Sky Network Television Ltd · NZX:SKT
Sky Network Television — Investor Day (May 2013)
62 slides from Sky Network Television's investor day presentation, May 15, 2013
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Slide 2: Disclaimer
Disclaimer This presentation contains statements that review current business operations. These statements are not forward looking. Media releases and management commentary, including those relating to the 2013 half year results announcement, are all available on SKY’s website. Please read this pres
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Slide 6: Marketing responsibilities
Subscriber Acquisition/Churn reduction ARPU generation/Product marketing SKY brand(s) custodian Consumer Insights Websites Prime TV marketing Product development (Matt Orange) SKY magazines IGLOO board
Slide 7: Discussion items
| Sky | Discussion items TV Viewing overview Recent Subscriber growth ARPU Growth opportunities
Slide 8: TV viewing overview, subscriber growth, ARPU, growth drivers
TV Viewing overview Recent Subscriber growth ARPU Growth drivers
Slide 9: TV viewing in NZ at an all time high
For personal use only Reports of my death are greatly exaggerated- Mark Twain. TV viewing in NZ is at an all time high. Consumers have more channels than ever before and better content than ever before. In many ways it’s a second golden age of TV with the best writers and producers making shows like
Slide 10: Companion devices opportunity
For personal use only However we understand that companion devices present a great opportunity for us to add value to our subscribers and potentially offer us ARPU and advertising opportunities. We believe the best way forward is a marriage of linear and on demand content giving subscribers a seamle
Slide 11: Why does TV still rule?
For personal use only Why does TV still rule? At a fundamental level it entertains better than anything else. Whether you want to be inspired, excited, educated of just veg out after a long day SKY is the only place that gives you those options. Free to air only offers a limited choice. Subscribers
Slide 12: Agenda: Recent subscriber growth
TV Viewing overview Recent Subscriber growth ARPU Growth drivers 12
Slide 13: Subscriber growth in difficult conditions
For personal use only We are pleased that we have been able to grow subscribers in what has been very difficult conditions for Pay TV operators right around the globe. FY12 however was a unique year for SKY. The Rugby World Cup 2011 in NZ gave us an unusually high number of new subscribers in the fi
Slide 14: Net gain in recent months relatively strong
| Sky | Net gain in recent months has been relatively strong 8,000 5 Net gain by month 6,000 ~ 4,000 2,000 O 4 Mar Apr May Jun -2,000 - 4,000 ~ May figures for FY13 are May 12*” Month to date 14 14
Slide 15: Interest in Pay TV remains strong
For personal use only Interest in Pay TV remains strong. We have been looking at interest in the category for 20 years and it’s a familiar pattern. As we add more subscribers, better content and better tools for adding value to our subscribers more NON subscribers , who previously rejected SKY move
Slide 16: Agenda: ARPU
TV Viewing overview Recent Subscriber growth ARPU Growth drivers 16 16
Slide 17: ARPU continues to grow
For personal use only ARPU continues to grow through … Our ability to increase the price of the basic service and to increase value through new programming and channel additions - MY SKY penetration increases - HD ticket - Multiroom -Growth in premium channels such as SoHo. 17
Slide 18: MY SKY net gain
For personal use only The dotted line shows where we think our MY SKY net gain will land this year. We have been very aggressive in migrating customers to this box over the last few years. We still think we can grow MY SKY but we do not wish to deeply discount in order to continue the growth at curr
Slide 19: Agenda: Growth drivers
TV Viewing overview Recent Subscriber growth ARPU Growth drivers 19
Slide 20: Continue our successful formula
For personal use only Continue our successful formula 20
Slide 21: Matt Orange introduction
For personal use only Good afternoon, my name is Matt Orange. I’ve been at SKY for 7 years, leading our business strategy and planning function. Over the last two years, I’ve also been involved in establishing a product innovation team that, to date, has developed products such as iSKY, IGLOO and th
Slide 22: Product innovation
For personal use only At SKY we see product innovation as a key way to enhance the overall customer experience. We know that one of the best ways to attract and retain customers is to ensure they always have something good to watch. So a big focus we have is on making it easier for customers to disc
Slide 23: MY SKY software upgrade
For personal use only The first of these relates to our flagship product – MY SKY As you all know, MY SKY has been an excellent product for SKY, with its ability to deliver lower churn and higher ARPU. At the end of December there were 424k MY SKY subscribers, representing 54% of our customer base.
Slide 24: New MY SKY user interface
For personal use only The change that customers will first observe will be a more modern looking user interface. Today, the MYSKY user interface you may be familiar with looks as follows. Once a customer has received the new software it will look more like this. The new user interface will be delive
Slide 25: New on demand offering
The new on demand offering will take advantage of broadband-based delivery, enabling SKY to significantly expand the amount of on demand content that can be made available to our customers. For personal use only 24
Slide 26: MY SKY Future On Demand
| SKY MY SKY - Future 4 On Demand Movies All The Bourne Legacy (m) An original story that introduces us to a new hero whose life-or-death stakes have been triggered by the events of the first three films. (M) SKY Movies Greats © MENU @ FULL GRID @ List (@ SEARCH @ BOX OFFICE The Lord of the Scott Pi
Slide 27: Types of on demand programming
For personal use only The types of on demand programming that SKY will look to offer falls into four main categories. The first relates to catchup VOD, which is programming that has already been broadcast on SKY and which is then made available on demand. Access to catchup VOD is free, depending on
Slide 28: Subscription and transactional VOD
The third category of on demand content is subscription VOD. This is additional content that a customer may choose to subscribe to for an additional monthly fee. For example, SKY may decide to license a genre based catalogue e.g.. Westerns For personal use only that it delivers via the on demand ser
Slide 29: Why upgrade MY SKY now
For personal use only There are several reasons why a major upgrade to MYSKY makes sense now. Firstly, the software we plan to utilise has been successfully deployed at several other major broadcasters and we believe it is now sufficiently stable and mature to deploy to our customers. Secondly, now
Slide 30: MY SKY replacement technologies
Such a replacement may look to take advantage of technologies such as ultra HD and cloud-based PVR. However, we believe that such technologies are still some way away from full commercial maturity. For personal use only 27
Slide 31: iSKY on tablets and smartphones
For personal use only The second major development that we have in the pipeline over the coming 12 months is the ability for our customers to consume their SKY content on a range of tablets and smartphones. This is about taking SKY beyond the living room (where we hope you’ll have MYSKY) and into th
Slide 32: iSKY launch and capital cost
We see the extension to smartphones and tablets as a logical progression and highly aligned to our objective of delivering the best content anywhere, anytime. We see the availability of a broad content lineup that includes live sport, movies For personal use only and TV series as key to enabling a b
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Slide 34: Content delivery and sport production
| SKY | 106 Full time Staff 2, 450 Freelance OB Staff Cz) Content delivery 2. : Sport production Outside broadcast 30
Slide 35: Sport content strategies
| Sky | Our sport content appeals for its local relevance or as marque events Strategies include THE RUGEY cur CHAMPIONSHIP 2013 7 1ano- N ROVER 4 i AY SE ASB CLASSIC [\ @Investec ASHES SUPERUGEY © ty Masters Maximise amount of Live sport Differentiate with HD Increase amount of local sport Use tech
Slide 36: Sport rights and new entrants
For personal use only We don’t think so. Aware of value of each piece of content via CPVH metric. Prepared to walk away from uneconomic content. Overseas markets have other unique drivers. Sports bodies may well elect to distribute content via OTT. Probably to other territories where the broadcaster
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Slide 38: Entertainment channels
For personal use only I’m Travis Dunbar and I look after our portfolio of Entertainment channels This involves my team building, aggregating and managing a range of channels that SKY both owns and provides carriage for (in the case of pass-through channels) We do this for both Basic and Premium tier
Slide 39: Output deals and strategic aims
For personal use only We have a select number of output deals that deliver key first run series for Soho (HBO) and Prime (CBS) We also take advantage of post Free to Air windows for series which have had a first run or which are syndicated We also have long-standing relationships with all the key St
Slide 40: Movie tier
For personal use only We see the Movie tier as a continued core component of our offering SKY has achieved some of the highest Movie tier penetration rates in the world by offering both breadth and depth The tier comprises 4 main linear channels plus a separate tier allowing transactional purchase v
Slide 41: Content acquisitions
For personal use only I’m Martin Enright and I manage the Content Acquisitions team We look after the acquisition of Entertainment and Sports rights This involves my team in: negotiating and securing a wide range of one-off and multi-year linear content rights protecting these rights by implementing
Slide 42: Entertainment release windows
For personal use only The entertainment industry business model is based on a complex series of release windows – many of you will know this already For those that don’t – it’s a different model to Sports where generally rights are acquired in bundles or on an event-basis Generally there are 3 types
Slide 43: Movie release window sequence
How this generally works is that a Movie will: (1) premier at the box office (2) before making its way to physical DVD sale (rental and retail- to-own) then For personal use only (3) onto PPV and digital rental (4) then to Subscription TV (5) and finally to Free TV The first three windows generate t
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Slide 45: SKY Advertising Sales
For personal use only SKY Advertising Sales is responsible for generating revenue from airtime and sponsorship. SKY Television - 30 Subscription channels. Free to air channel Prime Monthly listings guide – SKYWatch Digital assets 40
Slide 46: NZ advertising spend 2012
For personal use only $2.164b spent on advertising in 2012. -0.6% decline in 2012 All Media -0.6% -$15m TV -0.6% -$4m Newspapers -7.2% -$42m Radio +0.4% $1m Magazines +0.5% $1m On-line +11.6% +$38m Television revenue declined year on year, but retained the top spot. Television’s maintained share of
Slide 47: Television revenue share
Source PWC Television revenue decreased - 0.6% in 2012 Maintained share 28.4% 42
Slide 48: Events and TV advertising revenue
For personal use only Historically big events such as sport have lifted total television advertising revenue and shifted share to the host broadcaster. Evident in the chart is the large decline in revenue during the 2009 recession. TV revenues suffered 6 consecutive quarters of year on year decline.
Slide 49: SKY grows share in declining market
For personal use only In a declining market SKY has grown share. January to March 2013, total television revenue declined -3.84%. SKY subscription channel revenue increased 8.55% Prime increased 10.80% Combined, total revenue grew 9.40% in Quarter One 2013. 44
Slide 50: Online advertising in New Zealand
ONLINE ADVERTISING IN NEW ZEALAND lab. new zealand 45
Slide 51: Online advertising
For personal use only Looking closer at Online advertising. Money spent advertising Online increased 11.6% in 2012 to $363m. Online advertising accounted for 16.9% of all advertising revenue in 2012. It’s important to look at the composition of Online spend when evaluating the opportunity. 46
Slide 52: Composition of online spend
For personal use only Display advertising accounts for 30% of Online spend. Display ads include banner advertisements, video ads, sponsorships, email, Display ads in Facebook etc. Search & Directories advertising includes revenue from online Directories and Search engine listings. Search in NZ is do
Slide 53: Online and television advertising strategy
For personal use only In summary. Online is continuing to grow. The revenue opportunity is in Display, accounting for 30% of spend. An increasing share is being spent with international sites via Ad Exchanges. In NZ the top 4-5 sites secure 80% of the total revenue. The large volume of traffic resul
Slide 54: Common financial questions
For personal use only I thought I would take the opportunity to cover a few of the more common financial questions that analysts tend to ask. To be clear, we are not providing new “guidance”. SKY updated its FY13 Guidance at our interim results briefing in February. 49
Slide 55: Operating leverage
For personal use only The degree of operating leverage in SKY’s business is a topic of interest to investors. While there are fixed costs in our business, SKY is required to continually invest in its business to grow its subscriber base. Our investment in content costs is a good example. The cost of
Slide 56: Gearing and dividend policy
For personal use only We continue to get comments from analysts that SKY’s balance sheet is under geared. On the face of it our gearing does look conservative at 1.6x debt/EBITDA at 31 December 2012. However, our banks take a different approach and capitalise the leases we have on our satellite and
Slide 57: Depreciation and capex
For personal use only Analysts do have difficulty forecasting SKY’s depreciation levels. This chart shows SKY’s forecast depreciation schedule for its existing fixed asset base and also capital expenditure over recent years. There are a few points to note; SKY’s CAPEX has been “high” over recent yea
Slide 58: Foreign exchange exposure
For personal use only SKY is an importer of TV content and is a beneficiary of the appreciating NZ$. Our FY12 results for example, reflected an average US$ exchange rate of 71.2c. SKY’s policy is to hedge out at least 12 months of our forecast FX purchases to protect us against short term currency v
Slide 59: MY SKY payback
For personal use only A number of analysts have queried the pay back on SKY’s investment in MY SKY. In straight financial terms we assess that the $476 cost (box + install, 75% migrants) pays back in cash terms in 1.9 years. The box is proving to be very stable and as Matt has mentioned we plan to e
Slide 60: IGLOO update
For personal use only IGLOO was launched in December, 6 months later than intended due to problems with the stability of the box Since launch, the box has performed well. Subscribers are purchasing VOD content via IP, as well as PPV sports plus 10 linear pay TV channels December was not a good month
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