MEDIA LANDSCAPE IN BRAZIL This presentation constitutes proprietary - PowerPoint PPT Presentation

MEDIA LANDSCAPE IN BRAZIL This presentation constitutes proprietary and confidential information of Grupo Globo

MEDIA REVENUES 2013 (US$ BILLIONS) 64,7 59,8 45 36,6 29,8 29,1 GLOBO 25,3 22,2 18,4 IS THE 26 th MEDIA 15,3 CONGLOMERATE/ 6,3 5,7 COMPANY IN TERMS * OF REVENUE Source: Institute of Media and Communication Policy IMC considers companies with a strategic focus in the creation and distribution of content for print, cinema, television and online media, and that generate a significant portion of their revenue in advertisiment and/or content licensing. * Last 12 months ended September/2013

FOUNDED IN 1925 FAMILY OWNED 98 MM PEOPLE REACHED 19K EMPLOYEES DAILY INVESTMENT-GRADE RATING 12% REVENUE CAGR IN US$ (S&P, MOODY’S AND FITCH) (2009-2014) LARGEST ENTERTAINMENT CONTENT PRODUCTION CENTER IN THE AMERICAS (APPROX. 1.65 MM M 2 )

BROADCAST PRINT RADIO DIGITAL MUSIC SOCIAL & PAY TV

BRAZIL: Population Households Average Age 200 MM 65 MM 30,7 years 316 MM in the US 122 MM in the US 37,6 years in the US Life Expectancy Unemployment Rate Gini Index 74 years 5,7% 51,9 76 years in the US 7,3% in the US 45 in the US GDP GNI per capita Public Debt/GDP USD 2,2T USD 12K 56,8% USD16,8 T in the US USD54K in the US 72% in the US

BRAZIL: MEDIA ENVIRONMENT

BRAZILIAN AD MARKET HAS GROWN SIGNIFICANTLY OVER THE LAST YEARS…

BRAZILIAN AD SPEND (R$ BILLIONS) CAGR: 28% BRAZILIAN AD MARKET HAS GROWN 32,2 SIGNIFICANTLY 26,2 OVER THE LAST YEARS… 15,9 9,8 2000 2005 2010 2013 Source: Projeto Intermeios – does not capture sales of international search engines and social networks

6 MAJOR ADVERTSING MARKETS 2013 (US$ BILLIONS) …AND TODAY IS 167 THE SIXTH 53 41 LARGEST 23 20 16 MARKET USA BRAZIL CHINA JAPAN GERMANY UK 2013 VS 2012 (%) 3,5 2,1 10,1 -1,1 5,0 3,7 Source: Advertiging Age Fact Pack

BROADCAST TV HAS AN GRANDE IMPORTANT ROLE IN THIS MARKET RELEVÂNCIA OTHERS INTERNET 4% DA TV ABERTA 4% RADIO 4% PRINT 16% BROADCAST TV 67% PAY TV 5% Source : Brasil Mídia Dados 2013 and Projeto Intermeios

BROADCAST TV HAS AN …WHICH IS DIFFERENT IMPORTANT ROLE IN THIS MARKET FROM THAT OF THE US OTHERS OTHERS 5% 4% INTERNET 4% RADIO INTERNET 4% 19% TV 38% PRINT 16% TV 72% RADIO 10% PRINT 28% Source: Brasil Mídia Dados 2013 e Projeto Intermeios

% TV AD SPENDING … AND 69% MEXICO MOST OF THE 53% ITALY WORLD 49% RUSSIA 43% JAPAN 42% CHINA 34% FRANCE 27% UNITED KINGDOM Source: Brasil Mídia Dados 2013 e Projeto Intermeios

TV AVERAGE DAILY TIME SPENT (HOURS) 4:38 4:38 4:32 IS ALSO THE MOST 3:00 2:52 2:50 IMPORTANT MEDIA 2:17 2:17 IN TERMS OF 2:34 2:11 CONSUMPTION 2:00 1:18 1:10 1:05 2009 2013 2005 BROADCAST TV RADIO PAY TV INTERNET PRINT Source: IBOPE TGIndex e Ipsos EGM/Marplan

TV AVERAGE DAILY TIME SPENT (HOURS) 4:38 4:38 4:32 IS ALSO THE MOST 3:00 2:52 2:50 IMPORTANT MEDIA 2:17 2:17 IN TERMS OF 2:34 2:11 CONSUMPTION 2:00 1:18 1:10 WITH GROWTH 1:05 DRIVEN BY PAY TV 2009 2013 2005 BROADCAST TV RADIO PAY TV INTERNET PRINT Source: IBOPE TGIndex e Ipsos EGM/Marplan

WHICH, OVER THE LAST DECADE, EXPERIENCED STRONG GROWTH IN PENETRATION

TV HOUSEHOLDS WHICH, OVER THE (MM) LAST DECADE, EXPERIENCED 64,3 61,1 59,4 58,4 56,0 54,8 53,2 27% 28% STRONG 50,8 48,5 46,7 44,8 22% GROWTH IN 17% 13% 12% 3,6 3,9 4,2 4,6 5,3 6,3 7,5 9,9 12,7 16,2 18,0 10% 9% PENETRATION 9% 8% 8% PAY-TV SUBSCRIBERS PAY-TV PENETRATION TV HOUSEHOLDS Source: Pay-TV Market: Agência Nacional de Telecomunicações (“ Anatel ”) TV Households: 2003 - 2009 PNAD (IBGE) 2010: calculated based on Anatel’s penetration projection as of January 2011 2011 and 2012 – PNAD (IBGE) September 2013: PNAD (IBGE) as of December 2012

Pay TV Revenues PAY TV Top 10 Countries, 2013 REVENUES (USD Bi) 107,4 WILL ALSO SEE CONSIDERABLE GROWTH 12,2 10,3 10,2 8,9 8,3 7,4 5,5 5,3 4,5 Source: SNL Kagan

WITH A CONSIDERABLY HIGH ARPU

Fixed Broadband (mm households) 40 INTERNET 23 22 20 18 15 13 20 11 9 6 4 ACCESS HAS - 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 GROWN AND LOOKS LIKE WE Mobile Broadband (mm entries) WILL LEAPFROG 200 114,42 103,11 59,2 100 41,1 FIXED 20,6 8,7 3,9 0 BROADBAND 2008 2009 2010 2011 2012 2013 2014 Source: MiniCom , TIC Domicílios

HISTORICALY, FIXED LAND LINES NEVER REACHED MORE THAN 51% OF BRAZILIAN HOUSEHOLDS

275,7 MM mobile phones 41% use the 3G technology Smartphones already correspond to more than 70% of phones sold and represent about 30% of the total MAKING MOBILE People with access to a smartphone spend an average of 14 hours per week online PHONES A DEFINITE HIT Source: Teleco, IAB

29 Average time spent online Hours/month BRAZILIANS 5º Brazil is the fifth among countries with the most time spent online ARE TECH AND SOCIAL SAVVY Facebook has 86 million users in Brazil and represents to 1/3 of the time spent online About 73% of Brazilians with internet access regularly use it – via laptop, smartphone or tablet – while watching TV source: Comscore, IBOPE and Facebook

LONG-FORM VOD CONSUMPTION ASSOCIATED TO PAY TV SUBSCRIPTION IS ON THE RISE Millions of hours per month However, DVR has not 7,3 +630% achieved significant momentum in the country: 3,6 Pricing limited access • Interface is poor and • 1,0 suffers from changes in channels’ schedules Mar/2012 Mar/2013 Mar/2014 24 Source: NET, GVT, GLOBOSAT Internal reports

GLOBAL ONLINE VIDEO PLAYERS ARE ALREADY IN THE MARKET Netflix has an estimated 1 MM subscribers in the country, and is consumed by 33% of internet users who pay for online video. Source: ComScore, Netflix, POP Ibope 25

GLOBAL ONLINE VIDEO PLAYERS ARE ALREADY IN THE MARKET Youtube has been successful in driving consumption, with the local operation leaping ahead of other countries’ UK 87,8% 31,0% 31,5% 81,8% 20,2% 13,2% 86,1% 30,3% 27,9% JAPAN USA 91,8% 54,3% 47,1% BRAZIL Brazil has 8% of the world’s total Youtube consumption. % of online video consumers that use YT That places us in the 2 nd 56,7% 29,3% 20,7% % YT share of online video views overall position, only behind WORLD % YT share of total time watched online the US (18%) Source: ComScore (November/2013) 26

ORIGINAL PROGRAMING ON TV HAS ALWAYS VALUED BRAZILIAN CULTURE DRAMA/TELENOVELAS NEWS SPORTS TALK SHOWS AUDITORIUM VARIETY

CONTENT IN BRAZIL ORIGINAL BROADCAST TV VALUE OF BRAZILIAN CULTURE VERTICAL VALUE CHAIN ORIGINAL AND LICENSED GLOBAL: DUBBING HAS INCREASED ATTRACTIVENESS • PAY TV NACIONAL: REGULATORY INCENTIVES • SPORTS YOUTUBE (SHORT-FORM) Only 40% of consumption happens on Brazilian channels • ONLINE VIDEO Brazil ranks 2nd in consumption but 9th in content production • NETFLIX (LONG-FORM): MOSTLY DUBBED CONTENT 28

What are the similarities between OTA and Pay TV as incumbents in their reaction to disruptors? How will OTA play a role in the future of advertising? How to leverage the Pay TV and online on ad performance? What is the future of the 1:n linear model (terrestrial, cable, satellite...)? Will time shift consumption leave Broadcast TV only with live exhibitions? Is there a place for telenovela-like products? Are there relevant physical limitations that might hinder the growth of internet video? Can we help drive it, through 4K for example? Will the new technologies like LTE-broadcast disintegrate the broadcast distribution chain?

WITH THIS BEING SAID, WHERE COULD WE PLACE THE BRAZILIAN MARKET? THE DYNAMICS OF PRODUCT ARCHITECTURE, STANDARDS,AND VALUE CHAIN STRUCTURE: “ THE DOUBLE HELIX ” INTEGRAL PRODUCT MODULAR PRODUCT NICHE VERTICAL INDUSTRY HORIZONTAL INDUSTRY INNOVATION & COMPETITORS PROPRIETARY STANDARDS OPEN STANDARDS TECHNICAL ADVANCES HIGH- DIMENSIONAL SUPPLIER COMPLEXITY MARKET POWER PRESSURE TO INCENTIVE TO ORGANIZATIONAL DIS-INTEGRATE INTEGRATE PROPRIETARY SYSTEM RIGIDITIES PROFITABILITY Fine & Whitney, “ Is the Make/Buy Decision Process a Core Competence? ”