PowerPoint Presentation

What Generation Y thinks about pay TV

Analysis of research by The Intelligence Group

Zach BrownEPIX Research and Analysis Summer Intern PresentationAugust 9, 2011

Summary of research among Gen Y pay-TV subs 70 million Gen Yers were born 1981-19963 groups of pay-TV subscribers with differences in attitudes and behavior At Risk segment is the most vulnerable to cutting the cordCost-sensitive and tech-savvy consumers Low premium service penetration Alternatives for pay TV are becoming more prevalent More pay-TV subscribers are obtaining video content online Netflix and Hulu are used heavily by Gen Y pay-TV subscribersNearly 50% of At Risks use Netflix and Hulu Customization and tailored packaging are the future for Gen Y

Generation Y counts 70 million members

Research mixed online survey with panel responses

Have you ever thought about discontinuing your cable or satellite services and viewing your entertainment content through other platforms or services?

If the price were the same would you choose?

LoyalistsLeanersAt RisksYes to considered discontinuing and prefer a la carte contentNo to considered discontinuing and prefer cable/satellite/telco subscriptionYes to considered discontinuing or prefer a la carte content, but not both16414789100%55%45%55%45%100%Subs were segmented based on cord-cutting attitudes

Loyalists are not a threat to disconnect pay-TV serviceGroup is more settled and tends toward communal living

Members are safe for now because they value the benefits of pay TVSlight male skew

Demoout of school- suggests more settled and earningCommunal living (value shared watching and paying)

A&BDVR and Sports considered stickiness factorsWatch TV more than internet and have less wifi6

Leaners are less decided about pay-TV cord-cutting

Group leans toward cord-cutting because of online and Netflix usage

Members are not especially price-sensitive

DEMOlive alone more likely to live alone than loyalists and are more often the primary decision makers regarding media consumption habitsHigher income less price sensitive

A&B

Cellphone- also lowest in landline ownership7

At Risks are least loyal to pay-TV serviceSegment is most likely to drop pay-TV subscription in the future

Members place less value on communal viewing

DemoSingle and live alone- less value on communal viewingInfluential at home- exert more influence on sub based pay-tv decision making8

Age is not a significant factor in Gen Y pay-TV loyaltyWhat is your age?

Gen Y Pay-TV subscribersTotalLoyalistsLeanersAt RisksCurrently in 2-year college 9% 6% 6%15%Currently in 4-year college29%29%29%31%Currently in graduate school10%7% 7%12%Not currently in school/not a high school graduate 2%2% 1% 1%Not currently in school/high school graduate 17%18%21%11%Not currently in school/college graduate32%37%33%29%

At Risks are more likely to be (cost-conscious) studentsWhat is your level of education?

58% at risks in school10

Potential cord-cutters are more likely to live aloneGen Y Pay-TV subscribersTotalLoyalistsLeanersAt RisksIn an apartment/house alone26%20%28%35%In an apartment/house with other non-family29%37%29%22%In apartment/house with spouse45%43%43%43%

Do you live?

When deciding whether or not to purchase a cable/satellite subscription, what factors influence that decision?Gen Y Pay-TV SubscribersTotalAt RisksCost 81%82%Interest in watchingthe content available 52%58%Free time availableto watch content 47%62%Living situation (dorm, apartment, roommates, other)39%48%Availability/ownership of devices24%40%

At Risks consider several factors to assess pay-TVs worth

Convenience is the major driver to purchase pay TVGen Y Pay-TV SubscribersTotalAt RisksEasy to use59%54%I get one bill/statement49%40%I know how much my bill/total spendingon entertainment is every month46%39%All of my content is in one place36%30%My cable services are bundled so it iscost-effective41%44%Ability to record content through a DVR37%39%

What motivates you to purchase traditional pay-TV service (i.e., cable or satellite TV)

At Risks are less likely to be premium service subscribers Gen Y Pay-TV SubscribersTotalAt Risks Cable TV service 73%76% Satellite TV service 26%24% Telephone company TV service 7% 7% Premium channels 30%26% DVR/PVR 41%40%

What type of television service do you have in your home?What type of cable or satellite subscription service do you pay for ?

epixBig On Any Screen

At Risks are moving toward attention to TV on the PCLevel of attention paid while watching TV on TVLevel of attention paid while watching TV on the computer

Watching movies online is more popular among At RisksGen Y Pay-TV SubscribersTotalAt RisksOnline29%39%DVR23%26%DVD34%46%Cable/Satellite41%44%Device that transports to cable 7%12%TV Everywhere15%21%

For the following type of program, please tell us how you currently watch it Movies?

At Risks spend more time watching TV on their computers

Free access to movies online is a major roadblock for pay TV

Gen Y spends a significant portion of time onlineGen Y Pay-TV SubscribersTotalAt RisksGoing online to surf the Web4.04.2Watching TV programs and/or video contenton TV3.83.9Watching TV programs and/or video contenton computer1.61.7Watching TV programs and/or video contenton a mobile phone0.70.7

How many hours per day do you spend on the following activities?

At Risks are more familiar and fluent with new devicesWhich of the following devices and services do you currently have/own? Gen Y Pay-TV SubscribersTotalAt RisksiTunes66%73%WiFi at home58%69%Netflix44%56%Wii50%53%Netflix Watch Instantly32%40%Mac computer23%33%iPad14%21%Apple TV5%11%

22

Netflix + Hulu + TV network online content = cord-cutting?ContentMovies on demand

Archived TV shows on demand

Network TV sports

Network news

Current TV showsWhat are the ways that you watch entertainment content? (qualitative research)

Source

Netflix and Hulu usage are strong among At RisksWhich of the following services or platforms do you use to view entertainment content?

Netflix and Hulu provide streaming valuable content for subsWhich of the following services or platforms do you use to view entertainment content?

The higher degree of Netflix usage among game console users suggests value in delivering movies to the TV via consolesA greater proportion of Playstation users indicate that they watch video content on the console than other game consolesGame console streaming is a major opportunity and threat

At Risks seem less interested in subscription-based pay TVGen Y Pay-TV SubscribersTotalAt RisksPay for entertainment content as you go (i.e., iTunes, Hulu, Netflix, mobile) 38%65%Pay for entertainment content in one lump sum (i.e., cable, satellite) 62%35%

If you had $100 to spend per month on entertainment content, would you prefer to...?

What does this research mean for EPIX?

Important findings from the studyGen Y consists of large sub segments with different pay-TV attitudes and behaviors

More platforms for viewing are emerging not only as incremental offerings but also as true pay-TV alternatives

Netflix and Hulu (at their current price points) are major alternative sources of media consumption

The needs of young people are not being met by the value proposition of pay TV

Customization is the future for Gen YHave implications forUnderstanding this dynamic market in detail and on an ongoing basisDeveloping tailored marketing communications to each segmentDeciding on which platforms to offer content to maximize exposure without hurting the core business

Key findings have product and marketing implications

30

At Risks With Below Average Income Are More Likely To Cut The Cord Pay-TV subscribersTotalLoyalistsLeanersAt-RisksAverage household income$49.8k$55.7k$54.1k$46.7kUnder $25,00027%24%24%25%$25,000-34,99917%17%12%17%$35,000-49,99916%15%18%16%$50,000-74,99918%18%19%20%$75,000-99,99911%13%12%13%$100,000-149,9995%9%7%3%$150,000+3%4%3%-

What is your household income?

How likely are you to get the following?The perceived benefits Of Netflix Make It a serious threat to pay-TV providers