THE FUTURE AND CHALLANGES OF TRADITIONAL BROADCASTING Gyöngyvér Gerlei Sales Director 23 May, 2019

Time spent on content consumption CONSUMER ATTITUDES TO MEDIA CONSUMPTION IS CHANGING Time spent on content consumption 42% 58% Predictions 2025  TV = OTT ? Source: Ericsson Media consumption has changed a lot in the past few years mainly among the youger generations. It the past years there has been significant growth in consumers’ preference for on-demand content, favoring it over scheduled linear viewing. It seems that traditional TV is not enough anymore, people need additional OTT content above or instead of their TV service. This trend reflects in the time spent on audiovisual content. Time spent watching linear TV is decreasing and the future of entertainment is going towards video on-demand. Since 2010, the share of weekly video viewing time spend watching linear TV has decreased approximately by 15%. By 2020, 7 out of 10 consumers (globally) will prefer video on-demand and catch- up services over scheduled linear TV viewing Global TV market has been witnessing the recent surge of OTT platforms against traditional TV; in early 2017, Netflix subscribers surpassed cable TV subscribers in USA. The question is that „which will be the date when the time spent on OTT will exceed linear TV watching?”

Audiovisual subscriptions in Europe ALTHOUGH TRADITIONAL TV STILL REIGNS SUPREME, ITS MARKET SHARE DECLINES Audiovisual subscriptions in Europe 80% 84% 82% 84% OTT subscriptions TV subscriptions OTT penetration 34% 26% Pay TV penetration 18% 12% Predictions 2025  TV = OTT ? Source: Ericsson, Arthur D. Little, Ericsson Turning to Europe we can say that high percentage of households still pay for traditional Pay-TV service, but increasing SVOD (Subscription Video on demand – azaz előfizetéses OTT) penetration is expected. The question is almost the same in terms of service usage: when will SVOD surpass traditional pay TV subscriptions? (It is important to note that SVOD is currently an additional service(s) above traditional pay TV, the cord cutting phenomenon is not spread yet is Europe. Subscribers in advanced countries still prefer to have traditional pay TV in combination with a third-party OTT service instead of standalone OTT.)

Live and mostly free (Free-to-air) content! …BUT IN SOME AREAS IT REMAINS STRONG News Live and mostly free (Free-to-air) content! Sport Popular events (Interactive) entertainment As we have seen on-demand content already represents over 40 percent of total TV and video consumption, but in some areas or content types traditional linear TV remains strong. Scheduled linear TV continues to offer the most-watched content (TV series, TV shows, live sports, etc.), 34 percent of all scheduled linear TV viewing is now spent watching live content. The main driver content types of linear TV are live news, live sports, live broadcast of popular events and interavtive entertainment programs. Most of these contents are live and offered in free-to-air porgramming.

TRADITIONAL BROADCAST TRADITIONAL BROADCAST TECHNOLOGY HAS MANY ADVANTAGES TRADITIONAL BROADCAST UNICAST (OTT) One-to-endless connection, the cost of content delivery does not depend on the number of viewers One-to-one connection, the cost of content delivery is proportional to the number of viewers Beside of the contents the other important and attractive feature of traditional broadcasting is the technology behind. Traditional broadcast has a long and proven track record of delivering large scale transmissions and can serve mass needs (millions of people simultaneously ) on a cost effective way. The delivery expenses do not depend on the number of viewers, while in the case of unicast technologies (OTT) the cost of content distribution is proportional to the number of users, so these are more relevant for niche services.

Share of Pay and FTA TV platfroms IN HUNGARY TRADITIONAL TV IS DOMINANT… Share of Pay and FTA TV platfroms DVB-T (free) Pay DVB-T Satellite Cable IPTV Pay TV SVOD HU 86% 5% W -EU 80% 32% Hungary (and the CEE region) followes the global trends but much more slower than the US or the Wester part of Europe. Pay TV penetration in Hungary is high, it has reached 86%, while SVOD services have very limited popularity. The wired platforms (digital cable and IPTV) show growing viewer base stealing share from the rest (mainly wireless) players. Source: NMHH, Arhur D. Little

…AND THE ROLE OF FREE-TO-AIR IS SIGNIFICANT Steady FTA platform Increasing channel number (currently 12) Countrywide coverage ~580 k households 1 200 000 citizens Free-to-air television has significant role in Hungary. The platform is steady, accounts for approximately 580k households’ TV service. We could gradually enrich the FTA package after the Analogue Switch-Off (2013) from 3 to 12 channels, so currently MinDig TV is functioning as a mini basic package for out TV viewers . The platform also brings value for the TV channels, our Open Window initiatives have proven that FTA can significantly increase the viewing share of their programming.

BUT FACES CHALLANGES International frequency management– 700 MHz frequency band should be freed by 2020 Expansion of fixed platforms, favorable 3Play offers 5G – challenge and opportunity DVB-T platform faces several challenges. The main task of the next year is to handle the 700 MHz issue by smooth frequency reallocation and transition to DVB-T2 technology. An other challenge is the continuous expansion of the wired paltforms (cable, IPTV), they can offer very good value for money with their 3 or 4Play packages. And eventually, 5G means challenge and opportunity at the same time. On the one hand it can be a competitor of the traditional broadcasting platforms, but on the other hand 5G will give the opportunity to provide XPlay wireless offers for the customers.

Integrated media platform – complex value proposition ANTENNA HUNGÁRIA HAS ANSWERS AND VISION Integrated media platform – complex value proposition Expanding free TV Revised pay TV OTT Number of channels Technology will not change (DVB-T) „Smart choice” Supplementary to the FTA offer Local and unique content Regional role Directly connected to and in sync with linear TV Rich functionality An IPTV-like service package can be developed Antenna Hungária is prepared for the future. We have a vision of an integrated media platform with complex value proposition for our coustomers. Our main goal is to extend the FTA base by the further increase of the channel number. It is important that the technology will not change after 2020, DVB-T will be kept for the FTA viewers. The pay TV will be revised in line with market trends and customer needs. It will be a supplementary smart choice product to the extended FTA offer. We continue to build our OTT platform. Besides the TV everywhere services we will focus on standalone local and unique contents. Hbb TV as the tool of harmonizing broadcast and broadband delivery of entertainment will be a key element supporting our core media services.

THANK YOU FOR YOUR ATTENTION! Gerlei Gyöngyvér Sales Director 23 May, 2019