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This quarter we can see that the effect of external conditions has influenced some outcomes of the media and communications sector. The popularity of international events was reflected through substantial ratings increases and the appeal of premium content, sport, original documentary and original drama production continues as an industry focus. The popularity of over the top services also continues to be reflected both through subscriber growth and product development. At the same time positive growth has been seen by a number of media and entertainment companies. The number of existing subscription TV customers upgrading services also grew this quarter. While penetration is still relatively small, the range of connected TV services and products also continued to expand. Issues associated with future spectrum re-allocation, the online environment and sports rights remain the focus of regulatory reviews and parliamentary process. While advertising sector forecasts were impacted by global events, technological advances continue to increase options for advertisers and consumers. Digital switch-over rates continue to increase and the development of social media strategies remains at the forefront of deepening viewer engagement with content.

UNITED KINGDOM

BSkyB adds 51,000 new customers and takes subscriber base to 10.1 million households BSkyB has reported that it now has over 10.1 million customers with a rise of 51,000 in the quarter ending 31 March 2011. Over the same period BSkyB launched Sky Atlantic and Sky Living, secured exclusive rights to the Football League and Carling Cup and launched the Sky Anytime+ video on demand product. Revenue growth was up 14% to £4.8 billion.i Virgin Media experiences 47% subscriber slowdown but revenues climb 5.7% for Q1 2011 Virgin Media revenue for the first quarter to 31 March 2011 was up 5.7% to £982.3m when compared to the same period last year. While there was a subscriber slowdown over that period Virgin Media reported a 22% rise in the take-up of premium services and HD penetration increased to 41% of customers.ii

AUSTRALIA

AUSTAR results reflect the effect of natural disasters in regional areas for Q1 2011 Flooding and cyclones in regional Australia impacted AUSTAR customers in New South Wales, Victoria and Queensland in 2011. AUSTAR put in place arrangements to assist customers in affected areas. Total subscriber numbers decreased by 8,578 to 755,641 in Q1 compared to Q4 2010. My Star penetration increased by 6% to 205,815 over the same period and revenue remained stable at $174 million. There was significant sales improvement from February 2011 onward.iii UNITED STATES

DIRECTV sees increased subscriber numbers and revenue for Q1 2011 DIRECTV experienced an unprecedented increase in subscriber numbers adding a further 611,000 subscribers between January to March this year. DIRECTV's first quarter revenues of $6.32 billion increased 13% from the same period last year mainly due to strong subscriber and ARPU growth at DIRECTV U.S. and DIRECTV Latin America.iv

MEDIA TRENDS – Q2 2011

S TV D I S T R I BU T ION

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UNITED KINGDOM

Supermarket giant Tesco takes an 80% majority stake in movie streaming service Blinkbox In April 2011 Tesco took a majority stake in Blinkbox, one of the most popular movie streaming sites in the UK with over two million customers. The Blinkbox service is currently available on PC, Mac and PS3 but the company has announced that it will be available on Samsung connected TV’s and other devices throughout 2011. Tesco’s stated aim is to combine the purchase of DVDs with digital copies. Tesco’s UK CEO Richard Brasher said, “we can link physical purchase of a product to the building of digital collections in a new and seamless way’’.v

AUSTRALIA

Hulu files for Australian trademark Amidst the talk that Hulu is coming to Australia, it has been reported that the TV and movie streaming service filed for an Australian Trademark at the end of March 2011.vi UNITED STATES

Google plans to overhaul YouTube to take advantage of connected TV sets YouTube is planning a number of changes to its home page including the introduction individually themed ‘channels’. Twenty of these channels will feature some professionally produced and original programming. The Wall Street Journal reports that YouTube will spend up to $100 million to commission content designed for the web.vii Netflix the key to online video growth The Leichtman Research group has reported 30% of all households have at least one television set connected to the Internet via a

video game system, a Blu-ray player, and/or the TV set itself. The research notes that Internet connected devices in US homes had increased by 24% over the past year with growth heavily driven by Netflix subscribers. The report also highlights that 30% of Netflix subscribers watch video from the Internet via one of these connected devices weekly. In comparison weekly use among all non-Netflix subscribers was 3%.viii Netflix continues to attract new subscribers with growth over the past few years increasing substantially to 23.6 m subscribers.

0

2,000,000

4,000,000

6,000,000

8,000,000

10,000,000

2007 2008 2009 2010

Netflix new subscriber growth per year

A report by research group DisplaySearch has revealed that nearly 20% of all TV’s shipped worldwide in 2010 featured connected TV capabilities. This growth is expected to continue to over 123 million shipments in 2014. DisplaySearch forecasts that the connected TV market will grow increasingly complex and fragmented with enhanced broadcast services, basic video on demand, configurable apps, sophisticated search and navigation and advanced user interfaces all competing for customer attention.ix An examination of some of the current products in the connected TV space includes: Sony BRAVIA Internet Video - Available across the BRAVIA LCD TV range. Allows

I NNOVAT ION

A FOCUS ON CONNECTED TV ’ s

Ove r T he Top (OT T ) Se t T op Box ( S T B ) DEV ICE T R ENDS

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consumers to stream approximately 20 specific Internet channels to the TV including Yahoo!7, SBS, Billabong, YouTube, Wired, Golflink, eHow, Video Detective, Podcasts, Lifestrong, Ford Models, Epicurious, Blip and Style.com. Internet Widgets are available on specific models.x Samsung Smart Hub HDTV – The Samung Smart Hub comes with a built-in web browser. It also features Samsung Apps from the HDTV app store that offers social networking, sport, paid and free games and information apps. The TV’s have picture in picture functionality and come with a dual sided QWERTY-type smart remote.xi Telstra BigPond offers a number of IPTV services through Samsung including BigPond TV, BigPond Movies. Panasonic Viera Connect – The Viera Connect updates Panasonic’s Viera Cast internet TV. In the US Viera Connect offers Hulu Plus, Netflix, YouTube, CinemaNow, and Amazon VOD and archives of several sports sites. Web apps like Facebook, Napster, Skype, Ustream, and Gameloft are also included. The TV also features Viera Connect Market that allows third-party app downloads to personalise the TV viewing experience.xii While some services on connected TV’s, such as Telstra BigPond, are usually unmetered for BigPond customers the quality and download hours of connected TV services are ultimately influenced by the individual broadband plan of the consumer.

UNITED KINGDOM

Game of Thrones debut sets Sky Atlantic ratings record BSkyB has been having ratings success with the new channel Sky Atlantic which launched in February this year. HBO programs contribute

40% to Sky Atlantic’s schedule. In April, the medieval fantasy Game of Thrones premiered as the channel’s most popular program to date with an average 743,000 viewers beating audience numbers for Boardwalk Empire. xiii Note: Game of Thrones will make its Australian debut on Showcase in July. AUSTRALIA

FOXTEL and AUSTAR make AFL broadcast history For the first time in Australian broadcast history FOXTEL and AUSTAR customers will be able to watch every AFL Home and Away game, the AFL Finals, pre-season competition and the FOXTEL Cup game live and uninterrupted in HD. Games will also be delivered via mobile and broadband and through a dedicated AFL channel. The Brownlow presentation, historical and memorable matches from the vault will also be available.xiv Australia’s first multiplatform family action thriller to start production in June Commissioned by Movie Network Channels and produced by Melbourne based production company Circa Entertainment, Conspiracy 365 is a unique Australian television and multi-platform production targeted for the family audience. The series is based on the bestselling novels by Australian author Gabrielle Lord. The 12-part family action thriller will debut on Family Movie Channel in 2012. Tim Winton’s cloudstreet to premiere on Showcase in May The Australian production of Tim Winton’s iconic novel Cloudstreet will premiere exclusively on FOXTEL and AUSTAR on 22 May 2011. The three part series which tells the story of two fictional Australian families in and around Perth in the 1940s and 50s will premiere on Showcase, a Showtime Movie Channel.xv

NEW DEVELOPMENTS IN

PROGRAMMING

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FOXTEL secures the exclusive rights to new Steven Spielberg series Falling Skies The 10-part series will air exclusively on FOX8 shortly after its American debut in June. It opens in the aftermath of a hostile alien takeover of earth. As well as Spielberg as EP the series involves Justin Flavel and Darryl Frank, Graham Yost (Justified, The Pacific), screenwriter Robert Rodat, who earned an Oscar nomination for his screenplay for Saving Private Ryan as well as Mark Verheiden (Heroes, Battlestar Galactica) and Greg Beeman as co-executive producers. xvi International events, sport and documentary content drive ratings records The Royal Wedding was watched by more than 2.2 million people across UKTV, BBC World News, CNN and E! Entertainment. The news of Bin Laden’s death attracted 90,000 viewers to SKY NEWS at 3.30pm on 2 May 2011. Live sports viewing broke ratings records in Week 14 with the Live: Eels v Cowboys NRL game proving to be the highest rated broadcast on STV in 2011 to-date, and the original Australian production, Kalgoorlie Cops, which premiered in Week 16 was the highest rating documentary on STV to-date.xvii

UNITED STATES

AMC and Lionsgate officially make a deal with Mad Men creator Matthew Weiner Weiner inked a new long-term agreement with producer Lionsgate which includes a fifth and sixth season with potential for a seventh season of Mad Men, the 1960s original drama set in New York's advertising world. Note: Mad Men airs on Movie Extra in Australia. Mythbusters and other Discovery Channel programs get an ‘I’m Watching’ button The Discovery Channel has launched an iPad app with an ‘I’m Watching’ button so that consumers can alert Facebook and Twitter followers as to what they are watching. The free app includes clips from Gold Rush,

Deadliest Catch, Flying Wild Alaska and Mythbusters. xviii Warner Bros streams The Dark Knight via Facebook for 30-Facebook credits Consumers are able to rent a copy of The Dark Knight by clicking on a ‘rent’ icon on the films official Facebook page. For 30 Facebook credits ($3) viewers have 48 hours to watch the movie. While watching the film viewers are able to post comments or interact with friends with full Facebook functionality. Warner Bros is planning to roll out other films such as Harry Potter and the Sorcerer’s Stone, Inception and Life as we Know It over the coming months.xix Netflix outbids HBO for original content with House of Cards Internet video streaming company Netflix has committed to original content through its purchase of the 26 episode season of House of Cards starring Kevin Spacey. xx The Wall Street Journal has reported that Netflix outbid other cable companies to secure the programming. DIRECTV offers VoD early release movies 60 days after theatrical debut DIRECTV is partnering with Warner Bros. Home Entertainment, Universal Pictures, Sony Pictures Home Entertainment and 20th Century Fox to offer theatrical releases to DIRECTV HD DRV customers 60 days after theatrical debut. Titles will cost $29.00 and will be available for two weeks following the day they launch. They will then be taken off for a period and will return to the regular PPV/VoD window release and price after that time.xxi

UNITED KINGDOM

Digital Economy Act free to proceed after failed high court challenge Telecoms providers BT and TalkTalk have failed in their high court challenge to stop some elements of the Digital Economy Act 2010.

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Under the Digital Economy Act 2010 ISPs will be obliged to send notification letters to customers accused of illegal downloading by rights holders. Repeat offenders could then have their internet access slowed or blocked under the plan.xxii Product Placement ‘P’ logo to be shown on UK screens

Laws were changed to allow product placement in UK television programs for the first time in February this year. Ofcom has launched a logo that must be showed when a UK produced program contains product placement. The logo must appear for 3 seconds at the start and end of the program and after advertising breaks.xxiii

Ofcom consults prior to ‘largest ever’ 4G wireless spectrum auction for mobile services Ofcom has announced plans to conduct the largest ever single auction of additional spectrum for mobile services. Ofcom has said that the amount of 4G spectrum will be more than 80% of the 3G auction that took place in 2000. Ofcom is proposing to put in place safeguard caps to protect against long term competition issues. The time of the auction will be in the first quarter of 2012.xxiv AUSTRALIA

Convergence Review Framing paper released for comment The recently finalised Convergence Review Committee has released the first of a number of calls for comment in the form of a framing paper. The paper outlines the indicative timetable for the review and calls for comment on the fundament principles that will guide and shape the review and subsequent recommendations to Government.xxv ACMA releases discussion papers about future wireless spectrum strategy The Australian Communications and Media Authority (ACMA) has released two papers, Towards 2020 – Future spectrum requirements

for mobile broadband and 900 MHz Band – Exploring new opportunities with a view to developing a future spectrum strategy for mobile broadband that makes the best use of current and future technologies.xxvi Anti-Siphoning Bill and Broadcasting Services Amendment (Media Access) Bill to be introduced during Winter Sittings The Australian Government has indicated that both bills will be introduced into the House of Representatives in the Winter sittings 2011. The Government released an exposure draft of the proposed anti-siphoning changes in May. The Media Access Bill relates to captioning levels and standards under broadcasting legislation. UNITED STATES

House votes against ‘net neutrality’ but FCC still has Senate support The House has voted to ban the Federal Communications Commission (FCC) from implementing its plans to ensure net neutrality that were put in place December last year. Republicans said that the plans were a power grab by the FCC. The vote was supported by the US Court of Appeals in the District of Columbia that ruled in favour of the House.xxvii The Washington Times reports that the FCC’s net neutrality plans still have the support of the Democrat controlled Senate and the President.xxviii

Global ad expenditure predicted to grow by 4.2% ZenithOptimedia has forecast that the global ad expenditure market will grow by 4.2% in 2011. The forecast was revised down from 4.6% in December because of political turmoil in Egypt and the natural disaster in Japan. The forecast predicts that the US market will make gains this

ADVER T I S ING DEVE LOPMENTS

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year and next with North American ad spending predicted to increase 2.6% at $164.8 billion in 2011.xxix NDS to deliver addressable advertising insertion technology and enhanced audience measurement for DirecTV NDS is working with DirecTV on the seamless insertion of household addressable ads into both live and recorded video content from DirecTV’s SD DVR hard drives. NDS says that the technology will provide data that will support ‘the revenue-generating potential of addressable advertising on the DIRECTV platform with the ability to generate solid feedback on the ads that have been viewed’.xxx FOX SPORTS signs Toyota as the exclusive sponsor for its iPad app as part of a cross platform sponsorship deal

The Toyota sponsorship deal which started in late April will run for six months. as part of Toyota’s integrated sponsorship of FOX SPORTS shows both on TV and online. Adam Weimers from Toyota said "this six month, exclusive, multi-layered, on-air, online and iPad partnership, will continue to allow the Toyota Aurion to reach it’s predominantly male target market wherever, whenever and on whatever device they desire."xxxi

� Digital UK has confirmed that London’s

analogue switch off will occur before the 2012 Olympic games.

� An average of 4.142 million people tuned into CNN to watch the coverage of the death of Osama bin Laden. At one stage during the night viewer numbers hit 9 million people.

� Ofcom has confirmed that digital television take-up has now reached 92.5% of UK households.

� The latest Federal Government Digital Tracker survey for Q1 2011 reports that that about 4 in 5 Australian households can now watch digital television (79%), two percentage points more than the previous quarter.

� The analogue signal was switched off in regional Victoria on 5 May 2011 as the digital television rollout continues across Australia.

� The Deloitte State of the Media Democracy survey has showed that watching TV is still the favourite media activity for 71% of Americans.

� Nielsen has reported that in the fourth quarter of 2010 almost 30 hours a month was time-shifted viewing by 25-64 year olds in the US.

� In-Sat has reported that the global tablet market will grow to 50 million units in 2014.

� MagnaGlobal is predicting that the worldwide outdoor advertising market will expand by 8.3% in 2011.

� Screen Australia has released the guidelines for its All Media Fund that will encourage interactive or multi-platform innovative, risk-taking storytelling.

� The Nielson Company has reported that the average American watched 34 hours 39 minutes of TV per week in Q4 2010. An increase of two minutes on the previous year.

The Media Trends Report created by Infodec www.infodec.com.au for ASTRA www.astra.org.au

T R ENDS & S TA T S BR I E F

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ENDNOTES

iSky Corporate, http://corporate.sky.com/investors/latest_results/Q3_1011.htm ii Virgin Media, http://investors.virginmedia.com/phoenix.zhtml?c=135485&p=irol-reportsOtherVirginMedia

iii Austar, http://www.austarunited.com.au/home

iv DIRECTV, http://files.shareholder.com/downloads/DTV/1248435148x0x465220/0e237210-8afc-4dd2-a6a6-

0ce99d468625/DTV_News_2011_5_5_General_Releases.pdf v Wired, http://www.wired.co.uk/news/archive/2011-04/21/tesco-buys-blinkbox

viAdvanced Television, Hulu joining Aussie TV market?, http://www.advanced-

television.com/index.php/2011/04/21/hulu-joining-aussie-tv-market/ vii

Wall Street Journal,

http://online.wsj.com/article/SB10001424052748704013604576247060940913104.html viii

Leichtmarketresearch, http://www.leichtmanresearch.com/press/032811release.html ixhttp://www.displaysearch.com/cps/rde/xchg/displaysearch/hs.xsl/110425_connected_tvs_forecast_to_exce

ed_123m_units_in_2014.asp x Sony, http://www.sony.com.au/microsite/iptv/index.html

xi Samsung, http://www.coolgear.com.au/audio-visual/samsung-smarthub-hdtv/

xii PC World,

http://www.pcworld.com/article/215743/panasonic_expands_connected_tv_3d_tv_offerings.html xiii

The Guardian, http://www.guardian.co.uk/media/2011/apr/19/game-of-thrones-sky-atlantic-ratings xiv

FOXTEL, http://www.foxtel.com.au/about-foxtel/communications/foxtel-to-deliver-most-comprehensive-

live-afl-coverage-ever-124765.htm xv

Showtime, http://showtime.com.au/showcase/show/13180/season1/104069 xvi

If.com.au, http://if.com.au/2011/05/04/article/FOXTEL-secures-new-Spielberg-series-Falling-

Skies/DRLRLINZQK.html xvii

ASTRA, www.astra.org.au xviii

Discovery, http://blogs.discovery.com/discovery-insider/2011/03/discovery-channel-app-for-ipad-

launch.html xix

The Hollywood Reporter, http://www.hollywoodreporter.com/news/warner-bros-rent-movies-digitally-

165218 xx

Netflix, http://blog.netflix.com/2011/03/house-of-cards.html xxi

The Hollywood Reporter, http://www.hollywoodreporter.com/news/directv-premium-vod-service-launch-

179835 xxii

The Guardian, http://www.guardian.co.uk/technology/2011/apr/20/filesharing-bt-talktalk-digital-economy-

act’ xxiii

Ofcom, http://consumers.ofcom.org.uk/2011/02/product-placement-on-tv/ xxiv

Ofcom, http://media.ofcom.org.uk/2011/03/22/ofcom-prepares-for-4g-mobile-auction/ xxv

Convergence Review Committee, http://www.dbcde.gov.au/news-and-

events/department_media_releases/convergence_review_committee_calls_for_submissions xxvi

ACMA, http://www.acma.gov.au/WEB/STANDARD/pc=PC_312518 xxvii

Salon.com,

http://www.lon.com/technology/network_neutrality/?story=/politics/war_room/2011/04/08/us_internet_rul

es xxviii

Washington Times, http://www.washingtontimes.com/news/2011/may/5/fcc-chief-stands-net-neutrality-

push/?page=2 xxix

The Hollywood Reporter, http://www.hollywoodreporter.com/news/zenithoptimedia-cuts-global-ad-

growth-176713 xxx

NDS, http://www.nds.com/press_releases2011/DIRECTV_NDSDynamic_220311.html xxxi

MCN, http://www.mcn.com.au/News/Detail.aspx?IdDataSource=657