Digital Content Creation: Where will the funding come from?

Slide 1: Dig ital Co nte nt Cre atio n – Whe re will the Funding Co me Fro m? Th e Te le fó nic a E xpe rie n c e Te le c o mmunic atio ns and Me dia Fo rum Madrid, S pain Angel Blas c o. Head of Films . Corpo rate Content Unit June, 25th 2008 TELEFONICA S.A. 1 Corpora te Conte nt Unit

Slide 2: Summary Te le fó nic a Ove rvie w  Co nte nt Cre atio n – Co nte nt Adaptatio n -  S e rvic e s Co nte nt in Te le fó nic a  Funding : Lo o king fo r Bus ine s s Mo de ls  Cro s s – Platfo rm Co nte nt  Co nc lus io ns  TELEFONICA S.A. 2 Corpora te Conte nt Unit

Slide 3: Te le fo nic a Gro up: Marke t Size TELEFONICA S.A. 3 Corpora te Conte nt Unit

Slide 4: What do we do in c o nte nt? Inte rne t Portals Interne t Mobile FTA TV & Pay TV Portals Portals other IPTV Sate llite TV Cable & MMDS Ma rke ts Spain •Bra •Chi •Bra •Per •Bra LatAm •Chi •Col •Per •Col •Arg •Ven Te le fó nic a •R Checa Europe • 500+ k FTA • One o f the • 800 k • 53 MM • 20 MM c us tomer TV le ader worldwide c us tome r UVs us e rs s in le ade rs ; s • More than • Bigger than Highlights o f Argentina 550+ k 8 MM any off- res ults ho me s vide o dec k playe r us e rs TELEFONICA S.A. 4 Corpora te Conte nt Unit

Slide 5: Summary Te le fó nic a Ove rvie w  Co nte nt Cre atio n – Co nte nt Adaptatio n -  S e rvic e s Co nte nt in Te le fó nic a  Funding : Lo o king fo r Bus ine s s Mo de ls  Cro s s Platfo rm Co nte nt  Co nc lus io ns  TELEFONICA S.A. 5 Corpora te Conte nt Unit

Slide 6: Co nte nt Cre ation – Conte nt Adaptation - Se rvice s Fro m a Bus ine s s Po int o f Vie w, Dig ital Platfo rms are :  C onte nt P la tform s — S e rvic e P la tform s — P rom otiona l P la tform s — Ke y Drive r o f Co nte nt is the “Inte re s t” o f o ur Cus to me rs  Ne w Platfo rms have g re at po te ntial fo r “Targ e t s e g me ntatio n”  Inte rac tivity, S c re e n S ize , S pe e d, Po rtability… s hape Co nte nt o f e ac h  platfo rm Co nte nt may be “Adapte d” fro m o the r Platfo rms o r “Cre ate d”  F rom Ne ws pa pe rs to Mus ic or Movie s — F rom “Mob is ode s ” or “Mob ig a m e s ” to “Y ou Tub e ” or “Uniq loc k” — Co nte nt may be “Pro fe s s io nally Pro duc e d” o r “Us e r Ge ne rate d”  … Or “Us e r Mo de rate d”  A Who le Unive rs e o f S e rvic e s aro und the Cus to me r  TELEFONICA S.A. 6 Corpora te Conte nt Unit

Slide 7: Interac tivity: Vo D, inte rac tive s e rvice s and othe r fe atures Inte ractive Se rvice s Came ra Choice Vide o o n De mand De live ry pla tform s Inte ra c tive c onte nt Oth e r fe a ture s th a t    with full c ontrol ove r th a t c a n m a ke c onte nt ne w c onte nt c om ple m e nt a nd e xpe rie nc e e nh a nc e c us tom e r c us tom e r e xpe rie nc e Inte rne t & e -m a il  Ma ps  Inform a tion  TELEFONICA S.A. 7 Corpora te Conte nt Unit

Slide 9: Pay TV Te le fónica TV ac tivitie s Ac tive s inc e 1997;  pio ne e re d IPTV in 2004  IPTV as c o re te c hno lo g y c ho ic e  DTH and Cable to e ns ure Co nte nt o ffe r in s e le c te d are as  Mo ve to wards pe rs o nal TV  Pe rs o nalize d line -up s e le c tio n  PVR  Vo D  Catc h-up TV TELEFONICA S.A. 9 Corpora te Conte nt Unit

Slide 10: Inte rne t Te le fónic a Inte rne t (PC) ac tivitie s Ac tive Po rtal s inc e  1999 Expande d by  c o nte nt do wnlo ad/s tre amin g s e rvic e s  Te rra TV  S o no ra/Pixbo x Mo re than 53 MM  unique vis ito rs pe r mo nth Top 3 or 4 in all  marke ts . Us ually s ole non-GYM performe r among marke t le aders TELEFONICA S.A. 10 Corpora te Conte nt Unit

Slide 11: Mo bile Tele fónic a Mobile Inte rne t ac tivitie s One o f the mo bile  fo re runne rs in c o nte nt  Mo bile po rtals in all marke ts  S tro ng no n-S MS data re ve nue s  Early mo ve r in  Full-trac k do wnlo ads  Vide o  Ope n mo bile inte rne t TELEFONICA S.A. 11 Corpora te Conte nt Unit

Slide 12: 5% S pe c ific re as o ns to e nte r c o nte nt De s cription GROWT H FOCU D SE Ac c e s s to ne w e le m e nts of dis c re tiona l s pe nding  Ne w re ve nue Up to 100% m ore th a n e xis ting b a s e s o urc e s  E xte nd a nd im prove a s s oc ia tions  S uppo rt to B ra nd s pillove rs diffe re ntiatio n  D F N VE E E SI C onte nt dis trib utors e xploiting infra s truc ture to provide  Co mpe titive te le c om s s e rvic e s matc hing Avoid c h urn a nd pric ing pre s s ure  Pro te c tio n C onte nt/ e rvic e pla ye rs e xte nding its m a rke t pos ition into s  ag ains t te le c om s s e rvic e s do wns tre am mo ve s TELEFONICA S.A. 12 Corpora te Conte nt Unit

Slide 13: S o me e xpe rie nc e s about availability of Conte nt TV o ve r 3G - Live F1 (Ad Funded) DS L with mus ic s ubs c riptio n inc lude d Te rra TV Fre e o D – in the mo nthly pric e S e rie s & Mo vie s S ample De ve lo pme nts inte g rating c re atio n, adaptatio n, and dis tributio n o f c o nte nt o n multiple platfo rms ? Full trac ks Do wnlo ad O2 IPTV Ove r 1 Millio n trac ks o n UK and o the rs yo ur mo bile fo r o nly 6€ pe r mo nth TELEFONICA S.A. 13 Corpora te Conte nt Unit

Slide 14: Flexibility: “Time s hifting” “Te lo Perdiste” PVR • PVR o n ne t • PVR o n de c k Ne w s e rvic e s g ive c us to me r full c o ntro l o ve r the TV: fo rward, s to p, re wind…. TELEFONICA S.A. 14 Corpora te Conte nt Unit

Slide 15: Flexibility: “Plac e s hifting” • Mo bile TV o ffe r’s alre ady allo ws ac c e s s to TV c hanne ls o n s imulc as t • S pain: 40 c hanne ls , o f tho s e : • 20 c hanne ls in s imulc as t: MTV, Hollywoo d, His toria, Odis ea, Inte re conomia etc • 20 c hanne ls with s pe c ial ve rs ion e xc lus ive for mobile (“Loo ps ”): Paramount Come dy, Nic k, Bo o me rang e tc . TELEFONICA S.A. 15 Corpora te Conte nt Unit

Slide 17: Whe re will the Funding c o me fro m? Financ ing Pro duc ing Dis tributing Exhibiting Produc e rs Dealing with the Film – DVD - TV Produc e Equity Inve s to rs “Right to Se e ” The Produc t Se que ls New Me dia Pre que ls Lo ans De fe rrals Spin-offs Library value S po ns o ring Adve rtis ing Prize s Pro duc t Plac e me nt Pre – Sale s Sale s Grants Soft Mone y MGs Re ve nue Sharing S ubs idie s TELEFONICA S.A. 17 Corpora te Conte nt Unit

Slide 18: Allo c atio n of Playe rs in the value chain Rig hts Final Ag g re g ato r Cre ato r Dis tributo rs Cus to me r Ho lde rs s s As o n lin e dis trib u tio n in c re a s e s , a lloc a tio n of re ve nu e s will m o ve d o wn s tre a m th e c h a in TELEFONICA S.A. 18 Corpora te Conte nt Unit

Slide 19: Financing mode ls in online dis tribution Trans ac tio nal – S ubs c riptio n – Fre e On De mand •Inte g rate d Mus ic with ADS L Upfro nt Fe e •Vo D – IPTV •Full Trac k do wnlo ad Re ve nue S hare •(Aggre gator or c ontent Pro vider) (With o r W/O •Mo bile Vo D o ve r 3G MG) •(Aggre gator or c ontent Pro vider) Ad S hare •Te rra TV S pain (With o r W/O •F1 MG) TELEFONICA S.A. 19 Corpora te Conte nt Unit

Slide 20: Adjus tme nt o f bus ine s s mode ls to digital c o nverg enc e Live c o nte nt and inte rac tivity Bundle s Fre e Co nte nt o n PC in the s ame windo w that us e s Fre e to Air TV Nature o f c o nte nt Ope rato rs make s ne two rks the natural dis tributio n s ys te m Apro ac hing to date to date windo w and Exc lus ivity Rig hts fo r lo ng e r Vie wing Pe rio de Flat Rate and Dual Mus ic Co nc e rts fo r c us to me rs De live ry S e rvic e s TELEFONICA S.A. 20 Corpora te Conte nt Unit

Slide 22: Evo lutio n o f c ros s -platform offe rs will pus h inte g ratio n 7 6 Maria downloads the full-trac k of the las t 1 OT programme , and als o re c e ive s the ringtone and wallpape r in he r While c o mmuting , mobile The pro g ram is ove r and Maria joins Maria watc he s the the OT fo rum from the PC and draws Be s t-o f-the -We e k o f up a ranking o f the be s t s ongs OT in her mo bile 12 11 1 2 2 10 5 9 3 Onc e at ho me , s he 4 do wnlo ads a mo re 8 e xte nde d ve rs io n Vo ting s tarts ! Se nd an SMS o f OT we e kly 7 5 with the name of your favourite 6 s ummary to the PC s ing e r to make him win 3 4 Be e p Be e p!!! An alarm s ounds it its mobile : OT is going to s tart Maria c hats through TV IM in 5 minute s !!! with Carlos about today’s She runs to the s inge rs ’ pe rformanc e s TV TELEFONICA S.A. 22 22 Corpora te Conte nt Unit

Slide 24: S umming up S trate g ic Telefónic Oppo rtunity Alre ady a Te le fó nic a fo c us a: leading bro ug ht by le ading growth in bro ad s c o pe e nabling indus try playe r and digital in c o nte nt e ffe c tive entertain c hang e s s pe e ding up e ntry ment Bro adband All platfo rms Support of a   Content,   e xplo s io n s tro ng marke ting broadband and  Pay TV mac hine Dig italizatio n o f digital s e rvic e s   Inte rne t Bundling  c o nte nt 14% of re ve nue s s e rvic e s Effe c tive ne s s in  Ne w us e r ne e ds Growth we ll abo ve    Mo bile c onte nt and e xpe c tatio ns (5x) ove rall Ratio nale ac quis ition and  c ompany growth Ne w c o mpe tito rs  e c onomies o f  De fe ns ive or te le com marke t s c ale  Gro wth- Innovation:  driven te chnology and be yond Incre as ingly able  to c re ate 360º c ros s -platform offe rs TELEFONICA S.A. 24 Corpora te Conte nt Unit

Slide 25: S o me Co nc lus io ns Co nte nt will “find its way” to the Co ns ume r, de pe nding the 1. “inte re s t” it may g e ne rate . Cro s s platafo rm is a multiplie r whe n s o me thing hits that inte re s t 2. The Be s t ide as are s till to c o me 3. We try to appro ac h “Co nte nt” as a “S tand alo ne bus ine s s ”, no t 4. o nly as a “ho o k” fo r s e lling s o me thing e ls e . We ’d like to mo ne tize c o nte nt, s e rvic e s and pro mo tio ns in a way 5. that do e s n’t “burn” the c us to me r. The re fo re the impo rtanc e o f c re ating c o mmunitie s , trans pare nc y, and balanc e be twe e n “re al value ” and “pe rc e ive d value ” TELEFONICA S.A. 25 Corpora te Conte nt Unit

Slide 26: Th a nk you An g e l.B la s c o @te le fon ic a .e s

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