“Session 1: 2015 OTT Industry Scan- Assessment of Latest Deals, Strategies, and New OTT Services” Brian Mahony CEO and Principal Analyst, Trender Research, www.TrenderResearch.com Founder, OTT Executive Summit & Magazine, www.OTTexec.com/magazine bmahony@trenderresearch.com * 508-479-7254

Background Following the IPTV & OTT markets for 10 years Manage a 25,000 OTT community including: Trender Research OTT Video LinkedIn group OTT Executive Magazine, web, email, social OTT consulting clients including: OTT set-top box Pure-play OTT content network Leading OTT integrator OTT network video service provider Various investors: VCs, Wall Street, angels © 2015 TRENDER Research, Inc. All Rights Reserved.

OTT Background Data The number of OTT subscribers is likely to increase globally from 92.1 million in 2014 to 332.2 million by 2019 - Juniper Research Video traffic over smart-phones will increase 800%- Juniper Research © 2015 TRENDER Research, Inc. All Rights Reserved.

OTT Video Viewing Is Exploding The number of OTT subscribers is likely to increase globally from 92.1 million in 2014 to 332.2 million by 2019 - Juniper Research Video traffic over smart-phones will increase 800%- Juniper Research

Netflix Has a Chance To Become the Top “Channel” This Year

Linear Pay TV Services Beginning to Crumble In Q1, Pay TV providers saw first-ever Q1 subscriber losses (2013 was the first year of yearly losses) New and upcoming devices/services are hammering away: Sony PlayStation Vue Dish’s Sling TV Upcoming services from Apple and Verizon SVoD services from Netflix, Amazon, Hulu continue to grow Google’s YouTube is always lurking as a threat FreeCast’s $10 per year Rabbit TV has 4M subs and plans to add 5M Select TV subs (combines OTA/OTT) © 2015 TRENDER Research, Inc. All Rights Reserved.

Linear Pay TV Services Beginning to Crumble The subscription bundle is no longer sacred, with game theory strategies driving mutinies by HBO, CBS, Viacom, Showtime, etc. Consumers are happily paying an inverse amount for the value/time they spend on OTT services versus Pay TV “OTT video accounts for a disproportionate amount of content consumed when compared to expenditure — over one-third of video consumed per week is OTT, but it is only 9% of the household video budget. In terms of hours of consumption per dollar spent, consumers have every reason to shift spending to online video.” – Brett Sappington, director of research at Parks Associates © 2015 TRENDER Research, Inc. All Rights Reserved.

Pay TV Death Knells Pay TV’s audiences are dropping by double digits Bernstein Research Some Pay TV segments are in full retreat– kids shows down 20%+ In Q3, for example, traditional TV viewing was down 13 minutes per day while SVOD viewership was up about 12 minutes per day. Video Advertising Bureau estimates 30%-40% of pay TV ratings decreases can be attributed to SVoD services Estimates range from about 40% (Nielsen) to 60% (Parks Associates) of US homes accessing SVoD services now. © 2015 TRENDER Research, Inc. All Rights Reserved.

However, Broadband Continues to Grow in Q1 Pay TV providers added 1.2m broadband subs in Q1 (about 3M adds in past year, + 15% from prior year, 88.5 million total) But only 10K TV Subs Cable accounted for 90% of the broadband additions Telcos Verizon and AT&T together added 573,000 broadband subs, and lost 463,000 DSL Internet subscribers. Comcast increased the most broadband subs during Q1, with 407,000 additions; it lost 8,000 TV subs during that period. Time Warner Cable had 328,000 broadband additions and added 33,000 video subs; Charter added 136,000 broadband subs, and lost 5,000 video subs. * Leichtman Research Group (LRG) looking at the top 17 cable and telco broadband providers in the U.S. © 2015 TRENDER Research, Inc. All Rights Reserved.

Cable/Telco Pay TV Response Strategies Verizon offering “skinny bundle” channel packs (FiOS Custom TV) to address the (perceived?) high cost of Pay TV subscriptions Can’t beat ‘em, join ‘em by offering own or partner OTT services Cablevision CEO James Dolan, speaking at INTX: “Every dollar of profit I make in video I make $7 in profit in broadband.” Cablevision offering Hulu and HBO Now AT&T offering Hulu; promoting Amazon prime DirecTV does not have this option Wireless broadband is the OTT wild card 4G LTE “Public WiFi” (e.g. CableWifi) © 2015 TRENDER Research, Inc. All Rights Reserved.

Pay TV Can Leverage Core Strengths Integrated billing Content aggregation (after consumers add up their new OTT services) Follow-me TV (home TV, tablet/mobile, browser) Packaging other services (e.g. home security, home networks, home IT support, e-commerce) Big data personalization, search and discovery Customer installation/support? © 2015 TRENDER Research, Inc. All Rights Reserved.

M&A Chaos: Deals, Deals Everywhere Comcast buying Time Warner Cable Charter merging/buying Time Warner Cable and Bright House Verizon buying AOL AT&T buying DirecTV Altice buying Suddenlink © 2015 TRENDER Research, Inc. All Rights Reserved.

Implications for Content Providers Hedging bets with hybrid Pay TV/OTT bundles/shows A&E “Food Porn” and “Fall Into Me” Hulu as Pay TV/OTT content aggregator (e.g. “The Mindy Project”) Experimenting with business models Live streaming, ad-supported, SVoD, Freemium, live PPV, VoD, combination The launch of Vessel online video platform No longer have to “ask for permission”- floodgates are open! But, advertising brands can now go “direct to consumer” with their own channels (e.g. Red Bull) and apps (e.g. on Roku) © 2015 TRENDER Research, Inc. All Rights Reserved.

What Will Happen? Pay TV Bundle is now officially fragmented, if not dying Broadband demand will grow insatiably Driven by OTT Driven by Cable and Telcos themselves Driven by mellenials Premium content will become even more of a trump card Content discovery methods/portals still missing Social media as recommendation engine Content/service aggregators Continued business model specialization across content, broadband, and bundled services (voice, video, broadband, even value-added services- home IT, home security, etc.) © 2015 TRENDER Research, Inc. All Rights Reserved.