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STATE OF THE VIDEO MARKETPLACE

STATE OF THE VIDEO MARKETPLACE. Todd Juenger • Senior Analyst • +1-212-823-3157 • todd.juenger@bernstein.com. March 21, 2016. Bundled Pricing Is An Output, Not an Input. We believe bundled pricing didn’t drive the industry structure .

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STATE OF THE VIDEO MARKETPLACE

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  1. STATE OF THE VIDEO MARKETPLACE • Todd Juenger • Senior Analyst • +1-212-823-3157 • todd.juenger@bernstein.com • March 21, 2016

  2. Bundled Pricing Is An Output, Not an Input • We believe bundled pricing didn’t drive the industry structure. • We believe the industry structure drove bundled pricing. • Technology is changing the industry structure (from linear to on-demand). • Therefore we believe pricing practices will have to change as well.

  3. Pay TV Value Chain Sports Leagues Talent & Production Costs $10 Households $45 $17 $82 $10 TV Networks 40% margin +30% ROIC MVPDs 25% margin ~20% ROIC Studios 15% margin High SD/low DD ROIC Source: Wikimedia Commons, Bernstein Estimates & Analysis

  4. 2015 Current Affiliate Fee Breakeven Source: SNL Kagan, Bernstein Estimates & Analysis

  5. 2018 & 2023 Affiliate Fee Hypothetical Breakeven Source: SNL Kagan, Bernstein Estimates & Analysis

  6. If You Want To Accelerate the Change • Sports • Digital Antennas

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