Mobile Television and its Impact On Business

Mobile television and its impact on business The big picture on small screen opportunities Media & Entertainment

Whether it’s the traditional press and broadcast media, or the multitude of new media, audiences now have more choice than ever before. For media and entertainment companies, integration and adaptability are becoming critical success factors. Ernst & Young’s Global Media & Entertainment Center brings together a worldwide team of thousands of professionals with the industry knowledge to help you achieve your potential — a team with deep technical experience in providing assurance, tax, transaction and advisory services. Our global media and entertainment professionals work to anticipate market trends, identify the implications and develop points of view on relevant industry issues. Ultimately, it enables us to help you meet your goals and compete more effectively. We’ll use this study and other reports as a means of sharing information with you. It’s one of the ways Ernst & Young makes a difference.

Contents Introduction 2 Mobile TV service delivery 4 Mobile TV deployment – What success looks like outside the US 6 Three forces driving mass adoption of mobile TV 8 Customer acceptance and adoption 10 Talking about the generations – The ascendance of Y and Z 12 So what? The implications of mobile TV for video content producers and aggregators 14 What’s next? Some recommendations from Ernst & Young 16 Contacts 17 Mobile television and its impact on business

Introduction The big picture on small screen opportunities Will they or won’t they? And if they do, how far will they go? In Ernst & Young’s 2008 survey of 41 CEOs of global media 2 Those were the questions that technology and content providers and entertainment companies, 21% thought mobile 1 began pondering with the release of the video iPod in 2005, content would be the most likely medium for consumers to when the mobile TV debate began in earnest. Would consumers access entertainment in the future. Likewise, such mobile watch television shows, movies and other entertainment manufacturers as Nokia and Ericsson and operators such as on a small screen? So far, the answer has been “yes.” Not a Sprint and 3Italia have invested in the development of both resounding one, perhaps, but at least a qualified yes, bolstered content and technology to support the adoption of mobile largely by early adopters. At the very least, the infrastructure television. is finally laid out. Broadband is virtually a given for home PCs, There are two key drivers, particularly in the United States, game consoles and other media devices. This massive increase propelling the marketplace toward mass adoption of mobile TV in bandwidth has paved the way for widespread acceptance of and video. One is the maturation of Generation Y (the 18– to alternative distribution channels for a variety of content. The 27-year-olds) and Generation Z (12- to 17-year-olds). The other questions to ponder now are more about how much money is the convergence of these core elements of the entertainment consumers will spend on mobile technology and content process (Figure 1): and what successful companies are – or should be – doing to maximize their revenue from this burgeoning base. 1. Networks – The deployment of third and fourth generation mobile network technology providing high speed data transfer Figure 1 with low latency 2. Devices – The adoption of converged mobile devices (CMDs) such as the iPhone™, Google Phone (G1™), Blackberry Bold™ and Storm™, and the Nokia N96™ with their dramatically improved user interfaces, screens, available applications Content and graphics 3. Content – The availability of premium, free-to-air and internet mobile content combined with new applications and tools that will drive significant new advertising and licensing revenues for content producers and broadcasters Mass mobile US consumers’ increasing adoption of mobile TV services will TV adoption present companies with new business opportunities and revenue streams, from content licensing to advertising, along with the challenges that invariably accompany growth. What may be just as important, these services also will provide media companies with direct access to their key demographics, Generations Y Networks Devices and Z. Entertainment on the move is already popular. But if mobile consumers embrace mobile video in the same way they embraced digital music, the entertainment industry is in for a sea of change. 1 “Cool, a video iPod. Want to watch ‘Lost’?” New York Times, 16 October 2005, via Dow Jones Factiva. 2 Ernst & Young, Fast forward: How CEOs are balancing the transition to the digital future, October 2008. 2 Global Media & Entertainment Center

Advertising will be a dominant business model for monetizing That makes content companies much more empowered mobile TV in the short- to mid-term, with ad-supported content within the mobile distribution chain as they can provide models driving a much faster consumer acceptance rate and videos directly to the consumer without having to negotiate wider use of mobile video and TV. Mobile TV advertising will licensing or carriage agreements with the mobile operators. broaden the content owners’ advertising platform offerings, Galvanizing these new and potentially lucrative presenting a new and more valuable way to enhance media opportunities, however, will require expanded ad sales companies’ cost per thousand impressions (CPMs) for cross- capabilities that stretch the boundaries of current platform advertising sales. And with the increased bandwidth processes, technologies and people across all functional available with G3 and G4 technologies, consumers will be able to areas of traditional media companies. download videos to their mobile devices from online websites. Mobile television and its impact on business 3

Mobile TV service delivery There is little doubt that consumers are rapidly adopting Figure 2 technologies and services that blur the lines between US mobile TV and video users, 2007-2012 (M) entertainment and communication. With the maturing of a 50 generation raised on the concept of “anytime, anywhere, 45.7 46.5 anyhow” media consumption combined with the convergence 41.8 of mobile network infrastructure, next-generation handsets and 40 enhanced content, mobile TV represents a lucrative opportunity 35.0 for media and entertainment companies as well as mobile network operators (MNOs). Analysts estimate that in the United 30 States, mobile TV viewers will grow from 24 million in 2008 to 24.3 47 million in 2012, a 17% compound annual growth rate (CAGR). (Figure 2) 20 15.2 Likewise, revenue from mobile TV services will experience corresponding growth during the same period, from under 3 10 $1 billion in 2008 to almost $1.7 billion in 2012. (Figure 3) Some analysts are forecasting even larger mobile TV sales. As the demand increases, so do the delivery methods available 0 2007 2008 2009 2010 2011 2012 to consumers. Currently there are three primary models for delivering TV programming to mobile handsets – premium Ovum, “Wireless content forecasts and methodology,” May 2008 services, ad-supported services and a hybrid of the two. Figure 3 Premium services. This model requires a fee to be paid by US mobile TV and video revenue, 2007-2012 ($M) the end-user to receive television content which is delivered via their MNO’s network. Qualcomm’s MediaFLO is the exception to 2,000 this model, delivering their TV programming over the wireless 1,697 1,604 network they own and operate. Such content producers as MTV Networks or ESPN license their programming to a content 1,600 1,400 aggregator (e.g., MediaFLO or MobiTV), which contracts with a mobile network operator for content delivery. The MNOs act as the front-end for the service, arranging for end-user billing 1,200 1,083 and providing customer service. Mobile users pay a premium fee to the MNOs for access to the TV programming. This is the 794 dominant model in the US today, with consumers paying from 800 $10 to $30 per month to receive live, streamed or on-demand 516 programming via their mobile devices. 400 0 2007 2008 2009 2010 2011 2012 Ovum, “Wireless content forecasts and methodology,” May 2008 3 Ovum, “Wireless content forecasts and methodology,” May 2008. 4 Global Media & Entertainment Center

Ad-supported services. With this model, consumers can within the US has to be one standard if they want to 4 use their mobile device to receive broadcast television seize an opportunity of this scale and their Advanced signals sent directly from their local TV stations. While Television Systems Committee will select that standard. no intermediary (e.g., MNO) is necessary to provide or At the International Consumer Electronics Show on deliver the content, an MNO may charge a nominal fee to 9 January 2009, the OMVC announced their intention the end-user for equipping their mobile device with the to launch mobile, digital television service from 63 TV necessary chip to receive the broadcast TV signal. This stations in 22 markets, covering 35% of US television model is based on the traditional television broadcast households. Among the 63 stations are 14 NBC model whereby the local station pays to license content affiliates, 9 ABC affiliates, 9 CBS affiliates and 5 FOX (e.g., syndicated programming) or produce their own 5 affiliates. content (e.g., news broadcasts) and receives revenue from advertisers based on the number of viewers. Consumers continue to make it clear that they want access to content anytime, anywhere and with relative Hybrid of ad-supported and premium. This combo ease. Although all three methods for delivering on- model requires the consumer to pay a premium for demand content will gain some traction in the mobile receipt of the content and also includes some amount of TV marketplace, it will likely be the ad-supported, advertising. MobiTV, one of the two major TV programming free-to-air broadcast TV service that ultimately drives aggregators in the US and Canada, is an example of the mass consumer adoption in the US. With consumers hybrid model. They not only receive a subscription fee reluctant to pay for subscription-based content, online for the use of the service but they also sell advertising. advertising has become the dominant business model. According to their latest report, approximately 10% of their This trend is demonstrated by numerous online revenue is earned via advertising. content offerings, from AOL’s removal of its “walled In an effort to accelerate the ad-supported model and garden” approach to content to the New York Times’ make mobile TV a viable business opportunity, more multiple attempts to launch subscription services. than 800 TV broadcasters in the US have joined together Both services have since adopted advertising- 6 to form the Open Mobile Video Coalition (OMVC). The supported models. And since consumers are OMVC’s mission is to jump-start the process of creating a accustomed to seeing advertising while viewing new technical standard that would enable mobile phone television, this business model will be consistent users to receive digital television signals from local TV with their non-mobile media experience. stations. The group believes the underlying technology 4 “Mobile video’s final frontier,” Telephony, 1 November 2008, via Dow Jones Factiva, © 2008 Penton Business Media; “Mobile DTV 101,” Open Mobile Video Coalition website, www. openmobilevideo.com/about%2Dmobile%2Ddtv/mobile%2Ddtv%2D101/, accessed 13 November 2008. 5 “OMVC demonstrates future of mobile DTV and details initial broadcaster roll-out plans,” Business Wire, 8 January 2009, via Dow Jones Factiva. 6 “New York Times dumps paid for content,” Brand Republic, 19 September 2007, via Dow Jones Factiva; “AOL flips business, offers service for free,” CMP TechWeb, 2 August 2006, via Dow Jones Factiva. Mobile television and its impact on business 5

Mobile TV deployment – What success looks like outside the US Of the key markets that have seen widespread adoption of 3Italia, an MNO in Italy, successfully launched a mobile TV mobile TV, Japan and South Korea stand out. These two service using the Digital Video Broadcasting – Handheld (DVB-H) countries have successfully implemented ad-supported, free- technology in 2006. More than 100,000 people signed up within to-air broadcasting of mobile television. In Japan, television six weeks of its launch to watch live the World Cup action; the broadcasters send their signals to viewers using the free-to- company now reports over 850,000 subscribers. 3Italia offers air 1Seg technology, based on the Integrated Services Digital 12 channels of television programming, including its La3 channel Broadcasting-Terrestrial (ISDB-T) standard. ISDB-T uses 6MHz for which 75% of the programming is produced by the operator bandwidth channels divided into 13 segments. in-house. Although the service was originally fee-based, 3Italia announced in June 2008 that it would make its programming A high deﬁnition television (HDTV) broadcast signal utilizes 12 of available for free between the hours of 0800 and midnight to those segments, leaving the remaining one segment for mobile 7 spur additional demand for the service. content. Hence the name 1-segment, or 1Seg. Broadcasters deployed 1Seg for mobile viewers in April 2006. Over 41 million As these case studies from Japan, South Korea and Italy 1Seg handsets have been shipped since tracking began in illustrate, the ad-supported model drives signiﬁcant consumer June 2006 and the country now has nearly 70 million viewers adoption and, in turn, advances the business opportunities to of mobile television. In August 2008, 1Seg-enabled handsets those along the mobile TV value chain. That said, these three accounted for 85% of all mobile phones shipped within the markets are the exception rather than the rule, with adoption 8 country. (Figure 4) worldwide happening at a far slower pace. South Korea deployed its Terrestrial-Digital Multimedia Broadcasting (T-DMB) service in 2005 and has since grown its audience to more than 18 million viewers of free-to-air content – roughly 38% of the population. MNOs such as SK Telekom have entered the mobile TV arena by offering on-demand television content over their 3G wireless networks via subscription or on a pay-per-use basis. Although operators report that approximately two million users watch video clips that they download to their phones, the predominant method for mobile TV viewing is still 9 the free-to-air T-DMB service. 7 8 Ovum, “Mobile TV in Japan,” February 2008; “Broadcasting: does mobile matter?” Marketing, “Japan sees domestic mobile phone shipments decline in 1h 2008,” MIC - Asia Express, 17 September 2008, via Dow Jones Factiva. “Technology (A special report): Home 22 August 2008, via Dow Jones Factiva, © 2008 Market Intelligence Center; “Japan mobile entertainment — coming to a tiny screen near you,” The Wall Street Journal, phone shipments down 48 pct in Aug.,” Jiji Press English News Service, 8 October 2008, via 8 December 2008, via Dow Jones Factiva, © 2008 Dow Jones & Company, Inc. Dow Jones Factiva; “Broadcasting: does mobile matter?” Marketing, 17 September 2008, via Dow Jones Factiva. 9 “Four standards currently propel mobile TV,” Microwaves & RF, 1 March 2008, via Dow Jones Factiva. 6 Global Media & Entertainment Center

Figure 4 Accumulated shipments of 1Seg handsets (M) 45 41 40 40 37 35 33 31 30 28 26 25 23 20 20 18 14 15 15 13 12 10 10 8 8 7 4 5 5 3 3 2 2 2 0 Aug Oct Dec Feb Apr Jun Aug Oct Dec Feb Apr Jun Aug 2006 2007 2008 Ovum, “Mobile TV in Japan,” February 2008; “Japan sees domestic mobile phone shipments shipments up 7.6 pct in Jan.,” Jiji Press English News Service, 10 March 2008, via Dow Jones decline in 1H 2008,” MIC - Asia Express, 22 August 2008, via Dow Jones Factiva, © 2008. Market Factiva; “Shipments of mobile phones with digital TV function surpass 20 mil.,” NTT Topics, 18 Intelligence Center; “Japan mobile phone shipments down 48 pct in Aug.,” Jiji Press English News February 2008, via Dow Jones Factiva, © 2008 Gale Group Inc.; “Jiji Press daily Japan business Service, 8 October 2008, via Dow Jones Factiva; “Japan mobile phone shipments down 10.7 pct in news briefs (JAN. 16),” Jiji Press English News Service, 16 January 2008, via Dow Jones Factiva; May ,” Jiji Press English News Service, 8 July 2008, via Dow Jones Factiva; “Japan mobile phone “Japan’s mobile phone shipments down 30.4 pct in Oct.,” Jiji Press English News Service, 11 December 2007, via Dow Jones Factiva. Mobile television and its impact on business 7

Three forces driving mass adoption of mobile TV In Ernst & Young’s recent CEO Study, top media and Figure 5 entertainment executives cited mobile technology and Over the next two to three years, what trends will have the on-demand content as two of the major trends that will greatest impact on the media and entertainment industry? 10 impact the industry over the next few years. These senior Technology enablement media executives believe that technology will be the driver (broadband, mobile technology, 27% of change for both content creation and distribution as home storage, etc.) Changing consumer demand consumers continue to migrate toward more on-demand (on-demand content, free content, 27% entertainment. (Figure 5) interactivity, etc.) Content innovation To the increased availability of on-demand content add the (user-generated content, blogs, 19% increased content choices, etc.) convergence of network infrastructure and mobile devices, Digital content transformation and the end result is the combined force that will lead to the (digitization, increased quality, etc.) 15% tipping point of mass consumer adoption of mobile TV. Advertising innovation (advanced targeted advertising, 12% Network infrastructure. Wireless networks have to be online advertising, etc.) capable of distributing video content to devices in a reliable way that meets consumer expectations and is transparent 0% 5% 10% 15% 20% 25% 30% to the end-user. The MNOs have continuously invested in Percent of responses their networks and current third generation technology (3G) Ernst & Young, Fast forward: How CEOs are balancing the transition to the digital future, October 2008. enables carriers to reliably transmit TV programming to mobile phones. Absent current limitations on the number of mobile TV users per cell site, upcoming 4G technology will Figure 6 provide much greater capacity, upwards of 100 megabits per Worldwide mobile network connections, second, for mobile TV delivery. (Figure 6) WiFi technology, by generation (M) available today, enables wireless consumers to access 6,000 content directly from the content owners’ mobile application websites and avoid any premium pricing of intermediary service providers (e.g., MediaFLO). 5,000 2G Mobile devices. As consumers look to take their content with them, there is a demand for devices that meet both 4,000 2.5G their entertainment and communication needs. Witness the enormous success of portable media players. Mobile 3G device vendors are working to facilitate content on-the-go 3,000 through the introduction of converged mobile devices, or smartphones, that can support a range of features beyond mere telephony, including gaming, music and TV. Shipments 2,000 of these converged mobile devices, according to IDC, will grow from 157 million in 2008 to almost 339 million in 2012. (Figure 7) Such new devices as the Blackberry Storm™ or 1,000 Nokia N96™ use high-end operating systems that enable friendlier, more sophisticated user interfaces and larger viewing screens with sharper graphics. 0 2007 2008 2009 2010 2011 2012 Ovum, “Mobile regional and country forecast,” October 2008 10 Ernst & Young, Fast forward: How CEOs are balancing the transition to the digital future, October 2008. 8 Global Media & Entertainment Center

On-demand content. As with any emerging platform, The stage is set for new opportunities among telecommunications the ability to supply consumers with compelling content is and media and entertainment companies. But their audience is an crucial to sustaining and accelerating growth. And one of elusive one, even in the best of times. Now, divining their needs the features that makes content compelling is the speed and delivering the products they want are challenges that likely and ease with which consumers can access it. The flurry have been eclipsed by the challenge of retaining jobs and staying of activity from the MNOs and media and entertainment afloat in this turbulent economic climate. companies striving to provide mobile TV and video is representative of the increased focus on giving these Figure 7 consumers what they want. Worldwide converged mobile device (CMD) shipments (M) Premium content providers, such as MobiTV and 400 MediaFLO, have invested heavily in acquiring short-form content, optimized for small screens and targeted toward a particularly youthful audience. Content creators like MTV 300 Networks are embracing this new licensing and distribution platform at an accelerated pace – MTV Networks has more than 80 distribution deals and 40 on-demand and 200 11 streaming mobile video services worldwide. Wide scale availability of third-party device applications, such as the 15,000 applications currently available for 100 12 the Apple iPhone, enable users to access video content beyond that which is offered by the mobile operator. These applications represent a material shift – a real 0 2007 2008 2009 2010 2011 2012 paradigm shift – in how consumers access content from IDC, “Worldwide converged mobile device 2008-2012 forecast their devices. They are now able to bypass the mobile update, September 2008, Document #214292. operator’s subscription-based video services in favor of video content that is being delivered by sites supported by an advertising-based business model (e.g., Joost). As the efforts surrounding the development of network infrastructure, mass introduction of multifunctional mobile devices and compelling content all align, mobile TV in the US is poised for mass consumer adoption. 11 MTV Networks launches its first ever ads on premium mobile VOD,” PR Newswire (U.S.), 11 September 2008, via Dow Jones Factiva. 12 “iPhone 3G,” Apple website, www.apple.com/iphone/, accessed 6 February 2009. Mobile television and its impact on business 9

Customer acceptance and adoption US customers have not responded at the speed of their Time and technology may have worked their magic, however, counterparts in Japan, South Korea and Italy. Why not? What is and despite these reports of tepid interest for mobile TV, the standing in the way of all-out acceptance of mobile TV? A 2007 landscape is changing. Historically, the viewing experience was survey by Yankee Group Research (considerably in advance of suboptimal. Small screens with slow response times, content the economic downturn) suggested a range of reasons from that was difficult to access and manage, and high-cost monthly battery usage and screen size to subscription costs and higher subscription models with limited content were drawbacks that 13 monthly fees. (Figure 8) stymied adoption. The reticence may not be an all-American issue. A European Today’s converged devices are more aesthetically appealing, survey that same year also found that lack of interest and high with larger screens and sharper graphics for a better viewing cost were preventing mobile TV adoption. Among the European experience; traction of ad-supported business models, mobile users aged 16 and older that responded, 53% said particularly free-to-air; and content that meets consumers’ they had no interest in watching mobile TV and 74% were not demands, such as short-clips and live sporting events. This new interested in watching free ad-supported programming over landscape fuels strong adoption trends and will provide fertile 14 their mobile phones. ground for mobile TV to flourish. Of those that do subscribe to mobile TV, most prefer to view The current economic crisis must be factored into any short clips rather than full-length programs. Early results have forecasts of mobile TV uptake rates, especially given recent shown viewers typically watch for an average of 34 minutes per announcements of decreasing handset sales from some of the 15 16 week. Short movies, news, cartoons and sport highlights would major device manufacturers. However, downward market therefore make excellent content for mobile TV. (Figure 9) cycles do eventually recover and more favorable economic conditions may spur the eventual upswing in mobile video. Figure 8 Figure 9 Why aren’t you interested in subscribing to a mobile TV service? Content types preferred by current mobile video users Don’t want video on mobile phone 76% 2% 2% 1% News video clips 3% 3% Music video clips Don’t want to pay a monthly fee 68% 5% Sports video clips Comedy/entertainment Screen too small 59% video clips 6% 24% Live TV shows Too expensive 45% Weather video clips Other types of Already pay too much 11% 41% video clips for wireless services 21% Live TV comedy/entertainment Will eat up battery 35% 18% Live TV sports Live TV weather 0% 20% 40% 60% 80% 100% Live TV music Note: Multiple responses allowed. IDC, “US mobile television and commercial video 2008-2012 forecast,” May 2008, Document Source: Yankee Group Research, Inc., “Anywhere consumer: 2007 US entertainment survey,” December 2007. #212089 13 15 Yankee Research Group, Inc., “Anywhere consumer: 2007 US entertainment survey,” December IDC, “US mobile television and commercial video 2008–2012 forecast,” May 2008, Document 2007. #212089. 14 16 “New survey by Mobixell shows potential for ad-sponsored content in rich media services like 1,700 jobs to vanish as Nokia retrenches,” International Herald Tribune, 18 March 2009, via MMS and mobile video clips,” PR Newswire (U.S.), 2 June 2008, via Dow Jones Factiva. Dow Jones Factiva, © 2009 The New York Times Company; “Sony Ericsson issues profit warning as mobile phone sales slump,” Guardian Unlimited, 20 March 2009, via Dow Jones Factiva. 10 Global Media & Entertainment Center

Mobile television and its impact on business 11

Talking about the generations – The ascendance of Y and Z With their increasingly advanced media and mobile habits, the Figure 10 18– to 27-year-olds of Generation Y and the 12– to 17-year-olds Hours spent on interactive media of Generation Z play a major role in mobile TV adoption in the Hours per week (Gen Y vs. all adults) US. Gen Y already spends more time with interactive media than their older counterparts of 30 and above. They are active phone 4.4 users and twice as likely as the general population to watch Playing video games 17 1.8 videos on their phones, spending 20% more time with media and with their cell phones each week than US adults in general. 8.1 (Figure 10) Use the internet for personal purposes 5.6 What’s especially interesting is that they may be more amenable to the idea of ad-supported content. A study conducted in the UK 8.9 found that younger adults were willing to watch short targeted Use a cell phone ads in exchange for discounted or free mobile TV. Not so for 4.8 adults. The results of a similar survey indicated that the majority 18 of adult users would not be interested in ad-supported video. 6 Watching DVD’s or VHS 4.2 Teenagers are a key mobile demographic in the US, with over 19 70% adoption reported in 2007. This generation, which grew up using small-screen, hand-held gaming devices such as the 0 2 4 6 8 10 Nintendo DS, is very comfortable using a mobile device for Gen Y (18-27) All adults more than simply making phone calls. According to reports, teens send or receive seven times more mobile texts than calls Forrester Research, Inc., “Building Gen Y’s multichannel media proﬁle,” 23 May 2008 and are more likely to access the internet for entertainment and information purposes with their phone than the average 20 mobile user. As Generations Y and Z grow older and their spending power increases, mobile television adoption should accelerate within the US. With the “I want it now” battle cry of the consumer ringing in their ears, content producers and advertisers must prepare to leverage the mobile TV platform to its best advantage to engage and entertain these mobile evolutionaries. 17 Forrester Research, Inc., “Building Gen Y’s multichannel media proﬁle,” 23 May 2008. 18 eMarketer, “Mobile video and television,” August 2008, citing data from QuickPlay Media; “New survey by Mobixell shows potential for ad-sponsored content in rich media services like MMS and mobile video clips,” PR Newswire (U.S.), 2 June 2008, via Dow Jones Factiva. 19 eMarketer, “Kids and teens: communications revolutionaries,” November 2008, citing data from Pew Internet and the National Commission on Writing. 20 eMarketer, “Kids and teens: communications revolutionaries,” November 2008, citing data from Harris/CTIA and Nielsen Mobile. 12 Global Media & Entertainment Center

So what? The implications of mobile TV for video content producers and aggregators As mobile technology personalizes entertainment, enables business and influences lifestyles, it becomes more closely entwined with everyday life. Likewise, mobile exerts a similar influence on the M&E value chain, inextricably linking businesses and processes from creating the content through measuring and monetizing the results. Ernst & Young media and entertainment value chain Technology forces Consumer forces Bandwidth Control Reporting, Storage Content Distribution Audience Adaptability measurement Access creation and delivery aggregation Choice and analysis Connectivity Speed • Develop/acquire video content • Leverage mobile • Determine optimal CPMs • Ensure sales systems can that addresses unique mobile operator infrastructure for mobile video ads and support mobile operator market demands to explore new business ensure sales force is trained sales feeds • Design website video models to sell mobile video ads • Ensure sales/royalty content to work on mobile • Deliver video content • Leverage mobile audience systems can apportion applications tailored to mobile to access a new consumer revenues for new business • Ensure content is tagged platform and markets base with products tailored models (e.g., advertising, and available to be used in • Ensure website for previously untapped subscriptions) formats appropriate to mobile infrastructure is mobile markets • Ensure that finance systems • Enable cost-efficient compatible • Explore new business can capture and report on content versioning, storage, • Develop capabilities to models to push more new revenue streams identification, tracking, deliver and synchronize content and build new • Develop capability to report privacy, security and delivery advertising across consumer base sales and measure product • Secure the legal rights to use mobile, online and • Access previously untapped ROI across mobile, internet content in mobile formats traditional platforms markets to build a broader and traditional businesses global presence The tipping point for mobile TV and video has strategic and Most important, all members of the value chain must develop tactical implications across the entire value chain as well. the data systems and analysis capabilities to monitor, measure Content producers must be able to create and make available and monetize the growing mobile television audience. An compelling content to increase viewing demand and build brand estimated 10% of incremental revenues are currently attributed 21 loyalty in mobile viewers. Broadcasters must develop the ability to inaccurate content and sales reporting. Capturing this to optimize their advertising inventory. Marketers should develop incremental revenue opportunity, in addition to future revenues, simple, 15- to 30-second advertisements to fit the attention means addressing these operational challenges as quickly and span and smaller viewing screens of mobile TV viewers. comprehensively as possible. 21 “Mobile video’s final frontier,” Telephony, 1 November 2008, via Dow Jones Factiva, © 2008 Penton Business Media; “Mobile DTV 101,” Open Mobile Video Coalition website, www. openmobilevideo.com/about%2Dmobile%2Ddtv/mobile%2Ddtv%2D101/, accessed 13 November 2008. 14 Global Media & Entertainment Center

What’s next? Some recommendations from Ernst & Young All narrative aside, the simple proposition is that mobile TV Given the existing acceptance level, we look for mobile 22 presents a $1.7 billion opportunity – and maybe even more. television in the US to really take off in the 2009-2012 period, Asking some key questions can help you determine how predominately supported by advertising. As content companies prepared your company is to take advantage of this opportunity. increasingly leverage a direct-to-consumer model via their websites, look for an increase in margins as well as in consumer • Do you have a clearly articulated strategy that leverages access. Taking full advantage of this opportunity requires media the global reach, untapped markets and new consumers and entertainment companies to develop mobile strategies that accessible through mobile video distribution networks? involve adapting current systems, processes and people across all functional areas of traditional media companies. What we • Are you developing new products and services that address may also see intensify is the battle between traditional media the unique features of mobile markets? giants, new media companies that didn’t even exist a few years • Do you have a strong sense regarding which business models ago and telecom operators – all vying for their share of this will optimize your revenues from your mobile products? surging, emerging market opportunity. The likely winners will be • Are you building an integrated operational business plan the enterprises that can deploy these enhanced technological (across business units or brands) that maximizes your content capabilities to make their programming and associated and infrastructure investments? advertising more attractive and accessible to consumers and thus more valuable to advertisers, getting the most from this • Are you conducting multi-platform data capture and analysis distribution platform and its shape-shifting audience. The of customer viewing, engagement, impact, behavior, targeting challenge now is how to prioritize. and purchase transactions? • Do you know that your new partners are reporting and paying accurately on the sale of your content? • Do you have accurate end-to-end cost transparency and controls? • Can you develop timely, achievable operational management reporting and analysis? • Do you have accurate demand forecasting, planning and pricing analysis at a platform, device, network, geographic or demographic level? • Can you ensure responsive content management and rights clearances? • Are the sales feeds from your new distribution channels integrated into your sales and royalty processing systems? • Are you able to conduct reliable revenue recognition and streamlined transaction reporting, billing and collection? 22 Ovum, “Wireless content forecasts and methodology,” May 2008. 16

Contacts Telephone Email Global Media and Entertainment Center John Nendick, Global Sector leader (Los Angeles, US) + 1 213 977 3188 john.nendick@ey.com Sylvia Ahi Vosloo, Associate Director, Marketing (Los Angeles, US) + 1 213 977 4371 sylvia.ahivosloo@ey.com Karen Angel, Global Implementation Director (Los Angeles, US) + 1 213 977 5809 karen.angel@ey.com Beth Bemis, Global Markets leader (Los Angeles, US) + 1 213 977 3208 beth.bemis@ey.com Heather Briggs, M&E Senior Manager (Los Angeles, US) + 1 213 977 4219 heather.briggs@ey.com Mike Fischer, M&E leader (New York, US) + 1 212 773 7553 michael.ﬁscher@ey.com Yooli Ryoo, Knowledge Manager (Los Angeles, US) + 1 213 977 4218 yooli.ryoo@ey.com Peri Shamsai, M&E Senior Manager (New York, US) + 1 212 773 9172 peri.shamsai@ey.com Pam Walker, Events Coordinator (Los Angeles, US) + 1 213 977 3046 pam.walker@ey.com Global Area Leaders and Advisory Panel Members Farokh T. Balsara (Mumbai, India) + 91 22 4035 6550 farokh.balsara@in.ey.com Mark Besca (New York, US) + 1 212 773 3423 mark.besca@ey.com Neal Clarance (Vancouver, Canada) + 1 604 648 3601 neal.g.clarance@ca.ey.com Noriharu Fujita (Tokyo, Japan) + 813 3503 1355 fujita-nrhr@shinnihon.or.jp David McGregor (Melbourne, Australia) + 613 9288 8491 david.mcgregor@au.ey.com Gerhard Mueller (Munich, Germany) + 49 891 4331 13108 gerhard.mueller@de.ey.com Bruno Perrin (Paris, France) + 33 1 46 93 6543 bruno.perrin@fr.ey.com Michael Rudberg (London, England) + 44 207 951 2370 mrudberg@uk.ey.com Global Service Line Leaders and Advisory Panel Members Thomas J. Connolly, Global M&E Transaction Advisory Services leader + 1 212 773 7146 tom.connolly@ey.com Alan Luchs, Global M&E Tax leader + 1 212 773 4380 alan.luchs @ey.com Paul Macaluso, Global M&E Transaction Advisory Services leader + 1 213 240 7040 paul.macaluso@ey.com Chris Pimlott, Global M&E Tax leader + 1 213 977 7721 chris.pimlott@ey.com Gregg Sutherland, Global M&E Business Advisory Services leader + 1 720 931 4435 gregg.sutherland@ey.com Advisory Panel Members Howard Bass + 1 212 773 4841 howard.bass@ey.com Glenn Burr + 1 213 977 3378 glenn.burr@ey.com Vincent de La Bachelerie, Global Telecommunications leader + 33 1 46 93 6205 vincent.de.la.bachelerie@fr.ey.com Rick Fezell, Global Technology leader + 1 408 947 6568 rick.fezell@ey.com Bud McDonald + 1 203 674 3510 bud.mcdonald@ey.com Tim Teagle + 1 213 977 3216 tim.teagle@ey.com Ken Walker + 1 805 778 7018 kenneth.walker@ey.com Mobile television and its impact on business 17

Ernst & Young Assurance | Tax | Transactions | Advisory About Ernst & Young Ernst & Young is a global leader in assurance, tax, transaction and advisory services. Worldwide, our 135,000 people are united by our shared values and an unwavering commitment to quality. We make a difference by helping our people, our clients and our wider communities achieve their potential. For more information, please visit www.ey.com Ernst & Young refers to the global organization of member firms of Ernst & Young Global Limited, each of which is a separate legal entity. Ernst & Young Global Limited, a UK company limited by guarantee, does not provide services to clients. © 2009 EYGM Limited. All Rights Reserved. EYG no. EA0027 This publication contains information in summary form and is therefore intended for general guidance only. It is not intended to be a substitute for detailed research or the exercise of professional judgment. Neither EYGM Limited nor any other member of the global Ernst & Young organization can accept any responsibility for loss occasioned to any person acting or refraining from action as a result of any material in this publication. On any specific matter, reference should be made to the appropriate advisor.

Mobile Television and its Impact On Business

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