Us Pay TV networks and the consolidation of the European TV market 7th November 2018
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US PAY-TV NETWORKS - 10 major competitors, with very high level of vertical and/or horizontal integration (pay TV provider, FTA networks, film studios ) - Editing 100+ cable networks and 8 movies, series and fiction premium services on domestic market - Reaching 200 + countries through distribution deals, locally edited cable channels and acquisitions - Ongoing market concentration March 2018 June 2018 Pending acquisition Merger talks 6 cable networks Result of Time Warner purchase Doesn t include sports and news networks
PAY-TV NETWORKS REVENUES: 93 BILLION USD AMC 3% Discovery 7% A&E 4% HBO 7% Lionsgate 2% U.S. PAY TV NETWORKS REVENUES WORLD, FY 2017 USD CBS 3% Others 4% Viacom 11% Turner 13% NBCU 11% PAY TV NETWORKS REVENUES DISTRIBUTION BY SOURCE WORLD, FY 2017 Subscriber revenues Advertising revenues Other revenues PAY TV NETWORKS REVENUES GEOGRAPHICAL DISTRIBUTION - WORLD, FY 2017 Domestic Fox 17% Disney 18% International No prevailing competitor on a global scale for now Revenues mostly generated on domestic market through MVPD subscriptions
STRONG POSITION ON DOMESTIC TV MARKET 120 US TV HOUSEHOLDS 2017 Millions 8 TOP 15 NETWORKS 2017 Average prime time viewers (Millions) 100 80 60 6 4 40 2 20 0 0 Legacy pay-tv FTA Linear OTT Other Source: Nielsen yearly ratings 80% legacy pay-tv penetration on US TV households allow cable networks to compete with FTA networks on audience and advertising Strong presence on high-value segment through original programming and rights acquisition
MTV CNN MSNBC ESPN FX Discovery AMC A&E MTV CNN MSNBC ESPN FX Discovery AMC A&E DECLINE CORRELATED WITH LEGACY PAY-TV EVOLUTIONS Groups Viacom Turner NBCU Disney Fox Discovery AMC A&E Main networks subscribers 2018/2014-11% -7% -8% -10% +2% -10% -7% -9% FLAGSHIP CHANNELS PENETRATION Subscribers (million) FLAGSHIP CHANNELS AVERAGE AFFILIATE FEE USD per subscriber per month 100 90 80 1,1 0,9 6,44 6,99 7,54 7,86 7,86 9,00 6,00 70 0,7 60 0,5 3,00 50 0,3 Q114 Q218 0,1 2014 2015 2016 2017 2018 0,00 Total legacy pay-tv subscribers Flagship channels subscribers MTV CNN MSNBC FX Discovery AMC A&E ESPN TV networks are overall losing subcribers faster than Pay-TV operators as a consequence of cost reduction strategies implemented by operators and subscribers. To maintain revenues, networks raise affiliate fees.
TURNING TO NEW DISTRIBUTION MEANS Main vmvpd Subscribers (millions) Main networks D2C streaming services Subscribers (millions) 8 16 7 14 6 12 5 10 4 8 3 6 2 4 1 2 0 Q116 Q216 Q316 Q416 Q117 Q217 Q317 Q417 Q118 Q218 Q318 0 Q116 Q216 Q316 Q416 Q117 Q217 Q317 Q417 Q118 Q218 Q318 New distribution means appeared with a potential to contain subscribers losses for flagship channels: skinny bundles, D2C streaming services
EUROPEAN MARKET FEATURES -1 COUNTRIES SPECIFICITIES - Demographics - Language - Regulation - EU - Currency - GDP GDP per capita by country - 2017 Source: World bank >50K <50K <30K <20K <10K <5K
EUROPEAN MARKET FEATURES -2 TV MARKET STRUCTURE - 96% TV households penetration - 33% free-to-air households - 18 countries with FTA markets > 30% FTA market by country - 2018 >50% <50% <30% <10% 0%
EUROPEAN MARKET FEATURES -3 PAY TV ARPU - ARPUs from ~2 to ~40-20 countries with <10 ARPU - Growth rate -0,5% in 2018 ARPU by country - 2018 >25 <25 <10 <5
US NETWORKS IN EUROPE : PROFILE US NETWORKS CHANNELS BY GENRE Q12018 number of channels PAY / FTA CHANNELS Q12018 number of channels Other (Nature, Music, News, Lifestyle ) Cinema FTA Sport Generalist / Entertainment Kids PAY US networks edit close to 200 distinct channels of which 13% are free-to-air
Billions TV NETWORKS REVENUES TV BROADCASTERS REVENUES Europe - 2018 - % total revenues 30 FTA ADVERTISING REVENUES Europe - euros 25 CAGR 1,2% Pay TV revenues FTA advertising revenues 20 15 10 5 Public funding 0 2016 2017 2018 2019 2020 2021 2022 2023 FTA broadcasters capture the largest part of TV broadcasting revenues in Europe
FOCUS: MOVIES AND FICTIONS 15 most distributed channels - Movies and fiction Q1 2018 TV households penetration Comedy Central ORIGIN OF MOVIES/FICTION CHANNELS Q1 2018 number of channels Paramount Channel Fox AXN SyFy TCM Cinema CBS Action Universal Channel AMC CBS Drama Horror Channel True Movies US Networks Other channels Cinesony Giallo US Networks Other Networks Movies4men 0% 5% 10% 15% 20% 25% 30% 35% US networks strongest asset is their catalogue, however in Europe other features such as exclusivity and localization are crucial
FOCUS: SPORTS 15 most distributed channels - Sport Q1 2018 TV Households penetration Eurosport 1 ORIGIN OF SPORTS CHANNELS Q1 2018 number of channels Eurosport 2 Freesports Match TV Ginx TV L'Equipe Extreme Sports Channel Fight Network Motorsport.tv Nuvola61 RAI Sport Package Super Tennis US Networks Other Networks Sportitalia Sport Virtuali Package ClassHorse TV US Networks Other Networks 0% 10% 20% 30% 40% 50% Fewer US networks edit Sports channels because of the European market specificities: local rights, strong presence of operators
FOCUS: KIDS 15 most distributed channels - Kids Q1 2018 TV households penetration Disney Channel ORIGIN OF KIDS CHANNELS Q1 2018 number of channels Nickelodeon Cartoon Network Boomerang Disney Junior Nick Jr Boing Pop Baby TV Disney XD Karussell US Networks Other networks TV3 Radost Moya Gulli Cbeebies US Networks Other Networks 0% 10% 20% 30% 40% 50% 60% Despite a strong local competition, US operators count amongst the most distributed in the region
OTT DISTRIBUTION CHALLENGES US NETWORKS OTT MODEL Number of OTT platforms Q2 2018 Europe MARKET SHARE D2C PLATFORMS Number of subscribers Q2 2018 Europe D2C B2B US networks D2C platforms Other D2C platforms Direct distribution suppose the complete creation of a subscribers base for newly launched services
CONCLUSION Other US actors with significant power to consider Main differentiation points US / Europe FTA channels prevalence Strong role of Pay TV operators in channels edition Necessity of partnerships benefit from new distribution means
Q&A
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