5 . New Media

INVESTOR DAY
PARIS
FEBRUARY 2, 2004
OUTLINE OF THE PRESENTATION
Ô 1 . Introduction
Brigitte Gauthier-Darcet
Ô 2 . Audiovisual
Brigitte Gauthier-Darcet
n 2.1 Production / Distribution
n 2.2 Theme Channels
2
Ô 3 . Radio
Brigitte Gauthier-Darcet
Ô 4. Complementarity of Music Media
Christophe Sabot
Ô 5 . New Media
Fabrice Sergent
Ô 6. Multimedia advertising brokerage
Constance Benqué
Introduction
1 . INTRODUCTION : Presentation of Lagardere Active
Ô A media group focusing on 5 strategic and complementary areas
n
n
n
n
n
Producer and distributor of TV programs
Publisher of theme channels
Radio operator in France and 7 other countries
Publisher of multimedia services
Multimedia advertising rep
Ô With a clear management approach
n Combine growth with tight management
n Attract talents and promote creation
n Secure short-term profitability without undermining the long term
Prod.
Distrib.
17,3%
Net Sales
2002
4
Multimedia
Advertising
Brokerage
19,6%
Theme
Channels
12,7%
Radio
31,6%
New
Medias
18,8%
Production / Distribution
2 . 1 . Production / Distribution: Presentation of the Businesses
Ô 10 stock production companies :
n GMT Productions (Napoléon, Julie Lescaut, Boulevard du Palais,…)
n DEMD Productions (Nestor Burma, Joséphine Ange Gardien,…,
Le Bleu de l’Océan, 2003 summer serial on TF1)
n …
168 hours produced in 2002 (revenue 57 M€)
drama, documentaries, animation
all of them re-usable rights enriching our library
Ô 7 one-off production companies :
n JLR Productions (20h10 Pétantes with Stéphane Bern for Canal +)
n MAXIMAL Productions (C dans l’air for France 5)
n B3COM (created by Benjamin Castaldi)
680 hours produced in 2002 (revenue 25 M€)
ligth drama, magazines, gameshows, celebrity shows, real TV
only the formats may be resold after broadcast
6
2 . 1 . Production / Distribution: Business Model – Key Elements
Ô These companies address the entire market :
n The 6 French terrestrial TV channels (TF1, France 2, France 3, France 5, M6, Canal +)
n And some theme channels (Equidia, Match TV,...)
Ô Our library : 13 000 hours mainly fictions, documentaries, animation
Ô Although the instant audience measurement
n Has no direct impact on the financing of the related production,
n It is a key factor for the broadcasting channel’s advertising revenue
n It helps building up broadcaster loyalty and is a key element of long term business
growth
Ô One of our skills is the know-how over financing big international co-productions,
involving the main developed countries (in Europe, Canada and the United States),
and using all existing aids such as tax shelters and tax credits.
7
2 . 1 . Production / Distribution: Competitive Position
Ô No. 1 producer of fiction, 23% market share in France
No. 2 approximately twice smaller
Ô No. 3 producer of one-off programs to be on air in 2003 (No. 5 in 2002)
Ô 30 of the most successful 100 audiences in 2003 (14 in 2002)
29 of the 60 most successful audiences for fiction
Ô Awards from French and international juries
n 7 nominations for Emmy Awards in September 2003,
n 5 awards at the “16ème Nuit des 7 d’Or” ceremony in November 2003.
Lagardere Active has become a leader in TV production
8
2 . 1 . Production / Distribution: SWOT Analysis
Ô Strengths
Depth and variety of top talents
High quality programs
Good business profitability, due to tight management
Ô Weaknesses
Still insufficient presence in animations and gameshows
Ô Opportunities Changes in regulations (access to TV advertising for the
previously prohibited sectors,…)
Ô Threats
9
“Producer” risk
2 . 1 . Production / Distribution: Growth Prospects
Ô Consolidate the Group’s pre-eminence in fiction
Ô Strengthen production of one-off programs
n By a policy aimed at finding young talents
n Through the search for innovative formats
n By acquiring companies producing one-off programs in the gameshow
field
Ô Become a leading distributor in Europe through the acquisition of
existing catalogs
Be the leading program supplier for French terrestrial TV
for both fiction and one-off programs.
10
Theme Channels
2 . 2 . Theme Channels: Presentation of the Business
Ô Properties: 9 channels broadcast mainly in Europe in 4 editorial categories
n
n
n
n
n
Music: MCM, MCM TOP, MCM POP, MCM 100% Belge, MEZZO
Children: Canal J, TiJi
Daily life: La Chaîne Météo
People : Match TV
27.4% share in multiThématiques (publisher of Planète, Ciné-cinémas, Jimmy, etc.)
Ô Distributors: cable and satellite operators (CanalSatellite, TPS, Noos, etc.)
Ô Key figures:
over 5 M cable and satellite subscribers
nearly 28 M subscribers to our channels, incl. 10 M abroad
Ô Net revenue : 80% fees (from distribution platforms)
20% advertising
12
2 . 2 . Theme Channels: Competitive Position
Ô Children area
Canal J
n No. 2 theme channel, all theme channels viewers combined
n No. 1 children channel for 4-10 and 4-14 age group (7,9 %), all theme channels
viewers combined
TiJi
n No. 2 children channel for 4-10 age group (7,3 %), all theme channels viewers
combined
Canal J + TiJi combined enjoy a 42,9 % market share (4-14 age group)
on children channels
Ô Music area
MCM
13
n No. 1 theme channel for 15-24 age group
n No. 1 music channel for 4 + age group
2 . 2 . Theme Channels: SWOT Analysis
Ô Strengths
Strong presence on key sectors for advertisers (children, music)
Complementarity of TV music channels and radio stations
Increasing number of subscribers to CanalSatellite
Ô Weaknesses
Dependence on the distributor
Not backed by a terrestrial TV channel
Ô Opportunities Opportunities for acquisition (trend towards market concentration)
New distribution technologies : digital terrestrial TV, ADSL, etc.
Ô Threats
Music, etc.)
Sharpening competition from other theme channels (Piwi, M6
and from terrestrial channels (development of Star Academy type
of formats, etc.)
14
2 . 2 . Theme Channels: Growth Prospects
Ô Growth potential :
n Access to TV advertising for previously prohibited sectors
reserved until 2007 for cable and satellite channels
n Convergence between advertising market share (5%) / audience share (11%)
n Constant growth of audience share : from 7% in 2000 to 11% in 2003
Ô Spin off new channels from successful ones (Canal Jà TiJi)
Ô Opportunities to acquire one or more channels in order to :
n Enhance the product range in selected areas such as
l “children”, “music” and “daily life”
n Promote the international growth of MCM
Become an unavoidable package provider
for all pay channel distributors
15
Audiovisual Summary
Over a 8 year period, Lagardere Active has collected :
Ô Strategic assets:
n Talents: producers, anchors, channel executives
n Products, brands, catalogs
n Audiences
Ô A range of know-hows:
n
n
n
n
n
Creator of programming
Distributor
Producer for theme channels
Broadcaster of themes channels
Advertising airtime rep
Constituting an independent entity,
ready to contribute to the success of any new investment
in the Audiovisual field
16
Radio
3 . Radio: Presentation of the Business
Ô 3 national radio stations in France:
n A general-interest News & Talk format
n A music “generation motor” for 15-34 age group
n A contemporary music station for 25-49 age group
In a very competitive French radio environment
(15 private national broadcasters)
Ô 16 stations abroad, in 7 countries (Eastern Europe, Germany and South Africa):
25 M daily listeners
18
3 . Radio: Business Model – Key Elements
Ô 85% of net revenue from advertising à a very cyclical business
Most costs are fixed (schedule, broadcast, promotion)
n More than half of the costs are constituted by payroll charges
n Program generally set for the broadcast season (from september to june)
n Cost of dual broadcasting (LW/FM) for Europe 1
Ô Unbalanced distribution of frequencies throughout France :
n Europe 1
186 frequencies
51.6 M coverage on LW+FM
n Europe 2
199 frequencies
39.5 M coverage on FM
n RFM
162 frequencies
34.4 M coverage on FM
Representing total potential coverage of 125.5 M < threshold of 150 M
Note: NRJ 257 frequencies, France Inter 621 frequencies
19
3 . Radio: Competitive Position
Ô Very competitive environment in a context frozen by regulations
n 3 main private players: Lagardere Active, NRJ, RTL
n 3 small ones : Skyrock, RMC Info, Radio Classique, competing for growth
n A 7th player, on the audience market only: the state-owned stations
Ô Market share (source: Médiamétrie – Nov. / Dec. 2003):
n Cumulative audience
9.9% for Europe 1
6.7% for Europe 2
4.4% for RFM
no. listeners/d.
4,909,000
3,314,000
2,193,000
n A total of more than 10 million listeners every day
Ô Internationally:
20
No. 1 radio operator in Poland, Czech Republic, Romania,
No. 2 in Russia, No. 4 in Hungary
Positive operating income for the last 3 years
3 . Radio: SWOT Analysis
Ô Strengths
Programming expertise
Complementary formats reaching every age group
Abroad: strong Group positions in a balanced portfolio of
countries
21
Ô Weaknesses
Insufficient coverage of the country by our stations
Ô Opportunities
Changes in regulation (categories, threshold, …)
Satellite radio broadcasting (XM in the United States)
Abroad: opportunity for consolidation (values at cyclical low
point)
Ô Threats
Open access from 2007 to sectors (especially retail)
where TV advertising is still prohibited
3 . Radio: Growth Prospects
Ô Continue to improve coverage, by obtaining new frequencies
Ô Internationally, consolidate our positions in countries where we are
already present, while studying the possibility of investing in new
countries
Ô Develop the complementarity of media between music radio and
n
n
n
n
n
22
Music TV channels
Downloading
Spin-offs
Interactivity
Concerts
Complementarity of Media
4 . Complementarity of Media
A Unique Radio Landscape
Ô The French radio landscape today:
n A peculiar French situation that is not found in any other country
n 15 different national music and/or news stations
This situation is unique in the world today.
24
4 . Complementarity of Media
Segmentation of Content
Ô Radio is a business sector that is not exempt from the basic rules of
marketing:
Create desire,
be unique,
and make it known.
Ô Our every day policy:
n
n
n
n
Respect for the genetic codes of the brand
Respect for our promise concerning our products
Regularity in the production of our programs
Evolution, never revolution, in our offer of programs.
This is also our competitors’ policy.
25
4 . Complementarity of Media
Segmentation of Content (continued)
Ô To survive and grow in the face of the combined offering of music and
entertainment (mornings and evening talk shows) presented by our
competitors:
n Be segmented
n Be different
n Be capable of inducing a feeling of “ownership”
“making it theirs”
Ô Europe 2 and RFM, two music stations
n Positioned in the cycle of the discovery and consumption of music
n Trend-setters on their own market segment
Ô Exploit our brands more intensely
n So that they become labels
n And also take on a marketing function.
26
4 . Complementarity of Media
Music Radio and Interactivity
Ô An intense listener/radio station relationship through the “participatory
links” that arise from conventional resources, such as:
n
n
n
n
Fixed wire and mobile phones,
Text messaging,
Email,
The communities that we have developed on our Web sites.
Ô Make progress in the commercial use of databases identifying our
consumers (useful for downloading as well as for music searches),
while emphasizing:
n The marketing of our games lines,
n The use of text messaging for gameshows and talk show broadcasts.
27
4 . Complementarity of Media
Music Radio and Spin-offs
Ô Strong identifiable brands that are already producing lines of derivative
products:
CDs and DVDs
Ô with Europe 2
Ô with RFM
“un maxx’ de bruit”
the “un maxx’ de frisson” collection
“le meilleur du cinéma” or “night fever”
that constitute complementary sources of sales.
28
4 . Complementarity of Media
Music Radio and Downloading
Ô The commercial market for music downloads has no choice but to organize itself.
Ô We will be a media player in this process through the development of Virgin Méga.
Music Radio and Concerts
Ô The market for organizing concerts is changing particularly quickly.
Ô In this situation, our radio stations could rapidly develop a “concert branch”:
1st example: Europe 2 Live,
The first Radio & TV Show, simulcast on Europe 2 and MCM.
29
4 .Complementarity of Media
Music Radio and Music TV Channels
Downloading,
Concerts,
Derivative products,
Interactivity,
Are applied on the MCM channels
in the same way as in the FM business,
And by promoting synergies between the two fields.
30
New Media
5. New Media : Presentation of the Business
Scope of presentation :
Géography :
LAGARDERE ACTIVE BROADBAND
Nouveaux médias
rev.2002: Approx. m109 E
Mobile
Main services and brands :
Chat/Dating
Internet
Minority shareholder :
Content Syndication
32
Lifestyle
Pictures
Music
5 . New Media : Focus on mobile (1)
Ô Mobile device accelerate paying content services penetration !
logos
Single ton
ringtones
Colored
pictures
Voice mail
greetings
Telegreetings
Polyphonic
ringtones
Real tones
Java
Games
Bingo SMS
Greeting
cards
Premium
SMS
Animated
pictures
Jeux Java 2.0
Java
applets
33
2003
video clip
MMS
Karaoke
Fin 2002
MP3
downloads
2004
Live dating
5 . New Media : Mobile Data Market Europe vs USA
EUROPE
Western European Mobile
Subscribers
MM
400
350
300
250
200
150
100
50
0
285
301
131
320
312
87
108
326
85
332
85
Western European Mobile ARPU
US Mobile Subscribers
US Mobile ARPU
€/Month
MM
$/Month
40
31
30
3
33
32
31
6
5
4
34
7
35
9
20
170
233
203
200
150
128
141
241
247
100
28
27
27
27
10
27
26
2004
2005
2006
Not Internet Enabled
0
2001
2002
Voice
Source
Morgan Stanley Equity Research
2003
2004
2005
Morgan Stanley Equity Research
€ Bn
40
35
30
25
20
15
10
5
0
€ Bn
2.0
12
3
18
1.5
1.0
1.0
23% R
CAG
0.5
0.0
2002
P2P
1.8
32
12
2005
Browsing
183
42
60
54
1
50
54
1
53
2
53
2
52
52
3
5
52
51
49
47
2003
2004
2005
2006
2002
13
0
2001
2002
2.5/3G Phones
53
53
2001
2002
30
47
20
2003
2004
No 2.5/3G
2005
2006
Voice
Morgan Stanley Equity Research
Source
Data
Morgan Stanley Equity Research
US Market for Ringtones
$ Bn
$ MM
8
7
6
5
4
3
2
1
0
6.8
1.5
66% GR
CA
0.6
0.4
0.6
2005
403
2.8
300
1.5
200
2.5
100
7%
18 GR
CA
17
0
2002
Source
500
400
P2P
Morgan Stanley Equity Research
113
140
US Mobile Data Market (1)
Premium
Source
Source Morgan Stanley Equity Research
Notes
• Numbers include airtime revenue for operators
• Projections for 2005 in line with recent publications from Jupiter Research and W2F
40
128
83
Source
Western European Market for
Ringtones/Logos (2)
15
21
2006
Data
Western European Mobile Data
Market(1)
28% R
CAG
174
106
128
50
0
Source
164
61
94
2003
153
81
191
2001
2002
Internet Enabled
34
USA
2005
Browsing
Morgan Stanley Equity Research
Note
• Numbers include airtime revenue for operators
2002
Premium
Source
IDC, May 2003
2005
5 . Business Models
1) Technical expertise
COMMUNITIES
COMMUNITIES
2) Marketing expertise :
- mobile operators distribution
- advertising on print, TV, radio
CONTENT
CONTENT
àSUBSCRIBERS
àPAY PER VIEW
Wap
STATISTICS
BILLING
FRONT OFFICES
WAP
Imode
Java
BREW
Magazines
MOBILE OPERATORS CONNECTIVITY
35
5. New Media : Competitive Position
Match.com
Itouch
International
Prosodie
Jamba
Publishing
123 MM
AGL ADT
Newtech
ATS
Zingy
36
Hosting
Computel
Broadsystem
InfoSpace
Local
Jet MM
5 . New Media : SWOT Analysis
Ô Strengths
Internal mobile expertise
Operating practice on the audiotex markets since 1994
Operating presence in 4 key countries
Track record in mass market advertising since Club-Internet
Direct access to privileged data on music industry (Virgin,
MCM, Europe2) and image/pictures businesses (Gamma,
Paris Match)
Ô Brand ownership and promotion capacity
Ô
Ô
Ô
Ô
Ô
Ô Opportunities
Ô
Ô
Ô
Ô
37
New growing and profitable markets
Good match with other Group’s assets : Virgin, magazines…
Global markets, centralized technology, R&D and hosting
New technologies fosters operators’ growth as well :
UMTS…
Ô Weaknesses
Ô No mobile carrier’s ownership
Ô No large TV station ownership
Ô No music / movie majors’ ownership within the Group
Ô Threats
Ô Increase of space/ copyrights costs
Ô Fast sector consolidation
Ô Need of fast critical mass reach
5 . New Media : Growth Prospects (2) / Conclusion
Ô Existing brands, products, expertise and technologies with local
presence in 4 countries.
Ô Fast growing market overall, with
l Late US growth
l Opportunity to consolidate existing businesses in Europe
Ô … Strong opportunity to strengthen and extend our leading positions
as key content providers to mobile users and mobile operators.
38
Lagardere Active
Advertising Sales Company
6. Lagardere Active Publicité
The French advertising market
Ô 8.6 Billion Euros invested in the French media market in 2003
(+)
Outdoor
Advertising
11,3%
Internet
0,7%
Cinema
0,8%
National TV
29,0%
(+)
Other press
17,1%
Cable TV
1,5%
Radio
7,4%
National Daily
Press
15,3%
40
Source : Estimate LAP january 2004
Magazines
16,9%
(+)
(+)
6. Lagardere Active Publicité’s markets
The audiovisual sales company of the Lagardere Group is positionned on
both an « historical » market and two « emerging » markets.
Ô1 « historical » advertising market :
n Radio with a national and local commercialisation
Ô 2 « emerging » advertising markets with high growth potential:
n television thematical channels
n internet sites
Since 1999, Lagardere Active Publicité has experienced a steady rise of its
market share.
41
6. LAP’s position on these different markets
Ô Radio
On a highly concentrated market (3 major players : LAP, IP, NRJ)
Lagardere Active Publicité owns very strong brands and is present on
every level.
n A historical leading role
(2nd commercial radio, commercial
coverage share) with an innovative format : News & Talk.
n A musical network composed of
and
reinforced by the
commercialisation of
, leading offer ahead of NRJ.
n A presence on every market with strong positions :
l on the national market with a leading position in terms of audience (34% of
commercial coverage share),
l on local markets, a challenger position
Between 1998 and 2003, on the national market : Turnover +54% while the
market is up 30%
42
6. LAP’s position on these different markets
Ô Televison :
n Large commercial portfolio (26 cable TV and 5 local or regional TV) composed
of television channels edited by the group and channels owned by other groups
(primarly AB group) which makes LAP the leading sales rep with 30% coverage
share.
n Leading channels targetting the most interesting people : children with Canal J
and TiJi, the 15-34 with the MCM+ offer, the Housewives-50 with RTL 9.
Between 2001 and 2003 : Turnover +32% for a market up 6% (estimate)
Ô Web sites :
n A specific positionning : only sales rep which commercialises a portal
(Club-Internet) and strong internet brands (Europe1.fr, Europe2.fr, le
Routard.com,etc.)
n A systematic approach of prolonging our TV and Radio actions on our
websites (cross-media)
Between 2001 and 2003 : Turnover +20% for a market down 10% (estimate)
43
6. Lagardere Active Publicité
Market conditions
Ô Clients’ media strategies are becoming more and more complex
(search of opportunities, simultaneous work on different targets, etc…)
Ô Investments based on more and more quantitative criteria ;
the effective audience ; with a more and more accurate expertise of the
Media agencies (buying agency).
Ô Clients expect increased expertise in terms of service :
refined target groups with an efficiency that has to be proven.
44
6. Lagardere Active Publicité’s strengths
Ô Owned by a major media company
Ô Powerful media brands with very strong added value which can be
sold as a global media : cross-media
Ô A dynamic team with very ambitious objectives :
n more turnover and market share
n A guarantee of efficiency and perfect services
A performing back office allowing optimisation of revenues & profits
45
Annexes
46
6. Lagardere Active Publicité
The French advertising market
Ô In 2002, companies have invested 29,3 Billion euros for their communication
in France which represents a small increase (+0.6%) after the strong
increases until 2000 (up to +8%) and the steadiness of 2001.
Ô 2% of the national GDP is devoted each year to above-the-line and
below-the-line media (direct marketing, promotion,etc).
Ô The French advertising market makes up for 4% of the international
advertising market and 20% of the european advertising market.
Ô The French media have a great growth opportunity since France ranks
in the european average with 489€ invested by inhabitants.
47
6. Lagardere Active Publicité
Advertising income of the major media from 1998 to 2003
Millions of euros
1998
48
1999
2000
2001
2002
2003
Mkt share
2003
Var 2003 vs
1998
Var 2003 vs
2001
press
télévision
outdoor
radio
cinema
3 499
2 473
1 026
575
52
3 861
2 684
1 089
645
69
4 150
3 046
1 174
716
82
3 987
2 867
1 129
654
72
3 866
2 921
1 085
713
74
3 789
3 038
1 031
749
67
44%
35%
12%
9%
1%
8%
23%
0%
30%
28%
-5%
6%
-9%
14%
-7%
total
7 626
8 348
9 086
8 709
8 659
8 673
100%
14%
0%
Source : Irep 1998-2002 – estimate LAP for 2003
6. Lagardere Active Publicité
Sectorial breakdown of the brutto radio turnover
Tourism
4%
Other
8%
Distribution
24%
Food
6%
Transport
8%
Telecom
16%
Media
8%
Publishing
8%
Culture and
leisure
8%
49
Source : Secodip janvier-december 2003
Services
10%
50
Source : Médiamétrie 75 000+ November-december 2003 – Base 13 years + (commercial coverage share)
0,8
1,1
M
FM
R.
Cl
as
siq
ue
1,8
2,5
RM
C
Ch
an
so
ns
R
&
2,6
RT
L2
3,4
3,5
RA
DI
O
RF
M
FU
N
3,8
NR
NO
J
ST
AL
GI
E
SK
YR
OC
K
CH
ER
IE
FM
EU
RO
PE
2
RT
L
EU
RO
PE
1
4,1
5,2
5,4
6,9
8,1
12,1
6. Lagardere Active Publicité
Ranking of commercial stations