1. Channels and Choices…
Where will Broadband TV rank in the mix
for video content owners?
Aditya Kishore
Director,
Media and Entertainment Strategies
Yankee Group
akishore@yankeegroup.com
February 27th, 2006
© Copyright 2006. Yankee Group Research, Inc. All rights reserved.

2. Agenda
• Evolving media environment for the digital consumer
• Channel comparison: Revenues, penetration & growth
• Summary and conclusions
• Questions & Answers
© Copyright 2006. Yankee Group Research, Inc. All rights reserved. Channels and Choices February 2006 Page 2

3. Sweeping technology changes are shaping new trends in the
consumer media market
• Format independence
Digitization • Interactivity Device
• Personalization Multifunctionality
+ • Distribution and storage New channel
Broadband Internet development
+ • Portability New channel
Mobility • Ubiquity development
+ • Seamless media transference Device
Home Networking
Independence
New consumption behaviors and revenue opportunities
© Copyright 2006. Yankee Group Research, Inc. All rights reserved. Channels and Choices February 2006 Page 3

4. BEFORE: Traditional device-content relationships
Video VCR TV TV
Consumer
Retail
Radio
Music Stereo Radio
© Copyright 2006. Yankee Group Research, Inc. All rights reserved. Channels and Choices February 2006 Page 4

5. AFTER: Emerging digital consumer device map
Games
Music
Video
Mobile/Portable Device
Music Music
Stereo
Internet
Video
Retail
Video
PC
DVD Consumer
Games Games
Console
SneakerNet
TV
While potentially STB
disruptive, Broadband TV
Internet
IPTV
Terrestrial
Satellite
Cable
is only one of many video
distribution channels to
the consumer
© Copyright 2006. Yankee Group Research, Inc. All rights reserved. Channels and Choices February 2006 Page 5

6. Video revenues today: Traditional media rules
Domestic Revenue In Billions Of US $ • TV advertising is $60-65
billion and subscription
$125.0 $120.0
revenues are $55-60 billion
$100.0
• Domestic home video sales
$75.0
were $16 billion and rentals
$8 billion in ‘04- combining
$50.0 for almost 3x box office
revenue
$24.0
$25.0
• Mobile revenues were $122
<$0.5 <$0.1
$0.0 billion but video generated
Multichannel DVD/VHS Broadband TV Mobile TV less than $100 million
Video
Investment – both monetary and otherwise - from content owners should be
cautious and targeted given the size and scale of emerging platforms
Source: Yankee Group, VSDA, 2005 Portable Entertainment Forecast, North American Mobile Premium Forecast All numbers are year-end 2005
© Copyright 2006. Yankee Group Research, Inc. All rights reserved. Channels and Choices February 2006 Page 6

7. Video landscape today: Traditional media rules
% US Households • While 98% of all US homes
have broadcast TV, 86% are
100% 95%
86%
pay TV subscribers
75% • Nearly 40% of US HH
subscribe to broadband, but
50% only 23% regularly view
Internet video
23%
25%
• 59% of US HH have at least
1% one mobile phone, but only
0%
1.6 million users regularly
Multichannel DVD/VHS Broadband TV Mobile TV*
Video use wireless video
The disruptive impact of Broadband TV will be constrained by established
consumer behavior and enhancements to traditional channels
Source: Yankee Group Analysis, VSDA, 2005 TAF Survey, 2005 VCDS Survey All numbers are year-end 2005 *Users, not households
© Copyright 2006. Yankee Group Research, Inc. All rights reserved. Channels and Choices February 2006 Page 7

8. Video landscape at start of 2010: Traditional channels still rule
% US Households
• Telco entrants won’t grow
100% 95% multichannel video market,
86%
merely cannibalize it
75%
• Nearly 70 million US
households will subscribe
50%
41% to broadband, with 41%
viewing video regularly
25%
10% • 10-15 million mobile phone
0%
users will use their devices
Multichannel DVD/VHS Broadband TV Mobile TV* to access video content
Video
Even five years out, in spite of substantial growth of the emerging platforms,
traditional video channels continue to be dominant
Source: Yankee Group Analysis, North American Mobile Premium Forecast *Users, not households
© Copyright 2006. Yankee Group Research, Inc. All rights reserved. Channels and Choices February 2006 Page 8

9. Suitability of medium for advertising: TV is king
Avg. Viewing Minutes/Day/Viewer Today • Even in 2010, 1/3rd of US
homes will have basic TV
300.0
259.0
service
250.0
• 40% of homes won’t have
200.0 broadband; and 60% won’t
have a DVR - making them
150.0
well suited to the 30-second
100.0 commercial
50.0 • On average, broadband video
2.4 viewers will spend 25 minutes
0.0
viewing video daily
TV Broadband TV
Television remains valuable to advertisers despite the growth of new media
Source: Nielsen Media Research, Yankee Group analysis
© Copyright 2006. Yankee Group Research, Inc. All rights reserved. Channels and Choices February 2006 Page 9

10. Eliminating the middleman…
Quite apart from viewer driven advertising revenues, there are
billions of dollars tied to carriage revenues which will force
consideration of traditional distribution channels
Assume per subscriber per month carriage fee charged $0.95
for network
Assume reach (as % of US Households) 80%
Reach (in millions of US HH) 90 million
Monthly revenue from carriage fees (in millions) $85.5
Annual revenue from carriage fees $1.03 billion
© Copyright 2006. Yankee Group Research, Inc. All rights reserved. Channels and Choices February 2006 Page 10

11. Summary and Conclusions
• Reports of the death of television have been greatly exaggerated
– TV will most likely remain dominant form of home video entertainment
for average consumer at least through 2010
– However there are opportunities for second-run content, advertising,
marketing and digital “brand cocooning”
– In 2010, with 41% of US households viewing broadband video, there
will be a viable audience for video programming
• New forms of entertainment – podcasts, news and sports clips, ethnic
programming, shorts and edge created content – will drive early
adopters of broadband TV
– But the mass market will need “Big Brand” programming
• Portability is a key advantage in the immediate term for broadband TV
providers
– Steady growth in laptop penetration offers a foundation for video
portability
© Copyright 2006. Yankee Group Research, Inc. All rights reserved. Channels and Choices February 2006 Page 11

12. Summary and Conclusions
• In the long term, the Internet’s global aggregated audience could
revolutionize television economics
– Programmers should experiment with the medium and claim their
spot today
– But for now targeted and conservative broadband investments are
the order of the day
• Delivery of video programming to the TV will be a critical driver
for broadband TV
– A simple, cost-effective and easily managed approach is required
– An effective UI will be paramount
© Copyright 2006. Yankee Group Research, Inc. All rights reserved. Channels and Choices February 2006 Page 12

13. Questions?
Aditya Kishore
Director
Media and Entertainment Strategies
akishore@yankeegroup.com
www.yankeegroup.com
© Copyright 2006. Yankee Group Research, Inc. All rights reserved. Channels and Choices February 2006 Page 13