VIDEO: OPPORTUNITIES AND GROWTH DRIVERS Michel Azibert, Deputy CEO and Chief Commercial & Development Officer
Agenda
2
2
3
4
Eutelsat’s video business
Market trends
Eutelsat’s Video strategy
Conclusions
1
Eutelsat Video activity in a snapshot
3
► Total revenues of €913m • 63% of Group total
► High visibility • 83% of Group backlog • Long-term contracts
► ~ 5,800 channels • 37% Free-to-Air (FTA) • 63% Pay-TV
► HD penetration of 12% • 19% on HOTBIRD
REVENUES BY ACTIVITY IN FY 2015
REVENUES BY REGION IN FY 2015
83%
13%
Professional video
Broadcasting
Distribution
Central Europe
Western Europe
MENA
RCA
LATAM & Others
4%
€913m
€913m SSA
5% 9%
8%
19%
13%
46%
511
742
913
2,668
4,463 5,150
Ten years of growth
4
+79%
FY 2015 FY 2005
BACKLOG (€M)
REVENUES (€M)
CAGR: 6.0%
+93%
FY 2015 FY 2005
CAGR: 6.8%
FY 2010 FY 2010
EUTELSAT 117 WEST A
EUTELSAT 115 WEST A EUTELSAT 115 WEST B
EUTELSAT 113 WEST A
TELSTAR 12* 15* W
EUTELSAT 12 WEST A EUTELSAT 12 WEST B
EUTELSAT 7 WEST A EUTELSAT 8 WEST B
EUTELSAT 5 WEST A
EUTELSAT 3B
EUTELSAT 10 A
EUTELSAT 7A EUTELSAT 7B
EUTELSAT 9A
HOT BIRD 13B, 13C, 13D
EUTELSAT 16A EUTELSAT 16C
EUTELSAT 21B
EUTELSAT 25B
EUTELSAT 28F* EUTELSAT 28G*
EUTELSAT 31A
EUTELSAT 33C EUTELSAT 33D
EUTELSAT 36A EUTELSAT 36B
EUTELSAT 48A EUTELSAT 48D
EUTELSAT 53A*
EUTELSAT AT1* (56° E)
EUTELSAT 70B
EXPRESS AT2* (140° E)
EUTELSAT 172A
EUTELSAT 28E*
Valuable assets: ten video hotspots…
5 EUTELSAT FLEET NOVEMBER 2015 *
Stable orbit Inclined orbit Capacity on third-party satellites
Key Video Neighborhoods (>170 channels)
** being repositioned
**
KA-SAT
…with a reach of ~275 million homes
6 (1) Figures are not taking into account audience in SSA Source: Eutelsat TV Observatory
122
27 18 14
5 11 6 5
138
52
26 18 14 12 9 5
EuropeMENA
MENA SSARussia
WesternEurope
Europe Central EuropeSSA
MENAAfrica
EMEA
AUDIENCE GROWTH (MILLION HOMES)
Growth >30% since 2010
(1)
(1)
2014 2010
13° East 7/8° West 36° East 28° East 9° East 16° East 7° East 5° West
(1)
… and a strong channel line-up
7 (1) Figures are not taking into account audience in SSA Source: Eutelsat TV Observatory
1070
936 932 827
367 319
244 173 198
98 98 79 45 89
29 9
EuropeMENA
Central EuropeSSA
SSARussia
MENA MENAAfrica
Europe EMEA WesternEurope
5-YEAR AUDIENCE GROWTH (MILLION HOMES)
(1)
o/w HD
Channels
13° East
36° East
28° East
9° East
16° East
7° East
5° West
~40 TV platforms on Eutelsat’s fleet, up 17% since 2010
(1)
(1)
7/8° West
Western and Central Europe
8
► 59% of total video revenues • Number one player in volume market share
► HD penetration: ~17%
► Main neighbourhoods: • 13°East (HOTBIRD) • 9°East • 16°East • 5°West
► Western Europe • Mature market • Premium pricing
► Central and Eastern Europe • Moderate growth • Lower pricing
VOLUME MARKET SHARE (TRANSPONDERS USED FOR VIDEO)
TRANSPONDER DEMAND FOR VIDEO APPLICATIONS
SES
Eutelsat
Hispasat
Intelsat
Others
Western Europe Central Europe
39%
31%
9%
6%
15%
583 574 570 564 556 549
224 230 236 241 248 255
807 804 806 805 804 804
2014 2015 2016 2017 2018 2019
Source: Euroconsult
Key video hotspot: HOTBIRD at 13° East
9
► ~25% of total group revenues
► Three satellites: • 102 operational physical transponders (95 TPE)
► Fill rate c.95%
► Main markets are Italy and Poland
► Reach of 100m households in Western and Central Europe • Up 6 million vs. 2010 • ~30 million DTH
► 1,070 channels
• 63% Pay-TV • 19% HD penetration
► Average revenue per 36 Mhz equivalent transponder: €3.8m
HOTBIRD: MAIN MARKETS AND CUSTOMERS (EUROPE ONLY)
Middle East and North Africa
10
► 19% of Video revenues • Number one by volume market share
► Main neighbourhoods: • 7/8° West • 7° East (Digitürk anchor customer) • 13° East (HOTBIRD)
► HD penetration: 13%
► Main customers include Noorsat, Nilesat, Gulfsat, TDA, OSN, MBC…
► MENA characteristics: • Free-to-Air (FTA) the most widespread reception mode • Growing satellite TV universe
VOLUME MARKET SHARE (TRANSPONDERS USED FOR VIDEO)
TRANSPONDER DEMAND FOR VIDEO APPLICATIONS
Arabsat
Eutelsat
Nilesat
Turksat
Others
34%
21% 17%
6%
22%
405 422 433 444 454 462
2014 2015 2016 2017 2018 2019
Source: Euroconsult
CAGR: +2.6%
MENA growth momentum
11 Source: TV Observatory 2014
RECEPTION MODES IN MENA
Strong momentum consolidating leadership
25 27
52
2008 2010 2013
TV HOUSEHOLDS AT EUTELSAT’S 7/8° WEST NEIGHBORHOOD (M)
61% 67%
92%
39% 33%
6% 2%
2008 2010 2013
Satellite Analog terrestrial DTT / IPTV
Satellite has dominant market share
Sub-Saharan Africa (SSA)
12
► 8% of video revenues • Number one in volume market share
► Eutelsat is the leader with three Hotspots • 36° East • 16° East • 7° East
► Market characteristics • Growing satellite market share • Ongoing DTT transition • Growing number of both African and international channels
► Main customers include Multichoice, Azam Media, Canal + Overseas…
VOLUME MARKET SHARE (TRANSPONDERS USED FOR VIDEO)
TRANSPONDER DEMAND FOR VIDEO APPLICATIONS
215 231 256 274 290 303
2014 2015 2016 2017 2018 2019
Source: Euroconsult
CAGR: +7.1%
SES
Eutelsat
Intelsat
Others
35%
31%
15%
19%
Russia and Central Asia
13
► 9% of video revenues • Market leader in volume market share
► Global coverage of Russia with three orbital positions • 36° East • 56°East • 140° East
► Reaching 26m households at 36°East
► >750 channels • 13% HD penetration
► Serving Russia’s main DTH platforms • Tricolor TV and NTV+
VOLUME MARKET SHARE (TRANSPONDERS USED FOR VIDEO)
TRANSPONDER DEMAND FOR VIDEO APPLICATIONS
236 259 268 275 285 295
2014E 2015E 2016E 2017E 2018E 2019E
Source: Euroconsult
CAGR: +4.6%
SES
Eutelsat
Intelsat
Others
Gazprom
RSCC
26%
17%
15%
14%
18%
9%
Latin America
14
► 3% of video revenues • Relatively new market for ETL
► DTH and cable distribution at 117° West • Capacity and performance will be strengthened
with the launch of ETL 117 WB
► >200 channels on EAS fleet
► Anchor customer: Millicom
► Launch of ETL 65WA to boost and complement video resources for Brazil
VOLUME MARKET SHARE (TRANSPONDERS USED FOR VIDEO)
TRANSPONDER DEMAND FOR VIDEO APPLICATIONS
507 555 591 609 625 637
2014E 2015E 2016E 2017E 2018E 2019E
Source: Euroconsult
CAGR: +4.7%
Intelsat
SES
Eutelsat
Others
Star One
Hispasat
36%
19%
7% 6%
20%
12%
Agenda
15
2
3
4
Eutelsat’s video business
Market trends
Eutelsat’s Video strategy
Conclusions
1
Market trends
16
2.2
2.3
2.4
Evolving consumer behaviour
Improving image quality
Satellite to remain a key infrastructure in mature markets
Significant opportunity in fast-growing markets
2.1
2
2.1 Evolving consumer behaviour
Changing video landscape
17
► Series
► Short formats for mobile reception
► User-generated content
NEW FORMATS AND CONTENT NEW ENTRANTS NEW VIEWING HABITS
► OTT ► Time-shifted
► On-demand
► Multi-screen
► Social TV
2.1 Evolving consumer behaviour
Changes in viewing habits
US - AVERAGE TIME SPENT PER ADULT (18+) PER DAY (MINUTES)
18
269 259 251
26 29 29
46 48 43
36 56 66
377 392 389
2013 2014 2015► Linear viewing declining
but still predominant
► Growth of non-linear usages
CAGR
+35% -3% +6%
-3%
Source: Nielsen Total Audience Report
Live TV Time-shifted TV Internet on a PC Smartphone
ON VIDEO AUDIENCE DISTRIBUTION ON NUMBER OF CHANNELS ON LEGACY TV PLATFORMS
19
2.1 Evolving consumer behaviour
Impact of OTT
OTT
► Satellite will maintain critical mass as the only infrastructure able to reach households with insufficient terrestrial connectivity
► OTT leading to cord-shaving of non-premium channels in mature markets
► Western Europe markets differ from the US • Over twice as many channels per M inhabitant
in North America • Lower Pay-TV penetration in a number of countries
in Europe • Lower price of Pay-TV bundles
(less incentive to cut the cord) • OTT offer less diversified in Europe
► Eutelsat main markets, Poland and Italy, affected later and less
► Fast-growing markets not significantly impacted in foreseeable future
Market trends
20
2.2
2.3
2.4
Evolving consumer behaviour
Improving image quality
Satellite to remain a key infrastructure in mature markets
Significant opportunity in fast-growing markets
2.1
2
21 Source: Eutelsat
Ramp-up Period Broadcast Format Modulation
MPEG-2 compression
MPEG-4 compression
HEVC Compression
1990s-2000s DVB-S 12 20 -
DVB-S2 - 26 -
2000s-2010s DVB-S 2 to 3 5 -
DVB-S2 3 to 4 6 to 8 12 to 15
2020s DVB-S2 / DVB-S2X 1 to 2 3 to 4
SD
NUMBER OF CHANNELS PER 36 MHZ TRANSPONDER
2.2 Improving image quality
Capacity requirement as a function of image quality and compression
Improved quality will require more capacity, better compression to facilitate transition
22
10-Y HD CHANNEL PENETRATION EVOLUTION OF IMAGE QUALITY (NUMBER OF CHANNELS – EMEA + LATAM)
Source: Euroconsult 2015
2024 2014
37%
20% 15% 14% 12% 10%
5%
76%
67%
38%
47%
31% 32%
21%
NorthAmerica
WesternEurope
LATAM CentralEurope
MENA Russia andCentral Asia
SSA
5,000
10,000
15,000
20,000
25,000
2012 2014 2016 2018 2020 2022 2024
14% 38%
2.2 Improving image quality
HD adoption driving growth
… resulting in higher HD penetration Scope for ramp-up in all regions...
High Definition Standard Definition
2.2 Improving image quality
Conditions in place for UHD adoption
23
DEMAND
EQUIPMENT
STANDARDS
CONTENT
► Once viewed, two out of three consumers would like an UHD screen ► Ready to pay extra for UHD for both Free TV and Pay TV viewers
► UHD screen entry price now less than €1,000 ► By 2020, 70% of all screens sold in Europe will be UHD
► HEVC compression leading to greater cost-efficiency ► Industry consensus on development of 4K standard
► Film studios already massively producing UHD content ► OTT players producing their own UHD content ► First linear UHD channels on air - UHD live sports starting
Source: Gfk consulting, Eutelsat Focus Groups, Ericsson Consumer Lab
24
0
100
200
300
400
500
600
700
800
900
2015 2016 2017 2018 2019 2020 2021 2022 2023 2024
UHD CHANNELS BROADCAST BY SATELLITE
► Estimated 800 UHD channels worldwide by 2024
► Satellite to drive growth
2.2 Improving image quality
Satellite to benefit from UHD take-up
Source: Euroconsult
For distribution, satellite offers the best mix of coverage, image quality, availability and bandwidth
Market trends
25
2.2
2.3
2.4
Evolving consumer behaviour
Improving image quality
Satellite to remain a key infrastructure in mature markets
Significant opportunity in fast-growing markets
2.1
2
26 Source: Eutelsat analysis, European Commission - Broadband Coverage in Europe 2014, CISCO VNI 2015
► CDN costs rise in line with audience growth
► Satellite more cost efficient above 50k viewers in Western Europe
► Satellite a fraction of TV platforms operating costs
COST-EFFICIENCY UNIVERSAL REACH
► High cost of fibre roll-out ► Terrestrial networks cannot reach
entire population • Lower image quality • Or even no service
► Satellite providing full coverage of a market
SERVICE QUALITY
BROADBAND COVERAGE (>30Mbps)
► Higher quality of image leading to increased bandwidth usage
► Congestion of terrestrial netwoks • Video will represent ~80% of consumer
internet traffic by 2019
► Satellite and hybrid solutions allowing unimpaired viewing experience
86%
40% 27%
UK France Italy
4
8
20
1 SD channel in MPEG 2
1 HD channel in MPEG 4
1 UHD channel in HEVC
BANDWIDTH REQUIREMENT (Mbps)
Cost
Satellite
OTT
# viewers
2.3 Satellite to remain a key infrastructure in mature markets
Satellite’s competitive advantage over OTT / IP
2.3 Satellite to remain a key infrastructure in mature markets
Case study: development of hybrid offer in South Korea
27
► South Korea is one of the countries with the highest fiber penetration
► KT Telecom hybrid offer launched in August 2009 combining IPTV with DTH • Part of a triple play offer including broadband and Voice
over IP
► Differentiated services offering • Wide range of linear channels including HD channels
(from satellite TV) • Significant VOD contents (from IP offer)
► After adopting the hybrid platform • KT was perceived to be superior to cable TV
or competitor IPTV • Became leading IPTV player
KT MEDIA SUBSCRIBERS (M)
2.15
0.84
1.55
8.44
2.04
2.27
4.14
2011
4.55
2015
Olleh TV (IPTV)
Skylife TV (satellite)
Olleh TV Skylife (hybrid)
Satellite
Source: Eutelsat analysis, company reports
Satellite prospering in the land of fiber
Market trends
28
2.2
2.3
2.4
Evolving consumer behaviour
Improving image quality
Satellite to remain a key infrastructure in mature markets
Significant opportunity in fast-growing markets
2.1
2
2.4 Significant opportunity in fast-growing markets
Markets with structural growth drivers
29 (1) Source: OECD working paper - the emerging middle-class in developping countries (2) Source: Euroconsult 2015, Eutelsat analysis
ESTIMATED RISE IN MIDDLE-CLASS BY GEOGRAPHY1 (MILLION OF POP) CHANNELS PER M INHABITANT2
2 6
8 8
31
SSA MENA LATAM RussiaCentral Asia
North America
181
251
313
105
165
234
32
57
107
2009 2020 2030
LATAM MENA SSA
Underpenetration of television in fast-growing markets
Rise of middle-class with increased spending power
2.4 Significant opportunity in fast-growing markets
Pay-TV subs and advertising driving growth
30
Source: Global entertainment and media outlook, 2015-2019, PWC
GROWTH OF SATELLITE PAY-TV SUBSCRIPTIONS (M SUBSCRIBERS)
GROWING ADVERTISING REVENUES ($BN)
20.4
26.9
2014 2019
10 16 8
10
32
42
16
19
2014 2020
Russia MENA LATAM SSA
Source: Global Satellite TV forecast, Digital TV research, May 2015
Russia MENA LATAM SSA
66
87
CAGR: 4.8% CAGR: 5.7%
…and Free-to-Air Strong growth potential in both Pay-TV…
2.4 Significant opportunity in fast-growing markets
Sustained rise in channels
31 Source: Euroconsult 2015
~12,500
2014 2019 2024
CHANNELS BROADCAST BY SATELLITE
CAGR: 4.0%
+4%
+6%
+3%
+4%
11% 20% 32% HD penetration
~18,500
Russia MENA LATAM SSA
~16,200
2.4 Significant opportunity in fast-growing markets
Limited availability of TV via broadband in fast-growing markets
32 Source: Akamai's State of the Internet – Q2 2015 report; McKinsey – Offline and falling behind: Barriers to Internet adoption – October 2014
FIXED BROADBAND PENETRATION
% OF HOUSEHOLDS
USA Russia Brazil Mexico Turkey Egypt Tanzania
BROADBAND SPEED
% OF HOUSEHOLDS WITH >10Mbps
70% 44% 32% 39% 39% 10% 3%
43% 33% 2% 6% 7% <3% N/A
In many markets, satellite remains the most viable infrastructure for video distribution
2.4 Significant opportunity in fast-growing markets
Satellite gaining market share worldwide
33
► Total number of TV homes to increase by 140 million to 1.7 bn by 2020
► Satellite reception to grow by 80 million homes to 440 million by 2020
► Satellite market share to rise from 23% to 26%
MILLION TV HOMES BY DISTRIBUTION MODE - GLOBAL
528 520 507 490 478 470 465
563 561 565 575 583 591 599
102 118 134 150 165 177 188
362 378 393 407 420 431 442
0
200
400
600
800
1000
1200
1400
1600
1800
2014 2015 2016 2017 2018 2019 2020
Source: Euroconsult, Digital TV Research
Terrestrial Cable Satellite IP Growth of satellite in fast-growing markets, resilience in mature markets
Agenda
34
2
3
4
Eutelsat’s video business
Market trends
Eutelsat’s Video strategy
Conclusions
1
Eutelsat’s Video strategy
35
3.2
3.3
Strengthen resources in fast-growing markets
Encourage HD and UHD adoption
Innovate to maximise satellite value proposition
3.1
3
3.1 Strengthen resources in fast-growing markets
New capacity focused on fast-growing markets
36 TPE: 36-Mhz equivalent transponders
E 8 WB ENTRY INTO SERVICE OCT. 2015
+26 TPE MENA ► Ku-band fully presold
E 36 C Q4 2015 +19 TPE SSA RCA
► 11 expansion transponders presold to Multichoice (Africa)
E 117 WB Q1 2016 +48 TPE LATAM ► Anchor customer: Millicom
E 65 WA Q1 2016 +39 TPE LATAM ► ‘Piggy-backing’ on dynamic Brazil video neigbourhoods
SATELLITE LAUNCH CAPACITY1 COVERAGE
1 Regular capacity only
Eutelsat’s Video strategy
37
3.2
3.3
Strengthen resources in fast-growing markets
Encourage HD and UHD adoption
Innovate to maximise satellite value proposition
3.1
3
► Many Eutelsat Pay-TV customers accelerating migration from SD/HD line-up to full-HD
► Several Free-to-Air broadcasters are also extending HD offer on Eutelsat satellites
► Eutelsat main actions • providing additional capacity where needed • facilitating migration • providing support and commercial incentives to switch to HD
► HD development on Hotbird a priority for both pay TV and Free-to-Air
► Migration well underway now in MENA for premium content
3.2 Encourage HD and UHD adoption
Support HD ramp-up
Ensure satellite remains first in class in terms
of quality.
38
► Eutelsat dedicated capacity on Hotbird to launch UHD channels for the European market
► Demo channel in place on HotBird, encoded in HEVC at 50 frames per second with 10-bit colour depth. • Europe’s first UHD channel in this new standard.
► Several initiatives: • France: Fransat Ultra HD demo channel • Germany: public broadcasters • Russia: Tricolor TV going UHD with 2 channels
► Content partners preparing commercial launch of UHD linear channels • SPI International 4K FunBox
► Recent contracts with pay-TV customers incoporate roadmap for progressive introduction of UHD
3.2 Encourage HD and UHD adoption
Accompany UHD ramp-up
39
Eutelsat’s Video strategy
40
3.2
3.3
Strengthen resources in fast-growing markets
Innovate to maximise satellite value proposition
3.1
3 Encourage HD and UHD adoption
3.3 Innovate to maximise satellite value proposition
Satellite replicating experience available through terrestrial networks
41
ERGONOMIC NAVIGATION Smart EPG1
EXPERIENCE SOLUTION STATUS
Work in progress
MOBILITY MULTI-DEVICE Native IP Multiscreen Late stage
development
INTERACTIVITY ON-DEMAND
Already in production
1Electronic program guides
3.3 Innovate to maximise satellite value proposition
Smart LNB: enabling interactivity for end-users
42
► Low-cost home device, compatible with existing satellite equipment
► Providing narrow band return on top of regular DTH reception
► Enables TV platforms to deploy connected TV services via satellite: • Push VOD • Pay-per-view • Social TV • Live show participation
► Viewer intelligence and remote CPE management
► Mass market production to begin soon
► Interest notably in fast-growing markets
'Smart LNB'
IP IDU TS Video
Video
TV reception LAN connectivity
3.3 Innovate to maximise satellite value proposition
Multi-screen delivery solution via satellite
43
► Eutelsat the first enabler for multiscreen delivery via satellite to portable devices
► Combination of native IP multicast with local WiFi distribution
► Compatible with all mobile devices
► No increase in distribution costs as the number of users increases
► Benefits for broadcasters • OTT via satellite in markets underserved by terrestrial networks • Increased channel reach with detailed audience measurement • Nomadic TV reception in public spaces • Formats tailored for smartphones and tablets enabling up to 100 channels
per transponder and richness of channel line-up • Universal coverage
3.3 Innovate to maximise satellite value proposition
Multi-screen delivery solution via satellite: how it works
44
END-USER PREMISES INSTALLATION USE CASES
EASY INSTALLATION ► At home • Typically 4-5 simultaneous
users • Consumer-grade WiFi
access point
► In public spaces • Typically 40-50 simultaneous
users • High-end WiFi access point
is required • Commercial benefits
for hotels, cafés…
Agenda
45
2
3
4
Eutelsat’s video business
Market trends
Eutelsat’s Video strategy
Conclusions
1
To sum up
46
4.3
4.4
Track record of consistent growth in revenues, channels and audience
Attractive video assets both in mature and developing markets
Satellite has a competitive advantage in the evolving video ecosystem
Strategy focused on harnessing growth in fast-growing markets and leveraging the innovation opportunity
Video one of the pillars of Eutelsat’s growth
Q&A VIDEO: OPPORTUNITIES AND GROWTH DRIVERS