 12 11 11 5

167

108 100

92 88 86 87 79 77

62

36 34 26 23 23 23

15

0

50

100

150

200

250

The GoodWife (CBS)

Blue Bloods(CBS)

Elementary(CBS)

Orange isthe New

Black (LGF)

Mad Men(LGF)

TheBlacklist

(Sony/UTV)

New Girl(FOX)

The WalkingDead (Sony)

Revenge(ABC)

Gotham(WBTV)

Scandal(ABC)

Person ofInterest(WBTV)

Under theDome (CBS)

TheAmericans

(FOX)

Manhattan(LGF)

Extant (CBS) Zoo (CBS) TheFollowing(WBTV)

Mill

ion

s o

f $

s

Value of Incremental Season Estimated Current Deal Value

241

The value derived from one show sold into SVOD, after several seasons, can approach the levels we historcally saw in bulk deals.

And, simply keeping a show on the air and adding subsequent seasons to SVOD can result in real dollars adding up over time.

Source: Press reports, Amazon, Netflix, Hulu, Variety, Deadline, The Hollywood Reporter, industry sources, RBC Capital Markets estimates

Even if one knew whether a show would be a hit in syndication, it is difficult to predict the specific quarter in which the show will be delivered. Thus, investors may face opaque Y/Y comps since they might not know that a major syndication deal affected the prior year’s quarter, unless it was disclosed. In our opinion, CBS does the best job of telling investors about large syndication deals on both linear and digital platforms, but it remains difficult to keep track of all the levers being pulled at once because so many pieces of content are entering and exiting syndication.

Stripping Is Giving Way To Stacking In Off-Net Cable, Perhaps As A Result of the Evolution Of Binge Viewership “Taught” To Us By SVOD Platforms Traditionally, the ability to syndicate a show on a linear basis was dictated by the magic 80-100-episode count so “stripping” without seeing the same episode in a three-month period could be achieved. However, as consumer behavior has moved more toward stack binging (in SVOD as well as traditional VOD through cable boxes), we believe we are seeing the programming of off-network syndication content more in the form of “blocks” or “stacks” rather than strips. Instead of five episodes of five shows spread evenly across a week filling 25 hours, one is more likely to see a block of a different show every day for several hours. As a result, we believe the syndication window likely is open to shows with slightly fewer episodes. A case in point is a show like Elementary, which is being rolled in 2015 with ~70 episodes on WGN.

For some perspective on how consumer behavior and scheduling have changed, we have illustrate the greater prevalence of scheduling in stacking versus stripping using TBS scheduling during 2005 and 2014. We can see the comedy blocks have stretched from one hour in 2005 to two hours in 2014.

We ran the same analysis on USA and found that the network ran large film blocks on a daily basis in 2005, while in 2014 it is running larger blocks of NCIS, Law & Order: SVU, and CSI. TNT aired Castle from 2:00 PM through 10:00 PM on Mondays in 2014.

Linear scheduling today consists of more binge viewing, likely transferred from SVOD viewership trends


October 23, 2014 5

Exhibit 2: TBS Programming Schedule – 2005 versus 2014

Mon Tues Wed Thurs Fri

2:00PM Steve Harvey Steve Harvey Steve Harvey Steve Harvey Steve Harvey

2:30PM Steve Harvey Steve Harvey Steve Harvey Steve Harvey Steve Harvey

3:00PM Drew Carey Drew Carey Drew Carey Drew Carey Drew Carey

3:30PM Drew Carey Drew Carey Drew Carey Drew Carey Drew Carey

4:00PM Yes, Dear Yes, Dear Yes, Dear Yes, Dear Yes, Dear

4:30PM Yes, Dear Yes, Dear Yes, Dear Yes, Dear Yes, Dear

5:00PM Home Improvement Home Improvement Home Improvement Home Improvement Home Improvement

5:30PM Home Improvement Home Improvement Home Improvement Home Improvement Home Improvement

6:00PM Seinfeld Seinfeld Seinfeld Seinfeld Seinfeld

6:30PM Seinfeld Seinfeld Seinfeld Seinfeld Seinfeld

7:00PM Everybody Loves Ray… Everybody Loves Ray… Everybody Loves Ray… Everybody Loves Ray… Everybody Loves Ray…

7:30PM Everybody Loves Ray… Everybody Loves Ray… Everybody Loves Ray… Everybody Loves Ray… Everybody Loves Ray…

8:00PM Friends Friends Everybody Loves Ray… Friends Friends

8:30PM Friends Friends Everybody Loves Ray… Friends Friends

9:00PM Friends Sex and the City Everybody Loves Ray… Film Film

9:30PM Friends Sex and the City Everybody Loves Ray… Film Film

TBS - 2005

Mon Tues Wed Thurs Fri

2:00PM American Dad American Dad American Dad American Dad American Dad

2:30PM American Dad American Dad American Dad American Dad American Dad

3:00PM The King Of Queens The King of Queens The King of Queens The King of Queens The King of Queens

3:30PM The King of Queens The King of Queens The King of Queens The King of Queens The King of Queens

4:00PM Friends Friends Friends Friends Friends



5:30PM Friends Friends Friends Friends Seinfeld

6:00PM Seinfeld Seinfeld Family Guy Seinfeld Seinfeld



7:30PM Seinfeld Seinfeld Family Guy Seinfeld MLB Baseball

8:00PM The Big Bang Theory The Big Bang Theory MLB Baseball The Big Bang Theory MLB Baseball




TBS - 2014

Source: TV Guide, RBC Capital Markets

While SVOD (And Linear Cable Networks) Are Devoting More Dollars To Original Content, Off-Network Platforms Will Still Program Predominantly With Acquired Programming While TNT’s The Last Ship, FX’s The Americans and USA’s Royal Pains are all original flagships of their linear networks, just as Netflix’s House of Cards, Amazon’s Transparent and Hulu’s (soon to be) 11/22/63, are flagships of their respective SVOD networks, the vast majority of content spend (even as original slates ramp) is going to acquired programming. While much has been made of the potential for original programming to lower demand for acquired off-network programming, we think such concerns are overstated. The average linear cable channel or SVOD platform alike has to program 24 hours per day of viewer demand. This demand cannot be satisfied by a slate of six or so original shows.

Traditional TV Studios Largely Are Not Playing The SVOD Original-Content Game The dominant players on the network TV first-window side (CBS, Warner Brothers, Fox, etc.) are playing a virtually immaterial role in the production of content for the emerging original content SVOD ecosystem, even as its growth accelerates. Mini-majors and independents are taking the lead on SVOD originals, increasingly through co-production roles with the SVOD platforms themselves. Examples include players like Lionsgate (Orange Is the New Black and Deadbeat for Netflix and Hulu, respectively) or Legendary TV (which, in association with Judd Apatow, has a two-season commitment from Netflix for Love), Gary Trudeau (Alpha House for Amazon), or Electus (with Marco Polo for Netflix).

Traditional TV studios largely have not participated in creating SVOD original content


October 23, 2014 6

While these original SVOD series opportunities offer lucrative first run license fees, it remains to be seen how the ultimate financial model will compare to the more traditional TV business since we have yet to see a jump from “off-net SVOD” to another platform that would demonstrate that SVOD originals have true syndication value outside of window one. We suspect Orange Is the New Black could be one of the first litmus tests for this model since Netflix has not locked up exclusivity beyond season 4. We note that JJ Abrams’s Bad Robot Productions is working with Warner Bros. on 11/22/63 for Hulu, which could be the first example of a major studio creating original content for an SVOD provider.

We suspect the major TV studios might be less inclined to play in the SVOD original side in a big way even if an off-net opportunity proved real. The SVOD platforms providing window one for the content are seeking long-term exclusivity in both time and geography, which would essentially prevent real exploitation of content in syndication even if demand developed.

Longer Term, The Biggest Impact On More Procedural And Sitcom Oriented Content Producers (And Thus The Linear Syndication Pipeline) Will Be The Need To Balance Urgency To Watch Now With Potential For Monetization Over The Long Term Network TV programmers likely will seek more “event”-type programming to counteract time shifting viewership trends. Additionally, SVOD content acquirers want “binge-inducing”, “high rabidity-type” programming. This tends to play toward arc-based serialized dramas. However, traditional linear syndication and international TV likely will continue to offer enormous monetization opportunities for self-contained procedurals and multi-camera sitcoms. This will create an enormous tension, in our view, over whether networks will use their “first” window to accomplish maximum audience in window 1 on US network TV on a C+3 basis, or maximum monetization throughout the life of a piece of intellectual property (IP).


October 23, 2014 7

Understanding Syndication Trends To Decode The Black Box Of Media Companies

To some extent, virtually all of the major media companies in our coverage universe are TV content producers as well as distributors; thus the TV content syndication business plays a role in their studio/network operations. Historically, the broadcast TV marketplace was the only end market for TV content; further, it was the only market for syndicated content. Digital pay TV carriage expanded rapidly during the past ~15 years, making domestic demand for content far more competitive. Also, as the global market for television content developed, the demand for content has accelerated dramatically. Further, the rapid rise of Over-the-Top (OTT) Subscription Video-on-Demand (SVOD) digital online distribution has begun to drive demand for TV content as well. Nowhere has this increased demand for TV content been more obvious than in the syndication market. However, the very opportunity that has offered so much growth for the major media companies also lacks obvious transparency and predictability.

The addition of digital distribution agreements into the mix has made revenue streams even more opaque: it is often unclear what the duration of online streaming content agreements is and what the content fees really are. New features such as “content put” rights (such as those CBS has arranged with Netflix for its CSI franchises) are also playing a role. Further the advent of new syndication windows for SVOD, which can be as early as seven days after the initial airing of an episode on network or as far out as three years later (but before the linear window) have made it harder to predict the length and consistency of SVOD revenue streams. While per-episode values can be determined earlier for SVOD, the total number of episodes available for monetization remains an unknown. Thus, syndication streams can be lumpy and the source of many surprises for investors. In this section, we provide more clarity on the important drivers in the syndication market for key players in our coverage universe.

Historically, syndication was a method of distributing TV programming to national cable networks (i.e., TNT, USA, etc.) and local television stations (network affiliates and independents). Additionally, syndication for US content also pertains to the distribution of content produced domestically to markets outside of the US. This can be first-run programming or programming that has had a successful run on a network or elsewhere. Further, some studios are producing first-run programming SVOD (Lionsgate’s Orange Is the New Black, for example).

While first-run syndication (e.g., Dr. Phil or Wheel of Fortune) can be lucrative, we focus far more on the second-run off-network business (e.g., Big Bang Theory on TNT, CSI on Spike or The Good Wife on Amazon and Hulu) because:

A. Profit margins are often higher, with much of the negative cost of program production having been amortized in the first run and the bulk of expenses associated with the show being largely back-end participations; and

B. It is a more important driver of fundamentals for the major media companies in our coverage universe.

We estimate off-network domestic syndication alone provides ~$23B of revenue to content producers. SVOD (with only a modest non-domestic contribution) could add another nearly $7.0B. Beyond that, we assume SVOD spend on content grows in the double digits, especially in light of international expansion.

The addition of digital distribution agreements has made revenue streams even more opaque as it is often unclear what the duration of online streaming content agreements is and what the content fees really are


October 23, 2014 8

Exhibit 3: Historical And Projected Linear And Digital US Syndication Revenues

1

decided not to use:

5.3 6.7 7.2 8.3 9.4 10.4 11.2 11.8 12.6 13.6 15.2 16.4 17.4 18.4

2.7 3.0 3.1

3.1 3.2

3.3 3.4 3.3 3.2 3.2

3.1 3.2

3.2 3.3

0.8

3.04.0

5.26.8

0.0

5.0

10.0

15.0

20.0

25.0

30.0

20

02

20

03

20

04

20

05

20

06

20

07

20

08

20

09

20

10

20

11

20

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20

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20

14

E

20

15

E

Bill

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s

Digital Content Revenue Broadcast Syndication Revenues Cable Syndication Revenues

$1.8 $2.3

$2.8 $3.3

$0.5

$1.0

$1.5

$1.7

$0.5

$0.6

$0.8

$1.5

$0.0

$1.0

$2.0

$3.0

$4.0

$5.0

$6.0

$7.0

$8.0

2012 2013 2014E 2015E

Bill

ion

s o

f $

s

Hulu Amazon Netflix Other

$3.0

$4.0

$5.2

$6.8

We expect digital content spend to approach $7.0 billion in 2015

Source: SNL Kagan, industry sources, RBC Capital Markets estimates

Six Studios Provide Scripted Content In The Domestic First-Run TV Market, Which Feeds Into Linear And SVOD Syndication; SVOD Market is More Fragmented Six primary content producers (the major TV studios) supply the vast majority of TV programming to the broadcast networks (where most syndicated scripted content originates). Four of these studios are affiliated with sister networks (CBS Television Studios with the CBS Network, ABC Studios with the ABC Network, Fox Television Studios with the Fox Broadcasting Network, and Universal Television with the NBC Network) for whom they generally supply the majority of scripted content airing on the network. The remaining two TV studios (Warner Brothers Television Studios and Sony Entertainment Television Studios) play a more neutral role, supplying content to the highest bidder. Other players are becoming more active in the syndication market with made-for-cable content (a more nascent market), and Lionsgate (a major player in both SVOD and linear) and Viacom (through outsourced TV studio operations) have become more important players in the space.

We expect digital syndication revenues to approach $7B in 2015, and to grow in the double digits thereafter


October 23, 2014 9

Exhibit 4: Key Players In Domestic Content Production

Exclusively 3rd party Producers Primarily Produce Content for Sister Networks Original SVOD Producers

Source: Company reports, RBC Capital Markets Research

It Takes Several Seasons Of Episodes And Particular Types of Formats To Make Traditional Linear Syndication Possible Historically, in order to sell content on an off-network syndication basis, a content producer had to produce 60-100 episodes of a show (generally three-five seasons) so that the buyer (a cable network or a local TV station) could run an episode a day each weekday in ~four-five cycles per year (referred to in industry parlance as “stripping”). Additionally, content had to be syndication friendly; situation comedies or procedural dramas that are “self contained” and reach a broad audience tend to do well here.

It’s Easier For Cable Originals To Syndicate Than It Used To Be Historically, it was much more difficult for cable-based originals to be syndicated, but that has changed as cable originals have become longer-running series and more format-friendly. Made-for-cable originals were typically:

1. Not in formats that were “syndication friendly”. Typically, cable shows were arc-based or reality-based.

2. Cable network shows would order 13 or 14 episodes per season; therefore, it would take cable originals almost twice as long to hit the syndication hurdle. We are beginning to see more high quality original situation comedies made for cable featuring “household” names (e.g., Betty White in Hot In Cleveland, or Charlie Sheen in Anger Management). Additionally, cable has had some “breakout” hits that are not suitable for broadcast stripping but have found a home on lower-tier cable networks (Breaking Bad on Sundance TV).

3. While we do not expect to see a major cable network-to-cable network syndicated content market develop, SVOD offers the opportunity for more arc-based serialized formats to be monetized in binge-like viewing, creating increased demand for such content. Cable has created some of the most high-profile arc-based dramas during recent years (Walking Dead or Mad Men on Netflix).

SVOD offers the opportunity for more arc-based serialized formats to be monetized in binge-like viewing


October 23, 2014 10

Networks Affiliated With Studios Have Different Incentives As Network Broadcast Isn’t An End Unto Itself, But Rather Window One For Monetization In Both Linear And SVOD Syndication Networks that are affiliated with studios have unique incentives to keep some shows on the air (feeding syndication) or to cancel others (thus stunting the syndication pipeline). This is where synergy between ownership of a studio and a television network can really come into play. If a show is not affiliated with its network’s sister studio and it is performing marginally but perhaps well enough to squeeze out another season with relatively weak ratings, there is minimal incentive to keep the show on the air.

However, if the studio is affiliated with a network and the show is a good candidate for syndication (or better yet, is already in syndication with a proven demand for episodes in the off-network market), the network might decide to order another season of the show because its studio sibling will be able to generate solid earnings from the syndication run, even if the first run doesn’t bring much incremental profit for the TV studio.

Further, in the emerging SVOD landscape, studios with networks can lock in SVOD license fees, in some cases before a program has even aired (in many cases, guaranteeing profitability). As a result, networks could produce programming that might have seemed more risky, especially for “event” programming, such as CBS with Under the Dome or Zoo on Amazon and Netflix, respectively.

The Current Content Landscape Exhibit 5 offers a snapshot of some of the linear syndication deals powering the off-network syndication ecosystem on both the broadcast and cable network side. One of the things that should not go unnoticed is the tendency for procedural dramas to find a more prominent home on cable networks compared to broadcast stations, while situation comedies tend to find more prominent homes on broadcast stations.

What is not apparent from this chart is the fact that procedural dramas generally perform more favorably on an international basis than situation comedies from a price-per-episode perspective. After all, it is easy to identify with a criminal investigation in any culture, while humor tends to be more culturally relevant. As far as serialized dramas go — with the exception of relatively minor deals on broadcast (e.g., once per week or weekend-only viewing rather than the five-days-per-week stripped distribution model more closely associated with procedural dramas, on cable, or situation comedies, on cable or broadcast) — linear syndication is rarely a big factor.

A network might decide to order another season of a struggling show even if the first run doesn’t bring much incremental profit for the TV studio, since its studio sibling will be able to generate solid earnings from the syndication run


October 23, 2014 11

Exhibit 5: Select Scripted Shows In Off-Network Linear Syndication Available For Stripping

2 Broke Girls WBTV Sitcom TBS CBS $1.7 mm/episode

30 Rock UMS Sitcom Comedy Central Fox/CW Comedy Central paying $0.8 mm/episode

According to Jim ABC Studios Sitcom n.a. ABC -

American Dad Fox TV Animated Sitcom TBS/Adult Swim CW -

Bones Fox TV Procedural Drama TNT - -

Blue Bloods CBS Studios Drama WGN, ION - $1.1 mm/episode; $1.7 mm with Hulu Plus

Brothers & Sisters ABC Studios Serialized Drama Reelz Channel - -

Castle ABC Studios Procedural Drama TNT - TNT paying $1.5 mm/episode

Cold Case WBTV/CBS Studios Procedural Drama TNT - TNT paying $1.4 mm/episode

Community UMS/Sony Sitcom Comedy Central - -

Criminal Minds CBS/ABC Studios Procedural Drama A&E/ION - A&E paying ~$0.65 mm/episode, Ion Stations paying $0.175 mm per week

CSI CBS Studios Procedural Drama Spike/USA - Spike paying $1.6 mm/episode

CSI: Miami CBS Studios Procedural Drama A&E/AMC - A&E paid ~$0.75 mm/episode in '03, AMC paying $0.4 mm/episode

CSI: New York CBS Studios Procedural Drama Spike/USA - Spike paying $1.9 mm/episode

Curb Your Enthusiasm HBO Sitcom TGN/TV Land CW TGN paying $0.6 mm/episode

Desperate Housewives ABC Studios Serialized Drama Lifetime Fox -

Elementary CBS Studios Drama WGN, ION - $2.0mm/episode; $3.0 mm with Hulu Plus

Entourage HBO Sitcom Spike CW Spike paying $0.6 mm/episode

Everybody Hates Chris CBS Studios Sitcom NickatNite/BET Fox/CBS -

Everybody Loves Raymond CBS Studios/HBO Sitcom TBS/TV Land CBS Totaling $5.3 mm/episode throughout 2 syndication cycles

Frasier CBS Studios Sitcom Lifetime/Hallmark NBC NBC affiliate stations paying $3.1 mm/episode

Friends WBTV Sitcom NickatNite/TBS NBC Totaling $5.9 mm/episode from 2 syndication cycles

Fringe WBTV Serialized Drama Science Network - Science paying $0.4 mm/episode

Futurama Fox TV Animated Sitcom Comedy Central/Adult Swim CW Comedy Central paying $0.4 mm/episode

George Lopez WBTV Sitcom NickatNite/TBS - -

Glee Fox TV Sitcom Oxygen - -

Grey's Anatomy ABC Studios Serialized Drama Lifetime - Lifetime paying $1.2 mm/episode

Hawaii 5-0 CBS Studios Drama TNT - $2.2 mm/episode

Heartland Independent Serialized Drama TNT Fox/CBS Canadian show syndicated to CBS/Tribune/etc. stations

House UMS Procedural Drama USA/Bravo Fox/CBS USA/Bravo paying $1.4 mm/episode

How I Met Your Mother Fox TV Sitcom Lifetime, FX Fox/CBS Lifetime paying $0.75 mm/episode with CBS paying $1.4 mm

It's Always Sunny in Philadelphia Independent Sitcom FX Fox/CBS -

King of the Hill Fox TV Animated Sitcom FX Fox FOX O&O and affiliates paying $3 mm/episode

Law & Order UMS Procedural Drama A&E/TNT - A&E paid $0.16 mm/episode while TNT is paying $0.25 mm/episode

Law & Order: Criminal Intent UMS Procedural Drama USA/Bravo - USA/Bravo paying $1.925 mm/episode

Law & Order: Special Victims Unit UMS Procedural Drama USA - USA paying $1.3 mm/episode

Mike & Molly WBTV Sitcom FX CBS $0.8 mm/episode

Modern Family Fox TV Sitcom USA Fox Close to the $1.5 mm/episode The Big Bang Theory received from TBS

Monk ABC Studios/UMS Serialized Drama USA NBC -

My Name is Earl Fox TV Sitcom TBS/ION Fox/CBS TBS paying $0.625 mm/episode

My Wife and Kids ABC Studios Sitcom ABC Family/BET/NickatNite Fox Totaling $2.15 mm/episode in broadcast syndication

NCIS: LA CBS Studios Procedural Drama USA - -

New Girl Fox TV Sitcom TBS, MTV - $0.4 mm/episode estimated; SVOD moves it to a total of $1.5 mm/episode

Numb3rs CBS Studios Procedural Drama TNT - -

Parks and Recreation UMS Sitcom WGN - Also sold to Amazon

Person of Interest WBTV Procedural Drama WGN - First time WGN purchased exclusive cable window to syndicated series

Rules of Engagement CBS, Sony Comedy - Tribune, CBS $0.4 mm/episode

Scrubs ABC Studios Sitcom Comedy Central Fox -

South Park Independent Animated Sitcom n.a. Fox -

That 70s Show Fox TV Sitcom ABC Family/NickatNite/MTV Fox -

The Big Bang Theory WBTV Sitcom TBS Fox TBS paying $1.5 mm/episode with Fox paying $0.5 mm/episode

The Good Wife CBS Studios Drama Hallmark CBS Sold to Amazon, Hulu also; combined $2 mm/episode

The Mentalist WBTV Procedural Drama TNT - TNT paying $2.2 mm/episode

The Middle WBTV Sitcom ABC Family/Hallmark - $0.4 mm/episode estimated

The New Adventures of Old Christine WBTV Sitcom Lifetime CW Lifetime paying $0.35 mm/episode with Tribune syndicating in broadcast

The Office UMS Sitcom TBS NBC/Fox TBS paying $0.65 mm/episode with stations paying $2.1 mm

The Simpsons Fox Tv Sitcom FXX - $650Kepisode

The Sopranos HBO Serialized Drama A&E - A&E paying $2.5 mm/episode

Two and a Half Men WBTV Sitcom FX Tribune FX paying $0.8 mm/episode with Tribune Stations paying $1.5 mm plus barter

Ugly Betty ABC Studios Off-network Sitcom TGN - TGN paying $0.2 mm/episode

Without a Trace WBTV/CBS Studios Procedural Drama TNT - TNT paying $1.3 mm/episode

Production StudioShow Genre CommentBroadcast

LicenseeCable Licensee

Source: Syndicated Network Television Association, TV Guide, Broadcasting and Cable, TV By The Numbers and RBC Capital Markets estimates


October 23, 2014 12

SVOD Players Are Creating And Buying Content, Too We expect the total content budgets for the Big 3 SVOD players to approach ~$7B

1 in 2015,

with the expectation of continued double-digit growth for years to come, particularly as international expansion continues and the demand for big-budget shows (particularly arc-based dramas) continues to grow.

In 2013, we began to see a greater emphasis on single-show deals as well as “bulk library” deals. There had been single-show deals (such as the Lionsgate Mad Men/Netflix deal in 2011); however, there were not many with the major network-affiliated studios.

Additionally, beginning in the summer of 2013 with the premiere of Under the Dome on CBS and Amazon, we saw the creation of a new window: the network TV show sold into SVOD before it had even aired on broadcast network TV. That model continues to play itself out with shows like Extant and Zoo (CBS), and Gotham from Warner Brothers. This model, on some level, has enabled the major TV studios to take more of the “hit risk” out of producing premium broadcast content.

Often we are asked if we think a migration away from library to individual deals signals a “late innings” play for the content producers. In other words, are the producers being forced to sell “the best material” because demand for bulk remnants is declining? Is there a danger in that there is only “so much good stuff”? We do not see the migration from library to individual shows as the ninth inning of the game. Rather, it signals more of a new game. Those players with premium content will always have demand, no matter what form the deal takes. In fact, studios that continue to produce premium content can make more from one show than they would have from a library sale only a few years ago. We believe total licensing fees from an individual show like CSI: Miami to Netflix in 2012 might have exceeded the initial bulk library deal CBS did with Netflix.

In addition, the SVOD players began creating original productions exclusively for SVOD, opening another market for premium content to be created and sold by major studios. The major SVOD players are differentiated in their involvement with originals: Netflix tends to buy “packaged” content and does not necessarily focus on the need to “self produce”, while Amazon takes almost the opposite approach. House of Cards, Hemlock and Orange Is the New Black all have production costs in the range of, or exceeding, ~$4MM/episode. To date, Lionsgate has been one of the biggest winners in the incumbent TV production landscape with one of Netflix’s biggest franchise shows, Orange Is the New Black, as well as Hulu’s Deadbeat.

At the same time, we are beginning to see some bifurcation in the continuation of many of the original content deals. For the most part, demand for scripted dramas and comedies has remained strong. However, we are seeing less demand for reality-based docudramas. This has led to continued success for major players such as CBS, FOX, Disney’s ABC Studios and Time Warner’s Warner Brothers, with less success in the SVOD space for Discovery, Scripps, and A&E Networks. We are also seeing theatrical content becoming more marginalized in favor of TV content (illustrated by Netflix’s willingness to end its relationships with Starz and Epix).

1 Includes $3.3B for Netflix, $1.7B for Amazon, and $1.5B for Hulu (see Exhibit 3)

Selling network TV shows into SVOD before airing on broadcast has enabled the major TV studios to take more of the “hit risk” out of producing premium broadcast content


October 23, 2014 13

Even in the case where less “en vogue” programming has been dropped, we think negotiations have tended to break down based not just on price, but also on the concept of exclusivity. Even in the case of original productions, our sense from the channels is that exclusivity is far more important for these new players than ownership of the content itself (which on some level, achieves the same end, for at least some period of time).

That said, we often see one player jump into the breach when another passes based on price or exclusivity, as was the case when Amazon picked up streaming rights to Viacom’s content after Netflix and Viacom could not agree on terms. Further, while we have not seen evidence of the next player to join “The Big 3”, there likely will be others entering the ecosystem. Yahoo’s purchase of exclusive rights to prior seasons of Saturday Night Live and its order for a sixth original season of Community could be a harbinger of things to come.

Exhibit 6 illustrates some of the more high-profile shows acquired by SVOD distributors.

Exhibit 6: Recent Individual Off-Network Acquisitions of TV Shows To Digital Distributors

Extant CBS Amazon 2014 $0.75-$1.0 mm Drama Acquired before show aired on network

Gotham Warner Brothers Netflix 2014 $1.75 mm Drama Acquired before show aired on network

Zoo CBS Netflix 2014 $0.75-$1.0mm Drama Acquired before show aired on network

New Girl Fox Netflix 2014 $0.9 mm Sit-com Acquired prior to cable off-net deal

Saturday Night Live Broadway Video Yahoo 2013 $0.2 mm Comedy/VarietyHulu reliqunished rights in 2013 for full episode archives

from 1975-2013

Community Sony/Universal Hulu/Yahoo 2014 - Sit-com Hulu acquired original rights, Yahoo ordered 6th season

The Blacklist Sony/Universal Netflix 2014 $2.0 mm Drama Biggest per episode off-net price for SVOD

Dexter CBS Netflix 2013 $1.0 mm Drama Showtime original

Under The Dome CBS Amazon 2013 $0.75-$1.0 mm Drama Acquired before show aired on network

Revolution Warner Brothers Netflix 2013 $0.4 mm Drama -

The Good Wife CBS Amazon/Hulu 2013 $1.8 mm combined Drama Done in conjunction with linear syndication deal

Manhattan Lionsgate Hulu 2014 $0.75-$1.0 mm Drama Acquired before show aired on network

Blue Bloods CBS Hulu 2014 $1.5 mm Drama Part of new big push for Hulu

Elementary CBS Hulu 2014 $1.5 mm Drama Part of new big push for Hulu

South Park Viacom/Seth MacFarlane Hulu 2014 $0.35 mm Adult Animation Part of new big push for Hulu

Fargo Fox Netflix 2014 - Drama For Netherlands territory only

Revenge ABC Studios Netflix 2012 $0.9 mm Drama -

Scandal ABC Studios Netflix 2012 $0.9 mm Drama -

Walking Dead Sony Netflix 2011 $1.3 mm Drama -

The Following Warner Brothers Netflix - $0.33 mm Drama Season 2 recently added

Mad Men Lionsgate Netflix 2011 $1.0 mm Drama Landmark deal for individual show SVOD syndication

Gossip Girl Warner Brothers/CBS Netflix 2011 $0.7 mm Drama Part of broad output deal for WB shows

CSI: Miami CBS/Alliance Atlantis Netflix 2012 $1.0 mm Crime Procedural Part of "put option" for CBS to Netflix

CSI: New York CBS/Alliance Atlantis Netflix 2013 $1.0 mm Crime Procedural Part of "put option" for CBS to Netflix

ShowYear

AnnouncedGenre CommentsProduction Studio Buyer

Estimated

Budget/Episode

Source: Press reports, company reports and commentary, industry sources, RBC Capital Markets estimates

We note that content is constantly being added and dropped online, and tracking every piece of the content is almost impossible. (We have found numerous Web sites that track what is added or removed.) Notably, in October the full series of Gilmore Girls (Warner Bros.) was added to Netflix while Law & Order and Law & Order: SVU (UTV) were removed entirely. With so much content constantly rolling on and off, it feels almost futile to try to keep up with it.

Exclusivity is far more important for SVOD players than ownership of the content itself


October 23, 2014 14

Exhibit 7: What’s On Netflix

Source: http://whats-on-netflix.com/whats-new/

Docudrama And Non-Exclusive Content Is Being Dropped In 2011, Netflix and Amazon (and to a lesser extent, Hulu) essentially transformed the business model for the docudrama content (“reality programming”) dominant cable channel. Docudramas on cable range from cooking competitions to do-it-yourself shows on Scripps’ networks, “mountain man” adventures or families with 19 kids on Discovery’s networks, pawn-shop operators or hoarders on A&E’s networks, and even pregnant teen moms on MTV. These shows basically had no residual values outside of their endemic networks; there was no “off-network” syndication market for this content. Partially for this reason, the content was created for a fraction of the cost of more typical scripted, higher-end fare.

But something changed. SVOD providers Netflix, Amazon and Hulu created a new “syndication” window for this content that previously had no syndication (or window outside of endemic network runs). SVOD players signed deals to make cable docudrama content available on their streaming services. Bulk deals ranged from $100MM-$200MM upfront payments for one-two years of (non-exclusive) rights to stream online content. The first deals were done in early 2011 and the “last” was done in February 2013, when Amazon signed up streaming rights for Scripps’ networks’ programming.

However, even as the SVOD players were signing “bulk” deals for docudrama library content, their strategies seemed to be headed in a direction suggesting those deals might not be around for long. The idea of Netflix choosing not to renew some content deals was not a completely new one (it had dropped Starz and Epix in 2012). However, these were largely theatrical-driven streaming content deals. Given commentary from our channel sources, we believe that these early drops were more reflective of theatrical content becoming more marginalized (versus TV content).

With so much content constantly rolling on and off, it feels almost futile to try to keep up with SVOD licensing deals


October 23, 2014 15

In May 2013, Netflix let its streaming deal with Viacom expire for content including MTV, Comedy Central and Nickelodeon. Netflix argued that it wanted to focus on exclusive content and “select programming” rather than more costly, broad-based deals that fill its library with less-successful titles in addition to hits. We would note that Amazon stepped into the breach and signed a streaming deal with Viacom. (We suspect it was motivated more by a desire to compete in the kids’ category as opposed to docudrama, but the deal was “bundled”.)

In September 2013, Netflix dropped the remainder of A&E and History networks content, citing the same issues. Then, only a year after signing its deal with Scripps, in March 2014 Amazon ended its streaming relationship with Scripps for Amazon Prime customers. Around the same time, Netflix dropped its streaming deal with Discovery Networks. At this point, it also appears (given commentary from Discovery management recently) that Discovery’s streaming distribution deal with Amazon is likely to cease before year-end.

It is worth noting that it has been made clear in our conversations across the channels that both Amazon and Netflix would have been willing to pay for some of the content they dropped. However, the overall payments would no longer (in the eyes of the channel operators) have been sufficient to compensate for the risk of potential linear viewing cannibalization. Further, each platform has tended to want digital SVOD exclusivity.

Exhibit 8: Selected Library Streaming Deals Not Renewed

Content Provider SVOD Service Agreement BeganAgreement

EndedComments

Epix Netflix 2010 2012 First high profile streaming deal for premium content with major studiosStarz Netflix 2007 2012 Part of original "Vongo" deal with Starz

Viacom Netflix 2010 2013 Amazon became exclusive SVOD partnerA&E Networks Netflix 2011 2013 Amazon became exclusive SVOD partner

Scripps Amazon 2013 2014 Scripps was relatively long "hold out" for SVOD dealsDiscovery Networks Netflix 2011 2014 ExpectedDiscovery Networks Amazon 2011 2014 Expected

Source: Company reports and commentary, press reports, RBC Capital Markets estimates

We also note that there is probably some content cyclicality related to the evolution of the broader platform that will cause content to be in greater demand at some time and less at others. For example, we can look to the typical launch of linear cable channels to inform us.

When a cable channel launches initially, it seeks out less expensive, often bulk library on a non-exclusive basis. As the channel matures (and grows a brand and audience), it will often migrate to higher quality, but not necessarily exclusive off-net programming. Then, we will see an evolution to more exclusive, but still acquired, off-net programming. In the later stages of maturity, the cable network will attempt to program with more original programming to support the brand. Inevitably, a new cable channel will enter the market and begin the cycle again.

Two years ago, most viewers had never heard of WGN America. During the last cycle of linear syndication sales, WGN America picked up some the shows (Person of Interest and Blue Bloods) and has launched high-profile originals such as Fox 21’s Salem and Lionsgate’s Manhattan). In this vein, as Netflix and Amazon are cutting back on programming, we are seeing new players like Yahoo emerge. In April 2013, Yahoo acquired the exclusive streaming rights to Saturday Night Live’s full episode library. Further, in April Yahoo ordered an original sixth season of the Sony/Universal-produced Community after the show was cancelled by NBC.

Diminished SVOD demand for reality-based docudramas positions ABC, CBS, and Warner Bros well


October 23, 2014 16

Due To Timing Of Revenue Recognition, Syndication Can Drive Lumpiness In Earnings And Create Difficult Comps – Both Effects Are Often Not Obvious In terms of the mechanics of the impact on the income statement of syndication deals for major off-network runs, the producer delivers all the episodes produced through a given date. In exchange, most producers typically receive one (generally significant) lump-sum payment from the purchaser, a cable network. With the typical price of a show in syndication of ~$0.5MM-$2.5MM/episode for the first cycle of syndication (the second cycle typically amounts to half of cycle one), the launch of each new show into syndication, particularly for cable, can have a large financial impact. This can lead to both a (seemingly) unpredictable upside, and (seemingly) surprising and difficult comps.

Cable syndication deals typically are all cash or cash plus barter, with a lower value placed on “cable barter” than “broadcast barter.” The typical broadcast syndication deal is done either on a cash plus barter basis or entirely on barter, with deals usually lasting seven years and including terms requiring the broadcaster to run the show 1x-2x on weekdays and 2x-4x on weekends (viewership is higher on weekends). While the cash component of syndication deals varies based on the quality of the show, the amount of barter time in cash plus barter deals is relatively standard across both broadcast and syndication, with studios receiving 1.5 minutes and stations keeping the remaining 5.5 minutes for a 30-minute sitcom.

The split varies for deals that are all barter (historically only broadcast deals), but studios typically receive three-four minutes of barter for a 30-minute sitcom. Another difference between broadcast syndication and cable deals is the timing of payments: Cable channels typically pay a single lump sum to studios (while most studios recognize the entire lump-sum payment as current revenue, some studios may recognize revenues in installments over the duration of the deal) based on the number of episodes delivered and the price per episode, whereas broadcast stations generally pay license fees periodically (though the industry standard is to quote a weekly rate, broadcast stations usually pay monthly or quarterly).

SVOD syndication historically has not had any barter component and will not going forward, as long as the predominant SVOD platforms remain strictly subscriber supported and advertisement free. In 2010-2012, when SVOD was still in its infancy with respect to the acquired TV market, the delivery of content and implied economics were determined by bulk library deals. There was no prior demand for streaming content and no prohibition against selling into the streaming window, so studios could sell multiple back episodes of whatever they wanted and generally found Netflix and Amazon to be willing buyers. There may have been implied per-episode fees, but they were more trackable to investors through the bulk license fees. Basically, no current content was sold into digital because the studios didn’t want to risk an unknown potential for cannibalization of the core linear market.

I 2012, we began to see more individual show-by-show sales of premium content, many of them back seasons of current shows such as Fox’s New Girl deal for ~$0.9MM/episode with Netflix. These were identical to all-cash deals in off-net cable syndication, which implied per-episode deals that were usually akin to second- or third-cycle syndication deals ($0.5MM-$2.0MM/episode). By 2013, we began to see deals announced for current series with basically no prior seasons (essentially delivered anywhere from one week to one year after first airing), such as the landmark CBS/Amazon Under the Dome deal for ~$1.0MM/episode or Warner’s deal with Netflix for Gotham for $1.75MM/episode.

The recognition of syndication revenues can cause lumpiness in earnings given revenues generally are recognized as the content is delivered


October 23, 2014 17

Exhibit 9: Types Of Broadcast, Cable, And SVOD Syndication Deals

Studios(CBS, WBTV, Fox,

etc.)

Cable Channels(USA, TBS, TNT, etc.)

• Defined # of episodes (typically 100) • Duration: ~3-5 years

License fees between $0-$1.5mm/episode+ 1.5 minutes of barter

• Defined # of episodes (typically 100)• Duration: ~5-7 years

Cash + Barter

Cable Deals

Single lump sum equating to ~$0.5-$1.5mm/episode



All Barter

Cash

Studio receives ~4 minutes of barter

• Defined # of episodes/seasons (typically 100)• May include restrictions on broadcast times

Illustrative Example

The Mentalist• TNT pays WBTV lump sum of $2.2mm/episode for ~94 episodes

The Big Bang Theory• TBS pays WBTV $1.5mm/episode for ~116 episodes plus 1.5 minutes barter


etc.)

Broadcast Station Groups(Belo, Tribune, CBS O&O, etc.)

• Defined # of episodes (typically 100) • Duration: ~3-5 years

License fees between $0-$1.5mm/episode+ 1.5 minutes of barter

Cash + Barter

Broadcast Deals

All Barter

Studio receives ~4 minutes of barter

Broadcast Station Groups(Belo, Tribune, CBS O&O, etc.)

• Defined # of episodes/seasons (typically 100)• May include restrictions on broadcast times

Two and a Half Men• Tribune Stations pays WBTV $1.5mm/episode for 100+ episodes plus $1.5 million in barter

30 Rock• Fox O&O stations pay UMS/NBC Studios 3 minutes barter

Typically less successful or niche shows

Illustrative Example

SVOD Distributor(Netflix, Amazon, Hulu)

• Variable # of episodes or seasons• Duration: 1-5 years• More paid for exclusivity

SVOD Deals

Single lump sum equating to ~$0.4-$2.0 mm/episode deliverable as content is delivered

Cash

Illustrative Examples


etc.)

New Girl

• Netflix pays FOX lump sum of $900k/episode for exclusive, multiyear rights to past seasons with subsequent seasons added post their broadcast run

Extant

• Amazon pays CBS lump sum of $900k/episode for exclusive rights to the first season four days after the initial broadcast of each episode on CBS

*While most studios recognize the entire lump-sum payment as current revenue, some studios may recognize revenues in installments over the duration of the deal. Source: SNL Kagan, TVNewsCheck, industry sources, RBC Capital Markets estimates

Understanding The Pipeline Ahead Of Time Is Important To understand the fundamentals of the syndication market and how it affects the income statements of media companies, one must examine more than just the current shows in syndication. Rather, one must examine shows with potential for syndication, and even shows that have contractual agreements for syndication but have not yet been delivered to the actual marketplace. Making matters even more complicated, initial syndication deals increasingly are struck several years before there are enough episodes produced for a traditional syndication run (sometimes before the first season of a show is even completed). For example, Lionsgate began “shopping” Anger Management to station groups for off-network syndication weeks before the first episode even premiered. As a result, income statement impact may lag deal completion.

There are many ways to monetize content across cable, broadcast, and increasingly SVOD


October 23, 2014 18

Success In Network-Based First-Run Is A Good Place To Start For Understanding How The Pipeline Might Be Building Thus, the first step in determining the strongest players in the syndication market is to figure out which studio generally produces the most hits (shows that run long enough to be potential syndication candidates). Over the past seven years, CBS and Warner Brothers (WBTV) have been the leaders in creating hit content, arguably giving them a leg up in the syndication landscape. Interestingly, CBS and WBTV have employed very different strategies regarding first-run distribution. CBS uses its content primarily to program its sibling network, while WBTV doesn’t own a network and programs others’ networks.

In Exhibit 10, we’ve laid out our calculated hit rates for each of the major content providers during 2006-2012 and 2006-2010. The most noticeable change is at Sony, where the hit rate has declined from 36% to 25%.

Exhibit 10: TV Studio “Hit Rate” Comparison

2006-2012 2006-2010

24

42

36 31 33

15

14 168 11 9

5

CBS Studios WBTV Fox TV ABC Studios UTV Sony

Canceled Hit*

28% 18% 26% 21% 25%37%

Hit rate

10 106 7 6 4

15

30

24 21 22

7


Canceled Hit*

25% 20% 25% 21% 36%40%

Hit rate

Note: “Hit” is defined as a new show that debuted on the networks from 2006 through 2012 and has continued for at least three seasons Source: Company reports, cable channel Web sites, industry sources, RBC Capital Markets estimates

Even if a show is a hit in its first run, it will not necessarily be a major success in syndication. First, prominent placement on a major network tends to help a show’s first-run ratings and ability to syndicate – here the powerful synergy between a broadcast network and major TV studio becomes more obvious. Additionally, certain formats lend themselves to syndication better than others. Shows that are self-contained, or have greater elements of procedurals than of serialized dramas, are far more syndication friendly. We’d note the two most prolific syndicators of off-network TV shows have taken very different programming approaches – while WBTV has used situation comedies as more of a driver of syndication dollars, CBS has relied more on dramatic procedurals to derive syndication success.

CBS has the highest “hit rate”, or successful content, with Warner Bros., ABC Studios, and Sony following


October 23, 2014 19

Linear Syndication Performance Historically In Exhibit 11, we illustrate the performance of TV studio production with respect to content produced since 2006. We show:

Already Syndicated: How many of those shows went into how many have had syndication deals announced – the primary indicator of visible pipeline and driver of a major bump in high margin revenue.

Syndication Deal Signed: How many of those shows went into how many have had syndication deals announced, but have yet to deliver content.

Potential Future Syndication: How many have potential to be syndicated, as they have been running for a number of seasons and the format fits the mold, but are yet to sign a deal.

On a format-agnostic basis (which, as we note below, isn’t an easy assumption to make), this last category should be a good indicator of the forward pipeline for deals that have not yet been announced. The conclusion from this chart is that over the past seven years, CBS and WBTV have been by far the most successful at creating syndicated shows, while Fox and ABC have lagged.

In the following exhibit, we’ve laid out the change in syndication performance from 2006-2012 to 2006-2010.

Exhibit 11: Linear Syndication Performance of TV Studios

2006-2012 2006-2010

2219

1713 13

6

911

2

6 7

2

1

2

1


Nu

mb

er o

f sh

ow

s

Already Syndicated Syndication Deal Signed Potential Future Syndication

3232

20 19 20

8 16 1513

10 10

3

3 4

3

1

2

68

5

8 6

2

CBS Studio WBTV Fox TV ABC Studio UMS Sony

Nu

mb

er o

f sh

ow

s

Already Syndicated Syndication Deal Signed Potential Future Syndication

2725

21

1817

8

Note: “Already Syndicated” indicates shows that have been in network first-run in the past six years (2006-2011) and have already been syndicated; “Syndication Deal Signed” indicates shows with syndication deals, and therefore in the pipeline for the future; and “Potential Future Syndication” indicates shows without syndication deals but with potential to be syndicated in the future given that they have been on network first-run for three or more seasons

Source: Company reports, cable channel Web sites, industry sources, RBC Capital Markets estimates

Backlog Of Announced Deals Offers Less Visibility Than Before While each of the major studios has modest visibility to future syndication revenues based on the current revenue stream from syndication (it’s unlikely several shows in a diversified portfolio of syndicated content will be cancelled, ceasing the revenue opportunity of producing and selling incremental episodes), it’s more difficult to gain visibility to the big bumps associated with brand new syndication deals, where a large number of episodes are delivered in bulk on the launch of a syndication deal, generating a major revenue opportunity).

The following exhibit illustrates the opportunities associated with the visible pipeline of syndication deals announced, where revenues have been recognized recently or have yet to be. CBS and WBTV have the most visibility into 2015 syndication revenues versus the peer group, with Fox a modest third-place finisher.

We have less visibility into future syndication today than we did a few years ago


October 23, 2014 20

We’d note that versus when we’ve looked at future backlog previously, there is less visibility today than before. However, the growing SVOD market (see Exhibit 1) has probably contributed to this and in certain cases, could make up for it.

Exhibit 12: Visible Recent And Future Linear Syndication Deals

140

280

76 44

348 84

73

19

226

25

244

36 80

18 0

100

200

300

400

500

600

700

800


Mill

ion

s o

f $

s

2013 2014 2015

Warner Bros. and CBS lead 2015 in terms of inked linear backlog deals. Fox should continue to benefit from the sale of The Simpsons for years to come.

Source: TV Guide, Broadcasting and Cable, company reports, RBC Capital Markets estimates

Warner And CBS Are The Leaders In Signed Deals Since we began analyzing syndication, CBS and Warner Bros. have had the most substantial backlog of signed syndication deals in the pipeline. The first factor is the actual dollar value in the pipeline. We assess this by considering the dollar value per episode the distribution partner has committed (the value of these deals is often widely reported in the trade press and our own sources have given us insight on the shows for which data has not been reported). Typically, the range is between $0.5MM and $2.5MM/episode. The second factor is timing of syndication launches. This factor considers the gap between the announcement of the syndication deal and the actual delivery of the episodes.

For instance, in one of the most successful deals in syndication history, CBS and USA entered into a deal for NCIS: LA in 2009 after only seven episodes had aired. Thus, CBS secured a high price for a show that had very few episodes produced even for a first-run, ensuring solid profitability before the show had even proven itself. While the deal was for approximately 80-100 episodes at $2.4MM/episode for a total of ~$200MM upon launch of the syndication, it took until 2013 for the actual syndication to launch as the show couldn’t be stripped until enough episodes had been aired. In other words, CBS gained precise visibility of ~$200MM of very high-margin revenue four years in advance in what has traditionally been a hit-driven and unpredictable business.

CBS also struck a similar deal with TNT for Hawaii Five-0 at a price of ~$2.2MM/episode, resulting in another ~$200MM of backlog, after less than one season in first run.

Less Visibility In The Pipeline Today Compared to a few years ago when we had visibility in the syndication pipeline for two-three years out, today we have limited visibility into 2015 and none into 2016, which probably represents where we are in the content cycle.

CBS and WBTV have the most visibility into 2015 syndication revenues versus the peer group, with Fox a third place finisher


October 23, 2014 21

We have some visibility into a few linear syndication deals that should hit in 2015, including:

Elementary from CBS Studios to WGN/ION

2 Broke Girls from Warner Bros. to TBS and CBS Stations,

Person of Interest from Warner Bros. to WGN,

New Girl from Fox to TBS and MTV,

The Simpsons from Fox to FXX,

Grimm from Universal to TNT

Exhibit 13: Timing And Magnitude Of Recent And Future Linear Syndication Delivery

0

50

100

150

200

250

300

350

400


Mill

ion

s o

f $

s

2013 2014 2015

The Middle$25mm

Mike and Molly

$72mm

Blue Bloods$98 mm

The Middle$12mm

Person of Interest$117 mm

Scandal $24 mm

Community1

$18 mm

The Good Wife

$45 mm

Hawaii Five-O$205 mm

The Middle$25 mm

Glee $44 mmModern Family $134 mm

The Cleveland Show $44mmBob's Burgers $23 mm

Parks and Recreation $63 mmMike and

Molly$72 mm

2 Broke Girls$163 mm

NCIS: LA$226 mm

Blue Bloods$98 mm

Elementary$140 mm

The Middle$12 mm

The Simpsons $38 mmRaising Hope $35 mm

New Girl $38 mmThe Simpsons $38 mm

Cougar Town $30 mm

Scandal $24 mm

Community1

$18 mm

Community1

$18 mm

Grimm $44 mm

Source: TV Guide, Broadcasting and Cable, company reports, RBC Capital Markets estimates


October 23, 2014 22

We have some visibility into a few SVOD syndication deals that should hit in 2015, including:

For CBS: Elementary to Hulu for $1.5MM/episode, Under the Dome (season 3) to Amazon for $0.9MM/episode, Extant (season 2) to Amazon for $0.9MM/episode, and Zoo to Netflix for $0.9MM/episode. We also expect The Good Wife and Blue Bloods to air their recent seasons.

For Warner Bros.: Gotham to Netflix for $1.75MM/episode, Person of Interest to Netflix for $0.5MM/episode, and Friends to Netflix for $150K/episode. We also have modest expectations for recent season of The Following.

For Lionsgate: We assume a third season of Orange Is the New Black goes on Netflix for $2.5MM/episode and that season 2 of Manhattan will air on Hulu for $0.9MM/episode. We also assume the latest Mad Men season will air.

For Fox: we assume season 4 of New Girl will air on Netflix for $0.9MM/episode. We also include the expected delivery of Sons of Anarchy season 7 to Netflix in 2015. We have also included The Americans for Amazon at an estimated $1.0MM/episode.

For Sony/UTV: We expect The Blacklist season 2 to air on Netflix at $2.0MM/episode, for a total of $44MM (to be split between the two production companies) during 2015. Sony also gets the benefit of most recent season of The Walking Dead airing on Netflix.

For ABC: Revenge and Scandal could both add incremental seasons.

Exhibit 14: Estimated Magnitude Of Future SVOD Syndication Backlog

179

106

61

40 43

22

40

0

20

40

60

80

100

120

CBS Studios WBTV Lionsgate Fox Sony UTV ABC Studios

Mill

ion

s o

f $

s

2015 Estimated SVOD backlog

179

106

61 40 43

22 40

0

20

40

60

80

100

120

140

160

180

200

220

CBS Studios WBTV Lionsgate Fox Sony UTV ABC Studios

Mill

ion

s o

f $

s

2015 Estimated SVOD backlog

Elementary $72 mmThe Good Wife $40 mm

Blue Bloods $33 mmUnder the Dome $11 mm

Extant $11 mmZoo $11 mm

Gotham $39 mm Friends $35 mm

Person of Interest $27 mmThe Following $5 mm

Orange is the New Black $35 mmMad Men $14 mm

Manhattan $12 mmNew Girl $22 mm

The Americans $13 mmSons of Anarchy $5 mm

The Blaclklist $22 mm share

The Blacklist $22 mm shareThe Walking Dead $21 mm

Scandal $20 mm Revenge $20 mm

Source: Press reports, industry sources, RBC Capital Markets estimates

CBS’s digital backlog pipeline for 2015 actually exceeds that for its digital one (on a per show basis, excluding any bulk deals)


October 23, 2014 23

In the following exhibit, we estimate the value of select shows being renewed on air for an additional season, and then feeding the SVOD pipeline once the season has aired. We can see the value of having several different shows being added to SVOD each year – one season at a time – can add up to significant dollars. For example, when we take the value of an additional season of Blue Bloods, The Good Wife, Elementary, Extant, Zoo, and Under the Dome, we come up with an estimated $143MM of incremental revenues.

Exhibit 15: Estimated Backlog Of Future Shows Adding One Additional Season on SVOD

CBS Studios WBTV Fox ABC Studios Sony UTVLinear backlog 0 0 0 0 0 0SVOD backlog 0 0 0 0 0 0Total Backlog - Linear + Digital $0 mm $0 mm $0 mm $0 mm $0 mm $0 mm

Warner Bros. is the leader in 2015 linear plus digital visible backlog, with an estimated $386 million.

We estimate CBS has a combined visible backlog of

143

48 35 40

61 43

0

25

50

75

100

125

150

CBS Studios WBTV Fox ABC LGF Sony

Mill

ion

s o

f $

s

Once a stable of shows has been picked up by an SVOD provider, simply keeping the show on-the-air and delivering future seasons digitally can result in signficant revenues over time.


When we combine all of the visible linear and digital backlogs for 2015, we find that Warner Bros. is the leader with combined backlog at $386MM. CBS comes in second with an impressive $319MM of estimated visible total backlog next year. We would note that CBS’s digital backlog pipeline for 2015 actually exceeds that for its digital one (on a per show basis, excluding any bulk deals).

Exhibit 16: 2015 Linear + Digital Backlog For Select Shows And Networks

140

280

76 44

179

106

40

40 43

22

0

50

100

150

200

250

300

350

400

450

CBS Studios WBTV Fox ABC Studios Sony UTV

Mill

ion

s o

f $

s

SVOD backlog Linear backlog

$319 mm

$386 mm

$116 mm

$66 mm

Warner Bros. is the leader in 2015 linear plus digital visible backlog, with an estimated $386 million.

We estimate CBS has a combined visible backlog of $319 million in 2015.We note CBS's digital visible backlog exceeds its linear one.


Having several different shows being added to SVOD each year – one season at a time – can add up to significant dollars for content providers


October 23, 2014 24

More Ways To Handicap Additional Linear & Digital Syndication Opportunities In general, most shows that have been on the air for several seasons are pretty good candidates for syndication. However, not all formats lend themselves to linear syndication. Assessing the syndication potential of new shows (ones that have been on the air for less than a season) is somewhat like throwing darts since we don’t know what shows will be successful enough to justify production runs long enough to support syndication (though this is changing with remarkably early syndication commitments, a la NCIS: LA or Hawaii Five-0). However, some of these shows are in a syndication-friendly format and we can identify them as at least reasonable opportunities.

The most linear syndication-friendly format is the procedural drama (typically a crime, legal or medical-oriented show) that has no arc element to it; each episode resolves itself simply and there is no need to understand background information about the main protagonists. These shows tend to syndicate well domestically, primarily on general market, re-run-oriented cable channels, as well as international broadcast and cable channels.

Situation comedies also tend to have a very syndication-friendly format, particularly those that appeal more to a male audience. They too do not need to be viewed sequentially to understand them, generally. These shows are generally sold to be stripped across weekdays on both cable networks and broadcast stations (shown every day for five straight weekdays at the same time each day – typically adjacent to local stations’ news programming on the broadcast side, for the freshest, most premium content).

The least linear syndication-friendly format tends to be the serialized drama (at least, on a linear basis; this type of programming is seeing new life in the SVOD market). While there have been some successes for serialized dramas (they tend to sell best as programming in the fringe day-part – after the 11:00PM news – on local broadcast stations, particularly on weekends – they tend not to be stripped). These shows have often tended to do well on SVOD platforms, however.

Exhibit 17 illustrates by studio the new shows with the highest potential for linear syndication as well as those currently being broadcast that have not yet reached major syndication deals. We would emphasize that this process is far more art than science as:

A. We never really know what show will actually be a hit, and B. If a show that seemingly doesn’t fit the typical syndication-friendly format will end up

being an exception to the rule. For instance, A&E licensed The Sopranos for $2.5MM/episode in 2005 despite the fact that it was a highly serialized drama; this proved to be a ratings debacle for their respective buyers.

CBS is positioned well for future syndication, particularly with new shows airing this year that could syndicate in 2017


October 23, 2014 25

Exhibit 17: Shows With Formats/Elements Highly Friendly To Linear Syndication

Studio New Show Airing on Type Genre Comment

CSI: Cyber CBS New Drama Police procedural format could syndicate wellNCIS: New Orleans CBS New Drama Police procedural format could syndicate well

Scorpion CBS New Drama Elements of procedural crime/problem-solving likely syndicates wellThe McCarthy's1 CBS New Comedy Multi-camera sitcom format with a broad reach could syndicate well

The Millers CBS Existing Comedy Multi-camera sitcom format likely lends itself well to syndication1 Co-produced with Sony

Forever ABC New Drama Medical procedural format could syndicate wellStalker CBS New Drama Police procedural format could syndicate wellMom CBS Existing Comedy Multi-camera sitcom format likely lends itself well to syndication

Cristela ABC New Comedy Multi-camera sitcom format could syndicate wellLast Man Standing ABC Existing Comedy Multi-camera sitcom format with a broad reach likely syndicates well

How to Get Away With Murder ABC New Drama Crime procedural format could syndicate wellNashville2 ABC Existing Drama Serialized drama in 3rd season could syndicate somewhere

Resurrection ABC Existing Drama Procedural drama format could syndicate well2 Co-produced with Lionsgate

CBS TV Studios

Warner Bros.

Television

ABC Studios

Fox Television

Source: RBC Capital Markets estimates


October 23, 2014 26

ABC Studios ABC Studios has a few older shows in syndication, but, by and large, they are serialized dramas that generally:

A. Have done poorly due to the typical problems with serialized dramas in syndication, and B. Tend to under-earn versus situation comedies (domestically) and procedural dramas

(internationally).

As a result of struggling ratings, Cougar Town was moved to TBS in 2013, which allowed the show to renew for a fourth season (it went on to air six seasons). The syndication run on TBS began in September 2014.

Scandal also begun airing on BET this fall. The network bought rights to the first two seasons, and will air current episodes after they air on ABC. While details of the deal have not been reported in the press, we’d estimate the rights were purchased for $0.4MM/episode.

According To Jim and Scrubs have had modest success on the situation comedy side, while Grey’s Anatomy and Desperate Housewives have had some success on the drama side. One notable exception to the lack of procedural dramas produced by ABC is Criminal Minds (actually a joint production between CBS and ABC Studios), which was syndicated to both A&E and ION Stations for ~$650K/episode.

The 2011 syndication deal for Castle was a huge win for ABC and a bit of insurance against some of the older shows being canceled (which would result in a lost source of syndication dollars). Castle, a crime drama with shades of a procedural but many elements of a serialized show, was sold to TNT for ~$1.5MM/episode in early June as it was set to enter into its fourth season in the fall of 2011. Notably, in one of the first such deals we have seen (at least explicitly laid out in public documents), online rights for TNT’s TV Everywhere offering were also included as part of the syndication deal. With seasons 1 and 2 set to bow in summer 2012, ABC Studios’ near-term pipeline looks good. Six seasons of Castle have aired on TNT with a seventh season airing on broadcast this fall (leaving upside potential for further future syndication). At a total of almost $200MM in syndication, Castle has turned out to be a very strong show for ABC.

Exhibit 18: Recent And Near-Term Linear Syndication Pipeline For ABC Studio

Castle 2011 2012 TNT $1.5 mm 128 $192 mm Crime procedural; has gone on to air 6 seasons

Cougar Town 2012 2014 TBS $0.4 mm 89 $36 mm TBS granted the show a 4th season (at the time)

Scandal 2013 August 2014 BET $0.4 mm 47 $19 mm Will air current episodes after they are broadcast on ABC

ProgamLicense

Fee/EpisodeChannel Licensee

# of Episodes to

be Delivered

Est. Initial Lump

Sum Revenue

Year Off Net

Deal

Announced

Syndication

LaunchComments

Source: TV Guide, Broadcasting and Cable, and RBC Capital Markets estimates

ABC has had just a handful of successfully syndicated shows over the past few years


October 23, 2014 27

Exhibit 19: ABC Studios – Linear Syndication Status Of Select Recently Produced Shows

Program 2008 2009 2010 2011 2012 2013 2014Year Enter

SyndicationAccording to Jim

Scrubs

Ghost Whisperer*

Lost

Ugly Betty

Brothers & Sisters

Desperate Housewives

Criminal Minds*

Grey's Anatomy

Private Practice

Cougar Town

Castle

Scandal

Once Upon a Time

Revenge

Mistresses

Nashville*

Resurrection

Agents of S.H.I.E.L.D.

Black-ish

How to Get Away with Murder

Manhattan Love Story

Red Band Society

The Trophy Wife

Betrayal

Intelligence

Killer Women

Lucky 7

Mixology

The Neighbors

Zero Hour

Malibu County

Red Widow

The Family Tools

Good Christian Belles

Man Up

The River

Body of Proof

Happy Endings*

Detroit 1-8-7

My Generation

No Ordinary Family

Off the Map

FlashForward

Happy Town

Gary Unmarried*

Cupid

In the Motherhood

Life on Mars*

Dirty Sexy Money

Eli Stone

Reaper

Samantha Who

Already Syndicated: 13

New Shows: 4

Canceled: 38

Potential Future Syndie: 6

*Joint production with another studio Source: Company reports, Broadcasting and Cable, Variety and RBC Capital Markets research

ABC Studios has four new shows airing in the fall 2014-2015 broadcast primetime season. Of the group, How to Get Away With Murder probably has the most potential to syndicate given its crime procedural nature.


October 23, 2014 28

Exhibit 20: Potential Linear Syndication For 2014-2015 Primetime Broadcast ABC Productions

New ABC TV Show in 2014-2015 Season Studio TypeNetwork

Airing

Potential for Major

SyndicationComment

Black-ish ABC Studios Comedy ABC Low Single-camera sitcoms tend not to syndciate wellHow to Get Away With Murder ABC Studios Drama ABC High Crime procedural format could syndicate well

Manhattan Love Story ABC Studios Comedy ABC Low Single-camera sitcoms tend not to syndciate wellRed Band Society ABC Studios Drama FOX Low Serialized teen drama unlikely to syndicate well

Source: Company reports, RBC Capital Markets

Of the ABC Studios shows currently airing on broadcast television, Resurrection probably has the highest potential for future syndication given its procedural nature. Agents of S.H.I.E.L.D. has a sort of hybrid format of both serialized and procedural, similar in a way to Blue Bloods. That said, it could syndicate in the future. While Nashville (co-produced with Lionsgate) has a serialized nature with a female-skewing audience that doesn’t always lend itself well to a syndication format, we think its high quality and star appeal could lead it to syndication in the future (particularly on CMT or networks geared toward a female audience).

Exhibit 21: Potential Linear Syndication For Recent ABC Studios Productions

ABC Show GenreSyndication

Potential

Past Seasons

Aired

Renewed for

Season

Episodes to

be AiredComments

Agents of S.H.I.E.L.D. Drama Medium 1 2 44 Elements of serialized and procedural; could syndicate

Mistresses Drama Low 2 3 39 Serialized drama likely does not syndicate wellNashville1 Drama High 2 3 65 Serialized drama in 3rd season could syndicate somewhere

Once Upon A Time Drama Low 3 4 88 Serialized drama likely does not syndicate well

Resurrection Drama High 1 2 21 Procedural drama format could syndicate well

Revenge Drama Low 3 4 88 Serialized drama likely does not syndicate well1 Co-produced with Lionsgate

Source: Press reports, RBC Capital Markets research

ABC TV Studios SVOD ABC has completed bulk deals with both Netflix and Amazon over the past several years. While there was some overlap of content between the 2010/2011 Amazon and Netflix deals, the 2012 extension of the Netflix deal added exclusivity of Revenge, Scandal, and Once Upon A Time. Disney also did a sizeable deal in 2014 with Netflix, but we believe that was largely for film content and do not include it in our table.

Exhibit 22: Select ABC TV Shows Sold To SVOD Players

Grey's Anatomy, Desperate Housewives,

LostNetflix Bulk 2010 - $150-$200 million One year deal with option to extend

Lost, Grey's Anatomy, Felicity Amazon Bulk 2011 - -

New deal included 800 titles from Disney-ABC with fare

from ABC Family, ABC Studios, The Disney Channel and

Marvel

Alias, Grey's Anatomy, Desperate

Housewives, Private Practice, Lost,

Brothers & Sisters, Ugly Betty

Netflix Bulk 2011 - -Renewal and expansion; hundreds of library episodes of

series from ABC Studios, Disney Channel and ABC Family

Revenge, Scandal, Once Upon A Time Netflix Bulk 2012 - $0.9 mm/episode Added to the initial 2010 deal with Netflix

Criminal Minds1 Netflix Individual 2014 U.S. $0.9 mm/episode 9 seasons or ~210 episodes; ABC owns half

Nashville2 Hulu Individual 2014 U.S. -All prior seasons of the series upon the start of the

subsequent season1Co-produced with CBS2Co-produced with Lionsgate

Progam SVOD Licensee TypeDeal

AnnouncedRights In License Fee Comments



October 23, 2014 29

CBS Studios During the past decade or so, CBS has done an exemplary job of drawing on its wholly owned TV studio to create hits exclusively for its wholly owned TV network, subsequently monetizing this content (primarily procedurals and situation comedies) even more so through lucrative syndication deals. Furthermore, few studios have done as thorough a job of creating global franchises that take brands to span across multiple properties and appeal both domestically and internationally— most notably with the CSI franchises (CSI, CSI: New York, CSI: Miami, and this season CSI: Cyber) and the JAG/NCIS franchises (JAG, NCIS, NCIS: LA). Additionally, non-franchise shows like Cold Case and Without a Trace have been solid one-offs well suited for domestic off-network cable and international syndication on the procedural drama side.

2014 has been a busy year thus far. The Good Wife began airing on Hallmark and CBS Stations after being sold to both Amazon and Hulu Plus. While Hallmark probably paid ~$400K/episode, the combined license fee per episode across all platforms was probably closer to $2MM/episode.

Hawaii Five-0 began airing on TNT for ~$2.2MM an episode, raking in upwards of $200MM. Blue Bloods was sold to WGN, ION, and Hulu Plus. This includes 90 episodes at ~$1.1MM/episode on linear television (or $1.7MM/episode total across all platforms).

Elementary is slated to enter syndication during late 2015 on WGN and ION for $2.0MM/episode. The show was also sold to Hulu Plus and we estimate the total price tag is closer to $3.5MM/episode.

Going back in time, although 2011 was a relatively uneventful year, during 2012 CSI: Miami and Rules of Engagement (co-produced with Sony) both provided a modest boost to numbers. 2013 saw the first major syndication payoff since 2009, when NCIS: LA (syndicated for $2.4MM/episode to USA after only a few episodes had aired in 2009) began stripping on USA and also airing on Tribune and CBS affiliate stations.

Exhibit 23: Recent And Near-Term Linear Syndication Pipeline For CBS

CSI: Miami 2011 2012 A&E, AMC $0.4 mm 232 $93 mm Non-exclusive

Rules of Engagement1 2011 2012 Tribune, CBS Stations $0.4 mm 96 $40 mm Includes some barter

NCIS: LA 2009 2013 USA $2.4 mm 96 $226 mm -

The Good Wife 2013 1Q14 Hallmark, CBS Stations $0.4 mm 112 $45 mmSold to Amazon and Hulu Plus, also. Combined ~$2

mm/episode

Hawaii Five-0 2011 3Q14E TNT $2.2 mm 93 $205 mm Some press reports cite as high as $2.5 mm/episode

Blue Bloods 2014 Fall 2014 WGN, ION $1.1 mm 90 $98 mm Also sold to Hulu Plus; $1.7 mmm/episode total

Elementary 2014 3Q15E WGN, ION $2.0 mm 72 $140 mm Also sold to Hulu Plus; $3.5 mm/episode total

1 Co-production with Sony

# of Episodes to

be Delivered

Year Off Net

Deal

Announced

Syndication

LaunchProgam

License


Est. Initial Lump

Sum RevenueComments

Source: TV Guide, Broadcasting and Cable and RBC Capital Markets estimates

CBS has a rock-solid slate of new programming this season: four of seven new shows have a high likelihood of future syndication


October 23, 2014 30

Exhibit 24: CBS Studios – Linear Syndication Status Of Select Recently Produced Shows


Syndication

Everybody Hates Chris

The Game

Without a Trace*

Cold Case*

Ghost Whisperer*

Numb3rs

Medium

CSI: Miami

CSI: NY

Rules of Engagement*

Gossip Girl*

Criminal Minds*

CSI

NCIS

NCIS: LA

The Good Wife

Hawaii Five-O

Blue Bloods

Elementary May 2015

90210

Hart of Dixie*

The Vampire Diaries*

Beauty and the Beast

The 100

The Millers

Reign*

The Originals

Under the Dome

CSI: Cyber

Jane the Virgin*

Madam Secretary

NCIS: New Orleans

Scorpion

The McCarthy's*

Extant

Unforgettable*

The Tomorrow People

We Are Men

Bad Teacher

Emily Owens, M.D.

Cult

Friend Me

Vegas

A Gifted Man

How to Be a Gentleman

Ringer*

The Secret Circle*

The 2-2

Hellcats*

The Defenders

Life Unexpected*

Accidentally on Purpose

Melrose Place

Three Rivers

Gary Unmarried*

Harper's Island

Privileged*

New Shows: 7

Canceled: 28

Syndication Deal Signed: 1



*Joint production with another studio Note: Zoo premieres in 2015 and has not been included in the table Source: Company reports, Broadcasting and Cable, Variety and RBC Capital Markets research


October 23, 2014 31

In terms of the fall 2014-2015 broadcast season, CBS has a promising slate for potential future syndication. CSI: Cyber marks the third spinoff from the original CSI show, which has been an incredibly successful billion-dollar profit crime procedural franchise. CSI (or CSI: Las Vegas) is co-produced, is airing its 15th season and currently has 321 episodes. We believe CBS owns roughly 50% of the flagship show. The first spin-off was CSI: Miami, which began airing in the 2002-2003 broadcast season and ran for 10 seasons. CBS wholly owns the 232 episodes that aired.

The second spin-off, CSI:NY, began airing on the 2004-2005 broadcast season and aired 197 episodes over nine seasons. The series is wholly owned by CBS. Between the CSI and NCIS franchises, CBS has 575 episodes that have yet to be monetized on SVOD

2 (see Exhibit 30 for

more details).

We also expect NCIS: New Orleans to perform well and have a high likelihood of syndicating in the future given its similar format of police procedural content. This is the second spin-off of NCIS (NCIS: Los Angeles aired in 2009 and is entering its sixth season this year). The original NCIS is airing its 12

th season this fall.

Scorpion is also a procedural drama with elements of crime and problem solving, and could syndicate well in the future. Conversely, The McCarthy’s is a multi-camera sitcom with a broad reach that could also find a home in syndication in the future.

Exhibit 25: Potential Linear Syndication For 2014-2015 Primetime Broadcast CBS Studios Productions

New CBS Show in 2014-2015 Season Studio TypeNetwork

Airing

Potential for Major

SyndicationComment

CSI: Cyber CBS TV Studios Drama CBS High Police procedural format could syndicate wellExtant CBS TV Studios Drama CBS Low Serialized straight-to-series drama may not syndicate well on linear

Jane the Virgin1 Warner Bros. TV & CBS TV Studios Dramedy CW Low Single-camera sitcom with female-skewing audience may not syndicate wellMadam Secretary CBS TV Studios Drama CBS Low Serialized drama with female skewing audience may not syndicate wellNCIS: New Orleans CBS TV Studios Drama CBS High Police procedural format could syndicate well

Scorpion CBS TV Studios Drama CBS High Elements of procedural crime/problem-solving likely syndicates wellThe McCarthy's2 CBS TV Studios/Sony Comedy CBS High Multi-camera sitcom format with a broad reach could syndicate well

1 Co-produced with Sony2 Co-produced with Warner Bros.


With respect to the forward pipeline at CBS, there is one show currently airing that has potential for future syndication: The Millers. This multi-camera sitcom has a broad audience reach and tends to fit the mold for successful syndication. Unforgettable was cancelled recently, but its crime procedural nature means it could syndicate somewhere.

Exhibit 26: Potential Linear Syndication For Recent CBS TV Studios Productions

CBS Show GenreSyndication

Potential

Past Seasons

Aired

Renewed for

Season

Episodes to

be AiredComments

Beauty and the Beast Drama Medium 2 3 44 Teen crime procedural could syndicate somewhereHart of Dixie1 Dramedy Low 3 4 76 Serialized teen drama may not lend itself well to syndication

Reign1 Drama Low 1 2 44 Serialized historical fiction probably won't syndicate well

The 1001 Drama Low 1 2 29 Serialized post-apocalyptic teen drama probably won't syndicate wellThe Millers Comedy High 1 2 46 Multi-camera sitcom format likely lends itself well to syndication

The Originals1 Drama Low 1 2 44 Serialized The Vampire Diaries spinoff likely won't syndicate wellThe Vampire Diaries1 Drama Low 5 6 133 Serialized teen drama may not lend itself well to syndication

1 Co-produced with Warner Bros. TV2 Co-produced with Sony


2 Per company conference presentation on September 4, 2014


October 23, 2014 32

CBS TV Studios SVOD It’s been a busy fall for CBS on the SVOD front as well. During October, CBS announced a pact between Netflix and Showtime and CBS Studios International for European content licensing. The deal includes six international markets including Germany, Austria, the Netherlands, Switzerland, France, Belgium and Luxembourg and exclusive first-window rights to Penny Dreadful, as well as early seasons of Elementary, Under the Dome, Ray Donovan, Dexter, Deadwood, and Jericho.

Exhibit 27: Select CBS TV Studios Shows Sold To SVOD Players

Rules of Engagement1 Netflix Individual 2012 - - -

CSI: Miami Netflix - 2012 - $1.0 mm/episode Part of "put option" for CBS to Netflix

Bulk programming Hulu Bulk 2012 - - -

CSI: New York Netflix - 2013 - $1.0 mm/episode Part of "put option" for CBS to Netflix

Under the Dome Amazon Individual 2013 U.S.$0.75-$1.0

mm/episodeBeginning 4 days after initial air on Prime and for purchase

America’s Next Top Model, Everybody

Loves Raymond, Jericho, The L Word,

Undercover Boss, Amazing Race and

United States of Tara, among others. In

addition, fan-favorite TV series such as

Medium, The Tudors, the complete Star

Trek franchise, I Love Lucy

Amazon Bulk 2013 U.S. - Bulk deal with Amazon

The Good Wife Amazon/Hulu Individual 2013 -$1.8 mm/episode

combinedDone in conjunction with linear syndication deal

Dexter Netflix Individual 2013 U.S.$1.0 mm/episode

combinedShowtime original

Undercover Boss, United States of Tara,

Everybody Loves Raymond, Ghost

Whisperer, Taxi, The Brady Bunch,

Laverne & Shirley, Melrose Place, 7th

Heaven

Hulu Bulk 2014 U.S. $65.0 mm Extension of 2012 Hulu deal; 5,300 episodes

Extant Amazon Individual 2014 U.S.$0.75-$1.0

mm/episodeEpisodes available 4 days after initial broadcast

Medium, Tudors, Star Trek, I Love Lucy Amazon Bulk 2014 U.S. $85.0 mm Expansion and extension of bulk deal with Amazon

Penny Dreadful, as well as early seasons

of Elementary, Under the Dome, Ray

Donovan, Dexter, Deadwood, and

Jericho

Netflix Bulk 2014 International -Rights in Netherlands, Germany, Austria, Switzerland,

France, Belgium and Luxembourg

Blue Bloods Hulu Individual 2014 U.S. $1.5mm/episode Part of new big push for Hulu

Elementary HuluIndividual

Backlog2014 U.S. $1.5mm/episode Part of new big push for Hulu; airs in 2015; exclusive

Zoo Netflix Individual 2014 U.S.$0.75-$1.0

mm/episode

Acquired before show aired on network; exclusive; summer

2015

Criminal Minds2 Netflix Individual 2014 U.S. $0.9 mm/episode 9 seasons or ~210 episodes; CBS owns half

1Co-produced with Sony2Co-produced with ABC

CommentsProgam SVOD Licensee TypeDeal

AnnouncedRights In License Fee


Also during October, CBS announced it would be renewing Under the Dome for season 3 and Extant for season 2. As depicted in Exhibit 1, we think this represents a $22MM revenue opportunity for CBS. During late summer, nine seasons of Criminal Minds (co-produced with ABC Studios) also quietly appeared on Netflix. We estimate the price paid was $900K/episode, which nets to ~$95MM for CBS’s 50% ownership. In addition, while CBS is

With Under the Dome, Extant, Elementary, and Zoo, CBS has the most digital backlog visibility of its peers


October 23, 2014 33

launching its own SVOD service, we’ve laid out several of CBS’s other SVOD deals in the previous exhibit.

In terms of SVOD backlog, per the previous exhibit, CBS has Under the Dome, Extant, Elementary, and Zoo in the pipeline. We also looked at what shows are available on SVOD already to see what near-term opportunities exist. Based on the following exhibit, we think there is some incremental opportunity out there for shows to continue syndicating with additional syndication players.

Exhibit 28: Select CBS Shows Currently Available On SVOD

Select CBS shows available on SVOD Netlflix Hulu+ AmazonComments

7th Heaven O x xBeauty and the Beast x O OBlue Bloods O x OCriminal Minds x O OCSI: Miami x x OCSI: NY x O OElementary O 3Q15E O Probably exclusive with Hulu+; likely no near-term addt'l SVOD opportunityExtant O O x Exclusivity with Amazon; likely no near-term addt'l SVOD opportunityGhost Whisperer* x x OGossip Girl* x O OJericho x x OMedium x x ONumb3rs x x xRules of Engagement* x O OThe Game x x OThe Good Wife O x x Likely no near-term addtitional SVOD opportunityUnder the Dome O O x Exclusivity with Amazon; likely no near-term addt'l SVOD opportunityZoo x O O Exclusivity with Netflix; likely no near-term addt'l SVOD opportunity

*denotes joint production with another studio Source: Industry sources, Amazon, Hulu, Netflix, RBC Capital Markets estimates

We think significant potential exists for the SVOD market to tap more of the Showtime originals (as seen with the recent Netflix International deal). Per the following exhibit, many of the shows are not available anywhere today, including Shameless, Masters of Sex, House of Lies. Significant opportunity also exists for Ray Donovan and Nurse Jackie.

Exhibit 29: Select Showtime Shows Currently Available On SVOD

Title Linear Netflix Amazon Hulu PlusCalifornication - Y Y -Dead Like Me - - Y -Dexter NuvoTV Y - -Episodes - - - -Homeland - Int'l - -House of Lies - - - -Masters of Sex - - - -Nurse Jackie - - - -Penn & Teller: Bullshit! - - Y YRay Donovan - - - -Shameless - - - -Sleeper Cell - Y - -The Borgias - - - -The L Word Logo Y Y YThe Tudors - Y Y YUnited States of Tara - Y Y YWeeds TV GN Y - -



October 23, 2014 34

More importantly, per the following exhibit, we think a significant opportunity exists with CSI, and NCIS. While CSI is only partially owned by CBS, the sheer episode count and premium nature of the programming means an SVOD deal would be very attractive. NCIS is wholly owned by CBS, and at 263 episodes, we think an SVOD deal would be very impactful to CBS’s earnings.

Exhibit 30: Select CBS Shows Currently Unavailable On SVOD

Shows not yet available on SVOD Netlflix Hulu+ Amazon

CSI* O O O 317 episodes; 50% ownership by CBSHawaii Five-O na na na Linear syndication with TNT; likely no near-term SVOD opportunityNCIS O O O 258 episodes; wholly owned and available for SVODNCIS: LA na na na Linear syndication on USA; Likely no near-term SVOD opportunityThe Millers O O O 1 season; likely no near-term SVOD opportunity* denotes shows not wholly owned


We estimate that CBS will top $500MM in SVOD revenues during 2014, driven by extensions or renewals with Netflix and Amazon, Blue Bloods, The Good Wife, and the deals done with Hulu.

Exhibit 31: Modeled And Estimated CBS SVOD Revenues

$205 mm

$290 mm

$491 mm $508 mm$481 mm

0

100

200

300

400

500

600

700

2011 2012 2013 2014 2015

SVO

D r

eve

nu

es

Source: Company commentary, RBC Capital Markets estimates


October 23, 2014 35

Lionsgate Though Lionsgate has only produced a handful of original programs, the number of hits it has put forth is quite impressive. The firm’s TV division has quickly carved out a niche of producing successful comedy and drama series sold across cable and premium channels, including Weeds, Nurse Jackie, and Mad Men. Most recently, Orange Is the New Black has been a monster hit for Lionsgate, as it has been one of the few major “brand building” shows to air as a Netflix Original. Lionsgate retains the distribution rights to the show, which means in a few years it could sell it to another buyer or renew with Netflix. Given the significant brand association the show has as a Netflix Original, we would expect it to remain there.

Lionsgate’s most successful TV show to date has been Mad Men, an hour-long drama on AMC chronicling a 1960’s New York advertising executive. Though the show was relatively expensive for Lionsgate to produce, the studio was able to recoup the show’s costs through a landmark deal in which Netflix acquired the exclusive rights to every season of the show for an estimated price of ~$1.0MM/episode. Weeds, which ran for more than 100 episodes on Showtime, was another very successful show for Lionsgate.

Since airing these shows, Lionsgate has had a few hits and a few misses. Generally, the wins are outweighing the losses. Blue Mountain State, Running Wilde, Boss, and Saint George (a potential 10/90 deal) were all cancelled. However, Anger Management (a 10/90 Charlie Sheen pickup) and Nashville are performing well.

Exhibit 32: Lionsgate Produced Originals

Show Debut Episodes Seasons Network Genre Stars Synopsis Comment

Weeds Aug 2005 102 8 Showtime SitcomMary Louise-Parker, Kevin

Nealon

Suburban widow pursues drug trade to support

family-

Nurse Jackie Jun 2009 68 6 Showtime Drama Edie FalcoManhattan nurse juggles stressful job, pill

addiction, and deteriorating marriageRenewed for 7th and final season

Mad Men Jul 2007 92 7 AMC Drama Jon HammDrama about centering around 1960s New York

advertising executiveAiring final season

Blue Mountain State Jan 2010 39 3 Spike Sitcom Darin BrooksThree freshmen adjust to college life at a big state

universityCancelled after 3 seasons

Running Wilde Sept 2010 13 1 Fox Sitcom Will Arnett Clueless heir to oil fortune pursues love interest Cancelled after 1 season

Boss Oct 2011 18 2 Starz Drama Kelsey GrammerMayor of Chicago seeks re-election while battling

debilitating brain disease in secretCancelled after 2 seasons

Anger Management Jun 2012 100 2 FX Sitcom Charlie Sheen, Selma BlairFormer baseball player who suffered from anger

issues becomes anger management therapist10-90 deal; currently airing

Nashville Fall 2012 50 3 ABC Drama Connie Britton Soap opera set in Nashville's country music sceneCo-produced with ABC Studios; airing

season 3

Orange is the New Black Jul 2013 40Renewed for

season 3Netflix Drama Taylor Schilling, Laura Prepon

Story of female ad-exec's time in prison (inspired

by true story)

Exec-produced by Weeds creator Jenji

Kohan; based off the best-selling novel

Saint George Mar 2014 10 1 FX Sitcom George LopezThe life of a divorced working class Mexican-

American who is a successful entrepreneurPotential 10-90 that failed

Chasing Life Jun 2014 10 1 ABC Family Drama -A young female journalist finds out she has

leukemiaHas aired one season; unclear future

Manhattan Jul 2014 13 1 WGN Drama - Set in 1943 during the Manhattan Project Airing season one

Partners Aug 2014 10 1 FX SitcomKelsey Grammer, Martin

Lawrence

Chicago lawyers with different backgrounds

unexpectedly meet in court Potential 10-90 deal; currently airing

Source: RBC Capital Markets research

Lionsgate has a proven record of syndicating shows that might not always seem to fit the obvious mold; Orange Is the New Black has been a major brand-builder for Netflix Originals


October 23, 2014 36

Looking at Lionsgate’s pipeline, the country music soap Nashville is set to air on ABC (the show was co-produced with ABC Studios) this fall, and while it is uncommon for serialized drams to be syndicated, Lionsgate has demonstrated a reliable track record of monetizing content seemingly unfit for traditional syndication.

We would also note that CEO John Landgraf of FX Networks and FX Productions recently made comments signaling the network would now longer acquire shows under the 10/90 deals that Debmar Mercury pioneered.

“We tried three… Charlie's show [Anger Management] has been solid, but the other two not particularly solid. And nothing has been really a juggernaut,” said Landgraf during a conference. “To tell you the truth, I look at this as probably an experiment we won't continue in the long run."

3

Lionsgate recently announced it was in partnership with Tribeca Enterprises to create a SVOD service coined Tribeca Short List, launching next year. We would consider the announcement to be a non-event for Lionsgate as EPIX generally gets first pick for the library and first-run theatrical content that enters the pay-TV window.

Lionsgate SVOD Netflix has been a strong partner for Lionsgate content, buying rights to Mad Men, Weeds, and Blue Mountain State. Hulu purchased exclusive streaming rights for Manhattan before airing on network television at a reported $0.8MM-$1.0MM/episode. Given the recent renewal of the show, we would expect further SVOD licensing revenues are in the pipeline.

Exhibit 33: Select Lions Gate Shows Sold To SVOD Players

Mad Men Netflix Individual 2011 U.S./Canada $1 mm/episodeExclusive deal for first 4 seasons; subsequent seasons added

upon airing

Weeds Netflix Individual 2011 - - -

Blue Mountain State Netflix Individual 2011 - - -

Manhattan Hulu Individual 2014 -$0.8-$1.0

mm/episode

Exclusive streaming rights acquired before show aired on

network


AnnouncedRights In CommentsLicense Fee


3 Multichannel News


October 23, 2014 37

Sony Netflix recently acquired the exclusive SVOD rights to The Blacklist from Sony/Universal for ~$2.0MM/episode. This type of deal is similar to other high-profile exclusive-content deals such as the purchase of The Walking Dead for ~$1.3MM/episode or New Girl from Fox for ~$0.9MM/episode (years ahead of its linear syndication to MTV and TBS). The price paid for The Blacklist is reported to be the highest per-episode licensing fee paid for non-original purchased programming on SVOD.

Sony historically has approached the business in a similar way to how Warner Brothers TV has – providing content to other networks rather than programming its own. While it has some great historical successes (Seinfeld has reportedly accumulated ~$2.4B in syndication), more recently it hasn’t been a major force in network first run, and thus syndication, compared to its peers. Recent syndication has been light. The most recent were Rules of Engagement to Tribune and CBS Stations, Breaking Bad to SundanceTV, and Community to Comedy Central.

Exhibit 34: Recent and Near-Term Linear Syndication Pipeline For Sony

'til Death 2011 2011 WGN America, Spike $0.4 mm 81 $34 mm Airs on some stations as well

Rules of Engagement2 2011 2012 Tribune, CBS Stations $0.4 mm 96 $40 mm Includes some barter

Breaking Bad 2013 2013 Sundance $0.4 mm 46 $18 mm Heavily serialized syndication deal for first 4 seasons

Community1 2012 2013 Comedy Central $0.5 mm 71 $36 mm -

1 Co-production with UMS2 Co-production with CBS Studios

# of Episodes to

be Delivered

Est. Initial Lump

Sum RevenueCommentsProgam

Year Off Net

Deal

Announced

Syndication

LaunchChannel Licensee

License

Fee/Episode


The $2.0MM per episode fee that Netflix paid for The Blacklist is reported to be the highest licensing fee inked for non-original content on SVOD to date


October 23, 2014 38

Exhibit 35: Sony – Linear Syndication Status Of Select Recently Produced Shows


Syndication

Crossing Jordan*

The King of Queens*

'til Death

Rules of Engagement*

Breaking Bad

Community*

The Blacklist*

The Goldbergs

Marry Me

The McCarthy's*

Unforgettable*

The Michael J. Fox Show

The Night Shift

Welcome to the Family

Rake

Happy Endings*

Last Resort

Made In Jersey

Save Me

The Mob Doctor

Charlie’s Angels

Pan Am

Mr. Sunshine

Brothers

Sit Down, Shut Up*

The Unusuals


Canceled: 16


New Shows: 2



Sony has two new shows airing this fall: Marry Me and The McCarthy’s (co-produced with CBS TV Studios). We think The McCarthy’s could syndicate well given it is a multi-camera sitcom with a broad reach.

Exhibit 36: Potential Linear Syndication For 2014-2015 Broadcast Primetime Sony Television Show

New Sony TV Show in 2014-2015 Season Studio TypeNetwork

Airing

Potential for Major

SyndicationComment

Marry Me Sony Comedy NBC Low Single-camera sitcoms tend not to syndciate wellThe McCarthy's1 CBS TV Studios/Sony Comedy CBS High Multi-camera sitcom format with a broad reach could syndicate well

1 Co-produced with CBS TV Studios

Source: TV Guide, Broadcasting and Cable, imdb.com, and RBC Capital Markets estimates

In terms of future syndication potential for shows currently on the air, we think The Blacklist, as discussed previously in the Universal section, has the highest likelihood of syndication. Unforgettable might have, but it was recently cancelled, but it could syndicate somewhere eventually given its crime procedural nature.

Exhibit 37: Potential Linear Syndication For Recent Sony Studios Productions

Sony TV Show GenreSyndication

Potential

Past Seasons

Aired

Renewed for

Season

Episodes to

be AiredComments

The Blacklist1 Drama High 1 2 44 Part procedural, part serialized firefighter drama could syndicateThe Goldbergs Comedy Low 1 2 46 Single-camera sitcom may not syndicate well

1 Co-produced with UMS



October 23, 2014 39

Sony TV Studios SVOD Sony has inked quite a few deals for SVOD streaming rights, both exclusive and non-exclusive, select details of which we have laid out in the following exhibit. We note The Blacklist (co-produced with Sony) sold to Netflix for $2.0MM/episode, which is believed to be the highest price tag for acquired programming an SVOD distributor has paid. Given the show was renewed for season 2 by NBC, we would expect future episodes to continue to air on Netflix (which represents a $44MM total shared opportunity, per Exhibit 1).

Exhibit 38: Select Sony TV Shows Sold To SVOD Players

Rules of Engagement1 Netflix Individual 2012 - - -

Breaking Bad Netflix Individual 2013 - $1.4 mm/episode Includes every episode of the full 5 seasons

Better Call Saul Netflix Individual 2013 International - Netflix has exclusive streaming rights in all territories

Justified Amazon Individual 2013 - - Exclusive streaming rights

The Shield Amazon Individual 2013 - - Non-exclusive streaming rights

Damages Amazon/Netflix Individual 2013 - - Available for streaming on both platforms

Community2 Hulu Individual 2013 - - Subscribers get next-day access to new episodes

The Blacklist2 Netflix Individual 2014 - $2.0 mm/episodeBelieved to be the largest SVOD deal on/episode basis to

date; renewed for season 21 Co-produced with CBS TV Studios2 Co-produced with UMS

License Fee CommentsProgam SVOD Licensee TypeDeal

AnnouncedRights In



October 23, 2014 40

Twentieth Television Fox recently announced the syndication of New Girl to MTV and TBS beginning in the fall of 2015. Reports peg the value at $0.4MM/episode; however, Netflix previously paid ~$0.9MM/episode for streaming rights. That said, the total first-run syndication value of New Girl on streaming and off-net cable totals ~$1.3MM/episode, which comes close to the price TBS paid for The Big Bang Theory at ~$1.5MM/episode. This is an example of how studios are becoming more creative in how they monetize the content across platforms.

2014 has had fewer titles entering syndication, but this includes the first-ever off-network syndication of The Simpsons, as well as Raising Hope. In late 2013, Twentieth announced that it had licensed The Simpsons to FXX beginning in August 2014. This first off-network deal included cable and streaming rights to the more than 530 episodes at an estimated $650K/episode over ~10 years

4, bringing the total value to ~$345MM. (The show was sold

into the local station market almost 20 years ago; those original agreements with stations prevented the sale of the show into the cable market until its cancellation).

2013 was a very strong syndication year for Twentieth TV. Glee, Modern Family, The Cleveland Show, and Bob’s Burgers all entered syndication (which means revenues began to be recognized upon syndication).

Unlike its peers, Fox typically recognizes syndication revenues over the life of the syndication cycle, in this case a reported 10 years. That said, the inking of the syndication deal for The Simpsons will provide a smooth life to earnings growth over the next decade, rather than one big pop all at once.

Exhibit 39: Select Recent And Near-Term Linear Syndication Pipeline For Fox

How I Met Your Mother 2008 2009FX, Lifetime, Fox, CBS

Stations$0.8/$1.4 mm 110 $350 mm Lifetime paying $0.75 mm/episode with CBS paying $1.4 mm

Glee 2010 2013 Oxygen Network $0.5 mm 88 $44 mm -

Modern Family 2010 2013 USA Network, Fox Stations $1.4 mm 96 $134 mmClose to the $1.5 mm/episode The Big Bang Theory received

from TBS

The Cleveland Show 2010 2013TBS, Adult Swim, Fox

Stations$0.5 mm 87 $44 mm

Third syndication deal announced in one week (Modern

Family and Glee )

Bob's Burgers 2013 2013 Adult Swim $0.5 mm 45 $23 mm Seasons 1-3

Raising Hope 2013 2014CMT, WGN, FXX, CBS

Stations$0.4 mm 88 $35 mm Sinclair, Lin, and Larry H. Miller Communications as well

The Simpsons 2013 August 2014 FXX $0.7 mm 530 $345 mm The Simpsons helped with the launch of FXX network

New Girl 2014 Fall 2015 TBS, MTV $0.4 mm 94 $38 mm5-year pact; Netflix already has U.S. streaming rights (for

$900k/epsisode); total ~$1.3 mm/episode

License


# of Episodes to

be DeliveredComments

Est. Initial Lump

Sum Revenue

Year Off Net

Deal

Announced

Syndication

LaunchProgam

Source: Wall Street Journal, TV Guide, Broadcasting and Cable and RBC Capital Markets estimates

4 New York Times, Variety

New Girl future syndication is an example of how studios are becoming more creative in monetizing content across platforms


October 23, 2014 41

Exhibit 40: Twentieth Century Fox TV – Linear Syndication Status Of Recently Produced Shows


Syndication

Boston Legal

King of the Hill

My Name is Earl

Prison Break

The Unit

24

The Cleveland Show

Raising Hope

How I Met Your Mother

American Dad

Bones

Family Guy

Glee

Modern Family

Bob's Burgers

The Simpsons August 2014

New Girl Fall 2015

Last Man Standing

Sleepy Hollow

Backstrom

Cristela

Empire

Fresh off the Boat

Last Man on Earth

Hieroglyph

Gang Related 0.5

The Crazy Ones 0.5

Mind Games 0.5

Friends with Better Lives 0.5

Crisis 0.5

Dads 0.5

Enlisted 0.5

The New Normal

Back in the Game 0.5

Apartment 23 0.5

1600 Penn 0.5

Ben and Kate 0.5

How to Live with your Parents 0.5

The Goodwin Games 0.5

Touch 0.5 1 1

Allen Gregory 0.5

Awake (form. REM) 0.5

In The Flow with Affion Crockett 0.5

Napoleon Dynamite 0.5

Terra Nova 0.5

The Finder 0.5

The Playboy Club 0.5

The Chicago Code 0.5

Traffic Light 0.5

Lie to Me 0.5 1 1

Persons Unknown 0.5

Sons of Tuscan 0.5

The Deep End 0.5

The Good Guys 0.5

Better Off Ted 0.5 1

Dollhouse 0.5 1

Do Not Disturb 0.5

Life on Mars* 0.5

Mental 0.5

Sit Down, Shut Up* 0.5

The Ex List 0.5


New shows: 5

Canceled: 49

Syndication Deals Signed: 1




October 23, 2014 42

Twentieth only has one new show premiering on broadcast this season, Cristela, which was created by stand-up comedienne Cristela Alonzo. The multi-camera sitcom has a Latina-skewing audience and a format that could syndicate well.

Exhibit 41: Potential Linear Syndication For 2014-2015 Primetime Broadcast Twentieth’s Productions

New Twentieth Show in 2014-2015

SeasonStudio Type

Network

Airing

Potential for Major

SyndicationComment

Cristela Twentieth Comedy ABC High Multi-camera sitcom format could syndicate well Source: Company reports, RBC Capital Markets research

After finding success with New Girl, Bob’s Burgers, and The Cleveland Show in syndication, we think the next show to get picked up in syndication will be Last Man Standing. The multi-camera sitcom featuring Tim Allen has a format and broad audience reach that could syndicate well (season 4 airs this fall).

While not syndicated to traditional cable yet, Fox’s 21 Studios owns the long-term rights for one of the hottest cable shows, Showtime’s Homeland, and one of the most popular basic cable shows, FX’s The Americans. While the latter has already sold rights to Amazon, we’d expect upside opportunity for Homeland to do the same.

Exhibit 42: Potential Select Linear Syndication For Recent Twentieth Productions

Fox Show GenreSyndication

Potential

Past Seasons

Aired

Renewed for

Season

Episodes

AiredComments

Homeland Drama High 3 4 48 Highly serialized but very popular show likely syndicatesLast Man Standing Comedy High 3 4 64 Multi-camera sitcom format with a broad reach likely syndicates well

Sleepy Hollow Drama Low 1 2 31 Serialized horror drama may not syndicate wellSons of Anarchy Drama High 6 7 92 Serialized crime drama with cult following likely syndicatesThe Americans Drama High 2 3 26 Highly serialized but high quality show likely syndicates


Twentieth SVOD Back in fiscal 2012, 21

st Century Fox management inked sizeable deals with both Netflix and

Amazon for Fox Broadcast Network content. Most of the deals thus far have been bulk ones, with the primary exception being New Girl, which received $900K/episode from Netflix prior to being syndicated in an off-network deal (making it unique). During October 2014, the first three seasons of New Girl arrived on Netflix. We would expect future seasons to be added to the service, which could result in a $22 revenue opportunity each year (see Exhibit 1).

Sons of Anarchy has been available for streaming on Netflix since 2011. By November 2014, sixth seasons will have aired on Netflix, with plans for the seventh to follow after airing.


October 23, 2014 43

Exhibit 43: Select Fox Shows Sold To SVOD Players

Lie to Me, Bones, 24, King of the Hill,

Prison Break, Arrested Development,

Buffy the Vampire Slayer

Netflix Bulk renewal 2010 - -Renewal and expansion of Fox TV content; FOX had ability to

determine physical and streaming windows for content

Sons of Anarchy, Glee Netflix Bulk expansion 2011 U.S. - Subsequent seasons to be added annually

24, Arrested Development, The X-Files,

Ally McBeal, Buffy the Vampire Slayer,

The Wonder Years

Amazon Bulk 2011 - - Brought The Wonder Years to SVOD for the first time

New Girl Neflix Individual 2014 U.S. $0.9 mm/episode Acquired prior to cable off-network deal

Fargo Netflix Individual 2014 Netherlands - Rights for the Netherlands only

The Americans, How I Met Your Mother,

It's Always Sunny in Philadelphia, The

League, Louie, Archer

Amazon Bulk 2014 U.S. -Exclusive rights for The Americans season 1; non-exclusive

for 5 other shows

24, 24: Redemption, 24: Live Another

DayAmazon Bulk 2014 U.S. - 190+ episodes (previous + forthcoming) and TV movie

CommentsProgam SVOD Licensee TypeDeal

AnnouncedRights In License Fee


Management has said: “At our Film segment, third quarter operating income was $272 million, 10% higher than a year ago. This improved result includes higher contributions from the motion picture studio, most notably from the worldwide theatrical and domestic home entertainment performance of the most recent Alvin and the Chipmunks release as well as higher television production contributions that include increased syndication and digital distribution revenues. Year to date, we recognized approximately $250 million in total revenues from our Netflix and Amazon deals

5.”

While it is difficult for us to parse out how much of the $250MM figure is derived from television (rather than film) content, given the list of titles that have been inked or renewed, we assume it is a material portion. We expect SVOD revenues to Fox to maintain – and even grow a little – in fiscal 2015. Management hasn’t called out much detail surrounding recent SVOD deals (for 2013 and 2014) – either on the positive or negative side – and thus we assume there hasn’t been any major change to this revenue source.

Exhibit 44: Modeled And Estimated Fox SVOD Revenues

$75 mm

$300 mm $310 mm $316 mm $323 mm

0

100

200

300

400

500

600

F2011 F2012 F2013 F2014 F2015

SVO

D r

eve

nu

es

Source: Company commentary, RBC Capital Markets research

5 News Corp (now 21

st Century Fox) Q3/FY12 earnings call


October 23, 2014 44

Universal Television One could argue that Universal Television (the sibling studio of the NBC broadcast network) is the granddaddy of the syndication format-friendly genre. UTV’s Dick Wolfe pioneered the franchise procedural with Law & Order, which launched its first run in 1989 and spawned the modern golden age of syndication to cable networks. However, since first producing Law & Order it has not had a major money-making franchise on the procedural side. Outside of The Office, there have been only modest successes on the situation comedy front, with shows like 30 Rock and Parks and Recreation, or on the drama front, with Friday Night Lights. However, these types of shows have been solid singles and doubles instead of blockbuster home runs.

Further, for the past decade or so, NBC/UTV didn’t appear focused on using the network as a launching pad for syndication-friendly shows, and found itself with a limited pipeline with only two syndication deals. Community, a co-production with Sony, sold to Comedy Central for an estimated $0.5MM/episode. Parks and Recreation recently sold to WGN and Amazon. While terms of the deals were not reported, we would expect a similar per episode number to what Community received.

Most recently, it inked a deal with TNT for the first three seasons of Grimm to air on TNT during the spring of 2015 with a fourth season following subsequent to airing.

Exhibit 45: Recent And Near-Term Linear Syndication Pipeline For UTV

30 Rock 2009 2011 Comedy Central/WGN $0.8 mm 103 $82 mm -

Community1 2012 2013 Comedy Central $0.5 mm 71 $36 mm -

Parks and Recreation 2013 Sept 2013 WGN $0.5 mm 125 $63 mm Also sold to Amazon

Grimm 2014 2015 TNT $0.5 mm 88 $44 mm First 3 seasons available in spring; the 4th to follow in the fall

1 Co-production with Sony

Progam

Year Off Net

Deal

Announced

Syndication

LaunchChannel Licensee

License

Fee/Episode

# of Episodes to

be Delivered

Est. Initial Lump

Sum RevenueComments



October 23, 2014 45

Exhibit 46: UTV Studios – Linear Syndication Status Of Recently Produced Shows


SyndicationLaw & Order

Heroes

Friday Night Lights

House

Law & Order: Special Victim Unit

The Office

30 Rock

Parks and Recreation

Community*

Grimm

Parenthood

Chicago Fire

The Mindy Project

About a Boy

Brooklyn Nine-Nine

The Blacklist*

Chicago PD

Bad Judge

Mr. Robinson

Mulaney

State of Affairs

Dracula 0.5

Growing up Fisher

Iron Side

Sean Saves the World

Unbreakable Kimmy Schmidt

Animal Practice

Camp

Deception

Do No Harm

Go On

Smash

Up All Night

Whitney

Guys with Kids

Up All Night 0.5 0.5

Whitney 0.5 0.5

Smash 0.5 0.5

Bent 0.5

Best Friends Forever 0.5

Free Agents 0.5

Prime Suspect 0.5

Law & Order: Los Angeles 0.5

Love Bites 0.5

Outlaw 0.5

Outsourced 0.5

Perfect Couples 0.5

The Cape 0.5

The Event 0.5

100 Questions 0.5

Mercy 0.5

Trauma 0.5

Crusoe 0.5

Kath & Kim 0.5

Kings 0.5

Knight Rider 0.5

My Own Worst Enemy 0.5

The Philanthropist 0.5

Worst Week 0.5

Life 1

Lipstick Jungle 1


New Shows: 4

Canceled: 43



Universal Television has three new shows airing in the fall 2014-2015 broadcast primetime season (and one midseason, Mr. Robinson). Of the new shows, Mulaney’s format probably


October 23, 2014 46

has the highest likelihood of future syndication (but, we would note the show recently had its first season episode order reduced from 16 to 13)

6. The multi-camera sitcom is produced

by Lorne Michaels and stars familiar Saturday Night Live faces John Mulaney and Nasim Pedrad.

Exhibit 47: Potential Linear Syndication For 2014-2015 Primetime Broadcast UTV Productions

New Universal TV Show in 2014-2015

SeasonStudio Type

Network

Airing

Potential for Major

SyndicationComment

Bad Judge Universal Television Comedy NBC Low Single-camera sitcom with female-skewing audience may not syndicate wellMr. Robinson Universal Television Comedy NBC Low Single-camera sitcoms tend not to syndciate well

Mulaney Universal Television Comedy Fox High Multi-camera sitcom format with a broad reach could syndicate wellState of Affairs Universal Television Thriller NBC Low Serialized female-skewing drama may not syndicate well


Of the UTV Studios shows currently airing on broadcast television, Chicago Fire, Chicago P.D., and The Blacklist (already sold to Netflix) probably have the best chances of syndicating on linear television. Each contains a hybrid format of both serialized and procedural, similar in a way to Blue Bloods, and could syndicate in the future.

According to press reports, when Netflix purchased the rights to The Blacklist, off-network linear distribution rights were maintained by the production companies. That said, it could eventually syndicated on linear television.

While Parenthood may not fit the model for typical syndication, the sheer volume of episodes means it is likely to syndicate somewhere in the future.

Exhibit 48: Potential Linear Syndication For Recent UTV Studios Productions

UTV TV Show GenreSyndication

Potential

Past Seasons

Aired

Renewed for

Season

Episodes to

be AiredComments

About a Boy Comedy Low 1 2 26 Single-camera sitcom may not syndicate wellBrooklyn Nine-Nine Comedy Low 1 2 44 Single-camera sitcom may not syndicate well

Chicago Fire Drama High 2 3 68 Part procedural, part serialized firefighter drama could syndicateChicago P.D. Drama High 1 2 30 Part procedural, part serialized police drama could syndicateParenthood Drama High 5 6 103 Serialized drama; bulk of episodes likely syndicates somewhere

The Blacklist1 Drama High 1 2 44 Part procedural, part serialized firefighter drama could syndicateThe Mindy Project Comedy Low 2 3 61 Single-camera sitcom may not syndicate well

1 Co-produced with Sony


6 TVByTheNumbers.com


October 23, 2014 47

Universal Television SVOD Universal has inked quite a few deals for SVOD streaming rights, both exclusive and non-exclusive, select details of which we have laid out in the following exhibit. We note The Blacklist (co-produced with Sony) sold to Netflix for $2MM/episode, which is believed to be the highest price tag for acquired programming an SVOD distributor has paid.

Exhibit 49: Select UTV TV Shows Sold To SVOD Players

Parks and Recretion, Parenthood, Friday

Night LightsAmazon Bulk 2012 - - Non-exclusive

About a Boy, Friday Night Lights, House,

30 Rock, The Office, Parks and

Recreation

Netflix Bulk 2013 - -Renewal of a 2011 deal; includes 92 eps of The Office and

135 eps of 30 Rock

Grimm, Hannibal, Smash Amazon Bulk 2013 - - Expanding licensing agreement

Community1 Hulu Individual 2013 - - Subscribers get next-day access to new episodes

The Blacklist1 Netflix Individual 2014 - $2 mm/episodeBelieved to be the largest SVOD deal on/episode basis to

date





October 23, 2014 48

Viacom Back in 2010, Viacom’s TV Land began pursuing a new strategy of airing a limited amount of original programming to complement its base of historically classic acquired programming (primarily situation comedies). The first show on the schedule was Hot in Cleveland, which premiered in June 2010. Featuring Betty White and Valerie Bertinelli, Hot in Cleveland has the feel of the classic shows historically on TV Land (White and Bertinelli had starred in some of these, in fact) and offered an avenue to deliver exclusive, new programming while staying loyal to its fan base and core genre.

Hot in Cleveland became a successful cable show (by cable standards especially) that ultimately syndicated beginning in 2014. To date, this has been TV Land’s most successful show. The Exes and The Soul Man are showing promise as well; each has been renewed for a fourth season.

New shows recently announced for pick-up include Impastor and Teachers, which will each air 10-episode first seasons in 2015, and both of which are single-camera sitcoms. This continues the network’s migration toward single-camera comedies. Indeed, the only multi-camera shows airing on the network are Hot in Cleveland, The Soul Man, and The Exes.

Exhibit 50: Viacom Produced TV Land Originals

Show Debut Episodes Status Stars Synopsis

Hot in Cleveland Jun 2010 128 Renewed for season 6 Valerie Bertinelli, Betty White3 LA friends have emergency landing in Cleveland and end up staying there

since they find the midwest city far more friendly and welcoming

Retired at 35 Jan 2011 20 Canceled after 2 seasons George SegalManhattan businessesman drops out of rat race to live with parents in retired

community in Florida

Happily Divorced Jun 2011 34 Canceled after 2 seasons Fran DrescherWoman re-enters dating scene after finding out husband is gay, yet still lives

with husband as they're unable to sell house

The Exes Nov 2011 66 Renewed for season 4 Donald Faison, Wayne Knight3 recently divorced men live together in an apartment owned by their divorce

attorney (who also lives across the hall)

The Soul Man Jun 2012 42 Renewed for season 4 Cedric the EntertainerR&B superstar living the high life becomes a Reverend. Show is a spin-off

from Cedric's single-episode Hot In Cleveland guest star role

Kirstie Dec 2013 12 Canceled after 1 season Kirstie AlleyTells the story of an award-winning actress as the son she gave up at birth

reappears in her life

Jennifer Falls Jun 2014 10 Aired 1 season Jaime PresslyFollows a single mother who must move back home with her mother after

losing a high-paying job

Younger Jan 2015 12 Picked up for 1 season Sutton Foster, Hilary DuffA recently divorced middle-aged woman looks for a job and end sup working

in a publishing firm

Impastor 2015 10 Picked up for 1 season Michael RosenbaumRevolves around a gambler and drug-user who is evading a loan shark and

ends up stealing a pastor's identity

Teachers 2015 10 Picked up for 1 season The Katydids A show based on the web series created by the improv group the Katydids

Network's target demo is A25-54, with a focus on A40-54 and W25-54

Source: Company reports, RBC Capital Markets research

While the Viacom-owned TV Land didn’t have its own dedicated studio facilities for the production of these situation comedies, it retained the majority of the ownership of these shows while partnering with outside production companies and forgoing the overhead associated with large studio operations. Though from a programming perspective these early efforts may be successful, economically, TV Land still probably lacks the scale required for a major dedicated studio to make much sense.

Viacom has continued the migration toward single-camera comedies, despite the success in its multi-camera shows


October 23, 2014 49

TV Land SVOD In 2012, as part of a bulk deal with Amazon, Hot in Cleveland was added to Amazon Instant Video. The deal included significant content from other networks, particularly MTV and Nickelodeon.

Exhibit 51: Select TV Land Shows Sold To SVOD Players

Hot in Cleveland Amazon Bulk 2012 - -Part of bulk deal with Jersey Shore, iCarly, Dora the Explorer,

SpongeBob SquarePants, Love & Hop Hop, Mob Wives




In the following exhibit, we’ve laid out our historical and forward estimates for Viacom’s Media Networks SVOD revenues. While the majority of these are not derived from TV Land originals, we wanted to include these revenues given how significant they are and how successful Viacom has been in inking SVOD deals for its content.

Exhibit 52: Modeled And Estimated SVOD Revenues For Viacom Media Networks

$99 mm

$153 mm

$179 mm $172 mm $163 mm

0

50

100

150

200

250

300

F2011 F2012 F2013 F2014 F2015

SVO

D r

eve

nu

es

Source: Company commentary, RBC Capital Markets research


October 23, 2014 50

Warner Brothers Television Warner Brothers has been one of the most successful TV studios in the industry over the past decade, creating hits for virtually every major network on the air during that time. WBTV has 12 shows on the air in first run across the Big Four networks in the 2014-2015 season. In addition, 19 shows that WBTV has produced since 2006 (when we started tracking the current production “tail”) have been syndicated. Historically, the bulk of WBTV’s successes (in terms of big syndication earners) have been in the situation comedy genre. Recent activity has been no exception. The demand for this content in the domestic market is astounding, but as we noted earlier, the international appetite isn’t nearly as robust as on the drama side. So, if you commit to a situation comedy, you need to hit the cover off the ball in domestic syndication to outperform your peers globally; WBTV has clearly held its own.

Most recently notable, Warner Bros. TV inked a deal for a reported $1.7MM/episode for 2 Broke Girls to air on TBS and CBS Stations, surpassing the $1.5MM/episode that TBS paid for The Big Bang Theory

7. 2 Broke Girls is set to begin airing on TBS during 2015.

Person of Interest sold to WGN for a reported $1.3MM/episode. The show is set to begin airing on WGN during late 2015

8. This marks the first time WGN has purchased the exclusive

cable window rights to a series, further enhancing its commitment to purchasing content.

Coming off a monster fall 2011, which saw the launch of The Big Bang Theory (generating ~$175MM in revenue off of ~$2.0MM/episode paid by TBS and Fox Stations combined), the setup for summer/fall 2012 was even stronger with The Mentalist being delivered to TNT for stripping, likely generated ~$200MM of revenue during Time Warner’s Q2/12. In 2013, WBTV delivered The Middle to ABC Family and Hallmark Channel, sharing the property for a figure we’d estimate to be in the ~$400-$500K/episode range, combined (again, we’d expect that there is some barter, and that it skews more heavily in consideration than other more “premium” deals).

Exhibit 53: Recent And Near-Term Linear Syndication Deals For Warner Bros. TV

The Big Bang Theory 2010 3Q11 TBS, Fox Stations $2.0 mm 87 $174 mm $1.5 million from TBS and $500k from Fox stations

The Mentalist 2009 Fall 2012 TNT $2.2 mm 92 $202 mm Began running in fall 2011; full launch in fall 2012

Fringe 2012 2H12 Science Channel $0.4 mm 87 $35 mm Said to be non-exclusive so an OTT deal could be inked

The Middle 2012 3Q13/1Q14 ABC Family and Hallmark $0.4 mm 96 $37 mm ABC Family in the fall of 2013 and Hallmark March 2014

Mike and Molly 2012 3Q14 FX, CBS/Weigel stations $0.8 mm 96 $72 mmFX has cable syndication exclusivity and the ability to air the

series in all dayparts

2 Broke Girls 2012 2015 TBS, CBS Stations $1.7 mm 96 $163 mm Eclipsed price paid for The Big Bang Theory at TBS

Person of Interest 2013 Fall 2015 WGN $1.3 mm 90 $117 mmFirst time first time WGN has purchased the exclusive cable

window to a syndicated series

CommentsProgam Channel Licensee# of Episodes to

be Delivered

Est. Initial Lump

Sum Revenue

License

Fee/Episode

Year Off Net

Deal

Announced

Syndication

Launch

Source: Company commentary, Deadline.com, Hollywood Reporter, Press Reports, RBC Capital Markets estimates

7 Variety

8 Deadline.com


October 23, 2014 51

Exhibit 54: Warner Bros. Television – Linear Syndication Status Of Select Recently Produced Shows


Syndication

ER

Without a Trace*

Terminator: The Sarah Connor Chronicles*

Cold Case*

The New Adventures of Old Christine

Smallville

One Tree Hill

Supernatural

Two and a Half Men

The Bing Bang Theory

Gossip Girl*

The Mentalist

Fringe

The Middle

Mike & Molly

2 Broke Girls 2015

Person of Interest Fall 2015

Chuck

Southland

The Vampire Diaries*

Nikita

Suburgatory

Hart of Dixie*

Arrow

The Following

Reign*

Mom

Undateable

A to Z 0.5

Constantine

Forever

Gotham

iZombie

Jane the Virgin*

Preacher

Selfie

Stalker

The Flash

The Messengers

The Mysteries of Laura

Almost Human 1

Believe

Hostages

Starcrossed

Super Fun Night

Surviving Jack

Revolution 0.5 1

The Carrie Diaries 0.5 1

666 Park Avenue 0.5

Cult 0.5

Partners 0.5

Golden Boy 0.5

Alcatraz 0.5

Are You There Vodka? It's Me, Chelsea 0.5

I Hate My Teenage Daughter 0.5

The Secret Circle* 0.5

Work It 0.5

Ringer* 0.5

Harry's Law 0.5 1

Hellcats* 1

$#*! My Dad Says 0.5

Better with You 0.5

Chase 0.5

The Whole Truth 0.5

Undercovers 0.5

Human Target 0.5 1

Canceled: 53


New Shows: 12


Syndication Deal Signed: 2

*Joint production with another studio Source: Company reports, Broadcasting and Cable, Variety, Press Reports, RBC Capital Markets research


October 23, 2014 52

This fall 2014-2015 broadcast primetime season, Warner Bros. TV is producing three DC Comics vehicles for the fall season, including Constantine, Gotham, and The Flash, which we believe demonstrates a desire to build and monetize the DC Comics franchise (much like Disney has done with Marvel). The DC Comics intellectual properties (IP) include Superman, Batman, Wonder Woman, Green Lantern, The Flash, Aquaman, Cyborg, and Green Arrow. This could be the next leg up in Warner Bros.’ content-monetization story.

While these shows could do well in prime-time ratings, the serialized nature of the content doesn’t tend to lend itself well to linear syndication. However, the serialized dramas could find a home in the OTT market: Gotham has already been picked up by Netflix. In a precedent-setting deal, Netflix and Warner Bros. Television inked a pact for Netflix to become the exclusive SVOD home of the show before ever premiering on broadcast television. Netflix has rights to house the show both domestically, in the territories where Netflix operates, and certain other places where Netflix plans to launch services

9. In 2015,

Warner Bros. also has DC Comics shows iZombie (airing on the CW) and Preacher (airing on AMC) slated to premiere, bringing this total to five new DC Comics shows airing during 2014-2015.

With respect to shows introduced this broadcast season, most sitcoms are single-camera female skewing, which tends to create fewer opportunities for long-run syndication. Stalker is a genuine crime procedural with both a format and a storyline that could lend itself well to future syndication (although the subject matter is a bit risqué). The new Warner Bros. TV shows that likely lend themselves best to syndication are Stalker, which is a police procedural, and Forever, a medical procedural.

While most CW shows don’t syndicate on linear television, many do end up on an SVOD platform, such as The Vampire Diaries on Netflix. As such, we’d expect The Flash, Jane the Virgin, and iZombie could be potentially added down the line.

Exhibit 55: Potential Linear Syndication For 2014-2015 Primetime Broadcast Warner Bros. TV Productions

New WBTV Show in 2014-2015 Season Studio TypeNetwork

Airing

Potential for Major

SyndicationComment

A to Z Warner Bros. TV Comedy NBC Low Single-camera sitcom format tend not to syndciate wellConstantine Warner Bros. TV Drama NBC Low DC Comics serialized drama may not syndicate well

Forever Warner Bros. TV Drama ABC High Medical procedural with serialized elements; format could syndicateGotham Warner Bros. TV Drama FOX Low DC Comics serialized drama may not syndicate well

Jane the Virgin1 Warner Bros. TV & CBS TV Studios Dramedy CW Low Single-camera sitcoms tend not to syndciate wellSelfie Warner Bros. TV Comedy ABC Low Single-camera sitcoms tend not to syndciate well

Stalker Warner Bros. TV Drama CBS High Police procedural format could syndicate wellThe Flash Warner Bros. TV Superhero CW Low DC Comics serialized drama may not syndicate well

The Mysteries of Laura Warner Bros. TV Dramedy NBC Low Single-camera sitcoms tend not to syndciate welliZombie Warner Bros. TV Dramedy CW Low DC Comics serialized drama may not syndicate well

1 Co-produced with CBS Studios Source: Company reports, RBC Capital Markets research

9 Wall Street Journal

We believe increased television monetization of DC Comics IP may be the next leg up in Warner Bros.’ content-monetization story


October 23, 2014 53

Of the current shows that Warner Bros. TV has on the air, Mom is the sitcom with a wide audience reach that likely lends itself well for future syndication. Allison Janney’s 2014 Emmy win helped to build buzz (and the likelihood of longevity beyond season 2), giving the show an added tailwind. While Chuck would seem to fit the mold for syndication, the series ended during January 2012 and has yet to be picked up. If it becomes syndicated at this point, it probably would not command a large licensing fee/episode.

Exhibit 56: Potential Linear Syndication For Recent Warner Bros. TV Productions

Warner Bros. TV Show GenreSyndication

Potential

Past Seasons

Aired

Renewed for

Season

Episodes to

be AiredComments

Arrow Drama Medium 2 3 69 DC Comics serialized drama may not syndicate wellChuck Comedy Medium 5 - 91 Sitcom with a broad target audience could syndicate well

Hart of Dixie1 Dramedy Low 3 4 76 Serialized teen drama may not lend itself well to syndicationMom Comedy High 1 2 44 Multi-camera sitcom format likely lends itself well to syndicationReign1 Drama Low 1 2 44 Serialized historical fiction probably won't syndicate well

Suburgatory Sitcom Low 3 - 57 Serialized drama doesn't lend itself well to syndicationThe Following Drama Low 2 3 45 Serialized drama may not lend itself well to syndication

The 1001 Drama Low 1 2 29 Serialized drama may not lend itself well to syndicationThe Originals1 Drama Low 1 2 44 Serialized The Vampire Diaries spinoff likely won't syndicate well

The Vampire Diaries1 Drama Low 5 6 133 Serialized teen drama may not lend itself well to syndication1 Co-produced with CBS TV Studios


Warner Bros. TV SVOD Warner Bros. Television has had tremendous success in inking deals with SVOD players, largely Netflix and Amazon. This summer, Netflix acquired exclusive international streaming rights to Gotham before the show ever aired on broadcast television. Netflix will have exclusive rights to the Batman prequel in the US and in territories in which it operates today, as well as select other territories in which it plans to launch services. Each season of the series will be available to Netflix members following their broadcast run. In the US, that is expected to be in September 2015, which will coincide with a season 2 premiere.

Exhibit 57: Gotham Netflix

Source: Time Warner Inc. 2014 Investor Day

During October, Warner Bros. announced two major backlog SVOD deals, Person of Interest and Friends. Both will begin airing during 2015, and are among the only backlog SVOD deals that are known to the public. These announcements of backlog SVOD content deals signify a shift in how digital content deals are being struck, as this behavior more closely mimics how most linear deals are struck (that is, with more lead time).


October 23, 2014 54

Friends and Person of Interest are both wholly owned Warner properties. While we don’t know what price each sold for, at 236 episodes (Friends) and 68 episodes (Person of Interest), they should represent significant visible economics for Warner Bros. We estimate $150k/epsisode of Friends and $0.5MM/episode of Person of Interest.

Exhibit 58: Select Warner Bros. TV Shows Sold To SVOD Players

Revolution, Fringe, The Following,

Political Animals, Longmire, Chuck,

Fringe, The West Wing, 666 Park

Netflix Bulk 2013 -Hundreds of

millions of $sExclusivity

Sueprnatural, Vampire Diairies1 Netflix - 2013 - - Previous seasons of current shows

The Following Netflix Individual 2013 - $0.3 mm/episodeAirs season 1 on Netflix prior to season 2 broadcast

premiere; season 2 added during 2014

Veronica Mars Amazon Individual 2014 U.S. - Library

Gilmore Girls Netflix - 2014 - - Seven seasons

11/22/63 Hulu Individual 2014 - -Premiere data unknown; deal is the first original

collaboration with Hulu/WBTV

Gotham Netflix Individual 2014 International$1.75

mm/episode

Acquired before show aired on network; launche Sept. 2015

in U.S.

Person of Interest NetflixIndividual

Backlog2014 U.S. $0.5 mm/episode

First three seasons (68 episodes) will be available in the fall

of 2015, at the same time the series premieres off-network

on WGN America

Friends NetflixIndividual

Backlog2014

U.S. and

Canada

$0.15

mm/episode236 episodes/10 seasons beginning January 1, 2015

1Co-produced with CBS

CommentsProgamDeal

AnnouncedRights InSVOD Licensee License FeeType


Over the past few years, bulk-content sales of Warner Bros. TV content to SVOD players have been more common than individual sales. The company has probably been more specific than any other in providing details on the exact revenues being generated from SVOD. For example, Jeff Bewkes said:

“We generated around $375 million in 2013. That was up slightly from 2012. We think it’s at the top of our competitive set. And I do want to point out. That does not include the revenue, SVOD revenue for the CW Network, which is pretty significant.”

10

Regarding 2012 SVOD revenues, management said previously: “For the year, we’ve recognized around $350 million in SVOD revenues, the majority of which came from our television product.”

11

And, for 2011: “last year’s [2011] full-year figure for SVOD was less than $250 million, somewhere around $225 million. Those are the consolidated revenue figures for SVOD. Those do not include the revenues recorded by the CW. We expect revenues recorded by the CW to be somewhere around $80 million, $85 million this year, so just as a reminder, we own 50% of that”.

12

10 Time Warner Inc. 4Q13 earnings conference call




October 23, 2014 55

As shown in the following exhibit, we expect SVOD revenues to Warner Bros. to maintain – and even grow a little – in 2014 and 2015. It is difficult to know what shows are being included here and we assume many of these are evolving bulk deals. As an example, recall the recent bulk deal HBO and Amazon announced for premium back catalog content for HBO including The Sopranos, Six Feet Under, The Wire, Big Love, Eastbound & Down, Oz, Band of Brothers and Deadwood, as well as early seasons of Boardwalk Empire and True Blood. While this is not Warner Bros. content (rather, its HBO content), it may depict an example of the type of deals that the consolidated company engages in and prefers.

Exhibit 59: Modeled Warner Bros. SVOD Revenues

$225 mm

$350 mm$375 mm $385 mm

$400 mm

0

100

200

300

400

500

600

2011 2012 2013 2014 2015

SVO

D r

eve

nu

es

Note: estimate are for total Warner Bros. SVOD revenues; does not include The CW Source: Press reports, RBC Capital Markets research


October 23, 2014 56

Digital Content Distributors To date, we have seen the establishment of three major SVOD players domestically and internationally: Netflix, Amazon (through its Prime Instant Streaming product) and Hulu, collectively, “the Big 3”. Hulu is basically a domestic provider, with the other two being more international in nature. Beginning in 2011, SVOD created two new windows for the purchase of TV content:

A. Bulk library sales for content that had essentially amortized itself years ago, and B. Prior seasons of current shows that had yet to accumulate enough episodes to be sold in

linear syndication.

While Netflix, Amazon and Hulu are the “Big 3” of digital content distribution, many smaller platforms are popping up, as depicted below. The one thought to have had the most promise – Redbox Instant by Verizon – recently announced it was shutting down its services, which came as a surprise to most investors.

Exhibit 60: OTT Service Options

Service Estimated # of titles Content cost Select content suppliers Revenue models Selected devices

Acorn TV >100 (TV series) $4.99/month; $49.99/year British television subscription iPhone, iPad, Nook, Kindle Fire,

Roku, Google TV, Apple TV

Amazon Prime

Instant Video

Movies: 15,276;

TV seasons: 2,039

$99.00/year ABC, CBS, Nickelodeon,

Discovery, FOX, MTV

subscription iOS, Android, game consoles, smart

TV, Blu-ray, streaming media players

Crunchyroll Hundreds (25,000

episodes)

Free, ad-supported (limited

content); ad-free anime (limited

Manga and Drama content):

$6.95/month; all titles ad-free:

$11.95/month

TV Tokyo, ADK, King Record

Company Limited

subscription,

advertising

Xbox 360, PS4, PS3, PS Vita, iOS,

Android, Apple TV, Roku,

Chromecast, Ouya

DramaFever Hundreds (13,000

episodes)

Free ad-supported; ad-free:

$9.99/month, $99.99/year

Artear, CCTV, Imagina, KVS,

MBC, Telemundo, RTVE

subscription,

advertising

iOS, Apple TV, Roku, Android, Google

TV, Kindle Fire

Fandor Thousands $10/month, $90/year Monterey Media, Brainstorm

Media, California Newsreel

subscription iPad, iPhone, Roku, Chromecast,

Android, Kindle Fire

FlixFling ~3,000 Subscriptions: $2.99-

$7.99/month; movie rental:

$3.99, purchase: $9.99

Magnolia Pictures, Image

Entertainment, The Weinstein

Company, indie

subscription,

transactional

iOS, Android, Windows 8, Roku,

smart TV, Google TV

Hulu Plus Movies: 4,924;

TV series: 3,273

$7.99/month NBC, FOX, ABC subscription,

advertising

iOS, Android, game consoles,

Chromecast, Roku, Apple TV,

Amazon Fire TV, Windows 8,

Amazon Kindle Fire, Nook, smart TV,

Blu-ray players

Netflix Movies: 6,578;

TV seasons: 3,431

$8.99/month (2 concurrent

streams), $11.99/month (4

concurrent streams)

EPIX, Viacom, Disney, CBS subscription iOS, Android, game consoles, smart

TV, Blu-ray players, streaming media

players

Redbox Instant

(now shuttered)

Thousands Streaming sub: $8.00/month;

movie rental: $4.99-$5.99,

purchase: $10.99-21.99

EPIX, Paramount, Columbia

Pictures

subscription,

transactional

iOS, Android, Roku, Chromecast,

Google TV, Kindle Fire, Windows

Phone 8, Xbox One, PS4, PS3, Xbox

360

Viki Thousands Free ad-supported; ad-free &

HD: $3.99/month

NBC, BBC, KBS, SBS, TV Asahi subscription,

advertising

Chromecast, iOS, Android, Kindle

Fire, Google TV, BlackBerry,

Windows Phone, Nokia, Samsung

Smart TV, Xbox 360

WWE Network NA $9.99/month (with 6 month

commitment)

WWE subscription iOS, Roku, Android, Apple TV, Kindle

Fire, PS4, PS3, Xbox One, Xbox 360,

Amazon Fire TV, Kindle Fire

Source: SNL Kagan

The following exhibit shows the notice provided to customers on October 7, 2014 saying that Redbox Instant by Verizon had been shut down.


October 23, 2014 57

Exhibit 61: Redbox Instant by Verizon Shutdown Notice

Source: http://about.redboxinstant.com/news

While Netflix, Amazon and Hulu are the “Big 3” of digital content distribution, each has a differentiated approach to its business. Netflix remains the largest player with the most prestige and the biggest number of subscribers. Its original content has been nominated for awards (e.g., House of Cards and Orange Is the New Black). Amazon Instant Video is a part of the Amazon Prime membership that has its own studio (Amazon Studios). While Hulu was historically an aggregator of broadcast content (for parent companies ABC, FOX, NBC), it has made a major push for originals over the past few years.

Exhibit 62: Key SVOD Platform Differentiators

Netflix Amazon Hulu

Largest audience.

Seeking a greater identity on the original side as is know

primarily for current season Broadcast Network TV

programming.

Largest payday for talent.Increasing budget spend in search of a "break-out" such as

Transparent (on Amazon).

Most prestige in Hollywood. Nurtures ideas that don't necessarily have "mass appeal".

Of all the SVOD players, the smallest subscription service but

the most Hollywood like in process today (with recent

executives from the Warner TV and Fox side).

Lower price points for original production.Pushing hard to catch up in off-network syndication as well

as originals.

More nimble, with smaller projects.

Promises the most promotional support outside of the

platform. Also, could tap into broader Hulu.com, versus the

SVOD HuluPlus platform.

Key Platform Differentiators

Only platfom with Emmy nominated shows (House of Cards

and Orange Is The New Black).

Has the feel of Independent movies made for TV. Fewer

"organizing pricinipals" than Netflix or Hulu with respect to

the Hollywood content creation process.

Source: Press reports, company reports and commentary, RBC Capital Markets

In terms of getting new content “on the air” (or in this case, on the Internet), each of the Big 3 has a different strategy as well. Netflix greenlights an entire season all at once, while Amazon has a nimble production studio that crowd sources ideas for new content. Once Amazon airs a pilot, it allows users to vote on it. Hulu’s strategy is less cut and dry, and involves a little more of a “gut” feeling when choosing shows that go straight-to-series.


October 23, 2014 58

Exhibit 63: Process By Which SVOD Shows Get On The Air

Netflix Amazon Hulu

Content acquisition and algorithmic process greenlight

straight to series projects, sometimes for multiple seasons.

More like an independendt production player than a big

studio.

Willing to go straght to series (process evolving as new

management has come in fairly recently).

No pilot.

Go big or go home.

Process By Which Shows Get On The Air

Before shows go to full series orders, they go through public

pilot vetting with subscribers. Aim isn't to find the shows

with the most "thumbs up" voters, but rather the ones that

people are likely to be most passionate about.

Combination of data mining and "gut" feeling.


In terms of talent working with the Big 3, Netflix tends to lock up exclusive rights for a long period of time, which can limit upside from geographies where the service is not yet launched. Amazon budgets have tended to be lower than Netflix’s, although recent announcements say Amazon is willing to pay $4MM/episode for comedy properties

13.

Amazon Instant Streaming is not available for individual purchase (outside the Amazon Prime bundle), so it may not be the top priority for the company.

Hulu is the only SVOD service available with advertising and hasn’t had a prestigious break-out hit yet (like Orange Is the New Black or House of Cards for Netflix), but has recently committed to stepping up content spend to significantly.

Exhibit 64: Downside For Talent/Producers

Netflix Amazon Hulu

Failure is very public on the pilot side. Only SVOD service with commercials.

Budgets are lower. Hasn't had a prestige break-through hit yet.

Exposure will be lower.

Amazon Prime's streaming service isn't a stand alone service,

so content may not be the highest priority organization.

Downside For Talent/Producers

While not owning the productions, Netflix tends to lock up

exclusive rights (a newer trend) on a long-term basis for both

platform and geography. This could lead to lack of upside

from other geographical regions where Netflix isn't launched

and from selling rights on other non SVOD platforms (like

linear TV).

While platform has recently indicated intention to step-up

investment content broadly, it's still relatively early.


13http://variety.com/2014/digital/news/amazon-studios-wants-big-comedies-ready-to-pay-

4-million-for-pilots-sources-1201325038/


October 23, 2014 59

http://variety.com/2014/digital/news/amazon-studios-wants-big-comedies-ready-to-pay-4-million-for-pilots-sources-1201325038/

http://variety.com/2014/digital/news/amazon-studios-wants-big-comedies-ready-to-pay-4-million-for-pilots-sources-1201325038/

Enter CBS All Access And HBO OTT We would be remiss not to address the recent announcements from CBS and Time Warner Inc. about launching their own online subscription services. At its investor day, Time Warner Inc. laid out plans to launch HBO as a standalone OTT service in 2015. Management said it would target the 10MM US broadband-only homes. The service will not require cable authentication.

Exhibit 65: HBO Standalone OTT

Source: Time Warner Inc. 2014 Investor Day

CBS also launched its own OTT service, CBS All Access, which allows viewers to watch CBS current content (excluding NFL football) in stacked form on demand, and on a live streaming basis. Furthermore, it offers consumers access to a massive library of CBS's legacy content. The service is priced at $5.99/month and allows access to CBS streaming and on-demand content out-of-home. See our 10/16/2014 note What We Think CBS Was REALLY Thinking for more details on our thoughts surrounding the product launch.

Exhibit 66: CBS All Access

Source: CBS All Access


October 23, 2014 60

Netflix Programming Of the “Big 3” SVOD players, Netflix is the only distributor that discloses its content spend on a regular basis. In 2014, Netflix expects to spend ~$3.0B

14 (although that includes

international as well as domestic). Netflix management has indicated that ~10% of its spend is devoted to original programming (so ~$300MM).

Exhibit 67: Netflix Estimated Streaming Programming Costs

0.1 0.2 0.3 0.4 0.5

1.8

2.2

2.6

3.0

3.4

3.9

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

4.5

2012E 2013E 2014E 2015E 2016E 2017E

bill

ion

s o

f $

s

Originals Acquisitions

110%

70%

35%27%

18% 15% 13% 16%

0%

20%

40%

60%

80%

100%

120%

2014E 2015E 2016E 2017E

year

ove

r ye

ar g

row

th

Growth in Originals Growth in Acquisitions

Source: SNL Kagan, RBC Capital Markets

Throughout 2012 and 2013, Netflix produced a handful of different original series, which it exclusively aired along with numerous specials, miniseries and films. Of those nine original series, four started new seasons in 2014. The typical Netflix original is produced in ~12-episode arcs (much like a cable show). Our sense is that for hour-long drama series, which tends be the predominant genre of Netflix original content, average budget per hour (for shows like House of Cards or Orange Is the New Black or Hemlock Grove) is somewhere ~$4MM-$6MM/episode. Assuming four-six original shows of this genre at any given time, Netflix would be spending on originals consistent with its prior stated targets.

New shows in the offing include Marco Polo (produced by Electus for a show originally developed for Starz Network) and Love, produced by Legendary TV in association with Judd Apatow. Love is not only a big-budget original, but Netflix has green lit two seasons (the first a 10-episode season and the second a 12-episode season). Luring talent like Judd Apatow to “television” is considered quite a coup for both Legendary and Netflix and while a two-season commitment to a Netflix show isn’t unprecedented (a la House Of Cards), it’s highly unusual, showing a deep commitment to the talent.

In 2014, the political thriller House of Cards, supernatural horror series Hemlock Grove and dark comedy Orange Is the New Black aired their second seasons. Lilyhammer, a crime-drama and Netflix's very first original series, will debut its third. Children can get in on the Netflix action with the series Turbo FAST, an animated series based on the film Turbo, which DreamWorks Animation Television is producing exclusively for Netflix. A consistent theme for Netflix is that, unlike closest competitor Amazon, Netflix tends not to produce its original content directly. Rather, it tends to license shows that are basically in packaged form (in many cases, already “financed”).

14 Netflix’s April 2014 Long-Term View


October 23, 2014 61

Exhibit 68: Netflix Originals

Source: Netflix.com

The upside of such a strategy is that Netflix will have exclusive content from some of the most high-profile talent in Hollywood and tends to have limited “bombs”. There also tends to be a great deal of positive buzz around these shows, given the talent involved, which helps drive subscriber growth and retention. The downside, however, is that Netflix won’t necessarily own the content outside of an original window – the shows and their associated benefits are “rented”. The content owners (just like in linear TV) can reap greater rewards on other platforms and windows and Netflix will not participate.

One example of this would be Lionsgate’s Orange Is the New Black. Netflix is no doubt paying a hefty license fee to Lionsgate for what is essentially Netflix’s biggest “franchise” show, alongside House of Cards. However, our sense from the channels is that Netflix’s exclusive window on the first four seasons or Orange will end sometime shortly after the fourth season is delivered. At that point, Lionsgate will be free to sell Orange to the highest SVOD (and/or linear TV) bidder. Netflix will likely have to pay up to keep this “franchise show” exclusive.

Netflix is moving more aggressively into the original kids’ space (at a time when it’s cutting back some acquired programming from Viacom’s Nickelodeon). In late 2013, Netflix announced a deal with Dreamworks Animation, which includes over 300 hours of original programming in the form of TV series based on DreamWorks characters. TurbotFAST (based on the Turbo movie) has already premiered. Some of the first series to run will be based on popular characters like Shrek, Madagascar, Kung Fu Panda and How to Train Your Dragon. It’s unclear what the budget for animated kids’ fare is per episode, but we’d imagine it’s far less than the typical scripted live-action show Netflix has been commissioning.

Netflix has also begun more aggressively locking into exclusive SVOD distribution deals earlier in the windowing cycle for highly anticipated content that has yet to air. For example, Netflix agreed to pay ~$1.75MM/episode for the global rights for the Warner Bros. produced Fox TV series Gotham, before it even aired once. Netflix struck a similar deal to purchase Zoo from CBS (a show that won’t even air until the summer of 2015). Additionally, Netflix has committed to buying streaming rights of the Breaking Bad spin-off Better Call Saul, prior to its premiere on AMC. We would estimate that Netflix is paying ~$1.0MM/episode for this project as well.

In terms of other high-profile content, Netflix recently acquired the exclusive SVOD rights to The Blacklist from Sony/Universal for ~$2.0MM/episode. This type of deal is similar to other high profile exclusive content deals such as the purchase of The Walking Dead for ~$1.3MM/episode, Dexter from CBS for ~$1.0MM/episode or New Girl from Fox for ~$0.9MM/episode (ahead of its linear syndication to MTV and TBS). Netflix was a pioneer in this type of SVOD syndication deal (for a single “show” versus a bulk library deal) when it agreed to pay ~$1.0MM/episode for all seven seasons of Mad Men (when only four seasons had aired) in April 2011.

Netflix tends not to produce its original content, but licenses it in packaged form, which can limit bombs as well as monetization outside the initial first-run window


October 23, 2014 62

Additionally, CBS exercised its “put rights” for CSI: Miami as well as CSI: New York shortly after their cancellations in 2012 and 2013, as part of a broader long-term deal. We believe Netflix paid ~$1.0MM/episode for each of the CSI franchises.

We suspect that Netflix’s programming strategy will evolve over time to include more directly owned productions to benefit from windows beyond their original first runs. However, we believe the bulk of Netflix’s spend will revolve around previously aired, past seasons of shows. That said, where investors might assume the key for Netflix is “owned” content, or even “original” content, we think the emphasis will be on exclusive content.

Finally, Netflix has signed one of the more unique content deals for the SVOD players that we have seen so far with respect to implications for the international market. In March 2014, Netflix acquired exclusive rights to the Fox-produced 10-episode series Fargo. However, it acquired streaming rights for The Netherlands only. This is one of the few high-profile content “off-net” rights we have seen go straight to SVOD in the international market.

Exhibit 69: Details On Netflix Television Originals

Title Production Company Episodes/Seasons Involved Budget Genre Comments

Arrested Development

(continuation)

Imagine Entertainment

20th Century Fox Television

Hurwitz Company, The

Imagine Television

68 episodes over 4 seasons

(only 1 "original" to Netflix)

$4mm-

$5mm/episode for

original runs

SitcomLicensed and distributed online exclusively by Netflix from Fox for season 4.

Seasons 1-3 had aired on Fox and are availble on other platforms

Daredevil ABC Studios, Marvel Television 13 hour long episodes - Drama Daredevil rights reverted to Marvel from 20th Century Fox in 2012

Derek Derek Productions 13 episodes over 2 seasons$1mm-

$2mm/episodeDramedy

Show originated on British TV (starring Ricky Gervais). Second season was

commissioned by Netflix as well

Hemlock Grove

Gaumont International

Television,

Mad Hatter Entertainment,

ShineBox SMC

34 epsidoes over 3 seasons ~$4mm/episodeHorror/Mystery/Th

rillerEli Roth Horror themed show. Season 3 has been greenlit

House of Cards

Media Rights Capital,

Panic Pictures (II),

Trigger Street Productions

26 episodes over 2 seasons ~$5mm-$6mm DramaKevin Spacey stars and David Fincher directs. Netflix's most prominent original

vehicle

Knights of Sidonia Polygon Pictures 12 episodes over 1 season - AnimeCreated for Japanese Television, but Netflix has commissioned localized versions

for it's territories

Lilyhammer Rubicon TV AS 38 epsidoes over 3 seasons $0.5mm/episodeComedy/Crime/Dr

ama

3rd Season has been greenlit. Steve Van Zandt plays a gangster relocated to

Norway in witness protection program. Also runs on Norwegion broadcast TV

Love Legendary Television10 episode season 1; 12

episode season 2- Sitcom Judd Apatow 2 season order; first season to begin airing in 2016

Orange Is the New Black Lionsgate 39 episodes over 3 seasons$2mm-

$3mm/episodeDramedy Based on Piper Kerman's memoir

Peaky BlindersCaryn Mandabach Productions,

Tiger Aspect Productions12 episodes over 2 seasons - Historical fiction Netflix acquired exclusive US distribution rights

The Killing (continuation)Fox Television Studios, KMF

Films, Fuse Entertainment44 episodes over 4 seasons

$2mm-

$3mm/episode for

original runs

Crime/Drama/Mys

tery/Thriller

Based upon a Danish TV series. First 3 seasons were basically "SVOD

syndication", but season 4 was original for Netflix

Turbo FAST

DreamWorks Animation

Television,

Titmouse

15 epsidoes over 1 season Unknown Kids/CartoonFirst in a series of shows to include over 300 hours of original programming from

Dreamworks Animation Television

Marco PoloThe Weinstein

Company/Electus10 Episodes $7-$8mm Historical Drama

Project was developed for Starz, who dropped it, then Netflix picked it up.

Premiers in December. Electus distributes in all non Netflix territories

Source: Netflix, Amazon, press reports, industry sources, IMDB, RBC Capital Markets estimates


October 23, 2014 63

Amazon Programming While Amazon hasn’t publicly disclosed its streaming content spend (either originally produced content or acquired content), we believe its budget is in the ~$1.5B range. We’d estimate that Amazon produces ~10 full series per year, though only a portion of them are scripted, more adult-oriented shows and another 10-20 are pilots. As such, its original TV budget is probably in the ~$150MM-$200MM range.

Amazon has a slightly lower budget for scripted adult-oriented television programming versus Netflix and Hulu. We think Netflix spent ~$4MM/episode for House of Cards, which is probably materially higher than the average Netflix original. Similarly, Netflix probably paid ~$2.0MM-$4.0MM for Lionsgate/Jenji Kohan Orange Is the New Black. We’d expect most of Amazon’s scripted programming to be produced similarly to Netflix’s at ~$2MM-$3MM per hour (direct comparisons are somewhat tough because Netflix scripted originals tend to be more hour long in nature while Amazon’s are more half-hour sitcom oriented (at least the first few “high-profile” examples).

Amazon’s approach to original programming is unique in two key fashions:

A. Its method of determining series green lighting, and B. Its in-house approach to product development. Amazon offers pilots available for “free”

screening on the Amazon platform and then lets viewer feedback determine whether or not it will green-light for full series orders. This differs from other SVOD platforms such as Netflix, which tend to order a full series without even a pilot stage.

With respect to production, it has had a more “soup to nuts” approach to its original TV production efforts in that it tends to develop content within its own studio. Increasingly though, it is collaborating with higher-profile talent (Steven Soderbergh, etc.). Because it tends to have ownership over the production (as opposed to acquiring original content not previously broadcast as Netflix does for its originals), control of the content across markets (and platforms) tends to be far greater with Amazon’s originals than Netflix’s.

Amazon has produced pilots in “waves”, with about 5-10 pilots per “wave” since it launched its original programming strategy at the studio in 2012. The first wave premiered sometime in 2013. To date, there have been ~30 pilots produced and ~12 series greenlighted. While there is no rule of thumb (and we have only really had two genuine pilot waves), we think Amazon has ~50% hit rate with pilots (the 12 series were a result of the first ~20 pilots – we still haven’t gotten the viewer results from the most recent wave of pilots).

During October 2014, Amazon announced two additional high-profile originals pilots were being picked up for series orders: Steven Soderbergh’s coming-of-age comedy Red Oaks and the dramatic thriller Hand of God. Amazon also announced it would be renewing Transparent for season 2.

In terms of high profile off-net exclusive SVOD window deals, Amazon has done several high profile premium deals in the past 12 months. Most recently, CBS sold exclusive rights to Extant and Under the Dome (two summer series) for something in the range of ~$0.75MM-$1.0MM/episode each. Amazon also purchased, on a co-exclusive basis along with Hulu, rights to The Good Wife (for ~$1.8MM/episode when total rights fees are split between the two players).

Amazon tends to have ownership over the production, thus making control of the content across markets (and platforms) greater than Netflix's


October 23, 2014 64

Exhibit 70: Amazon Prime Member Exclusives: Not On Netflix

Source: Amazon.com

In April 2014, Amazon purchased a large chunk of the HBO library for what we estimate was a deal worth ~$100MM per year for ~two-three years. Many HBO original franchise shows such as, The Sopranos, Six Feet Under, The Wire, Big Love, Eastbound & Down, Oz, Band of Brothers and Deadwood, as well as early seasons of Boardwalk Empire and True Blood are included in the deal. Some newer shows, such as Girls, were included, but Game of Thrones was not. With respect to shows currently on that are included in the deal, shows won't become available on Amazon Prime Instant Video for three years from HBO's original broadcast. This was considered something of a coup in content circles since:

A. HBO previously had never allowed its content to appear on an online-only, SVOD that wasn’t in some way linked to an HBO subscription, and

B. It was likely content that other players like Netflix and Hulu greatly desired.

Exhibit 71: Selected Original Amazon Prime Streaming Deals, 2013-2014

Alpha House 04/19/13 22 $1-2mm/Episode SitcomDC oriented sit-com reated by Doonesbury creator Gary Trudeau starring John Goodman. Probably

Amazon's most high profile project to date. Production for second season began in July 2014

Betas 04/21/13 22 $1-2mm/Episode Sitcom Sit-com about a dating ap start-up. Stars Ed Begley. Second season greenlighted in March 2014

Annedroids 07/25/14 13 ~$100k~$200k/Episode Kids Live action kids show

Creative Galaxy 06/27/14 13 ~$100k~$200k/Episode Kids Animated interactive art kids show from creator of Blues Clues

Tumbleleaf 05/23/14 13 ~$100k~$200k/Episode Kids Stop motion series focused on exploration and science

Bosch 01/01/15 10 $1-2mm/Episode Drama LA based police procedural

The After 01/01/15 10 $1-2mm/Episode Drama Post apocolyptic drama from X-Files creator Chris Carter

Transparent 09/01/14 10 $1-2mm/Episode DramedyStars Jeffrey Tambor (from Arrested Development) as a divorced father of 3 beginning process of

transitioning to life as a woman.

Mozart In The Jungle 12/01/14 10 $1-2mm/Episode DramaThe story was inspired by Mozart in the Jungle: Sex, Drugs, and Classical Music. Stars Bernadette

Peters.

Gortimer Gibbons Life On Normal Street 04/29/13 10 ~$250K-$500K/Episode Teen SitcomComing-of-age tale that centers around Gortimer, his two best friends Ranger and Mel, and their

exploits on Normal Street .

Wishenpoof 04/30/13 10 ~$100k~$200k/Episode Kids Animated series that revolves around Bianca, who has ability to make her wishes come true

Hand of God 08/29/14 10-12 $1-2mm/Episode DramaDrama about morally corrupt judge who suffers a breakdown and becomes a vigilanted. Stars Ron

Perlman and Dana Delaney; Pilot picked up in October 2014

Red Oaks 08/29/14 10-12 $1-2mm/Episode Comedy Workplace comedy; pilot picked up in October 2014

CommentsShow Full Series Debut

Estimated Number of

Episodes Committed For

Purchase

GenreEstimated Budget

Source: Amazon, press reports, RBC Capital Markets


October 23, 2014 65

Of the five new pilots airing on Amazon – including three dramas and two comedies – Red Oaks and Hand of God have been picked up for full season orders thus far.

Exhibit 72: Current Amazon Pilots

Hysteria 08/29/14 Pilot Drama A Dr. returns to her hometown to investigate mysterious outbreak. Stars Meena Suvari

The Cosmopolitans 08/29/14 Pilot Dramedy Young group of American expatriates in Paris

Really 08/29/14 Pilot Comedy Opinionated group of thirty-something friends in Chicago. Stars Sarah Chalke

Show Full Series DebutEstimated Number of

Episodes Committed For Genre Comments

Source: Amazon, press reports, RBC Capital Markets

That said, original programming only represents a small portion of Amazon’s titles and ~10%

15 of its programming budget. The balance of content has been acquired from more

traditional library “bulk” deals and increasingly specific “syndication” deals, such as Under the Dome or Extant (each thought to cost Amazon ~$1MM-$2MM/episode).

Exhibit 73: The Cosmopolitans Pilot On Amazon Instant Streaming

Source: Amazon

In terms of acquired content, Amazon has done deals with virtually every large content provider, including CBS, Discovery, HBO, NBC Universal, Scripps, Twentieth Century Fox, Viacom, and Warner Bros. Amazon recently publicly dropped content for Discovery and Scripps. Discovery shows dropped included Discovery Channel’s Dirty Jobs, TLC’s Say Yes to the Dress and Animal Planet’s Whale Wars. We estimates the impact to Discovery’s revenues was ~$50MM.

Scripps’ content dropped included Diners, Drive-Ins and Dives, Anthony Bourdain: No Reservations, and House Hunters International, Iron Chef America, Man v. Food, Throwdown With Bobby Flay, and Chopped.

In the following exhibit, we’ve laid out a few of the recent acquired programming deals that Amazon has inked with content providers. See previous company-specific sections of this note for more specific details.

15 Comprised of $150MM out of $1.5B total


October 23, 2014 66

Exhibit 74: Selected Acquired Programming For Amazon Prime Instant Streaming

A&E Networks 01/04/13 - U.S. Pawn Stars, Storage Wars, Dance Moms

BBC Worldwide North America 03/07/141 series (current &

forthcoming seasons)U.S. Orphan Black

CBS 02/11/13 1 season U.S.Under the Dome - beginning 4 days after initial air on Prime and for purchase (airs on CBS beginning

6/24/13)

CBS 02/13/13 - U.S.

America’s Next Top Model, Everybody Loves Raymond, Jericho, The L Word, Undercover Boss, Amazing

Race and United States of Tara, among others. In addition, fan-favorite TV series such as Medium, The

Tudors, the complete Star Trek franchise, I Love LucyCBS 09/12/13 1 season U.S. Under the Dome Season 2 - offer the episodes four days after broadcast

CBS 01/08/14 1 series U.S. Extant (episodes available 4 days after initial broadcast)

CBS 01/29/14 - U.S. Medium, Tudors, Star Trek, I Love Lucy

Cinedigm 06/26/14 11 series U.S. Cheap Thrills, A Field in England, The Visitor, Ms. 45, The Congress

HBO 04/23/14 - U.S.The Sopranos, Six Feet Under, The Wire, Big Love, Deadwood, Eastbound & Down, Family Tree,

Enlightened, Treme, Band of Brothers

MGM 10/22/13 >5 titles U.S. Vikings, Fargo, Platoon, Annie Hall

MGM 02/18/14 - U.S. Teen Wolf, The Usual Suspects, Raging Bull, Thelma and Louise, The TerminatorNBCUniversal Cable & New Media

Distribution05/16/13 10 series U.S.

Covert Affairs, Defiance, Grimm, Hannibal, and Suits. Children series such as Curious George and Land

Before Time

PBS 11/20/13 1 series (1 season) U.S. Mr. Selfridge

PBS Distribution 02/01/13 1 series U.S. Downton Abbey

PBS Distribution 06/26/13 hundreds (episodes) U.S.NOVA, Masterpiece and Ken Burns documentaries along with even more great PBS KIDS shows like

Caillou, Arthur, Daniels Tiger’s Neighborhood, Dinosaur Train and Wild Kratts

Scripps Networks Interactive 02/28/13 hundreds (episodes) U.S.

Rachael Ray’s Week in a Day; Anthony Bourdain: No Reservations; Cupcake Wars; Diners, Drive-Ins and

Dives; House Hunters and House Hunters International; Iron Chef America; Man v. Food; Selling New

York and Selling LA; Throwdown With Bobby Flay; Chopped; Ghost Adventures; and Yard Crashers,

among other popular shows across the networks. Many of the popular lifestyle programs from Scripps

will also be available for purchase and download from Amazon Instant Video.

Sony Pictures TV 02/26/13 2 series U.S. Justified, The Shield

Tribeca Film 02/20/14 - U.S.The Broken Circle Breakdown, How to Make Money Selling Drugs, Greetings from Tim Buckley,

Sparrows Dance, Moon Man

Twentieth Century Fox 02/06/14 6 series U.S. The Americans, How I Met Your Mother, It's Always Sunny in Philadelphia, The League, Louie, Archer

Twentieth Century Fox 04/01/14

190+ (previous episodes,

upcoming episodes, TV

movie)

U.S. 24, 24: Redemption, 24: Live Another Day

Viacom 06/04/13 thousands (episodes) U.S., UK, Germany Dora the Explorer, Go, Diego, Go!, Blue’s Clues, The Backyardigans

Warner Bros. Domestic TV Distribution 01/09/14 1 series (3 seasons) U.S. Veronica Mars

Genre ShowStudio Full Series DebutEstimated Number of

Episodes Committed For

Source: SNL Kagan, RBC Capital Markets


October 23, 2014 67

Hulu Programming Hulu plus now has over 6MM paying subscribers and ~30MM unique monthly visitors on its free service. Of the “Big 3” SVOD services, Hulu is the smallest content buyer today. We’d estimate Hulu’s annual content budget in the range of $750MM. That said, Hulu is acquiring scale, and we’d expect it to be playing a larger role in the content acquisition/production arena over the next few years and we think Hulu is likely to take the biggest “step function” in budget growth of the major players over the next year or two.

Historically, Hulu was most notable for its unique window of off-net acquired programming – current season content from five of the six major broadcast networks (Fox, NBC, ABC, CW and Univision). Additionally, it had over 5,300 library titles from CBS.

With respect to original programming, Hulu has had a lower profile and somewhat differentiated strategy than its bigger competitors. We view non-off net acquired content in three basic buckets:

A. Hulu-owned and -produced (or at least co-produced) exclusive original content,

B. Third party owned/produced exclusive original content, and

C. Internationally produced content that is exclusive to Hulu in the domestic US, but was developed and has run in other markets. This last bucket is actually rather large for Hulu.

We believe Hulu spent substantially less per hour on its original content than its SVOD competitors, and frankly, it wasn’t even in the same ballpark as Netflix. However, post its recapitalization and management changes, Hulu is expected to evolve into a more substantial spender. Hulu management indicated at its 2014 “upfront” presentation that it expected to dramatically step up content spend over the next few years saying "Over the next year we will quadruple our investment in original programming”, adding that meant that Hulu would be spending "several billion" over the next few years acquiring shows. Further, management indicated its intention over the next year that Hulu will quadruple its investment in original programming.

Specifically, we would expect Hulu to look to acquire or self-produce a one-hour drama, as management recently indicated, “What we don't have is a one-hour show and that's the coin of the realm right now.” It appears as though 11/22/63 (a drama series adaptation of Stephen King’s bestselling novel) produced by JJ Abram’s Bad Robot will likely be that project as a Hulu/Bad Robot/Warner Bros. co-production. The show will likely be a nine-episode series and will be Hulu’s “big bang”. While budgets haven’t been publicly disclosed, we would suspect this kind of production would have to be in the $4MM-$5MM/episode range.

Exhibit 75: Selected Self-Produced Hulu Original Programming Details

11/22/63 Hulu/Bad Robot/Warner Bros. not yet set 9 $4-5 mm/episode Drama Adaptation of Stephen King's best-selling novel

Behind The Mask Hulu/Josh Greenbaum 10/29/13 20 $0.1 mm/episode Sports Documentary Comedic docu-series that dives into the world of sports mascots

Deadbeat Hulu/Lionsgate Co-production 04/09/14 20 $1.0 mm/episode Supernatural Comedy

Subversive comedy stars Tyler Labine (“Reaper”) as Kevin

Pacalioglu, a hapless but gifted medium who will go to any lengths

to help New York’s ghosts settle their unfinished business

The AwesomesHulu/Broadway Video/Lorne

Michaels/Bento Box Animation08/01/13 20 $1.0 mm/episode Animated

2nd original Hulu produced show. Animated show for adults; Stars

Seth Meyers

The Wrong Mans Hulu/BBC 11/01/13 12 $0.5 mm/episode Dramedy Co-production with BBC; Politcal conspiracy dramedy

Show Full Series Debut Number of Episodes Genre CommentsProduction Studio Estimated Budget

Source: Hulu.com, press reports, industry sources, RBC Capital Markets

Hulu plans to significantly step up content spend over the next few years; near term, we expect it to reach $750MM; 11/22/63 could be Hulu’s “big bang” at $4MM-$5MM cost per episode


October 23, 2014 68

In the following exhibit, we’ve laid out a few of the exclusive acquired original programs for Hulu, including East Los High, The Hot Wives of Orlando, Moone Boy, and Quick Draw.

Exhibit 76: Selected Exclusive Self-Acquired Original Programming For Hulu Streaming

East Los High Populuar Media Center/Prajna Productions 06/03/13 49 $0.25-$0.5 mm/episode Half Hour Teen DramaReflects the lives of teenagers growing up in East Los Angeles from

the American-Latino perspective

The Hot Wives Of Orlando Paramount Digital Entertainment 07/15/14 7 $0.25-$0.5 mm/episode Satircal Sitcom Parady of the Real Housewives Bravo franchise

Moone Boy Baby Cow Productions 07/05/12 18 $0.25-$0.5 mm/episode Sitcom Produced for Irish TV

Quick Draw Nancy Hower 08/05/13 18 $0.25-$0.5 mm/episode SitcomAbout a Harvard graduate who becomes a sheriff in the old West in

1875

Show Full Series Debut Number of Episodes Genre CommentsProduction Studio Estimated Budget


In the following exhibit, we’ve laid out some of the exclusive non-originals that Hulu has available for streaming.

Exhibit 77: Selected Exclusive Non-Original Programming For Hulu Streaming

Doozers Jim Henson/DHX 04/25/14 27 $0.05-$0.1 mm/ episode Kids Live action puppet show -- sequel to Fraggle Rock. 12 minutes long

Elite New Face Elite Media/Film Buff 02/28/14 20 $0.05-$0.1 mm/ episode DocudramaEpisodic series documenting an incredible, fast-paced global

journey for young, aspiring models from every corner of the world

Fresh Meat Lime Pictures 02/28/14 24 $0.05-$0.1 mm/ episode Dramedy Produced for British TV

Fugget About It Teletoon 10/13/03 39 $0.05-$0.1 mm/ episode Animated Produced for Canadian TV -- an adult animated sitcome

Line Of Duty BBC/World Productions 08/01/12 11 $0.05-$0.1 mm/ episode Drama Police dram produced for British TV

Misfits Clerkenwell Films 10/01/11 37 $0.05-$0.1 mm/ episode Science Fiction Dramedy Produced for British TV

Mother UpRodgers Media/Eva Longoria/Broadway

Video/Hulu11/06/13 13 $0.05-$0.1 mm/ episode Animated Sitcom Adult animated sitcom developed for Canadian Television as well

Pramface Little Comet/BBC 06/01/12 18 $0.05-$0.1 mm/ episode Sitcom Sitcom about young familiy produced for British TV

Rev BBC/Big Talk Productions 07/01/14 19 $0.05-$0.1 mm/ episode SitcomProduced for British TV. A small town vicar moves to the London

Inner City

Spy Hat Trick Productions 12/12/12 17 $0.05-$0.1 mm/ episode Sitcom Produced for British TV

Moody Family Jungle Boys Production 06/15/14 6 $0.05-$0.1 mm/ episode Sitcom Produced for Australian TV

The Bridge (Broen/Bron) Severiges Television/Danmark Radio 01/14/14 30 $0.05-$0.1 mm/ episode DramaThe original Scandanavian version of "The Bridge" (which has been

adapted for FX Channel in a US version)

The Next Step BBC Worldwide America 01/01/14 30 $0.05-$0.1 mm/ episode DocudramaProduced for Cabnadian TV. Teen reality docudrama about a group

of dancers attempt to win a regional championship

The Only Way is Essex Lime/All3Media 01/01/14 145 $0.05-$0.1 mm/ episode Docudrama Produced for British TV - cross between The Hills and Jersey Shore

Genre CommentsShow Production Studio Full Series Debut Number of Episodes Estimated Budget


Since Mike Hopkins took over as CEO in 2013, Hulu has already stepped up its per-episode spend on premium “off-network” spend as illustrated by several recent deals. More recently, Hulu has been stepping up to the plate to acquire more high profile exclusive “off-net” SVOD content, with recent purchases of Manhattan, Blue Bloods and Elementary. We think these types of shows ($1MM-$2MM/episode commitments) demonstrate that Hulu is becoming a more aggressive player with deeper pockets, thanks in part to a renewed commitment from owners Fox, Comcast and Disney to build the business. Hulu also purchased, on a co-exclusive basis along with Amazon, rights to The Good Wife (for ~$1.8MM/episode when total rights fees are split between the two players). We also believe that Hulu’s acquisition of the entire (247 episode) South Park library on a three-year exclusive basis from Viacom for ~$350K/episode in July 2014 augured a more aggressive spend to attract the millennial demographic.


October 23, 2014 69

Appendix

Exhibit 78: 2014-2015 Big Four Broadcast Prime Time Schedule – Prior To Schedule Revisions

8:00 Dancing With the Stars BBC Worldwide Productions The Big Bang Theory/2 Broke Girls Warner Bros. TV/Warner Bros. TV The Voice Warner Horizon TV Gotham Warner Bros. TV8:30 Dancing With the Stars BBC Worldwide Productions Mom Warner Bros. TV The Voice Warner Horizon TV Gotham Warner Bros. TV9:00 Dancing With the Stars BBC Worldwide Productions Scorpion CBS TV Studios The Voice Warner Horizon TV Sleepy Hollow Twentieth9:30 Dancing With the Stars BBC Worldwide Productions Scorpion CBS TV Studios The Voice Warner Horizon TV Sleepy Hollow Twentieth

10:00 Castle ABC Studios NCIS: Los Angeles CBS TV Studios The Blacklist/State of Affairs (11/17) Sony/Universal TV10:30 Castle ABC Studios NCIS: Los Angeles CBS TV Studios The Blacklist/State of Affairs (11/17) Sony/Universal TV8:00 Selfie Warner Bros. TV NCIS CBS TV Studios The Voice Warner Horizon TV Utopia Taipa Media USA8:30 Manhattan Love Story ABC Studios NCIS CBS TV Studios The Voice Warner Horizon TV Utopia Taipa Media USA9:00 Marvel's Agents of S.H.I.E.L.D. ABC Studios NCIS: New Orleans CBS TV Studios Marry Me Sony New Girl Twentieth9:30 Marvel's Agents of S.H.I.E.L.D. ABC Studios NCIS: New Orleans CBS TV Studios About a Boy Universal TV The Mindy Project Universal TV

10:00 Forever Warner Bros. TV Person of Interest Warner Bros. TV Chicago Fire Universal TV10:30 Forever Warner Bros. TV Person of Interest Warner Bros. TV Chicago Fire Universal TV8:00 The Middle Warner Bros. TV Survivor CBS TV Studios & Mark Burnett Prods. The Mysteries of Laura Warner Bros. TV Hell's Kitchen ITV Studios & A. Smith and Co.8:30 The Goldbergs ABC Studios Survivor CBS TV Studios & Mark Burnett Prods. The Mysteries of Laura Warner Bros. TV Hell's Kitchen ITV Studios & A. Smith and Co.9:00 Modern Family Twentieth Criminal Minds CBS TV Studios & ABC Studios Law & Order: Special Victims Unit Universal TV Red Band Society ABC Studios9:30 Black-ish ABC Studios Criminal Minds CBS TV Studios & ABC Studios Law & Order: Special Victims Unit Universal TV Red Band Society ABC Studios

10:00 Nashville ABC Studios Stalker Warner Bros. TV Chicago PD Universal TV10:30 Nashville ABC Studios Stalker Warner Bros. TV Chicago PD Universal TV8:00 Grey's Anatomy ABC Studios Thursday Night Football (9/11-10/23) Big Bang Theorry (Warner Bros TV 10/30) The Biggest Loser Universal TV Bones Twentieth8:30 Grey's Anatomy ABC Studios Thursday Night Football (9/11-10/23) The Millers (CBS TV Studios 10/30) The Biggest Loser Universal TV Bones Twentieth9:00 Scandal ABC Studios Thursday Night Football (9/11-10/23) 2.5 Men (Warner Bros. TV 10/30) Bad Judge Universal TV Gracepoint Shine America9:30 Scandal ABC Studios Thursday Night Football (9/11-10/23) The McCarthy's (CBS TV Studios/Sony 10/30) A to Z Warner Bros. TV Gracepoint Shine America

10:00 How to Get Away With Murder ABC Studios Thursday Night Football (9/11-10/23) Elementary (CBS TV Studios) Parenthood Universal TV10:30 How to Get Away With Murder ABC Studios Thursday Night Football (9/11-10/23) Elementary (CBS TV Studios) Parenthood Universal TV8:00 Last Man Standing Twentieth The Amazing Race CBS TV Studios & ABC Studios Dateline NBC News Masterchef Junior Shine America & One Potato Two Potato8:30 Cristela Twentieth The Amazing Race CBS TV Studios & ABC Studios Dateline NBC News Masterchef Junior Shine America & One Potato Two Potato9:00 Shark Tank Sony & Mark Burnett Hawaii 5-0 CBS TV Studios Grimm Universal TV Utopia Taipa Media USA9:30 Shark Tank Sony & Mark Burnett Hawaii 5-0 CBS TV Studios Grimm Universal TV Utopia Taipa Media USA

10:00 20/20 ABC News Blue Bloods CBS TV Studios Constantine Warner Bros. TV10:30 20/20 ABC News Blue Bloods CBS TV Studios Constantine Warner Bros. TV8:00 Saturday Night Football ABC Sports Crimetime Saturday Encore Programming Fox Sports Saturday: Fox College Football Fox Sports8:30 Saturday Night Football ABC Sports Crimetime Saturday Encore Programming Fox Sports Saturday: Fox College Football Fox Sports9:00 Saturday Night Football ABC Sports Crimetime Saturday Encore Programming Fox Sports Saturday: Fox College Football Fox Sports9:30 Saturday Night Football ABC Sports Crimetime Saturday Encore Programming Fox Sports Saturday: Fox College Football Fox Sports

10:00 Saturday Night Football ABC Sports 48 Hours Mystery CBS News Encore Programming Fox Sports Saturday: Fox College Football Fox Sports10:30 Saturday Night Football ABC Sports 48 Hours Mystery CBS News Encore Programming7:00 America's Funniest Home Videos Vin Di Bona Prods. 60 Minutes CBS News Football Night in America NBC Sports NFL on FOX FOX Sports7:30 America's Funniest Home Videos Vin Di Bona Prods. 60 Minutes CBS News Football Night in America NBC Sports The OT/Bob's Burgers NFL Films/ Twentieth8:00 Once Upon a Time ABC Studios Madam Secretary CBS TV Studios NBC Sunday Night Football NBC Sports The Simpsons Twentieth8:30 Once Upon a Time ABC Studios Madam Secretary CBS TV Studios NBC Sunday Night Football NBC Sports Brooklyn Nine-Nine Universal TV9:00 Resurrection ABC Studios The Good Wife CBS TV Studios NBC Sunday Night Football NBC Sports Family Guy Twentieth9:30 Resurrection ABC Studios The Good Wife CBS TV Studios NBC Sunday Night Football NBC Sports Mulaney Universal TV

10:00 Revenge ABC Studios CSI/CSI: Cyber CBS TV Studios NBC Sunday Night Football NBC Sports10:30 Revenge ABC Studios CSI/CSI: Cyber CBS TV Studios NBC Sunday Night Football NBC Sports

8 5 6 6

NBC FOX

Saturday

Total New (ex-Football)

Sunday

CBSABC

Monday

Tuesday

Wednesday

Thursday

Friday

Blue shading denotes new program Source: Industry sources, press reports, RBC Capital Markets


October 23, 2014 70

Exhibit 79: 2014-2015 CW Broadcast Prime Time Schedule

8:00 The Originals Warner Bros. TV & CBS TV Studios8:30 The Originals Warner Bros. TV & CBS TV Studios9:00 Jane the Virgin Warner Bros. TV & CBS TV Studios9:30 Jane the Virgin Warner Bros. TV & CBS TV Studios8:00 The Flash Warner Bros. TV8:30 The Flash Warner Bros. TV9:00 Supernatural Warner Bros. TV9:30 Supernatural Warner Bros. TV8:00 Arrow Warner Bros. TV8:30 Arrow Warner Bros. TV9:00 The 100 Warner Bros. TV & CBS TV Studios9:30 The 100 Warner Bros. TV & CBS TV Studios8:00 The Vampire Diaries Warner Bros. TV & CBS TV Studios8:30 The Vampire Diaries Warner Bros. TV & CBS TV Studios9:00 Reign CBS TV Studios & Warner Bros. TV9:30 Reign CBS TV Studios & Warner Bros. TV8:00 Whose Line is it Anyway Hat Trick & Angst Prods.8:30 Whose Line is it Anyway Hat Trick & Angst Prods.9:00 America's Next Top Model CBS TV Studios, Bankable Prods., 10x10 Ent.9:30 America's Next Top Model CBS TV Studios, Bankable Prods., 10x10 Ent.

CW

Monday

Tuesday

Wednesday

Thursday

Friday

Source: Industry Sources, Press Reports, RBC Capital Markets

Exhibit 80: Warner Bros. Growth In Original Programming

259

326

175

277

0

78

156

234

313

391

469

547

625

2008-2009 2012-2014

Nu

mb

er

of

Ori

gin

als

# of Non-Scripted Originals # of Scripted Originals

26%

58%

Source: Time Warner Inc. 2014 Investor Day, RBC Capital Markets

Exhibit 81: Subscription Online Video Revenue Projections

3.67

4.92

5.976.50

6.91 7.16 7.37 7.53 7.65 7.75 7.85

$0

$1

$2

$3

$4

$5

$6

$7

$8

$9

2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023

Bill

ion

s o

f $

s

Source: SNL Kagan


October 23, 2014 71

Ticker CBS DIS DISCA FOXA SNI TWX VIAB

Company CBS Corporation Walt DisneyDiscovery

Comm.

Twenty-First

Century Fox

Scripps

NetworksTime Warner Viacom

Price as of: 2014/10/23

Class A Shares N/A $87.10 $69.78 $32.75 $74.32 $76.57 $70.45

Class B Shares $52.91 N/A $73.60 $31.64 N/A N/A $70.43

Class C Shares N/A N/A $68.96 N/A N/A N/A N/A

50 Day Average Volume 7,523,988 6,612,694 3,347,266 12,674,517 1,036,758 5,490,040 2,694,271

ENT. VALUE CALCULATION

Total Diluted Shares Outstanding 560,191 1,755,970 343,120 2,269,000 141,499 878,864 439,810

Diluted Equity Market Cap $29,639,696 $152,944,977 $23,870,609 $73,423,392 $10,516,184 $67,294,585 $30,976,811

Total Enterprise Value $35,238,696 $165,224,977 $30,461,609 $81,572,686 $10,686,969 $82,883,585 $42,418,811

KEY FINANCIAL METRICS

Net Revenues

2012A 12,820,000 42,840,000 4,521,000 25,635,500 * 2,307,182 25,325,000 13,249,000

2013A 14,005,000 46,009,000 5,535,000 26,882,000 2,530,809 26,461,000 13,677,000

2014E 14,245,875 49,468,569 6,452,646 27,173,983 2,686,429 27,322,016 13,975,749

2015E 14,692,742 52,126,421 7,108,809 28,549,377 2,909,225 28,585,297 15,058,995

2013-14 Growth 2% 8% 17% 1% 6% 3% 2%

2014-15 Growth 3% 5% 10% 5% 8% 5% 8%

EBITDA

2012A 3,091,000 10,589,000 1,976,000 5,993,500 * 1,040,873 6,428,000 3,913,000

2013A 3,315,500 12,006,000 2,271,000 5,915,000 1,102,460 6,954,000 4,238,000

2014E 3,578,390 13,671,138 2,573,082 6,624,493 1,150,557 7,377,987 4,427,333

2015E 3,811,767 14,308,780 2,847,405 7,260,331 1,288,740 7,760,795 4,710,728

2013-14 Growth 8% 14% 13% 12% 4% 6% 4%

2014-15 Growth 7% 5% 11% 10% 12% 5% 6%

EPS

2012A $2.20 $3.06 $2.51 $1.34 * $3.28 $2.94 $4.06

2013A $2.79 $3.64 $2.98 $1.29 $3.62 $3.51 $4.99

2014E $3.33 $4.37 $3.70 $1.65 $3.86 $4.00 $5.54

2015E $4.00 $4.73 $4.62 $1.92 $4.61 $4.58 $6.37

2013-14 Growth 20% 20% 24% 27% 7% 14% 11%

2014-15 Growth 20% 8% 25% 16% 19% 14% 15%

FCF/Share

2012A $2.62 $2.43 $2.82 - $3.33 $2.52 $4.37

2013A $2.65 $3.47 $3.92 $1.33 $3.72 $3.38 $5.17

2014E $3.34 $3.93 $4.67 $1.63 $4.53 $3.77 $5.79

2015E $4.08 $4.16 $5.72 $1.80 $5.34 $4.32 $6.62

2013-14 Growth 26% 13% 19% 23% 22% 11% 12%

2014-15 Growth 22% 6% 23% 10% 18% 15% 14%

TRADING/VALUATION MULTIPLES Average

EV/2012A EBITDA 11.4x 15.6x 15.4x 13.6x 10.3x 12.9x 10.8x 12.9x

EV/2013A EBITDA 10.6x 13.8x 13.4x 13.8x 9.7x 11.9x 10.0x 11.9x

EV/2014E EBITDA 9.8x 12.1x 11.8x 12.3x 9.3x 11.2x 9.6x 10.9x

EV/2015E EBITDA 9.2x 11.5x 10.7x 11.2x 8.3x 10.7x 9.0x 10.1x

2013-14 EV/EBITDA To Growth NA 0.87 0.89 1.03 2.13 1.84 2.14

2014-15 EV/EBITDA To Growth 1.42 2.48 1.00 1.17 0.69 2.06 1.41

Price/2012A EPS 24.0x 28.4x 27.8x 24.4x 22.7x 26.0x 17.3x 24.4x

Price/2013A EPS 19.0x 24.0x 23.4x 25.3x 20.5x 21.8x 14.1x 21.2x

Price/2014E EPS 15.9x 19.9x 18.9x 19.8x 19.2x 19.1x 12.7x 17.9x

Price/2015E EPS 13.2x 18.4x 15.1x 17.1x 16.1x 16.7x 11.1x 15.4x

2013-14 P/E To Growth 0.80 0.99 0.77 0.72 2.90 1.35 1.17

2014-15 P/E To Growth 0.66 2.20 0.61 1.05 0.84 1.16 0.73

Price/2012A FCF 20.2x 35.9x 24.7x N/A 22.3x 30.4x 16.1x 24.9x

Price/2013A FCF 20.0x 25.1x 17.8x 24.6x 20.0x 22.6x 13.6x 20.5x

Price/2014E FCF 15.8x 22.2x 14.9x 20.0x 16.4x 20.3x 12.2x 17.4x

Price/2015E FCF 13.0x 20.9x 12.2x 18.2x 13.9x 17.7x 10.6x 15.2x

2013-14 FCF/Share To Growth 0.60 1.67 0.78 0.87 0.75 1.78 1.00

2014-15 FCF/Share To Growth 0.59 3.54 0.54 1.86 0.78 1.21 0.75

*FOXA calandar historicals are a blend of fiscal years where noted because quarterly breakdown has not been provided

**DISCA share price adjusted for for stock-dividend

Figures in thousands, except per share data. All multiples based on calendar year estimates/consensus

FCF excludes changes in working capital and related items due to the high level of volatility in some large-cap media companies

Source: Company reports, RBC Capital Markets estimates


October 23, 2014 72

Companies mentionedCBS Corp. (NYSE: CBS; $53.75; Top Pick)Discovery Communications Inc. (NASDAQ: DISCA; $35.97; Outperform)Scripps Networks Interactive, Inc. (NYSE: SNI; $75.48; Sector Perform)The Walt Disney Company (NYSE: DIS; $87.99; Outperform)Time Warner Inc. (NYSE: TWX; $78.19; Outperform)Twenty-First Century Fox Inc. (NASDAQ: FOXA; $33.54; Outperform)Viacom Inc. (NASDAQ: VIAB; $71.47; Outperform)

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Distribution of ratings

RBC Capital Markets, Equity Research

As of 30-Sep-2014

Investment Banking

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