Traditional broadcasting – is it still relevant ?Gilles FontaineHead of Department for Information on Markets and FinancingEAO Conference under the Czech PresidencyPrague, 9 June 2016

Overview

1. A slow crisis

2. More competition ahead

3. The Empire strikes back

A slow crisis ?

2,010 2,011 2,012 2,013 2,01450,000

55,000

60,000

65,000

70,000

75,000

80,000

85,000

90,000

95,000

Nominal value

Constant Euro 2010

No growth in constant Euro between 2010 and 2014

Is it due to Internet and on-demand yet ?

OBS, WARC, IHS, EBU/MIS

35%

38%

26%

1%

29%

33%

36%

3%

Public fundingAdvertising TVPay-TV revenues On-demand pay-revenues

The 3 pillars of audiovisual services fundingOn-demand only accounts for about 3% of total revenues

EU 2014 CZ 2014

OBS, WARC, IHS, EBU/MIS

Advertising: recovery or transformation ?

2006 2007 2008 2009 2010 2011 2012 2013 20140

5,000

10,000

15,000

20,000

25,000

30,000

35,000

M E

UR

EU TV advertising revenues lower in 2014 than in 2007

33%

WARC

Linear television has reached a plateauDaily viewing time decreased in 12 EU countries in 2014

Competition from Internet advertisingInternet advertising higher than TV advertising in 7 EU countries in 2014

TV audience is more fragmented

-16

-14

-12

-10

-8

-6

-4

-2

0

BG

CZ

FI

HRHU

IEIT

LT

LV

PLPT

SI

SK

EUR

%

The audience share of the top 4 TV channels decreased between 2011 and 2014

Advertising: recovery or transformation ?33%

MEDIAMETRIE

Pay-TV still growing – but not everywhereThe number of pay-TV subscribers decreased in 9 EU countries between 2013 and 2014

-350

-300

-250

-200

-150

-100

-50

0

AT

CZ

DK

FR

IT

LT MT

PL SE

Thou

sand

s

36%

AMPERE

Public funding under pressure

2010 2011 2012 2013 20140

5,000

10,000

15,000

20,000

25,000

30,000All EU

All EU, excluding Germanym

EUR

Public funding decreased in average of 1.2% per year between 2010 and 2014 (excluding Germany)

29%

OBS, EBU/MIS

The impact of on-demand/internet has been low so farLinear still represents the vast majority of time spent and revenues

2010 2011 2012 2013 2014 20150

20

40

60

80

100

120

140

160EU Pay-TV subscribers

EU SVOD subscribers

mill

ion

2011 2012 2013 2014 20150:00

1:12

2:24

3:36

4:48

6:00

US TV daily watching

US Digital video daily watching

hh:m

m

Still, on-demand is growing (fast)

AMPERE EMARKETER

•Always improving quality of service of OTT delivery

•Integration of live events

•Increasing access to the TV set for Internet services

•International reach and economies of scale

•Low cost strategy

•Deep pockets

Internet services can leverage strong assets:

0 2000 4000 6000 8000 10000 12000 14000

Modern Times Group

France Télévisions

Netflix

RTL Group

BBC Group

ARD

Sky

m EUR

Central European Media Enterprises

2014 revenues

OBS

But the empire strikes backUnlike the music industry, TV is investing the new digital territories:

•Catch-up services compensate (to an extent) the stagnation/decrease of linear viewing

•Media groups launch TVOD and SVOD services

2010 2011 2012 2013 20140

50

100

150

200

250

300UK Time-shifted

TV viewing

Daily

mn

UK Live TV viewing

BARB

Media groups also invest in Internet video properties

… improve the relevance of television advertisingProgrammatic advertising to target linear viewers

… and invest in original contentA consolidation process in the TV/Production sector

Groups involved Target production company

Discovery, Liberty Global Joint acquisition of All3Media

Discovery Purchase of Raw TV

21st Century Fox, Apollo Global Management Merger of Endemol, Shine and Core Media

Sky Purchase of Love production

ITV Purchase of Leftfield, Big Talk, The Garden, So TV

Canal+ Purchase of Red Production

NBCU, RTL, TF1 Agreement for the joint production of TV series in the US

LOV Group, De Agostini Merger of Banijay and Zodiak

ITV Acquisition of Twofour Group and Talpa media

Open questionsLinear euros and on-demand cents

Scale

(Intelligence) technologies

Will the transition to online viewing translate in the same levels of advertising ?

How to recoup investments in original programming on the international market ?

How to compete in big data and recommendations with native Internet video providers ?