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September 9, 2013

Equity Research
Broadcast: Monetization Of Spectrum Is Coming
Part 2 Of Our Post Consolidation Report Series The move to a new television standard is becoming reality great for investors, in our view. Part of our positive thesis on the television stocks has been our belief that the underlying television spectrum provides upside potential. While we focused on the fair market value of broadcast spectrum in our 5/17 report, TV: Spectrum Values Provide A Pretty Nice Floor, todays piece describes how the broadcast industry could generate a sizeable non-advertising revenue stream by essentially converting some of its spectrum to a Content Delivery Network (CDN) via Broadcast Overlay technology and then leasing such spectrum to the wireless carriers. All of this is contingent on the industry coming together to establish a new television transmission methodology known as ATSC 3.0. The good news is this new standard is becoming reality and could be available as soon as 2016. According to our research, this technology also provides various benefits to other constituents, as it fulfills the FCCs goal of ensuring the highest and best use of spectrum, and it provides the U.S. Treasury with a far more sustainable and substantial revenue stream than it would otherwise get from a one-time payment from the Incentive Auction. BOTTOM LINE: While not a NT catalyst, we view the move to ATSC 3.0 as a big first step, and we consider Broadcast Overlay a nice option for broadcast spectrum. What is Broadcast Overlay technology? Broadcast Overlay matches the transport platform with the type of potential IP traffic (i.e. broadcast for pointto-multipoint and traditional unicast wireless signals for point-to-point), providing a much more efficient deployment of spectrum. How can the industry convert to such technology? There needs to be an upgrade in television standards from the current ATSC 1.0 to ATSC 3.0, which could be easily and inexpensively done once the industry agrees on the specifics. What are the benefits of ATSC 3.0? The overall intent is to enable seamless transmission of HD, 4K, 22.2 audio and other data streams to fixed, mobile and handheld devices in all types of terrain. Essentially, ATSC 3.o makes a broadcast bit similar to a mobile bit, allowing scalability and flexibility. What is the potential timing? The ATSC 3.0 subcommittee issued a Call for Proposals in March, with 19 organizations submitting 10 proposals in August. Finalized printed documents are due 9/27/13 and a candidate standard by 2016. What is the cost of ATSC 3.0? For the industry, the cost is a minimal $25k per station. For the consumer, there is no cost to pay-tv subs (~90% of households) and ~$10-15 per TV set (for a dongle) to those receiving broadcast OTA (~10%). What is the potential monetary benefit of Broadcast Overlay? Per the The Economic Value of Broadcast Innovation Impact on the U.S. Treasury, the broadcast industry could generate $10B in annual non-advertising revenue in year 1--moving to $220B/yr over time. Under the ancillary revenue model, the U.S. Treasury would receive $0.5B in year 1, ramping to $11B/yr over time. Why should the FCC support the move to ATSC 3.0? First, we think Broadcast Overlay provides for the most efficient use of spectrum (core to the National Broadband Plan). Second, the Broadcast Overlay service is more likely to translate to a significant annuity payment, dwarfing the one-time payment from an incentive auction.

Media & Cable

Marci Ryvicker, CFA, CPA, Senior Analyst ( 21 2 ) 2 1 4 -5 0 10 / m a r c i . r yv i ck e r@ w ell s f a rgo . co m Eric Katz, Associate Analyst ( 21 2 ) 2 1 4 -5 0 11 / e ri c. k atz 1@ w e ll s fa rg o . co m Stephan Bisson, Associate Analyst ( 21 2 ) 2 1 4 -8 0 3 3 / st e p han . b i s so n @ w el l sf a rg o. co m

Please see page 14 for rating definitions, important disclosures and required analyst certifications All estimates/forecasts are as of 09/09/13 unless otherwise stated.
Wells Fargo Securities, LLC does and seeks to do business with companies covered in its research reports. As a result, investors should be aware that the firm may have a conflict of interest that could affect the objectivity of the report and investors should consider this report as only a single factor in making their investment decision.

Media & Cable

WELLS FARGO SECURITIES, LLC EQUITY RESEARCH DEPARTMENT

The move to a new television standard is becoming reality great for investors, in our view. (Part 2 of our Post-Consolidation Report Series)
Part of our positive thesis on the broadcast television stocks has been our belief that the underlying television spectrum provides an element of upside potential despite the fact that these operators dont own this spectrum outright. An important point to stress here is the fact that no one really owns spectrum outright-not even the telephone companies (i.e. VZ and T covered by J. Fritzsche)--as spectrum is managed by the Federal Communications Commission (FCC) via a process called frequency allocation. Given our focus on broadcast spectrum, two questions continue to pop up from the investment community: 1) What is the value of broadcast spectrum?, and 2) How much of this value is hidden (i.e. not used in current operations and/or not reflected in current stock prices)? We attempted to answer the first question in our May 17, 2013 report, entitled TV: Spectrum Values Provide A Pretty Nice Floor, where we used results from the 2008 U.S. 700MHz FCC wireless spectrum auction (Auction 73) to assign values to each TV station license, ultimately giving us what we called a floor price for all publicly traded television companies. We are happy to provide that report and our underlying analyses for those who did not get a chance to read it or for those who loved it so much they want to read it again--but for now, we paste our final conclusion below. Current Spectrum Value Per Share (updated from our May 17, 2013 Report) (Figures in millions, except per share values)
Ticker SBGI SSP BLC TVL JRN NXST TRBAA GTN MDP GCI CBS NWSA CMCSA DIS Current Spectrum Value $2,975 $896 $1,460 $731 $299 $798 $3,290 $151 $792 $1,116 $5,365 $5,635 $5,577 $1,460 Current Spectrum Value / Share $36.26 $15.90 $14.02 $14.09 $5.94 $25.48 $32.89 $2.63 $17.58 $4.75 $8.41 $2.42 $2.08 $0.80 Current Price / Share $26.30 $15.48 $14.24 $16.83 $7.15 $33.52 $60.30 $6.61 $43.62 $24.54 $53.62 $16.19 $42.48 $61.39 Current Spectrum Value as % of Current Stock Price 138% 103% 98% 84% 83% 76% 55% 40% 40% 19% 16% 15% 5% 1%

Note 1: SBGI calculations do not include Allbritton stations and TRBAA does not include Local TV stations; Note 2: Share prices are as of 9/6/13 close; Source: TvB, BIA, Public FCC Documents, and Wells Fargo Securities, LLC estimates The second question is not as easy to answer (not that our spectrum report was easy--but we did find what we considered to be an objective way to eventually determine broadcast spectrum value), as there is no television spectrum just lying around unused. It is important to understand that each station/channel is assigned 6MHz of spectrum, which has the capacity to deliver 19.39 megabits of data per second. What we learned in researching the FCCs broadcast incentive auction back in 2010/2011 is that a channel only needs 3 MHz of spectrum to provide a primary and a secondary HD feed--the remaining 3MHz can be put to other uses, such as additional channels, data-casting, mobile, etc. While it is tough to know the current or future spectrum plan for each station, we have come to the realization that television operators have some degree of choice when it comes to monetization of the remaining 3MHz of spectrum. In November 2011, SBGI commissioned a report entitled The Economic Value of Broadcast Spectrum Impact on the U.S. Treasury that explores the possibility and consequent benefits of utilizing spectrum by station operators via what is known as a Broadcast Overlay service--instead of just auctioning off that spectrum for exclusive wireless operator use. The key point in the study is that not all traffic is created equal. While its no secret that IP data traffic is expected to continue its exceptional growth, the study purports that the majority of this growth will come from point-to-multipoint traffic (traffic involving non-unique users, i.e. video), rather than point-to-point services (traffic involving unique users, i.e. data, email, search, voice, etc.). Because wireless operators rely on a point-to-point traffic infrastructure, they would not be able to most effectively utilize broadcast spectrum

Broadcast: Monetization Of Spectrum Is Coming

WELLS FARGO SECURITIES, LLC EQUITY RESEARCH DEPARTMENT

acquired via auction. Instead, the study offers an alternative called the Broadcast Overlay system whereby broadcasters (who utilize a point-to-multipoint traffic infrastructure) lease some of their spectrum to wireless carriers so-as to alleviate network congestion by offloading some of the heavier point-to-multipoint IP traffic. This would not only improve the quality of service, but would also result in lower bandwidth prices for consumers. According to the study, with certain technological innovations and updates, part of the broadcast spectrum could actually start to look like a Content Delivery Network (CDN), which could then lead to two pretty significant revenue streams--one for the broadcast industry; and one for the U.S. Treasury (the important point here is that there is a 5% revenue share for all revenue generated via non-core use of television spectrum) that would far surpass any one-time proceeds generated from a spectrum incentive auction. Specifically, the Economic Value of Broadcast Spectrum report concludes that under the Broadcast Overlay system, broadcasters would be able to generate non-advertising revenue of roughly $10B in year 1 of adoption--moving to $220B per year over time. Taking 5% of this ancillary revenue stream would provide the U.S. Treasury with $0.5B of incremental revenue in year 1, ramping to $11B per year over time. Taking this to a company-specific level (which is what we would highlight to investors), SBGI (Outperform, $26.30) used the results of this study back in 2011 to conclude that leasing 25% of its spectrum to wireless carriers via a CDN model would have resulted in an incremental $1B of non-advertising related revenue. Importantly, at the time of this study, SBGI was just half its current size (65 stations versus the current 140), so to put this in todays terms, we would just double this figure to get $2B of incremental non-advertising related revenue. Now, for this Broadcast Overlay technology to become reality, a bunch of things need to happen (and we are keeping this part as high level as we can so that investors can understand the concept without getting bogged down in technical details--the bulk of which are provided in the rest of this piece). 1) From a technical standpoint, the broadcasters would need to upgrade to a new television standard (ATSC 3.0 vs. the current ATSC 1.0), which would essentially result in a broadcast bit looking similar to a mobile bit; 2) Another technicality is that only UHF spectrum would be involved here, as VHF is not effective for mobile use (due to the physical characteristics of the VHF band which we described in our May 17th report); and 3) The broadcast and wireless industries would need to work together to share information and services--so that the appropriate transport system could be allocated to the appropriate IP traffic. We anticipate there being a lot of questions involving the timing of ATSC 3.0 and the Broadcast Overlay service, the cost of implementation, any potential obstacles, and the regulatory requirements. Given the complexity of this topic and technology, we provide our detailed views in a Q&A format below--but the gist of our thoughts are as follows: It sounds like timing of the ATSC 3.0 standard is likely 2016, with implementation of the Broadcast Overlay service soon-after; Cost of upgrade to ATSC 3.0 does not appear to be significant ($25K per station); The biggest obstacle today appears to be industry-wide agreement on the technicalities that would comprise the new ATSC 3.0 television standards (although a big positive to us is that the industry has finally agreed that a more robust television standard is necessary); and There appear to be some mixed views on how the regulatory bodies factor in here, but as we understand it-the FCC would need to approve of a move to ATSC 3.0 from ATSC 1.0 (which we believe is feasible given the monetary benefits as well as the more efficient use of spectrum that would result). BOTTOM LINE: While not a near-term catalyst, we view the move to an ATSC 3.0 standard as a positive for the space, and we consider the Broadcast Overlay service to be a nice option when it comes to the potential monetization of broadcast spectrum. We also think this technology provides various benefits to other constituents, as it fulfills the FCCs goal of ensuring the highest and best use of spectrum (the crux of the National Broadband Plan), and it provides the U.S. Treasury with a far more sustainable and substantial revenue stream than it would otherwise get from the one-time payment resulting from the Incentive Auction.

FREQUENTLY ASKED QUESTIONS (FAQ) Part I: DETAILS OF THE ECONOMIC VALUE OF BROADCAST INNOVATION STUDY AND BROADCAST OVERLAY TECHNOLOGY

Media & Cable

WELLS FARGO SECURITIES, LLC EQUITY RESEARCH DEPARTMENT

What is The Economic Value of Broadcast Innovation Impact on the U.S. Treasury study? This was a study conducted by Business Analytix, Inc. of Bordentown, NJ that was commissioned by Sinclair Broadcast Group in November 2011. This paper evaluates how alternative spectrum policies are much more efficient and much more lucrative (to the U.S. Treasury as well as to consumers) than a one-time transfer of spectrum from broadcasters to wireless carriers--such as that being proposed by the FCC via its broadcast incentive auction. The alternative spectrum policy explored in detail throughout the study is a point-to-multipoint service employed by what is called Broadcast Overlay technology. What is the point-to-multipoint Broadcast Overlay technology? Broadcast Overlay is a proposed technology system that provides a much more efficient utilization of spectrum by matching the transport platform with the most suited type of potential IP traffic (i.e. broadcast for point-to-multipoint and unicast for point-to-point), which can be most effective if the broadcasters and the wireless companies work together to render shared services. Broadcast Overlay specifically addresses the pain-point of carrying point-to-multipoint IP traffic in the most cost-efficient way, leveraging ancillary data capacity available in the transmission streams broadcasters provide for their primary broadcast service. From a technical standpoint, this solution assumes a distributed single frequency network (SFN) broadcast architecture with multiple towers, which would be far more cost efficient than building hundreds of cell towers to cover the same area using wireless technologies. Importantly, Broadcast Overlay is BEST used with UHF spectrum given that VHF spectrum is lower quality from a mobile standpoint. As we explain in our May 17th report: 1) mobile devices operating on VHF bands would require larger antennas that may not conform to consumer expectations of mobile handset form factors. 2) Signals carried over lower radiofrequency waves tend to fade in and out, potentially translating into dropped calls and poor service for mobile broadband users. 3) Mobile broadband services in VHF bands may face out-of-band interference issues with adjacent channel operations in the Amateur band (50-54 MHz) and the aeronautical beacon band (72-75 MHz). It is important to note, however, that this does NOT mean there is no use for VHF spectrum. Weve heard that VHF spectrum has potential applications for sending and receiving signals to moving vehicles, among other uses. What is the difference between point-to-multipoint and point-to-point IP traffic? Live TV is currently distributed by means of a broadcast network, which is highly efficient in that it carries one stream to many viewers i.e. point (the television satellite) to multi-point (each antenna). Live TV over the Internet carries a separate stream for each unique viewer (point-to-point). The key here is that a shift from multicast or broadcast to over-the-top unicast would multiply the IP backbone traffic by more than an order of magnitude. Cant wireless operators utilize a point-to-multipoint system using eMBMS? Technically they can, but they wont. Weve heard that switching their cellular towers to eMBMS (or evolved Multimedia Broadcast Multicast Service, which is a point-to-multipoint interface that wireless operators have begun to rollout to accommodate point-to-multipoint data traffic) drastically reduces their point-topoint data capabilities, rendering such services (i.e. making phone calls) more difficult and spotty. Another option would be for wireless operators to build out broadcast transmission towers, but we view this as too expensive and too time-consuming to become reality. What are the advantages of point-to-multipoint versus point-to-point technologies? Cost of transport is one of the biggest advantages of point-to-multipoint technology. The paper specifically states that the cost of a gigabyte of mobile data delivered over a point-to-point mobile broadband network is between $70 and $80, while point-to-multipoint transport would cost $17 to $20 for that same gigabyte of mobile data. Gigabyte bandwidth prices are highest when one-to-one streams are used to carry one-to-many traffic due to a) higher cost on account of economic inefficiencies--impacting the numerator, and b) lower usage due to network congestion--impacting the denominator. A successful implementation of an optimal transport solution to carry one-to-many data without unnecessary duplication (multiple unicast streams all carrying the same data in the same service area) would result in bringing the cost/price per used bit for such traffic down substantially. This paper assumes that the one-to-many bytes would be priced at one-quarter of the real price for mobile data delivered over point-to-point cellular networks. Not only does point-to-point technology cost the mobile carrier, but it also costs the consumer, who is billed at the same per-gigabyte rate for video as it for other data. BOTTOM LINE HERE - Point-to-multipoint technologies result in lower bandwidth prices as a direct result of better bandwidth availability and better economics arising from higher bandwidth efficiency.

Broadcast: Monetization Of Spectrum Is Coming

WELLS FARGO SECURITIES, LLC EQUITY RESEARCH DEPARTMENT

Why is Broadcast Overlay technology better than simply transferring more spectrum to the wireless operators via the FCCs Incentive Auction? One of the more compelling arguments we found in this paper is the simple fact that as mobile traffic grows, the composition of that traffic is expected to change greatly. In fact, according to Cisco, two-thirds of the worlds mobile data traffic will be video by 2015 (source: Cisco Visual Networking Index: Usage. Rep. San Jose, CA: Cisco Systems, 2010. Print). As such, the demands of a mobile data ecosystem might be too diverse to be served only by cellular networks and commercial wireless operators. Different kinds of mobile data traffic require different networks and service models. Video traffic is qualitatively and quantitatively different from traditional mobile traffic, such as voice email and web surfing in that it: a) consumes vastly more bandwidth; b) is not unique to the specific user (i.e. the same video can be consumed in any given period of time by thousands or even millions of users whereas phone calls and emails are unique to one specific user at a time); and c) the bandwidth demands increase dramatically with screen size for example, an email consumes the same bandwidth whether rendered on a smartphone, a tablet or a laptop whereas quadrupling a video screen size requires a sixteen-fold increase in data to maintain equivalent perceived video quality. Because wireless operators rely on a point-to-point traffic infrastructure, they would not be able to most effectively utilize broadcast spectrum acquired via auction. Instead, the Broadcast Overlay system would enable the wireless carriers to alleviate network congestion by offloading some of the heavier point-tomultipoint IP traffic to the broadcast industry, resulting in a more efficient use of spectrum, an improvement in the quality of service, and lower bandwidth prices for both wireless operators and consumers. Additionally, the Broadcast Overlay system would result in a recurring revenue stream for both the broadcast industry ($10B in year 1 moving to $220B over time) and more importantly the U.S. Treasury ($0.5B per year in year 1 ramping to $11B over time) which would far exceed what the U.S. Treasury might get from a one-time incentive auction. (For reference, we calculate that the U.S. Treasury would get at MOST ~$10B to $15B in a one-time payment from the incentive auction after netting the amounts ear-marked for the First Responder Network, proceeds to the broadcast participants, and re-packing requirements). What did the Economic Value of Broadcast Innovation Impact on the U.S. Treasury study actually entail? In a nutshell, this study forecasted a number of variables that are likely to affect mobile data traffic and pricing from now until 2026. Using these variables, the study determined the potential monetary benefit to the U.S. Treasury based on a 5% share of broadcasters ancillary revenue stream. We explore the studys various steps below. Step 1: The study began by estimating the volume of point-to-multipoint consumer mobile IP traffic in the U.S. Step 2: The study provided an estimate of the value of point-to-multipoint services using a techno-economic model based on several factors, such as: o Adoption of Broadcast Overlay services by the broadcasters in terms of population covered; o Demand for point-to-multipoint Broadcast Overlay services in the areas covered; and o Supply of the bandwidth capacity by participating broadcasters to support such point-to-multipoint demand. Step 3: The study computed the potential ancillary revenue generated by Broadcast Overlay service--under the assumption that the broadcasters would share 5% of such ancillary revenue with the U.S. Treasury in accordance with present regulations. This U.S. Treasury revenue stream was then discounted at the 10-Year Treasury Bonds yield to determine its Net Present Value. The study also computed the economic value of residual revenue that would occur beyond the forecast horizon of 2026 (until perpetuity) by capitalizing the 2026 revenue and discounting it to present value. What were the over-arching conclusions of this study? From a qualitative perspective: o Broadcast Overlay would result in lower cost per used bit and therefore lower bandwidth prices for consumers. o Broadcast Overlay would result in improved quality of service given greater efficiency of spectrum. o Broadcast Overlay would generate substantial ancillary revenue for the broadcast industry (see analysis below). o Broadcast Overlay would generate a substantial annuity for the U.S. Treasury (see below), which is likely to be much more significant and meaningful than one-time proceeds from the auction of broadcast spectrum. From a quantitative perspective, the study and associated techno-economic model looked at two scenarios-both based on net present value terms. o The base case scenario stated the U.S. Treasury would gain $62B in ancillary revenue share between 2014 and 2026 and another $215B beyond the forecast horizon of 2026.

Media & Cable

WELLS FARGO SECURITIES, LLC EQUITY RESEARCH DEPARTMENT

o In the studys worst case scenarios, the U.S. Treasury would gain $46B in ancillary revenue share between 2014 and 2026 and another $54B beyond the forecast horizon of 2026. Looking at a chart on page 26 of this particular study, it appears that on an annual basis, the Broadcast Overlay system could net the broadcast industry roughly $10B of incremental revenue in year 1, ramping to $220B of incremental revenue over time. Taking the 5% ancillary revenue fee as required by current rules, the U.S. Treasury would then net $0.5B of incremental revenue in year 1, ramping to $11B of incremental revenue (per year) over time. We provide the numerical results in two charts below. Importantly, the first chart shows the cumulative revenue potential for both the broadcast industry and the U.S. Treasury under a Broadcast Overlay System--with two time periods calculated on a net present value basis (2014-2026 and then a perpetuity beyond 2026). Ancillary Revenue from Broadcast Overlay: Base and Worst Case Scenarios - NPV Basis (figures in millions) Base Case (NPV) 2014-2026 2026 andBeyond Broadcast G ross Revenue $1,240,000 $4,300,000 US Treasury Ancillary Revenue Share $62,000 $215,000
Worst Case (NPV) Broadcast G ross Revenue US Treasury Ancillary Revenue Share 2014-2026 $920,000 $46,000 2026 andBeyond $1,080,000 $54,000

Note 1: Figures are based on a 5% U.S. Treasury ancillary revenue share; Note 2: All figures are discounted to net present value. Source: Business Analytix, Inc., company data, and Wells Fargo Securities, LLC The second chart is our interpretation of the annual ramp in potential revenue for both the broadcast industry and the U.S. Treasury--with data coming from a table in the Economic study we discuss throughout this piece. Importantly, the figures below are ANNUALIZED and provide the potential gross revenue stream per year NOT discounted on a net present value basis. Potential Annual Revenue Generated from Broadcast Overlay Using Table 15 on Page 26 of The Study (figures in millions) Rev enue Per Y ear Y ear 1 Y ear 15 Broadcast G ross Revenue $10,000 $220,000 US Treasury Ancillary Revenue Share $500 $11,000 Source: Business Analytix, Inc., company data, and Wells Fargo Securities, LLC What is the timing of the Broadcast Overlay Service? The timing is dependent on how quickly the ATSC can reach industry agreement as to what ATSC 3.0 should look like from a standards perspective. Once the ATSC develops the standard, the FCC will need to give final regulatory approval and incorporate it into its own set of rules in order for industry adoption to occur. Just recently, we have learned that 19 organizations have submitted 10 proposals for the physical layer of ATSC 3.0 (described below) and are on target for a candidate standard to be produced by 2016. Given the importance of ATSC 3.0, we explore the history of television standards and their technical relevance as it relates to implementation of Broadcast Overlay service below.

GENERAL ASPECTS OF TELEVISON STANDARDS


What are TV Standards? TV standards are a set of voluntary/recommended technical specifications, protocol, and best practices applicable to all aspects of broadcast transmission, reception, and display. These are created with a significant amount of industry input. These standards are necessary for television in order to create and maintain 1) the ability for all receivers in the hands of the public to receive signals from authorized transmitters within range, 2) consistent high quality picture/sound from household to household, 3) widest possible coverage, 4) lowest possible receiver

Broadcast: Monetization Of Spectrum Is Coming

WELLS FARGO SECURITIES, LLC EQUITY RESEARCH DEPARTMENT

cost, 5) relevancy of television broadcast technology, and recently, 6) interoperability with other forms of media. In essence, TV standards provide a comprehensive guide for broadcasters and consumer electronics manufacturers when it comes to TV transmission methodology. Who monitors/creates these TV Standards? The facilitating bodies that develop/propose these standards are established by the FCC and are made up of representatives from organizations with a vested interest in keeping broadcast TV as efficient, relevant, and widely accessible as possible. Representatives are requested by the FCC as needed and thus can be different for each TV standard (see below Who made up the National Television Standards Committee? and Who makes up the Advanced Television System Committee?). Under certain circumstances, the FCC also ensures that industry players adhere to compulsory components of TV standards. For example, under the CALM (Commercial Advertisement Loudness Mitigation) Act, the FCC is required to restrict audio of commercials from being broadcast louder than the accompanying TV programming, which the FCC does by enforcing certain equipment, software, and method requirements outlined in ATSC A/85, Techniques for Establishing and Maintaining Audio Loudness for Digital Television (a standard developed by the Advanced Television System Committee that replaced a previously allvoluntary standard). What are the different TV Standards that are used today? Different television standards are used around the world. At this point in time, the U.S. implements what are known as the ATSC (Advanced Television Systems Committee) Standards for digital TV; whereas the NTSC (National Television System Committee) Standards were used for analog broadcasts (prior to the analog-todigital conversion in 2009). Other standards, such as SECAM and PAL, are used in other parts of the world. What is the difference between spectrum and television standards? We have been asked this several times, but the truth is spectrum and television standards are not comparable things. Spectrum consists of many bands or ranges of electromagnetic radio frequencies that are allocated by the FCC for different types of commercial and non-commercial use. For example, VHF (Very High Frequency) spectrum consists of the 54-72 MHz (1 million cycles per second), 76-88MHz, and 174-216MHz frequency bands that are allocated for purposes including TV broadcast, FM, and weather radio. UHF (Ultra High Frequency) spectrum consists of the 470-608MHz and 614-698MHz frequency bands allocated for purposes including TV broadcast, mobile phones, wireless LAN, and GPS. Television standards, on the other hand, are recommended technical specifications and best practices for the transmission/reception of broadcast television (see What are TV Standards? above). That said, often times TV standards include specifications on how to best utilize spectrum, which may be the reason for confusion. For example, vestigial sideband transmission was a standard approved in the original NTSC standards (refer to What exactly are the NTSC standards? below) regarding signal encoding and transmission in a 6MHz channel of spectrum frequency. Data compression is another standard in the ATSC set of standards (see What exactly are the ATSC standards?) that refers to compressing data in order to save bandwidth within said allocated spectrum. When and why were TV standards first introduced? The first set of TV standards was introduced to prevent conflicts between interested parties as broadcast TV was first becoming a viable commercial business. A historical timeline follows below: In 1935, RCA (Radio Corporation of America) successfully demonstrated a fully electronic television system. This sparked a large amount of interest from players in the radio industry of a potentially lucrative new market. Before the FCC could authorize commercialization of broadcast TV, it set forth two ground rules: 1) frequency allocations would need to be set, and 2) technical standards would need to be written to ensure wide access and high quality service to the public. In 1936, the RMA (Radio Manufacturers Association) proposed an early set of standards; and by 1939, RCA inaugurated broadcast service in New York using RMA standards as well as began a small-scale production of their signal receivers. However, the industry complained to the FCC in a 1940 hearing, raising concerns that RCA was in fact, freezing standards for TV without input from the industry as a whole. The FCC agreed, and rescinded all permission for commercial TV broadcasting. The FCC consequently established the NTSC (National Television Standards Committee) in 1941, to create a set of analog standards for TV broadcasting. The eventual standards agreed upon by the NTSC are what made monochrome (black and white) television as we know it today, possible.

Media & Cable

WELLS FARGO SECURITIES, LLC EQUITY RESEARCH DEPARTMENT

Who made up the National Television Standards Committee? In addition to trade associations, the NTSC included representatives from companies such as: Dell Telephone Laboratories, Columbia Broadcasting System, Don Lee Broadcasting System, DuMont Laboratories, Inc., Farnsworth Television and Radio Corporation, General Electric Company, Hazeltine Service Corporation, Hughes Tool Company, Institute of Radio Engineers, Philco Corporation, Radio Corporation of America, Stromberg-Carlson Telephone Mfg. Company, Television Productions, and Zenith Radio Corporation. What exactly are the NTSC standards? Most of the monochrome NTSC standards were built upon previous recommendations made by the RMA (refer to When and why were TV standards first introduced?), and have to do with the technical aspects of transmission, reception, and display of a CRT (Cathode Ray Tube) television set. These include an interlaced (2 to 1) system with 525 scan lines, 30 frames per second at 60 Hz refresh rate, 4:3 aspect ratio (or 720 x 480 resolution), FM sound signal, and Vestigial Sideband Transmission (VSB) coding scheme on 6MHz channel width. Although we are NOT engineering experts, we have tried our best to outline the most important components of the monochrome NTSC standards in Appendix 1 on page 11. What about color TV? The first NTSC did not include standards for color TV as the technology had yet to be developed. Eventually, however, CBS pushed the NTSC to begin field tests of color systems using its own CBS field sequential color system as well as its own set of color TV standards. This color system used a rotating wheel of red, blue, and green filters in front of a monochrome camera. These were actually briefly approved by the FCC in 1950. However, to maintain the same quality of image as the current monochrome standard, CBSs system required more bandwidth. To work within a 6MHz channel, CBS had to decrease its fps to 24, and scan lines to 405, making the entire signal incompatible with legacy black and white receivers from the NTSC monochrome standard. For this reason, the FCC called upon the NTSC a second time and eventually replaced CBSs system with an extension of the original NTSC standards known as the NTSC Color TV Standard or NTSC-M. In order to remain backwards compatible, NTSC-M used a luminance-chrominance encoding system whereby the transmitter adds a color signal to the basic black and white signal. Although legacy black and white receivers could not display the color (chrominance) signal, they were still able to receive the monochrome (luminance) signal while new color television sets would receive and display both. Along with NTSC-M came a couple of changes to the original NTSC standards including a slight reduction to the fps and refresh rate specifications to 29.97 fps and 59.94Hz. Eventually, the standards were also altered to accommodate for new components such as captioning and stereo sound. What standards do we use today? The U.S. currently uses the ATSC 1.0 (Advanced Television Systems Committee) standards. With the advancement of digital technology, the FCC created a syndicate of companies known as the Grand Alliance with the aim of developing digital television and high-definition television technology in order to keep broadcast TV competitive and to reclaim spectrum used by analog broadcasts for wireless use. Recall that digital TV allows for data compression and is much more efficient in terms of bandwidth use. The Grand Alliance consisted of representatives from AT&T Corporation, General Instrument Corporation, Massachusetts Institute of Technology, Philips Consumer Electronics, David Sarnoff Research Center, Thomson Consumer Electronics, and Zenith Electronics Corporation. Eventually, the FCC formed the ATSC (Advanced Television Systems Committee) to develop standards using recommendations from the Grand Alliance as a base. The ATSC was NOT required to set forth standards that were backwards compatible with NTSC technology (like NTSC-M was) and thus much of the NTSC TV system in the U.S. was replaced by the ATSC standards in the jump to digital on June 12, 2009. Who makes up the Advanced Television System Committee? The ATSC consists of over 200 members representing broadcast, broadcast equipment, motion picture, consumer electronics, computer, cable, satellite, and semiconductor industries led by the following board members: Glenn Reitmeier, NBC Universal (Board Chairman); Lynn Claudy, NAB; Mark Eyer, Sony; Richard Friedel, FOX; Ira Goldstone, Univision; Brett Jenkins, LIN Media; James Kutzner, PBS; Brian Markwalter, CEA; Sam Matheny, Capitol Broadcasting; Andy Scott, NCTA; Robert Seidel, CBS; Dave Siegler, Cox Media Group; Peter Symes, SMPTE; John Taylor, LG Electronics USA; Yiyan Wu, IEEE.

Broadcast: Monetization Of Spectrum Is Coming

WELLS FARGO SECURITIES, LLC EQUITY RESEARCH DEPARTMENT

What exactly are the current ATSC Standards? Again, we are not engineering experts, but we have outlined what we believe to be the most important ATSC standards in Appendix 2 on page 12. In a nutshell, ATSC standards differ from NTSC standards in that they include more video formats with different resolutions/aspect ratios/fps, data compression standards, better audio codes, 8-level VSB transmission (vs. NTSCs regular vestigial sideband transmission system) and some software specifications including conditional access. Many aspects of the ATSC Standards are actually patented, including elements of MPEG video coding, AC-3 audio coding, and 8-VSB modulation. Cost of patent licensing for manufacturers is estimated to be about $50 per digital TV receiver. Will there be an upgrade to the current ATSC standards? Yes, the FCC has already commissioned the ATSC to create the next set of standards, dubbed ATSC 2.0, which will be a complete suite of new services for the conventional fixed DTV receiver and will focus on integrating the Internet into TV broadcasting, ultimately bringing all Internet services to a viewers TV screen. Simultaneously, the industry is working on a new physical layer, which is ATSC 3.0. What is ATSC 2.0? The current standard, ATSC 1.0, was implemented before texting and didnt anticipate transmission to mobile devices. ATSC 2.0 will enable over-the-air video-on-demand, online interactivity, the ability to push alerts to sleeping TVs, and the ability to watch two channels simultaneously on a single screen, among other things. It will also continue to support the type of linear service now enabled by ATSC 1.0. MOST IMPORTANTLY, ATSC 2.0 WOULD LEAD TO PERSONALIZED, ON-DEMAND CONTENT including recommended TV channels, news and weather services, and even music distribution. Expected features of ATSC 2.0 include advanced video compression, audience measurement tools, internet connectivity standards, Digital Rights Management (DRM) tools, dual-screen capabilities, and most importantly, Non-real-time (NRT) transmission standards, which is really the centerpiece of ATSC 2.0 as it allows file-based content to be delivered in advance of use and stored for later consumption via software using IP mechanisms for delivery. Essentially, it will provide an alternative to linear programming that has been prevalent in broadcast and turns to a more on-demand model. It will also allow for targeted advertising and interactive content to be provided to the viewer. ATSC 2.0 is required to be backwards compatible with current ATSC 1.0 services. Where is ATSC 2.0 in the development process? The ATSC announced the formation of its ATSC 2.0 implementation team on January 22, 2013. This team is responsible for conducting market studies, demonstrations, field trials, compliance, certification, branding, marketing, and promotion. David Siegler, VP of Technology at Cox Media will serve as chairman. ATSC 2.0 was set to become a candidate standard in Q2 2013 and finalized by the end of the year. As of now, delays have prevented ATSC 2.0 from advancing to the candidate level, but weve heard that standardization this fall is not an unreasonable target. How much will an upgrade to ATSC 2.0 cost incrementally? According to the ATSC, most of the broadcast equipment included in ATSC 2.0 is already on the market and should be widely available to broadcasters. Consumer manufacturers have been actively engaged in the ATSC 2.0 process, so early planning on implementation of some of the new TV features is likely already underway. Since ATSC 2.0 is required to be backwards compatible with incumbent ATSC standards (refer to Will there be an upgrade to the current ATSC standards? above), weve heard that there should be very little incremental cost. Consumers already receiving an ATSC signal should not require a new television set for this transition. We have heard more about ATSC 3.0 than 2.0 what is the difference? According to our conversations, ATSC 2.0 sounds more like a suite of apps rather than a brand new technology--whereas ATSC 3.0 really upgrades the television standard to enable broadcasters to transform into something similar to a Content Delivery Network (CDN). As of now, it is difficult to say for certain what will be included in ATSC 3.0, but the overall intent is to enable seamless transmission of HD, 4K, 22.2 audio and other data streams to fixed, mobile and handheld devices in all kinds of terrain. Specifically, ATSC 3.o will most likely include: o Much better bandwidth and transmission efficiency resulting in a 30% target increase of data rate (to 25.2 Mbps from the current 19.39 Mbps) o Ultra High Definition TV at 60fps and 3840 x 2160 pixels (i.e. 4K Ultra High Definition) o Convergence with wireless broadband technologies

Media & Cable

WELLS FARGO SECURITIES, LLC EQUITY RESEARCH DEPARTMENT

o More audio codec choices such as 22.2 surround audio o OFDM (Orthogonal Frequency-Division Multiplexing) Technology for true mobile TV see below for details! o ATSC 3.0 is also being developed with a global perspective in mind What are the potential obstacles with upgrading to ATSC 3.0? ATSC 3.0 will not be backward-compatible with 1.0 or even 2.0, meaning that televisions now capable of processing over-the-air TV signals will not be able to decode ATSC 3.0 signals. (Of course, we learned through our research that this does not impact any pay-tv households, which are 90% of the industry. For the other 10%, a dongle is required for each television set, which costs about $10-15 per piece). One further complication is the continued poaching of broadcast spectrum by the FCC/ wireless industry--as evidence by the 2009 analog-to-digital transition as well as the pending incentive auction. Once the ATSC develops the standard, the FCC would need to give final regulatory approval and incorporate it into its own set of rules in order for industry adoption to occur. (We believe this will happen as ATSC 3.0 and the Broadcast Overlay system fulfill the goals of the National Broadband Plan as well as the U.S. Treasurys need for proceeds.) When will ATSC 3.0 be developed? On March 26, 2013, the ATSC subcommittee (called TG3, or Technology Group 3, and chaired by James Kutzner of PBS) announced a call for physical layer proposals for ATSC 3.0, with the physical layer referring to the core transmission standard. Initial responses for proposals to ATSC 3.0s physical layer were due on Aug 23, 2013 (we have since learned that the ATSC received 10 such proposals) and detailed technical descriptions are due on Sept. 27, 2013. The goal at this point in time is for ATSC 3.0 to become a candidate standard by 2016. What is OFDM? Quite simply, OFDM (Orthogonal Frequency-Division Multiplexing) is a method of transmission that enables much more efficient use of bandwidth and has only recently become viable for use in cable products, wireless products, and 4G applications. In more technical terms: OFDM is a type of Frequency Division Multiplexing (FDM) that involves splitting data when transmitting and placing symbols onto narrow-bands of frequency within the bandwidth, while letting each band overlap at inflection points, positioning them in an orthogonal manner. This is an alternative to transmitting symbols one by one. Instead, by transmitting on multiple narrow-bands simultaneously, OFDM yields a couple of advantages. Because transmission is happening on multiple narrow-bands, OFDM does not require as high of a data rate and instead lengthens the duration of each symbol on each individual channel. Consequently, OFDM reduces much of the interference and makes the data a lot more reliable because now the data is split into several slow-modulating streams instead of one rapidly-modulating stream--this also simplifies the process of creating an equalizing filter at the receivers end. Why is OFDM important? With a call for proposals to the physical layer of ATSC 3.0, it is likely that the current 8-VSB platform (which supports ATSC today) is going to change. Given that 8-VSB has been prone to some in-efficiencies, OFDM is one possible platform that is being heavily pushed by broadcasters. Specifically, Sinclair conducted a series of side-by-side DTV reception tests in 1999 that showed several shortcomings of 8-VSB versus OFDM including proneness to interference from obstacles like hills and buildings. Regardless, 8-VSB was still adopted by the industry in 1996 due to its large bandwidth, ability to transmit HDTV, and low power requirements; while OFDM was still very much underdeveloped. Now with a new set of standards being built, the same broadcasters believe that an OFDM platform will not only open many constraints in the current 8-VSB system, but is also essential to a multicast delivery system that will allow for true mobile TV broadcast (even in a moving vehicle). They also argue that the same amount of bits can be delivered on OFDM with a simple exciter card switch and that any additional power requirements are negligible as the difference is only apparent at a transmit radius outside of where the majority of viewers are receiving their signal. Europe, which uses an OFDM based DVB-T standard for mobile TV, has shown a fair amount of success. Why hasnt the industry moved to the ATSC 3.0 standard yet? The biggest obstacle up until now had been industry inertia as no one but SBGI had really been talking about the potential of ATSC 3.0 and the Broadcast Overlay service. Now that the industry seems to agree that a move to ATSC 3.o is a necessity, the question has become, what should ATSC 3.0 look like? In our view, we think significant progress has been made relative to even just a year ago.

10

Broadcast: Monetization Of Spectrum Is Coming

WELLS FARGO SECURITIES, LLC EQUITY RESEARCH DEPARTMENT

Can the industry adapt ATSC 3.0 without adapting ATSC 2.0 first? Yes the two can develop simultaneously. As mentioned previously, ATSC 2.0 revolves around TV applications and improved codecs while ATSC 3.0 is really more about the physical transmission layer that is driven by IP data. In fact, the original concept of these new ATSC standards was to stick ATSC 2.0 components to ATSC 3.0 as ATSC 3.0 came online. What is the cost of switching to ATSC 3.0? From what weve heard, the cost of switching to ATSC 3.0 is pretty minimal, which include roughly $25,000 per broadcast station for necessary upgrades as well as a simple switch of the exciter card at each transmission tower. Weve been told that this could quickly and easily be rolled out whenever necessary. In fact, SBGI demonstrated this to the National Association of Broadcasters (NAB) 12-13 years ago and has conducted recent tests in Baltimore. From a consumers perspective, about 90% of people who are receiving a cable signal or a satellite signal through fiber would not have any issues whatsoever. However, the remaining 10% of people who are still receiving signals OTA would need to eventually replace their television sets or buy a software dongle pluggable into each sets HDMI port in order to convert a new ATSC 3.0 signal. Weve heard it would cost a mere $10-15 to produce each dongle.

11

Media & Cable APPENDIX 1: Detailed Descriptions of NTSC Standards


- Int erlaced (2 t o 1) sy st em wit h 525 scan lines

WELLS FARGO SECURITIES, LLC EQUITY RESEARCH DEPARTMENT

o When v ideo is recorded, the im age is captured in fram es. We perceiv e m ov em ent of that im age w hen those fram es are display ed sequentially at a high enough speed. o A CRT TV set, howev er, display s an im age in fields, or half-fram es, rather than full-fram es, using a technique called interlacing. Im agine a still fram e broken up into ev en-num bered and odd-num bered lines with the total num ber of lines determ ining the quality of the picture. With an interlaced sy stem , the TV w ill scan the ev en-num bered lines first, and then the odd-num bered lines to generate a full picture. Do this quick enough, and y ou can create fluidity in m ov em ent. o The NTSC decided that 52 5 scan lines w as a fair com prom ise betw een the 4 4 1 -scan line standard used by the RCA and proposals to increase the num ber of scan lines to between 605 and 800 by Philco and DuMont who were also m em bers of the NTSC (refer to Who m ade up the National Telev ision Standards Com m ittee?). - 30 frames per second at 60 Hz refresh rat e o Fps (fram es per second) refers to the num ber of fram es shot ev ery second. Fps is an im portant com ponent of TV standards because a telev ision set needs to know when it m ust be ready to receiv e each new fram e of inform ation in order to properly sy nc the fram e rate captured on cam era and the TVs scanning sy stem . o Refresh rate refers to how m any tim es the im age display ed on a TV screen is com pletely reconstructed ev ery second and is m easured in hertz. For reference, hertz (Hz) is the unit of frequency representing the num ber of cy cles per second. This is im portant because the frequency of cy cles that an electric pow er grid transm its (alternating current or AC the US uses 6 0Hz) to the TV set and v ideo recorder m ust m atch the refresh rate on the display in order to av oid interm odulation (rolling bars on the TV screen). o These tw o specs are inherently related because in a 3 0 fps signal, each v ideo fram e is repeated tw ice ev ery 6 0 th of a second with a 6 0Hz refresh rate. So in other countries where 50Hz refresh rate is standard, v ideo footage shot draw ing 50Hz power will only be able to display a 2 5FPS signal. As a result that v ideo w ill not be com patible with a US TV set. - 4:3 aspect rat io (7 20 x 480 resolut ion) o This sim ply refers to the proportional height and w idth of the im age display ed on the screen w hile resolution refers to the num ber of pixels in that space. - FM (frequency modulat ion) sound signal o The break from AM (am plitude m odulation) to FM was relativ ely new when the NTSC standards w ere introduced. Although the range of FM is lim ited com pared to AM, FM w as chosen because it is less susceptible to interfering noise. - Vest igial Sideband Transmission (VSB) coding scheme and 6 MHz channel widt h o This is a technique used to encode data by v ary ing the am plitude of the carrier frequency to create a signal. At the m ost basic lev el, two sidebands of identical inform ation are created abov e and below the carrier frequency . How ev er, in order to fit on a 6 MHz channel, a portion of the lower sideband is rem ov ed (thus called v estigial sideband transm ission as only a v estige of the low er sideband rem ains) through a VSB receiv er.

Source: Company data and Wells Fargo Securities, LLC

12

Broadcast: Monetization Of Spectrum Is Coming APPENDIX 2: Detailed Descriptions of ATSC 1.0 Standards
- 18 High Definit ion, St andard Definition, and Enhanced Definit ion formats:

WELLS FARGO SECURITIES, LLC EQUITY RESEARCH DEPARTMENT

o 6 High Definition, 3 Standard Definition form ats, and 9 Enhanced Definition form ats were created so that all digital TVs could display at least one of them , with the form at being chosen by the broadcaster. o 6 High Definition, 3 Standard Definition form ats, and 9 Enhanced Definition form ats were created so that all digital TVs could display at least one of them , with the form at being chosen by the broadcaster. o The SDTV and EDTV form ats go down to a 4 :3 aspect ratio, 64 0 x 4 80 resolution and include a sim ilar range of fps. - MPEG-2 Data Compression St andard o MPEG-2 data com pression specifications is what m akes high-definition and efficient bandwidth use possible for ATSC. It is capable of a 50-to-1 reduction in data by not retransm itting areas of the screen that hav e not changed since the prev ious fram e. - 5.1-channel surround sound using Dolby Digital AC-3 format o Dolby Digital AC-3 is the audio codec (the program used for audio signal decoding) and allow s for up to fiv e channels of sound with an additional sixth channel for low-frequency effects (essentially deep, low -pitched sounds), hence the 5.1 -channel designation. - Conditional Access o The ATSC standards also include specifications for software and equipm ent that allows broadcasters to encry pt transm itted program m ing, thus allowing control of DTV serv ices to authorized users only . - Eight -level VSB (8-VSB) t ransmission o Zenith dev eloped an im prov ed VSB coding schem e used in the prev ious NTSC standard that essentially uses m ore lev els of pulse am plitude m odulation (8 lev els), thus creating four copies of data where a VSB filter rem ov es two of these copies w ithout disruption to the integrity of the signal. This reduces transm it power without hav ing to com prom ise by reducing the am ount of data transm itted.

Source: Company data and Wells Fargo Securities, LLC

13

Media & Cable

WELLS FARGO SECURITIES, LLC EQUITY RESEARCH DEPARTMENT

BROADCAST/OUTDOOR 2013E/2014E COMPARABLE VALUATIONS Comparative EV-to-EBITDA Blended 2013E/2014E

12.0x 10.0x

EV/EBITDA '13/'14E

8.0x 6.0x 4.0x 2.0x 0.0x

7.7x

7.8x

7.8x

7.9x

8.0x

8.5x

8.7x

8.8x

8.9x

9.2x

9.4x

10.2x

10.5x

10.9x

Comparative 2013E/2014E FCF Yield

24.0%

FCF Yield '13/'14E

18.0%

17.4% 14.7% 12.5% 12.6% 12.7% 12.9% 15.0% 15.5%

18.7%

12.0%

6.0%

4.6%

6.4%

6.6%

8.1%

8.1%

0.0%

Notes for all charts: Radio includes ETM and SGA. Television includes BLC, GTN, NXST, SBGI and TVL. Outdoor includes LAMR and CCO. SBGI (EV minus HV): Enterprise Value minus Hidden Value. Sources for all charts: Company data and Wells Fargo Securities, LLC estimates

Required Disclosures
Additional Information Available Upon Request
I certify that: 1) All views expressed in this research report accurately reflect my personal views about any and all of the subject securities or issuers discussed; and 2) No part of my compensation was, is, or will be, directly or indirectly, related to the specific recommendations or views expressed by me in this research report.

14

Broadcast: Monetization Of Spectrum Is Coming

WELLS FARGO SECURITIES, LLC EQUITY RESEARCH DEPARTMENT

Wells Fargo Securities, LLC does not compensate its research analysts based on specific investment banking transactions. Wells Fargo Securities, LLCs research analysts receive compensation that is based upon and impacted by the overall profitability and revenue of the firm, which includes, but is not limited to investment banking revenue.

STOCK RATING

1=Outperform: The stock appears attractively valued, and we believe the stock's total return will exceed that of the market over the next 12 months. BUY 2=Market Perform: The stock appears appropriately valued, and we believe the stock's total return will be in line with the market over the next 12 months. HOLD 3=Underperform: The stock appears overvalued, and we believe the stock's total return will be below the market over the next 12 months. SELL

SECTOR RATING

O=Overweight: Industry expected to outperform the relevant broad market benchmark over the next 12 months. M=Market Weight: Industry expected to perform in-line with the relevant broad market benchmark over the next 12 months. U=Underweight: Industry expected to underperform the relevant broad market benchmark over the next 12 months.

VOLATILITY RATING

V = A stock is defined as volatile if the stock price has fluctuated by +/-20% or greater in at least 8 of the past 24 months or if the analyst expects significant volatility. All IPO stocks are automatically rated volatile within the first 24 months of trading. As of: September 9, 2013 49% of companies covered by Wells Fargo Securities, LLC Equity Research are rated Outperform. 48% of companies covered by Wells Fargo Securities, LLC Equity Research are rated Market Perform. 3% of companies covered by Wells Fargo Securities, LLC Equity Research are rated Underperform. Wells Fargo Securities, LLC has provided investment banking services for 49% of its Equity Research Outperform-rated companies. Wells Fargo Securities, LLC has provided investment banking services for 34% of its Equity Research Market Perform-rated companies. Wells Fargo Securities, LLC has provided investment banking services for 21% of its Equity Research Underperform-rated companies.

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EEA The securities and related financial instruments described herein may not be eligible for sale in all jurisdictions or to certain categories of investors. For recipients in the EEA, this report is distributed by Wells Fargo Securities International Limited (WFSIL). WFSIL is a U.K. incorporated investment firm authorized and regulated by the Financial Services Authority. For the purposes of Section 21 of the UK Financial Services and Markets Act 2000 (the Act), the content of this report has been approved by WFSIL a regulated person under the Act. WFSIL does not deal with retail clients as defined in the Markets in Financial Instruments Directive 2007. The FSA rules made under the Financial Services and Markets Act 2000 for the protection of retail clients will therefore not apply, nor will the Financial Services Compensation Scheme be available. This report is not intended for, and should not be relied upon by, retail clients.

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Media & Cable

WELLS FARGO SECURITIES, LLC EQUITY RESEARCH DEPARTMENT

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SECURITIES: NOT FDIC-INSURED/NOT BANK-GUARANTEED/MAY LOSE VALUE

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