TELEFONICA S.A.Conference on Audiovision and Copyright Prague, 19 March 2009

Raising awareness in Digital Content Space

2TELEFONICA S.A.

� Content media products, services and initiatives developed and implemented by Telefonica in Europe:

- IPTV services in Czech “O2TV” and Spain “Imagenio”

- Music and Video content streaming and download services to PC “Terra/Pixbox” and Mobile O2 / Movistar

� Intellectual Property awareness program “Educar para Crear” carried out in Spain in 2008 with the participation of Telefonica

� Key messages

Summary

3TELEFONICA S.A.

Total Accesses (Sep ’08)92,1 Mill.

Fixed line servicesMobile services

Data September ‘08

Telefonica has achieved an important position in Eu ropean Telecom market

Spain: 47,2 millions

UK: 19,3 millions

Germany : 15,2 millions

Ireland : 1,7 millions

Czech Republic : 8,0 millions

Slovakia : 0,4 millions

1

21

11

4

2

3

4TELEFONICA S.A.

Telefonica O 2 TV Services

� Active since 1997 � IPTV to STB as core technology

choice; pioneered IPTV in 2004� More than 600K customers in

Spain and 100K in Czech� DTH and Cable added to ensure

economical offer in selected areas

� More than 1,2Million customers in Latam (Brazil, Chile, Colombia, Peru y Venezuela)

� Move towards personal TV:� Personalized line-up

selection� PVR� Catch-up TV

Telefónica TV activities

5TELEFONICA S.A.

In particular, Pay TV offers innovated in our markets with highly flexible packaging

Elements of commercial offer, packaging/line-up sel ection

Mundo

Acesso (21 canais)

Canais Abertos +

Infantil

Esportes

Filmes e Séries

HBO

HBO Max

Variedades

Esportes

EsportesEsportes

Documentários

++ +

++ +

+ +

Cinemax

Música

Notícias

� Flexible offers, supporting positioning of personalization

� low-cost basic package , also used as retention offer

� optional complements: variety of mini-packs and a la carte channels

6TELEFONICA S.A.

Partners Movies

Major studios license contracts120 current titles a year120 library titles a year

Independent distributors license contracts120 current titles a year 30 library titles a year

License contract for Kids programming250 of 10´episodes

Number of licensed titles a year

The success of VoD service depends on attractivenes s of library titles that creates value of the service but the real driv er are current movies more than 500 titles a year

By Dec 2008 more than 1.000.000 movies were rented form Videoteka O 2TV

Top 10 of 20081/ Václav 2/ Taxi4

3/ Gympl

4/ Lovci pokladů: Kniha tajemství

5/ Roming

6/ Rambo: Do pekla a zpět

7/ Já, legenda

8/ Harry Potter a Fénixův řád

9/ Piráti z Karibiku na konci světa

10/ Ratatouille

7TELEFONICA S.A.

O2TV ZABAVA

448 / 547CZK

Basic packagesThematic packages

DOKUMENTY plus60CZK

FILMY plus150 CZK

STYL plus60 CZK

HUDBA plus60CZK

DĚTI plus60 CZK

KINO plus250CZK

Cinemax200CZK.

PRIVATE plus250CZK

HBO200CZK.

Premium packages

O2 TV current packaging with 69 channels in Czech

Hustler TV 200CZK

SPORT plus150 CZK

O2TV KINO448 / 547CZK

O2TV SPORT

448 / 547CZK ZABAVA plus250 CZK

8TELEFONICA S.A.

Video On Demand, Interactive Services and Other functionalities

Video On Demand

� Videoclub / Videoteka

� Films, Series, Documentaries, Sports Events

� Rental pay-per-view or subscription

Time Shifting Other functionalities

� PVR - on the STB- on the Network

� New services give User control on TV: forward, stop, rewind….

� Other functionalities to improve customer experience

� Camera Election� Maps� Information

9TELEFONICA S.A.

Internet to PC Services

� Active since 1999� Portal augmented by

content download & steaming services

� Terra TV� Sonora/Pixbox

� More than 53 MM unique visitors per month

� Terra TV 8 MM unique visitors per month

� Top 3 or 4 in all markets. Usually sole non-GYM performer among market leaders

Telefónica Internet (PC) activities

10TELEFONICA S.A.

Internet: elements of Portal and Terra TV

Commercial OfferT

erra

Por

tal

Pix

box

/ Son

ora

• Generalist portal•Editorial content: news, finance, lifestyle, sports….•Entertainment •Services

• Communities: Gaia; Fotolog; Terra Música (Spain)• Communications services: integrated VoIP• Branded broadband access (LatAm only)• User Generated Content (e.g. “Tú Reportero”)

Ter

ra T

V

• Streaming: •Own/commissioned content•Majors and pay TV providers: Disney, NatGeo, Discovery…

• Download (Rental and Electronic sell-through)• Business models include advertising and pay-per-use• Platforms: Arvato (P2P downloads, Spain) and Lab One

• Streaming (pay-per-use Internet radio)• Download: single-track and subscription• Supported by editorial content • Sub-brands

•PixBox (Spain, download)•Sonora (LatAm, streaming & download)

11TELEFONICA S.A.

What is Pixbox?

� Pixbox is Telefonica’s music and film download plat form in Spain

� P2P platform in a pay for content environment which is legal and secure

� A music subscription service that is unique in Europe

� Different ways of purchasing and renting contents

� Exclusive advantages for Telefonica's ADSL users

� The first P2P service that is acceptable to content owners

� An extensive catalogue with over 3 million songs and 1500 films

� 1.5 million songs from Movistar’s emoción portal

� Compatible with the latest mobile generations

12TELEFONICA S.A.

…and what is ADSL/Music Bundle Promotion?

Then you better start swimmin'Or you'll sink like a stoneFor the times they are a-changin'.

“The Times They Are A-Changin'”Bob Dylan

� Tethered download subscription music service with access to more than 2.000.000 songs

� All Major Labels catalogues included (Sony, Universal, Warner and EMI).

� Also many other important independent Labels (e.g. The Orchard)

� Telefonica’s music subscription services bundled wi th ADSL

13TELEFONICA S.A.

Mobile Content Services

� Mobile portals in all markets:

- Movistar emoción in Spain

- O2 Active in UK, Ireland, Germany, Czech and Slovakia

� All type of Contents:- Music: RT, RBT, Full-

tracks- Video Streaming y

Download- Mobile TV (3G - DVBH)- Sports Events- Games

Telefónica Mobile Content activities

14TELEFONICA S.A.

Adapting to consumer needs03

Trios: Phone, Broadband and Pay TV

Single Service, Basic phone line

Phone + Low speed Internet

“Quad Play”: Phone, Broadband, Pay TV and Mobile

Content ANY.. time, where, device

15TELEFONICA S.A.

Changes in the digital environment are creating opportunity

Digital

content

TV Video

Music

BettingBlogs

Communities

Games

Sports

Podcasting

Unprecedented availability of digital content and services anytime and anywhere

PC

TV

Mobile

Multimedia players

New customer behavior and expectations� Growing consumption� New requirements� Shift among platforms

Exponential growth

Mobility and Broadband

Digital Content

16TELEFONICA S.A.

Educar para Crear (1)

� Education project in Intellectual Property rights

� Carried out in Asturias (Spain) during 2007/2008

� Experiences at three levels: Primary, Secondary and High School

17TELEFONICA S.A.

� The role of creators in the development of culture

� Community commitment in a multimedia space

� Intellectual property and culture interactivity

Three thematic focuses

Educar para Crear (2)

� During four months researchers and teachers worked together to make students reflecting on the work that it’s behind any creation.

� With a methodology adapted to each age group children evolve up to reflecting positions, from a first phase of confusion and ignorance about IP, to a later comprehension of the subject.

� Final Report and more information at http://www.educarparacrear.org/

18TELEFONICA S.A.

� The market, as well as the regulatory framework, ne eds to meet the consumer’s:� Right to Choice, Knowledge and Cultural Diversity� Right to Privacy� Demand for secure and user-friendly services� Demand for high quality content and price-worthy

� The key in the digital age is to create new models to enjoy content in a way which ensures the people who create the contents ca n be supported and rewarded

� Without creators there is no content and without th e fans there is no industry . Changes in the digital environment should be seen n ot as a threaten but as an opportunity.

Key messages

� So we think it’s better for ISPs and rights holders work together to develop new services which offer people the content they want, how they want it, for a fair price

19TELEFONICA S.A.

Meeting Consumer’s needs

ISPs and rights holders working together to develop new serviceswhich offer people the content they want, how they want it, for a

fair price