Transcript Intl Networks 101 - v4x

International Branded
Networks Strategy
[January 14, 2010]
1
SPT’s Integrated Strategy
SPT’s integrated strategy provides competitive advantage
• SPT businesses are an integrated production-networks-distribution value chain
 Digital content distribution provide opportunities to own and operate branded
digital networks
 Channels expansion continues to enhance competition and support content
pricing
 Worldwide exploitation of formats on SPTI networks
 Multi-platform original production and format exploitation require strategic
coordinated approach
2
• Branded Networks Strategy
• SET India Discussion
• Appendix
3
Networks – A Diversified Portfolio
117 feeds, 140 countries, 400MM households, 22 languages
Russia
U.K.
North America
Spain
Germany
Korea
Central Europe
ASIA
Italy
Japan
Spain / Portugal
Portugal
India
AFRICA
LATIN AMERICA
Singapore
Brazil
Southeast Asia
Australia
4
Networks History/Evolution – Key Milestones
(1997)
 AXN Asia
 AXN Spain
 AXN Latam
 AXN Japan
 Animax Japan
(1995)
 SET Latam
 SET India
 PMP
 TV1
 AXN Israel
 HBO Romania
 Cinenova
 SET MAX (India)
 HBO India
1996
1994
 HBO Latam
(2002)
 HBO Bulgaria
1998
2000
 Animax Asia
 Animax India
 AXN CE
2003
 AXN Sci Fi (Russia)
 SET Asia
 AXN Beyond Africa
 Animax Spain /
Portugal
 SET Portugal
 AXN Italy
 SET Pix (India)
 Animax Korea
 AXN Korea
 SET Spain
2004
2005
2006
2007
 Animax Latam
 SAB TV (India)
(1999)
 HBO Czech
 HBO Hungary
 Cinenova
 E! LatAm
 HBO Asia
 HBO India
Note: Deal color coding—black (channel launches), blue (acquisitions) and red (monetizations/closedowns).
2008
(2008)
 Mystery
(2009)
 Channel 8
(India)
 Animax CE
(1997)
 HBO
Poland
 E! Latam
 HBO Asia
 AXN
Germany
 AXN CE Sci Fi/Crime
 Animax Germany
 Animax Mobile
 Animax Africa
 SET Africa
2009
(2009)
 HBO CE
 [HBO LatAm]
(2008)
 HBO CE-Spektrum
(2009)
 AXN Israel
5
Strategic Rationale
Owning Branded Networks is a key element in SPT’s strategy
SPTI Branded Networks
Production
• Feature Films
• TV series
TV Distribution
• SPE
product
• Acquired
product
SPTI Movie Channels
Television Clients
•
Creates consistent demand for SPT licensing product
•
Diversifies SPT’s product-driven revenue with additional revenue streams
and networks profits
•
Consistent long-term earnings contribution and growth
•
Promotes Sony’s feature films, music and electronics
•
Provides high profit margin (over 30% for some mature networks)
•
Generates significant long-term asset value ($1–1.5BN)
6
Branded Networks Triple-Play
107 channel feeds, 135 countries, 373 million Households, 21 languages
Action
Entertainment
• Japan
• Pan Asia / Korea / China
• India
• Latin America / Brazil
• Spain / Portugal / Africa
• Germany / Switzerland /
Austria
• Italy
• Central Europe
• Russia
Japanese
Anime
• Japan
• Korea
• Pan Asia
• India
• Latin America / Brazil
• Spain / Portugal
• Germany
• Central Europe
• Africa
• Upcoming Launch: Turkey
General
Entertainment
• Singapore
• India
• Latin America / Brazil
• Spain / Portugal
• Africa
• Upcoming Launches:
Tamil GE Channel,
Russia
7
The AXN Brand
Viewers around the globe
trust the AXN brand with
its clear positioning as the
best in high energy,
action & adventure
entertainment
8
The AXN Brand (cont.)
Multinational
High discretionary income
Viewer Profile
Innovators vs. Adopters
High expectation of network
Well-educated
Primary Audience
18-34 yrs
Male skew
9
The Animax Brand
Anime-inspired
Entertainment for today’s
youth
connected
audience
With crossover anime franchises at its core, ANIMAX
offers the best in fresh, animation-inspired entertainment
for teens and young adults. ANIMAX abandons convention
and celebrates originality.
ANIMAX is
youth culture and
user-generated innovation
Breakthrough Series
Iconic Films
Music
Gadgets
Trends
Games
10
The Animax Brand (cont.)
ANIMAX is
Unconventional,
radical,
a true
ANIMAX
original
is more than a channel… it’s a linear and digital platform for youth expression.
11
QUALITY
WITTY
TRENDSETTING
INNOVATION
The SET Brand
Our mission is to entertain
our audiences with
programming that is
humorous and hip,
relevant and relatable,
for every member
of the family.
12
The SET Brand (cont.)
Backed by 60+
years of
SONY’s world-class standards,
technical expertise and innovative vision,
SET is strategically positioned to
‘entertain the future’
with compelling content.
Lighthearted general entertainment channel
Destination for 16-49 yrs
Blend of sophistication and style
13
Promotional Platform for Sony United
Branded Networks are a platform to advertise SPE programs and other Sony products
Motion Pictures
MP3
Players
Phones
Televisions
Computers
Game
Consoles
Cameras
PSPs
Music
14
Incremental Value to Sony
Sony products in front of almost 400 million households worldwide
• AXN networks promoted release of
Spider-Man 3
• Animax original movie LaMB to be available
through the Playstation Store
• AXN’s entertainment show Buzz highlights
various Sony motion pictures
• Promotion of Sony game systems at annual
Animax Youth Festival
• Music shows on AXN and SET feature top Sony
Music performers
• HD launch of SPE channels to help Sony
strategy of increased HD penetration - joint
SPE, Sony electronics effort in Spain
15
Historical Revenue Growth
International Pay TV industry revenue growth rates in all regions have exceeded
U.S. & Canada, with SPTI significantly exceeding industry averages
50%
% CAGR (2004-2008)
43.4%
40%
30%
26.6%
19.2%
20%
14.7%
15.9%
11.0%
10%
8.9%
0%
Asia Pacific
Latin America
Industry
EMEA
US & Canada
SPTI
16
Source: FIC analysis of SNL Kagan PayTV programmer Income (excluding platforms).
Projected Revenue and Business Growth
SPT’s existing networks continue to deliver strong growth
EBIT (US $MM)
Revenue (US $MM)
1,200
500
450
400
350
300
250
200
150
100
50
0
1,000
800
600
400
200
0
FYE09
Actual
--
FYE10
Q3 Fcst
20%
FYE11
MRP
17%
YoY Growth
FYE12
MRP
11%
FYE13
MRP
10%
FYE09
Actual
FYE10
Q3 Fcst
Int'l
Domestic
9%
10%
FYE11
MRP
GSN Gain
15%
FYE12
MRP
FYE13
MRP
Monetization
16%
Operating Margins
19%
17
Revenue & EBIT Contribution by Region
FYE10 Q3 Forecast
$343
350
US$ (MM)
300
250
$246
200
$175
$158
$155
$156
150
$103
100
50
$59
$36
$40
$19
$4
0
Asia
$85
$71
India
Revenue
Latin
America
EBIT
EMEA
Monetizations
$3
$17
U.S. &
Other
18
Networks – Market Environment
From MRP presentation
•
Competition continues to increase (i.e., Fox and NBCU)
•
Costs to acquire programming continue to escalate
•
Macro economy has slowed ad sales growth
– Key ad markets expected to grow ~10%; 15% assumed in MRP due to increased
performance (improved market share)
– Subscriber revenue growth of ~5%-10% in key regions; MRP in-line with growth
•
Numerous opportunities remain to acquire or launch new networks with
significant returns when others can’t invest
•
Cable digitalization creates opportunities for channel carriage for those with
well established brands and operations in the region
19
Networks – Strategic Priorities
From MRP presentation
Retain disciplined cost controls, continue to grow margins
Global
Initiatives
Asia
Pacific
Latin
America
Europe
U.S.
•
Introduce HD feeds as markets evolve, including in Latin America, Italy, and Japan
•
Reposition Animax to increase relevance to youth segment and broaden audience
•
Continue to invest in original multi-screen programming to attract broader advertiser base and
reduce dependence on acquired product
•
Evolve 3D strategy
•
Re-launch channels in Korea for larger scale
•
Enter China through online venture
•
Determine new Australia strategy
•
Re-invigorate SET brand
•
Establish long-term strategy independent of HBO
•
Migrate operations from Caracas to Miami
•
Explore launch of new brand
•
Establish multi-channel presence in Italy
•
Maintain commitment to Russia despite current challenges
•
Search for partner to defray risk of Spain DTT network
•
Launch FEARnet as a linear channel
•
Develop U.S. strategy to exploit SPE brands – SET HD
20
Branded Digital Networks
New Map?
Rapid global expansion of branded digital destinations
FVOD Brands
Korea
UK
Canada
Germany
Spain/Portugal
Italy
Israel
Mexico
Taiwan
Poland
Japan
Hong Kong
Mobile Brands
Singapore
Australia
SVOD Brands
21
• Branded Networks Strategy
• SET India Discussion
• Appendix
22
SET India Overview
•
Top 4 cable and satellite television channel provider in India
•
One of the largest producers and aggregators of Hindi language programming in the
world with a library of over 12,000 hours of filmed entertainment
•
Own and operate the following cable and satellite channels:
– 2 Hindi language general entertainment channels (GECs) on cable and satellite  Sony
Entertainment Television (SET) and SAB
– #1 Hindi language movie channel, SET MAX (MAX)
– #3 English language movie channel, SET PIX (PIX)
•
Distributes channels in India as part of TheOneAlliance, the 3rd largest distribution
platform in number of channels and 2nd largest in revenue
•
In addition to India, channels are available in over 70 other countries
•
Experienced management team with over 450 employees
23
SET India History/Evolution – Key Milestones
 Acquired rights
to distribute
and sell
advertising on
AXN India
 Conversion of
SET to a pay
channel
 Launch of SET
International
1995
 Grant of FIPB
approval to set
up MSM and
launch SET
1997
1998
 Acquired
rights to
distribute
NDTV India
and NDTV
24x7 in India
2000
 Launch of SET
MAX
2001
2002
2003
 Acquired rights to
ICC cricket
tournaments from
2002 to 2007
 Established MSM
Discovery JV;
distributing
channels under
the brand name
TheOneAlliance
 Acquired SAB
from Sri Adhikari
Brothers
Television
Network Limited
 Acquired rights to
distribute NDTV
Profit in India
2004
2005
 Acquired rights to
distribute MTV and
Nickelodeon (Nick)
in India and
distribute and sell
advertising on
Animax India
 Launch of MAX
International
 Acquired rights to
the Indian Premier
League (a
domestic cricket
league launched
by BCCI)
 Launched SAB in
the international
markets
2006
2008
 Acquired 100%
of MSM
Singapore
through a share
swap corporate
restructuring
 Launch of SET
PIX
24
SET India Networks
•
The flagship network SET reaches 44MM households, showcasing serials, reality,
movies and events
– Competes with Star Plus, Zee, Colors, Imagine and 9X
– Known to introduce innovative and exciting formats
•

Recent hits include Indian Idol (currently in its 4th season), Jhalak Dikhhla Jaa (currently in its 3rd
season), and Comedy Circus

Recent launches Dus Ka Dum, Naya Roop Nayi Zindagi and K for Kishore

New fiction shows are being developed to launch in Q4 of FYE10
MAX is among India’s top Bollywood and special events channels
– Currently the clear #1 in its category, largely due to major gains from recent IPL broadcast

Was the #1 channel in India for 6 weeks during IPL Season 1 & 2
– Continues to lead through innovations in programming and marketing

Has been recognized with numerous national and international awards for creative excellence
– Pioneered Extraaa Innings, a unique wraparound program using female anchors, which
continues to be the best cricket entertainment show
– Acquires top class movies each year
25
SET India Networks (cont.)
•
SAB is the first Hindi GEC that showcases content with a strong comedy skew
– Produces optimistic, humorous, innovation and popular entertainment for New India
– Has created a niche for itself in a highly cluttered and fragmented GEC space


Lo Ho gayi Pooja Is Ghar Ki is India’s first daily family comedy
Tarak Mehta Ka Oolta has gained traction
– Recent launched Main Kab Saas Banungi on September 1st and Jugni Chali
Jallandhar on September 15th

•
Viewership has grown quickly
PIX is India’s #3 English movie channel
– Launched in early 2006 to compete with the 3 dominant movie channels

HBO, Star Movies and Zee Studio
– Library movie channel

Strong player in the market despite limited access to current titles (has won the #2 slot in
some weeks)
– PIX is premium in its appearance

Focuses on telling good stories and enhances the experience of viewing English movies by
using localized content and elements
– Available in 10-12 million households, with the emphasis on the top 6 metro areas
– Has launched its 1st reality show, Gateway, and 1st Hollywood film review show on
Indian television with Chicks on Flicks
26
Competitive Environment in India
•
•
•
•
•
•
•
Primary competition continues to expand their portfolios
– Star India has set up Fox Studios for local television production
– Zee has acquired stakes in TEN Sports and the Indian Cricket League (ICL)
Viacom formed a JV with TV18 and contributed MTV, VH1 and Nickelodeon
– The JV launched Colors, a Hindi GEC which has attracted considerable viewer traction in a
short period of time
NDTV, a local news channel provider, has partnered with a former Star TV executive to launch
Imagine, a Hindi GEC, along with some other channels
– Imagine has not proven to be successful thus far
INX Media, which was launched by a former Star TV executive in late 2007, has launched three
new channels  9x, a Hindi GEC; 9XM, a Hindi language music channel; and 9X News, an
English language news channel
– INX has been struggling
UTV has launched Bindass, a youth-focused GEC, which has not performed well
Miditech, traditionally a non-fiction production company, is set to launch a GEC through a joint
venture with Turner, in March
In 5 years, the Indian general entertainment space will likely be controlled by the Hollywood studio
giants
27
Networks – SPT India Update
From MRP presentation
Improve India Operations and Invest for Future Success
Improve
Existing
Operations
• Hired new CEO and SET business head
• Renegotiated IPL contract – good season 2 results; prepping for season 3
• Implementing new programming strategy. Slow build, ratings stabilizing
• SAB enjoying good growth
• Private equity process underway; due diligence being performed
• MRP shows solid growth through “blocking and tackling.” Need
management to stay focused and disciplined
• Turn cash positive during the MRP time period
Invest for
Future
Success
• Continue to capitalize on success of IPL with addition of two new teams
• Continue to invest in programming and marketing
• Launch sports channel
• Continue regional channel investment
28
SET India Partner Issues
SET India’s minority partners do not have the same long-term goals as SPE
• Minority partners are unwilling or unable to fund
future initiatives due to capital constraints
• Atlas/Grandway and Capital seek liquidity and have
repeatedly requested an exit from the partnership
Current Ownership
SPE
62.0%
Atlas/Grandway
32.4%
Capital International
5.6%
• Partner concerns have escalated over time and could negatively affect the business
• Have been actively looking for a private equity partner to buy out minority shareholders

SPE was close to a deal with Ashmore that eventually collapsed
• Market conditions have prevented the completion of an IPO of SET India

We anticipate that an IPO would be forthcoming (even with the presence of a new private equity partner as
they would ultimately need to seek liquidity)
29
• Branded Networks Strategy
• SET India Discussion
• Appendix
30
Indian Economic Outlook
•
Fueled by strong GDP growth, India is expected to be among the top 3 economies in
the world by 2050
•
As GDP grows, consumers are attaining higher levels of disposable income
•
Disposable income can be expected to translate into lifestyle changes with consumer
spending expected to shift towards leisure and entertainment
•
India is the largest youth market in the world, comprised of approximately 340MM
individuals under the age of 15
GDP & Disposable Income Projections
Among Top 3 Economies in World by 2050
6,000
50,000
5,000
USD Billion
2003 USD Billon
40,000
30,000
20,000
8% CAGR (GDP)
4,000
3,000
2,000
1,000
10,000
0
2005
0
China
US
India
Japan
Brazil
Russia
UK
Germany France
2010
2015
2020
2025
2030
Italy
GDP
Sources: Goldman Sachs “Dreaming with Brics: The Path to 2050”, October 1, 2003; South Asia Institute, University of Texas
GDP per capita
31
Indian Media Industry
•
Media Industry continues a robust expansion projected to grow from $10.1BN in
2006 to $22BN in 2011 (18% CAGR) due to growth of the economy, increase in
disposable income and the fact that a high percentage of population is young
•
Television drives the industry growth with revenues projected at a 22% CAGR
•
Television is the strongest medium reaching 500MM individuals; print, the second
largest medium, reaches 222MM individuals
Share of Indian Media Revenues
12,070
USD Millions
12,000
8,000
5,395
4,447
4,000
4,070
2,974
1,965
116
395
167 202
233 500
209 442
Music
Outdoor
Live Ent
37
221
0
TV
Print
Films
Radio
2006
2011
Source: PWC-FICCI Report – The Indian Entertainment and Media Industry – A Growth Story Unfolds, 2007.
Internet Adv
32
Indian Television Industry
•
India represents the third largest television audience in the world and is the fifth
largest market for television sets in the world
•
Today, of the 215MM households in India, 115MM are television households, a
penetration rate of 54%
•
Pay television’s penetration is significant at 64% of television households and is
projected to grow to 87% by 2011, the majority of whom are expected to receive cable
service
Growth of Television Households
Millions
200
150
102
109
112
115
210
205
200
195
190
185
180
119
123
140
120
212
128
130
100
50
Millions
250
Growth of Pay Television Households
100
80
60
40
20
0
0
2004
2005
2006
2007
Households
2008
TV Households
2009
2010
2011
102
130
128
123
119
115
112
109
101
80
75
70
68
61
90
50
1
2
4
6
8
10
12
0
2004
2005
2006
2007
2008
2009
2010
2011
TV Households
Cable Households
DTH Households
33
Source: PWC-FICCI Report – The Indian Entertainment and Media Industry – A Growth Story Unfolds, 2007; Credit Suisse, “Challenges for Hollywood in Bollywood”, April 21, 2008
Indian Advertising Market
•
Television ad market has grown rapidly over the last several years and the share of ad spending
on television relative to all media has grown from 41% in 2004 to 44% in 2006 and is projected to
grow to 52% by 2011
•
Despite the increase in ad revenue in recent years, India still has a relatively low level of TV ad
expenditure as a percentage of GDP compared to other countries – expected to rise from 0.5% of
GDP in 2007 to 0.55% by 2010, indicating significant potential for future growth
•
Projected increase in total advertising spend, coupled with strong growth in television viewership,
makes India a very lucrative television market
US
Malaysia
Singapore
UK
France
Germany
So Korea
China
India
1.1
1.0
0.9
0.9
0.8
0.8
0.8
0.6
0.5
Projected Ad Revenue Growth of TV Industry
3,000
2,860
2,535
2,500
2,198
USD Millions
TV Ad Spending as a % of GDP in 2007
1,930
2,000
1,721
1,500
1,267
1,307
2005
2006
1,116
1,000
500
2004
2007
2008
2009
2010
2011
34
Sources: The Associated Chambers of Commerce and Industry of India (ASSOCHAM) (2007); PWC-FICCI Report – The Indian Entertainment and Media Industry – A Growth Story Unfolds,
2007; Credit Suisse, “Challenges for Hollywood in Bollywood”, April 21, 2008
Indian Distribution Market
•
Subscription revenue is projected to be the key growth driver of revenue for the
Indian television industry over the next five years, mainly due to:
– Economic growth, which is expected to increase both the number of pay television
households and subscription rates
– Pressure on cable operators to report subscriber numbers more accurately
Subscription revenue is projected to grow from $2.7BN in 2007 to $8.8BN by 2011,
representing a 26% CAGR over five years
Projected Sub Revenue Growth of TV Industry
8,791
9,000
8,000
USD Millions
•
7,116
7,000
6,000
5,209
5,000
4,000
4,000
3,000
2,000
2,256
2,721
3,174
1,744
1,000
2004
2005
2006
2007
2008
2009
2010
2011
35
Source: PWC-FICCI Report – The Indian Entertainment and Media Industry – A Growth Story Unfolds, 2007