Outlook For The Broadcast Networks

Transcription

1 UBS 38th Annual Global Media and Communications Conference Outlook For The Broadcast Networks David F. Poltrack Chief Research Officer, CBS Corporation President, CBS Vision 1

2 This is more like it! 2

3 The Outlook Outlook for 2011 The Audience Situation The Longer-Term Outlook for Television Advertising The Television Network System The New Distribution Options 3

4 The Outlook Outlook for 2011 The Audience Situation The Longer-Term Outlook for Television Advertising The Television Network System The New Distribution Options 4

5 Original 2010 Forecast Network Television Revenues +5.0% Underlying Growth Rate +3.0% 5

6 Revised 2010 Forecast Network Television Revenues +6.2% Underlying Rate +4.6% 6

7 The Current Market Strong Upfront Even Stronger Scatter Market Watching the Consumer 7

8 The Current Market Strong Upfront Even Stronger Scatter Market Watching the Consumer 8

9 The Current Market Strong Upfront Solid first half scatter market fuels Upfront demand Return to normal spending levels by auto advertisers adds to Upfront base Networks return to normal Upfront unit sales levels 9

10 The Current Market Strong Upfront Even Stronger Scatter Market Watching the Consumer 10

11 The Current Market Even Stronger Scatter Market Gradual economic improvement and big marketing battles push Scatter prices up 20%+ versus Upfront 11

12 The Current Market Strong Upfront Even Stronger Scatter Market Watching the Consumer 12

13 The Current Market Watching the Consumer Consumer spending has grown at a progressively faster rate during the past three quarters In the 3 rd Quarter, consumer spending on durable goods was up +6% despite the presence of the Cash for Clunkers stimulus in 2009 Corporations are closely watching this trend and they have increased their investments in equipment and software, an indication of their growing confidence in the continuation of this increased consumer spending. 13

14 2011 Forecast Network Television Revenues +3.4% Underlying Rate +5.0% 14

15 The Outlook Outlook for 2010 The Audience Situation The Longer-Term Outlook for Television Advertising An update on the Television Network System TV Everywhere 15

16 The Outlook Outlook for 2010 The Audience Situation Audience Deficiencies 16

17 Primetime Year-Over Over-Year First 9 Weeks Most Current +1% +4% +2% +3% +2% +3% +6% +4% -5% -4% -8% -6% -17%-16% -16% -19% CBS NBC ABC FOX HH Rtg PER2+ A25-54 Rtg A18-49 Rtg Source: NTI, 9/20/10-11/21/10 vs year ago; All Programs; Most Current Data 17

18 Primetime Year-Over Over-Year First 7 Weeks Live+7 +4% +6% +5% +6% +4% +5% +3% +4% -5% -3% -5% -9% -18% -18%-20% -21% CBS NBC ABC FOX HH RTG PER 2+ A25-54 RTG A18-49 RTG Source: NTI, 9/20/10-11/7/10 vs year ago; All Programs; Live+7 Data 18

19 Primetime Year-Over Over-Year First 7 Weeks - C3 +3% +4% +2% +3% +3% +5% +1% +3% -4% -4% -5% -7% -16% -16%-18% -20% CBS NBC ABC FOX Households Persons 2+ A25-54 A18-49 Source: NTI, 9/20/10-11/7/10 vs year ago; All Programs; C3 Data 19

20 Primetime Top Show Performance First 6 Weeks Top 10 Top 20 +3% +4% +3% +4% +1% +4% +3% N.C. N.C. +1% +2% N.C. -2% -4% -4% -5% Live+7 C3 Live+7 C3 Households Viewers A25-54 A18-49 Source: NTI, 9/20/10-10/31/10 vs. same period last year; Live+7 20

21 The Outlook Outlook for 2010 The Audience Situation Audience Deficiencies The Impact of the DVR 21

22 Primetime DVR Penetration Trend 100% 90% 80% 70% 60% 50% 40% 30% 21% 29% 34% 38% 20% 11% 10% 0% Fall 2006 Fall 2007 Fall 2008 Fall 2009 Fall 2010 Source: NTI Sample Penetration 22

23 Primetime Total Viewers (m) Season-to to-date (Live+7 vs.. Live +Same Day vs. Live) CBS NBC ABC FOX Live Live+SD Live+7 Source: NTI, 9/20/10-11/7/10, Per 2+ Millions 23

24 Primetime Adults Ratings Season-to to-date (Live+7 vs.. Live +Same Day vs. Live) % % +12% +17% % % +18% % CBS NBC ABC FOX Live Live+SD Live+7 Source: NTI, 9/20/10-11/7/10 24

25 DVR Impact Three Year Trend DVR PENETRATION Primetime All DVR Playback* Primetime - All DVR Playback 4.1 HHLDS +29% % 34% 38% % 6.3 A % +13% DVR PENETRATION Source: NTI, 9/20/09-11/7/10; CBS, NBC, ABC, FOX 25

26 Primetime DVR Penetration Impact DVR Playback by Hour 9-10 PM 9-10 PM Source: NTI, 9/20/10-11/7/10 26

27 Primetime DVR Playback Lift Rank Season-to to-date Total Viewers Program Title Network LIVE+7 PER2+ (000) LIVE PER2+ (000) Lift MODERN FAMILY ABC 15,087 9,622 5,465 GREY'S ANATOMY ABC 15,044 9,971 5,073 BIG BANG THEORY, THE CBS 15,354 10,652 4,702 GLEE FOX 13,181 8,503 4,678 NCIS CBS 21,931 17,421 4,510 HOUSE FOX 11,541 7,505 4,036 MENTALIST, THE CBS 17,675 13,685 3,990 HAWAII FIVE-0 CBS 14,707 10,762 3,945 CRIMINAL MINDS CBS 16,489 12,585 3,904 SURVIVOR: NICARAGUA CBS 13,564 9,688 3,876 DESPERATE HOUSEWIVES ABC 14,300 10,563 3,737 OFFICE NBC 9,508 5,837 3,671 TWO AND A HALF MEN CBS 15,834 12,221 3,613 CASTLE ABC 13,419 10,056 3,363 CSI CBS 16,174 12,821 3,353 BONES FOX 11,463 8,227 3,236 EVENT NBC 9,598 6,388 3,210 NCIS: LOS ANGELES CBS 17,984 14,840 3,144 GOOD WIFE, THE CBS 14,667 11,592 3,075 Source: NTI, 9/20/10-11/14/10; Live+7 vs. Live [Lift of 3 million viewers or more] 27

28 Primetime C3 Ratings Adults 18 Adults Season-to to-date (All Programs, Excludes Sports and News Specials) CBS NBC ABC FOX LIVE LIVE+SD C3 Source: NTI, 9/20/10-11/7/10; C3=Live+3 Commercial Ratings Weighted by Commercial Seconds 28

29 Primetime C3 Ratings Adults 25 Adults Season-to to-date (All Programs, Excludes Sports and News Specials) CBS NBC ABC FOX LIVE LIVE+SD C3 Source: NTI, 9/20/10-11/7/10; C3=Live+3 Commercial Ratings Weighted by Commercial Seconds 29

30 Nielsen To Count Repeat Viewing in 2011 Impact on Primetime Live+7 Ratings % Four-Broadcast Network Averages % % Households A18-49 A25-54 Source: NTI NPower, 9/20/10-10/17/10; Live+7 Data 30

31 Nielsen To Count Repeat Viewing in 2011 Impact on Primetime C3 Ratings Four-Broadcast Network Averages % % % Households A18-49 A25-54 Source: NTI NPower, 9/20/10-10/17/10; C3 Data 31

32 DVR Playback Beyond 7 Days In DVR Households Primetime - Percent of DVR Playback Audience That is Uncounted A Source: Nielsen Custom Analysis, October, CBS, NBC, ABC, FOX 32

33 DVR Playback Beyond 7 Days In All Households Primetime - Percent of DVR Playback Audience That is Uncounted A Source: Nielsen Custom Analysis, October, CBS, NBC, ABC, FOX 33

34 Primetime C3 Season-to to-date vs. Year Ago +3% +4% +2% +3% +3% +5% +1% +3% -4% -4% -5% -7% -16% -16%-18% -20% CBS NBC ABC FOX Households Persons 2+ A25-54 A18-49 Source: NTI, 9/20/10-11/7/10 vs year ago; All Programs; C3 Data 34

35 The Outlook Outlook for 2010 The Audience Situation Audience Deficiencies The Impact of the DVR The Cable Network Competition 35

36 Factors in Cable Audience Growth Penetration Proliferation Programming 36

37 Factors in Cable Audience Growth Penetration Growth 85% 91% Cable+Satellite U.S. Penetration Source: NTI, Cable+ADS Penetration, Broadcast Year Averages 37

38 Factors in Cable Network Channel Proliferation * Number of Channels Receivable Source: NTI, Television Audience Reports * was the final year Nielsen reported Channels Receivable 38

39 Primetime First-Run Cable Series Trend vs Most Viewed Cable Show (Rizzoli & Isles) 8.18m Rank = 51 Most Viewed Cable Show (The Closer) 4.79m Rank = Cable Shows with more Viewing than Least Viewed BC Show 2.59m Rank = Cable Shows with more Viewing than Least Viewed BC Show 3.13m Rank = 222 Source: NTI, 9/21/09-9/19/10 vs. 9/19/05-9/17/06 39

40 Primetime Cable C3 Season-to to-date vs. Year Ago Ad-Supported Cable Networks Plus Minus Same Adults Adults Source: NTI, 9/20/10-11/7/10 vs. 9/21/09-11/8/09 40

41 Primetime C3 Weighted Share of A Season-to to-date vs. Year Ago Weighted Share of A Audience % 65.2% 33.1% 66.9% CBS All Other Broadcast CBS All Other Broadcast Source: NTI, 9/20/10-10/31/10 vs. 9/21/09-11/1/09 41

42 Primetime C3 Weighted Share of A Season-to to-date vs. Year Ago Weighted Share of A18-49 Audience % 68.0% 30.0% 70.0% CBS All Other Broadcast CBS All Other Broadcast Source: NTI, 9/20/10-10/31/10 vs. 9/21/09-11/1/09 42

43 Primetime C3 Weighted Share of A Season-to to-date vs. Year Ago Weighted Share of A Audience % 76.1% 25.0% 23.9% CBS ALL OTHER CBS ALL OTHER Source: NTI, 9/20/10-10/31/10 vs. 9/21/09-11/1/09 [All Other = NBC, ABC, Fox, CW, Top 10 Ad-Supported Cable Networks] 43

44 Primetime C3 Weighted Share of A Season-to to-date vs. Year Ago Weighted Share of A18-49 Audience % 79.4% 21.4% 20.6% CBS ALL OTHER CBS ALL OTHER Source: NTI, 9/20/10-10/31/10 vs. 9/21/09-11/1/09 [All Other = NBC, ABC, Fox, CW, Top 10 Ad-Supported Cable Networks] 44

45 Primetime Share of Playback Audience S-T-D S - Broadcast Networks and Ad-Supported Cable A % 31% Broadcast Networks Ad-Supported Cable Networks Source: NTI, 9/20/10-10/31/10 45

46 Primetime Share of Playback and Live Audience S-T-D S - Broadcast Networks vs. Ad-Supported Cable A18-49 PLAYBACK LIVE 69% 31% 40% 60% Broadcast Networks Ad-Supported Cable Networks Broadcast Networks Ad-Supported Cable Networks Source: NTI, 9/20/10-10/31/10 vs. 9/21/09-11/1/09 46

47 The Outlook Outlook for 2010 The Audience Situation Audience Deficiencies The Impact of the DVR The Cable Network Competition Sports Franchises 47

48 NFL Broadcast vs. Cable GRP Distribution vs % 17% 88% 12% Broadcast Cable Broadcast Cable Source: NTI, NFL Regular Season, Gross Rating Points, Households 48

49 NFL Broadcast GRP Trend Source: NTI, NFL Regular Season, Gross Rating Points, Households 49

50 NFL Ratings Year-Over Over-Year 2010 vs CBS NBC FOX ESPN +13% +9% +2% -1% Households Source: NTI, NFL Regular Season, 11 Weeks 50

51 MLB Broadcast GRP Trend GRP Distribution vs % 43% 88% 12% Broadcast Cable Broadcast Cable Source: NTI, NFL Regular Season, Gross Rating Points, Households 51

52 MLB Broadcast GRP Trend Source: NTI, MLB Post Season, Fox/ESPN, Fox/TBS; Gross Rating Points, Households 52

53 The Outlook Outlook for 2011 The Audience Situation The Longer-Term Outlook for Television Advertising The Television Network System The New Distribution Options 53

54 Television Viewing At Historic Highs vs vs Households n.c. +8% Children +3% +8% Teens +2% +8% Adults % +8% Adults % +9% Adults % +12% Adults % +6% Source: NTI, Broadcast Year Averages Huts/Puts for Mon-Sun Total Day 54

55 Television Advertising Effectiveness 55

56 EMPIRICAL EVIDENCE OF TV ADVERTISING EFFECTIVENESS Joel Rubinson Chief Research Officer Advertising Research Foundation 56

57 Findings TV is as effective as ever, possibly even increasing in effectiveness, in terms of unit sales lift from incremental GRP pressure. TV is effective in generating sales in particular by generating awareness. Source: ARF, EMPIRICAL EVIDENCE OF TV ADVERTISING EFFECTIVENESS Study 57

58 Research Support Needed Throughout the Marketer s s Decision Making Chain Marketer Decides How Much: Marketing budget goes to advertising Advertising investment goes to television Television budget goes to broadcast network television Broadcast budget goes to each network 58

59 Research Support Provided Across the Marketer s s Decision Making Chain Impact of a 1% change on a Broadcast Network s s revenues $1,000,000,000 $900,000,000 $800,000,000 $700,000,000 $600,000,000 $500,000,000 $400,000,000 $300,000,000 $200,000,000 $100,000,000 $0 $180,000,000 $200,000,000 $190,000,000 $220,000,000 Broadcast Network Broadcast-Cable TV Advertising-TV Advertising Marketing-Advertising 59

60 Advertising and Marketing Expenditures Year Total Marketing Spending Advertising Television Broadcast Networks $ Billions % of Total Marketing % of Total Advertising % of Total Television Advertising , , Source: Wilkofsky Gruen Associates, Inc. 60

61 Advertising and Marketing Expenditures Year Total Marketing Spending Advertising Television Broadcast Networks $ Billions % of Total Marketing % of Total Advertising % of Total Television Advertising , , , Source: Wilkofsky Gruen Associates, Inc. 61

62 62

63 Food Brand A Multivariate Prime vs. All Other Dayparts For the first five brands analyzed there is an ROI advantage for Primetime over all other dayparts. In the case below, the premium programs bought in Prime (e.g. Olympics, Emmys) drove up price (CPM) above normative levels but Primetime Sales Effectiveness more than compensated. The recession-driven flight from primetime is probably doing more harm than good Prime All Other 0.0 Source: TRA Single Source Los Angeles May 2008-October 2008 Multivariate analytics controls for price/promotion, baseline and seasonality Sample size: Total Static Brand Purchasers (6 months) =

64 Shampoo Brand: ROI by Ad Frequency Recency Effect: Every other day commercial exposure maxes ROI for 4 of first 5 brands analyzed. $0.07 $0.08 $0.40 Multivariate ROI $0.24 Freq Frequency generated within households across time (weeks) ROIs calculated using multivariate model Confidence levels: 1-75%, 2 55%, 3 98%, 4 98% Source: TRA Single Source Los Angeles: May October 2008 Sample size: Total Static Brand Purchasers (6 months): Brand 963 Multivariate Model Controls for Price, Promotions, Seasonality and Trend 64

65 Programs Which Index Above Average Against Brand HSPs Among Those Programs on the Original Schedule Significantly Over-deliver ROI HSP Index Cutoff Based on Distribution to Maximize Statistical SignificanceS Beverage Brand A $2.04 Total Programs (90%) ROI % $3.07 (90%) HSP Index 120+ Programs % (75%) Beverage Brand B (99%) Beverage Brand C $0.23 (90%) % $1.61 (80%) Total Programs HSP Index 105+ Programs Model Controls for Price, Promotions, Seasonality and Trend ( ) Significance level Source: TRA Single Source Los Angeles: May 2008-October 2008 Sample size: Total Static Brand Purchasers (6 months): Bev Brand A=7,235 Bev Brand B=24,229 Bev Brand C=1,147 65

66 Introduction to Nielsen Catalina Ventures

67 Nielsen Catalina Ventures (NCV) The Nielsen Company and Catalina Marketing formed a joint venture to create the industry s most comprehensive ROI measurement and advanced analytics service Links media audience data with actual purchase data Partnering with Retailers and Set Top Box data providers Establishes direct link between what consumers view and what they buy Industry s leading provider of media and marketing measurement services Providing nationally representative media audience data and all-outlet consumer purchase data Industry s leading provider of consumer driven marketing programs Powered by the world s largest shopper data warehouse 67 Copyright 2010 The Nielsen Company. Confidential and proprietary.

68 Breakthrough Targeting and ROI Capability Buy Data scale All outlet Single Source + Demo graphics Watch Data scale Weekly Shopper Purchase Transactions Long term Static Longitudinal Purchase Panel Measure ROI Develop Brand Target Television People Meter Set Top Box HH Tuning Attitudinal segments Buy Assets Catalina Frequent Shopper Data o 10+ Major Retailers in US o 60 million households Nielsen Homescan Panel Deliver Brand Ratings Currency Watch Assets Nielsen NPM and Set Meter Panels Nielsen Online Panel Set Top Box Data 68 Copyright 2010 The Nielsen Company. Confidential and proprietary.

69 The Outlook Outlook for 2011 The Audience Situation The Longer-Term Outlook for Television Advertising The Television Network System The New Distribution Options 69

70 The Broadcast Network Television System 70

71 Franchise Programs 71

72 Franchise Program Trend (Total = 45) (Total = 38) CBS NBC ABC FOX Comedy Drama Reality CBS NBC ABC FOX Comedy Drama Reality Potential Note: Franchise Series defined as: broadcast for five plus seasons, top-rated, sold in syndication 72

73 Network Licenses + International Sales = Profitability on Day One GLOBAL (Canada) HAWAII FIVE-0 is the #1 new show in Canada Premiere on Global was the #2 show of the day in Adults Ranks #1 in its time period with total viewers, and several key adult demos AXN (Southeast Asia) Premiere led AXN to the #1 rated channel among all ad-supported international channels in the Southeast Asian market. Improved over the 2010 year-to-date timeslot average by +129% in Singapore, +200% in the Philippines and +202% in Malaysia. Liv (Latin America) Premiere pushed Liv into the top 10 among all pay TV channels in Brazil and Colombia. Ranked #1 among Men in Columbia 73

74 Network Licenses + International Sales = Profitability on Day One 74

75 Primetime Top 20 Cable Shows Produced by Studios Owned by Broadcast Networks % 25.0% Broadcast Studio Other Source: Nielsen, 9/21/09-9/19/10; Persons 2+ (000); Live+7 Data 75

76 Off-Broadcast Network Repeats on Cable Garner More Audience Than Top-Rated First-Run Cable Shows Off-Broadcast First-Run Cable 62% 38% Source: Nielsen, 9/21/09-9/19/10; Persons 2+ (000) Primetime GRP s; Live+7 Data 76

77 Broadcast Networks Retransmission consent fees Programming Content for distribution over the web controlled by MSOs Affiliate fees Reverse affiliate comp O&O s Affiliates TV Everywhere TV Stations TV Stations Over The Top Delivery. Advertiser Supported Tier Subscription Based Tier Hulu Plus Owned And Operated Websites ABC.com, CBS.com, NBC.com, Fox.com Scott Koondel / President of Distribution 77

78 Life of a Series Original Network Airing Rental SVOD Syndication International Domestic Broadcast 2 nd cycle Back-end Library Owned & Operated VOD TV.com? plus Traditional DVD Day of Air 1 to 4 Days Later 7 Wks 10 Weeks 10 Months 1 yr 3-4 yrs 8-12 yrs? TV Everywhere Domestic Cable Cable Retrans Affiliate Fees Summer Repeat Plus Prior Season Holdbacks Cable Network Early Exhibition Scott Koondel / President of Distribution 78

79 The Powerful Reach of CBS LOCAL Adults 18+ Reach September 2009-August % 81% 3% 4% 85% 81% 3% 7% 85% 4% 76% 82% 6% CBS Web CBS Radio CBS TV 58% 60% 63% 49% 58% 6% 45% 53% 61% 56% 60% 65% 64% 58% 67% New York L.A. Chicago Philadelphia Dallas San Francisco Boston Source: Scarborough Research, PRIME NExT -- Crosstab Report 79

80 Local News Advertising Positioning Opportunities Presentation to: CONFIDENTIAL AND PROPRIETARY Copyright 2010 by Frank N. Magid Associates, Inc. Any duplication, reproduction, or usage of this document or any portion thereof without the written consent of the firm is prohibited. 80

81 Open Mobile Video Coalition Project Roadblock: Mobile Advertising Case Study Promising Results of Test of Mobile Digital Television: Local News Major Program Attraction Major Impact for Drunk Driving PSA Carried in Mobile Digital Programming 81

82 The Outlook Outlook for 2011 The Audience Situation The Longer-Term Outlook for Television Advertising The Television Network System The New Distribution Options 82

83 New Distribution Options Threat or Opportunity? 83

84 New Distribution Options Opportunity! 84

85 Current Distribution Options Only partial monetization of viewers with advertisers Only minimal share of subscription revenues WE CAN DO BETTER THAN THIS! 85

86 The Total Television Audience vs. The Total Saleable Audience Primetime The Total Television Audience 14,702 89% 13,127 75% 34% Total Viewers Total Viewers 11,028 Total Viewers 4,949 A18-54 Total Audience In-Home Program Audie nce In-Home Commercial Audience "Saleable" In-Home Commercial Audience Source: Nielsen, CBS Primetime , (000); 9/20/10-10/10/10 86

87 The Total Television Audience vs. The Total Saleable Audience Primetime The Total Television Audience Total TV Audience, 14,702,000 Saleable A18-54 C3 Audience, 4,949,000 34% Source: Nielsen, CBS Primetime , ; 9/20/10-10/10/10 87

88 Total Television Subscription Revenues $67 Billion Total TV Subscription Revenue 88

89 Total Television Subscription Revenues $67 Billion $1 Billion Total TV Subscription Revenue Broadcast Retransmission Fees 89

90 New Distribution Options 90

91 Video Market Segmentation CONVERGENCE CONCEPT Fully Connected TV Centric Web Centric Old School 91

92 Video Market Segmentation TOTAL ADULTS SPRING 2006 TV Centric DIGITAL TV, NO BROADBAND 24% 25% 16% Fully Connected DIGITAL TV AND BROADBAND Web Centric BROADBAND, NO DIGITAL TV Old School 35% NO DIGITAL TV, NO BROADBAND Source: MRI, Spring

93 Video Market Segmentation TOTAL ADULTS SPRING 2009 TV Centric DIGITAL TV, NO BROADBAND 17% 46% 17% Fully Connected DIGITAL TV AND BROADBAND Web Centric BROADBAND, NO DIGITAL TV Old School NO DIGITAL TV, NO BROADBAND 20% Source: MRI, SPRING

94 Video Market Segmentation TOTAL ADULTS SPRING 2010 TV Centric DIGITAL TV, NO BROADBAND 16% 50% 17% Fully Connected DIGITAL TV AND BROADBAND Web Centric BROADBAND, NO DIGITAL TV Old School 17% NO DIGITAL TV, NO BROADBAND Source: MRI, SPRING

95 Video Market Segmentation OWN A DVR SPRING % (159) Fully Connected DIGITAL TV AND BROADBAND 7% (40) Web Centric BROADBAND, NO DIGITAL TV 15% (90) TV Centric DIGITAL TV, NO BROADBAND 2% (10) Old School NO BROADBAND, NO DIGITAL TV Source: MRI, Spring 2010; Percent that Own a DVR, ( ) Index to Total U.S. 95

96 Video Market Segmentation GROWTH OF FULLY CONNECTED 52% 57% 52% 29% 30% 22% 29% 8% A18-34 A35-54 A55-64 A65+ Source: MRI, Spring 2010 vs Spring

97 Internet Video Goes Mainstream Internet Video Goes Mainstream Broadband Penetration May 2010 Broadband, 73.0% Non- Broadband, 28.0% Source: NTI sample based Universe Estimates 97

98 Video Streaming Activity Watch TV Content Online - Frequency 17% 23% 17% 26% 10% 13% Daily Weekly Monthly Source: Horowitz Multiplatform Content & Services,

99 Video Streaming Activity Watch TV Content Online - Frequency 28% 33% 40% 37% 7% 10% 13% 13% Regularly Stream Occasionally Stream Source: CBS Entertainment Panel, Fall each year 99

100 Video Streaming Activity Streamed Primetime Program They Watched Percent Streamed - All Respondents 5% 6% 6% Source: CBS Entertainment Panel, Fall each year 100

101 Video Streaming Activity Streamed Primetime Program They Watched Percent Streamed - By Demo 7% 7% 2% 8% 3% 3% A18-49 A50+ Source: CBS Entertainment Panel, Fall each year 101

102 Video Streaming Activity Streamed Primetime Program They Watched Percent Streamed - By Fully Connected 5% 6% 6% 6% 6% 5% ALL A18-49 Source: CBS Entertainment Panel, Fall each year Fully Connected defined as having both digital television and broadband in the home 102

103 Video Streaming by Source Streamed or downloaded on a computer, mobile device, or Internet,, after the episode aired on TV on TV Total Sample 5% 6% 6% Fully Connected 5% 5% 5% A % 7% 8% A50+ 2% 3% 3% Highest 12% 17% 13% Highest Shows: Terminator: Sarah Connors Gossip Girls One Tree Hill, Vampire Diaries Source: CBS Entertainment Panel Survey, Fall 103

104 Internet Video Goes Mainstream TELEVISION VIEWING PLUS STREAMING - CUME AUDIENCE 100% 1.1% 1.7% 80% 60% 40% 98.9% 98.3% 20% 0% Total U.S. HHLDS Broadband HHLDS TV Streaming Source: Nielsen People Meter, VideoCensus; May

105 Television and the Internet A New Broadcast Network Television Model? 105

106 A New Broadcast Network Television Model? Current Model Ad Value Live 10 Minutes of Ads = 20 Ads x DVR Playback 10 Minutes of Ads = 20 Ads x OnLine Streaming 2 Minutes of Ads = 4 Ads x

107 A New Broadcast Network Television Model? If you were going to watch a TV program online and were presented with the following two options, which option would you choose? Total A A A 55+ Sample Size: N= Watch the program without commercials for $1.99 8% 4% 8% 9% Watch the program with commercials for free 92% 96% 92% 91% All Age Source: CBS Entertainment Panel Survey, July

108 A New Broadcast Network Television Model? Currently, most TV programs offered on the Internet for free contain fewer commercials than when the programs are seen on TV. If a program that you wanted to watch were offered free on the InternetI but contained the same amount of commercials that the program has when seen on TV, would you Total A A A 55+ Sample Size: N= Still watch for free 96% 94% 96% 97% Pay $1.99 to watch without commercials 4% 6% 4% 3% All Age Source: CBS Entertainment Panel Survey, July

109 A New Broadcast Network Television Model? Viewing, Ads Served and Retention are all Up! STD 10 STD 09 % Chg Episode Segments Played Online (P2+) * 11.7 Million 7.3 Million +59% Ads Served (P2+) * 50.6 Million 8.1 Million +525% * Weekly Average Source: Ads Served DART 9/24-11/4/10 vs 9/25-11/5/09; Episodes segments played online /4-11/5/09- Move Networks: /24-11/4/10 Digital Smiths. *10/1-11/30/09 109

110 A New Broadcast Network Television Model? Increased ad loads in full episodes from 5 to 12 Ad completion rates during full episodes are over 90% Full episode ad completion rates are up over year ago despite increased ad load Source: CBS Interactive 110

111 A New Broadcast Network Television Model? 600, , ,000 Total Video Streams (000) +91% YoY 487M 396M 300, M 200, , M +157% YoY 0 Oct 2009 Nov 2009 Dec 2009 Jan 2010 Feb 2010 Mar 2010 Apr 2010 May 2010 Jun 2010 Jul 2010 Aug 2010 Sep 2010 Oct 2010 CBS Interactive CBS.COM Source: comscore VideoMetrix Aug Oct

112 A New Broadcast Network Television Model? Minutes Per Viewer +151% YoY % YoY 0.0 Oct 2009 Nov 2009 Dec 2009 Jan 2010 Feb 2010 Mar 2010 Apr 2010 May 2010 Jun 2010 Jul 2010 Aug 2010 Sep 2010 Oct 2010 CBS Interactive CBS.COM Source: comscore VideoMetrix Aug Oct

113 Video Streaming After you have watched a program on the internet, how would you say it has affected your viewing of that program on TV TV Watching: Increased 16% 27% 23% 29% Decreased 9% 7% 13% 9% Remained the Same 75% 66% 64% 62% Source: CBS Television City New Technology Focus Groups, December each year 113

114 New Distribution Options 114

115 Advantage of New Distribution Options Dynamic Ad Insertion Addressability Targeting 115

116 New Distribution Options 116

117 Advantage of New Distribution Options Theoretical A La Carte Distribution Alternatives 117

118 Theoretical A La Carte Distribution Alternatives All networks available on demand on any device All networks, broadcast and cable, priced at the same price Respondent chooses the networks they would purchase Total price of networks selected is compared to the respondent s s current cable bill Respondent then chooses between new, theoretical a la carte package and current cable package. Experiment is run at several different prices Last time fielded: December 2009 Source: CBS Entertainment Panel Survey, July

119 Theoretical A La Carte Distribution Alternatives At highest price tested demand for most networks, broadcast and cable, was inelastic Average price a la carte package chosen was 17% less than current cable package Just under half of respondents (49%) said that they would select the new a la carte package over their current cable package If this happened, it would result in a decline of 16% in subscription revenues Source: CBS Entertainment Panel Survey, July

120 Theoretical A La Carte Distribution Alternatives Approximately 70% of the respondents included each of the broadcast networks in their a la carte package That would mean that 19.2% of the subscription fees would go to the broadcast networks Source: CBS Entertainment Panel Survey, July

121 Total Television Subscription Revenues from Switchers $24 Billion $4.6 Billion Total TV Subscription Revenue Broadcast Share 121

122 Total Television Subscription Revenues $56 Billion $4.6 Billion????????? Total TV Subscription Revenue Broadcast Share Broadcast Retransmission Fees 122

123 Advantage of New Distribution Options The Viewers Choose 123

124 Programs A New Distribution System Must Have Average Must Haves = 12 Shows Top 50 = 67% of Mentions Top 100 = 91% of Mentions Broadcast Network Programs 88% of Top 50 Mentions 79% of Top 100 Mentions CBS = 31% of Mentions (23 different shows) Source: CBS Entertainment Panel Survey, July

125 New Distribution Options 125

126 Food For Thought 126

127 Coverage Engagement Equals Critical Mass 127

128 Uniques - Facebook October ,000,000 Unique Visitors/Viewers 250,000, ,000, ,000, ,000, ,000,000 50,000,000 0 Facebook Source: Facebook: comscore, October 2010; Unique Visitors times; CBS: Nielsen, NPower, October 2010, CBS Affiliate Total Day Cume Audience Persons

129 Time Spent Facebook October ,000,000,000 Total Time Spent in Minutes Per Month 250,000,000, ,000,000, ,000,000, ,000,000,000 50,000,000,000 42,582,000,000 0 Facebook Source: Facebook: comscore, October 2010; Unique Visitors times average minutes spent; CBS: Nielsen, NPower, October 2010, CBS Affiliate Total Day Cume Audience times average minutes viewed 129

130 Uniques/Reach - Facebook October 2010 Facebook vs. CBS Television 300,000, ,000,000 Unique Visitors/Viewers +159% 239,886, ,000, ,000, ,000, ,000,000 50,000,000 0 Facebook CBS Source: Facebook: comscore, October 2010; Unique Visitors times; CBS: Nielsen, NPower, October 2010, CBS Affiliate Total Day Cume Audience Persons

131 Time Spent - Facebook October 2010 Facebook vs. CBS Television 300,000,000, ,000,000, ,000,000,000 Total Time Spent in Minutes Per Month +394% 210,349,550, ,000,000, ,000,000,000 50,000,000,000 42,582,000,000 0 Facebook CBS Source: Facebook: comscore, October 2010; Unique Visitors times average minutes spent; CBS: Nielsen, NPower, October 2010, CBS Affiliate Total Day Cume Audience times average minutes viewed 131

132 Thank You 132