OTT and the Media Broadcasting Industry

1. WHITEPAPER Connect the Dots and Make the Right Moves with Research & Analytics OTT AND THE MEDIA & BROADCASTING INDUSTRY The Impact & The Way Forward Based on a Study Conducted by SG Analytics With the disruptive advent of OTT platforms, audience viewing patterns and content consumption across the US are experiencing significant shift. Our study observed the emerging trends and the strategies that the media & broadcasting industry is adopting to stay relevant and competitive. We conducted a primary and secondary research among consumers in the US to understand the customer behavior patterns and changes in the supply and demand scenarios. We surveyed a panel of 3000 respondents of the age group of 18-64 years, across the south, northeast, west, and midwest regions of USA. www.sganalytics.com

2. OTT Platforms & Content Consumption: THE TRENDSPOTTING Distributed OTT platforms and smart TV penetration is changing the way the world consumes content. And how! Viewers are largely seeking convenience and privacy while consuming high-quality content, more of dark genres, at relatively lower costs. Proliferation of smart devices is encouraging anytime, anywhere viewing across multiple screens. This is giving rise to the cord-cutting trend where consumers are rapidly growing out of conventional PayTV services. Here are certain trends that we spotted in our study: 88% 24% All About Convenience and Privacy Cord-Cutting Trend on the Rise of the survey respondents between the age group of 18-34, tune-in into OTT platforms at least once daily, and rarely into PayTV channels. The shift in content consumption across platforms is primarily about convenience and privacy. of the survey respondents no longer have access to traditional PayTV services and this number is slated to grow further in 2019. The cord-cutting trend, evidently, is rapidly growing and putting traditional PayTV services under high pressure. 33% 47% Anywhere, Anytime Viewing Dark Genre of Content Rules! of those who responded watch content across more than one screen – smart TV/mobile/laptop/tablet. Device ownership and the changing consumer life style are enabling the anywhere, anytime viewing. of the respondents have been watching at least one episode of content, that is a combination of crime, thriller, and science fiction, in a week. 24% THE SURVEY DEMOGRAPHICS High Quality Content at Low Cost AGE-GROUP 18-24 yrs – 9% 25-34 yrs – 30% 35-44 yrs – 21% 45-54 yrs – 18% 55-64 yrs – 22% LOCATION South Northeast – 24% West Midwest – 17% ETHNICITY Caucasian Asian/Pacific Islander Hispanic African- American – 37% – 69% of those who responded change their subscription platform based on the popular shows. This churn is a factor of fast changing content and customer experience available at low cost. – 22% – 30% – 9% – 9% OTT Platforms & Content Consumption: THE STRATEGIES Players across the media and entertainment value chain—networks, broadcasters, distributors and production houses— are evidently reinventing themselves to stay relevant and maintain their market share. Here are certain strategies that media and broadcasting companies have adopted to stay competitive and continue to generate revenue from alternative sources of monetization. Here’s what we have observed: NETWORKS Coping Strategies And What Lies In Future 1. Enabling Viewers to Binge Watch on their OTT Platforms Every major television company has launched a dedicated streaming service. Industry giants such as Amazon, Netflix, Hulu, etc. continue to spend on content and technology to expand their subscriber base. Alternative platforms such as unreel.me are helping the industry giants with white-labelled platforms to launch customized offerings for their larger audience. Such platforms are helping the networks stay competitive and significantly improve their time to market. THE IMPACT OF OTT & THE WAY FORWARD www.sganalytics.com 2

3. 2. Partnering with Streaming Video Services and Digital Platforms to Ensure Distributed Presence There has been a sharp increase in the volume of original content being launched by networks on other platforms over the last few years. Major successful shows are now available for streaming across platforms. Here, we have noticed that various media firms are concerned about the cannibalization of the existing viewership and have expressed the need for an accurate valuation of their content over the short and long terms. These organizations are aware that without the right analytical tools, they may face an increase in non-returning consumers and loss of viewership. 3. Tech Acquisitions/Tie-ups are Enabling High Quality Products and Customer-Centric Features Ad-tech acquisitions are at an all time high to usher in superlative innovation, especially with the advent of artificial intelligence and machine learning. The media value chain, from networks to distributors, are making acquisitions to rapidly grow in the programmatic ad market space. So far, Fox, with its acquisition of TrueX, has been reasonably successful in introducing next-gen technologies into conventional TV viewing. By acquiring BAMTech, Disney is also successfully foraying into the OTT space. 4. Broadcasting Rights to Live Stream Sports and Performances are Getting Hotter! Networks continue to see value in acquiring rights to popular sports and live performances. However, the increasing demand to live-stream such performances across the platforms is making the landscape quite competitive. Networks are investing billions into content acquisition to win the broadcasting rights for their platforms. 5. Content Is King, as Always, and Drives Customer Acquisition The internet companies are competing with the network giants such as NBCU, Fox, etc. in their content production budgets. Netflix and Amazon put together are spending more than 40% of the overall production budgets of the world. Facebook is slated to join the league with its content production spends while Youtube is already launching its TV streaming services. 6. M&As are Creating Content Monopoly, Leading to Major Investments in Tech and Content Strategies 2018 has seen some major mergers and acquisitions in the media space for organizations to stay competitive and consolidate their strengths. MGM’s acquisitions of Epix, the Discovery-Scripps merger, the Disney-Fox merger are some of the mega conglomerates that are merging to create strategic competitive advantage. CABLE BROADCASTING FIRMS Coping Strategies And What Lies In Future 1. The vMVPD is the New Digital Way to Deliver the Conventional PayTV Services Conceptually, a Virtual Multivideo Platform Distributor (vMVPD) is quite similar to a conventional cable or satellite TV provider. Instead of using a set-top box to distribute linear television programming, vMVPD delivers it over the Internet. Instead of being viewed as a ‘cord-cutter’, vMVPD is being considered native to the cable universe as it allows a household to receive linear and network content on the same subscription. 2. Dynamic Ad-insertion Techniques are Helping Content Monetization and Increasing Transparency Firms like Comcast are deploying technology solutions that enable dynamic ad-insertion based on the demographic, contextual, and behavioral audience attributes. These attributes include genres being watched, time of the day tune-in, co-viewing parameters, etc. Ad-tech firms are also leveraging these technologies to ascertain the accuracy of viewership metrics and impact of advertising to avoid the “lemon’s problem” (or the reduced asymmetry of information). As ratings are no more bound by panel ratings, advertisers are experiencing greater transparency in the ad-buying contracts. THE IMPACT OF OTT & THE WAY FORWARD www.sganalytics.com 3

4. 3. QVCs are Being Upgraded to Video-Based eCommerce Solutions on Top of the Platforms Advanced analytics and machine learning platforms are revolutionizing e-commerce on video-streaming. Direct links to e-commerce are being placed in the video meta data enabling users to click on the link while watching a video to purchase items instantly. Deep video meta-data tagging is slated to revolutionize the way shoppers interact with the smart TV and give the advertisers and broadcasters unconventional ways of monetization and partnerships. 4. Launching Own OTT Platforms is Easier Than Before Launching independent OTT platforms is becoming increasingly easier as the media-tech firms are providing white- labelled platforms that can be customized to broadcasters’ needs. Platform partnerships will increase the network and device compatibility, and exponentially increase the audience reach. The M&A activities are expected to increase in this space to bring right content and superlative customer experience on such platforms. WHAT WILL THE OTT DISRUPTION LEAD TO? It will change the future of advertising, for sure. The future of media and entertainment industry will be of highly customized one-on-one marketing and advertising to ensure high customer loyalty, with the help of subtle advertising and deep video meta-data tagging. Nevertheless, the paradigm is eventually driven by the availability of opportunities to monetize. We believe that the advertising game will change forever to have a lasting impact on those who are embracing and adopting emerging technologies to stay on top of innovation in this space. The new and more fierce competition is going to emerge from the left field as technology/Internet giants such as Google, Apple, Facebook, Microsoft and more are making unprecedented moves to enter this game. We believe that various technologies, such as virtual & augmented reality, addressable TV, dynamic ad-insertion, and peripheral wearables will help companies ride the digitization wave. ABOUT SG ANALYTICS For over a decade, SG Analytics is one of the leading global research & analytics firms with offices in India, Switzerland, UK and USA, servicing scores of customers across the globe. We have been recognized as the Best Employer by the World HRD Congress in 2018. We work closely with the media & entertainment sector to ensure our customers are always in sync with the emerging technologies and evolving consumer preferences. MEET US AT THE QUIRK’S EVENT FOR MARKETING RESEARCH & INSIGHTS PROFESSIONALS February 12-13, 2019 London, England THE IMPACT OF OTT & THE WAY FORWARD www.sganalytics.com 4