March 21, 2016 STATE OF THE VIDEO MARKETPLACE

March 21, 2016 STATE OF THE VIDEO MARKETPLACE

March 21, 2016 STATE OF THE VIDEO MARKETPLACE Todd Juenger Senior Analyst +1-212-823-3157 [email protected] See Disclosure Appendix of this report for important Disclosures and Analyst Certifications Bundled Pricing Is An Output, Not an Input We believe bundled pricing didnt 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. U.S. MEDIA | 2 Pay TV Value Chain Sports Leagues Talent & Production Costs $10 Households $45 $82 $17 $10 MVPDs 25% margin ~20% ROIC TV Networks 40% margin

+30% ROIC Source: Wikimedia Commons, Bernstein Estimates & Analysis Studios 15% margin High SD/low DD ROIC U.S. MEDIA | 3 2015 Current Affiliate Fee Breakeven (Fees in $/sub/mo) Pay-TV ARPU $82 Aggregate Affil Fees Customer-Related Expenses $45 $16 Gross Margin $'s $21 Gross Margin % Customer-Related OpEx % 45% 20% DIS FOXA TWX VIAB DISCA CBS AMCX SNI 2015 Fees

($/sub/mo) $9.93 $5.09 $3.71 $3.04 $1.06 $1.11 $0.75 $0.62 Distributor Break-Even (% Subs Lost) 32.6% 19.9% 15.3% 12.9% 4.9% 5.1% 3.5% 2.9% Source: SNL Kagan, Bernstein Estimates & Analysis U.S. MEDIA | 4 2018 & 2023 Affiliate Fee Hypothetical Breakeven (Fees in $/sub/mo) Pay-TV ARPU Current $82 Aggregate Affil Fees Customer Expenses Gross Margin $'s $45 $16 $21 Gross Margin %

25% DIS FOXA TWX VIAB DISCA CBS AMCX SNI Current Fees $9.93 $5.09 $3.71 $3.04 $1.06 $1.11 $0.75 $0.62 Est. Growth Rates 4% 9% 4% 2018 $92 $58 $18 $15 Est. Growth Rates 9% 4% 17%

2018 Est. Break-Even Growth Fees (% Subs Rates ($/sub/mo) Lost) 5% $11.49 43% 8% $6.42 29% 10% $4.94 24% 3% $3.32 18% 6% $1.26 8% 5% $1.28 8% 6% $0.90 6% 6% $0.73 5% 2023 $112 $90 $22 $0 0% Est. Growth Rates 5%

15% 2023 Break-Even (% Subs Fees Lost) $14.67 100% $9.43 100% $6.30 100% $3.85 99% $1.69 99% $2.23 99% $1.20 98% $0.98 98% Source: SNL Kagan, Bernstein Estimates & Analysis U.S. MEDIA | 5 If You Want To Accelerate the Change Sports Digital Antennas U.S. MEDIA | 6

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