�Predicting the Future of Video����Jordan Bitterman �SVP, Social Mobile & Content, Digitas �

��Video is being freed - It’s moving to the cloud.�Software is becoming just as important as hardware.�Business models & technology are slowing the pace of change.�Familiar names are emerging as the new video power players.�

Summary �

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•  Current Situation �•  Industry Drivers �•  Major Innovations �•  Futurescape�

Outline�

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���Section 1: Current Situation ����

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�1. Time spent with media is rising, not falling�2. Consumers fragmenting in search of their own solution �3. Proliferation of options are changing habits & conventions �

4. Americans have new devices on their wishlists ��

Current Factors �

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TV +5.3%, Online +11.6%, Mobile +141% (from 2010 – 2012)�

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1. Time Spent With Media Is Up: Now 699 Mins/Day �

Source: eMarketer, October 2012 �

0

50

100

150

200

250

300

Television Online Radio Mobile Print Other

2010

2012

Americans:�11.7 hrs/day �with media �

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After television, tablets are most popular, blu-ray/dvd next�

2. Dozens of Ways to Watch Video�

7 �Source: ChangeWave Research, Alternative TV options Transforming Traditional TV, October 2012 �

0%

5%

10%

15%

20%

25%

30%

35%

iPad Blu-Ray player

iPhone Game console

Smart TV Apple TV Roku

% Respondents

Game consoles & �Smart TVs have also�

gained ground�

32%� 31%�

25%� 24%�

17%�

13%� 13%�

77% of connected U.S. population simultaneously watches TV while using another device�

3. Americans: Multiple Devices/Activities at Once�

8 �Source: Google and Sterling Brands, The New Multi-Screen World: Understanding Cross-Platform Consumer Behavior, August 2012 �

0%

10%

20%

30%

40%

50%

60%

70%

80%

Television Tablet Computer Smartphone

% of All Interactions

77%� 75%�

67%�

57%�Simultaneous activities:�•  E-mailing: 60%�•  Browsing: 44%�•  Social: 42%�•  Playing games: 25%�•  Searching: 23%�•  Watching other video: 9%�

Computers & Smart TVs lag far behind�

4. Americans Plan to Buy: Tablets & Game Consoles �

9 �Source: Nielsen, 360 Gaming Report: U.S. Market, November, 2012 �

0%

10%

20%

30%

40%

50%

60%

70%

80%

Tablets Game console

Smartphone Computer Smart TV

% Respondents

72%�65%�

37%�

19%�13%�

Devices on Wishlist:�•  iPad: 21%�•  iPad Mini: 11%�•  Kindle Fire: 11%�•  Samsung Galaxy: 9%�•  Microsoft Surface: 3%�

Assigning Order to a Fast Changing Industry:�5 Key Segments �

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Current Landscape�

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Continuum of Options: Established to Emerging�

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Established� Emerging�

Cable/Satellite� Smart TV� OTT Solutions �Game Consoles � Next Gen �

Cable� Manufacturers � OTT Solutions �Game Consoles � Software Platforms �

56.6M� cable subs �

in 2012; down 3.1% from 2011 �

15.2M �Smart TVs �

in U.S. – 12.7% of HHs �

7.8M OTT devices �

owned in the U.S.�

108.2M consoles �in U.S.; Approx. 15M used�for video�

61.2M mobile video users –

19.3% of U.S. population �

All statistics sourced from eMarketer reports, 2012 & 2013 �

installed base,�best content,�Triple plays �

cut the cord,�all-in-one device�

cut the cord & �pay-as-you-go�

cut the cord,�youthful/rabid

base�

Portability,�scale opportunity,�

New triple play �

Advantages

���Section 2: Industry Drivers ����

��1.  Need for video portability �2.  Transmedia desire drives adoption �3.  Content deals become ubiquitous �4.  Consumer cost will play a role�5.  Look out for “The Big Bang” ���

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Industry Drivers �

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1. Need For Video Portability �

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Hanging on a Wall � Carried in Your Pocket�

Momentum towards solutions allowing for anywhere, anytime viewing

Portability requirements won’t make providers irrelevant; but software may trump hardware�

Major mobile operating systems will benefit from a shift to portability �

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2. Transmedia Desire Drives Adoption �

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Samsung�

Xbox 360 �

DirecTV�

Apple TV�

Apple iOS �

Google Android�

Common, cross-platform software will win out over proprietary solutions

Google TV�

3. Content Deals Become Ubiquitous �

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A more level playing field as content providers begin to license more broadly

4. Consumer Cost Will Play A Role�

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Avg. price for a flat panel TV set is $1,224**; Avg. replacement time for U.S. TVs: 9 years***; With other options available, usage/growth will be there, but will be challenged�

Big 3 sold 32.6M units in 2012, but growth from video will ultimately depend on consumer desire to forgo Smart TV & tablet purchases �

Product innovation and content acquisition will have to proliferate to drive purchase at critical mass – otherwise, OTT will be a “nice to have” and that won’t be good enough to justify cost�

To-date: phones and plans to handle high consumption of video, so we don’t know costs of hardware and plans; But: mobile is becoming primary device, so consumers may be justified�

Source: * Market Strategies Int’l, Cord Frayer Consumption Trends, October 2012; ** IHS Research, July 2012; *** Morgan Stanley analyst Katy Huberty, December 2012 �

Last 2 years: 44% downgraded to less expensive TV package, 33% spent less with cable company, 6% dropped pay service*;�But: no equipment to buy �

Advantage will go to solutions that would have been bought otherwise

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5. Look Out For “The Big Bang” �

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Many product categories have had game change innovations sparking adoption

iTunes �

iPhone�

Big Innovations Catalyzed Mobile� What About Video? �

Form factor: an Apple television �

Acquisition: Google buys Twitter for integrated social TV experience�

Experiential: Google search functionality for television; the “mother of all channel guides” �

���Section 3: Major Innovations ����

Product Innovations Affecting Video�

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Slingbox�

Today’s ultimate remote control: your living room TV, anywhere on

any device

Roku �

OTT leader now enables Cable subs to watch programming

anywhere

Aereo TV �

Watch live TV on the Internet.

Samsung: OLED Screen �

Screens are innovating at a fast pace.

Multiple company and product developments are driving/enabling portability.

���Section 4: Futurescape����

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What The Future Looks Like����

Predictions For The Next 3+ Years �

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50% Smart TV growth to 47M

users

37% tablet growth to 109M users & 19% smartphone growth to 138M

users

Video software will rival hardware in driving purchase

decisions

All companies will build and refine

their mobile approach.

Content deals will make it easier to watch from any

device

We will still watch the walls of our

living room, but we will control the

experience from our laps

Video will be watchable from everywhere via

tablets and smartphones

2013 � 2014 � 2015 � 2016 �

All statistics sourced from eMarketer reports, 2012 & 2013 �

For further discussion contact:�@jordanbitterman �