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DEVELOPMENTS IN THE UK TELEVISION MARKET

DEVELOPMENTS IN THE UK TELEVISION MARKET. December 2002. Contents. Industry Figures Digital TV Programming and Audiences Focus on ITV. Components of television revenue in 2001. £84 million. 1%. Sponsorship. £312 million. 4%. Sale of goods. £382 million. 5%. Other. £1.7 billion.

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DEVELOPMENTS IN THE UK TELEVISION MARKET

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  1. DEVELOPMENTS IN THE UK TELEVISION MARKET December 2002

  2. Contents • Industry Figures • Digital TV • Programming and Audiences • Focus on ITV

  3. Components of television revenue in 2001 £84 million 1% Sponsorship £312 million 4% Sale of goods £382 million 5% Other £1.7 billion 21% BBC licence fee spent on TV £2.0 billion 25% SubscriptionRevenue £3.4 billion 44% Net Advertising Revenue Sources of UK television revenue... ...and trend in share of main components,1995-2001 60.0% 50.0% NAR 40.0% 30.0% Subscription BBC licence fee spent on TV 20.0% Other 10.0% Sale of goods Sponsorship 0.0% 1995 1996 1997 1998 1999 2000 2001 Source: ITC

  4. 80% 70% 60% Channel 3 incl GMTV 50% 40% 30% Cable and Satellite and other 20% Channel 4 incl S4C 10% Five 0% 1995 1996 1997 1998 1999 2000 2001 UK TV Net Advertising Revenue by channel over time... Source: ITC

  5. 500 450 400 Cash Bids £ million, nominal prices 350 PQR 300 250 200 150 100 50 0 2001 1994 1995 1996 1997 1998 1999 2000 Tender payments by Channel 3, Five and Additional Services licensees,1993-2001 The Broadcasting Acts 1990 and 1996 require that certain kinds of licence are awarded by the ITC after a process of competitive tender. Licences awarded in this way are required to make additional payments to the Treasury (via the ITC). Additional payments are in two parts. The first is a percentage, set by the ITC, of qualifying revenue (PQR). The second part is the cash bid, which on renewal is set by the ITC. This is index-linked and payable annually. Note: The drop in total tender payment in 1999 reflects the renewal of some Channel 3 licences. The increase in PQR in this year reflects the policy decision that more emphasis be given to the PQR component of tender payments. Source: ITC

  6. Contents • Industry Figures • Digital TV • Programming and Audiences • Focus on ITV

  7. Take-up of digital television compared with other home technologies 80 VCR1980-1989 70 60 Colour TV Sets1969-1978 50 Penetration (% of households) Digital TV1998-Sep 2002 40 PC1984-1993 30 Satellite1987-1996 20 10 0 0 1 2 3 4 5 6 7 8 9 Year after launch Digital TV’s strong initial growth is, in part, a result of the move to switch existing subscribers from analogue todigital packages - by 1998 analogue multichannel TV had already achieved penetration of some 25% of households Source: ITC

  8. UK Pay-TV Growth, 1999 - 2002 UK Multichannel Pay-TV Penetration, Quarter 3, 2002 12 ITV Digital* Platform Households (‘000s) % of UK TV households 10 Millions of subscribers Digital Satellite 6,063 24.9% 8 Sky Digital 6 Digital Cable 2,037 8.4% 4 Analogue Cable 1.333 5.5% Digital Cable 2 Analoguemultichannel Total 9,433 38.7% 0 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 1999 2000 2001 2002 Pay TV take-up by platform * Please note: ITV Digital went into Administration on 27 March 2002 and ceased trading on 1 May, therefore we have only included subscriber numbers up to 31 March 2002. Source: Company data

  9. How people are watching free-to-air digital television, Q3 2002 FTA DTT Adaptors 120,000 (8%) A small number were using set top boxes provided by manufacturers such as Pace - following the launch of Freeview this number is expected to increase rapidly iDTV308,000 (20%) The number of iDTV sets is beginning to show significant growth Sky FTA Churn317,000 (20%) We estimate that 25% of Sky’s ex-subscribers still use the set top box to obtain FTA channels Sky FTA Viewers 230,000 (15%) More than 200,000 households are estimated to have taken advantage of Sky's £100 FTA box offer before it was withdrawn in early 2002 - it is being re-introduced in early 2003 Ex-ITV Digital600,000 (37%) We estimate that 600,000 of ITV Digital’s ex-subscribers now use the set-top box to receive Freeview services Sources: Estimates for iDTVs are provided by Intellect, all other figures are ITC estimates

  10. 100% 80% Digital 60% Analogue multichannel 40% Total multichannel 20% 0% Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 2002 1999 2000 2001 -20% -40% Quarterly growth in pay-TV subscribers Source: Company data

  11. Range of available digital basic packages (Satellite & Cable) Sky Cost: £12.50 £15.50 £18.50 Channels included: More than 14 channels, mostly free to air 4 ‘themed’ packs (Popular mix, Knowledge, Kids/music, Lifestyle pack), each offering some 25 channels More than 70 channels Telewest Cost: £15 £18.50 £21.50 £25.50 Channels included: More than 20 channels, mostly free to air More than 40 channels Some 44 channels More than 70 channels NTL Cost: £19.50 £25.50 Channels included: More than 20 channels,mostly free to air More than 70 channels • Please note: prices for NTL and Telewest packages include phone line rental;installation charges are applicable for all three platforms Source: Company literature, January 2003

  12. 1,200 ‘000s 1,000 ADSL 800 NTL Telewest 600 400 200 - Q1 Q2 Q3 Q4 Q1 Q2 Q3 2001 2002 Growth in broadband internet subscribers 2001-2002 1,046,000 748,000 479,000 330,000 222,000 147,000 93,000 Source: Company literature

  13. Contents • Industry Figures • Digital TV • Programming and Audiences • Focus on ITV

  14. Audience share in all homes by channel, 1999-2002 35 % 30 (CAGR) BBC1 (-2.8%) 25 ITV1 (-8.0%) Other (15.5%) 20 15 BBC2 (2.8%) 10 C4 (-1.6%) Five (2.4%) 5 0 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 1999 2000 2001 2002 Source: BARB

  15. Audience share in multi-channel homes by channel, 1999-2002 (CAGR) 45 Other (3.9%) % 40 35 30 25 BBC1 (-1.6%) 20 ITV1 (-6.8%) 15 10 C4 (1.8%) BBC2 (2.4%) 5 Five (-1.1%) 0 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q3 1999 2000 2001 2002 Source: BARB

  16. Audience share in analogue terrestrial homes by channel, 2001-2002 40 % 35 BBC1 30 ITV1 25 20 BBC2 15 CH4 10 Five 5 0 Q1 Q2 Q3 Q4 Q1 Q2 Q3 2001 2002 Source: BARB

  17. Average weekly audience reach (3 minutes consecutive) by channel, all homes, 2001-2002 100 % 90 BBC1 ITV1 80 BBC2 CH4 70 60 CH5 50 40 30 20 10 0 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 1999 2000 2001 2002

  18. 11% 23% Allhomes 40% Allhomes 30% 60% 35% Multi-channelhomes Multi-channelhomes 14% 44% 28% 56% 36% 22% Analogueterrestrialhomes 41% Analogueterrestrialhomes 59% 7% 18% 25% 50% ABC1 C2DE Viewer profiles by type of television received Profile of viewers by type of service and social class, Q3 2002 Profile of viewers by type of service and age, Q3 2002 Children 35-54 16-34 55+ Source: BARB

  19. Q3 2001 Q4 2001 Q1 2002 Q2 2002 Q3 2002 ABC1 C2DE All Individuals ABC1 C2DE All Individuals All Homes Multichannel Homes Hours viewed per household per day by social class, 2001-2002 4.5 4 3.5 3 2.5 % 2 1.5 1 0.5 0 Source: BARB

  20. Q3 2001 Q4 2001 Q1 2002 Q2 2002 Q3 2002 Children 16-34 35-54 55+ Children 16-34 35-54 55+ All Homes Multichannel Homes Hours viewed per household per day by age, 2001-2002 6 5 4 % 3 2 1 0 Source: BARB

  21. Issue of ITC licences Issue of ITC licences and total number of licensed programme services, 1994-2001 600 Net licences issued in year (all services) 500 Total programme services 400 300 200 100 0 1994 1995 1996 1997 1998 1999 2000 2001 -100 Note: The negative figure for net licences issued in 2000 reflects the replacement of many regional cable licences with fewer national licences. Source: ITC estimates

  22. Contents • Industry Figures • Digital TV • Programming and Audiences • Focus on ITV

  23. The ITV licensees Grampian Scottish Tyne Tees Ulster Yorkshire Border Central Granada Anglia HTV Carlton/LWT Westcountry Meridian Channel

  24. The ITV licensees - ownership structure ITV Granada Group Carlton Group Scottish Media Group Anglia Carlton Grampian Border Central Scottish Granada HTV Ulster LWT Westcountry Meridian Channel Tyne Tees Yorkshire

  25. ITV1 BBC1 Audience share by region, ITV1 compared with BBC1, Q3 2002 40 35 30 25 20 15 10 5 0 West Ulster Wales Border London Scotland Midlands Yorkshire North East South East North West South West East of England Source: BARB

  26. ITV1 BBC1 Audience share for regional news programmes by region, ITV1 compared with BBC1, Q3 2002 50 45 40 35 30 25 20 15 10 5 0 West Ulster Wales Border London Scotland Midlands Yorkshire North East South East North West South West East of England Source: BARB

  27. 100 90 % Achieved in 2001 ITV 80 58% Five 70 Channel 4 ITC LicenceRequirement 55% 60 Five 50 40 69% Channel 4 60% 30 20 10 81% ITV 0 65% 1996 1997 1998 1999 2000 2001 Original programmes (including repeats) as a percentage of total output (hours) by channel ITV, Channel 4 and Five all have requirements in their licences to produce a set amount of original programming each year. ITC Licence Requirement for original programmes and actual performance, 2001 Original programmes as a percentage of total output, 1995-2001 % Note: Channel 4’s original programming target was only introduced as a licence requirement in 1998;prior to this the figures were reported in Channel 4’s Annual Report. Source: ITC; Channel 4 Annual Report

  28. 100 Achieved in 2001 90 % 80 73% Five Five 70 ITC LicenceRequirement 25% Channel 4 60 50 61% 40 Channel 4 25% ITV 30 20 10 31% ITV 0 25% 1996 1997 1998 1999 2000 2001 Qualifying hours commissioned from independent producers as a percentage of total qualifying output by channel ITV, GMTV, Channel 4 and Five all have requirements in their licences to commission a set amount of programming from independent producers each year. ITC Licence Requirement for independently produced programmes and actual performance, 2001 Qualifying independents as a percentage of total qualifying output, 1995-2001 Source: ITC

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