Presentation Slides

Sky Italia – Investor Field Trip
Milan, 3rd December 2014
Gomorrah
This document contains certain forward looking statements with respect to Sky Italia’s financial condition, results of operations and business, and our strategy,
plans and objectives for Sky Italia. These statements include, without limitation, those that express forecasts, expectations and projections, such as forecasts,
expectations and projections in relation to new products and services, the potential for growth of free-to-air and pay television, fixed line telephony, broadband
and bandwidth requirements, advertising growth, DTH, OTT and IPTV customer growth, Multivision, Sky Online, My Sky, Sky HD, On Demand, Sky Go and other
services penetration, revenue, administration costs and other costs, advertising growth, churn, profit, cash flow, content, marketing and capital expenditure.
Although the Company believes that the expectations reflected in such forward looking statements are reasonable, these statements are not guarantees of
future performance and are subject to risks, uncertainties and other factors, some of which are beyond our control, are difficult to predict and could cause actual
results to differ materially from those expressed or implied or forecast in the forward looking statements.
All forward looking statements in this document are based on information known to the Group on the date hereof. The Group undertakes no obligation publicly
to update or revise any forward looking statements, whether as a result of new information, future events or otherwise.
2
5
• Serving 20 million Sky customers in five countries
20 million
• Shared ethos of increased choice, better content
and superior TV experience
£11 billion
Countries
Customers
• Leveraging best-in-class capabilities
£4.6 billion
• Substantial opportunity
Content
investment
31,000
• Good for customers and shareholders
Employees
30
Main sites
3
Revenue
• Expanded growth opportunity
• Platforms of choice
• Better for customers
• Enhanced value creation
– Greater long term revenue growth
– Earnings enhancing
– Progressive dividend
4
• Transaction completed 12 November 2014
• Name changed to Sky Plc
• Acquired 90% of Sky Deutschland; Jeremy Darroch and Andrew Griffith appointed to Supervisory Board
(inc. Jeremy Darroch as Chairman)
• 9.9% equity placed at 870p
• All debt financing for the transaction completed with blended pre-tax cost of debt <3% pa
• Group leverage of c3.5x net debt/EBITDA
5
Andrea Zappia,
Domenico Labianca
Andrea Scrosati
Chief Executive Officer
Chief Financial Officer
Executive VP Programming
• 2011: Sky Italia - CEO
• 2003: Sky Italia - CFO
• 2010: BSkyB - Managing Director
of Customer Group
• 2002: Stream - Financial Director
• 2003: Sky Italia - VP Marketing,
Promotion and Business
Development
• 2002: Matrix (Telecom Italia
subsidiary) – Head of Credit
Control
6
• 2013: Cinema, Entertainment
and Third Party Channels
• 2010: VP Programming and
Promotions
• 2007: Joined Sky Italia as VP
Corporate Communications
1) Strong business executing clear strategy
2) Capturing growth opportunity with leading customer proposition
3) Enhanced potential as part of a bigger Sky group
7
8
Stream
Canal+
NewsCorp
Sky
Italia
1990
1993
1997
2000
2003
Pay TV enters
Italy with Tele+
A 2nd player,
Stream, enters
Pay TV
Tele+ owned
by Vivendi
(100%)
NewsCorp
joins Stream
in a 50% JV
Stream acquires
100% of Tele+
Sky EBIT
breakeven
Sky #1
2004
2006
2012
NewsCorp
buys remaining
20% stake
from Telecom
Italia reaching
100%
Sky Italia reaches
EBIT break-even
with 3.8m
subscribers
NewsCorp
–
Tele+
Sky Italia starts
operations with
1.8m subscribers
Source: Agcom, Bloomberg
9
Sky Italia
becomes the No
1 TV player in
terms of
turnover
Subscribers
Monthly ARPU
Revenues
Source: Company data for FY14. Financial data as reported in Sky plc full year results announcement
10
EBITDA
Employees
Multi-platform
(Pay & Free)
Broadcaster
Content creator
Aggregator
11
• 163 pay channels, 66 HD, 28 PPV, 184 FTA
• 80% of customers watch Sky content in HD
• More than 50% of customers use Sky Go
• Almost 30% of boxes connected with c.3,000 hours
of On Demand content
Company data 2014
12
NPS = Promotors-Detractors
23%
18%
16%
5%
5%
2%
0%
-34%
Sky Italia
Sky Go by Sky
Free DVB-T
(Telesione
Digitele)
PremiumPlay
By Mediaset
Source: Source: Ericsson ConsumerLab TV & Media 2014 Study
13
Infinity
By Mediaset
Telecom Italia
(Altice TV &
Cubovision)
Mediaset
Rai TV by RAI
58%
% ratings 8-10
55%
50%
38%
38%
35%
33%
33%
B1 On a scale from 1 to 10 (1 = poor 10 = excellent), how would you judge the overall image/reputation of the following companies?
Source: Tracker Report 1H FY14
14
Base: Total population - Prospects and Sky Customers who gave an answer
33%
30%
30%
15
25 million homes
PAY
~6m
(27%)
4.7m
Platforms
DTH
pay
1.7m
18.6m
0.3m
DTT
pay
OTT
Main Player /
Propositions
16
FTA
only
65%
51%
33%
27%
18%
19%
DE
ES
IT
FR
Source: IHS SD
Note: data are related to comparable pay TV offerings excluding pay light propositions
17
UK
Netherlands
Total TV revenues by nature
TV revenue by type (€bn)
TV revenue by player (€bn)
9.6
9.6
1.7
8.4
8.4
1.8
2.5
Licence fee
4.8
3.6
Discovery
2.8
LA7
Rai
Advertising
3.5
Pay TV
2.6
Mediaset
Sky
3.1
3.1
2.9
2.9
CY10
CY14E
CY10
CY14E
Source: IHS SD
18
Subscribers (‘000)
4,972
4,901
4,742
FY10
FY11
ARPU (€)
FY12
43.4
4,756
4,725
FY13
FY14
FY10
19
42.1
FY11
41.2
FY12
42.5
42.8
FY13
FY14
GDP (yoy % variation)
CY
08
09
10
11
12
13
14
15
Household consumption (yoy % variation)
16
17
18
CY
08
09
10
11
12
13
14
15
16
17
18
1.8%
0.9%
0.4%
0.4%
0.7%
1.0%
0.9%
0.7% 0.7%
(0.3%)
(1.2%)
0.8%
(0.5%)
(0.2%)
(0.6%)
(1.0%)
(2.4%)
(0.3%)
(1.9%)
(2.5%)
(3.9%)
(5.5%)
Source: Internal estimates, ISTAT, Consensus forecast
Actual
20
Latest Forecast
–
2003
2004
EU undertakings
Digital Switch Off
9-year commitments
- cannot enter pay
DTT
DTT spectrum
assigned for free to
incumbents (MS, Rai)
No exclusive deals
with Major Studios &
Sport rights
DTT STB subsidized
with €200m state
contribution*
2005
Pay TV DTT
MS acquires
exclusive pay TV
rights for 5 best
Serie A teams
Sky obliged to buy
Pay DTH rights
from MS for 90% of
total cost
2007
2008
2009
Auditel
VAT
Advertising on
Pay TV
Government lowers
adv thresholds only
for pay TV to 12%
keeping MS limits at
18%
Audience
measurement
company
controlled by MS
& Rai
Sky audience
ratings not
measured till
2007
VAT on pay TV
doubled overnight
by government
decree
Agcom approves
TivùSat
A neutral regulatory and political scenario is in place now
* Declared “discriminatory state aids” by EC and European Court of Justice
21
2010
LCN
Sky launches Cielo on
Channel 10 but
Government forces
the channel to move
to Channel 26
Players
Landscape as of today (2014)
No of FTA
channels
Audience
Share
Adv Rev
Share
14 SD
+1 HD
37.5%
20%
12 SD
+ 3 HD
31.8%
56%
46 SD
14.1%
12%
Others*
76
Total
* Including: Sky, Cairo Communication, L'Espresso, De Agostini, Scripps, la Feltrinelli. Sky Pubblicità and Digitalia not included in Gross Adv Rev.
22
FTA
SVoD
TVoD
23
What we did
What we achieved
• Protected our best subs with a strong value
injection and TV superiority (Sky On Demand,
Sky Go, Restart)
• Churn from 13.4% in FY12 to 10.7% in FY14
• Invested in content exclusivity (F1, Moto GP,
Italia’s Got Talent, X Factor, Masterchef,
Gomorrah)
• Evolved commercial strategy from volume to
value, attracting only new prospects in line with
Sky profile
• Acclaimed original production and new
audience records
• Launched first ‘triple play’ offer: bundled BB
with Fastweb
• Bundled offer now 20% of sales and driving
positive churn characteristics
• Cut our cost base through a multi-year
efficiency program
• €33m of savings secured in FY14, €120m run
rate by FY17
• ARPU from €41 in FY12 to €43 in FY14
• Quality of sales improved dramatically
24
25
1
2
1. Strengthen DTH
proposition through
increased product
penetration
Expand growth
opportunities with
diversified business
strategy
4
3
Leverage market
leading proposition in
content & innovation
Drive operating
efficiency
26
Italian households (m)
25
4.7
21
12
Of which 1.7m Mediaset Premium subs
9.0
2.2
2.1
1.9
1.7
All HHS
Have Sky
Prospects
Low income
Age <30; >65
Core
Prospects
Source: Sky estimates
27
Families
with kids
55-70 High
Income
Singles
Other
families
1.1
No TV, DTH
obstructed
28
11m
Active Services
FY08
FY09
FY10
FY11
FY12
29
FY13
FY14
1.1
On Demand
2.2
SkyGo
4.1
HD
0.9
Multivision
2.8
MySky
Q1 penetration %
64
61
57
49
50
40
38
28
18
19
19
27
22
FY15
FY13
16
5
FY13
FY14
FY15
PVR
FY13
FY14
HD
FY15
FY13
FY14
Multiscreen
30
Note: HD penetration related to paying subs
FY15
FY13
FY14
VoD
FY14
SkyGo
FY15
Churn benefit by number of products
(% disconnection rate over 6 month period, indexed to 100)
130
100
90
70
40
Average
% Customer Base
TV only
1 product
26%
27%
Note: Products are MySkyHD, HD, Multivision (paying), SkyGo, On Demand (free)
31
30
2 products
3 products
4 products
20%
23%
4%
ARPU by number of products (€/ month)
42.8
42.4
46.0
48.5
34.9
Total CB
% customer base
TV only
26%
Note: Products are MySkyHD, HD, Multivision (paying), SkyGo, On Demand (free)
1 Product
27%
32
2 Products
20%
>3 Products
27%
Influence on decision to subscribe to Sky
30%
Movies/Tv
Series On
Demand
30%
Restart
Interest in product/services influencing decision to subscribe to Sky
Source: Company data.
29%
My Sky
26%
Wide Offer
33
24%
HD
21%
Sky Go
20%
Football
1
2
Expand growth
opportunities with
diversified business
strategy – Fibre, OTT, IPTV
Strengthen DTH
proposition through
increased product
penetration
4
3
Leverage market
leading proposition in
content & innovation
Drive operating
efficiency
34
% Pay TV penetration
58%
19%
27%
1%
7%
39%
19%
UK
Italy
DTH
Note: all types of pay TV offerings including pay light propositions
Source: IHS SD
DTT
Cable / IPTV
35
•
•
Cable has never been developed
IPTV at early stage
BB subs
Q1 2014
Mkt
share %
Fibre /4G roll out targets
Partnership with Sky
5,390
49%
- 50% population coverage
by 2016
- LTE coverage 80% by 2016
- New IPTV
- Exclusive Sky channels (mobile only)
1,565
14%
- 27% population coverage
by 2016
- Home pack (DTH+BB)
- Sky Online
6,955
63%
Source: Between (Ernst & Young)
36
Partnership Sky – Telecom IPTV 2.0
• Mirroring DTH offer and experience with IPTV offering
delivered via TI broadband/ ultra-broadband network
• Retail model with revenue share – NPV neutral vs DTH
• Marketing through all TI channels but with Sky
managing customer TV relationship
• Identified 1m+ prospects without access to satellite
• Targeting 3.5m TI BB customers who do not have Sky
• Live from April 2015
37
• Launched April 2014
• Pricing options in two packs:
– series €9.90, cinema €19.90
• Sport TVOD
• Opening up new market segments (young, heavy
digital users) and resonating strongly with
customers
• Live events and original production driving appeal
(X Factor, Gomorrah)
• Building on NOW TV experience in the UK
38
Devices
Today
Partnership
Today
39
By 2015
1
2
Strengthen DTH
proposition through
increased product
penetration
Expand growth
opportunities with
diversified business
strategy –
FTA opportunity
4
3
Leverage market
leading proposition in
content & innovation
Drive operating
efficiency
40
• Cielo launched in 2010
• Consistent with objective to capture all growth opportunities in
the TV landscape
• Strength in FTA supports pay TV strategy:
– Ability to cross promote pay TV offering
– Provides second monetisation window for original productions
• Optimise use of rights
41
Cielo performance vs peers
Adv Revenues
Audience share (%)
1.77 Real Time
CAGR
CY11-'13
CY14
Mkt Share
-12%
100%
PAY
-1%
12%
FTA Generalists
-16%
79%
FTA DTT
+18%
9%
Total TV
1.55 DMAX
1.37 CIELO
1.38
1.24 IRIS
1.01 RAI 4
0.53
Q1 FY13
Source: Nielsen Data (YTD Sept 2014)
42
Q1 FY14
Q1 FY15
Avg. Price per TV spot (30 secs)
Market Share Sky Adv (%)
Var. CY14 vs CY13
Var. CY13 vs CY12
10.0%
Var. CY12 vs CY11
8.9%
+4%
-2%
Sky
+7%
7.8%
6.9%
5.3%
6.7%
-20%
5.8%
-27%
Rai
-17%
-15%
FY 08
FY 09
Source: Nielsen Data (YTD Sept 2014)
FY 10
FY 11
FY 12
FY 13
-19%
FY 14
-25%
43
Mediaset
Italian households (m)
25
4.7
21
12
9.0
All HHS
Have Sky
Prospects
Low income
Age <30; >65
2.2
Core
Prospects
Families
with kids
2.1
1.9
55-70 High
Income
Singles
1.7
1.1
Other
families
No TV, DTH
obstructed
DTH
Platforms/ business models
IPTV
OTT
FTA
Source: Sky estimates
44
1
2
Strengthen DTH
proposition through
increased product
penetration
Expand growth
opportunities with
diversified business
strategy
4
3
Leverage market
leading proposition in
innovation & content
Drive operating
efficiency
45
2006
2012
2014
–
2003
2010
2013
46
2015
•
•
•
•
•
47
•
Downloads
•
•
+100%
•
50m
24m
Q1 14
48
Q1 15
•
Life of Pi
•
•
•
49
•
•
•
•
50
1
2
Strengthen DTH
proposition through
increased product
penetration
Expand growth
opportunities with
diversified business
strategy
4
3
Leverage market
leading proposition in
innovation & content
Drive operating
efficiency
51
•
•
•
•
•
Fargo
52
Sport – season 2014/2015
53
Total
2010-12
2012-15
2015-18
• Matches: 380/380
• Exclusive matches : 56/380
• Avg. Cost p.a.: ca. €575m
• Matches: 380/380
• Exclusive matches : 56 /380
• Avg. cost p.a.: ca. €560m
• Matches: 380/380
• Exclusive matches : 132 /380
• Avg. cost p.a.: ca. €570m
€795m
€830m
€940m
(avg cost pa)
Source: Serie A public records, domestic Pay TV live rights only
54
F1 & Moto GP: a true Italian passion with year round great events
36 weekends in 2014 season
• Formula 1
20 races; 11 exclusive
Interested in sports (Individuals, million)
10.7
9.3
7.6
6.2
• Moto GP
19 races; 10 exclusive
3.9
3.6
1.7
Italian
Football
Formula 1
Source: Monitor Calcio 2013-2014 Italian Adult Population>14yo
55
UEFA
Champions
League
Moto GP
Tennis
Int’l Football
Rugby
Monaco
Malaysia China
Singapore
Austria
Italia
Germany
Abu Dhabi
U.S.A
In F1 since 1950
Record world titles:
16 manufacturers, 15 drivers
Australia
March
15 22 29
Spain
Bahrain
9 world championships
108 Grand Prix won
Only man to win all classes (125, 250,
500, Moto GP)
June
Hungary
July
August
Japan
September
5 12 19 26 3 10 17 24 31 7 14 21 27 5 12 19 26 2 9 16 23 30 6 13 20 27
Qatar
Valentino Rossi
UK
Canada
May
April
Belgium
France
Austin
Italy
Holland
Spain
Argentina
UK
Indianapolis
Germany
Catalonia
S.Marino
Russia
October
Japan
Aragon
Malaysia
56
November
4 11 18 25 1 8 15 2229
Australia
Czech Rep
Brazil
Valencia
Italy’s leading movies service
• Exclusive deals with 4 out of 6 Hollywood majors
– Disney, Fox, Paramount and Sony
• Excellent movie offer with over 2,000 titles per year
– 4x more movie premieres than competition
• Strong Italian movies offering plus Sky Cinema original
production
• 12 HD channels and successful use of pop-up/event
channels:
– Bond channels, Oscar channels, Star Wars, Monsters Attack,
Christmas channel, Disney Princess
• All movies in HD, On Demand and available on Sky Go
• Over 70% of customers take movies proposition – among
highest level in pay TV industry
57
Thor
• More exclusivity than any other platform
– 17 of the top 20 performers at the Box Office are available
on Sky Cinema of which 13 are exclusive
• Key partnerships with Italian movie distributors
– Deals granting significant exclusivity and ancillary rights on
strong titles (Dallas Buyers Club, The Wolf of Wall Street,
Rush, The Butler)
• Key franchises
– Bond, Indiana Jones, Star Wars, Transformers, Lord of The
Rings/Hobbit, Godfather
Data for period FY12 - FY14
58
• Widening offer with branded channels in key genres
• Sky Uno is only pay channel in the world to show exclusive
franchises such as:
– X-Factor, Italia’s Got Talent, Masterchef, Masterchef Junior,
Hell’s Kitchen
• Exclusive agreement with HBO – backbone of Sky Atlantic
• Creating successful track record in original commissions
• No 1 Arts channel in Italy
• Exclusive deal with Fox giving strong portfolio:
– FOX, Fox Life, Fox Crime, Fox Animation, Fox Comedy, Nat Geo,
Nat Geo People, Nat Geo Wild)
59
Sky Branded Channels & Original
Productions as key differentiators
X Factor Italia
Italia’s Got Talent
Masterchef Italia
• No 1 TV choice for
subscribers on
Thursday nights
• Exclusive to Sky Uno
from FY15 (from
March 2015)
• Highest rating show
on Sky Uno
• Best talent show
debut on Sky Uno
• No 1 show for
interactive
• Previously the top
talent show on FTA
for Mediaset for 3
years
• Consistently top
Italian cooking show
• Over 80% of
production cost
covered by product
placement and
advertising
• Production cost fully
covered by product
placement and
advertising
60
Masterchef Junior
Hell’s Kitchen
• Perfect companion
to Masterchef
franchise reinforcing
Sky Uno cooking
show line-up
• Launched April 2014 – already receiving 95% positive feedback on Sky
• Home of HBO product and Sky Italia original production
61
• Highest rating series on Sky
• Original production sold in over 100 countries to leading
broadcasters (e.g. HBO, Canal+, La Sexta)
• Season 2 re-commissioned for premiere in March 2016
• First ever sale of an Italian series into the US off the
pilot
“Italy’s answer to The Wire”
“Forget The Sopranos, here are The Savastanos”
“One of the most hotly anticipated new international drama series”
“A Scorsese Goodfellas”
62
STATUS Delivered
ON AIR April 2015
EPISODES 10x50’
The year 1992: Italy is in turmoil. The old political system ruled by Cristian
Democrats and Socialists is about to collapse under the biggest criminal
investigation in Italian history: Tangentopoli.
STATUS In post production
ON AIR May 2015
EPISODES 2x90’
New mysteries to be solved by the unconventional barman detective
created by best selling author Marco Malvaldi.
STATUS In post production
ON AIR October 2015
EPISODES 35x30’
Psycologist Giovanni Mari returns with new patients. Each episode focuses
on one (including Giovanni himself), each airing a different week night.
STATUS In development
ON AIR March 2016
EPISODES 12x50’
The Savastano’s saga will engage its worldwide audience for another
action-packed season, that will bring us into the darkest core of
Neapolitan mob.
STATUS In development
ON AIR May 2016
EPISODES 8x50’
Written and directed by Oscar winner Paolo Sorrentino. A new pope of
American origin is elected. He will bring unconventional and unsuspected
reforms to the Catholic Church.
STATUS In development
ON AIR November 2016
EPISODES 10x50’
The comic anti-hero that counts million of followers, will be finally brought to
the small screen in a high end international co-production.
STATUS in development
ON AIR April 2017
EPISODES 10x50’
Meet the Vatican Profilers, a mysterious organisation of the Catholic Church,
whose origins are shrouded in mystery. A modern thriller based on International
bestseller by Donato Carrisi.
63
• 8 part series written and directed by Paolo
Sorrentino (Oscar winner for “The Great
Beauty”)
• €20-25M production budget – 80%
financed by international partners, driven
by success of Gomorrah
• Due in 2016
YOUNG POPE
64
Key Partners Channels
65
1
2
Strengthen DTH
proposition through
increased product
penetration
Expand growth
opportunities with
diversified business
strategy
4
3
Leverage market
leading proposition in
content & innovation
Drive operating
efficiency
66
…€120m more to come
Cumulative €170m delivered FY10-13…
Gross Annual Savings (€m )
• New efficiency program launched in FY14
• Due to be completed in the next 18 months
42
• Targeting c.€120m run rate saving by FY17
equivalent to c.10% of cost base (ex-rights)
172
• €33m of savings already delivered in FY14
44
43
43
FY10
FY11
FY12
FY13
FY10 FY13
FY14 FY16
67
Supply Chain Excellence
Customer care optimisation
Diversion rate*
PVRHD Swap
51%
42%
34%
11.6%
18%
8.1%
Call Rate**
65%
3.8
48%
37%
3.2
FY11
FY12
FY13
3.9%
No fault found
4.3
3.9
5.6%
FY14
* Self service transactions (Web / IVR) as % of total (net retention activities)
** Avg Calls per sub
Source: Customer Satisfaction survey (July 2013)
FY11
68
FY12
FY13
21%
FY14
• Launched in Nov 2013
• Strong progress to date:
– Reached c.0.6m unique users
– 1m downloads (47% Tablet, 53% Smartphone)
– 1.3m transactions
– Mobile App achieved 22% of total upgrades
on Self Service channels (Web, Mobile App, IVR)
69
• 300bp improvement since FY11
Other operating costs as % of sales
• Achieved alongside multiple product launches
• Contributing to investment in the customer
proposition
26%
25%
• Continues to be an area of opportunity
for the future
24%
23%
FY11
Operating costs excluding programming
70
FY12
FY13
FY14
71
• Well positioned for growth in an attractive market
• Delivering the best customer experience
• Building a more valuable and stable customer base
• Continued investment in content and innovation
underpinned by efficiency programme
• Unlocking multi-platform and product growth
opportunity
• Sky Italia is an exciting part of a significant growth
opportunity at the new Sky
72