VIDEO: OPPORTUNITIES AND GROWTH DRIVERS · PDF fileVIDEO: OPPORTUNITIES AND GROWTH DRIVERS Michel Azibert, Deputy CEO and Chief Commercial & Development Officer

VIDEO: OPPORTUNITIES AND GROWTH DRIVERS Michel Azibert, Deputy CEO and Chief Commercial & Development Officer

Agenda

2

2

3

4

Eutelsat’s video business

Market trends

Eutelsat’s Video strategy

Conclusions

1

Eutelsat Video activity in a snapshot

3

► Total revenues of €913m • 63% of Group total

► High visibility • 83% of Group backlog • Long-term contracts

► ~ 5,800 channels • 37% Free-to-Air (FTA) • 63% Pay-TV

► HD penetration of 12% • 19% on HOTBIRD

REVENUES BY ACTIVITY IN FY 2015

REVENUES BY REGION IN FY 2015

83%

13%

Professional video

Broadcasting

Distribution

Central Europe

Western Europe

MENA

RCA

LATAM & Others

4%

€913m

€913m SSA

5% 9%

8%

19%

13%

46%

511

742

913

2,668

4,463 5,150

Ten years of growth

4

+79%

FY 2015 FY 2005

BACKLOG (€M)

REVENUES (€M)

CAGR: 6.0%

+93%

FY 2015 FY 2005

CAGR: 6.8%

FY 2010 FY 2010

EUTELSAT 117 WEST A

EUTELSAT 115 WEST A EUTELSAT 115 WEST B

EUTELSAT 113 WEST A

TELSTAR 12* 15* W



EUTELSAT 5 WEST A

EUTELSAT 3B

EUTELSAT 10 A

EUTELSAT 7A EUTELSAT 7B

EUTELSAT 9A

HOT BIRD 13B, 13C, 13D

EUTELSAT 16A EUTELSAT 16C

EUTELSAT 21B

EUTELSAT 25B

EUTELSAT 28F* EUTELSAT 28G*

EUTELSAT 31A

EUTELSAT 33C EUTELSAT 33D

EUTELSAT 36A EUTELSAT 36B

EUTELSAT 48A EUTELSAT 48D

EUTELSAT 53A*

EUTELSAT AT1* (56° E)

EUTELSAT 70B

EXPRESS AT2* (140° E)

EUTELSAT 172A

EUTELSAT 28E*

Valuable assets: ten video hotspots…

5 EUTELSAT FLEET NOVEMBER 2015 *

Stable orbit Inclined orbit Capacity on third-party satellites

Key Video Neighborhoods (>170 channels)

** being repositioned

**

KA-SAT

…with a reach of ~275 million homes

6 (1) Figures are not taking into account audience in SSA Source: Eutelsat TV Observatory

122

27 18 14

5 11 6 5

138

52

26 18 14 12 9 5

EuropeMENA

MENA SSARussia

WesternEurope

Europe Central EuropeSSA

MENAAfrica

EMEA

AUDIENCE GROWTH (MILLION HOMES)

Growth >30% since 2010

(1)

(1)

2014 2010

13° East 7/8° West 36° East 28° East 9° East 16° East 7° East 5° West

(1)

… and a strong channel line-up

7 (1) Figures are not taking into account audience in SSA Source: Eutelsat TV Observatory

1070

936 932 827

367 319

244 173 198

98 98 79 45 89

29 9

EuropeMENA

Central EuropeSSA

SSARussia

MENA MENAAfrica

Europe EMEA WesternEurope

5-YEAR AUDIENCE GROWTH (MILLION HOMES)

(1)

o/w HD

Channels

13° East

36° East

28° East

9° East

16° East

7° East

5° West

~40 TV platforms on Eutelsat’s fleet, up 17% since 2010

(1)

(1)

7/8° West

Western and Central Europe

8

► 59% of total video revenues • Number one player in volume market share

► HD penetration: ~17%

► Main neighbourhoods: • 13°East (HOTBIRD) • 9°East • 16°East • 5°West

► Western Europe • Mature market • Premium pricing

► Central and Eastern Europe • Moderate growth • Lower pricing

VOLUME MARKET SHARE (TRANSPONDERS USED FOR VIDEO)

TRANSPONDER DEMAND FOR VIDEO APPLICATIONS

SES

Eutelsat

Hispasat

Intelsat

Others

Western Europe Central Europe

39%

31%

9%

6%

15%

583 574 570 564 556 549

224 230 236 241 248 255

807 804 806 805 804 804

2014 2015 2016 2017 2018 2019

Source: Euroconsult

Key video hotspot: HOTBIRD at 13° East

9

► ~25% of total group revenues

► Three satellites: • 102 operational physical transponders (95 TPE)

► Fill rate c.95%

► Main markets are Italy and Poland

► Reach of 100m households in Western and Central Europe • Up 6 million vs. 2010 • ~30 million DTH

► 1,070 channels

• 63% Pay-TV • 19% HD penetration

► Average revenue per 36 Mhz equivalent transponder: €3.8m

HOTBIRD: MAIN MARKETS AND CUSTOMERS (EUROPE ONLY)

Middle East and North Africa

10

► 19% of Video revenues • Number one by volume market share

► Main neighbourhoods: • 7/8° West • 7° East (Digitürk anchor customer) • 13° East (HOTBIRD)

► HD penetration: 13%

► Main customers include Noorsat, Nilesat, Gulfsat, TDA, OSN, MBC…

► MENA characteristics: • Free-to-Air (FTA) the most widespread reception mode • Growing satellite TV universe



Arabsat

Eutelsat

Nilesat

Turksat

Others

34%

21% 17%

6%

22%

405 422 433 444 454 462

2014 2015 2016 2017 2018 2019

Source: Euroconsult

CAGR: +2.6%

MENA growth momentum

11 Source: TV Observatory 2014

RECEPTION MODES IN MENA

Strong momentum consolidating leadership

25 27

52

2008 2010 2013

TV HOUSEHOLDS AT EUTELSAT’S 7/8° WEST NEIGHBORHOOD (M)

61% 67%

92%

39% 33%

6% 2%

2008 2010 2013

Satellite Analog terrestrial DTT / IPTV

Satellite has dominant market share

Sub-Saharan Africa (SSA)

12

► 8% of video revenues • Number one in volume market share

► Eutelsat is the leader with three Hotspots • 36° East • 16° East • 7° East

► Market characteristics • Growing satellite market share • Ongoing DTT transition • Growing number of both African and international channels

► Main customers include Multichoice, Azam Media, Canal + Overseas…



215 231 256 274 290 303

2014 2015 2016 2017 2018 2019

Source: Euroconsult

CAGR: +7.1%

SES

Eutelsat

Intelsat

Others

35%

31%

15%

19%

Russia and Central Asia

13

► 9% of video revenues • Market leader in volume market share

► Global coverage of Russia with three orbital positions • 36° East • 56°East • 140° East

► Reaching 26m households at 36°East

► >750 channels • 13% HD penetration

► Serving Russia’s main DTH platforms • Tricolor TV and NTV+



236 259 268 275 285 295

2014E 2015E 2016E 2017E 2018E 2019E

Source: Euroconsult

CAGR: +4.6%

SES

Eutelsat

Intelsat

Others

Gazprom

RSCC

26%

17%

15%

14%

18%

9%

Latin America

14

► 3% of video revenues • Relatively new market for ETL

► DTH and cable distribution at 117° West • Capacity and performance will be strengthened

with the launch of ETL 117 WB

► >200 channels on EAS fleet

► Anchor customer: Millicom

► Launch of ETL 65WA to boost and complement video resources for Brazil



507 555 591 609 625 637

2014E 2015E 2016E 2017E 2018E 2019E

Source: Euroconsult

CAGR: +4.7%

Intelsat

SES

Eutelsat

Others

Star One

Hispasat

36%

19%

7% 6%

20%

12%

Agenda

15

2

3

4


Market trends


Conclusions

1

Market trends

16

2.2

2.3

2.4

Evolving consumer behaviour

Improving image quality

Satellite to remain a key infrastructure in mature markets

Significant opportunity in fast-growing markets

2.1

2

2.1 Evolving consumer behaviour

Changing video landscape

17

► Series

► Short formats for mobile reception

► User-generated content

NEW FORMATS AND CONTENT NEW ENTRANTS NEW VIEWING HABITS

► OTT ► Time-shifted

► On-demand

► Multi-screen

► Social TV


Changes in viewing habits

US - AVERAGE TIME SPENT PER ADULT (18+) PER DAY (MINUTES)

18

269 259 251

26 29 29

46 48 43

36 56 66

377 392 389

2013 2014 2015► Linear viewing declining

but still predominant

► Growth of non-linear usages

CAGR

+35% -3% +6%

-3%

Source: Nielsen Total Audience Report

Live TV Time-shifted TV Internet on a PC Smartphone

ON VIDEO AUDIENCE DISTRIBUTION ON NUMBER OF CHANNELS ON LEGACY TV PLATFORMS

19


Impact of OTT

OTT

► Satellite will maintain critical mass as the only infrastructure able to reach households with insufficient terrestrial connectivity

► OTT leading to cord-shaving of non-premium channels in mature markets

► Western Europe markets differ from the US • Over twice as many channels per M inhabitant

in North America • Lower Pay-TV penetration in a number of countries

in Europe • Lower price of Pay-TV bundles

(less incentive to cut the cord) • OTT offer less diversified in Europe

► Eutelsat main markets, Poland and Italy, affected later and less

► Fast-growing markets not significantly impacted in foreseeable future

Market trends

20

2.2

2.3

2.4





2.1

2

21 Source: Eutelsat

Ramp-up Period Broadcast Format Modulation

MPEG-2 compression

MPEG-4 compression

HEVC Compression

1990s-2000s DVB-S 12 20 -

DVB-S2 - 26 -

2000s-2010s DVB-S 2 to 3 5 -

DVB-S2 3 to 4 6 to 8 12 to 15

2020s DVB-S2 / DVB-S2X 1 to 2 3 to 4

SD

NUMBER OF CHANNELS PER 36 MHZ TRANSPONDER

2.2 Improving image quality

Capacity requirement as a function of image quality and compression

Improved quality will require more capacity, better compression to facilitate transition

22

10-Y HD CHANNEL PENETRATION EVOLUTION OF IMAGE QUALITY (NUMBER OF CHANNELS – EMEA + LATAM)

Source: Euroconsult 2015

2024 2014

37%

20% 15% 14% 12% 10%

5%

76%

67%

38%

47%

31% 32%

21%

NorthAmerica

WesternEurope

LATAM CentralEurope

MENA Russia andCentral Asia

SSA

5,000

10,000

15,000

20,000

25,000

2012 2014 2016 2018 2020 2022 2024

14% 38%


HD adoption driving growth

… resulting in higher HD penetration Scope for ramp-up in all regions...

High Definition Standard Definition


Conditions in place for UHD adoption

23

DEMAND

EQUIPMENT

STANDARDS

CONTENT

► Once viewed, two out of three consumers would like an UHD screen ► Ready to pay extra for UHD for both Free TV and Pay TV viewers

► UHD screen entry price now less than €1,000 ► By 2020, 70% of all screens sold in Europe will be UHD

► HEVC compression leading to greater cost-efficiency ► Industry consensus on development of 4K standard

► Film studios already massively producing UHD content ► OTT players producing their own UHD content ► First linear UHD channels on air - UHD live sports starting

Source: Gfk consulting, Eutelsat Focus Groups, Ericsson Consumer Lab

24

0

100

200

300

400

500

600

700

800

900

2015 2016 2017 2018 2019 2020 2021 2022 2023 2024

UHD CHANNELS BROADCAST BY SATELLITE

► Estimated 800 UHD channels worldwide by 2024

► Satellite to drive growth


Satellite to benefit from UHD take-up

Source: Euroconsult

For distribution, satellite offers the best mix of coverage, image quality, availability and bandwidth

Market trends

25

2.2

2.3

2.4





2.1

2

26 Source: Eutelsat analysis, European Commission - Broadband Coverage in Europe 2014, CISCO VNI 2015

► CDN costs rise in line with audience growth

► Satellite more cost efficient above 50k viewers in Western Europe

► Satellite a fraction of TV platforms operating costs

COST-EFFICIENCY UNIVERSAL REACH

► High cost of fibre roll-out ► Terrestrial networks cannot reach

entire population • Lower image quality • Or even no service

► Satellite providing full coverage of a market

SERVICE QUALITY

BROADBAND COVERAGE (>30Mbps)

► Higher quality of image leading to increased bandwidth usage

► Congestion of terrestrial netwoks • Video will represent ~80% of consumer

internet traffic by 2019

► Satellite and hybrid solutions allowing unimpaired viewing experience

86%

40% 27%

UK France Italy

4

8

20

1 SD channel in MPEG 2

1 HD channel in MPEG 4

1 UHD channel in HEVC

BANDWIDTH REQUIREMENT (Mbps)

Cost

Satellite

OTT

# viewers

2.3 Satellite to remain a key infrastructure in mature markets

Satellite’s competitive advantage over OTT / IP

2.3 Satellite to remain a key infrastructure in mature markets

Case study: development of hybrid offer in South Korea

27

► South Korea is one of the countries with the highest fiber penetration

► KT Telecom hybrid offer launched in August 2009 combining IPTV with DTH • Part of a triple play offer including broadband and Voice

over IP

► Differentiated services offering • Wide range of linear channels including HD channels

(from satellite TV) • Significant VOD contents (from IP offer)

► After adopting the hybrid platform • KT was perceived to be superior to cable TV

or competitor IPTV • Became leading IPTV player

KT MEDIA SUBSCRIBERS (M)

2.15

0.84

1.55

8.44

2.04

2.27

4.14

2011

4.55

2015

Olleh TV (IPTV)

Skylife TV (satellite)

Olleh TV Skylife (hybrid)

Satellite

Source: Eutelsat analysis, company reports

Satellite prospering in the land of fiber

Market trends

28

2.2

2.3

2.4





2.1

2

2.4 Significant opportunity in fast-growing markets

Markets with structural growth drivers

29 (1) Source: OECD working paper - the emerging middle-class in developping countries (2) Source: Euroconsult 2015, Eutelsat analysis

ESTIMATED RISE IN MIDDLE-CLASS BY GEOGRAPHY1 (MILLION OF POP) CHANNELS PER M INHABITANT2

2 6

8 8

31

SSA MENA LATAM RussiaCentral Asia

North America

181

251

313

105

165

234

32

57

107

2009 2020 2030

LATAM MENA SSA

Underpenetration of television in fast-growing markets

Rise of middle-class with increased spending power


Pay-TV subs and advertising driving growth

30

Source: Global entertainment and media outlook, 2015-2019, PWC

GROWTH OF SATELLITE PAY-TV SUBSCRIPTIONS (M SUBSCRIBERS)

GROWING ADVERTISING REVENUES ($BN)

20.4

26.9

2014 2019

10 16 8

10

32

42

16

19

2014 2020

Russia MENA LATAM SSA

Source: Global Satellite TV forecast, Digital TV research, May 2015


66

87

CAGR: 4.8% CAGR: 5.7%

…and Free-to-Air Strong growth potential in both Pay-TV…


Sustained rise in channels

31 Source: Euroconsult 2015

~12,500

2014 2019 2024

CHANNELS BROADCAST BY SATELLITE

CAGR: 4.0%

+4%

+6%

+3%

+4%

11% 20% 32% HD penetration

~18,500


~16,200


Limited availability of TV via broadband in fast-growing markets

32 Source: Akamai's State of the Internet – Q2 2015 report; McKinsey – Offline and falling behind: Barriers to Internet adoption – October 2014

FIXED BROADBAND PENETRATION

% OF HOUSEHOLDS

USA Russia Brazil Mexico Turkey Egypt Tanzania

BROADBAND SPEED

% OF HOUSEHOLDS WITH >10Mbps

70% 44% 32% 39% 39% 10% 3%

43% 33% 2% 6% 7% <3% N/A

In many markets, satellite remains the most viable infrastructure for video distribution


Satellite gaining market share worldwide

33

► Total number of TV homes to increase by 140 million to 1.7 bn by 2020

► Satellite reception to grow by 80 million homes to 440 million by 2020

► Satellite market share to rise from 23% to 26%

MILLION TV HOMES BY DISTRIBUTION MODE - GLOBAL

528 520 507 490 478 470 465

563 561 565 575 583 591 599

102 118 134 150 165 177 188

362 378 393 407 420 431 442

0

200

400

600

800

1000

1200

1400

1600

1800

2014 2015 2016 2017 2018 2019 2020

Source: Euroconsult, Digital TV Research

Terrestrial Cable Satellite IP Growth of satellite in fast-growing markets, resilience in mature markets

Agenda

34

2

3

4


Market trends


Conclusions

1


35

3.2

3.3

Strengthen resources in fast-growing markets

Encourage HD and UHD adoption

Innovate to maximise satellite value proposition

3.1

3

3.1 Strengthen resources in fast-growing markets

New capacity focused on fast-growing markets

36 TPE: 36-Mhz equivalent transponders

E 8 WB ENTRY INTO SERVICE OCT. 2015

+26 TPE MENA ► Ku-band fully presold

E 36 C Q4 2015 +19 TPE SSA RCA

► 11 expansion transponders presold to Multichoice (Africa)

E 117 WB Q1 2016 +48 TPE LATAM ► Anchor customer: Millicom

E 65 WA Q1 2016 +39 TPE LATAM ► ‘Piggy-backing’ on dynamic Brazil video neigbourhoods

SATELLITE LAUNCH CAPACITY1 COVERAGE

1 Regular capacity only


37

3.2

3.3


Encourage HD and UHD adoption


3.1

3

► Many Eutelsat Pay-TV customers accelerating migration from SD/HD line-up to full-HD

► Several Free-to-Air broadcasters are also extending HD offer on Eutelsat satellites

► Eutelsat main actions • providing additional capacity where needed • facilitating migration • providing support and commercial incentives to switch to HD

► HD development on Hotbird a priority for both pay TV and Free-to-Air

► Migration well underway now in MENA for premium content

3.2 Encourage HD and UHD adoption

Support HD ramp-up

Ensure satellite remains first in class in terms

of quality.

38

► Eutelsat dedicated capacity on Hotbird to launch UHD channels for the European market

► Demo channel in place on HotBird, encoded in HEVC at 50 frames per second with 10-bit colour depth. • Europe’s first UHD channel in this new standard.

► Several initiatives: • France: Fransat Ultra HD demo channel • Germany: public broadcasters • Russia: Tricolor TV going UHD with 2 channels

► Content partners preparing commercial launch of UHD linear channels • SPI International 4K FunBox

► Recent contracts with pay-TV customers incoporate roadmap for progressive introduction of UHD

3.2 Encourage HD and UHD adoption

Accompany UHD ramp-up

39


40

3.2

3.3



3.1

3 Encourage HD and UHD adoption

3.3 Innovate to maximise satellite value proposition

Satellite replicating experience available through terrestrial networks

41

ERGONOMIC NAVIGATION Smart EPG1

EXPERIENCE SOLUTION STATUS

Work in progress

MOBILITY MULTI-DEVICE Native IP Multiscreen Late stage

development

INTERACTIVITY ON-DEMAND

Already in production

1Electronic program guides


Smart LNB: enabling interactivity for end-users

42

► Low-cost home device, compatible with existing satellite equipment

► Providing narrow band return on top of regular DTH reception

► Enables TV platforms to deploy connected TV services via satellite: • Push VOD • Pay-per-view • Social TV • Live show participation

► Viewer intelligence and remote CPE management

► Mass market production to begin soon

► Interest notably in fast-growing markets

'Smart LNB'

IP IDU TS Video

Video

TV reception LAN connectivity


Multi-screen delivery solution via satellite

43

► Eutelsat the first enabler for multiscreen delivery via satellite to portable devices

► Combination of native IP multicast with local WiFi distribution

► Compatible with all mobile devices

► No increase in distribution costs as the number of users increases

► Benefits for broadcasters • OTT via satellite in markets underserved by terrestrial networks • Increased channel reach with detailed audience measurement • Nomadic TV reception in public spaces • Formats tailored for smartphones and tablets enabling up to 100 channels

per transponder and richness of channel line-up • Universal coverage


Multi-screen delivery solution via satellite: how it works

44

END-USER PREMISES INSTALLATION USE CASES

EASY INSTALLATION ► At home • Typically 4-5 simultaneous

users • Consumer-grade WiFi

access point

► In public spaces • Typically 40-50 simultaneous

users • High-end WiFi access point

is required • Commercial benefits

for hotels, cafés…

Agenda

45

2

3

4


Market trends


Conclusions

1

To sum up

46

4.3

4.4

Track record of consistent growth in revenues, channels and audience

Attractive video assets both in mature and developing markets

Satellite has a competitive advantage in the evolving video ecosystem

Strategy focused on harnessing growth in fast-growing markets and leveraging the innovation opportunity

Video one of the pillars of Eutelsat’s growth

Q&A VIDEO: OPPORTUNITIES AND GROWTH DRIVERS

Documents

VIDEO: OPPORTUNITIES AND GROWTH DRIVERS · PDF fileVIDEO: OPPORTUNITIES AND GROWTH DRIVERS Michel Azibert, Deputy CEO and Chief Commercial & Development Officer