TV OTT Technology Briefing

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Pace plc Technology Briefing

OTT : Over-the-top

Dr. Paul Entwistle Head of Investor Relations & Chief TechnologistWednesday, 9th June 2010

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Over-the-TopAgenda

I will explain :

What OTT is

That TV is part of a spectrum of video content services : OnDemand, DVD, Cinema,Subscription, Free...

Emphasize that our customers offer Subscription TV and that it is a managed service

That Subscription TV has a strong business underpinning it

That the consumer benefits from the robust, easy to use and upgradeable managed services

And conclude :

That far from a being a threat OTT allows our customers (the Subscription TV providers) tooffer even more services such as Video-on-Demand, Catch-up TV, Interactive applications...

That the continuous (relentless) evolution of these services drives demand for ever morecapable STBs

And that the STB remains the efficient, dedicated, managed device to ensure the delivery ofthose services !

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BasicsWhat is a Set-top-box?

STB: Technically standardised, commoditized, retailed

STB: Service provider managed, bespoke, edge of proprietary network

98%*

* 98% of Paces 2009 revenue was for service provider managed STBs

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DefinitionsWhat is OTT?

OTT (Over-the-top) (syn. Internet TV)

The delivery of a service often video using the open internet

It can be delivered straight from the provider who could be the creator to the viewer

Without the need for intervening carriage negotiations, or infrastructure investments

(It is independent of the viewers internet service provider)

However, it is unmanaged and quality of delivery can not be guaranteed

IS NOT THE SAME AS

IPTV (Internet Protocol TV)

A managed TV service delivered using internet protocols*

Closed, proprietary network, accessed via a specific internet service provider Services are optimised and customised to suit the network and end-device capability

Providing control over quality of delivery and end device serviceability

* internet protocols a basic suite of standardised techniques for moving data packets across a network; used on and off the internet

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Over-the-TopLandscape...

User Generated Content

Internet broadcasters

Content retailers (rent / sell)

Distributing content owner

Traditional broadcasters

Multichannel Subscription TV

Broad range of content (inc. premium) (Movies, TV shows, Education ...)

High Quality Material HD, 3D, Surround Sound

Robust high quality deliveryManaged ServiceState-of-the-art Device

PVR, HD, Hybrid, VoD, WholeHome

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Subscription TVPaying for Content

Theatrical

DVD Sale (Full price, discounted price)

Pay Movie Channels(inc. subscription bundles)

Free TV

(Advertising funded)

Library

On-Demand

DVD Rental (Launch price, library price)

Pay.Per.View

On-Demand

< 3 months 6 12 months 12 15 months 2 3 years

Source: 4 BBC Trust : Report on the Impact of Canvas on Pay-VoD Services

This [Canvas] is likely to shift value from the DVD Rental market to the PPV / VoD market4

Pacescustomers

Subscription TV, Video Rental and PurchaseAre different products with different consumer behaviours

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Subscription TVPaying for Content

Source: 5 Entertainment Merchants Association,

Investing in sport :

DirecTV $4B NFL Sunday ticketBSkyB 1B Premier league

Multichannel

Subscription TV

US Video Revenues (2008)Total 42B USD

Opportunity for traditional TVdistributors to offer On-Demand

Traditional TV distributors havevery strong consumer brand

Consumers get easy to use,seamless, integrated managed

service

On their TV, via an STB

Available on todays Hybrid STBs: DirecTV, Canal+, Viasat...

DTO

8.2

14.5

9.8

2.1

3

2.8

DVD Rental migration to Download-to-rent [DTR] (eg. Netflix, Seesaw) DVD Sales migration to Download-to-own [DTO] (eg. Amazon, Apple)

DTR

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Subscription TVHow Big is the PayTV Industry?

Global PayTV subscription revenue (2009) : ~180 B (USD)2

Global PayTV STB shipments (2009) : +120 M2

Global PayTV TV households (2009) : 57%3

US PayTV households (2009) : 94% (108 M)

US top 10 TV distributors subscribers (2009) : 89.3 M1

US top 10* TV distributors aggregate market cap. : 351 B (USD)

US Cables revenue from residential video (2009) : 53 B (USD)1

* Based on 8 of the top 10 (excludes Cox Communications & Bright House Networks)

Source: 1 NCTA, 2 ScreenDigest, 3 IMS research

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Subscription TVPaying for Content (example US : 2008)

Source: 6 Bill Gurley, abovethecrowd.com, 7 DirecTV & Dish SEC filings

CREATORS

AGGREGATORS

TV DISTRIBUTORS

MSO DBSTELCO BCST

Cable Networks Broadcast Networks

DirecTV Dish

Comcast TWC

Verizon AT&T

AffiliatedStations

Discovery ESPN TNT

ABC CBS FOX

42B USDADVERTISERS 32B USD6

Affiliate fees

21B USD1

VIEWERS

51B USD1

US Video (2008)

Reve nue (42B USD)5

14.5

8.2

9.8

3

2.82.1

home video - bought

home video - rental

Theatrical

Premium cable

Basic Cable & Broadcast

On Demand

29B USD7

Pace0.67B USD(US only 2009)

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Subscription TVPutting OTT into perspective

Source: 8 DirecTV SEC filing

Satellite broadcaster - No IP infrastructure Uses OTT to complement and enhance broadcast offering Delivered to the TV via the STB

DirecTV8 : ~6000 titles

Primarily impacts the 22.7 B USD DVD rental and sales market Wallmart acquires VUDU (STB and OTT delivery platform)Netflix : 17000 titles

Apple : 200 TV shows, 400 movies

On-demand content:

The television industry fundamentally has a subsidized business model that gives everyone a set-top box, and that pretty much undermines

innovation in the sector.Ask TiVo, ask Roku, ask Google in a few months. The only way this is going to change is if you start from scratch, tear up the

box, redesign and get it to the consumer in a way that they want to buy it. But righ t now, theres no way to do that. The TV is going to lose until theres a

viable go-to-market strategy. Thats the fundamental problem with the industry. Its not a problem with the technology, its a problem with the go-to-market

strategy. Im sure smarter people than us will figure this out, but thats why we say Apple TV is a hobby.

Steve Jobs

Remember 32 B USD of Affiliate fees at stake !! 9.95 USD pcm to be introduced on some content Owners: News Corp/Fox, Disney/ABC, NBC (Comcast tbc)

Hulu : 190 Content Providers

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Any time, place, ... deviceGiving viewers what they want (as long as they subscribe)

TV Everywhere

TWC & Comcast initiative to allow their subscribers to access content on-line

Free access to subscribers

Giving subscribers greater choice of device (and therefore time and place)

Federated approach allows Content Owner portals

No single gatekeeper

Supports important brand identity of creators / aggregators

BSkyB Sky Player

For subscribers:

Access live streaming and On-demand

Through XBox360 and PC

IP is the common communication language of Connected Deviceswhether Games Console, Phone, PC or STB...

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Over-the-TopSummary so far

Successfully being used by Subscription PayTV to complement and enhance

their broadcast offerings with on-demand

Free OTT TV is highly unlikely to replace subscription PayTV (businessmodel dependence on distribution fees)

Most likely to impact traditional video rental

Initiatives to meet consumers multi-device demands are underway (any time,

any place)

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TechnologyTechnology

Technology

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InteractivityOTT is an interactive app.

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Connected TVStandards & Specifications

(Software) components of an OTT enabled device:

IP delivery :

Signalling and broadcast service integration :

Presentation and navigation : Security / DRM :

Metadata :

Audience measurement :

Application run-time and management :

Many pieces no common solution

Technical StandardsDVB, ETSI, IEC, IETF

Solutions for specific technicaltasks

Platform SpecificationsDTG

Profile and selection of TSs for aspecific service

Device & Platform SpecificationsCanvas, Bespoke

Further includes detailedspecification of user experience

(interaction, presentation, quality)

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Connected TVTechnology : choices, choices

HbbTV Hybrid Broadcast Broadband TV European broadcaster supported initiative

Blended not alternate experience TV optimized browser (HTML / JS / remote control) Minimal specification to ease implementation Middleware and device friendly Completed Nov2009 sent to ETSI for Standardisation

DTG DBook 6.2 Connected TV feature : MHEG xPlayer

Published Mar2010DTG DBook 7 Working with Canvas and other stakeholders

BBC + Arquiva, BT, C4, Five, ITV, TalkTalk Detailed and open specification of an internet TV device & platform Technical details currently confidential / and not yet all available

A solution available without [a content] subscription

(that also allows a pay/subscription business model) Keeps control over user-interface / navigation and presentation Seeks to avoid a defacto proprietary solution emerging

Started Dec 2008 products due Spring 2011

Technical homogenisation can not provide the Subscription TV industry with competitive differentiation

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Connected TVTVs with web

CE Industry(Walled garden aggregations) Sony Bravia Internet Video Panasonic Viera Cast

Samsung Internet@TV Philips NetTV

Custom integrations

Is there a long-term commitment to maintaining portfolio of content / device software?

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Connected TVThrough a Managed Service Platform

Pace - Innovation Partner

Remember STB is a bespoke managed service platform software updates...

Pace is currently demonstrating Flash Lite apps running on our US HD Cable STBs

...

Internet applications : Social networking Video streaming Information

FlashLite

Paces EnginewareTM

Network Services:

In-band Docsis OTT

Subscription TV managed STBs offering video rich, OTT applications

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Over-the-TopSummary

Paces customers (Subscription TV Providers)

OTT expands their service offerings

Being used today : DirecTV, Viasat, Canal+, ...

Robust, secure, upgradeable Managed service

Pace : Trusted Partner, Innovator and Leader

Delivering : Hybrid (OTT), Whole-Home, ...

Demonstrating : Advanced interactivity (OTT)

Increasing need for higher performance and connected STBs

Convergence : expanding Subscription TV with Over-the-Top

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Great products to ourcustomers every time.