5 Year Strategic Plan Board Meeting September 2 nd, 2009 Coral Gables.

5 Year Strategic Plan

Board Meeting

September 2nd, 2009Coral Gables

2

Overview

3

Strategic DirectionStrategic Direction

• HBO:– Improve local relevance/connection in key markets– Improve premium channel and content image

• Cinemax: – Differentiate brand and content between premium and basic distribution

• Original Productions: – Capitalize and build on prior year successes

• Technology: – Invest for long term efficiencies and improve quality– Invest in new consumer technologies

5 Year Strategic Plan (2010 – 2014)

4

Strategic Direction - HBOStrategic Direction - HBO

• Be leader in HD distribution in every major market and meet consumer needs as new television media develop.

• Diversify production capabilities into key countries– Increase On-Air post production capability

• Mexico• Brazil


5

Strategic Direction - CinemaxStrategic Direction - Cinemax

Differentiate basic and premium channel and brands

– New premium brand line extensions– Emphasize premium attributes and technology– Transition first run movies out of the basic

distribution– Add HBO LAG Original Production library in basic– New long term ad sales revenue stream– Barker capabilities for premium channels


6

Strategic Direction – Original ProductionsStrategic Direction – Original Productions

• Reinforce the Original Production franchise

• Brazil tax incentives for two series per year

• Better use of Original Production library to differentiate basic distribution

• Aim for critical acclaim

• Promotional and media value of coverage of original productions to support brand


7

Strategic Direction – TechnologyStrategic Direction – Technology

• Invest to:– Replace obsolete decoders

– Adopt new technologies that:• Allow efficient use of satellite capacity• Support new customer needs

– HD– SVOD


8

SummarySummary

• Revenues will continue to grow at 8% CAGR– $496M by 2014

• Net Profit after Tax increases every year


9

Background to Plan: 2008 and 2009 • Maintain growth in Revenues & Profits in global recession

• Affiliates– Telephone companies investing in marketing– Dish – aggressive entry in Mexico– Last year of Buy-Thru in Brazil– Roll out of HD & SVOD

• Marketing– Focus on results: increase subscribers and improve brand perception

• Programming– New Output deals, studios & HBO– Critically acclaimed HBO LAG Original Productions– Post production capabilities in Mexico & Brazil

• Technology– Shadow stabilized


2008 2009Revenue 323.8$ 340.8$

Net Profit 44.3$ 50.0$

10

Highlights:• Improved quality and additional rights of product from studios.

• Improved productivity in Staff & Technology.

Historical Perspective


2007 2008 2009 (Reest.) CAGR

Affiliate Revenue (in US $'000s) 236,058 285,036 301,539 13.0%

Programming% of Affiliate Revenue

Total Programming 46.3% 50.2% 50.8% 4.7%Major Studio Movies 37.5% 38.9% 41.3% 4.9%Independents 2.5% 2.6% 1.9% -11.9%Non-Movies 3.3% 3.1% 1.3% -38.0%Original Production 0.7% 3.0% 2.1% 65.9%Production, Film Facilities & Subtitling 2.2% 2.4% 2.4% 4.9%Cost of Licensing 0.0% 0.3% 0.8% 56.5%

Other Expenses% of Total Revenue

Sales 1.4% 1.3% 1.4% 0.1%Marketing 5.7% 5.2% 5.3% -3.9%Staff 15.7% 15.5% 14.1% -5.1%Technology 4.0% 3.7% 3.4% -8.4%

% of Total RevenueProfit before Taxes 28.1% 24.4% 25.4% -4.9%Taxes 9.3% 10.7% 10.8% 7.4%Net Profit 18.8% 13.7% 14.7% -11.7%

11

Studios’ share of Revenues


2007 2008 2009 (Reest.)1st

Window2nd

Window

Studios'share of Revenues

Output Deal as a % of Affiliate Revenue 37.5% 38.9% 41.3%

Summary of Studio ProductNo. of titles*

High Rentals 32 15 25 4 Other First Run 76 53 43 7 Local - 12 12 1 Total First Run Titles 108 80 80 12

MFTV 41 24 50 - Library 309 334 309 -

Total 458 438 439 12

12

Assumptions for 5 yearsAssumptions for 5 years • No major economic crises

• GDP, and Inflation assumed to be at historically stable levels

• Exchange rates assumed– Brazil R$ 2.00– Venezuela B$ 3.17– Mexico M$ 13.92– Argentina Arg$ 4.50

• New technologies used to support revenue growth.


13

Financial ProjectionsFinancial Projections

14

HBO Latin America Group FinancialsHBO Latin America Group Financials


Actual Actual Reest. Forecast Forecast Forecast Forecast Forecast CAGR2007 2008 2009 2010 2011 2012 2013 2014 2010-2014

Revenues 271.5 323.8 340.8 365.6 399.6 434.2 464.4 496.1 7.8%

Operating ExpensesProgramming 109.3 142.2 150.7 165.0 175.1 179.1 191.3 198.2 5.6%

Cost of Licensing .0 1.0 2.5 3.8 3.8 3.8 3.8 3.8 8.8%

Sales 3.8 4.1 4.8 9.0 9.3 5.8 6.5 7.5 9.4%

Marketing 15.5 16.8 18.0 20.0 21.6 23.2 24.6 25.9 7.6%

Network Operations 10.9 11.9 11.5 13.0 13.0 13.0 11.0 11.0 -0.9%

General & Administrative 9.0 10.8 10.3 11.6 12.3 13.4 14.5 15.5 8.5%

Bad Debt .1 .1 .0 .0 .0 .0 .0 .0 11.2%

Staff 42.5 50.0 48.1 49.7 50.4 51.7 51.7 51.7 1.5%

Leasing .3 .4 .3 .2 .1 .0 .0 .0 -100.0%

Depreciation 5.8 6.2 7.0 9.3 9.0 9.1 8.6 7.1 0.2%

VAT, Property Taxes & Other Taxes 2.7 2.6 2.2 2.3 2.4 2.6 2.7 2.9 6.1%Total Operating Expenses 200.0 246.1 255.3 283.9 297.1 301.7 314.8 323.5 4.8%

Total Operating Profit 71.5 77.8 85.5 81.6 102.6 132.5 149.7 172.6 15.1%

Other (Income) Expenses -4.9 -1.2 -1.3 -1.3 -1.3 -1.3 -1.3 -1.3 0.0%

Profit (Loss) Before Taxes 76.4 78.9 86.7 82.9 103.8 133.8 150.9 173.9 14.9%

Taxes 25.4 34.7 36.7 32.6 37.7 41.5 44.9 48.3 5.6%

Net Profit (Loss) 51.1 44.3 50.0 50.2 66.1 92.2 106.1 125.6 20.2%

15

Expenses as percentage of Total RevenueExpenses as percentage of Total Revenue



Revenues 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 0.0%

Operating ExpensesProgramming 40.3% 43.9% 44.2% 45.1% 43.8% 41.3% 41.2% 39.9% -2.0%

Cost of Licensing 0.0% 0.3% 0.7% 1.0% 0.9% 0.9% 0.8% 0.8% 1.0%

Sales 1.4% 1.3% 1.4% 2.5% 2.3% 1.3% 1.4% 1.5% 1.5%

Marketing 5.7% 5.2% 5.3% 5.5% 5.4% 5.4% 5.3% 5.2% -0.2%

Network Operations 4.0% 3.7% 3.4% 3.6% 3.3% 3.0% 2.4% 2.2% -8.1%

General & Administrative 3.3% 3.3% 3.0% 3.2% 3.1% 3.1% 3.1% 3.1% 0.6%

Bad Debt 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 3.2%

Staff 15.7% 15.5% 14.1% 13.6% 12.6% 11.9% 11.1% 10.4% -5.9%

Leasing 0.1% 0.1% 0.1% 0.1% 0.0% 0.0% 0.0% 0.0% -100.0%

Depreciation 2.1% 1.9% 2.1% 2.5% 2.3% 2.1% 1.9% 1.4% -7.0%VAT, Property Taxes & Other Taxes 1.0% 0.8% 0.6% 0.6% 0.6% 0.6% 0.6% 0.6% -1.6%

Total Operating Expenses 73.7% 76.0% 74.9% 77.7% 74.3% 69.5% 67.8% 65.2% -2.7%

Total Operating Profit 26.3% 24.0% 25.1% 22.3% 25.7% 30.5% 32.2% 34.8% 6.8%

Other (Income) Expenses -1.8% -0.4% -0.4% -0.3% -0.3% -0.3% -0.3% -0.3% -7.2%

Profit (Loss) Before Taxes 28.1% 24.4% 25.4% 22.7% 26.0% 30.8% 32.5% 35.0% 6.6%

Taxes 9.3% 10.7% 10.8% 8.9% 9.4% 9.6% 9.7% 9.7% -2.0%

Net Profit (Loss) 18.8% 13.7% 14.7% 13.7% 16.5% 21.2% 22.8% 25.3% 11.5%

16

2007 5YP vs 2009 5YP2007 5YP vs 2009 5YP


2007 5YP

Reest. Forecast Forecast Forecast Forecast Forecast Forecast Forecast CAGR2007 2008 2009 2010 2011 2012 2013 2014 2010-2012

Revenue 252.5 270.4 292.0 307.4 330.7 352.8 n/a n/a 6.5%Profits 39.9 30.2 30.8 34.7 41.9 47.3 n/a n/a 15.4%

2009 5YP


Revenue 271.5 323.8 340.8 365.6 399.6 434.2 464.4 496.1 7.8%Profits 51.1 44.3 50.0 50.2 66.1 92.2 106.1 125.6 20.2%

17

Revenues

Affiliate Revenues– Key Affiliates in major markets continue rolling out Digital STBs– Maintain premium rates in the range of US$4 to US$6– New technologies; HD, SVOD– Basic Movie Service Distribution– End of Buy-through in Brazil

Ad Sales– Growth from Basic Movie distribution in latter years of plan

Services Fees– No growth except for interim satellite capacity

Original production revenues– Remain at 2009 levels.



Affiliate Revenue 236.1 285.0 301.5 323.5 354.7 388.3 417.9 446.4 8.2%Ad Sales 5.3 6.7 7.5 8.2 9.1 10.0 12.5 15.6 15.8%Fees 29.5 30.7 29.2 30.1 32.1 32.2 30.3 30.4 0.8%Original Production/TV Rights .7 1.4 2.6 3.7 3.7 3.7 3.7 3.7 7.4%

Total Gross Revenues 271.5 323.8 340.8 365.6 399.6 434.2 464.4 496.1 7.8%

18

ProgrammingProgramming

• Maintain quantity, quality and pricing of promotable movies from studios

• New distribution technologies (mobile, VOD, internet)

• Output Deal

• Differentiate product from other movie services through exclusive series/content.

• Renegotiate Disney output deal (2011)

• Inventory to introduce basic channel.

• Transition first runs from Cinemax basic

• HBO NY – output deal

• HBO LAG – original productions



Studio Programming 88.6 110.8 123.3 127.0 136.1 138.1 147.6 151.8 4.2%HBO NY Output Deal .0 .0 4.2 5.2 5.3 5.4 5.5 5.7 6.2%Ind. Films/Non Movies 13.8 16.2 9.7 13.2 12.5 12.8 13.9 15.0 9.1%Original Production 1.8 8.4 6.2 11.9 13.3 14.6 15.6 16.8 22.1%Production, Film Facilities & Subtitling 5.2 6.8 7.4 7.6 8.0 8.3 8.6 9.0 4.1%

Total Programming 109.3 142.2 150.7 165.0 175.1 179.1 191.3 198.2 5.6%

19

Potential actions to maintain, enhance and protect value of Premium PayTV Window• Protect Premium “exclusivity” and promotional windows ( i.e. structured windows)

• Use and promote new technology (High Def, VOD, HD, IPTV, Dolby, Mobile, Ipods, etc.)

• Have programming content that will drive premium business – “something worth paying for”

• Exclusive HBO Latin America Productions

• Improve and strengthen local content offering in key markets to (i.e. Brazil buy through).

• Exclusive series and programming (HBO branded)

• Localize On Air look and feel needs to be more provocative than basic channels

• Regain leadership in “Programming Trends”- always HBO first

• Be more interactive with subscribers

Programming needs to adapt to meet Premium PayTV requirements


20

Potential actions to maintain, enhance and protect value of Premium PayTV Window

• Original Content tailored to major markets

• Mexico: 26 episodes (2 series/year)

• Brazil: 26 episodes (2 series/year)

• Other: 13 ½ episodes per year (late night)

• Maintain Sports Franchise

• Boxing

• Fair Play

• Reinforce HBO Brand

• HBO NY branded product

• Strengthen HBO franchises (HBO Plus, HBO Family, Max HD)

• Maximize use of government incentives

• Brazil: Condecine & Article 3a


21

Summary:Summary:• Revenue growth

• HD improves perception of premium value

• Improved distribution model for Cinemax

• Ad Sales becomes new source of revenue.

• Dependent on maintaining value of Premium window

• Exclusive content and local production will help improved desirability of the service

• Continued support of studio promotable product required

• Cinemax is effective barker channel

• Connect with customer

• Localization of content

• Control costs

• Improve efficiency in use of satellite capacity.

(Potential for significant profitable growth)


22

Back Up


23

Revenues

Affiliate Revenues• Opportunities

– Key Affiliates in major markets continue rolling out Digital STBs

– Maintain premium rates in the range of US$4 to US$6

– New Players: Telcos (Telefonica, Telmex, America Movil and others) and DISH

• Telcos DTH platforms targeting low SES by bundling PayTV, Telephony & Broadband

– New technologies; HD, SVOD– Basic Movie Service Distribution– End of Buy-through in Brazil

• Risks– Bundling with other services contributing to

rate erosion– Further concentration of platform revenues by

limited cable operators• Telmex, Televisa, Telefonica, Globo,

Clarin, Liberty Media– Protectionist legislation: Country Risk– Currency devaluation– End of Buy-through in Brazil– DTH Piracy– Transition strategy from Basic to Premium

(Chile, Peru, Central America)





24

Reest Forecast Forecast Forecast Forecast Forecast2009 2010 2011 2012 2013 2014 CAGR

Latin America Premium Dist. 112.6$ 134.5$ 166.6$ 184.3$ 202.4$ 219.3$ 14.3%

Basic Dist. 70.4$ 66.4$ 41.2$ 40.7$ 42.6$ 44.6$ -8.7%

Basic Movie Channel -$ 6.8$ 17.1$ 21.6$ 23.2$ 24.9$ 38.1%

183.0$ 207.8$ 224.9$ 246.5$ 268.1$ 288.8$ 9.6%

Brazil Premium Dist. 118.6$ 114.8$ 127.0$ 137.0$ 144.2$ 151.0$ 5.0%


118.6$ 115.7$ 129.8$ 141.7$ 149.8$ 157.6$ 5.9%

Total Premium Dist. 231.2$ 249.4$ 293.6$ 321.3$ 346.5$ 370.3$ 9.9%

Basic Dist. 70.4$ 66.4$ 41.2$ 40.7$ 42.6$ 44.6$ -8.7%


TOTAL 301.5$ 323.5$ 354.7$ 388.3$ 417.9$ 446.4$ 8.2%

– Growth will come mainly from• CATV revenues from digitalization of services• New players forcing more competition

– Expanding subscriber universe by acquiring subs that otherwise would not have our channels

– Projection considers transition strategy from Basic to Premium by 2011– Assumes no major Fx adjustments– Rate erosion based on the bundling packaging structure being introduced in the markets, oriented to

increasing distrinbutors ARPU– Basic Movie Channel targeted to growth of future PayTV business (lower SES segments)– New Technologies (VOD, HD)

• Regional feeds: contribution to the value perception of premium channels

Affiliate Revenues5 Year Strategic Plan (2010 – 2014)

25

Premium BusinessPremium contentDrivers

• Regional feeds tailored to main markets• Expand HD channel offer• Must maintain Premium Window integrity

to protect its strength– New output deal with extended

windows• Movie Premieres continue to be relevant

element in premium environment• Maintain Non-Movie differentiations

– Series– Local original productions (Mexico,

Brazil, Argentina)– Boxing/Concerts– Provocative Documentaries/Mini-

Series– Sports Mags/Comedy

Barriers

• Basic channels movie content has increased in quantity and quality (avg. of 14 channels with strong movie content basic tier)

• New alternative technologies to access premium content (web, mobile)

• Some competitors’ blockbuster movie premiere windows better than HBO’s

• Other Movie Networks incorporating elements of Non-Movies within their programming strategy

– Boxing– Series


26

Premium BusinessDistributionDrivers

• Revision of premium packaging strategy, considering Regionalization, HD & SVOD

• Increase of digital addressable homes/penetration opportunity

• Consumer packaging offer introduced by new entrants (Telefonica, DISH) should increase Pay TV household

• Effect of new players entering market– Conventional cableoperators must

react and invest in new technologies• New technologies are an opportunity for

revenue expansion and improved value perception of product

• Increase marketing investment

Barriers

• New mergers could create migration/churn/volume discounts

• Affiliates’ capex for continuing Digital roll-out

• Traditional structure and mind-set within existing distribution network require stronger involvement from HBO

– Lack of interest in premium, more focused on triple-play strategies

• Movie download services may become regular players

• DTH piracy• Multiple platforms operating in the region

hamper pan-regional promotions


27

Premium BusinessPackagingDrivers

• Pay TV bundling with other services (internet, telephony, mobile)

• HD improves value perception of premium channels

• SVOD marketing/bundling opportunities• Traditional basic package segmenting

into various tiers

Retail Pricing

• Lower entry level pricing for Basic tier• Bundled telephony, basic Pay TV

service, and internet

Barriers

• Bundling of basic services with telephony competes for share of disposable dollars

• Limited access to premium from all basic tiers

– Basic– Extended Basic– Mini Basic

Retail Pricing

• Premium price to value is not proportional to basic tier offers

• Basic tier = Price & # of channels = Value

• Less upgrade motivation• Distributors’ premium profit margin at a

disadvantage vs other services– Basic, internet, telephony


28

• Premium Business - Competition– FOX Group

• Distribution agreement concluded with LAPTV• Plans to convert Cinecanal to a fully distributed basic network by year end

– Fox and Cinecanal have joined to produce local programming• New distribution platform represents 25 channels in the Latin American

territory– Basic channels continue to compete for our Premium Business Growth– Premium Window threats

• Potential access to our product through other media– Hulu, YouTube

– Telecine theatrical titles have improved• Shorter windows (13 months vs. 18 months)

– Other Premium and Basic players are engaging in local productions– DVD Piracy reducing demand for Premium Tier


29

• Pan-Regional Revenue Strategy (2001-2009)– 2001 to 2005

• Packaging Strategy: Introduce new channels & packages– HBO/MAX Digital, including HBO Family and Max Prime

– 2006 to 2009• Build and exploit existing revenue streams by targeting

proven markets and affiliates (consumer/distribution)– Regional feeds: tailored to each main market– Key Affiliates (DTH,CATV,TELCOS)– Addressability/Digital expansion

• Investment in areas with clear volume potential– New platforms: Mexico, Brazil, Venezuela, Colombia, Chile

• Launch of HD and SVOD


30

• Pan-Regional Revenue Strategy (2010-2014)– 2010 to 2014

• Create new revenue streams by building aggressive partnerships with telecommunications companies entering the multi-channel video category

– Leverage new competition within existing distribution network• Revision of premium packaging structure - considering HD• Transition in Basic markets to Premium by 2011 by launching Max HD.

– Chile, Peru, Central America• Convert Cinemax into a truly basic services as part of our channel portfolio

strategy.– Will promote and drive Premium Business– Major element in the transition in Basic markets to Premium– Participant in business share of new platforms targeting lower SES

• Caveat/Assumption: Continued Programming Innovation– Content Franchises (Box, Sports, Series, Comedies, Concerts, Adult, Movies)– Special Features (HD, SVOD, multi-language audio/subtitles, Dolby, etc.)


31

5 Year Strategic Plan (2010 – 2014)• Brazil

– Buy-through will end this December 2009• Restructuring of NET and SKY negotiations will result in rate erosion

– Country average effective rates will decline as well:» 2009 overall effective rate = US$7.59» 2014 overall effective rate = US$6.17

• This year the remaining operators will join NET and SKY in offering Telecine– Oi deal finalized, and contract signed, in August 2009

• Includes the launch of the Basic Movie Service by March 2010• Project 1,000,000 subscribers by the year 2014

– Telefonica/TVA• Revenues increase from 21% to 23% of total• TVA will be affected by Telecine entry

– Premium penetration will fall from 80% to 58%

– Embratel will launch by 2010

2009 2010 2011 2012 2013 2014SKY 7.10$ 6.26$ 6.14$ 6.04$ 5.99$ 5.95$ NET 9.04$ 7.85$ 7.62$ 7.42$ 7.07$ 6.71$

Affiliate Revenues(in $M) Reestimate Forecast Forecast Forecast Forecast Forecast

2009 2010 2011 2012 2013 2014 CAGRBRAZIL $118.3 $115.4 $129.6 $141.5 $149.6 $157.4 5.9%

32

• Mexico– CATV

• Televisa leading the consolidation process through mergers and acquisitions– Approx. half of market share (Actual 3.0M subs)– HBO’s penetration in Cablevisión México grows from 16% to 21% by year 2014– Telmex expected to launch IPTV in 2011

• Other MSO’s have followed suit in digitalization roll-out– Megacable

– DTH• Total sub growth from 2.1 to 3.8 million by 2014, primarily driven by the entrance of

DISH– Migration of MVS subscribers to be completed by the end of 2012

– Pricing and Packaging structure disadvantaged for Premium• Strong price disparity between Premium and Basic• Overabundance of movie channels on Basic (approx. 14)

– Grey Market/Piracy (northern Mexico)



2009 2010 2011 2012 2013 2014 CAGRMEXICO $37.5 $48.0 $54.7 $61.4 $67.0 $72.5 14.1%

33

• ArgentinaGrupo Clarin– MSO’s represent a consolidated platform with 62% market share (2.9 million subs)– Digitalization

• CF/GBA completed in April 2007• The main interior cities completed in April 2009

– Approx. 400k total digital subs• Small interior cities remain with analog service

– Cost-efficiency evaluations underway to determine feasibility of digitalizing them

– Subsequent penetration growth will be limited due to a strong basic tier offering• Soccer and movie services (i.e. CineCanal) have basic distribution

– TyC lost the right to air soccer on the premium tier

– Telco’s• Grupo Clarin has challenged all attempts by telco’s to obtain broadcasting licenses

– Has been unsuccessful in its own attempts to get license for telephony• Regardless, Telefonica is forecast to launch in 2011


2009 2010 2011 2012 2013 2014 CAGRARGENTINA $23.8 $26.9 $31.5 $36.2 $39.9 $43.6 12.8%


34

• Chile– VTR

• Continue transition from Full Basic (with HBO/MAX) to “Basic Light” (without HBO/MAX)– Has cannibalized Basic subscribers – downgrade of 200k subs in 18 months– Full transition of HBO/MAX from Basic to Premium by 2011

• Liberty Media controls VTR and DTV (63% market share)– DTV for sale due to regulatory ownership laws– VTR represents over 55% of Pay TV market

» Granted license to launch & operate new mobile service» 1st CATV operator with Quadruple Play, levels playing field with Telefonica and Telmex

• Commercial SVOD launch in April 2009, potential for new growth– Telcos

• Telefonica’s launching of HBO Premium in the DTH Platform initiated repackaging in Chile– Introduction of new concept of packaging – different target– Created reaction from competitors

• Telmex purchase of ZAP TV has been very successful– ZAP TV had 40k subs, Telmex increased the distribution to over 250k subs



2009 2010 2011 2012 2013 2014 CAGRCHILE $27.6 $31.3 $30.8 $31.6 $33.7 $34.8 4.7%

35

• DTV/SKY– DTV/SKY

• Total DTH Revenue contribution to HBO changes from 31% to 25%• Growth from 5.4 million to 6.8 million subs by 2014• Shift in socio-economic segments from AB towards C+, introducing a “pre-pago”

concept– Very successful in Venezuela (18% of total subs)

• Telefonica and Dish are limiting DTV/SKY growth– DVR and HD offer are part of defensive strategy in order to avoid churn

» DTV Pan-Am forecast for end of 2010 250k» SKY Brazil forecast for end of 2010 350k» SKY Mx forecast for end of 2010 150k

– Considerations by territory• Mexico: Packaging, pricing structure, and number of basic-tier movie channels• Brazil: end of Buy-through• Argentina: Rich premium product on basic (soccer, movies channels)



2009 2010 2011 2012 2013 2014 CAGRDTV/SKY $93.1 $97.0 $101.5 $105.5 $109.1 $112.7 3.9%

36

• Telcos (CATV & DTH Platforms)– Began as a defensive strategy

• Leverage a huge telephony subscriber base for triple-play

– Telefonica• Expected 2011 launch in Argentina

– Others• Oi projected to have 1MM subs by

2014– Telcos have a massive pan-regional

presence• Total revenues will account for 37% of

HBO’s revenue by 2014– Currently at 34%

• Their market share of our total subscribers is 30%



2009 2010 2011 2012 2013 2014 CAGRTELCO's $102.6 $107.4 $121.8 $138.4 $152.0 $165.3 10.0%

2009 2010 2011 2012 2013 2014

Brazil 696 824 944 1,068 1,197 1,332 Chile 262 282 301 321 340 360 Colombia 170 200 230 260 290 320 Venezuela 75 115 155 195 235 275 Peru 577 606 634 663 691 720 Argentina - - 80 135 190 245 Telefonica 1,781 2,026 2,345 2,642 2,944 3,252

Colombia 1,420 1,420 1,500 1,618 1,684 1,750 Brazil 3,230 3,740 4,000 4,267 4,540 4,815 Chile 266 286 300 340 380 420 Peru 71 88 105 121 138 155 Mexico - - 48 65 83 100 CA 132 167 206 248 295 347 Ecuador 19 30 35 45 55 65 Carib - 14 18 21 25 28 Telmex 5,139 5,745 6,210 6,725 7,199 7,680

Oi - 200 400 600 800 1,000 Others - 200 400 600 800 1,000

Total 6,919 7,972 8,955 9,967 10,943 11,932

TELCOS's - TOTAL SUBSCRIBER MARKET SHARE

37

Revenues Revenues 5 Year Strategic Plan (2010 – 2014)

Service Fees:Service Fees: • No significant changes in fees to basic channels

• Assume WBTV leaves Sunrise in 2009

• A&E networks & E! serviced from Adrosa

• Globecast per contract

• Reduced administration support to the basic channels

• Sales of Original Programming• Maintain at current levels

• Ad Sales: Addition of Ad Sales revenue on Cinemax basic distribution in Latin America.




38

Value of Premium PayTV Window

• Impacted 2001 – 2009

• Growth and decline of DVD business and increased DVD piracy.

• Shortening of Theatrical and DVD windows by certain major studios. Studios discussing merging DVD/Theatrical windows, downloading, etc.

• Basic Cable Channels

• Excessive number of movie channels in certain markets resulting in stronger prime time scheduling (Mexico, Argentina).

• Access to better quality promotable movies (TNT, Fox, Hallmark, local movie channels, local broadcast channels).

• Basic channels pushing social limits with increasingly edgy product.

• Spread of distribution to pan regional channels (actual & library) and increased non-compliance with “Rules of Promotion”

• New Output agreements with studios have provided better quality library to help value of HBO and Cinemax.


39

Sales ExpensesSales Expenses

• Growth in line with Revenues growth

• Set top decoder replacement program.

• Ad Sales commission 25% of Revenues



Trade Shows & Conventions .8 .8 .6 .6 .6 .7 .7 .7 5.0%Decoder Incentives .5 .4 .5 4.4 4.4 .5 .5 .5 0.0%Affiliate Support Expenses .4 .5 .7 .7 .8 .8 .9 .9 5.0%HBO LAG Affiliate Sales Expenses: .7 .8 1.1 1.2 1.3 1.3 1.4 1.4 5.0%Advertising Commissions 1.3 1.6 1.9 2.1 2.3 2.5 3.1 3.9 15.9%

Total Sales Expenses 3.8 4.1 4.8 9.0 9.3 5.8 6.5 7.5 9.4%

40

Marketing and ResearchMarketing and Research

• Growth in line with Revenues growth

• Media spend to concentrate on following initiatives

• HBO LAG Original Productions

• HBO NY content

• Brand Marketing


(in US $M) Actual Actual Reest. Forecast Forecast Forecast Forecast Forecast CAGR2007 2008 2009 2010 2011 2012 2013 2014 2010-2014

Affiliate Marketing & Promotional Support 5.4 5.8 7.1 9.8 10.9 11.9 12.7 13.5 13.9%Media 6.2 6.8 7.0 8.5 9.3 10.2 11.0 11.7 10.9%Research 1.0 .8 1.2 1.2 1.2 1.2 1.2 1.2 0.0%Public Relations 2.1 2.2 1.7 2.0 2.1 2.1 2.1 2.1 4.1%Other Marketing .8 1.2 1.0 1.5 1.5 1.5 1.5 1.5 8.1%

Total Marketing 15.5 16.8 18.0 23.0 24.9 26.8 28.5 30.1 10.8%

41

Network OperationsNetwork Operations

• Maintain cost of Network Operations to market benchmarks

• Replacement of decaying decoders 2010 – 2012.

• Assume additional capacity to facilitate migration to new technology.

• Two IS-11 transponders scheduled to expire December 31, 2012.

• Initiate negotiation with Intelsat (2010).


(in US $M) Actual Actual Reest. Forecast Forecast Forecast Forecast Forecast CAGR2007 2008 2009 2010 2011 2012 2013 2014 2010-2014

Transponder 8.4 8.4 8.4 10.4 10.4 10.4 8.4 8.4 0.0%Network Operations 2.5 3.5 3.1 2.6 2.6 2.6 2.6 2.6 -3.5%

Total Network Operations 10.9 11.9 11.5 13.0 13.0 13.0 11.0 11.0 -0.9%

42

General & AdministrativeGeneral & Administrative

• Increase facilities, infrastructure and communication in Mexico and Brazil.

• Maintenance costs of new traffic system

• Includes new Uplink equipment ($5.5M), Traffic System ($5.5M), telecommunications upgrade ($800K) to support post production capabilities in Mexico & Brazil and replacement of obsolete equipment



G&A 9.0 10.8 10.3 11.6 12.3 13.4 14.5 15.5 8.5%Bad Debt .1 .1 .0 .0 .0 .0 .0 .0 11.2%Leasing .3 .4 .3 .2 .1 .0 .0 .0 -100.0%Depreciation 5.8 6.2 7.0 9.3 9.0 9.1 8.6 7.1 0.2%VAT, Property & Other Taxes 2.7 2.6 2.2 2.3 2.4 2.6 2.7 2.9 6.1%

Total 17.9 20.1 19.8 23.4 23.8 25.1 25.8 25.5 5.2%

43

Staff & ExpensesStaff & Expenses5 Year Strategic Plan (2010 – 2014)

• Headcount increase in 2010 is related to the freelancer rationalization done in the second half of 2009 where freelancers who were hired to support the development and roll-out of on-going projects such as HD, VOD, SVOD, the Caribbean feed, etc., were converted to regular staff.

• Growth in staff, 2011 and 2012, to support expansion of channel offerings and to support the development of Cinemax Network restructuring, offset by additional efficiencies in T&O.

• Staff cost increases at a nominal 5% average per annum across the organization, offset by devaluation of Bolivar to $3.17.

• No significant changes in benefits are contemplated.


Headcount 512 518 543 555 560 575 575 575 1.2%

Compensation and benefits 36.6 43.1 41.4 42.3 42.9 44.0 44.0 44.0 1.2%Non Salary 5.9 7.0 6.3 7.4 7.5 7.7 7.7 7.7 3.9%Basic Channel Support .0 .0 .3 .0 .0 .0 .0 .0 -100.0%

Total 42.5 50.0 48.1 49.7 50.4 51.7 51.7 51.7 1.5%

Date post:	17-Jan-2018
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5 Year Strategic Plan Board Meeting September 2 nd, 2009 Coral Gables.

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