1. Connected TV 2014 Combining the incompatible? Contact: Clemens Schwaiger, Principal Global Lead Digital Media schwaiger.clemens@adlittle.com

2. 2 Globally, the digital ecosystem is enjoying continued growth, but content players are as sexy as telecom equipment providers in terms of revenue growth Revenues of the digital ecosystem by sub-sector(1) USD bn +0.6% +0.5% CAGR 2007-2012 (1) Top 30 per category by 2012 revenues +8.9% 3,181 1,252 1,023 364 282 94 2008 3,190 1,243 1,006 373 297 85 2007 2,962 1,174 +6% 919 336 274 76 Network operators Devices Software and IT services Content Internet 2012 4,008 1,480 Equipment 1,405 458 194 2011 3,760 1,403 184 1,301 434 285 154 2010 277 3,452 1,296 187 1,196 387 279 117 2009 189184177170 Illustrative companies Source: Thomson Reuters, Arthur D. Little analysis +6.4% +20.6% +4.7% The Battle over Value in the Digital Ecosystem 3. 3 Both telecom operators and content players have to cut back on investments and face a declining share of the ecosystems FCF while devices & software take all 19% Network operators +2 pt 67% +0pt -3 pt -1 pts 64% -2 pt 4%2% +5 pt InternetEquipment 2%3%5% Software Content 4%5% Devices 2% 24% 31% 6% 6% Equipment 4% -2pt 34% 22% 24% Devices 21% 26% +5 pts +3 pts -6 pts +2 pts -3 pts 9% Software 6% 12% InternetContentNetwork operators 20122007 20122007 Free cash flows by sub-sector(1) % of total ecosystem FCF Investment by sub-sector(1) % of total ecosystem investment Source: Thomson Reuters, Arthur D. Little analysis (1) Top 30 per category by 2012 revenues The Battle over Value in the Digital Ecosystem 4. 4 Financial investors are clearly punishing this weak performance, thus content players and network operators should stop fighting each other and start to co-operate 195 76 159 76 137 40 60 80 100 120 140 160 180 200 2013(2)201220112010200920082007 Software Network operators Devices Equipment Content Internet 105 +95% -24% -24% +5% Basis of 100 in 2007 Market capitalisation by sub-sector(1) +59% (1) Top 30 per category by 2012 revenues (2) As of June 2013 Source: Thomson Reuters, Arthur D. Little analysis +37% The Battle over Value in the Digital Ecosystem 5. 5 What might these charts shows? ? ? R = 0.98 R = 0.96 The Battle over Value in the Digital Ecosystem 6. 6 1 -250 -200 -150 -100 -50 0 50 5 6 7 8 9 3 0 10 4 11 2 Q4/11 Q1/12 Q2/12 Q3/12 Q4/12 Q1/13 Q2/13 Q3/13 OTT video clearly is a scale business and as stated in our 2012 report: first to scale wins 171513 23 25 24 26 27 28 29 30 18 19 20 21 22 23 24 21 20 0 22 0 12 14 16 Q1/13 Q2/13 Q3/13 Q3/12 Q2/12 Q1/12 Q4/11 Q4/12 Netflix, domestic streaming Netflix, international streaming Paid subscribers (million) Paid subscribers (million) Contribution margin (% of revenues) Contribution margin (% of revenues) The Battle over Value in the Digital Ecosystem 7. 7 In a strive for scale and industry leadership, both traditional and new players are building strategic partnerships Source: Arthur D. Little Distributors Consumer electronics manufacturers Content providers/ broadcasters Internet players 1 3 2 4 Cross value-chain partnerships (examples) and many more Samsung smart TV Ultraviolet redbox instant First to Scale Wins Netflix on CATV Yomvi Virgin Media, Com Hem, Waoo! 8. 8 In a strive for scale and industry leadership, both traditional and new players are building strategic partnerships Source: Arthur D. Little Distributors Consumer electronics manufacturers Content providers/ broadcasters Internet players 1 3 2 4 Cross value-chain partnerships (examples) Partnership with the highest value creation potential Broadcasters and Telcos/Pay TV - a Perfect Match National content meets distribution power Strong defensive move against OTT Potential for highest user experience Limited competition/regulatory concerns 9. 9 TV markets are extremely concentrated, with two to three broadcasters owning the majority of eye-balls and great content with national relevance Source: Arthur D. Little analysis Germany Hungary Netherlands Croatia Romania Czech Republic Slovak Republic 25% Prima Group 22% CME Group40% Others 13% CT Group Others 38% 10% ALPHA Group 15% Antenna Group17% Teletypos 19% Kanal D 9% Others 35% Intact Group 18% Prima Group 6% CME Group32% Others 28% STV Group 8% JOJ Group 29% CME Group 35% Others 16% HTV Group 21% RTL Group 28% CME Group 35% Others 13% P7S1 18% RTL Group 25% Public44% 32% Others 22% Public 26% SBS 20% RTL Group 10% ex P7S1 17% RTL Group30%37% Public Others 6% MTG TV Viewer share 2013 all day 14 - 49 Greece Broadcasters and Telcos/Pay TV - a Perfect Match Poland 24% Polsat 27% TVN 35% Others 15% Public 10. 10 Pay TV operators on the other hand have tightened their grip on US major content Source: MTG capital markets day presentation Pay-TV Free-TV SVOD Scandinavia CEE & Baltics Scandinavian CEE & Baltic Scandinavian CEE & Baltic NBC Universal, Fox Walt Disney Sony Pictures MGM under neg. under neg. Warner Brothers under neg. Paramount HBO endemol fremantlemedia CBS Nordisk film Scanbox HollywoodstudiosTVcontentlocal Exclusive content deals MTG Broadcasters and Telcos/Pay TV - a Perfect Match 11. 11 Netherlands NOS / Sport 1 Sport 1 Sport 1 NOS as well as for most premium sports rights Source: www.premierleague.com, UEFA champions league, public press release, Arthur D. Little 128/146 matches exclusive Nederlandse Omroep Stichting, Rozhlas Televizia Slovenska Germany Sky (128/146 matches exclusive) / ZDF (18) Sky Sky / RTL Television Sky Romania Digi sport / Dolce Sport / Pro TV & Sport.RO Eurosport n.a Digi Sport / Dolce sport & Antena 1 Greece Mega Channel / Nova Sports / OTE Sport OTE Sport OTE Sport OTE Sport / Nova Sport Hungary Digi sport Digi sport n.a Croatia Hrvatski Telekom / HRT Sportklub Kreator TV Czech Republic Modern Times Group Nova TV / Slovak sport TV Nova TV Nova TV Slovakia RTVS Nova TV / Slovak sport TV Nova TV / Datjo Nova TV Champions League Premier League Formula 1 Bundesliga NL Eredivise Greek Super League NHL Romanian Liga Broadcasters and Telcos/Pay TV - a Perfect Match 12. 12 But the ultimate strength telecom operators is their distribution and bundling power e.g. by bundling preferential access to exclusive content with mobile tariffs Source: Arthur D. Little Red Bull Mobile is an MVNO of Austrian incumbent A1 offering a standard tariff scheme but also granting its subscribers exclusive access to the world of Red Bull Customer benefit Two different types of subscriptions (i) small abundance for 19.90 (ii) large abundance for 29.90 Exclusive apps to access Red Bull content Preferential access to Red Bull events & clubs Behind the scenes content on many Red Bull athletes Business Model Regular mobile tariff, but focus lies on exclusive access to content and apps Red Bull Mobile Description Attractive content and features as core positioning to sell plain vanilla mobile abundance tariffs Broadcasters and Telcos/Pay TV - a Perfect Match 13. 13 or by leveraging their network assets Swisscom has launched an OTT video extension to its highly successful IPTV service The service is also available for non-Swisscom customers and offers: 90 live TV channels Pay-per-view offering of live sports events and a library of more than 2800 titles Customer benefit Two different types of subscriptions (i) Swisscom TV air for 9 CHF/month including data traffic and advertising free (ii) Swisscom TV easy without extra charge but excluding data traffic and with advertising Business Model Classic freemium approach Increasing demand for data bundles Swisscom OTT Video Description Swisscom uses its OTT video service to push data usage and to attract new users for its content offering Broadcasters and Telcos/Pay TV - a Perfect Match 14. 14 UK broadcasters JV, behind the scenes Revenue model Freemium approach with content exclusivity - Free catch-up TV for BBC Worldwide, Channel 4, ITV - Transaction spend for VOD library - Wholesale revenues Ownership structure Flow of Funds BBC Worldwide 33% 33% 33% ITV Channel 4 Other content providers Ad sales Editorial Technical operation Viewers AdvertisersAd spend Joint PlatformJV partners Transaction Spend VOD retailers (open & closed)Wholesale fee JV revenue JV costs Dividends Revenue share Revenue share Platform royalties1 Also the UK broadcasters exclusive VOD joint venture was forbidden by UK authorities, but contained a very interesting wholesale component Source: Arthur D. Little analysis analysis 1) The highly successful 4OD platform by Channel 4 would have been transferred to the JV, resulting in an on-going royalty payment Partnerships Need the Right Governance 15. 15 Youview JV, behind the scenes Revenue model Technical platform only - VOD - Linear TV - Non-video content (apps) Ownership structure Flow of Funds Technical operation Viewers Consumer electronics Joint Platform Transaction Spend Advertisers JV revenue JV costs Youview is an example of an industry-wide standardization effort, but is plagued by delays due to its complex ownership structure and business model 14% 14% Channel 4 14% Arqiva 14%Talk Talk 14% BT 14% Channel 5 14% ITV BBC JV partners Other content providers Advertising Spend Licence fee ISPs Broadcaster Partnerships Need the Right Governance 16. 16 Main findings Equal ownership Non-content players can ease competition authoritys concerns Partners with complementary skills are an excellent match At least one financially strong partner is required Freedom of a start-up and access to content & funding supports rapid growth Acquiring existing assets speeds up time-to-market Joint Venture requires clear governance structures Long-term commitment prior to JV start is essential Ownership structure Operational efficiency The right operating structure and partner mix are essential for continued success of industry cooperation Source: Arthur D. Little Partnerships Need the Right Governance 17. 17 As the worlds first consultancy, Arthur D. Little has been at the forefront of innovation for more than 125 years. We are acknowledged as a thought leader in linking strategy, technology and innovation. Our consultants consistently develop enduring next generation solutions to master our clients' business complexity and to deliver sustainable results suited to the economic reality of each of our clients. Arthur D. Little has offices in the most important business cities around the world. We are proud to serve many of the Fortune 500 companies globally, in addition to other leading firms and public sector organizations. For further information please visit www.adlittle.com Copyright Arthur D. Little 2014. All rights reserved. Contact details Your speaker today Clemens Schwaiger Global Lead Digital Media at Arthur D. Little schwaiger.clemens@adlittle.com Mobile: +43-664-6051438