Pay DTT in Italy

Madrid, 24 April 2008
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Table of contents Pay DTT: just another pay TV platform in Italy? The importance of iDTV and CAMs availability for future growth in Italian DTT Source: BAH Analysis 1 .

decoder & installation incentives.Pay TV market strategy in Italy: newcomers needed a different approach from the incumbent Main features of traditional Pay TVs Entertainment Cartoons Documentary News Sport … Implications for operators and subscribers High TV programming costs for maintaining the wide multi-channel offer Multichannel Pay TV Operators Costly back-office systems for client management and billing – Large call-center – Complex and expensive SMS / billing system investments High acquisition costs (discounts. …) Premium Events Major sport events TV first run of Movies TV Series Reality shows … Clients Costly monthly subscription – Fees are independent from time spent watching TV – Clients pay for a wide offer but are actually interested in a small portion of it Source: BAH Analysis 2 .

business and niche private market and niche private market Mass market Mass market (private and business) (private and business) Pricing Pricing High cost per minute High cost per minute Low cost per minute Low cost per minute (recharges available for € 3) (recharges available for € 3) Penetration Penetration Low Low High High (~100% penetration) (~100% penetration) Source: BAH Analysis 3 . in order to reach the mass market Mobile Phone Market in Italy Before 1998 After 1998 Prepaid pay-perPrepaid pay-perconsumption consumption no subscription required no subscription required Scratch card used to recharge mobile phones in Italy Service Service Description Description Subscription compulsory Subscription compulsory Target Target High-spender. business High-spender.Mobile phone market demonstrated that a low-cost prepaid offering can boost sales.

Mediaset identified an innovative positioning in the DTT Pay TV market. complementary to the one of the incumbent. based on the open horizontal DTT platform Platform Positioning SUBSCRIPTION Satellite and IPTV COST PER USER PAY PER VIEW FREE Analogue Terrestrial Ca. 10 DTT 30 – 60 100 + NATIONAL CHANNELS Source: BAH Analysis 4 .

based on re-chargeable pre-paid smart cards DTT Pay TV Model – Pay per View 1 Purchase of smart cards at shops or large distributors (like mobile phone rechargeable cards) 4 Periodic replacement of cards after expiry date Pre-paid smart card 2 Access to pay-per-view content by decreasing the credit on the card by Set Top Box 3 Card Recharge (using scratch card and/or virtual voucher) 5 .…developing a pay-per-view offer.

avoiding to implement complex billing systems High volumes: the low cost model has the potential to reach the mass market Flexible. no cables. low-cost pay-per-view offers advantages to both TV operators and users Advantages for broadcasters and final users Limited Investments: Pay TV operators invest only on key premium content TV rights.In summary. without sustaining the cost of a multichannel offering Broadcasters Broadcasters Simpler and cost effective customer management in respect to traditional pay-TV operators: events are purchased through a pre-paid card . cheap and user friendly offer: – No subscription – Pay-per-consumption – Possibility to choose only “valuable content” – Low pricing of smart cards and flexible recharge – Plug and Play hardware (no Sat dish. …) Clients Clients Source: BAH Analysis 6 .which enables to buy content “locally” with credit / debit stored in the smart card .

574 2.500 Active Smart Cards Premium (1) (‘000 Smart Cards) 1. ‘000 Smart Cards) 2.5 million Smart Cards activated by December 2007 … Smart Cards Premium Sold (1) (2004-2007.795 2.436 0 Dec ‘04 Dec ‘05 Dec ‘06 Dec ‘07 Dec ‘07 Smart Card activated/recharged by clients Smart Card sold to Retailer (1) Net data (excluding Smart Card expired in june 2007) Source: Mediaset 7 .Mediaset Premium has reached 2.

002.… creating new value for the company Mediaset Total Revenues 2001 2.351.1 Mio/Euro Other (including Pay TV) 95% Advertising Advertising 83% 8 .1 Mio/Euro Other 5% 17% Mediaset Total Revenues 2007 3.

Table of contents Pay DTT: just another pay TV platform in Italy? The importance of iDTV and CAMs availability for future growth in Italian DTT Source: BAH Analysis 9 .

Analisi BAH 10 . today more then half of DTT receivers sold is then half of DTT receivers sold is constituted by iDTVs constituted by iDTVs – iDTVs are the main driver for – iDTVs are the main driver for future DTT mass diffusion future DTT mass diffusion Is the set top box the only way to Is the set top box the only way to grant operators and viewers. access to pay per view content? access to pay per view content? 26% 55% IDTV STB MHP 71% 37% Zapper 3% 4Q'06 8% 4Q'07 Fonte: DGTVi.694 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% 1. today more experienced a boom.IDTVs will be the driver of future DTT growth Total DTT Receivers Sales (comparison 4Q’06 vs. 4Q’07) 431.559 Comments Comments In the last year the IDTV diffusion In the last year the IDTV diffusion experienced a boom.114. GFK. grant operators and viewers.

the Conditional Access Module is strategic for DTT pay service’s diffusion Conditional Access Module IILL LLU UST STR RAT ATIV IVE E Comments Comments The availability of CAMs for Pay TV reception on iDTVs is strategic for DTT diffusion: The availability of CAMs for Pay TV reception on iDTVs is strategic for DTT diffusion: – iDTVs will be the driver of future DTT growth – iDTVs will be the driver of future DTT growth – Premium contents offering has been in Italy a key driver to increase DTT penetration – Premium contents offering has been in Italy a key driver to increase DTT penetration Italian DGTVi labelling program has already delivered the first results: Italian DGTVi labelling program has already delivered the first results: – On March the 15th. the first CAM developed by SmarDTV was marketed in Italy – In the last months. many iDTV manufacturers have ordered CAMs to be bundled with their iDTVs – In the last months. many iDTV manufacturers have ordered CAMs to be bundled with their iDTVs 11 . the first CAM developed by SmarDTV was marketed in Italy – On March the 15th.With the growth of the iDTV market.

becoming eligible for the “full” trademark trademark Major TV Set requirements: DTT Tuner for free TV. > 40% of the iDTV market is in the shelves. becoming eligible for the “full” the end of 2009. Common Interface for Pay TV(+ bundled CAM options) Under discussion… DGTVi associates will promote all DGTVi trademarks on their networks and will not develop any commercial initiatives with companies not enrolled in the program 12 .Italian DGTVi has issued a trademark to certify iDTVs compliancy to Pay TV through compatible CAMs iDTV trademark: only pay TV (Common Interface + CAM) Comments Comments DGTVi has already certified major TV DGTVi has already certified major TV manufacturers: manufacturers: – SAMSUNG – SAMSUNG – PANASONIC – PANASONIC – TELEFUNKEN – TELEFUNKEN – FINLUX – FINLUX – INNO HIT – INNO HIT The DGTVi trademark is widely present on the The DGTVi trademark is widely present on the shelves. > 40% of the iDTV market is in the program program Manufacturers involved in the labelling Manufacturers involved in the labelling program accept to add MHP to their iDTV by program accept to add MHP to their iDTV by the end of 2009.