Sony Pictures Entertainment Confidential

Sony Pictures Entertainment Confidential

Sony Pictures Entertainment Confidential

Decoding Digital: Module Three

Distribution

Outline Overview

  1. Film Theatre
  1. Non-Theatrical
  2. Overview of the living room, devices, models
  3. Transactional
  4. Films
  5. TV
  6. UV
  7. Subscription
  8. Syndication
  9. Authentication
  10. Ad Supported

Appendix Details

Film Theatre Outline

  1. Changing landscape
  2. Digital screen conversation at 60% in North America, 50% Worldwide
  3. Sony along with all major studios supporting transition
  1. Higher quality presentation with digital over analog media
  2. Film vs. digital (every print is a show print)
  3. 2K vs. 4K resolution
  4. Higher frame rates
  1. New Theatrical Formats:
  2. 3D display technologies (active, passive, silver screens): RealD, Master Image, Dolby, XPanD
  3. 4D Technologies: DBox, 4DPlex, MediaMation
  1. New Theatrical Presentations
  2. Alternative content
  1. More efficient distribution model
  2. Types of feature digital delivery (hard drives, satellite, fiber)
  3. How theatres ingest and program a digital movie, trailers and manage this new technology. Digital project system.
  4. Multiple version in single package (subtitled, dubbed, captioned, etc.)
  5. Greener technology
  6. What happens to the movie after it is done in the movie theatre
  7. Carbon footprint
  8. Security and encryption
  9. Improved access control to our content. Access is controlled by decryption key instead of protecting physical media
  10. More advanced forensics

The Changing Living Room Outline

  1. Setup/Back-story
  2. Linear: Broadcast channel pioneers (ABC, NBC, CBS)
  3. In the beginning there was not choice, people watched what was on when it was on
  4. Cable: Emergence of consumers choice in 80s/90s
  5. 100s of networks launched, growing to over 500 today
  6. Targeted audience, targeted programming, targeted advertising
  7. VOD/DVR: Rise on –demand
  8. High penetration of pay TV HH/high penetration of VOD
  9. Choice and control – consumers seek time-shift viewing, not linear
  10. On Demand Behavior = Digital – the same behavior that is driving VOD on TV also is driving consumer spending on digital entertainment and media
  11. Digital scale through Broadband Penetration: Ability to reach 50 million users became a reality
  12. Radio – 38 years -> TV – 13 years -> Internet – 4 years
  13. Facebook (750MM users), YouTube (3BN streams/day), Apple (15BN apps downloaded in three years)
  14. Digital Platforms
  15. PC: The new entertainment alternative
  16. Evolution of the PC; Growth driver of the internet in the past decade
  17. Mass penetration of PC ushered in new uses for internet in the home
  18. Work productivity tool – entertainment portal (YouTube, Hulu, Facebook, Zynga, and the rise of Netflix) and media management (e.g., iTunes)
  19. Mobile/Tablet: Taking the living room with you
  20. Mobile
  21. Global Smartphone growth
  22. App market
  23. iOS and Android
  24. Tablet
  25. Room-shifting; Legitimate alternative to TV
  26. Dual screen usage with the TV
  27. OTT: What’s old is new (back to the living room with uber-choice and control)
  28. Behavior and implications: Brings “Blockbuster” to your home
  29. Long tail and short tail now available through digital services
  30. Lean-back and forward: choice to passively consume or consume on demand
  31. Save money – concept of “cord- cutting” (and some stats on what’s really going on)
  32. Devices overview
  33. Smart TVs (examples of interfaces and offerings e.g. Bravia, Samsung)
  34. Blue Ray (examples)
  35. Game console (PS# and Xbox offerings)
  36. Digital media player (e.g., Roku)
  37. Summary graphic detailing penetration by device 2006A-2014E U.S. only
  38. 1% HH penetration in 2014: Smart TVs (81%), Pay-TV STB/DVR (70%), Blu-Ray Player (50%), Game Console (48%) Digital Media Player (10%)
  39. The Cloud
  40. Able to manage all of your media in the home our outside
  41. Operating systems overview and implications: iOS, Android, Windows

Transactional Business Outline

  1. Theatrical product (Smurfs) as a new release
  2. Background – films typically come to the home entertainment/transaction window between 90 -120 days from theatrical release. The date of release is called “Street Date”. Window in non-exclusive and is premised on wide distribution.
  3. Physical – SPHE makes new release title available via DVD and Blu-ray for rental and sale on “Street Date”
  4. Key retailers – Walmart, Best Buy, Target, Amazon
  5. Key Rentailers – Redbox, Netflix, Blockbuster
  6. Digital – Electron Sell –through (EST)
  7. Definition – a digitally delivered file to which the customer has the right to watch as many times as they want with no expiration date
  8. Titles typically released for EST on “Street Date”
  9. Recently SPHE has become the first studio to experiment with EST release two weeks before “Street Date”. Early results are very encouraging.
  10. SPHE makes product available in Standard Definition (SD) and High Definition (HD)
  11. Typical retail pricing $12.99 - $14.99 (SD) and $17.99 - $19.99 (HD)
  12. Key retailers – iTunes, Xbox, PSN/Video Unlimited, Amazon, Vudu (Walmart)
  13. Availability – once made available for EST, titles stay continuously available
  14. Status – this model is growing, but has not yet to really take off. SHPE research shows that to-date key inhibitors have been
  15. Price
  16. Desire to access EST file on the televisions set
  17. Device interoperability
  18. Cloud storage
  19. We believe that all of the above issues either have been or are in the process of being solved – segue to Rich/Mitch discussion of UV, cloud storage, interoperability etc.
  20. Ultraviolet
  21. Movie industry faces disruption
  22. Technical
  23. Behavioral
  24. Digital theft
  25. Millennial are driving this disruption
  26. Digital sell through has not reached its potential
  27. Sales are flat
  28. Consumers are dissatisfied
  29. Cannot share with family
  30. Feel loss if HDD crashes
  31. Cannot switch device brands
  32. Cannot keep track of what you own
  33. Media Industries (Content and Technology) have come together to form DECE
  34. Ultraviolet was created to address consumer dissatisfaction with DWP
  35. Valuable use model
  36. Web based account system
  37. Open technical specs
  38. UV logo and Marketing
  39. Ultraviolet functional roles
  40. Content Provider
  41. Digital Service Provider
  42. Locker Access Service Provider
  43. Client implementer
  44. Retailer
  45. Ultraviolet coordinator
  46. Consumer surveys confirm UV value proposition
  47. They would pay a premium
  48. Consumers would switch retailers to find UV branded content
  49. ITunes is the most vulnerable retailer for switching
  50. Consumers will buy more vs. rent and buy more often
  51. Digital Video on Demand
  52. Definition – A digitally delivered file to which the customer has the right to watch for a limited period of time (24-48 hours)
  53. Market segments
  54. Residential VOD (RVOD) – largest portion of the business. VOD delivered by a platform operator (e.g. Cable, Satellite or Telco provider)
  55. Electronic VOD (EVOD) – smaller but rapidly growing segment delivered over the internet to the PC or TV through “over the top” OTT providers
  56. Key retailers
  57. RVOD – Comcast, Time Warner Cable, DirecTV, Dish Network, Verizon, Fios, AT&T Uverse
  58. EVOD – iTunes, Xbox, PSN/Video Unlimited, Amazon, Vudu (Walmart)
  59. Titles typically released for VOD (RVOD and EVOD) on “Street Date”, although some key titles (e.g. Smurfs, The Social Network) are released two week after street date
  60. SPHE makes product available in Standard Definition (SD) and High Definition (HD)
  61. Typical retail pricing $3.99 (SD) and $4.99 (HD)
  62. Availability – once made available for VOD, titles typically stay available for about 90 days and then come down for the duration of the first pay window
  63. Status – this segment has grown rapidly over the past few years largely due to the move by most studios to “day and date” availability and consumer awareness /familiarity
  64. Catalog
  65. Physical – Titles stay continuously available and are re-priced as they age.
  66. Increasingly difficult to maintain retail “shelf space” as titles age
  67. Studio compete aggressively on price in order to gain retail space
  68. Digital EST – Titles made continuously available and are re-priced as they age
  69. SPHE currently has approximately 1,600 titles available
  70. Typical retails pricing $9.99 and $14.99 - $17.99 HD
  71. Digital VOD – Title availability post pay 1 is largely dependent on negotiated TV holdbacks
  72. SPHE currently has approximately xx titles available for RVOD
  73. SPHE currently has approximately 600 titles available for EVOD
  74. Typical retail pricing $1.99 - $2.99 (SD) and $2.99 - $3.99 (HD)
  75. Television Product (e.g. Justified) as a new release
  76. Physical
  77. DVD and BD release of full season typically released one year after airing. For example DVD/BD of Season 1 typically released in advance of Season 2 airing
  78. Digital – EST
  79. Episodes released on a “Next Day TV” basis (i.e. episodes can be purchased the day after airing). Typical pricing is $1.99 per episode for SD and $2.99 per episode for HD
  80. Consumers can also buy a “Season Pass” where each episode is automatically downloaded the day after airing
  81. Sometimes promoted vs. “sum of episodes”
  82. Catalog
  83. Physical
  84. Previous seasons are available on DVD and BD
  85. Aggressive price promotions
  86. Digital EST
  87. Previous seasons are available ($20 – $25 for SD, $30 -$35 for HD)
  88. Often promoted at a discount vs. “sum of episodes”

Digital Distribution: Subscription, Syndication, TV Authentication and Ad Supported Outline

  1. Intro on Digital Distribution
  2. THEN: Traditional distribution paths for TV shows and movies
  3. Have been linear cable networks and TV stations
  4. Needed approximately 100 episodes to be able to air reruns and this process would begin after a show aired for four to five years on a broadcast network
  5. These traditional platforms also needed stand alone self contained episodes
  6. NOW: Digital distribution services/platforms offer different business models to consumers and open up new and different distribution paths for content creators
  7. Include no money paid by consumers
  8. Advertiser supported
  9. Subscription supported
  10. Offers new paths, qualifications and timing for product
  11. Takes episodes with as little as one season at a time and these services thrive on serialized product and as opposed to a four to five year building up a library
  12. These services will begin airing episodes as soon as next day after the network broadcast
  13. Accelerates distribution of product, requires less episodes produced and buys serializing programming
  1. Business models to consumers
  2. Amazon
  3. offers video streaming of movies and TV series to consumers that sign up for $79 a year shipping to promote e-commerce on Amazon
  4. The video offering is both an incentive and reward for signing up… consumers spend no extra money for the video (Amazon also offers rental and sell thru of video)
  5. Hulu
  6. Offers consumers the freshest (next day) video content for TV and library movies on a split model (1) Ad vod and (2) SVOD
  7. Ad vod is advertiser supported video and consumers don’t have to pay anything but need to watch ads
  8. SVOD is an expanded offering where consumers need to pay to subscribe to Hulu+
  9. Netflix
  10. Has the largest video offering of films and TV series and is a SVOD service where consumers have to subscribe to see the video
  11. Television – Network
  12. NBC catch-up rights
  13. During the original broadcast season for “Community”, NBC has the right to stream up to five episodes at a time on NBC.com, Hulu and other NBC partner websites (with ads).
  14. Episodes are periodically refreshed. Once a new episode is posted, the oldest of the five episodes is actually pulled down
  15. Episodes can be available on-demand for a maximum of 30 days
  16. Sony’s current season digital rights
  17. SPT has EST rights the day after an episodes premieres on NBC
  18. Television – Syndication
  19. Sony’s digital rights in syndication
  20. Once “Community” goes into syndication, Sony can license episodes from prior season in broadcast and cable syndication, as well as to Internet subscription and free video-on-demand services
  21. Hulu
  22. SPT has struck an innovative deal with Hulu for “Community” that includes SVOD and FVOD
  23. SVOD – starting immediately, Hulu will have the right to stream library and current episodes on Hulu Plus subscription offering
  24. FVOD – once the traditional syndication window starts in Fall 2013, Hulu will also have the right to stream a limited number of library episodes on a FVOD basis on Hulu “classic”
  25. Basic Cable
  26. SPT has also licensed “Community” to Comedy Central for a linear cable telecast plus FVOD on a TV Everywhere basis and via the Comedy Central website.
  27. Five episodes may be streamed at any one time
  28. Streaming episodes must be selected from episodes aired on the network during a trailing 14 day period
  29. Episodes can’t be streamed for more than two continuous weeks
  30. Crackle
  31. SPT has a FVOD streaming rights for Crackle follow an exclusive cable and Hulu window.
  32. Crackle will have the right to stream up to five library episodes at a time, refreshed periodically
  33. TV Authentication
  34. TV Everywhere
  35. How the cable and satellite companies are providing greater value for their customers and serves as a tool to combat cord cutting for SVOD services
  36. Perception/reality is that consumers are dropping cable and satellite subscriptions because they can get enough content for less money and enjoy out of home/multi screen experiences with services like Netflix
  37. TV everywhere offers consumers the ability to watch everything they pay for on any device anywhere for both linear and vod viewing experiences
  38. A consumer logs in their customer id number and they get all of their content thru their connected devices
  39. By consumers getting this content, they are less likely to drop their cable/satellite services to get SVOD services
  1. Ad Supported
  2. Size of online ad market
  3. Total US
  4. For video
  5. Role of “Comscore” as a primary metrics platform (akin to ratings)
  6. Revenue drivers in the ad supported market
  7. Uniques
  8. Ad impressions
  9. CPM
  10. Definition of ad units
  11. Pre-roll/mid-roll
  12. Sponsorship
  13. Competitive landscape for digital ad-supported video players
  14. Who are the players?
  15. YouTube
  16. Hulu
  17. Yahoo
  18. Overview of offerings
  19. Movies
  20. TV
  21. Competitive landscape for digital offerings of Networks (US)
  22. Relative sale of players (e.g., NBC, ABC, MTV, Comedy Central)
  23. Role of TV “Catch Up/streaming of TV shows
  24. Role authentication (e.g. HBO GO, TBS using Adobe Pass)

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