7 PREDICTIONS ABOUT THE FUTURE OF MEDIA Providing

7 PREDICTIONS ABOUT THE FUTURE OF MEDIA Providing in-depth insight, data, and analysis of everything digital.

1. DIGITAL WILL INHERIT THE EARTH

DIGITAL MEDIA CONSUMPTION IS GROWING, EVERYTHING ELSE IS SHRINKING US Consumer Media Consumption Share 2011 2012 2013 2014 2015 43. 2% 40. 9% Mobile 35. 2% 30. 0% Desktop/laptop 14. 0% 12. 0% 6. 6% TV Radio 2. 9% Print 5. 8% 3. 3% Other Digital Source: e. Marketer

And averages do not tell the whole story…

THE SHIFT IS GENERATIONAL Top 5 Media Mentions Among All Adults, 2013 Aged 75+ Aged 65 -74 Aged 55 -64 Aged 45 -54 Aged 35 -44 Aged 25 -34 Aged 16 -24 Total Watch TV Read newspapers/magazines Listen to the radio 0 50 100 Go online on a computer/laptop/netboo k/tablet Source: Ofcom

GENERATIONS HAVE A PREDICTABLE LIFE CYCLE… Source: Goldman Sachs

MILLENNIALS AND GEN Z • First digital native generation(s) • Already 45% of population and largest share of earners • Profoundly different media habits

18 -24 TV VIEWING DOWN ~30% IN 4 YEARS Traditional TV* Viewing Trends Among 18 -24 Year-Olds Weekly time spent in hours, based on total 18 -24 population 30 Hours spent 25 26 20 15 16 10 5 0 Q 1 Q 2 Q 3 Q 4 Q 1 Q 2 2011 2012 2013 2014 2015 *Traditional TV refers to all live + DVR/time-shifted TV viewing during the quarter. Source: Nielsen

Meanwhile…

DIGITAL MEDIA CONSUMPTION GROWING EVERY YEAR, ESPECIALLY MOBILE Total minutes (MM) Growth In US Digital Media Time Spent Desktop Mobile App Mobile Browser 118, 299 97, 440 77, 081 409, 847 778, 954 621, 410 476, 553 480, 967 550, 522 Jun-13 Jun-14 Jun-15 MOBILE TIME Source: com. Score Media Metrix Multi-Platform & Mobile Metrix; US, Total Audience

MILLENNIALS CHECK THEIR PHONES EVERY 10 MINUTES Source: Kana Software

My smartphone never leaves my side, night or day 87. 0% THEY KEEP THEM IN REACH 24 HOURS A DAY 12. 0% Agree Disagree Not sure Source: Zogby Analytics, cited by KPCB (Mary Meeker – Linked. In slideshare)

When I wake up, the first thing I do is reach for my smartphone 80. 0% THEY CHECK THEM FIRST THING IN THE MORNING 18. 0% 2. 0% Agree Disagree Not sure Source: Zogby Analytics, cited by KPCB (Mary Meeker – Linked. In slideshare)

So here’s a glimpse at the past, present, and future of media…

THE PAST (~2000): 3% DIGITAL 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Smartphone Computer/laptop/tablet Radio Print TV Source: Ofcom

THE PRESENT (~2015): 40% DIGITAL 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Smartphone Computer/laptop/tablet Radio Print TV Source: Ofcom

THE FUTURE (~2030): 80%+ DIGITAL 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Smartphone Computer/laptop/tablet Radio Print TV Source: Ofcom

2. SUBSCRIPTIONS FOR THE WIN!

Remember when pundits said digital content had to be free because no one would ever pay?

Oops.

STREAMING VIDEO SUBS CLIMBING FAST Streaming Video Subscription Revenue US 11. 5 9. 2 4. 0 2014 4. 8 2015 E Billions USD 7. 3 5. 8 2016 E 2017 E 2018 E 2019 E Note: Includes video services that stream long-form TV and movie length content (e. g. Netflix and Hulu). Does not include short-form video content services (e. g. You. Tube).

MUSIC SUBS ARE CLIMBING FAST Streaming Music Paid Subscribers US 16. 5 18. 7 20. 6 14. 0 Billions 11. 4 8. 7 2014 E 2015 E 2016 E 2017 E 2018 E 2019 E Source: BI Intelligence estimates based on historical data from the RIAA

EVEN “PRINT” SUBS ARE CLIMBING FAST $ 120 New York Times Digital Revenue Global $ 100 Subscriptions Millions Subscriptions $ 80 $ 60 $ 40 Advertising $ 20 Advertising Q 1 13 Q 2 13 Q 3 13 Q 4 13 Q 1 14 Q 2 14 Q 3 14 $Q 4 14 Source: The New York Times

The new pundit story is that there’s one right model — subs or ads

The truth is that both work, as do a la carte sales.

Most media companies have dual revenue streams.

“FREEMIUM” IS OFTEN THE BEST APPROACH Paid Digital Subscribers As % Of Total Digital Users 30% 25% 22% 21% 20% 15% 10% 5% 5% 5% 3% 2% NYT Linked. In 0% Spotify Hulu Whats. App Pandora Match Group Source: BI Intelligence estimates

3. (NATIVE) DIGITAL ADVERTISING WILL CONTINUE TO THRIVE

The best definition of “native ads”…

“NATIVE ADS” Ads that fit the way content and stories in the medium are consumed.

In digital, “search” and “scroll” are the dominant ways content is consumed.

BEHOLD THE POWER OF NATIVE DIGITAL ADS Digital Advertising Revenues Global Twitter AOL Twitter Yahoo AOL AOL Yahoo Twitter AOLYahoo $20 Twitter Yahoo Twitter Facebook AOL Twitter AOLYahoo Facebook Twitter AOL Yahoo Facebook Twitter AOL Facebook $15 Twitter AOLYahoo AOLTwitter AOL Yahoo Y ahoo Facebook Twitter AOL Twitter Facebook Yahoo Facebook AOL Twitter Facebook Y ahoo Twitter AOL Y ahoo Yahoo Twitter Facebook AOL Facebook Twitter Facebook AOL Yahoo $10 Facebook Yahoo Facebook Google Google Google Google $5 Google $0 1 Q 11 2 Q 11 3 Q 11 4 Q 11 1 Q 12 2 Q 12 3 Q 12 4 Q 12 1 Q 13 2 Q 13 3 Q 13 4 Q 13 1 Q 14 2 Q 14 3 Q 14 4 Q 14 1 Q 15 2 Q 15 3 Q 15 Billions $25 Note: Based on GAAP revenue. Source: Company Filings, BI Intelligence estimates

“Read, watch, and listen” are also digital formats.

But the experience is different than in legacy media.

Native digital brand ads will increasingly take advantage of the digital difference.

4. THE EXISTENTIAL CRISIS OF AD BLOCKING WILL RESOLVE ITSELF — BUT CAREFUL WHAT YOU WISH FOR

n Ju 06 _ 00 an n 15 15 14 14 13 13 12 121 _x _J 00 06 _x an n Ju 06 _ 00 _x _J 00 06 _x an n 12 39 Ju 06 _ 00 _x _J 00 06 _x an 11 11 10 30 Ju 06 _ 00 _x _J 00 06 n Ju an n 10 21 _x 06 _ 00 _x _J 00 06 _x an Ju 06 _ 00 _x _J 00 06 _x AD BLOCK USAGE IS RISING Adblock Monthly Active Users In Millions 181 198 144 54 Source: Adobe, Page. Fair

ESPECIALLY AMONG MILLENNIALS… Share Of Global Internet Users Who Have Blocked Ads In The Past Month, By Age 55 -64 17% 45 -54 22% 35 -44 24% 25 -34 31% 16 -24 35% 0% 5% rce: Global. Web. Index 10% 15% 20% 25% 30% 35% 40% Source: Global. Web. Index

AND TECHIES Ad-Block Usage Rates, By Vertical Global Travel Finance Local Lifestyle Business News Sports Entertainment Adult Comics Technology Games 5% 10% 10% 15% 20% 20% 25% 30% Note: Estimated to nearest 5% increment Source: Page. Fair

There is a lot of self-interested finger-pointing, moralizing, and rationalizing going on — from all parties.

ONE THING IS CLEAR… If all ads are blocked, most free content will cease to exist.

So what will happen?

Quality will improve!

Publishers, platforms, and advertisers will focus more on user experience and choice.

People will choose to view ads from, and/or subscribe to, publishers and platforms they like.

These decisions will not all be voluntary.

5. THE NEXT BIG PLATFORM IS…

As smartphones get boring, everyone is hunting for the next big platform.

Many candidates have been suggested — glasses, watches, cars, virtual reality…

None of these will be the next big platform.

Smart glasses flopped.

Smartwatches haven’t entirely flopped, but no one will be reading, watching, or listening to media on them anytime soon.

Cars won’t become media and communications platforms — other platforms will be used inside them.

VR is promising, but it’s still too early.

VR INSTALLED BASE STILL SMALL 30 25 20 Millions Estimated Global Virtual Reality Headset Shipments 15 10 5 2015 E 2016 E 2017 E 2018 E 2019 E 2020 E Source: BI Intelligence estimates, 2015

• Complicated to use AND EXPERIENCE STILL LEAVES MUCH TO BE DESIRED • Screen resolution low • Display often nausea-inducing • Prices steep

SO THE NEXT BIG PLATFORM WILL BE… Messaging apps!

Smartphone Activities Performed At Least Once Each Day MESSAGING IS AT THE HEART OF THE MOBILE EXPERIENC E Accessing email 91% Text messaging 90% Searching on the internet 76% Social networking 75% Getting news alerts 62% Playing games 57% Listening to music 46% Reading Watching videos or movies Getting directions 43% 30% 24% Source: Salesforce

SOCIAL NETWORKS ARE BIG… Monthly Active Users Global 3, 500 3, 000 Top 4 Social Networking Apps 2, 500 Millions 2, 000 1, 500 1, 000 500 0 4 Q 11 1 Q 12 2 Q 12 3 Q 12 4 Q 12 1 Q 13 2 Q 13 3 Q 13 4 Q 13 1 Q 14 2 Q 14 3 Q 14 4 Q 14 1 Q 15 2 Q 15 3 Q 15 Source: Companies, BI Intelligence estimates

BUT MESSAGING APPS ARE ALREADY BIGGER Monthly Active Users Global 3, 500 Top 4 Social Networking Apps 3, 000 Top 4 Messaging Apps 2, 500 Millions 2, 000 1, 500 1, 000 500 0 4 Q 11 1 Q 12 2 Q 12 3 Q 12 4 Q 12 1 Q 13 2 Q 13 3 Q 13 4 Q 13 1 Q 14 2 Q 14 3 Q 14 4 Q 14 1 Q 15 2 Q 15 3 Q 15 Source: Companies, BI Intelligence estimates

THE TOP 4 HAVE ALMOST 3 BILLION USERS Monthly Active Users Global, Q 3 2015 1000 900 800 700 600 500 400 300 200 100 0 Whats. App Messenger We. Chat Viber LINE Snapchat Tango Kik Kakao. Talk Source: Companies, BI Intelligence estimates

FACEBOOK OWNS TWO — PLUS INSTAGRAM Facebook Messenger Monthly Active Users Global Millions 900 800 700 600 500 400 300 200 100 0 4 Q 11 1 Q 12 2 Q 12 3 Q 12 4 Q 12 1 Q 13 2 Q 13 3 Q 13 4 Q 13 1 Q 14 2 Q 14 3 Q 14 4 Q 14 1 Q 15 2 Q 15 3 Q 15 Source: Company, BI Intelligence estimates

SNAPCHAT HAS 200 MILLION AND COUNTING Estimated Snapchat Monthly Active Users Global, millions 250 200 150 100 50 0 4 Q 11 1 Q 12 2 Q 12 3 Q 12 4 Q 12 1 Q 13 2 Q 13 3 Q 13 4 Q 13 1 Q 14 2 Q 14 3 Q 14 4 Q 14 1 Q 15 2 Q 15 3 Q 15 Source: Companies, BI Intelligence estimates

YOU CAN DO EVERYTHING IN THESE APPS Calls Chat GIFs Games Stickers Vo. IP Taxi E-commerce Music Video Payments URL Bar / Search Utilities QR Codes

GENERATION DIGITAL IS NUTS ABOUT THEM % Of Smartphone Owners Who Use Messaging Apps US 50+ 30 -49 18 -29 24% 37% 49% Source: Pew Research Center, March 17 -April 12, 2015

6. TV NETWORKS WILL SOON FEEL NEWSPAPERS’ PAIN

TRADITIONAL TV HAS PASSED ITS PEAK Households With Pay TV Vs. Subscription OTT, U. S. , 2010 -2015 E, Millions Pay TV Households 120 100 99 100. 9 Digital Subscription (OTT) Households 100. 8 99. 3 98 38 43 97. 1 80 60 40 20 23 28 33 50. 3 0 2011 2012 2013 2014 2015 E Leichman Research Group, US Census Bureau, Activate analysis

PAY TV SUBSCRIBERS ARE SHRINKING Cable TV Subscribers (US) 50. 7 Millions 50. 2 49. 7 49. 2 48. 7 48. 2 Q 1 14 Q 2 14 Q 3 14 Q 4 15 Q 1 15 Q 2 15 Source: Leichtman Research Group

VIEWERSHIP IS FALLING… Primetime Household TV Ratings Nielsen Household Rating (% Of Households With TV Sets Watching) 6. 2 Big 4 US TV Networks Average 6. 0 5. 8 5. 6 5. 4 5. 2 5. 0 4. 8 2007 -2008 -2009 -2010 -2011 -2012 -2013 -2014 Source: Nielsen

Meanwhile…

NETFLIX ~70 MILLION AND GROWING Netflix Subscribers Estimates in millions, Global 07 3 _Q 2 _x 20 00 13 07 _Q 3 _x 20 00 13 07 _Q 4 _x 20 00 13 07 _Q 1 _x 20 00 14 07 _Q 2 _x 20 00 14 07 _Q 3 _x 20 00 14 07 _Q 4 _x 20 00 14 07 _Q 1 _x 20 00 15 07 _Q 2 _x 20 00 15 07 _Q 3 20 15 20 1 2 _x 00 07 _Q 1 20 1 _x 00 _Q 4 07 _x 00 07 _Q 3 20 1 2 Millions 80 70 60 International 50 International 40 International International 30 International Domestic 20 Domestic Domestic Domestic 10 0 Source: Netflix

HULU ~10 MILLION AND GROWING Hulu Subscribers 10 9 8 7 6 5 4 3 2 1 0 2015 E Millions Estimates in millions, Global 2011 2012 2013 2014 Source: Hulu, BI Intelligence estimates

AMAZON PRIME ~45 MILLION AND GROWING Amazon Prime Members Estimates in millions, Global 50 40 Millions 30 20 10 2011 2012 2013 2014 0 2015 E Source: Deutsche Bank, Company reports

APPLE TV 35 MILLION+ AND GROWING Apple TV Installed Base 40 US 30 25 20 15 Millions Global 35 10 5 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Source: BI Intelligence estimates

FACEBOOK REACHES MORE 18 -24 THAN FREE TV 73% 58% 63% 68% Facebook 83% 89% 63% 42% Age 18 -24 Age 25 -34 Age 35 -54 Percent Reach Facebook vs. TV Daily Reach US Four TV Networks Age 55+ Source: Nielsen

NETFLIX IS WATCHED MORE HOURS PER MONTH THAN ALMOST EVERY OTHER NETWORK Total Hours Of Viewing, Per Month Per Network Liam Boluk, MEDIA REDEF

NETFLIX HOUSEHOLDS WATCH 60 HOURS OF NETFLIX PER MONTH, 2 X ANY NETWORK GROUP Source: Liam Boluk, MEDIA REDEF

YES, TV STILL DOMINATES VIEWING TIME US Consumer Time Spent On Video Per Month, 2015 E, Hours Ad-Supported 9% Paid Downloads 5% Total: 177 hours Subscription TV 14% Traditional TV 72% Source: Digitalsmiths, e. Marketer, Gf. K, Sandvine, Nielsen, TDG, Activate analysis

BUT DIGITAL VIEWING UP ~100% IN 3 YEARS Monthly Consumer Time Spent On Video, U. S. , 2012 -2015 E, Hours Paid Downloads 7. 5 3. 5 Ad Supported 15 Subscription 25 16. 5 8 2012 2015 E Source: Digitalsmiths, e. Marketer, Gf. K, Sandvine, Nielsen, TDG, Activate analysis

And the TV audience is increasingly a specific demographic…

MEDIAN VIEWER AGE MSNBC and CNN: 60 Broadcast Networks: 62 -64 FOX News: 68

WHY IS DIGITAL TV GROWING? Convenience.

WHY IS DIGITAL GROWING? We can watch what we want to watch when we want to watch it — on any screen.

So what’s going to happen?

First, ignore people who say “TV will die. ”

Old media don’t die. They just find their niche(s). See radio and print.

There are three key parts of “TV” — and two of them are thriving.

1. Digital TV networks will continue to thrive

ITUNES AND NETFLIX ALREADY DWARF AVERAGE CABLE NETWORKS (Millions) Cable Network vs. Digital Content Revenue 2007 -2014 $20, 000 $18, 000 $16, 000 $14, 000 $12, 000 $10, 000 $8, 000 $6, 000 $4, 000 $2, 000 $0 i. Tunes Netflix AMC 2007 2008 2009 2010 2011 2012 2013 2014 Source: News Reports, Company Filings

YOUTUBE REVENUE CLOSING IN ON BROADCAST NETWORKS You. Tube Ad Revenue Vs. CBS Ad Revenue And AMC Networks Revenue $ 12, 000 (Millions) $ 10, 000 CBS Ad Revenue CBS Ad $ 8, 000 $ 6, 000 You. Tube Ad Revenue $ 4, 000 $ 2, 000 AMC Networks Revenue $2007 2008 2009 2010 2011 2012 2013 2014 Source: News Reports, Company Filings, BI Intelligence estimates, Bof. A Merrill Lynch Global Research

2. Access providers will continue to thrive — unless (until? ) real price competition

CABLE’S FUTURE IS BROADBAND Cable Subscribers Millions By Service (US) Broadband 51 50 49 50 50 50 51 49 Q 3 13 Q 4 13 Q 1 14 Q 2 14 Q 3 14 49 52 Q 4 14 54 53 53 49 49 49 Q 1 15 Q 2 15 Q 3 15 Millions TV Note: Select major cable providers Source: Leichtman Research Group

WIRELESS’S FUTURE IS BROADBAND Wireless data service spending in the US (Billions, USD) 144. 2 108. 4 79. 6 6. 9 12. 3 2005 2006 25. 5 32. 3 2007 2008 45. 5 2009 125. 0 89. 8 55. 6 2010 2011 2012 2013 2014 2015 Source: TIA

3. Traditional TV networks will go through ~decades of pain

Why?

Money follows eyeballs.

WHEN EYEBALLS LEFT PRINT THIS HAPPENED Newspaper Ad Revenue (Print vs. Online) $ 60, 000 Print Online $ 50, 000 In Millions $ 40, 000 $ 30, 000 $ 20, 000 $ 10, 000 $2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015* Source: Newspaper Association Of America, *Estimate

THERE ARE TOO MANY NETWORKS Channels Receivable And Watched Per TV Household US Average TV Channels Received 151. 4 136. 4 129. 3 17. 3 2008 17. 7 2009 17. 8 2010 Average TV Channels Watched 189. 1 179. 1 168. 5 17. 5 2011 17. 8 2012 17. 5 2013 Source: Nielsen

THERE ARE TOO MANY (MEDIOCRE) SHOWS Average original TV series each year vs. survival rate Source: Liam Boluk, MEDIA REDEF

So get ready for years of consolidation and pain.

FORTUNATELY, TV IS AWASH IN MONEY Revenues, U. S. , 2015 E, USD Billions Pay TV Subscriptions $103. 1 Paid Downloads $2. 0 TV Advertising $67. 0 Ad Supported $7. 7 $185. 3 B Total Subscription $5. 5 Source: BIA/Kelsey, Digital TV Research, e. Marketer, Google, Hulu, Netflix, Pw. C, SNL Kagan, Statista, Digital Market Outlook, TDG, Activate

So they’ll suffer in style.

7. POWER AND WEALTH WILL BE MORE CONCENTRATED THAN EVER

DIGITAL MEDIA IS THE NEW “BIG MEDIA” 2014 Revenue Select Media Companies 10. 3% Yo. Y $ 66. 0 8. 4% Yo. Y (Billions) $ 48. 8 -8. 2% Yo. Y $ 27. 4 -9. 7% Yo. Y 3. 7% Yo. Y 58. 4% Yo. Y $ 13. 8 $ 13. 3 $ 12. 5 Google Disney Time Warner CBS Viacom Facebook 25. 8% Yo. Y -1. 3% Yo. Y -4. 6% Yo. Y 8. 7% Yo. Y 0. 8% Yo. Y $ 5. 5 $ 4. 6 $ 3. 2 $ 2. 5 $ 1. 6 Netflix Yahoo Gannett AOL New York Times Source: Company Filings, BI Intelligence estimates

And “big media” companies are now distinctly medium-sized.

THIS IS THE NEW “BIG” 2014 Revenue Select Media Companies 27. 9% Yo. Y $ 233. 7 2. 9% Yo. Y Billions $ 132. 4 Apple AT&T 5. 4% Yo. Y $ 127. 1 Verizon 6. 4% Yo. Y 10. 3% Yo. Y $ 68. 8 $ 66. 0 Comcast Google Source: Company Filings, BI Intelligence estimates

THANK YOU!