LUMA Partners presents “The State of Digital Video,” as presented at the VidCon conference on January 23, 2015. This presentation reviews some of the key topics discussed at the conference: the rise of digital video, the traditional TV model, and convergent video.

1. LUMApartners
The State of
DIGITAL VIDEO
Terence Kawaja

2. The Rise of
Digital Video

3. Hours
29%
Source: eMarketer, comScore
U.S. Digital Video Proper6es
Ranked by Unique Video Viewers
Average Time Spent per Day
with Digital Video by Device in U.S.
YouTube Has Dominated the Rise of Digital Video
0
0.1
0.2
0.3
0.4
0.5
0.6
0.7
0.8
2011
2012
2013
2014
2015
Tablet
Smartphone
Desktop
Other

4. But Now It’s Not the Only Game in Town

5. Facebook Auto-Play Videos are Ubiquitous
75%From Mobile
4 Billion Daily Views

6. Mobile Apps Bring Live Content to Your Fingertips

7. Snapchat Has Built Mobile-First Advertising

8. Publishers Are Making Video Too

9. There Just Isn’t Enough Supply!
Display Ad CPM
$1.90
Video Ad CPM
$24.60
Source: ZenithOptimedia, Note: Average CPM

10. $2.9%
$4.2%
$6.0%
$7.8%
$9.5%
$0.0%
$1.0%
$2.0%
$3.0%
$4.0%
$5.0%
$6.0%
$7.0%
$8.0%
$9.0%
$10.0%
2012% 2013% 2014% 2015% 2016%
CAGR:&34%&
CAGR:&172%&
Source: eMarketer
$ billions
ProgrammaAc Video
Digital Video
Digital Video Spend Continues to Rise

11. Source: eMarketer
$ billions
ProgrammaAc Video
Digital Video
TV
$0.0$
$10.0$
$20.0$
$30.0$
$40.0$
$50.0$
$60.0$
$70.0$
$80.0$
2012$ 2013$ 2014$ 2015$ 2016$
$64.5
$66.4
$68.5
$70.6
$73.8
But is Still Only a Fraction of the TV Market

14. Traditional Digitalvs.

15. Traditional Digitalvs.

16. 100 : 1
19
Buckets
36
~ 100
Companies
~ 400
$150 billion
Total Spend
$6 billion
$1.5 Billion
$ / Company
$15 Million
Traditional TV vs. Digital Video Players

17. 100 : 1
Market Cap: $2 Trillion
Cash: $530 Billion
5x
Cash
New Entrants Have Plenty of Money to Build or Buy

18. Screens
Delivery
Content
2008 Was So Simple: Traditional & Digital Silos

19. Delivery
Screens
Content
Second Screen
Chromecast /Airplay
Partnerships
“Netflix + Disney”
Convergence Begins with Device Proliferation

20. OTT/CTV
Delivery
Screens
Content Partnerships
“Netflix + Disney”

21. TV
Economics

22. Content Channels Media MVPDs Device / UI
9,000+
Channels
C
O
N
S
U
M
E
R
CTV
Devices
OTT
UI
Traditional TV Content Model

23. Content Channels Media MVPDs Device / UI
C
O
N
S
U
M
E
R
Programs NetworksChannel
Bundles
“Must Carry” &
Broadcast Content
Traditional TV Content Model

24. Content Channels Media MVPDs Device / UI
Tier 1
Cable and
Broadcast
Content
M
A
R
K
E
T
E
R
CPG Upfronts$30BB
$40BB Spot and
Scatter TV ads
$6.3BBComcast bundles
in sports content
C
O
N
S
U
M
E
RAffiliate Fees
$40BB
Retrans Fees
$80BB
Subscriptions
Traditional TV Content Model

25. Bundling Enables Pre-Funding of Content
10%Support100%

26. Bundling Enables Pre-Funding of Content

27. Final Late
Night Episode
Evolution of
Top Rated Show
Most Viewed
Episode
1993
1990
1992
80MM
52MM
38MM
TraditionalTV
ContentModel

28. Final Late
Night Episode
Evolution of
Top Rated Show
Most Viewed
Episode
1993
2007
1990
2013
1992
2009
80MM
30MM
52MM
8MM
4MM
38MM
Crosschanneldevices
killedthetelevisionstar!

29. MediaChannels MVPDsContent Device / UI
C
O
N
S
U
M
E
R
“Just broadband
only, thanks!”
Subscription content on license
Discrete content
“Made for web” content
“I forget what
channel it’s on
I just stream it”
“Artist to
Consumer”
Digital Opens Different Distribution & Content Strategies

30. Big $$$
A18-49
Reach
Incremental Budget
A25-54
Reach
Paying 30-50%
more for .5-1%
more reach?!
TRP
Source: Needham & Co. , Nielsen
Incremental Cost
Per Reach Point
Incremental is Increasingly Expensive on TV!

31. eMarketer Digital Video Spend Projection
$0 $0
Source: eMarketer
eMarketer TV Spend Projection
Yet TV Dollars aren’t Slowing…

32. TV is Definitely Not Hurting Yet
Leslie Moonves, CEO
3 Year Compensation:
$186 Million
2014 Revenue
>

33. Cracks
In The Wall

34. Slack in Demand for Upfront Buys

35. OTT Options are Growing
$50-­‐$70
$8
$9
$20
$99/year
$15
$6
Average Basic Cable Packages
~$120
Source: NPD Group
$15
Stream

36. Programmatic Platforms
Targeting Technology
Attribution / Analytics
Low-Cost Production
Integrated
Workflow
Premium Content
Brand Relationships
Convergence of Two Worlds

37. Selling Points Reverse in 2015
Upfronts
NewFronts
Selling Premium Content
Selling Data-­‐Driven Approach

38. Selling Points Reverse in 2015
Selling Data-­‐Driven Approach
Selling Premium Content
Upfronts
NewFronts

39. Now TV is Being Aggressive with Data
Credit Card Data
Subscriber Data
Target Audience
Yogurt Buyers
Frozen Snack Buyers
Wireless Data Users
Inspired by WSJ

40. Digital is Increasing Investment in Original Content
Everyone is geVng in on the game
?

41. New Tier 1 Shows Backed with Tier 1 Talent

42. $0 $0
(1) Assumes 7.5% of TV Spend Shifts to Digital
Source: eMarketer
eMarketer Digital Video Spend ProjectioneMarketer TV Spend Projection
Digital Dollars Could Double

43. Perception vs. Reality in Addressable TV
Linear TV
Programma6c TV
Percep6on
Reality
Linear TV
Addressable
Linear TV
Video On
Demand
(VOD)
Over The Top
(OTT)
Digital
Video
Programma6c TV

44. WARNING: LUMA Decks Usually Call for More M&A

45. Convergent TV via M&A
CONTENT
DISTRIBUTION
MONETIZATION
Media

46. 31 Video Deals in the Last 2 Years

47. Digital Video Has a Very Bright Future
1. Preferred Consumer Media
2. Continued Device
3. New Content Formats
4. Ad Inventory Shortage
5. TV Demand Shift
6. Strategic Exit Opportunities

48. New York | San Francisco | Palo Alto
Access. Insights. Execution.
LUMApartners
Thank you! @tkawaja