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Redefining the PayTV ExperienceSP Video Market Trendsand Case StudiesAunindo GhoshSenior Product Manager – ServiceProvider Video BUJuly 2015

Agenda1. Pay TV Updates2. Time Shifted Viewing Trends3. Next-Gen UX Trends4. Latest on OTT 2013-2014 Cisco and/or its affiliates. All rights reserved.

Pay TVUpdates 2013-2014 Cisco and/or its affiliates. All rights reserved.

Worldwide Pay TV GrowthTotal Pay TV Subscribers and Annual CAGR by Regions (in M) 4.4%603530 1.3%0% 2.1% 5.3% 4.9%821211288120112521256114Africa and Middle EastAsia PacificCentral and EasternEurope2012 2013-2014 Cisco and/or its affiliates. All rights reserved.Source: IHS Screen Digest, 2/201520132014North America201520162017South and CentralAmerica2018Western Europe

Screen, Screens, Screens90%SmartphoneLaptop/PCTabletTelevisionof all media interactionsare screen based10%RadioNewspaperMagazineof all mediainteractions arenon-screen basedOn average we spend4.4 hours of our leisuretime in front of screenseach day.Source: Google, Sterling Brands & Ipsos: The New Multi-Screen World, 2012 2013-2014 Cisco and/or its affiliates. All rights reserved.

TV Consumption is Undergoing a RevolutionShare of Television Viewing by DeviceTV is still the main household videoconsumption device3 Screens4 Screens4%10%5%However, almost a third of 4-screenowners regularly watch TV on othervideo-enabled devicesSize matters: Consumers prefer thebiggest screen available at any point:TV at home, 3G/4G Dongle on themove, else mobile18%16%77%TV69%ComputerSource: IAB – The Multi-Screen Marketer, 5/2012 2013-2014 Cisco and/or its affiliates. All rights reserved.SmartphonesTablets

Will Content Providers Go “All In” on OTT in 2015? Two major Go-to-Market strategies: White-Label and Aggregation Portal Both monetize via combination of paid subscription and dynamic ad insertionWhite-Label PlatformAggregation me 2013-2014 Cisco and/or its affiliates. All rights reserved.MLBDISHDirecTVMLB,ESPN,WWE, HBODisney: ESPN,Disney ChannelTurner Broadcast:Adult Swim, TNT,CNN, TBS, HLN,Cartoon NetworkbeIN SPORTS enEspañol, Cine SonyTelevision, MTV,¡Hola! TV

Content Innovation – Heavy Investment in Programming US networks collectively invest 30Bn annually in premium TV content DirecTV and Dish each spend 45-52% of their revenue on programmingAnnual US Multichannel Network Programming Expenses (in Bn)18.6200919.82010 2013-2014 Cisco and/or its affiliates. All rights reserved.Source: SNL-Kagan, .12017

Increasing Costs and Competition Bring SPs to ConsolidateRevenue Synergy Upsell / Package upgrades Advertising scaleCost Synergy Sales & Marketing Support & Maintenance Reduce content acquisitioncosts as a result of increasedbargaining power Network / Backbone 2013-2014 Cisco and/or its affiliates. All rights reserved.BuyerSeller/sSum Paid( Bn)Total Subs(M)49274532.625.424.510.18.57.517.82.20.7

Service & Technology Innovation – Dish CaseNon-Dish subs: “Sling TV” Pure OTT service for linear TV 20/month (no commitments) Adding News or Kids packageswill cost an extra 5 each Offers linear streaming from 12basic and premium cablenetworks including ESPN Features pause, rewind andreplay of (some) live shows forup to 3 days after airing 2013-2014 Cisco and/or its affiliates. All rights reserved.Premium subscribers: 4KJoeyMainstream subs: New RC, UIand Vevo music video app Uses BCM 7448 SoC capable of4K playback at 60fps or side-byside HD display The Hopper voice controller isequipped with a touchpad,responding to swipe gestures Available this summer. New 4Kcontent partnerships deals are inthe works In addition, a new UI will comingto the Hopper DVR this year aswell as a Vevo app Compatible with current HopperSTB and works with any 4K sets(unlike Comcast, DirecTV)

Creating New Service and Bundling Opportunities “To date, DirecTV has offered “synthetic” bundles with AT&T and Verizon, whichcombine TV, Internet and phone. But those bundles aren’t integrated, requiring twotruck rolls and two separate bills. Last year only 9% of DirecTV’s customers opted forsuch a “synthetic” bundle.” Mike White, DirecTV president and CEO“AT&T sees opportunities to extend DirecTV service in other areas, too. We areplanning to expand the satellite TV service into the auto market (as a way ofentertaining kids in the back), building on ours agreement with General Motors todeliver 4G LTE to the select vehicles.” 2013-2014 Cisco and/or its affiliates. All rights reserved.Source: Goldman Sachs’ Communacopia conference, 9/2014Ralph de la Vega, president and CEO of AT&T’s mobility division

Catch-Up and Box SetsCatch-Up TV (up to 30 days fromairing) Up to 60 channels (depends on package) Restart TV – enabled only after show ends(currently in SKIT, UK launch later this year) 2013-2014 Cisco and/or its affiliates. All rights reserved.Sky Box Sets (TV Series, S-VOD) Solution targets binge viewers Examples of available premium content: Downton Abbey S1-4 (Feb 14)The Walking Dead S1-5a (Oct 14)True Detective S1 (Mar 2014)The Following S1-2 (Apr 14)

Movies On-Demand and Sky StoreSky Movies On-Demand (S-VOD) Netflix equivalent (mostly long-tail)VOD must be downloaded to HDDCounts against BB usage capsFiltered by Cast and GenreAlso includes push-VOD items (found on“Showcase” section) and link to Sky Store 2013-2014 Cisco and/or its affiliates. All rights reserved.Sky Store (Movies, Transactional VOD) Rental, Purchase-to-Own, Pre-Order Downloads can be archived to save DVRspace (only title metadata is saved) DVD shipped within 5 business days Plans to enable device access via apps Non-Sky TV customers will be able topurchase via the Sky Store website

DTH Monetize Content While Cable Monetize the PipeProviderSky DeutschlandViasatVirgin MediaCom HemFootprintGermany & TV Subs3.5M580K3.7M612KServiceSnapViaplayNetflix on TiVoAudienceSubs & Non-SubsSubs & Non-SubsExisting SubscribersContentVODVOD Live SportsNetflix VOD CataloguePriceSubs: 4.90Non-Subs: 9.90Subs: FreeNon-Subs: From 12/m 2013-2014 Cisco and/or its affiliates. All rights reserved. 5.99/month(to Netflix) 11.57/month(to Netflix)

Time-ShiftedViewing 2013-2014 Cisco and/or its affiliates. All rights reserved.

The Tip of The Iceberg Time-shifting accounts for 15% of viewing in UK and steadily growingUK Live vs. Time-Shifted Viewing (in %), 1/2006 - 1/201510090807060Time- Shifted504030Live Viewing2010 2013-2014 Cisco and/or its affiliates. All rights reserved.Source: BARB, Feb 07Oct-06Jul-06Apr-06Jan-060

The Younger They Are, The Less Linear They Will WatchLinear accounts for only half of video consumption among ages 16-24,while time-shifted content account for almost 30%UK Video Consumption by age (in %), 2013100%80%60%27668136718537174431331220Short Online Clips16DVD/Blu-RayOnline Subscription40%20%506164698082PVRLinear TV0%16-2425-34(4:14)(3:51) 2013-2014 Cisco and/or its affiliates. All rights reserved.Source: Ofcom, Aug 2014VOD/Catch-Up35-44(3:50)45-5455-6465 (4:31)(4:37)(4:36)

Original Programming Accounts for Bulk of TSTV ViewingTotal UK Viewing Time by Genre, Time-Shifted and Linear (in %), Feb 201518.6 2.82.41.3 2013-2014 Cisco and/or its affiliates. All rights reserved.Source: BARB, Feb 0.10.20.10.0

TSTV Challenges Methodology for Audience Measurement71% of time-shifting occurs within the first 24hrs after airing;87% of time-shifted viewing occurs within the first 3 daysUK TSTV Viewing by Playback Delay, 2013472410Same day as liveDay 1 2013-2014 Cisco and/or its affiliates. All rights reserved.Source: StatistaDay 26543Day 3Day 4Day 5Day 61Day 7

Why Does This Matter? Advertising.Networks campaign to retire live and same-day ratings Showtime: “Its been years since the network last paid attention to live viewing.” 60-70% of Dexter viewers watch via VOD or DVR Only 32% of Homeland’s 7M weekly views occur during a live Sunday night telecastABC, CBS, NBC, Fox: “viewers are time-shifting more than many might think.” Last season, the average rating among adults 18-49 grew by 40% in live C7 ratings aloneIndustry is moving towards recognizing longer viewing windows It’s Finally Happened: A Big Ad Buyer is Paying for a Week of Time-Shifting (Jun 14) Multiple broadcasters have reached pacts with ad-buyer GroupM to do prime-time entertainment dealsbased on 7 days of commercial viewing after shows airCBS/Dish Deal: No Skipping Ads With AutoHop (Dec 14) Ad-skipping functionality of AutoHop will not be available for CBS-owned stations during the C7 window 2013-2014 Cisco and/or its affiliates. All rights reserved.

Latest on OTT 2013-2014 Cisco and/or its affiliates. All rights reserved.

Why its not all about OTT yet ?Frustrations/Concerns With Watching Video Content Over the Internet605053%4051%45%302019%100Advertising during the Time required to Video quality (ie poorprogrambuffer/download thedefinition)videoSource: Accenture – Video-Over-Internet Consumer usage survey, 2012 2013-2014 Cisco and/or its affiliates. All rights reserved.Cost of the videocontent19%Broadband / highspeed cost ofdownloading thevideo17%Range of programsavailable12%Navigationexperience (i.e.search / epg)

Cord Cutting “Nibbling at the Edges” But Not Mainstream“Cord cutting in general remains less a thing thanmany pundits would have you believe;The number cord-cutters dropped in 2014, andwas the lowest rate since 2008.” Leichtman Research Group, Mar 2015“Yes, some consumers are cutting the cord, butthey’re in the low single digits percentagewise. Amore real behavior is cord-shaving, whereconsumers reduce what they spend, rather thaneliminating it altogether.” 2013-2014 Cisco and/or its affiliates. All rights reserved.eMarketer, Dec 2014

MSO Strategy: Befriending DisruptorsCompetition (Past)Co-opetition (Present) Partnership is mutually beneficial SPs saw Netflix as a threat Used various countermeasuresReduces SP’s content costs on VOD Imposed bandwidth caps for Netflix trafficRetains cord-cutters in SP’s ecosystem Launched their own OTT/TVE servicesProvides a one-stop-shop for video content But Netflix kept growing Netflix’s 23M subscribers account for 1/3 ofdownstream IP traffic in the US Does not cannibalize SP businessNetflix offers mostly long-tail content with no liveor premium VOD, complementing SPsSeveral European operators already offer Netflix appAmerican SPs are negotiating 2013-2014 Cisco and/or its affiliates. All rights reserved.

TV Everywhere: Monetization StrategyTarget AudiencePremiumMainstreamNon-SubscribersBusiness ModelIncrease ARPUReduce ChurnMonetize ContentOffer TypeTV EverywhereTV EverywherePure OTT422Downloading EnabledYesNoNoAvailable on YouViewNoNoYesSky Movies & SportsLive channels VODSky Movies & SportsLive channels VODSky Movies & SportsExtra 5/mFree for Sky TVcustomersMovies: 8.99/m for first3 months, then 15/mSports: 9.99 day-passRegistered DevicesContentPriceDifferent consumer segments warrant different business models for TVE 2013-2014 Cisco and/or its affiliates. All rights reserved.

Sky’s Multiscreen Strategy in Numbers 5XSkyGo ExtraMonthly Cost 397 XNew SubscriberAcquisition Cost1244K 2.7MSkyGo ExtraSubscribersannuallyX10.4M 8.3MAverage AnnualChurn ReductionTotal Sky TVSubscribersannuallyXMonths0.2%( 8.99 3 15x9) X 25KXNowTV Cost for NowTV Cost fromfirst 3 Months3rd MonthSource: BSkyB, 6/2013 2013-2014 Cisco and/or its affiliates. All rights reserved.NowTVSubscribers 4Mannually

Next-GenerationUser Experience 2013-2014 Cisco and/or its affiliates. All rights reserved.

Comcast X1: Enhanced Metadata and Public API Integration Cast & Crew Info Rotten Tomatoes Buzzing on Twitter Now Showing In More Like This Most Popular Now 2013-2014 Cisco and/or its affiliates. All rights reserved.

Comcast X1: Personalization and Customizable Menus Liner Recommendations“For You” Menu 2013-2014 Cisco and/or its affiliates. All rights reserved. Customizable EPG“Personal, Prioritized Guide” Customizable VOD“Kid’s View”