Q3 U.S. Digital Video Benchmark

U.S. Digital Video Benchmark Adobe Digital Index Q3 2014

Table of contents

As broadcasters, cable networks, pay-TV providers, publishers and advertisers look to engage viewers, they need to be aware that online video (unauthenticated) and TV Everywhere (authenticated) viewing behaviors are changing. With a broadening array of access points, including mobile devices, Apple TV®, and Xbox consoles, and an ever-increasing supply of premium content, the number of viewers of online video and paid TV Everywhere is reaching and surpassing record levels every quarter. Additionally, advertisers are seeing much more value in digital audiences. These audiences are easier to quantify and target than audiences in traditional linear broadcasting, and also provide advertisers the ability to scale digital marketing efforts based on the shifting size of the audience. With this shift in viewing behaviors, media sellers must develop new strategies for developing and packaging ad products for audiences that create value for the agencies and advertisers they serve.

Online video 3 Key insights 4 Online video start growth

5 Device share of video starts

6 Consumption across mobile devices

7 Video view rate by device

8 Ad starts per video start

TV Everywhere 9 Share of authenticated video by access type

10 Share of authenticated video by access type and genre

11 Authenticated video growth by share of access type

12 Monthly unique visitor growth

13 Video viewing frequency growth by access type 14 Video viewing frequency by genre and programmer

Appendix 15 Predictions

16 Methodology

17 Glossary

18 Tables

ADOBE DIGITAL INDEX | U.S. Digital Video Benchmark Q3 2014

Key insights Online video •  Mobile has one-third share of online video—As of Q3 2014, mobile devices account for 29% of all online video starts. (Q3 ’14).

•  Microsoft devices are making a move—Over the last year, Microsoft devices have realized an impressive growth in their share of video starts when compared to similar devices. Surface share of tablet video starts is up 200%, and Lumia share of smart phone video starts is up 157%.

•  Browser ads more frequently viewed than mobile app ads—24% more ad views per video start occurred on a browser compared to apps.

•  Kindle Fire and Samsung Galaxy are more video centric devices—Video view rates on the Kindle Fire were 70% higher than the average tablet; Samsung Galaxy video view rates were 100% higher than the average smart phone.

TV Everywhere •  iOS extends dominance—iOS devices were used for 56% of all authenticated TV Everywhere video starts in Q3 2014,

a share growth of 9% year over year (YOY). •  Episodic content is less app centric—TV Everywhere content viewing within the broadcast and cable genre was primarily through a

browser with 46% of episodic views being browser based; iOS 37%, Android 11%, gaming console & OTT 6%. •  Video start growth extends in Q3—TV Everywhere video start growth continued through Q3 2014, growing

108% YOY and 38% quarter over quarter (QOQ). •  Android™ viewing frequency up 65%—Android devices saw the largest YOY growth in viewing frequency, up 65%.

Gaming console and over-the-top (OTT) device viewing frequency grew the most QOQ, up 14%. ADOBE DIGITAL INDEX | U.S. Digital Video Benchmark Q3 2014 3

Q3 2013 Q4 Q2 Q3Q1 2014

38 B

15,000

30,000

QUARTERLY ONLINE VIDEO STARTS(IN BILLIONS)

22%GROWTH

YOY

ONLINE VIDEO

Online video start growth Online video viewing continues to grow YOY and is flat QOQ due to limited new content during the lull of the summer.

The findings: •  Total online video starts grew 22% YOY (Q3 ‘13 through Q3 ‘14). •  The amount of online video starts in Q3 2014 slowed to

38 billion, flat QOQ.

Insight:

Although growth has stalled in the most recent quarter, the trend is still in the positive direction, up 22% YOY. This trend shows that online video is a part of our lives more today than it has ever been. To put these staggering figures in perspective, 38 billion video starts equates to an average of 5.3 video starts per person per quarter globally.

ADOBE DIGITAL INDEX | U.S. Digital Video Benchmark Q3 2014 4

S STABLET MARTPHONES

27%GROWTH

56%GROWTH

DEVICE SHARE OF ONLINE VIDEO STARTS(Q3 2013 vs. Q3 2014)

11%

14%

9%

14%

ONLINE VIDEO

Device share of video starts Market share of online video consumption continues to be carved out by mobile devices like smartphones and tablets. Over 29% of online video views are on a mobile device, a market share increase of 45% YOY.

The findings:

•  Video viewing on smartphones is continuing to gain popularity with 56% YOY share growth.

•  In Q3 2014, edged out smart phones with 14.3% share (smartphones with 14.2% share).

•  Although a small percentage of the total (<0.1%), gaming consoles and OTT devices realized the highest market share growth, up 124% YOY.

The opportunity: Mobile devices are becoming much more relevant in online video consumption with close to one-third of video starts occurring on a mobile device. Developers need to be prepared to offer an array of options that cater to multiple platforms and an increasing buffet of screen sizes.

5 ADOBE DIGITAL INDEX | U.S. Digital Video Benchmark Q3 2014

ONLINE VIDEO Consumption across mobile devices A large majority of mobile video starts tracked by Adobe customers are occurring on an Apple device, while Samsung devices are solidly holding 2nd place. In the battle for 3rd place, Microsoft is growing its share of starts in both the smartphone and tablet markets with the Lumia and Surface.

The findings: •  Apple devices are dominating the mobile market when it comes to online

video viewing with 80.7% of tablet share on the iPad and 81.4% of smart phone share on the iPhone.

•  Microsoft is making waves in the hardware space. The share of video starts on a Microsoft device has grown 199% in the tablet market (Surface) and 157% in the smartphone market (Lumia).

The opportunity:

Developers need to know which devices are used the most and optimize their websites and apps for those devices first. Knowing which devices are up-and-coming is useful in resource planning to stay ahead of the emerging trend.


TABLET SHARE OF ONLINE VIDEO STARTS

(Q3 2014)

SMARTPHONE SHARE OF ONLINE VIDEO STARTS

(Q3 2014)

3%

4%

6%

81%

3%

1%

1%

INDEX100%

Q32013

Q42013

Q12014

Q22014

Q32014

SURFACE LUMIA NOOK KINDLE FIRE MOTION HTC ONE X RZR

EMERGING DEVICE SHARE GROWTH

200%SURFACEGROWTH

OTHER1% OTHER

ONE1% NOOK

MOTION1% SURFACE

LUMIA

RAZR

4% KINDLE FIRE

GALAXY

iPHONE

12%

81%

GALAXY

iPAD

150%

200%

GAMING CONSOLE

TABLET

XBO

X

PS4

AM

AZO

N

KIN

DLE

FIR

E

SAM

SUN

G

GA

LAXY

TA

B

SAM

SUN

G

GA

LAXY

NO

TE

SAM

SUN

G

GA

LAXY

S5

NO

KIA

LU

MIA

PC

LARGE SCREENPHONE

SMARTPHONE PC

ONLINE VIDEO VIEW RATE BY DEVICE TYPE: VIDEO STARTS PER VISIT(Q3 2014)

ONLINE VIDEO VIEW RATE BY DEVICE: VIDEO STARTS PER VISIT(Q3 2014)

20%

50%

40%

GAMING CONSOLE TABLET LARGE SCREEN PHONE SMARTPHONE PC

HTC

ON

E X

MO

TORO

LA

DRO

ID R

AZR

APP

LE iP

HO

NE

GO

OG

LE N

EXU

S 5

APP

LE iP

AD

GO

OG

LE N

EXU

S 10

MIC

ROSO

FT S

URF

ACE

78%more engaging

than PCs.

ONLINE VIDEO Video view rate by device As screen sizes decrease, so do views per visit. PCs are the exception to this trend, realizing the fewest online video starts per visit.

The findings: •  More than half of all website visits on a gaming console resulted in a

video start with a video view rate of 54% •  On average, gaming consoles and OTT devices have a 78% higher video

view rate compared to PCs. •  iPhone video view rates underperform the average smartphone by 54%,

while iPad video view rates underperform the average tablet by 49%.

Insight: Although Apple devices contribute to a large amount of mobile video views, the average iOS user does a lot more browsing. As a result, an iOS device is more of a multipurpose device, and single-purpose devices, such as the Kindle Fire, have a much higher video view rate.


ONLINE VIDEO Ad starts per video start Online video advertisement viewing continues to creep up, with the number of ad starts per video start setting another record.

The findings: •  Viewers watched 2.2 ads per video start in Q3 2014,

up 16% YOY (Q3 ‘13 through Q3 ‘14). •  In Q3 2014, the ratio of ad starts per video start was 22% higher

when watched on a browser versus a mobile app.

The opportunity:

As viewers become more comfortable watching digital video ads, content publishers and distributors need to develop new ways to package and sell both content and audiences to agencies and advertisers. Additionally, both media buyers and sellers need to develop ways to ensure proper tracking and cataloging of ads.


ONLINE VIDEO AD STARTS PER VIDEO START

ONLINE VIDEO AD STARTS PER VIDEO START BY DEVICE TYPE(Q3 2014)

MOBILE APP AD STARTS PER VIDEO START BROWSER AD STARTS PER VIDEO START

22%HIGHER

1.8

2.2

1

2

Q3 2013 Q4 Q2 Q3Q1 2014

2.2

16%GROWTH

YOY

SHARE OF TV EVERYWHERE AUTHENTICATIONS BY ACCESS TYPEiOS BROWSER ANDROID GAMING CONSOLE AND OTT

56%10%

14%

21%

Q32013

Q32014

51%4%

16%

29%

When it comes to authentication, iOS devices extend their dominance in the TV Everywhere (TVE) space.

The findings: •  Browser access type market share of authentications shrank the most

YOY, down 29%, however share was up 11% QOQ. •  iOS devices had a 9% YOY growth in share of authenticated video

starts and now commands 56% of all authenticated video starts. •  The share growth that Android saw in Q2 of 2014 has slipped during

the most recent quarter, down 30% QOQ, and is also down 13% YOY.

Insight

People are turning away from browser-based access types to stream TVE and are instead using a variety of devices to consume their TVE content. In short term, while HTML% and DASH are rapidly evolving, HLS continues to be an attractive format for authenticated delivery because of its compatibility across screens including desktop flash.


TV EVERYWHERE Share of authenticated video by access type

BROADCAST AND CABLE NETWORKS SHARE OF TV EVERYWHERE AUTHENTICATIONS BY ACCESS TYPE

(Q3 2014)

iOS BROWSER ANDROID GAMING CONSOLE AND OTT

A+E NETWORKS SHARE OF TV EVERYWHERE VIEWS BY ACCESS TYPE(Q3 2014)

iOS AND ANDROID BROWSER GAMING CONSOLE AND OTT

37%6%

46%

45%

22%

33%

11%

TV EVERYWHERE

Share of authenticated video by access type and genre Share of authenticated TVE viewing by access type in the broadcast and cable genre level and on the programmer level differs greatly from the overall TVE landscape as represented by data from A+E Networks. A+E Networks is the parent company of A&E, HISTORY, and Lifetime

channels with over 25 million app downloads and as an early adopter with a broad assortment of TVE applications is not necessarily reflective of other episodic television channel results.

The findings: • Within the broadcast and cable genre, browser access types had the largest

market share of authenticated views, with a 46% share. • On the programmer level, 22% of A+E Networks viewers watched content

through a gaming console or OTT device, and half of those views occurred on Roku.

The opportunity:

Viewing behaviors change dramatically between genres and programmers. Knowing which access types audiences use to access their content will allow programmers to support the most frequent access types first and scale out from there.


iOS BROWSER ANDROID GAMING CONSOLE AND OTT

108%GROWTH

TV EVERYWHERE VIDEO GROWTH BY SHARE OF ACCESS TYPE

NOV2013

JAN2014

MAR2014

MAY2014

JUL2014

SEP2013

SEP2014

50%

100%

TV EVERYWHERE Authenticated video growth by share of access type TVE is continuing to realize growth in authenticated video starts over the last year as well as the most recent quarter. The hangover of a landmark sports-driven year with events during the winter, spring, and summer seasons is not yet being realized.

The findings: •  The total amount of TVE authenticated videos grew 108% YOY;

38% QOQ.

The opportunity:

TVE growth is starting to come back down to earth and normalize. YOY growth was still an impressive 108%, and TVE is continuing to become a more relevant part in broadcast consumption. Content providers must be prepared with an TVE offering or risk losing viewers to their competitors.


TV EVERYWHERE MONTHLY UNIQUE VISITOR GROWTH

NOV2013

JAN2014

MAR2014

MAY2014

JUL2014

SEP2013

SEP2014

34%GROWTH

INDEX100%

25%

50%

TV EVERYWHERE Monthly unique visitor growth TVE continues to attract new users quarter after quarter.

The findings: •  Monthly unique visitors are turning to TVE for a wide range of

content consumption, growing 34% YOY.

Insight:

There is a hurdle that needs to be overcome when setting up a TVE account and major sporting events are often the catalyst pushing consumers over the hurdle. Interestingly we are seeing that months lacking in major worldwide sporting events are still seeing unique visitors continue to stick around and watch non-sporting content. The pattern is looking like consumers are coming to TVE for the sporting content, but staying for the experience.


iO ROWSER ANDROI AMING CONSOLE AND OTT

TV EVERYWHERE VIEWING FREQUENCY: AUTHENTICATED VIDEO PER VISITOR PER MONTH(Q3 2013 vs. Q3 2014)

7.17.9

3.7

4.8 5.0

8.3

5.1

8.2

65%MORE

ENGAGED

S B D G

TV EVERYWHERE Video viewing frequency growth by access type TVE consumers are watching TVE content more frequently than ever before.

The findings: •  The average monthly number of authenticated videos per visitor has

increased 39% YOY. •  Android app access type viewing frequency is 65% higher than is was a

year ago.

The opportunity: Viewer behavior is changing from casual viewing to a binge consumption approach, streaming multiple episodes in one session. Content providers need to be aware of this shift in the viewing habits of consumers and have a content strategy that caters to those evolving behaviors.


5.2

BROADCAST ANDCABLE NETWORKS

SPORTS NETWORK OVIE NETWORKS

TV EVERYWHERE VIEWING FREQUENCY BY NETWORK TYPE: AUTHENTICATED VIDEO PER VISITOR PER MONTH

(Q3 2013 vs. Q3 2014)

SESSIONS EPISODE STARTS

A+E NETWORKS TV EVERYWHERE(BINGE vs. REGULAR VIEWING)

4.0 3.84.2

2.5

4.1

64%GROWTH

YOY

REGULAR VIEWING (<3 EPISODE STARTS PER SESSION) BINGE VIEWING (3+ EPISODE STARTS PER SESSION)

95%

5%

68%

32%

S M

TV EVERYWHERE Video viewing frequency by genre and programmer

Not all content is created equal. Differing genres of content exhibit differing levels of viewing frequency, among other things.

The findings: •  Broadcast and cable programming realized a viewing

frequency increase of 30% YOY. •  Movie network frequency of viewing has realized the most

growth over the past year, up 61% YOY. •  Binge viewing is a minor share of the number of A+E Networks

viewing sessions (5%), but one-third (32%) of all A+E Networks episode starts.

Insight:

Binge viewing within broadcast and cable episodic content is leading the lift in viewing frequency and in the absence of sports, binge viewing is what is sustaining TVE. Programmers in this space need to consider catering more content to this type of viewer.


ADOBE DIGITAL INDEX Predictions Online TV Growth to Slow in December 2014 due to Seasonal Downturn •  The fourth quarter appears to be a slow period for online TV slowing 13% in Q4 2013, we expect Q4 2014 to follow this trend.

Christmas Gift Giving of Various Gadgets Will Continue to Erode Browser Share •  The new devices being purchased as gifts for the holiday season will provide an additional lift to the growth of TV

Everywhere. More of these devices will also continue to dilute browser share of video starts.

Viewing Frequency Will Continue its Steady Increase •  As content release strategies evolve to cater to changing viewing behaviors, we will see viewing frequency continue to rise as

binge viewing becomes an industry norm.


ADOBE DIGITAL INDEX Methodology This report is based on consumer video viewing in 2013 and 2014. It consists of the aggregated and anonymous data from media and entertainment sites gathered from Adobe Analytics and Adobe Primetime.

Sample information includes: •  177 billion total online video starts •  1.79 billion TV Everywhere authentications (temporary plays and authenticated plays)

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©2014 Adobe Systems Incorporated. All rights reserved. Adobe and the Adobe logo are either registered trademarks or trademarks of Adobe Systems Incorporated in the United States and/or other countries. Apple TV is a trademark of Apple, Inc. registered in the U.S. and other countries. Android is a trademark of Google Inc. All other trademarks are the property of their respective owners.

ADOBE DIGITAL INDEX Glossary •  Online video start−Any browser-based, unauthenticated video start. •  Video View Rate −Website video starts per website visit. •  Authenticated video−Video content that requires credentials from multichannel video

programming distributor (MVPD). •  Monthly unique visitors−Total number of unique visitors per month. •  Access type –  Browser includes Chrome, IE, Firefox, and Safari on both computers and mobile devices. –  iOS app is an app on any Apple mobile device. –  Android app is a TVE app on any Android mobile device. –  Gaming console and OTT includes Xbox, PS4, Apple TV, Roku, and similar devices.

•  TVE video viewing frequency −Authenticated video starts per monthly unique visitor.



ADOBE DIGITAL INDEX Tables

Emerging Device Share Growth Q3 2013 Q4 2013 Q1 2014 Q2 2014 Q3 2014

Surface 100% 105% 255% 303% 299% Lumia 100% 188% 223% 270% 257% Nook 100% 138% 132% 150% 152% Kindle Fire 100% 122% 131% 131% 145% Motion 100% 107% 101% 115% 120% HTC One X 100% 104% 183% 155% 101% RAZR 100% 111% 118% 114% 65%

Online Video View Rate Device Type Average Gaming Console 54% Tablet 50% Large Screen Phone 46% Smart Phone 42% PC 30%

TV Everywhere Video Growth by Share of Access Type 9/1/2013 10/1/2013 11/1/2013 12/1/2013 1/1/2014 2/1/2014 3/1/2014 4/1/2014 5/1/2014 6/1/2014 7/1/2014 8/1/2014 9/1/2014

100% 86% 95% 79% 118% 122% 138% 127% 121% 134% 178% 204% 208%

Online Video View Rate Device Average Samsung Galaxy S5 83% Nokia Lumia 62% HTC One X 34% Motorola Droid RAZR 31% Apple iPhone 19% Amazon Kindle Fire 85% Samsung Galaxy Tab 63% Microsoft Surface 46% Google Nexus 10 34% Apple iPad 25% Samsung Galaxy Note 68% Google Nexus 5 23% Xbox 68% PS4 52%

Online Video Ad Starts per Video Start Q3 2013 Q4 2013 Q1 2014 Q2 2014 Q3 2014

1.9 1.8 2.1 2.1 2.2

TV Everywhere Monthly Unique Visitor Growth 9/1/2013 10/1/2013 11/1/2013 12/1/2013 1/1/2014 2/1/2014 3/1/2014 4/1/2014 5/1/2014 6/1/2014 7/1/2014 8/1/2014 9/1/2014

100% 84% 87% 76% 103% 105% 111% 101% 102% 113% 127% 133% 134%

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Q3 U.S. Digital Video Benchmark