February 2012 2012 Cisco andor its affiliates All

Consumer Behavior Video = 91% of consumer IP traffic by 2014 Broadcasters and Media New distribution platform & interactive content – Sky Sport TV on i. Pad / RTL on i. Phone & i. Pad CE/Over The Top Brand power Service Provider Multi-screen offering becoming table stakes 20% Netflix = 20% of US downstream internet traffic in peak times Online Video Snacking 11. 4 Hour /month © 2012 Cisco and/or its affiliates. All rights reserved. New business models – Hulu 2009 revenue: $100 M 1 st half 2010 revenue: $100 M Building application & content eco-systems Hybrid Broadcast Broadband TV: Hbb. TV New Streaming subscription services Rising churn and Subscriber acquisition cost Partnerships & Vertical Integration 2

Consumer Experience Business Models Content Fragmentation Subscription Fragmentation Broadcast, Premium, UGC Broadband, TV, Mobile, Movie rentals, OTT Device & Screen Fragmentation Free vs. Paid TV, PC, Mobile, Gaming, PDA Interactivity Fragmentation Lean back, Lean forward, Social © 2012 Cisco and/or its affiliates. All rights reserved. © 2012 Cisco Systems, Inc. All rights reserved. Ad Dollars Fragmentation Transition from linear TV to online 3 3

Age 2+ 30. 2% Age 12 -17 39. 5% Age 18 -34 32. 7%

What Kind of TV Programs do you Stream or Download and Watch on a PC? Total 18 -34 Age 35 -54 Age 55+ Age Missed episodes of shows I watch on TV 88% 89% 88% 86% Episodes of TV shows I do NOT watch on TV 27% 36% 20% Episodes of TV shows I have ALREADY watched on TV 16% 21% 16% 11% Episodes of past shows that are not on TV now 39% 44% 40% 31% None of these 4% 2% 4% 7% Source : CBS Entertainment Panel Survey, July 2009 © 2012 Cisco and/or its affiliates. All rights reserved. 5 20

Device Shifting § 75% of respondents watch video on computers Reasons for Watching Computer Video When at Home § Each week, they watch about 1 hour, 45 minutes of video on computer § They watch at home 63% of time § 93% of 18 - to 24 -year-olds watch video on a computer, averaging 2 hours, 45 minutes per session § 40% of respondents watch video using portable devices § Each week, they watch about 54 minutes of video on portable devices § 39% of this time, they are at home Base: Watch Video on the Computer at Home Consumers Watch Video on Their Computers To Time-Shift and Multi-Task © 2012 Cisco and/or its affiliates. All rights reserved. Source: Cisco IBSG Connected Life Market Watch, 2012 6

But SP’s Struggle to Deliver Online Content on TV /STB Intuitive Unified Navigation for All Content Multi-screen TV experience Web 2. 0 Experiences on TV/STB © 2012 Cisco and/or its affiliates. All rights reserved. 7

• About half of the Netflix users watch it on a console (XBOX 360, Wii or Playstation 3) • 89% of the HULU users watch it directly from their PCs (compared to 42% of the Netflix users) • About 20% of the Netflix users watch it on Smart. TV • 37% of the i. Phone users watch video on their phone (6 x as likely as the typical subscriber) • Vital question: is your content and distribution network ready to be delivered to all these devices – consoles, PC, mobile devices, Smart. TVs? Source: Game. Politics. com, Market Watch, Nielsen. com © 2012 Cisco and/or its affiliates. All rights reserved. 8

John More Social Visual © 2012 Cisco and/or its affiliates. All rights reserved. 9

More Mobile Visual © 2012 Cisco and/or its affiliates. All rights reserved. 10

Cloud Network Client 1 On the content quality and quantity – more and better 2 On the delivery network: delivery on managed and unmanaged networks 3 On the consumer device: delivery to any device Σ The weakest (technology) point will ruin the experience © 2012 Cisco and/or its affiliates. All rights reserved. 11

Network Reduce Costs Manage “over the top” video traffic Cap. Ex: Make better use of resources Op. Ex: Manage video bandwidth during peak usage Coming Profitability Gap Data Traffic (Cost) Cloud Increase Revenue Multiple options for monetizing services enabled by Videoscape Enable partnerships Ad revenue ARPU per Bit (Revenue) Partnered content Client Improve Experience Three-screen experience and session shifting Quality of video experience © 2012 Cisco and/or its affiliates. All rights reserved. 12

Model 1 – Subscription / Transaction § § § Monthly fee or per transaction purchases (Download to own, Rental) Could also be a combination of both. More appropriate for data SP’s who want to expand service offering into video space. (Good first step) Model 2 – Bundle Uplift / Reduce Churn § § § TV Everywhere offered to higher end service tiers at no additional fee Revenue is indirect through encouraging greater stickiness in higher service tiers. Further revenue lifts via pull through business. “You’d like video – you might want to move up to the higher data service tier” Model 3 – Advertising Based § § This is typically an OTT solution, which don’t have to be affiliated with Consumer SP’s Revenue is via advertising, typically as “price per mili”, “price per click”, and inserted ads in programming © 2012 Cisco and/or its affiliates. All rights reserved. 13

Limited Revenue Growth and Increasing Costs B 2 C Broadcasters Business to Consumer Network Termination $ $ Peering Points Service Providers Rising Costs: Increased SAC and Churn Increased bandwidth usage Bigger bundle of products Flattening Revenues: • Saturated markets – few new subscribers • Increased use of flat-rate tariffs • Regulatory & Competitive price pressure $ Time Today © 2012 Cisco and/or its affiliates. All rights reserved. 14

Differentiated User Experience, Service Velocity and Monetization Broadcasters Government Advertisers OTT/Content Aggregator Application Developer B 2 B 2 C Business to Consumer $ $ $$$ Service Providers $ $ $$ Utilities SP Platform Leverage Network and Data Assets © 2012 Cisco and/or its affiliates. All rights reserved. Tomorrow 15

• Streaming was limited to the customers of Verizon only, for PC and mobile platforms, based on Silverlight • Time lag was between 15 sec and 45 sec. • 2. 1 m users watched the game online (from total 111. 3 m), average 39 min/view. • Vital question: is your distribution network ready to take a load of 2% of your viewers, going on-line? Would you compromise the quality of your top content because of lack of preparation? Source: Streamingmedia. com, nfl. com © 2012 Cisco and/or its affiliates. All rights reserved. 16