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11MODERN TIMES GROUPCAPITAL MARKETS DAY 2013TV EVERYWHEREJette Nygaard–AndersenEXECUTIVE VICE PRESIDENTNORDIC PAY–TV BROADCASTING
2JETTE NYGAARD-ANDERSENJOINED MTG IN 2003Appointed EVP of the Group’s Nordic pay-TV broadcasting operationsin June 2013CEO of Viasat Denmark since 2011Acting CEO of the Group’s Nordic pay-TV broadcasting operationsbetween October 2012 and March 2013Favourite app: ViaplayBest lap: Jumping to CEO’s office in10 seconds on the stairs
THE COMPETITIVE LANDSCAPENEW POSITIONS AND ACTORS IN VALUE CHAINOPERATORSBROADCASTERNEWOTTCO-OP’sCUSTOMERSCONTENTOWNERCONTENTRIGHTSOWNERCONTENTAGGREGATORNETWORKOWNER3
4SEVERAL OTT OFFERS LAUNCHEDTV EVERYWHERE & TOP-UP OFFERS*PURE OTTNORDIC DISTRIBUTORS NORDIC BROADCASTERS*) With or as part of subscription, unless Public service broadcast offer
Pay-TV industryMARKET TRENDS, INDUSTRY IMPLICATIONSAND OPPORTUNITIESOpportunity for MTG tocapitalise on growing totalmedia consumption throughnew services catering to newconsumer needs.New consumer andviewing behavioursIncreasing contentdemandOTT distributionof top-up productsFibre & IPTV growthand Open networksOpportunity for MTG to growon IPTV through fi. opennetworks, as well as growingViaplay in general on the backof increasing broadbandspeeds. Strong focus on CRMcapabilities in DTH - customerretention and churnprevention.Increased content demand.As an integrated player acrossthe value chain and with avery strong position, especiallyin sports, MTG is in a greatposition in the pursuit forthe best content.MTG is no longer boundby DTH or third partynetworks – but is able todirectly address the “whole”market – 9 millionScandinavian households.5
CLASSIC CONSUMER MODERN CONSUMER SUPPORTING DATAHOWGlobal video consumption per device(users with devices)WHENscheduledprogramming+ anytimeUS time spent with mediaWHEREGlobal video consumption(smartphone and tablet users)WHAT Prime-time TV showsOn-demand(Catering to consumers’ specificcontent needs, thus expandingrelevant content beyond mainstream.)Scandinavian pay OTT penetration2010 2011 2012Linear TV On-demandSources: Time spent with linear vs.on-demand, Nielsen Cross-PlatformReport; Nordic pay OTT penetration,MTG research; devices and out-of-home viewing, Ericsson ConsumerLabTV & Video Trend Report 2012CONSUMER BEHAVIOUR IS CHANGINGINCREASED CONSUMER CHOICE LEADING TOOVERALL GROWTH IN VIDEO CONSUMPTION+ anytime+34%TV-screenDesktop computerLaptopSmartphoneTabletPrime-time TV shows+78%22% In-homeOut-of-home18%82%Pay OTThouseholdsRemaininghouseholds6
7IPTV IS GROWING, LARGE OTT POTENTIALSCANDINAVIAN DISTRIBUTION LANDSCAPE – PRIMARYPAY–TV SUBSCRIPTIONSSource: internal market estimates (2012), sources include Screen Digest.OTT penetration is based on 1,65 million pay OTT subscriptions and 9 million households in Scandinavia (assumes max onepay OTT subscription per household).0%25%50%75%100%2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017Cable IPTV DTT DTH Pay OTT penetration?IPTV growth opportunityOTT top-up growthopportunity in full universe
ON-DEMAND GROWING ON TOP OF LINEAR TV CORD-CUTTING IS LIMITED, CORD-SHAVING ISA POTENTIAL OPPORTUNITY0501001502002502010 2011 2012AVERAGE TIME SPENT PER MONTH (US MARKET)Linear TV On-demand Using InternetShavers CuttersSHARE OF DK OTT CUSTOMERS CORD SHAVING/CORD CUTTING7 % 5 %8CORD CUTTING VERY LIMITED… SOME EARLY SIGNS OF CORD SHAVINGSource: Nielsen Cross-Platform Report, US marketTime spent watching on-demand video has grown by 34% over 2years– while linear TV has also grown, although by 2% over 2 years.On-demand is incremental to linear TV and thus grows the total videoconsumption.Opportunity for MTG to grow by addressing the on-demand viewingsegment with new servicesOTT unlocks a new market for MTG, allowing direct customerrelationships outside the DTH universe.There is a growing segment of “cord-nevers” – consumers who neverhad pay TV and choose OTT services rather than to sign up for payTV.Source: OmnicomMediaGroup, Denmark
VISION FOR PAY TV NORDIC… ADDRESSING THE CHANGES IN THE MARKET PLACEThe most relevant and engaging content and products – always anticipating consumer needsPeople and capabilitiesMaking our offering broadly available“The most relevant and engaging provider of video entertainment in theNordics, anytime, anywhere, on all platforms and devices”VISION PILLARSTechnology & product leadership focused on creating value for customersCost efficiency and synergiesABCDE9
SUPERIOR CONTENT Linear channels added to DTHsince last CMDDenmarkSBSBonnierSkyViacomDROther 3OwnOwnSkyEgmontViacom* Expected according to industry sources1st pay window2nd pay windowSwedenOwnBonnierViacomSkyOther 310NorwayOther 3
11STEADY GROWTH FROM PAY TV NORDIC… AND INVESTING IN THE FUTURESource: MTG3,9344,327 4,4844,7304,9251,310692 725 822 923 8341462008 2009 2010 2011 2012 2013 Q1 2013guidancePAY TV NORDIC REVENUE & EBIT (MSEK)Revenue EBIT17.6 % 16.8 % 18.3 % 19.5 %16.9 %11.1 %10 – 12 %EBIT margin2008–2012 CAGR +6%
MARGIN DELTA DYNAMICS IN 2013CONTENT INVESTMENTS VIAPLAY INVESTMENTS DTH CHURN IN DENMARKWe continue to invest incontent to maintain productleadership.Our leading content line up isleveraged botha) through retention of existingcustomers, and throughb) establishing MTG as a leaderin IPTV and the emergingsegments of new viewingbehaviours.Investments in Viaplay tosecure a leading positionin the growing on-demandand OTT segments.Investments include bothmarketing, technology andproduct development.Churn from the DTHplatform in Denmark hasbeen high during 2011and 2012.The DTH segment ingeneral has suffered fromthe entry of new pay TVcompetition from terrestrialbroadcaster Boxer as wellas IPTV growth.12
FIBRE ROLL OUT & IPTV13… BUT GROWING REVENUESTHREE MAJOR MARKET OPPORTUNITIESOTT is opening up a large new universe.Viasat has great growth potential on IP and cable – there’s significant room to grow penetration on IP while more and more cablehouseholds are being made available through the on-going digitalisation.Viasat has third-party distribution agreements with most relevant distributors.Third-party network ARPU is developing at a similar pace as DTH (CAGR for last two years: 5,2%)Additionally, third-party subscriber costs are significantly lower than on DTH (fi. 75-80% lower acquisition costs).DIGITALISING CABLE OTT/TOP-UP SERVICESSHARE OF TOTAL PAY TV SUBS ON IPTVAND SWEDISH FTTH COVERAGEPAY OTT PENETRATIONCABLE SUBSCRIBERS, NORDIC(THOUSANDS)02,5005,0002007 2012 2017Analogue Digital14%25%33%44%2007 2012 2017IPTV subscribers FTTH coverage?18%2010 2011 2012Source: Screen Digest, PTS Bredbandskartläggning 2012 Source: Screen DigestSource: internal market estimates (2012),sources include Screen Digest.
15BALANCED WEIGHTING ACROSS MAINGEOGRAPHIESREVENUE SPLIT 2012SwedenDenmarkNorwayFinland
2008 2009 2010 2011 2012 YTD 2013Total IPTV subscribers Viasat IPTV subscribersSource: Competitor annual reports and MTG estimates (open networks market).1 0.98 1.03 1.05 1.0511.271.651.75 1.732008 2009 2010 2011 2012IPTV SUBSCRIBER DEVELOPMENT,SWEDEN (OUT-GOING, INDEXED)16PAY TV SWEDENVERY STABLE BASE, LARGE POTENTIAL IN IPTVPREMIUM SUBSCRIBER DEVELOPMENT,SWEDEN (OUT-GOING, INDEXED)DTH is performing well and churn is best in class (single digit).Third party network subscriber base has grown fast over the last 5years.There is still significant potential in the growing IPTV market (whereViasat so far has grown from 14% penetration to 19% penetration),especially in the open networks segment.+71%+136%Source: MTG“Com Hem AB [...] has announced a nationwide FTTx roll-out”PacketFront Software press release (supplier)“TeliaSonera will invest more than SEK 8 billion in fiber until 2014”TeliaSonera Annual Report 2011DTH Third party14% 19%
INDEXED SUBSCRIBER DEVELOPMENTBOXER DECLINE17PAY TV DENMARKDTH STABILISING, THIRD PARTY NETWORKS GROWING-84 -76 -66 -71 -72 -55 -62 -70 -64 -67 -42 -45-15-15001503004502010 Q1 2011 Q1 2012 Q1 2013 Q1Subscribers (000s) EBIT (MSEK)Source: Teracom financial reportsDTH CHURN STABILISING BUT STILL PRESSURE FROM IPTV,WHICH DRIVES VIASAT THIRD PARTY NETWORK GROWTHBOXER DENMARK SUBSCRIBERS AND EBITBoxer has been extremely aggressive with both unsustainablylow prices and large marketing investments.Since the start of Boxer Denmark, the company has had lossestotalling more than 800 MSEK.INDEXED DTH CHURN DEVELOPMENT1.091.130.982010 Q1 2011 Q1 2012 Q1 2013 Q11.05 0.92 0.79 0.6511.92.552.78 2.942008 2009 2010 2011 2012DTH Third Party1
Restated with constant exchange rates per Q1 2013.NORDIC DTH PREMIUM ARPU (SEK) – CAGR +6.3&18DRIVING ARPUAND ADD ON SERVICE PENETRATIONPENETRATION OF ADD-ON SERVICES IN PREMIUM DTH BASEDTH price increases in Sweden and Norway implemented June 1Gold package price in Sweden (excluding card fee): SEK 459 (SEK 409)Gold package price in Norway: NOK 569 (NOK 549)Third party price increasesTelia price has been adjusted to SEK 459 from SEK 389 for the gold packageDenmark Waoo! prices have been raised from DKK 399 to 469 DKK.Source: MTG4,3844,4874,5784,6674,7594,8194,906 4,935 4,955Q1 2011 Q2 2011 Q3 2011 Q4 2011 Q1 2012 Q2 2012 Q3 2012 Q4 2012 Q1 20132008 2009 2010 2011 2012Multiroom HD58%Price/Valuefor the same price, you can takeyour spouse and two kids towatch a movie once a month.
0%1%5%8%10%13%17% 17%1%2%10%15%21%22%25%28%Q1 2011 Q2 2011 Q3 2011 Q4 2011 Q1 2012 Q2 2012 Q3 2012 Q4 2012 Q1 2013Nordics DenmarkNovember 2011 Viaplay isintroduced as a TVEverywhere add-on servicein Norway & Denmark.June 2013: TV Everywhere to allsubscribers (previously only offeredto sports subscribers due to PremierLeague rights issue).LIMITED CANNIBALISATION BETWEEN VIAPLAY AND VIASATMULTIROOM19VIAPLAYTV EVERYWHERE ADD-ON, REACHING NEW SUBSCRIBERSVIAPLAY MULTISCREEN PENETRATION AMONG PREMIUM DTHSUBSCRIBERSGrowing Viaplay usage and penetration is a key area in order to both reduce churn and future-proof the subscriber base by catering tonew viewing behaviour.Sweden only recently started offering Viaplay as a free add-on (June 2013), thus the overall penetration level is significantly lower on aNordic scale, but expected to grow.Source: MTG0%5%17%47%53%58%2010 2011 2012MULTIROOM & MULTISCREEN PENETRATION IN PREMIUM DTHMultiscreen Multiroom
20NICLAS EKDAHLJOINED MTG IN 2002Born 1970Joined MTG as Trainee 2002CEO of Viaplay since February 2011Senior Vice President of Nordic Pay-TV channels and Video OnDemand services between 2007 and 2011, and Head of MTG’sCreative Services between 2003 & 2007Also previously co-founder of a mobile Internet startup and ManagingDirector of an advertising agencyFavourite APP: SpotifyBest LAP: Midnattsloppet in AIK shirt chased by drunk Hammarbysupporters
HLH LNORDIC OTT SUBSCRIPTION LANDSCAPENEW COMPETITION IN TWO SEGMENTSPACKAGECONTENTSTRENGTHKEY MOVEMENTLow price entrants formovies/seriesCombined TV, sport and movies(Cmore, TV2 Sumo etc.)Linear channels online (Cmore,TV2, Comoyo, Filmnet, YouSee,Magine etc.)TVE with full offer (YouSee,Telia etc)PRICE21
22PHYSICAL SALES IS IN DEATH-ROLLVIDEO VIEWING “LIFECYCLE”Source: Veronis Suhler Stevenson; McKinsey2007 2008 2009 2010 2011 2012 E 2013 E 2014 E 2015 E 2016 EHALF OF US PHYSICAL DVD REVENUE “LOST” IN A DECADERental Retail
SUMMARYAggregating content behind a subscriptionFocus on TV-series, sports and movies – onlineAvailable on any deviceFocus on full length professional contentAvailable across Nordic region, Russia and Ukraine(as TV Everywhere for Viasat satellite customers)23
2 TARGET GROUPSGENERAL BROADBAND POPULATIONCore urban age 20-40 with videocentric online behaviourVIASAT LINEAR SUBSCRIBER BASEGetting access to Viaplay asa “TV Everywhere” product24
25STRONG SUBSCRIBER DEVELOPMENT…… GROWTH SINCE LAST YEAR’S CMD+273%
KEY AREAS (CMD 12)Maintain long term premium content leadershipMake available on increasing number of devicesEnhance content discovery and recommendationEnable offline modeExpand into new territories26
ViaplayCMoreNetflixSTUDIO 1 - SONY STUDIO 2 - DISNEY STUDIO 3 – NBC UNIVERSALSTUDIO 1 - FOX STUDIO 2 - PARAMOUNTSTUDIO 1 - WARNERCONTENT COMPARISON27
75% 69% 63% 60% 58% 58%25% 31% 37% 40% 42% 42%2008 2009 2010 2011 2012 2013 Q1DTH Third-party networks37OUR PAY TV NORDIC POSITIONPAY TV NORDIC SUBSCRIBERS SPLITSource: MTGStill large base of installed customers on our DTH platform.Third-party networks are growing on the back of IPTV and fibre growth.Managing the transition to IPTV and OTTMTG is uniquely positioned to face the development given our high degree of integration and many levers to utilise.Simultaneously, OTT isfast creating a new marketoutside of traditional payTV with Viaplay being asignificant player.
CONCLUSIONTHE INDUSTRY IS CHANGING...AND WE ARE DRIVING THAT CHANGEWe have a successful DTH platform with rising ARPU and clear capacity advantages for newformat launchesWe have a platform agnostic channel business with rising ARPU + volume growth from IPTV,fibre & open network roll-outs... Online video consumption is largely incremental to existing offline consumption and anopportunity to be tapped into via TVE and Viaplay...... and, we are uniquely positioned to seize the growth opportunity through leveraging oursuperior content portfolio, existing customer relationships, our integrated position in the valuechain, and our first mover advantage and established position in the OTT space…ON TRACK TO DELIVER GROWTH AND MARGIN EXPANSION IN 201438