September 2009 YTD Operational Highlights September 2009 YTD Operational Highlights Operational Highlights Operational Highlights – Capadocia receives 3 International Emmy nominations for Best Drama Series, Best Leading Actress, Best Leading Actor. – HBO LAG Original Production receive awards: • Alice: Monte Carlo Television Festival • Capadocia: Geneva TV & GLAAD – Completed exhibition of Epitafios II & Sexo Urbano. – HD launched with Sky Brazil & DTV Panamericano. – Production of Capadocia II begins. – Marketing activities for premiere of FDC II (exhibition Oct 2009). – Warner output deal agreed in principle. – Mulher de Fases approved by Ancine ( Q4 highlight ) Financial Highlights Financial Highlights – Major currency impacts: • Net currency gains on collection in Brazil & Argentina ($1.2M) • Currency devaluation impact on revenues in Mexico ($2.0M). • Gain on bond transactions ($1.5M). 22
2009 September YTD Variance Analysis 2009 September YTD Variance Analysis Revenues higher than Reestimate Revenues higher than Reestimate •Revenues higher than Reestimate due to increased subscribers and exchange rates. •Ad Sales better than Reestimate due to exchange rates. Ad sales recorded at minimum guarantee. •Original Production revenues above Reestimate due to timing of sale Epitafios II ($520K), DVD sales of Capadocia ($10K) and boxing ($5K). •Service Fee revenues above Reestimate ($861K) due to higher basic channel distribution fees ($140K) and additional services requested by channels ($640K). Additional services include downlink ($98K), decoders ($78K) and regional office support ($464K). 23
2009 September YTD Variance Analysis 2009 September YTD Variance Analysis Expenses higher than Reestimate Expenses higher than Reestimate • Programming higher than Reestimate due higher EBU’s ($7.7M), offset by timing of MEGA title ($1.9M) and non movie exhibitions ($175K). Savings on second season of La Liga en Accion ($114K). • Cost of Licensing is higher due to timing of sales of Epitafios II and Capadocia DVD’s. • Marketing lower due to timing delays with Research ($344K), Media ($261K), Affiliate Marketing ($259K), Consumer Marketing ($230K), website development ($114K) and public relations ($62K). Delays associated with the timing of exhibition of LAG Original Productions. • G&A higher due to rent increases, higher utilities and office supplies. • Bad debt release associated with collection of past due balances. • Staff expenses higher due to foreign exchange ($1.3M), basic channel staff ($165K), timing of social security taxes ($161K) and freelancers ($123K). • Other income higher due to gain on bond transactions ($1.5M), gain on Brazil collections ($1.3M). These are offset by loss on Argentina collections ($100K) and revaluation of tax assessments in Brazil ($220K). • Taxes are above due to higher affiliate revenue, timing of Ancine credits ($2.2M), VAT accruals in Venezuela ($391K), higher VAT in Brazil due to higher service fees ($190K). 24
YTD 2009 September Actual vs. Reestimate YTD 2009 September Actual vs. Reestimate 2009 2009 Actual Reestimate Variance Gross Revenue Affiliate Cable $ 140,879 $ 137,298 $ 3,581 3% DTH 91,894 87,755 4,139 5% Total Affiliate Gross Revenue 232,773 225,053 7,720 3% Original Production/TV Rights 798 263 535 203% Ad Sales 6,175 5,636 538 10% Service Fees 23,136 22,275 861 4% Total Gross Revenue 262,881 253,227 9,655 4% Operating Expenses Programming 125,753 121,092 4,661 48% 48% 4% Cost of Licensing 597 0% 154 443 288% Sales 3,220 3,447 (228) 1% 1% -7% Marketing 12,850 14,050 (1,199) 5% 6% -9% Network Operation 8,616 8,617 (1) 3% 3% 0% General & Administrative 8,099 7,793 307 3% 3% 4% Bad Debt (398) (183) (215) 0% 0% Staff Expenses 38,175 36,432 1,743 15% 14% 5% Leasing Expenses 263 0% 251 0% 12 5% Depreciation 4,919 5,003 (83) 2% 2% -2% VAT, Property, and other Taxes 2,439 1,720 719 1% 1% 42% Total Operating Expenses 204,534 198,375 6,159 78% 78% 3% Other (Income)/Expense (3,828) (1,237) (2,591) -1% 0% 209% Operating Profit (Loss) 62,176 56,089 6,087 24% 22% 11% Taxes Condecine 2,022 1% 1,025 0% 997 Withholding & Income Taxes 29,447 27,670 1,777 11% 11% 6% Net Profit (Loss) $ 30,707 $ 27,394 $ 3,313 12% 11% 12% 25
YTD 2009 September Actual vs. Budget YTD 2009 September Actual vs. Budget 2009 2009 Actual Budget Variance Gross Revenue Affiliate Cable $ 140,879 $ 131,314 $ 9,565 7% DTH 91,894 81,833 10,061 12% Total Affiliate Gross Revenue 232,773 213,147 19,626 9% Original Production/TV Rights 798 1,840 (1,042) -57% Ad Sales 6,175 5,567 608 11% Service Fees 23,136 20,720 2,416 12% Total Gross Revenue 262,881 241,273 21,608 9% Operating Expenses Programming 125,753 109,526 16,227 48% 43% 15% 597 1,527 (930) 0% 1% -61% Sales 3,220 3,710 (490) 1% 1% -13% Marketing 12,850 15,261 (2,411) 5% 6% -16% Network Operation 8,616 8,680 (64) 3% 3% -1% General & Administrative 8,099 7,914 186 3% 3% 2% Bad Debt (398) (398) 0% Staff Expenses 38,175 34,685 3,490 15% 14% 10% Leasing Expenses 263 0% 241 0% 22 9% Depreciation 4,919 2% 4,994 2% (74) -1% VAT, Property, and other Taxes 2,439 1% 1,608 1% 831 52% Total Operating Expenses 204,534 188,146 16,388 78% 74% 9% Other (Income)/Expense (3,828) (573) (3,255) -1% 0% 568% Operating Profit (Loss) 62,176 53,701 8,475 24% 21% 16% Taxes Condecine 2,022 1,867 155 1% 1% Withholding & Income Taxes 29,447 25,223 4,223 11% 10% 17% Net Profit (Loss) $ 30,707 $ 26,610 $ 4,097 12% 11% 15% 26
YTD September 2009 vs. YTD September 2008 YTD September 2009 vs. YTD September 2008 2009 2008 Actual Actual Variance Gross Revenue Affiliate Cable $ 140,879 $ 136,138 $ 4,741 3% DTH 91,894 79,909 11,985 15% Total Affiliate Gross Revenue 232,773 216,047 16,726 8% Original Production/TV Rights 798 963 (164) Ad Sales 6,175 5,286 889 17% Service Fees 23,136 21,448 1,688 8% Total Gross Revenue 262,881 243,743 19,138 8% Operating Expenses Programming 125,753 99,857 25,895 48% 41% 26% Cost of Licensing 597 890 (293) 0% 0% -33% Sales 3,220 3,162 57 1% 1% 2% Marketing 12,850 5% 11,427 5% 1,424 12% Network Operation 8,616 8,794 (178) 3% 4% -2% General & Administrative 8,099 3% 7,628 3% 471 6% Bad Debt (398) 327 (725) 0% 0% -222% Staff Expenses 38,175 15% 36,336 15% 1,839 5% Leasing Expenses 263 337 (74) 0% 0% -22% Depreciation 4,919 4,536 383 2% 2% 8% VAT, Property, and other Taxes 2,439 2,033 405 1% 1% 20% Total Operating Expenses 204,534 175,329 29,205 78% 72% 17% Other (Income)/Expense (3,828) -1% (1,684) -1% (2,144) 127% Operating Profit (Loss) 62,176 24% 70,099 29% (7,923) -11% Taxes Condecine 2,022 2,022 1% 1% Withholding & Income Taxes 29,447 26,165 3,281 11% 11% 13% Net Profit (Loss) $ 30,707 12% $ 43,934 18% (13,227) -30% 27
2010 Budget Overview
2010 Budget Overview 2010 Budget Overview 2010 2009 Budget Reestimate Variance Revenues $ 380.8 $ 340.8 $ 40.0 Operating Expenses 296.9 255.3 41.5 Taxes/Other 32.7 35.5 (2.8) Net Income 51.3 50.0 1.3 Cash Distributed from 2008 4.3 12.2 (7.9) Cash Distributed from 2009 30.9 36.4 (5.5) Total Cash Distribution/Declaration 35.2 48.6 (13.4) Revenues: Continue growth in Affiliate (subscribers and exchange Revenues: rates), Original Production & Ad Sales revenue. Offset by lower service fees. Expenses: Higher due to increased Programming, Marketing & Staff Expenses: expenses. High profile HBO original productions. Cash Distribution: Estimated $30.9. Increased CAPEX and Original Cash Distribution: Production 29
2010 Budget vs. 2009 Reestimate 2010 Budget vs. 2009 Reestimate (in US$ unless otherwise indicated) 2010 2009 Budget Reestimate Variance Gross Revenue Affiliate Cable $ 196,444 $ 183,265 $ 13,179 7% DTH 143,448 118,274 25,173 21% Total Affiliate Gross Revenue 339,891 301,539 38,352 13% Original Production/TV Rights 3,037 2,618 419 16% Ad Sales & Sponsorships 8,075 7,492 583 8% Service Fees 29,809 29,160 649 2% Total Gross Revenue 380,813 340,808 40,004 12% Operating Expenses Programming 177,170 150,702 26,468 47% 44% 18% Cost of Licensing 1,899 0% 2,474 1% (575) -23% Sales 4,727 4,769 (42) 1% 1% -1% Marketing 23,311 17,994 5,317 6% 5% 30% Network Operation 13,597 11,517 2,079 4% 3% 18% General & Administrative 12,146 10,309 1,837 3% 3% 18% Bad Debt () 0% Staff Expenses 52,590 48,066 4,524 14% 14% 9% Leasing Expenses 206 311 (105) 0% 0% -34% Depreciation 9,080 7,032 2,048 2% 2% 29% VAT, Property & Sales Tax 2,143 2,151 (8) 1% 1% 0% Total Operating Expenses 296,869 255,325 41,544 78% 75% 16% Other (Income)/Expense (44) (1,250) 1,207 0% 0% -97% Operating Profit (Loss) 83,988 22% 86,734 25% (2,747) -3% Taxes Condecine, W/H and Income Tax 32,707 36,730 (4,023) 9% 11% -11% Net Profit (Loss) $ 51,280 $ 50,004 $ 1,276 13% 15% 3% 30
2010 Risks & Opportunities 2010 Risks & Opportunities Risks: Risks: • Currency Volatility • Customer Impacts • Debt of customers • Poor Treasury habits (foreign exchange losses) • End of buy through in Brazil (short term). Opportunities: Opportunities: • Recession is short term • End of buy through in Brazil (long term). 31
Affiliate Sales
Agenda Agenda � 2009 Highlights � Budget 2010 � Key Variables � Budget Premises � Affiliate Revenue � Subscribers � Basic and Premium Distribution � Variance Analysis: Budget vs. Reestimate � DTH � Affiliate Revenue by Region � Southern Cone � Mexico � Central America � Andes � Caribbean � Brazil 33
2009 Highlights 2009 Highlights � Pay TV market has been growing at higher rates than last year but in the low entry level packages. � Many operators have created new offers to target customers with a lower socioeconomic status (SES). � Satellite platforms facing difficulties competing against bundled offers by cable operators and telecommunication companies. � Telecommunication Companies’ new operations: � Oi Brazil � Telmex/America Movil � Peru � Dominican Republic � Central America � Flow – Trinidad and Grenada � Wireless Communication– St. Marten � FOX platform considerably stronger competitor as now can offer Premium and basic channels, with distribution of CineCanal (premium and basic), MovieCity, City buy, City star, City max and City family. 34
2009 Highlights 2009 Highlights � Brazil: � Lower subscribers than expected in Brazil mainly due to: � Net Servicios finalizing the digitalization process. No effort oriented to HBO growth due to the proximity of the end of buy through (EOB). � Telefonica CAPEX constraint and lack of focus in TV due to the low margin in this segment. � Several migration processes to a buy through offer: TV Filme acquired by SKY; Vivax and Big TV acquired by Net. � More competition due to Telecine increasing an already aggressive marketing investment due to the end of the buy through. Several affiliates may choose to launch Telecine affecting our penetration and growth. � Mexico : � Successful launch of Dish Networks � Megacable digitalization process resulted in an increase in premium subscribers. Sept. 2009 Dec. 2008 Dec. 2007 60,333 37,709 39,412 � Greater increase in revenues than in subscribers mainly due to: � Brazil and Venezuela F/X: Jan. - Sept. Reestimate 2009 Avg. 2009 2.08 2.40 Brazil Venezuela 2.15 2.50 � One time events: � DirecTV Settlement results: $728K � NEO Settlement results: $480K � Millicom minimum guarantee: $480K � TV Cable Ecuador audit results: $395K � Sky Brazil HD launching exclusivity period fee: $500K � TDS Curacao: $313K 35
Budget 2010
Budget 2010 Budget 2010 Key Variables � Financial impact of global crisis has not affected Latin American region as hard as expected. There has been general economic growth. � For budget purposes, some fluctuations are being considered. Actuals Budget/ Budget Jan. - Sept. Reestimate 2010 2009 Avg. 2009 Brazil 1.90 2.08 2.40 Colombia 2,099.00 2,278.02 2,500.00 Argentina 4.50 3.70 4.00 Venezuela 3.18 2.15 2.50 � Brazil, Chile and Colombia are being profiled as the most robust economies. � Mexico and Argentina continue to be very volatile. � Venezuela – Economic instability due to uncertainty in governmental decisions. 37
Budget 2010 Budget 2010 Budget Premises � Budget incorporates Cinemax in basic � Channel has three different types of distribution considered in budget. � Cinemax Basic already distributed in Colombia, Venezuela and Argentina with no impact on revenues. � MAX transitions to premium distribution and the Cinemax in basic enters the market with a new rate in regions such as Chile and Peru. � New distribution for Cinemax in basic in affiliates such as Oi Brazil, Embratel (Telmex Brazil) and DTV Pan American and DISH. � Brazil: � End of buy through in November of 2009 opens a significant opportunity in the mid and long term, although there are some current issues that are being considered: � Rate erosion for SKY and NET although budget includes a significant amount of new subscribers. SKY: NET: 2010 Latest 2010 Latest Projected YE subscriber Projected YE subscriber subscribers report subscribers report Variance Variance 515 444 71 510 434 76 � Penetration can be affected by the distribution of Telecine in platforms where HBO is already distributed (such as TVA). � TVA/Telefonica is considered as one platform. � Launch with Embratel (Telmex DTH platform). � Full year impact of launching Oi Brazil: $2.2M and 42K HBO YE subscribers. 38
Budget 2010 Budget 2010 Budget Premises � Mexico: � Televisa continues to consolidate the market by acquiring more operations and increasing its control of the market. May acquire Megacable in 2010 giving them control of about 60% of the revenues in the market. � Aggressive growth from Cablevision and Megacable: Cablevision: Megacable: � Full Year impact of DISH: $4.3M 2010 2009 2010 2009 Projected YE Reestimate YE Projected YE Reestimate YE subscribers subscribers Variance subscribers subscribers Variance � Pan American: 120 100 20 110 58 52 � Argentina: � Launched Red Intercable � New telecommunications law has been approved. Argentine government is in the process of drafting the final regulation. Revenue impact remains unclear until said regulation is completed. � Futbol and Cinecanal have moved to basic distribution jeopardizing the growth of premium business. � Venezuela: � Political environment affecting cable operators. � Cable operators are unable to get households (set top boxes) due to the restrictions on U.S. Dollars. � Government has imposed limitations on promotions offered by cable operators. � Central America: � Strategic alliance with Claro TV with the objective of combating the under reporting of subscribers and pirating and move toward total digital distribution and a cleaner subscriber base. � Due to said alliance, some affiliates are not considered in budget since no agreement has been reached (have not wanted to accept the subscriber increase). � Chile/Peru: � Key affiliates have advanced digitalization network creating the base to initiate the transition of HBO/MAX from basic to premium. � Pan Regional: � HD and SVOD business materialized in 2009 and is projected to continue growing throughout 2010 by using it as a tool to adjust rates and/or enhance package offerings. 39
Budget 2010 Budget 2010 Affiliate Revenue BUDGET REESTIMATE BUDGET 10 VS REEST 09 ACTUAL BUDGET 10 VS ACTUAL 08 2010 2009 Diff. % 2008 Diff. % (000's) DTV Panamericana 42,272 38,813 3,460 8.9% 31,574 10,699 33.9% Sky Brazil 48,010 37,157 10,854 29.2% 37,970 10,040 26.4% Sky Latin America 19,358 19,478 (119) -0.6% 20,814 (1,455) -7.0% DISH/MVS 4,260 1,336 2,924 218.9% 1,041 3,219 309.0% Oi 2,226 - 2,226 - 2,226 Telmex/America Movil 9,683 6,602 3,080 46.7% 3,683 6,000 162.9% Telefonica 17,638 14,889 2,749 18.5% 11,268 6,370 56.5% DTH Revenue 143,448 118,274 25,173 21.3% 106,350 37,098 34.9% Southern Region 35,491 34,988 503 1.4% 35,974 (483) -1.3% Mexico Region 24,536 19,724 4,812 24.4% 19,931 4,605 23.1% Central America Region 15,658 16,175 (517) -3.2% 13,846 1,811 13.1% Andes Region 36,108 33,246 2,862 8.6% 28,584 7,525 26.3% Caribbean Region 5,183 4,927 256 5.2% 3,548 1,635 46.1% Brazil Region 79,467 74,205 5,262 7.1% 76,803 2,665 3.5% CATV Revenue 196,444 183,265 13,179 7.2% 178,686 17,758 9.9% TOTAL REVENUE 339,891 301,539 38,352 12.7% 285,036 54,856 19.2% � Budget revenue has an increase of 12.7% and 19.2% when compared to 2009 Reestimate and 2008 Actuals respectively. � Budget Includes $9.8M in revenue from Cinemax in basic. New channel projected to being invoicing in 2010. � DTH platform represents 65.6% and 67.6% of the growth vs. 2009 reestimate and 2008 actuals respectively. 40
Budget 2010 Budget 2010 HBO YE Subscribers BUDGET ACTUAL SEPT BUDGET 10 VS SEPT 09 REESTIMATE BUDGET 10 VS REEST 09 ACTUAL BUDGET 10 VS ACTUAL 08 2010 2009 Diff. % 2009 Diff. % 2008 Diff. % (000's) DTV Pan-American 975 805 170 17.4% 824 151 18.3% 693 282 40.6% Sky Brazil 515 443 72 13.9% 449 66 14.7% 410 105 25.7% Sky Latin America 341 317 24 6.9% 355 (14) -3.9% 321 20 6.3% DISH/MVS 100 50 50 49.6% 55 45 81.8% 15 85 546.0% Oi 42 3 39 93.0% - 42 - 42 Telmex/America Movil 403 293 110 27.4% 285 118 41.5% 209 194 93.2% Telefonica 343 257 86 25.1% 294 49 16.6% 226 117 52.1% DTH Subs 2,719 2,169 550 20.2% 2,262 457 20.2% 1,873 845 45.1% Southern Region 1,109 1,109 0 0.0% 1,141 (32) -2.8% 1,164 (54) -4.7% Mexico Region 369 252 118 31.9% 268 102 38.0% 233 137 58.8% Central America Region 559 552 7 1.3% 580 (21) -3.6% 489 70 14.3% Andes Region 615 775 (161) -26.1% 782 (168) -21.4% 698 (84) -12.0% Caribbean Region 81 69 12 15.0% 68 13 19.1% 58 23 40.2% Brazil Region 790 757 33 4.2% 783 7 1.0% 771 19 2.5% CATV Subs 3,524 3,514 9 0.3% 3,622 (99) -2.7% 3,413 111 3.3% TOTAL SUBS 6,242 5,683 559 9.0% 5,884 358 6.1% 5,286 957 18.1% � Budget subscribers show an expected increase of 6.1% and 18.1% when compared to 2009 Reestimate and 2008 Actuals respectively. � Expected decrease in Andean Region is a result of the first stage of Cablemagico Peru’s transition from basic to premium distribution. 41
Budget 2010 Budget 2010 MAX YE Subscribers BUDGET ACTUAL SEPT BUDGET 10 VS SEPT. 09 REESTIMATE BUDGET 10 VS REEST 09 ACTUAL BUDGET 10 VS ACTUAL 08 2010 2009 Diff. % 2009 Diff. % 2008 Diff. % (000's) DTV Pan-American 768 978 (209) -21.4% 973 (204) -21.0% 791 (22) -2.8% Sky Brazil 509 436 72 16.5% 444 65 14.6% 399 109 27.3% Sky Latin America 351 322 29 9.1% 343 8 2.4% 321 30 9.4% DISH/MVS 88 35 53 150.4% 51 37 71.7% - 88 Oi 42 2 40 1949.8% - 42 - 42 Telmex/America Movil 480 347 133 38.2% 324 156 48.3% 209 271 130.0% Telefonica 478 368 110 29.8% 415 63 15.2% 377 102 27.0% DTH Subs 2,716 2,489 227 9.1% 2,550 166 6.5% 2,096 620 29.6% Southern Region 2,679 2,417 262 10.9% 2,418 261 10.8% 2,509 170 6.8% Mexico Region 539 992 (453) -45.7% 986 (447) -45.3% 986 (447) -45.4% Central America Region 583 588 (4) -0.7% 630 (46) -7.4% 538 46 8.5% Andes Region 686 3,146 (2,461) -78.2% 3,407 (2,721) -79.9% 2,738 (2,052) -75.0% Caribbean Region 76 69 7 10.1% 68 7 10.8% 58 18 30.4% Brazil Region 561 555 6 1.0% 555 6 1.1% 553 8 1.4% CATV Subs 5,124 7,767 (2,643) -34.0% 8,063 (2,940) -36.5% 7,382 (2,258) -30.6% TOTAL SUBS 7,840 10,255 (2,416) -23.6% 10,613 (2,773) -26.1% 9,478 (1,639) -17.3% � Budget subscribers have an expected decrease of 26.1% and 17.3% when compared to 2009 reestimate and 2008 actuals respectively. � Expected transition to Cinemax in basic: Gremio, DTV Colombia and Mexico. 42
Budget 2010 Budget 2010 CINEMAX IN BASIC YE Subscribers BUDGET REESTIMATE BUDGET 10 VS REEST 09 ACTUAL BUDGET 10 VS ACTUAL 08 2010 2009 Diff. % 2008 Diff. % (000's) DTV Pan-American 1,998 - 1,998 1,998 Sky Brazil - - - - Sky Latin America - - - - DISH/MVS 143 - 143 143 Oi 350 - 350 350 Telmex/America Movil 102 - 102 102 Telefonica 324 - 324 324 DTH Subs 2,917 - 2,917 - 2,917 Southern Region 1,839 - 1,839 1,839 Mexico Region 1,092 - 1,092 1,092 Central America Region 110 - 110 110 Andes Region 3,076 - 3,076 3,076 Caribbean Region - - - - Brazil Region 1,142 - 1,142 1,142 CATV Subs 7,259 - 7,259 - 7,259 TOTAL SUBS 10,176 - 10,176 - 10,176 � Cinemax in basic essentially within three groups � Already in region with no impact on revenue – Argentina, Mexico, Venezuela, Colombia � MAX transitions to premium and Cinemax in basic enters with a new rate – Chile, Peru � New distribution – Brazil, DTV Pan-American, DISH 43
Budget 2010 Budget 2010 Basic and Premium Distribution: Revenue BUDGET REESTIMATE BUDGET 10 VS REEST 09 ACTUAL BUDGET 09 VS ACTUAL 08 2010 2009 Diff. % 2008 Diff. % (000's) HBO Premium Distribution Rev 212,505 187,551 24,953 13.3% 179,714 32,791 18.2% HBO Basic Distribution Rev 41,921 39,826 2,095 5.3% 36,996 4,925 13.3% Total Revenue- HBO 254,425 227,377 27,048 11.9% 216,709 37,716 17.4% MAX Premium Distribution Rev 51,796 45,003 6,793 15.1% 41,650 10,146 24.4% MAX Basic Distribution Rev 23,847 29,158 (5,311) -18.2% 26,677 (2,829) -10.6% Total Revenue- MAX 75,644 74,162 1,482 2.0% 68,326 7,317 10.7% Cinemax in Basic Distribution Rev 9,822 - 9,822 - 9,822 Total Revenue- Cinemax Basic 9,822 - 9,822 - 9,822 Total Premium Distribution Rev 264,301 232,555 31,746 13.7% 221,364 42,937 19.4% Total Basic Distribution Rev 65,768 68,984 (3,216) -4.7% 63,672 2,096 3.3% Total Revenue- HBO/MAX 330,069 301,539 28,530 9.5% 285,036 45,033 15.8% - Cinemax in Basic Distribution Rev 9,822 - 9,822 - 9,822 Total Revenue- Cinemax Basic 9,822 - 9,822 - 9,822 Total Revenue 339,891 301,539 38,352 12.7% 285,036 54,856 19.2% 44
Budget 2010 Budget 2010 Basic and Premium Distribution: Subscribers BUDGET ACTUAL SEPT. BUDGET 10 VS SEPT. 09 REESTIMATE BUDGET 10 VS REEST 09 ACTUAL BUDGET 10 VS ACTUAL 08 2010 2009 Diff. % 2009 Diff. % 2008 Diff. % (000's) HBO Premium EOY Subs 3,938 3,201 737 23.0% 3,435 503 14.6% 2,961 977 33.0% HBO Basic EOY Subs 2,304 2,482 (178) -7.2% 2,449 (145) -5.9% 2,324 (20) -0.9% Total Subscribers- HBO 6,242 5,683 559 9.8% 5,884 358 6.1% 5,286 957 18.1% MAX Premium EOY Subs 3,607 3,001 606 20.2% 3,119 487 15.6% 2,684 923 34.4% MAX Basic EOY Subs 4,233 7,255 (3,021) -41.6% 7,494 (3,260) -43.5% 6,794 (2,561) -37.7% Total Subscribers- MAX 7,840 10,255 (2,416) -23.6% 10,613 (2,773) -26.1% 9,478 (1,639) -17.3% Cinemax Basic EOY Subs 10,176 - 10,176 10,176 - 10,176 Cinemax Basic EOY Subs 10,176 - 10,176 - 10,176 - 10,176 45
Variance Analysis
Variance Analysis Variance Analysis BUDGET 2010 vs REESTIMATE 2009 Affiliates Revenue Reestimate 2009 301,539 DTH: Sky Brazil 10,854 � Out of the $38M projected total DISH 2,924 growth for 2010: DirecTV Colombia 2,560 � 28% (~$10.9M) is attributable Telmex Chile 2,246 Oi Brazil 2,226 to Sky Brazil Telefonica Brazil 1,207 � 17% (~$6.4M) is due to Telefonica Venezuela 995 Net/Vivax Embratel (Telmex) 515 � 13% (~4.8M) is a result of DirecTV Chile 514 Mexico CATV Others 1,133 Total DTH 25,173 � 9% (~3.5M) is because of DTV CATV: Pan American. Brazil - Net/Vivax 6,407 Mexico - Megacable 2,800 Mexico - Cablevision Mexico 712 Mexico - Cablemas 504 Colombia - EPM 959 Colombia - Telmex 435 Peru - Cablemagico 573 Peru - Telmex 239 Others 550 Total CATV 13,179 Affiliates Revenue Budget 2010 339,891 47
Variance Analysis Variance Analysis DUE TO: TOTAL BUDGET 10 REESTIMATE 09 F/X SUBS PRICE MIX VARIANCE Sky Brazil 48,010 37,157 7,969 5,142 (2,257) $ 10,854 Telefonica Brazil 8,419 7,213 1,465 287 (546) $ 1,207 NET/VIVAX $ 6,407 54,925 48,517 9,706 3,131 (6,430) DirecTV Argentina $ (205) 11,921 12,126 (2,017) 1,308 504 Argentina MSOs $ (468) 7,667 8,135 (1,321) 520 333 DirecTV Colombia $ 2,560 5,601 3,041 683 1,438 439 Telefonica Colombia $ 122 1,855 1,733 258 (95) (42) DirecTV Chile $ 514 3,193 2,679 413 336 (235) Telefonica Chile $ 191 4,473 4,282 593 31 (432) Telmex Chile $ 2,246 8,495 6,249 1,162 2,179 (1,095) DirecTV Venezuela $ (576) 16,599 17,175 (4,975) 1,316 3,083 Telefonica Venezuela $ 995 1,770 775 (576) 1,426 145 Others $ 14,505 166,963 152,457 - 2,063 12,442 TOTAL $ 339,891 $ 301,539 $ 13,361 $ 19,082 $ 5,909 $ 38,352 48
Variance Analysis Variance Analysis DTH � BRAZIL � Sky: � Revenue show a 29.2% ($10.9M) expected increase over reestimate because of the favorable exchange rate and a 14.7% projected increase in YE subscribers 515K v. 449K (budget v reestimate). Subscriber growth can be partially attributable to acquisition of TV Filme. � Telefonica: Increase in revenue compared to reestimate is primarily a result of the favorable exchange rate. � New Players: � Embratel (Telmex Brazil) projected to contribute $515K in revenues by YE. � Oi Brazil has $2.2M foreseen revenues by YE. � LATIN AMERICA � DTV Panamericana projects 8.9% ($3.5M) increment in revenue compared to reestimate: � Chile has a projected increase revenue of 19.2% ($514K) mainly due to a favorable exchange rate. � Colombia has an anticipated increase of 84.2% ($2.6M) primarily as a result a 37% (19K) projected increase in HBO YE subscribers. 49
Variance Analysis Variance Analysis DTH (CONTD.) � LATIN AMERICA (CONTD.) � Telmex/America Movil Latin America foresees a 38.9% ($2.6M) increase in revenue: � Chile anticipates a 35.9% ($2.2M) increase mainly because of an expected increase of 35% (97k) in YE HBO subscribers and also due to a favorable exchange rate when compared to the 2009 reestimate. � Dominican Republic and Peru have a combined projected revenue of $311K by YE (neither was considered in the 2009 Reestimate. � DISH has an anticipated revenue increase of $2.9M compared to reestimate as a result of 81.8% (45K) higher number of projected YE subscribers. Multivision migration has been completed. � Telefonica has an expected increase of 20.1% ($1.5M) in revenue: � Venezuela has an anticipated increase of $995K versus reestimate due to an increase of 25K in subscribers. 50
Variance Analysis Variance Analysis CATV � BRAZIL � Net/Vivax 13.2% ($6.4M) projected increase in revenue is due primarily to a favorable exchange rate compared to 2009 reestimate and a 12% anticipated increase in subscribers by YE. � LATIN AMERICA � Argentina: � 6.4% decrease in revenue is largely attributable to an unfavorable exchange rate as compared to the 2009 reestimate (4.50 budget rate vs. an average rate of 3.82 for the reestimate). � Mexico: � Cinemax in Basic has $2M in revenues projected by YE from various affiliates. � Megacable: Projected increase of 89.3% ($2.8M) is mainly due to the Hbo/Max bundled package ($2.1M in revenue and 35K subs by YE). � Colombia: � Cinemax in Basic has $3.5M in revenues projected by YE: • EPM: $1.3M • Telmex: $1.9M . 51
DTH
DTH DTH BUDGET REESTIMATE BUDGET 10 VS REEST 09 ACTUAL BUDGET 10 VS ACTUAL 08 2010 2009 Diff. % 2008 Diff. % (000's) Argentina 11,921 12,126 (205) -1.7% 10,908 1,012 9.3% Chile 3,193 2,679 514 19.2% 2,713 481 17.7% Venezuela 16,599 17,175 (576) -3.4% 11,094 5,505 49.6% Colombia 5,601 3,041 2,560 84.2% 3,603 1,998 55.5% Others 4,959 3,792 1,167 30.8% 3,256 1,702 52.3% DTV Pan-American Revenue 42,272 38,813 3,460 8.9% 31,574 10,699 33.9% Mexico 17,196 17,246 (50) -0.3% 18,817 (1,621) -8.6% Brazil 48,010 37,157 10,854 29.2% 37,970 10,040 26.4% Others 2,163 2,232 (70) -3.1% 1,996 166 8.3% SKY Revenue 67,369 56,634 10,734 19.0% 58,784 8,585 14.6% Chile 4,473 4,282 191 4.5% 3,758 715 19.0% Venezuela 1,770 775 995 128.3% - 1,770 Colombia 1,855 1,733 122 7.0% 1,261 594 47.1% Peru 1,120 886 234 26.4% 785 335 42.7% Brazil 8,419 7,213 1,207 16.7% 5,464 2,956 54.1% Telefonica Revenue 17,638 14,889 2,749 18.5% 11,268 6,370 56.5% Chile 8,495 6,249 2,246 35.9% 3,683 4,813 130.7% Central America 362 353 9 2.7% - 362 Peru 140 - 140 - 140 Dominican Republic 171 - 171 - 171 Brazil 515 - 515 - 515 Telmex/ America Movil Revenue 9,683 6,602 3,080 46.7% 3,683 6,000 162.9% Oi 2,226 - 2,226 - 2,226 DISH 4,260 1,336 2,924 218.9% 1,041 3,219 309.0% DTH Others Revenue 6,486 1,336 5,150 385.5% 1,041 5,445 522.8% TOTAL DTH REVENUE 143,448 118,274 25,173 21.3% 106,350 37,098 34.9% 53
Affiliate Revenue by Region
Affiliate Revenue by Region Affiliate Revenue by Region Southern Cone BUDGET REESTIMATE BUDGET 10 VS REEST 09 ACTUAL BUDGET 10 VS ACTUAL 08 2010 2009 Diff. % 2008 Diff. % (000's) Argentina 11,921 12,126 (205) -1.7% 10,908 1,012 9.3% Chile 3,193 2,679 514 19.2% 2,713 481 17.7% Uruguay 482 441 41 9.3% 381 101 26.4% Telefonica Chile 4,473 4,282 191 4.5% 3,758 715 19.0% Telmex Chile (Zap TV) 8,495 6,249 2,246 35.9% 3,683 4,813 130.7% Total DTH 28,565 25,778 2,787 10.8% 21,443 7,121 33.2% Argentina 10,965 11,716 (751) -6.4% 12,575 (1,609) -12.8% Chile 14,588 14,446 141 1.0% 14,845 (257) -1.7% Uruguay 5,244 4,396 847 19.3% 4,183 1,060 25.3% Bolivia 3,808 3,576 232 6.5% 3,426 381 11.1% Paraguay 887 853 34 4.0% 945 (58) -6.1% Total CATV 35,491 34,988 503 1.4% 35,974 (483) -1.3% Total Southern Region 64,056 60,766 3,290 5.4% 57,417 6,639 11.6% � Region represents 18.9% of overall budget revenue 55
Affiliate Revenue by Region Affiliate Revenue by Region Mexico BUDGET REESTIMATE BUDGET 10 VS REEST 09 ACTUAL BUDGET 10 VS ACTUAL 08 2010 2009 Diff. % 2008 Diff. % (000's) DISH 4,260 1,336 2,924 218.9% 1,041 3,219 309.0% Sky Mexico 17,196 17,246 (50) -0.3% 18,817 (1,621) -8.6% Total DTH 21,456 18,582 2,874 15.5% 19,859 1,597 8.0% Mexico 24,536 19,724 4,812 24.4% 19,931 4,605 23.1% Total CATV 24,536 19,724 4,812 24.4% 19,931 4,605 23.1% Total Mexico Region 45,992 38,305 7,687 20.1% 39,790 6,203 15.6% � Region represents 13.5% of overall budget revenue. 56
Affiliate Revenue by Region Affiliate Revenue by Region Central America BUDGET REESTIMATE BUDGET 10 VS REEST 09 ACTUAL BUDGET 10 VS ACTUAL 08 2010 2009 Diff. % 2008 Diff. % (000's) Sky Costa Rica 692 795 (103) -13.0% 821 (130) -15.8% Sky Guatemala 237 229 8 3.7% 331 (94) -28.3% Sky Nicaragua 98 169 (71) -41.8% 70 28 40.4% Sky El Salvador 38 - 38 - 38 Sky Honduras 35 - 35 - 35 America Movil 362 353 9 2.7% - 362 Total DTH 1,462 1,546 (83) -5.4% 1,222 240 19.6% Costa Rica 7,303 7,013 290 4.1% 5,198 2,105 40.5% Guatemala 2,590 3,778 (1,187) -31.4% 4,140 (1,550) -37.4% El Salvador 2,936 2,583 353 13.6% 2,122 814 38.3% Honduras 2,423 2,505 (82) -3.3% 1,778 645 36.3% Nicaragua 405 301 104 34.6% 607 (202) -33.3% Total CATV 15,658 16,181 (523) -3.2% 13,846 1,811 13.1% Total Central America Region 17,120 17,726 (606) -3.4% 15,069 2,052 13.6% *Sky includes DTV for actuals � Region represents 5.0% of overall budget revenue 57
Affiliate Revenue by Region Affiliate Revenue by Region Andes BUDGET REESTIMATE BUDGET 10 VS REEST 09 ACTUAL BUDGET 10 VS ACTUAL 08 2010 2009 Diff. % 2008 Diff. % (000's) Venezuela 16,599 17,175 (576) -3.4% 11,094 5,505 49.6% Colombia 5,601 3,041 2,560 84.2% 3,603 1,998 55.5% Ecuador 1,104 758 346 45.6% 720 384 53.3% Sky Panama 475 467 8 1.8% 454 21 4.6% Peru 1,501 1,060 441 41.6% 856 645 75.3% Sky Dominican Republic 587 567 21 3.7% 320 267 83.6% Telefonica Peru 1,120 886 234 26.4% 785 335 42.7% Telefonica Venezuela 1,770 775 995 128.3% - 1,770 Telefonica Colombia 1,855 1,733 122 7.0% 1,261 1,261 100.0% Telmex Peru 140 - 140 - 140 America Movil Dominican Republic 171 - 171 - 171 Total DTH 30,923 26,462 4,461 16.9% 19,093 11,830 62.0% Peru 11,078 9,997 1,081 10.8% 8,876 2,202 24.8% Colombia 7,663 6,376 1,288 20.2% 5,571 2,092 37.5% Ecuador 4,839 5,503 (664) -12.1% 3,677 1,162 31.6% Venezuela 6,737 6,539 198 3.0% 5,849 888 15.2% Dominican Republic 3,246 2,795 451 16.1% 2,743 503 18.3% Panama 2,544 2,035 509 25.0% 1,866 678 36.3% Total CATV 36,108 33,246 2,862 8.6% 28,584 7,525 26.3% Total Andes Region 67,031 59,708 7,323 12.3% 47,677 19,354 40.6% � Region represents 19.7% of overall budget revenue 58
Affiliate Revenue by Region Affiliate Revenue by Region Caribbean BUDGET REESTIMATE BUDGET 10 VS REEST 09 ACTUAL BUDGET 10 VS ACTUAL 08 2010 2009 Diff. % 2008 Diff. % (000's) Curacao 355 302 53 17.5% 230 126 54.7% Aruba 10 14 (4) -28.9% 19 (9) -45.8% Trinidad 1,506 1,216 291 23.9% 1,050 456 43.5% Total DTH 1,872 1,532 339 22.1% 1,298 574 44.2% Curacao 653 859 (206) -24.0% 541 111 20.5% Aruba 481 429 53 12.3% 372 109 29.4% St. Lucia 732 686 46 6.7% 663 69 10.4% Trinidad/Bonaire/Grenada 2,298 2,004 294 14.7% 991 1,307 132.0% Barbados 940 950 (10) -1.0% 981 (41) -4.2% N. Antilles 26 - 26 - 26 Jamaica 52 - 52 - 52 Total CATV 5,183 4,927 256 5.2% 3,548 1,635 46.1% Total Caribbean Region 7,055 6,460 595 9.2% 4,847 2,208 45.6% � Region represents 2.1% of overall budget revenue. 59
Affiliate Revenue by Region Affiliate Revenue by Region Brazil BUDGET REESTIMATE BUDGET 10 VS REEST 09 ACTUAL BUDGET 10 VS ACTUAL 08 2010 2009 Diff. % 2008 Diff. % (000's) SKY Brazil 48,010 37,157 10,854 29.2% 37,970 10,040 26.4% Telefonica Brazil 8,419 7,213 1,207 16.7% 5,464 2,956 54.1% Embratel (Telmex) 515 - 515 - 515 Oi 2,226 - 2,226 - 2,226 Total DTH 59,170 44,369 14,801 33.4% 43,434 15,736 36.2% TVA 18,920 18,271 649 3.6% 15,418 3,501 22.7% TV Filme - 1,190 (1,190) -100.0% 1,927 (1,927) -100.0% NEO 4,290 5,092 (802) -15.7% 7,128 (2,838) -39.8% NET/Vivax 54,925 48,517 6,407 13.2% 51,354 3,570 7.0% Independents 1,333 1,135 198 17.4% 975 358 36.7% Brazil Region 79,467 74,205 5,262 7.1% 76,803 2,665 3.5% Total Brazil Region 138,637 118,574 20,063 16.9% 120,237 18,400 15.3% � Region represents 40.8% of overall budget revenue. 60
Ad Sales HBO Original Production Revenue (Home Video & Licensing)
Budget 2010 Budget 2010 Ad Sales Ad Sales • In line with 2009 ad sales. • Increases associated with foreign exchange. HBO LAG Original Production Licensing HBO LAG Original Production Licensing 2010 Budget 2009 Reestimate Variance Epitafios (S2) 858 501 357 Capadocia (S2) 667 667 Mandrake 387 660 -274 Filhos do Carnaval (S1 & S2) 298 278 19 Capadocia 234 333 -100 Golden Boy 198 75 123 Epitafios (S1) 142 49 93 Alice 123 504 -381 Sexo Urbano (S2) 67 70 -3 Sexo Urbano (S1) 20 21 -1 Boxing 44 90 -46 Los Simuladores 35 -35 3,037 2,618 419 62
Service Fees Service Fees
Service Fees Service Fees Services to Basic Channels 2010 Budget 2009 Reestimate Variance Distribution Fees 11,803 8,957 2,846 Marketing Support 2,000 2,000 Technology Fees 12,235 13,435 (1,200) Administration & Facilities 1,703 1,846 (142) 2,067 2,922 (855) Globecast and SARs 29,809 29,160 649 Total Overview: Overview: •Fee basis same as 2009 Reestimate • Fees based on established rate card for basic channels • Average increase: • USA fees: 3% • Venezuela fees: 25% 64
Distribution Fees Distribution Fees 2010 Budget 2009 Reestimate Distribution Services to Basic Channels Variance Affiliate Revenues 194,000 165,961 28,039 Number of Networks 8 8 Distribution fees Flat Fee 2,800 2,800 Incremental Fee 6,199 5,562 637 Incentive Fee 2,804 595 2,209 Total Distribution Fees 11,803 8,957 2,846 Affiliate Marketing Support Group Affiliate Development 2,000 2,000 Channel Specific Marketing Total Affiliate Marketing Support 2,000 2,000 Miscellaneous 13,803 10,957 2,846 Total Distribution Division Fees Incremental Fee: Incremental Fee: • Increase due to higher expected Affiliate Revenues compared to 2009 • Basic Channels: 17% growth in Affiliate Revenues Growth Incentive Fee: Growth Incentive Fee: • Increase due to higher Affiliate Revenue growth rate 65
Technology Fees Technology Fees Technology Services to Basic Channels 2010 Budget 2009 Reestimate Variance Number of Networks EOP 7 8 (1) Number of Feeds EOP Sunrise 23 28 (5) Caracas 7 7 - Total 30 35 (5) Transponder Fees 4,752 4,752 Sunrise Service Fees Uplink /Origination /MC /Ingest / 4,113 4,388 (275) ...Dekocast ,Signal Monitoring Post-Production Subtitling Total Sunrise Service Fees 4,113 4,388 (275) Caracas Service Fees Uplink 547 531 16 Origination Post-Production 106 268 (162) TQC 1,328 1,185 144 Traffic 81 246 (166) Library 358 743 (385) Subtitling 570 940 (370) Affiliate Authorization 320 240 80 Production External 60 142 (83) Production Studio Total Caracas Service Fees 3,370 4,295 (925) 12,235 13,435 (1,200) Total Technology Division Fees 66
Technology Fees Technology Fees Overall decrease of $1.2M Overall decrease of $1.2M •WBTV leaving 2Q 2010 •E! Entertainment transfer of 2 feeds to VC Studios, library services, TQC Services Transponder: Transponder: •Same as 2009 Reestimate Sunrise: Sunrise: •Lower Basic Channel revenues due to transfer of some services to VC Studios for E!, A&E, THC and Biography Caracas: Caracas: •Decrease in Post-Production hours •E! TQC service transferred to VC Studios, offset by prices increase and higher number of hours for SET and Animax •Traffic service decreased •Decrease in number of tapes. No library services for E! •Decrease in subtitling service/volumes 67
Administrative Fees Administrative Fees Administrative Services to Basic Channels 2010 Budget 2009 Reestimate Variance - - - Research Condecine Support 35 84 (49) IT Support, Infrastructure & Systems 468 683 (215) 80 76 4 Fiber Connections Human Resources 116 93 23 Controller 274 221 53 121 97 24 Services & Logistics Taxation 243 236 7 Legal 221 214 6 146 142 4 Internal Audit Basic Channels F&A - - - 1,703 1,846 (142) Total Overall decrease of $142K: Overall decrease of $142K: •Less volume of Condecine projects. •Less IT infrastructure (IT remote and onsite support services (WBTV). 68
Other Service Fees Other Service Fees 2010 Budget 2009 Reestimate Variance Fixed Asset Leasing (Globecast) 1,322 1,103 219 Other Service Fees 746 1,820 (1,074) 2,068 2,923 (855) Total Overall decrease of $855K: Overall decrease of $855K: • Globecast minimum guarantee after third year lease • Other Services to basic channels included in budget (ie: downlink). 69
Rate Cards Rate Cards (in US$ except for %) 2009 Cost Driver 2010 Budget Reestimate % Change Technology Rate Cards Sunrise Uplink Per feed (monthly price) 6,514 6,324 3% Origination Per feed (monthly price) 4,098 3,978 3% Master Control (performed in Caracas) Per feed (monthly price) 5,589 4,471 25% Ingest Per feed (monthly price) 533 518 3% Dekocast Per feed (monthly price) 229 223 3% Signal Monitoring Per feed (monthly price) 369 358 3% TQC HD Enhancement Per suite (monthly price) 2,827 0% Digital Cue Tones Per feed (monthly price) 85 0% DVB Subtitle System Per feed (monthly price) 100 0% Caracas (includes VAT) Post Production Price per labor hour 58.75 47 25% TQC Price per labor hour 60.56 48.45 25% Traffic Price per labor hour 44.06 35.25 25% Library Price per tape 0.75 0.75 0% Subtitling Spanish Only Price per minute Affiliate Authorization Price per decoder per month 2.55 2.04 25% Production External Price per day 422 338 25% Production Studio Price per day 995 865 15% Increases due to CPI increase: Increases due to CPI increase: •US: 3% •Venezuela: 25% 70
Rate Cards Rate Cards (in US$ except for %) 2009 Cost Driver 2010 Budget Reestimate % Change Administrative Services Price List Condecine Support Per project (minimum rate) 5,570 5,408 3% IT Support - Remote Per employee (per year) 2,339 2,271 3% IT Support - On Site US Per day 2,060 2,000 3% 1,170 1,136 IT Infrastructure Per employee (per year) 3% IT General Financial Systems Per authorized user 3,509 3,407 3% IT Traffic Systems Per authorized user 1,170 1,136 3% Human Resources Caracas Per network 57,833 46,266 25% Controller US Per network 11,696 11,356 3% 131,270 105,016 Controller Caracas Per network 25% Services & Logistics Per network 60,586 48,469 25% Taxation Per network 40,436 39,258 3% Legal Per network 73,520 71,379 3% Internal Audit Per network 29,242 28,390 3% Increases due to CPI increase: Increases due to CPI increase: •US: 3% •Venezuela: 25% 71
Sales & Marketing Sales & Marketing
Sales & Marketing Sales & Marketing 2010 2009 Budget Reestimate Variance Sales $ 4,727 $ 4,769 $ (42) Affiliate Marketing 1,331 1,252 79 Affiliate Promotional Support 6,905 5,220 1,686 Consumer Marketing 904 598 306 Media 8,950 7,000 1,950 Website / Internet 570 475 95 Agency Fees 115 120 (5) Research 1,677 1,172 505 Public Relations 2,438 1,736 702 Ad Sales Marketing 421 422 (1) Total Sales & Marketing $ 28,038 $ 22,763 $ 5,275 73
Sales Expenses Sales Expenses 2010 2009 Budget Reestimate Variance Trade Shows & Conventions $ 663 $ 567 $ 96 Decoder Incentives - 500 (500) Affiliate Support Expenses 663 702 (39) HBO LAG Affiliate Sales Expens 1,383 1,136 247 Advertising Commissions 2,019 1,865 154 - Total Sales Expenses $ 4,727 $ 4,769 $ (42) Sales Expenses ($4.7M) Sales Expenses ($4.7M) • Trade Shows increase due to increases for ABTA in Brazil ($96K). • Decoder incentive decrease associated with capitalization of new decoders. • HBO LAG Affiliate Sales expenses increase due to increased support for Central America. • Advertising Commission increase associated with foreign exchange. 74
Marketing Expenses Marketing Expenses Overview Overview • Overall increase to support key initiatives: • Increased high profile original productions (The Pacific, Capadocia II, True Blood, Big Love, Hung, Mad Men) • HBO channels (HD, HBO Plus, HBO Family) • Max channels (HD, other Max channel rebranding) Affiliate Marketing & Promotional Support ($8.2M) Affiliate Marketing & Promotional Support ($8.2M) • Overall increase of $1.8M attributed to: • Support launch of new platforms in Brazil (Oi TV, Embratel) and Mexico (Dish). • Support necessary for end of buy through in Brazil. •Support operator efforts (primarily DirecTV & Sky) to acquire new HD subscribers and increase HD penetration throughout the region. • Respond to increased competition of LAPTV distribution by Fox. 75
Marketing Expenses Marketing Expenses Consumer Marketing ($904K) • Overall increase of $306K primarily due to Cinemax ($350K). • Consumer marketing initiatives focused on Cinemax ($350), HD ($160K), and original productions ($350K). Media ($9.0M) Media ($9.0M) • Overall increase of $1.95M. • Media expense support 11 primary campaigns • HBO Original Productions ($5.6M) • Includes 6 high profile productions exhibited in 2010 (The Pacific, Capadocia, True Blood, Big Love, Hung, Mad Men). • Movie campaigns ($2.5M) • Includes quarterly movie campaign which improves mix of movie/series media promotion. • Max Channels ($900K) 76
Marketing Expenses Marketing Expenses Website/Internet/Agency ($685K) Website/Internet/Agency ($685K) • Website/Internet increase of $95K due to enhancements to new website and additional focus on HBO original productions. • Agency fees in line with 2009. Overall decrease ($5K). Research ($1.2M) Research ($1.2M) • Overall increase of $505K due to Cinemax ($200K) and research of HBO channels ($235K) (HBO Plus, HBO Family) and new HBO concepts. • Research expenses include ongoing audience measurement ($395K) (IBOPE, DTV), general marketing research for brand tracking and TV usage applied to programming strategies ($220K), and individual channel audience studies ($170K). 77
Marketing Expenses Marketing Expenses Public Relations ($2.4M) Public Relations ($2.4M) • Overall increase of $702K • Maintain leadership position in the region by maximizing exposure and support of existing and future HBO LAG Original Productions. • Support milestone HBO series (The Pacific) as well as other key HBO series (True Blood, Big Love, Hung, Bored to Death). • Expand communications to obtain more nominations and awards in 2010. • Enforce antipiracy efforts in the Central America & Caribbean and throughout the region. 78
Cost of Licensing Cost of Licensing
Cost of Licensing Cost of Licensing 2010 Budget 2009 Reestimate Variance Capadocia (S2) 515 0 515 Filhos do Carnaval (S1 & S2) 446 468 -22 Epitafios (S2) 320 417 -97 Mandrake 240 539 -299 Capadocia (S1) 213 337 -124 Alice 118 628 -510 Sexo Urbano (S2) 28 70 -42 Epitafios (S1) 20 15 5 1,899 2,474 -575 • Cost of Licensing includes the amortization ($1.9M) of long term rights for sale of HBO LAG original production rights for DVD and international distribution. • Decrease due to timing of sales. 80
Proposal to Amortize Programming Costs
Amortization Amortization Proposal to Amortize Programming Costs • Cost of top rated titles has varied significantly from prior output deal • 2007: SHR/SFR range from $800K - $1.0M • 2010: Megas/SHR range from $1.7M - $2.1M • These titles are not exhibited every month, resulting in significant variations in monthly/quarterly operating profits. • HBO (US) and other HBO International ventures have adopted amortization policies. 82
Amortization Amortization Proposal to Amortize Programming Costs • First and second windows are valued in accordance with contractual terms (currently 80% / 20%) • All products are expensed on first exhibition in its window, except for product with cost greater than or equal to $1.5M. • Products with cost greater than $1.5M in a window will be amortized equally over the length of the window. 83
Amortization Amortization Proposal to Amortize Programming Costs • Impact on 2010 Budget is approximately $15M $25,000,000 $20,000,000 $15,000,000 $10,000,000 $5,000,000 $- Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 Jan-13 Jan-14 Jan-15 Jan-16 May-08 Sep-08 May-09 Sep-09 May-10 Sep-10 May-11 Sep-11 May-12 Sep-12 May-13 Sep-13 May-14 Sep-14 May-15 Sep-15 May-16 Sep-16 Amortized Non-amortized 84
Programming & Original Production
Major Studio Output Deal Major Studio Output Deal 2010 Budget 2009 Reestimate Variance MOVIE EXPENSE - Warner Bros. $41,524 $50,957 -$9,433 - SPTI $55,478 $30,524 $24,954 - SPTI (2nd Window) $3,612 $1,963 $1,649 - BVI $35,030 $33,502 $1,528 - BVI (2nd Window) $2,559 $2,559 Total $138,203 $116,946 $21,257 $ $ AVG EBU EXPENSE - Warner Bros. $1,292 $1,603 -$311 - SPTI $1,999 $1,688 $311 - BVI $1,347 $1,089 $258 Total $4,638 $4,380 $258 TOTAL EXPENSE - Warner Bros. $42,817 $52,560 -$9,744 - SPTI $57,477 $32,213 $25,265 - SPTI (2nd Window) $3,612 $1,963 $1,649 - BVI $36,377 $34,591 $1,786 - BVI (2nd Window) $2,559 $2,559 Total $142,842 $121,327 $21,515 Note: 2010 Budget Reinvestment and Flat Fee acquisition amounts for Sony ($15K) are not reflected in the amounts above. They are reflected in the Related Party acquisitions slide. Profit & Loss amounts per studio include output deal and reinvestment amounts. 86
Major Studio Output Deal Movie Mix Major Studio Output Deal Movie Mix 2010 Budget vs. 2009 Reestimate WB SPTI SPTI (2nd BVI BVI (2nd TOTAL Category Window) Window) MEGA 0 -1 0 -1 0 -2 SHR 0 4 -1 1 0 4 SFR -2 5 2 0 1 6 FR's (FR - FR 4) -6 10 8 -2 13 23 MFTV/DTV -1 -1 0 -3 0 -5 LOCAL -1 -1 1 0 9 8 LIB/Me 2 5 0 6 0 13 LIB/ER -1 15 0 8 0 22 LIB -8 45 0 9 0 46 LIB FF -2 -1 0 7 0 4 Variation -19 80 10 25 23 119 87
Major Studio Output Deal Movie Mix Major Studio Output Deal Movie Mix 2010 Budget WB SPTI SPTI (2nd BVI BVI (2nd TOTAL Category Window) Window) MEGA 2 0 1 1 0 4 SHR 4 5 1 3 0 13 SFR 5 7 3 4 1 20 FR's (FR - FR 4) 11 25 15 9 13 73 MFTV/DTV 11 21 0 13 0 45 LOCAL 1 1 2 8 9 21 LIB/Me 8 7 0 11 0 26 LIB/ER 18 24 0 18 0 60 LIB 57 80 0 47 0 184 LIB FF 40 46 0 38 0 124 Total 2010 Budget 157 216 22 152 23 570 88
Major Studio Output Deal Movie Mix Major Studio Output Deal Movie Mix 2009 Reestimate WB SPTI SPTI (2nd BVI BVI (2nd TOTAL Category Window) Window) MEGA 2 1 1 2 0 6 SHR 4 1 2 2 0 9 SFR 7 2 1 4 0 14 FR's (FR - FR 4) 17 15 7 11 0 50 MFTV/DTV 12 22 0 16 0 50 LOCAL 2 2 1 8 0 13 LIB/Me 6 2 0 5 0 13 LIB/ER 19 9 0 10 0 38 LIB 65 35 0 38 0 138 LIB FF 42 47 0 31 0 120 Total 2009 Reestimate 176 136 12 127 0 451 89
Major Studio Movie Quantity Analysis Major Studio Movie Quantity Analysis Titles Per Month 2010 Budget 60 8 15 10 10 15 50 8 8 Number of titles 7 6 4 40 5 7 10 13 8 7 7 4 9 3 30 2 2 5 3 41 20 40 40 40 36 32 30 30 29 27 27 22 10 0 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Library MFTV/DTV & Local First Run Month Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Total First Run 8 10 5 4 13 10 15 10 8 7 5 15 110 MFTV/DTV & Local 8 7 9 7 2 4 7 8 3 2 3 6 66 Library 41 40 27 32 29 30 36 40 30 27 22 40 394 Total 2010 Budget 57 57 41 62 44 44 58 4 41 36 30 61 570 90
Average Cost of Films Average Cost of Films 2010 Average EBU $3,510 2009 Average EBU $3,106 2010 BUDGET 2009 REESTIMATE OUTPUT DEAL FILMS 1st Window 2nd Window Total 1st Window 2nd Window Total MEGA $2,106 $421 $2,527 $1,864 $373 $2,236 SHR $1,755 $351 $2,106 $1,553 $311 $1,864 SFR $1,404 $281 $1,685 $1,242 $248 $1,491 FRA $1,053 $211 $1,263 $932 $186 $1,118 FRA-2 $702 $140 $842 $621 $124 $745 FRA-3 $351 $70 $421 $311 $62 $373 FRA-4 $263 $53 $316 $233 $47 $280 LOCAL $211 $42 $253 $186 $37 $224 LOCAL - BVI $291 $60 $351 $258 $53 $311 MFTV/DTV $263 $263 $233 $233 LIB/Me $263 $263 $233 $233 LIB/ER $263 $263 $233 $233 LIB $140 $140 $124 $124 LIB FF $43 $43 $41 $41 91
Independent & Related Party (non- -output deal) output deal) Independent & Related Party (non 2010 Budget 2009 Reestimate Variance QUANTITY HBOe FILMS 16 10 6 RELATED PARTY FILMS 1 90 (89) INDEPENDENT FILMS 169 168 1 TOTAL MOVIES 186 268 -82 EXPENSE HBOe FILMS $1,291 $1,175 $116 RELATED PARTY FILMS $15 $1,947 ($1,932) INDEPENDENT FILMS $5,790 $5,815 ($25) TOTAL COSTS $7,096 $8,937 ($1,841) Independent & Related Party Independent & Related Party • Related Party includes: • 16 HBOe branded product ($1.3M). Includes 7 titles with second window transmission ($300K). • 1 Reinvestment Sony title ($15K). • Lower average cost of independent film acquisitions ($25K). 92
Non- -Movie Expenses Movie Expenses Non 2010 Budget 2009 Reestimate Variance NUMBER OF EPISODES HBOe non movies 126 158 (32) HBOe Boxing events 11 17 (6) Warner non movies 31 56 (25) Animated & Family Series 433 148 285 Drama & Comedy Series 228 177 51 Specials & Variety 5 10 (5) Sports & Boxing 42 13 29 Documentaries 24 22 2 Music 27 25 2 TOTAL QUANTITY, NON MOVIES 927 626 301 0 EXPENSE HBOe non movies 2,708 1,886 822 HBOe Boxing events 1,100 1,120 (20) Warner non movies 475 520 (45) Animated & Family Series 1,199 703 496 Drama & Comedy Series 2,170 1,376 794 Specials & Variety 123 111 12 Sports & Boxing 798 646 152 Documentaries 450 335 115 Music 249 187 61 TOTAL EXPENSE, NON MOVIES 9,271 6,884 2,387 93
Non- -Movie Expenses Movie Expenses Non Non Movie Expenses Non Movie Expenses • Overall increase of $2.4M due to new series and additional seasons of existing series. • HBOe non movies includes: • New series such as The Pacific ($600K), Boardwalk Empire ($400K), Treme ($400K), and How To Make in America ($80K). • Additional seasons ($838K) of True Blood (S3), Eastbound & Down (S2), Hung (S2), Life and Times of Tim (S2), Real Time with Bill Maher (S10). • Second windows ($345K) of Five Days, Generation Kill, House of Saddam, John Adams. • Animation and Family includes new series such Contraptus, Cosmic Cowboys, Déjà Vu, Halfmoon Investigators, Little Nick and Time Jam and new seasons of Merlin (S2), Carl2 (S4), M.I. High (S3), Zombie Hotel (S2). Product intended for HBO Family. • Drama & Comedy series include Mad Men (S3), Ashes to Ashes (S2), Skins (S4), Vu du Ciel (S2), Co-Ed Confidential (S3,S4), Satisfaction (S3). • Boxing includes HBOe Boxing and Golden Boy Boxing. 94
Original Production Expenses Original Production Expenses 2010 Budget 2009 Reestimate Variance HBO ORIGINAL PRODUCTIONS $8,232 $6,183 $2,049 2010 EXPENSED PROJECTS Capadocia II $3,866 $3,866 Alice Special $1,579 $1,579 Mandrake Special $1,579 $1,579 Fair Play $908 $908 World Cup Series $300 $300 Filhos do Carnaval II $2,679 -$2,679 Epitafios II $1,893 -$1,893 La Liga en Acción $832 -$832 Sexo Urbano III $431 -$431 First Look $349 -$349 $8,232 $6,183 $2,049 • 2010 Projects ($8.2M): � Capadocia II – 13 episodes will be aired starting August 2010 � Alice - Special – 2 episodes will be aired in June 2010. � Mandrake – Special – 2 episodes will be aired in November 2010. � Fair Play – 10 episodes will be aired starting March 2010. � World Cup Series – 15 episodes will be aired starting April 2010. 95
Original Production Cash/Ancine Requirements Original Production Cash/Ancine Requirements 2010 2009 Budget Reestimate Variance Cash Requirements Latin America Projects 13,012 7,501 5,511 Brazil Projects 3,211 673 2,538 16,223 8,174 8,049 Ancine Requirements (Brazil) Article 39 6,605 3,226 3,379 Article 3a 6,316 6,316 12,921 3,226 9,695 Total Production (Cash & Ancine) 29,144 11,400 17,744 96
Original Production Cash/Ancine Requirements Original Production Cash/Ancine Requirements 2010 Total Latin America Projects Budget Production Profugos (Production) 4,321 4,321 Sr. Avila (Production) 4,310 4,310 Capadocia (S2) (Production) 2,694 6,444 Fair Play (Production) 487 908 World Cup (Production) 300 300 Total Production Projects 12,112 16,283 Hernan Cortez (Development) 150 Rey de Espadas (Development) 150 Profugos (S2) (Development) 150 Epitafios (S3) (Development) 150 Capadocia (S3) (Development) 150 Mexican Series (Development) 150 Total Development Projects 900 Total Cash & Ancine Requirements (Brazil) 13,012 *Amounts adjusted for 2010 exchange rates 97
Original Production Cash/Ancine Requirements Original Production Cash/Ancine Requirements 2010 Total Brazil Projects Cash Ancine Budget Production Preamar (Production) 1,947 5,421 7,368 7,368 FDP (Production) 3,684 3,684 3,684 Mandrake Special (Production) 1,579 1,579 1,579 Mulher de Fases (Production) 1,447 1,447 3,684 Alice Special (Production) 789 789 1,579 Total Production Projects 1,947 12,921 14,868 17,894 O Poder (Development) 158 - 158 Mandrake (S3) (Development) 158 - 158 Desmandamientos (Development) 158 - 158 Os Prazeres da Carne (Development) 158 - 158 Destino Sao Paolo (Development) 158 - 158 FDP (S2) (Development) 158 - 158 Mulher de Fases (S2) (Development) 158 - 158 Filhos do Carnaval Special (Development) 158 - 158 Total Development Projects 1,264 - 1,264 Total Cash & Ancine Requirements (Brazil) 3,211 12,921 16,132 *Amounts adjusted for 2010 exchange rates 98
Production & Film Facility Expenses Production & Film Facility Expenses 2010 2009 Budget Reestimate Variance Equipment & Studio Rental $ 55 $ 66 $ (11) Talent & Wardrobe 519 666 (147) Music Rights, Scenography 208 177 30 Voice Over 1,212 1,221 Post-Production 60 91 (31) Prodution Outside Services 3,832 3,010 822 Permisologies & SP Fees 26 25 1 Miscellaneous Production Expenses 55 77 (22) Total Production $ 5,967 $ 5,334 $ 633 Duplications $ 1,425 $ 800 $ 625 Subtitling 1,157 1,155 $ 2 Dubbing 1,212 82 1,130 Total Film Facilities $ 3,794 $ 2,037 $ 1,757 Production & Film Facility Production & Film Facility • Increased Production Outside Services includes general On Air projects ($1.5M) (LAG original production elements, Max channels, Max HD), NBG boxing ($1.1M), Cinemax ($500K), HBO rebranding & new concepts ($300K) (HBO Plus, HBO Family), and series campaign (268K). • Duplication increase due to increased HD requirements. •Increased dubbing related to dubbing for more localization and distribution to low income subscribers. 99
Headcount & Staff Headcount & Staff
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