entertainment -- dvr risk -- 5-29-09

8/14/2019 Entertainment -- DVR Risk -- 5-29-09

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PLEASE SEE ANALYST(S) CERTIFICATION(S) ON PAGE 14 AND IMPORTANT DISCLOSURES BEGINNINGON PAGE 15

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Investment ConclusionSince our upgrade reports, some investors have reiterated to us their structural concerns surrounding the broadcast TV business, withDVR usage their primary concern for the future of the broadcast TV business. So in addition to a network-by-network summary of the TVupfronts in this our annual upfront review, we outlined 10 key points we have learned regarding the impact that DVR usage has on TVwatching. While consensus views ad-skipping as a material threat, we actually believe the TV business may have alreadyrealized the bulk of the business impact from the advent of DVRs. We developed a simple dynamic model that illustrates howcommercial viewership often goes up for DVR households given the correlated uplift of TV viewership in DVR homes. In terms of ad

revenue, we continue to believe broadcast TV networks can prove beneficiaries of an improving economy later in the year as scatter admarkets solidify. As such, we estimate 2010 broadcast TV advertising growth of 4.0% Y/Y to $36.8 billion. As is consistent with thetheme inherent in our 5/15/09 sector upgrade report, we believe cyclical improvement could serve as an offset to well-known structuralconcerns in 2010/11, including risks to broadcast TV posed by DVRs. Should a cyclical improvement come to fruition, we believebroadcast TV network beneficiaries would include DIS (owner of ABC), NWSA (owner of FOX), and most of all CBS Corp. (owner of CBS).

Summary TEN POINTS ABOUT DVRs: 1) DVRs increase overall TV-watching; 2) Not everyone skips commercials upon DVR playback; 3)Viewership of commercials is often higher for DVR households; 4) Recent DVR adopters are less likely to time-shift; 5) DVR playbackrates are higher for higher-rated (broadcast TV) shows; 6) Most DVR playback happens in day one; 7) Many internet users are watchingTV while online; 8) Nielsen data remains the primary currency for TV ad buyers and sellers; 9) Longer-term, DVRs are probably atransitional technology; and 10) Product placement, interstitial TV ads, and sponsorship all provide other ways to monetize TV shows.

UPFRONT TAKEAWAYS: The broadcast network TV upfront presentations concluded last week, and while consensus expects Y/Ydeclines in sellout ratios, network sellers remain adamant they intend to hold the line on price. As we detailed in our 4/24 upfrontpreview, "TV Upfront: Assessing the Downside," we expect total upfront dollar volume to be down roughly 15% Y/Y. We note that CBScomes into upfront negotiations as the only broadcast TV network to have grown viewership this season on all major ratings metrics.

TV ADVERTISING GROWTH IS LIKELY IN 2010E: Broadcast TV advertising is not a structurally broken business, in our view. On 5/15,we raised our TV advertising estimates for 2010E to +4.0% for Broadcast TV. This was in part due to our Barclays Capital EconomicsTeam's GDP growth estimates of +2.0% in 3Q09, +3.0% in 4Q09, and +2.8% in 2010. History tells us that in years of accelerating GDPgrowth, advertisers tend to spend more. As part of our 5/15 sector upgrade report, we upgraded our ratings on Viacom, Inc. (VIA.B) andCBS Corp. (CBS), both of which we believe would be beneficiaries of an advertising recovery in 2010E.

TEN POINTS ABOUT DVR IMPACT ON TV-WATCHING HABITS; THE SKY IS ACTUALLY NOT FALLING

May 29, 2009

Entertainment

Industry Overview

DVR Usage: An Overstated Risk?Sector View:New: 2-NeutralOld: 2-Neutral

Anthony J. DiClemente, CFA George L. Hawkey1.212.526.1341 1.212.526.9297

[email protected] [email protected], New York BCI, New Yo

AmericaInternet & Media

Entertainment


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On the heels of this weeks Upfront presentations, given pushback we have received from investors regarding the structural concernssurrounding the broadcast TV business, and given the consensus view that digital video recorders (DVRs) pose a significant risk to thebroadcast TV business model, we thought it would be useful to point out some of our view about DVRs and DVR usage, and how theexistence of DVRs have and might continue to impact the way TV advertisements are sold. On the heels of our sector upgrade report on5/15, we have encountered some perpetuated myths about TV-watching that may not necessarily reflect the realities of the current TV

broadcast business. We highlight those realities in this note and have outlined ten points about DVR usage:

POINT #1: DVRs Increase Overall TV-WatchingNielsens 1Q09 A2/M2 Three Screen Report demonstrates both rising TV viewership and an increasing amount of time watching TV, asthe average American now watches 153+ hours per month, an all-time high. Television is far and away the dominant choice for Americans who watch video, as almost 99% of the video watched in the U.S. is done on television. We estimate DVR penetration hasgrown quite steadily, rising to 32%-33% presently (30.6% as of March-end), up from 22.3% in January 2008. As shown below, time-shiftedTV-watching has increased 40% Y/Y as of 1Q09-end. Other than the increase in time-shifted viewing, it is difficult to pinpoint exactly howmuch increased television viewership is driven directly by the existence of the DVR in and of itself, but we do know that for the highest-ratedshows, gross ratings for DVR households are higher than gross ratings for non-DVR households. We do believe that the presence of a DVReffectively adds ratings points (viewership inventory), particularly for hit shows, and this is mostly true for the highest-rated shows. The liftin viewership driven by DVRs for some shows can be as high as 20% over and above the live rating for the program. To us, this isintuitive, as a DVR essentially creates more time for watching television and provides users with a broader range of programming that theywant to watch. This expands options from the traditional linear network programming model which forced viewers to choose amongprograms. In our view, the reality of DVR ownership is that by owning one, a TV-watcher is more likely to watch greater hours of overalltelevision. To the extent that the DVR playback of highest-rated shows is cannibalizing the viewership of cable TV shows or broadcast TVshows at a later time in the night, we acknowledge that there may be some individual shows (likely later-night shows or cable TV shows)whose ratings are hurt by DVRs to the benefit of higher-rated shows, but on an overall basis, DVRs have generally helped to increaseoverall TV viewership.

Figure 1. Monthly Time Spent in Hours and Minutes Per User

1Q09 4Q08 1Q08 % Diff Y/YAbsoluteDiff Y/Y

Watching TV in the Home 153:27 151:03 150:38 1.9% 2:49Watching Timeshifted TV 8:13 7:11 5:52 40.1% 2:21Using the Internet 29:15 27:04 27:57 4.6% 1:17Watching Video on Internet 3:00 2:53 1:57 53.2% 1:02Mobile Subscribers Watching Video on a Mobile Telephone 3:37 3:42 NA NA NA

Source: Nielsen A2/ M2 Three Screen Report, 1Q09. The Nielsen material contained in this report represent Nielsen estimates and do not represent facts.Nielsen has neither reviewed nor approved this report and/or any of the statement made herein.

Figure 2. Overall Number of Users (000s) Monthly Reach1Q09 4Q08 1Q08 % Diff Y/Y

Watching TV in the Home 284,574 285,513 281,106 1.2%Watching Timeshifted TV 79,533 73,934 57,934 37.3%Using the Internet 163,110 161,525 158,002 3.2%Watching Video on Internet 131,102 123,195 115,970 13.0%Using a Mobile Phone 230,436 228,920 219,619 4.9%Mobile Subscribers Watching Video on a Mobile Telephone 13,419 11,198 8,817 52.2%

Source: Nielsen A2/ M2 Three Screen Report, 1Q09. The Nielsen material contained in this report represent Nielsen estimates and do not represent facts.Nielsen has neither reviewed nor approved this report and/or any of the statement made herein.


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Figure 3. Household DVR Penetration Through March 2009

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Source: Nielsen. The Nielsen material contained in this report represent Nielsen estimates and do not represent facts. Nielsen has neither reviewed nor approved this report and/or any of the statement made herein.

POINT #2: Not Everyone Skips Commercials Upon DVR PlaybackThis is the most controversial point, but we believe its true. Approximately 35%-45% of commercials are NOT skipped upon DVRplayback, according to published Nielsen and TiVo data/ research. The consensus view is that when people can skip commercials,they will . And anecdotally, virtually everyone we speak with about television watching habits say that they skip through each and everycommercial upon playback (one can question the diversity of the demographic set to which we are exposed, of course, as early-adopters dotend to watch a higher percentage of TV shows in DVR playback modemore on that later). The 35%-45% figure is electronicallymeasured, not conducted via a survey, so we believe there is integrity in this data. The 45% of people not skipping commercials iselectronically derived via the "Nielsen People Meter" which, through the use of an audio code, can detect automatically if one is fast-forwarding through a commercial or not. In the case of TiVos data, ad-skipping is measured electronically through the TiVo standalone set-top box. In our conversations with the data providers, we asked why people would ever NOT skip the commercials if given the choice.Some of these explanations include, but are not limited to: 1) Most viewers when watching TV are in a relaxed or distracted state (i.e., noteveryone is an active TV-watcher); 2) The remote control may not be accessible at the moment; 3) Approximately 31% of Internet activityoccurs when consumers are also watching television (also meaning TV-watchers may be distracted); 4) Research indicates that there issome evidence that viewers will choose to watch only those commercials they enjoy (think the new Nike LeBron/ Kobe puppet commercials)and are likely to fast-forward through others (research has demonstrated that viewers may actually stop in the midst of ad-skipping to watcha commercial that looks entertaining such as a movie trailer); and 5) Most viewers start fast-forwarding too late following the end of acontent segment, and stop early coming into a content segment, catching the first and last commercials in a commercial pod as a result (inrecent years, this has made the first and last commercials in pods much more desirable to ad buyers).

POINT #3: Net Viewership of Commercials is Often Higher for DVR Households than non-DVR Households Nielsen C3 (commercial + 3 days of playback) ratings on average index higher than those of Live ratings; this implies that theincremental audience created by allowing for 3 days of DVR playback more than offsets the portion of the audience which skipscommercials. The live TV rating measures viewers watching a TV show during its scheduled broadcast, with no time-shifting or commercial-specific viewership measurement. The industry shifted to using C3 ratings for the 2007-2008 upfront; the C3 ratingsmethodology measures only when a viewer watches commercials, but includes three additional days of DVR playback. The first part of thiscalculation-- moving from Live Only to Live Commercial ratings-- results in average Live Commercial ratings roughly 5% lower than those of

Live Only (just from normal channel-switching with a remote control, for example). The second part of the calculation is more complicated.First, we assume 33% of homes have a DVR. Secondly, we assume that of the DVR households, the lift in viewership is about 10% (thismay be conservative, as for the higher-rated shows, the lift in viewership is up to 20%). We then assume that for DVR homes, about 40%viewership is watched in playback mode (note that for early DVR adopters, the playback mode split is closer to 40%; but for later/morerecent DVR adopters, the playback mode split is closer to 20%, which means this assumption may actually be conservative, on average).Finally we assume that 40% of commercials are watched when in DVR playback mode (this is an average of the 35% and 45% figures fromTiVo and Nielsen, respectively). Mathematically, the ratings points lost as a result of commercial-skipping are more than compensated for by the viewership lift and the addition of three additional days of playback. This is why, when examining the A18-49 demographic, relative tothe Live Only ratings, the Nielsen C3 rating indexes higher for CBS, NBC, ABC, and FOX. Below we have included a sample modeldepicting how it could be possible that the incremental ratings points added from the lift in viewership from DVR playback canmore than offset the viewership lost from DVR-enabled ad-skipping. Feel free to call or email us for a dynamic version of thismodel, as varying the key assumptions can, of course, yield different outcomes.


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Figure 4. Sample Analysis DVR Impact, Live vs. C3 Rating

Key Assumptions:% DVR Penetration 33%% of Commercials Watched Upon Playback 40%% Lift in TV Viewership from DVR Households 10%% of TV Viewership in Playback Mode (for DVR Households) 40%

Live C3Non-DVR Home

LIVE LIVE LIVE PLAYBACK TOTAL1) Overall Gross Ratings Points 5.00 5.50 5.50 5.502) % DVR penetration (Non-DVR Home vs DVR Home) 0% 67% 33% 33%3) % Viewership in Live mode (vs Playback) 100% 100% 60% 40%4) Net Rating Points ((1)*(2)*(3)) 5.0 3.69 1.09 0.73 5.505) % of Commercials Watched 95% 95% 95% 40%6) Net Ratings Points ((4)*(5)) 4.75 3.50 1.03 0.29 4.83

% Increase in Commercial Ratings Points, C3 Vs. Live 1.6%

Note: Nielsen rating is calculated as percentage of US television households tuned to a network program for a minute of its telecast.Note: Nielsen C3 ratings are a combination of average commercial minute ratings for the live broadcast of a program, plus three days of playback via DVRs.Note: Assumption of 40% of commercials watched upon playback corresponds to simple average of Nielsen and TiVo data.

DVR Home

Source: Barclays Capital estimates, Nielsen. The Nielsen material contained in this report represent Nielsen estimates and do not represent facts. Nielsenhas neither reviewed nor approved this report and/or any of the statement made herein.

POINT #4: Recent DVR Adopters are Less Likely to Time-Shift than Early Adopters Conventional wisdom would tell us that as DVR penetration continues to grow, the negative differential between Live and Playbackviewership ratings would potentially widen and become greater. However, recent research indicates that heaviest time-shifters arelikely the early adopters who purchased a stand-alone DVR (like a TiVo), while late-stage adopters are medium and light users thatprimarily utilize their cable set-top box with an integrated DVR. As could be intuitively expected, recent data suggests that of the earlyadopters, about 40% watch in playback mode whereas new users watch roughly only 20% in playback mode, on average. The implicationfrom this shift, in our view, is that as DVR penetration rises, the likelihood of a negative differential between Live and C3 ratings diminishes.This point raises an interesting caveat, however, as it introduces into our analysis the aspect of demographic differences between early andlate-stage adopters of DVR devices. To be fair, earlier DVR adopters are probably more likely to be those of an affluent demographic; this isimportant, as the top 30% of income-earners drive about 70% of consumer spend in the U.S. While this could be a valid concern for investors, we would again point out that if it is likely that the top 30% of income-earners already have a DVR in their homes , then we believe

we may have already seen the bulk of the impact that DVRs are going to have on the broadcast and cable TV industry, as incrementalusers of DVRs from here are likely to not only be less likely to watch TV shows in playback mode, but they would also be less likely to bethe top-30% income-earners (i.e., generally a more desirable target demographic for ad buyers).

POINT #5: DVR Playback is Higher for Broadcast TV ShowsDVR playback is higher for broadcast TV shows; DVR playback for broadcast network TV shows (NBC, CBS, NBC, or FOX)represents approximately 60%-70% of all DVR playback, and this overindexes as compared to broadcast televisions 44% share of overall TV viewership (versus cables 56%). We believe the prevalence of DVR playback for broadcast TV could be explained by both 1)the reach of network TV; and 2) the genre of network TV programming. Highest-rated shows are the shows that are often recorded the most(examples include CSI, Greys Anatomy, American Idol ). But also, most time-shifting occurs for the type of programming more endemic tobroadcast TV, including scripted dramas, talk shows, and reality TV. In contrast, most viewers would rather watch current news and sportson a live basis. On average, cable TV has fewer scripted shows than broadcast and thus less desirable programming to be time-shifted. Inmany cases, re-runs are more prevalent for cable TV shows as well. According to TiVos ratings results for March, the most time-shiftedviewed shows were Greys Anatomy, Desperate Housewives, and American Idol. This implies that the analysis of DVR impact isdisproportionately more important for broadcast TV; again, commercial viewership can be higher for highest-rated shows in DVRhouseholds (per our earlier analysis). At the same time, cable TV programs or programs broadcast in the 10PM-11PM are facing increasedpressure from the DVR itself, as many viewers watch programming recorded earlier in the evening during that late prime time slot.According to Nielsen, of programs airing in the 8-9PM slot, 53% of all seven day playback occurred during the same evening as comparedto the 9-10PM and 10-11PM slot which had 42% and 27% of seven day playback, respectively, occurring during the same evening.Additionally, according to recent Nielsen data, 22% of all DVR playback occurs during the 9-10 PM and 10-11PM slot. The majority of same-day DVR playback occurs during the 10-11PM slot, of course implying that time-slotting on behalf of the networks is becoming lessimportant. Given the shift to C3 ratings, we assume that programs aired during the first two hours of prime time are likely to gain someincremental audience during the playback period, while programs aired during the final hour of prime time, are not as likely to see thoseincremental viewers captured.


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Figure 5. % of DVR Playback by Hour Across Total Day (November 2008 Sweeps)

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Source: Nielsen. The Nielsen material contained in this report represent Nielsen estimates and do not represent facts. Nielsen has neither reviewed nor approved this report and/or any of the statement made herein.

POINT #6: Most of DVR Playback Actually Occurs in Day #1Most DVR Playback happens within the first day after the show is recorded. Approximately 65% of all playback takes place within 24hours. The best example of this is Thursday night at 9PM where The Office competes against CSI and Greys Anatomy ; as many of thoseshows are watched in playback mode on the same night, later in the night. DVR playback of previously played shows is actually a newcompetitor in many later time slots. Furthermore, research indicates that 85%-90% of DVR playback occurs in the first three days. Webelieve the implication of this point is that the idea that an ad message gets stale because it does not reach the consumer in time(given the DVR playback delay) is largely a false myth. As long as an ad message is not of a next-day importance level (very few adsare, in our view), then ad buyers can be somewhat comfortable their ad will reach viewers in time, meaning within 1-3 days of initialviewing. Whats also interesting here is that now that the industry has shifted to the C3 methodology, remember that ad buyers are onlypaying for the first three days of playback, meaning that they are getting playback for days 4 and beyond (i.e. 10%-15% of all DVRplayback) for free. This is of particular interest to advertisers whose messages are branded ad campaigns without time expiry concerns,such as consumer staples brands.

POINT #7: Many Internet Users are Watching TV at the Same TimeIt has become apparent that a growing number of TV-watchers are also online at the same time, and, vice versa, a growing number of Internet users are also watching TV at the same time. This makes intuitive sense to us. By the numbers, approximately 31% of Internetactivity occurs while consumers are watching TV, according to Nielsen. And isolating out just prime-time broadcast TV hours,approximately 25% of people who are online during prime-time hours are also watching TV during that time. The implication of this impliesa lesser of two evils set of outcomes for ad buyers: would an ad buyer rather a TV viewer be actively fast-forwarding through an ad? Or would an ad buyer rather a viewer elect not to fast-forward through the ad, but rather have that viewer be distracted by whatever he or sheis doing online? Another interesting aspect to this point is that Internet usage is not really increasing that dramatically as of 1Q09, overallInternet usage was up 3.2% Y/Y, while monthly time spent on the internet was up 4.6% Y/Y. Similarly to our prior conclusion about DVRadoption (that the likelihood of negative differential between Live and C3 ratings diminishes as DVR adoption increases), we believe thelikelihood of TV-watching cannibalization from Internet usage diminishes as broadband adoption flattens out over time.

POINT #8: Nielsen Data Remains the Primary Currency for TV Ad Buyers and Sellers While there are a wide range of concerns regarding the sample-size and methodology of Nielsens television research, in our view it is themain currency of television media buying and is the most broadly used. The Nielsen Commercial + 3 days methodology (C3) is now thecentral currency for television media buying, and it is the agreed upon currency across nearly all of the broadcast and cable networks. Anadvertiser pays the rates negotiated based upon this currency, regardless of whether or not the Nielsen data is objectively agreeable toeither parties (as compared to other data sets). While there may very well exist new, more representative, quantitative, or electronic forms of ratings methodology, for the time being, advertising sales are negotiated with the Nielsen currency. Last year, more than $70 billion of TV advertising was bought and sold using the Nielsen ratings construct. We do not see any near-term catalyst for change of thiscentral reality.

POINT #9: Longer-term, the DVR May Be a Transitional Technology As we discussed earlier, we believe DVR playback growth will likely begin to decelerate in the future as DVR adoption peaks. In our view,video on-demand (VOD) technologies which may ultimately include internet-based video-on-demand (both advertising and subscriptionsupported) could have the potential to overtake both DVR utilization and traditional VOD applications as the bridge between the computer


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BROADCAST TV UPFRONT REVIEWThe broadcast network TV upfront presentations concluded last week, and while network sellers remain adamant that they intend to holdthe line on price, we continue to expect to see Y/Y declines in sellout ratios. As we detailed in our April 24th upfront preview, "TV Upfront:Assessing the Downside," we continue to expect total upfront dollar volume to be down roughly 15% Y/Y. As we stated in our preview,given that CBS is the only broadcast network to post season-to-date ratings gains, we estimate it will likely be the only network toguarantee ratings growth for the upcoming season; public commentary from management indicates the preference for lower inventory sellout in defense of pricing. We expect ABC to also sell less volume given recent ratings weakness, in hopes of a firmer scatter market. FOX, given its double digit ratings declines in the current season, is likely to also lower sellout levels on lower ratingsguarantee levels. We believe NBC is likely to have the most difficult upfront in terms of dollar ad volume, as it is removing 5 hours of prime-time scripted programming for the new season. As a result, we expect NBC will see a fair degree of pricing pressure, with 5% declines inCPM pricing. On a CPM basis, we are estimating an average price decrease of 2%-3% for the total upfront market. We expect thatinventory sell-out ratios are likely to be much lower than in prior years, as networks attempt to control pricing by holding back inventory.Overall, we anticipate an average sell-out ratio of 72%, with CBS holding back the most, selling 69% of inventory in the upfront. Weestimate total dollar volume could be down the most for NBC at -20%, while we estimate that CBS upfront dollar volume could fall 10%. Weestimate a 14% decline and an 18% decline in dollar volume for ABC and FOX, respectively.

Figure 6. Barclays Capital Broadcast Network 2009 2010 Upfront Outlook ($ Billions)

Broadcast Network Estimated Prime-Time Upfront Sales ($billions)

$'s % Change $'s % Change $'s % Change $'s % Change $'s % Change

1991-92 $0.95 -- $1.00 -- $1.10 -- $0.37 -- $3.42 --1992-93 0.97 2.1% 1.10 10.0% 1.05 -4.5% 0.54 45.9% 3.66 7.0%1993-94 1.02 5.2% 1.04 -5.5% 0.92 -12.4% 0.55 1.9% 3.53 -3.6%1994-95 1.34 31.4% 1.21 16.3% 1.21 31.5% 0.73 32.7% 4.49 27.2%1995-96 1.60 19.4% 1.30 7.4% 1.70 40.5% 1.00 37.0% 5.60 24.7%1996-97 1.59 -0.6% 1.18 -9.2% 2.01 18.2% 0.96 -4.0% 5.74 2.5%1997-98 1.45 -8.8% 1.20 1.7% 2.15 7.0% 1.10 14.6% 5.90 2.8%1998-99 1.40 -3.4% 1.15 -4.2% 2.10 -2.3% 1.15 4.5% 5.80 -1.7%1999-00 1.70 21.4% 1.40 21.7% 2.20 4.8% 1.30 13.0% 6.60 13.8%2000-01 2.45 44.1% 1.62 15.7% 2.35 6.8% 1.30 0.0% 7.72 17.0%2001-02 1.60 -34.7% 1.40 -13.6% 1.90 -19.1% 1.30 0.0% 6.20 -19.7%2002-03 1.50 -6.1% 1.95 39.4% 2.74 44.3% 1.30 -0.1% 7.50 20.9%2003-04 1.70 13.0% 2.20 12.5% 3.00 9.3% 1.60 23.5% 8.49 13.3%2004-05 1.60 -6.0% 2.39 8.8% 2.75 -8.2% 1.60 0.1% 8.34 -1.8%2005-06 2.10 31.2% 2.46 3.1% 1.94 -29.6% 1.59 -0.8% 8.09 -3.0%2006-07 2.21 5.5% 2.39 -3.2% 1.41 -26.9% 1.62 1.7% 7.63 -5.7%2007-08 2.36 6.8% 2.45 2.7% 1.75 23.9% 1.81 11.8% 8.37 9.8%2008-09 2.46 4.1% 2.50 2.0% 1.85 5.5% 1.95 7.8% 8.76 4.6%2009-10 $2.11 -14.2% $2.25 -10.0% $1.48 -19.9% $1.59 -18.4% $7.43 -15.2%

2009-10 Summary

ABC Analysis Total Incremental CBS Analysis Total IncrementalTotal upfront sales for '08-'09 season 83% sold Total upfront sales for '08-'09 season 79% soldTotal upfront sales for '09-'10 season $2.46 Total upfront sales for '09-'10 season $2.50If 100% of inventory were sold @ last year's rates 2.98 If 100% of inventory were sold @ last year's rates 3.16

% Change in ratings sold -2.0% (0.06) % Change in ratings sold 4.0% 0.13 % Change in CPM (cost per thousand) -3.0% (0.09) % Change in CPM (cost per thousand) -1.0% (0.03)

Incremental dollars (0.15) Incremental dollars 0.0 Gross '09-10 upfront $'s if 100% sold 2.83 Gross '09-10 upfront $'s if 100% sold 3.26 Total '09-'10 upfront based on inventory sale of: 75% $2.11 Total '09-'10 upfront based on inventory sale of: 69% $2.25Y/Y % Change -14.2% Y/Y % Change -10.0%

NBC Analysis FOX AnalysisTotal upfront sales for '08-'09 season 80% sold Total upfront sales for '08-'09 season 85% soldTotal upfront sales for '09-'10 season $1.85 Total upfront sales for '09-'10 season $1.95If 100% of inventory were sold @ last year's rates 2.31 If 100% of inventory were sold @ last year's rates 2.29

% Change in ratings sold -6.0% (0.14) % Change in ratings sold -4.0% (0.09) % Change in CPM (cost per thousand) -5.0% (0.12) % Change in CPM (cost per thousand) -1.0% (0.02)

Incremental dollars (0.25) Incremental dollars (0.1 Gross '09-10 upfront $'s if 100% sold 2.06 Gross '09-10 upfront $'s if 100% sold 2.18 Total '09-'10 upfront based on inventory sale of: 72% $1.48 Total '09-'10 upfront based on inventory sale of: 73% $1.59Y/Y % Change -19.9% Y/Y % Change -18.4%

Total "Big 4"ABC CBS NBC FOX

Source: Paul Kagan Associates, Broadcasting & Media, Mediaweek, Barclays Capital.

THE NEW SEASON; LOOKING FOR NEW HITS The Big Four television networks, ABC, CBS, FOX and NBC, and the weblet The CW, announced their respective fall schedules for the200910 season last week. Based on the schedules as they stand now, we believe CBS and FOX present advertisers with the most stableschedules of any of the broadcast networks. With that said, CBS and FOX must continue to manage the risks of the gradual ratingsdeterioration of legacy shows such as CSI and American Idol though the continued replenishment of the content pipeline. As CBS is theonly network to demonstrate any ratings growth during the 2008 2009 season, and given that its line-up remains relatively steady, webelieve CBS should continue to post the largest total audiences of the networks. We believe CBS new programs provide the bestcompliment to the shows currently on the network. As for FOX, we expect the season to again be weighted to the back-half of the year asAmerican Idol the most watched show on television runs January through May. We believe American Idol continues to be the bestperforming show on any network, and any programs successful during the first half of the season on Tuesday/Wednesday nights will likelyface significant competition come January. With Wednesday nights featuring 3 hours of new programming, we believe ABC could be most


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at risk for a 2 nd half impact from American Idol. We would expect some mid-season shuffling by ABC to mitigate some of this impact. ABC islaunching the greatest number of programs next season, with Wednesday continuing to be the night of greatest weakness for the network.As we discussed in our upgrade note of two weeks ago, we believe that ABC has likely reached the bottom of its television content cycleand as a result is likely to see some uptick from the programs launched during the upcoming season. We anticipate at least two of the newprograms will catch on with viewers and make it to a second season. Of the major networks, we believe NBC remains in the weakestposition of the majors, especially given its decision to no longer feature entertainment programming during the 10 11PM prime time hour.NBC has moved Jay Leno from the 11:30 PM 12:30 AM late night slot to a prime time slot, saving the network tens of millions of dollars incontent costs, but potentially costing the network viewers. One potential benefit of the new Jay Leno show is that it is live programming,making it essentially DVR proof driving viewers to watch it live. At the same time, if the show flounders, the network has given up 5 hoursof valuable prime time real estate. The CW weblet continues to focus on its core demographic of young women and has pulled together another very targeted schedule. Even without programming Saturday or Sunday nights which The CW has given back to the affiliates the network will be broadcasting more hours of scripted programming than NBC.

Figure 7. Network By Network Prime Time Programming Acquisitions ABC CBS FOX NBC CW

Comedy 4 1 4 3 ---Drama 6 5 2 4 3Unscripted 1 2 0 1 ---Total 11 8 6 8 3

Source: Variety, Futon Critic, Mediaweek


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Figure 8. Night By Night 2009 2010 Fall Prime Time Broadcast Schedule

ABC CBS FOX NBC CW

The Simpsons

The Cleveland Show

Family Guy

American Dad

ABC CBS FOX NBC CW

How I Met Your Mother

Accidentally On Purpose

Two and a Half Men

The Big Bang Theory

ABC CBS FOX NBC CW

ABC CBS FOX NBC CW

Hank The New Adventures of Old Christine

The Middle Gary Unmarried

Modern Family

Cougar Town

ABC CBS FOX NBC CW

SNL Weekend Update Thursday

Parks and Recreation

The Office

Community

ABC CBS FOX NBC CW

Brothers

'Til Death

ABC CBS FOX NBC CW

Cops

Cops

The Forgotten The Good Wife Local Station Programming Local Station Programming

Gossip Girl8:30-9:00

9:00-9:30

9:30-10:00

Shark Tank

Dancing with the Stars Results /Better Off Ted

NCIS

NCIS: Los Angeles

The Biggest Loser

Tuesday

8:00-8:30

So You Think You Can Dance?(Performance Show)

Wednesday

Gossip Girl

One Tree Hill

Local Station Programming

Dancing with the Stars

Castle CSI: Miami Local Station Programming

8:00-8:30Parenthood America's Next Top Model

8:30-9:00

House

Lie to Me

Heroes

Trauma

60 Minutes

The Amazing Race

Three Rivers

The OT (NFL Post-Game)

9:00-9:30Criminal Minds Law & Order: SVU

9:30-10:00Glee The Beautiful Life

10:30-11:00Eastwick CSI: NY Local Station Programming The Jay Leno Show Local Station Programming10:30-11:00

So You Think You Can Dance?(Results Show)

Thursday

8:00-8:30Bones

8:30-9:00Flash Forward Survivor Vampire Diaries

9:00-9:30CSI: Crime Scene Investigation Fringe Supernatural

9:30-10:00Grey's Anatomy

10:30-11:00Private Practice The Mentalist Local Station Programming

10:30-11:00The Jay Leno Show Local Station Programming

Friday

8:00-8:30Supernanny Ghost Whisperer Smallville

8:30-9:00Law & Order

9:00-9:30 Ugly Betty Medium Dollhouse9:30-10:00

America's Next Top Model (Encore)

10:30-11:0020/20 Numb3rs Local Station Programming The Jay Leno Show Local Station Programming

10:30-11:00

Southland

Saturday

8:00-8:30

8:30-9:00Crime Time Saturday

Saturday Night College Football

One Tree Hill

Dateline NBC

9:00-9:30America's Most Wanted Trauma (Encore)

9:30-10:00

10:30-11:0048 Hours Mystery Local Station Programming

10:30-11:00Law & Order: SVU (Encore)


10:30-11:00

10:30-11:00

9:30-10:00

10:30-11:00

10:30-11:00

Monday

10:30-11:00

Sunday Night Football


The Jay Leno Show


Football Night in America

The Jay Leno Show

America's Funniest Home Videos

Desperate Housewives

Extreme Makeover: Home Edition

Brothers & Sisters Cold Case

8:30-9:00

9:00-9:30

9:30-10:00

10:30-11:00

8:00-8:30

Sunday

7:00-7:30

7:30-8:00

8:00-8:308:30-9:00

9:00-9:30



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ABC ABC is a network in transition, as many of its long running franchises such as Desperate Housewives and Lost continue to age. DesperateHousewives has been experiencing double-digit audience declines in aggregate and in the more important target demographics, while Loswill be concluding the series in May of next year. Overall audience performance for the 2008 2009 season was difficult for ABC, as it wasunable to place first among the big four networks on any night of the week. As a result, ABC has been the most aggressive with its

development slate, launching 11 new shows: 4 comedies, 6 dramas, and one unscripted show. Wednesday continues to be the problemnight for ABC, and the network is essentially resetting and launching five of its eleven new series on Wednesday nights. ABC has firmed upits Thursday nights with the addition of Flash Forward , the most anticipated new program on its new fall schedule. In combination withGreys Anatomy and Private Practice, ABCs strongest returning dramas, Thursdays become ABCs strongest night of programming. Webelieve that ABC has likely neared a cyclical bottom for its television content cycle and as a result is more than likely to see some uptickfrom the programs launched during the upcoming season.

Figure 9. ABC 2009 2010 Fall Prime Time Broadcast Schedule Sunday Monday Tuesday Wednesday Thursday Friday Saturday

ABC

Hank

The Middle

Modern Family

Cougar Town

FALL

Saturday Night CollegeFootball

Dancing with the Stars

America's FunniestHome Videos

Desperate Housewives

Extreme Makeover:

Home Edition

Brothers & Sisters EastwickCastle

Flash Forward

Grey's Anatomy

Shark Tank

Dancing with theStars Results / Better

Off Ted

The Forgotten Private Practice

7:00-7:30

7:30-8:00

8:00-8:30

8:30-9:00

9:00-9:30

9:30-10:00

10:30-11:00

10:30-11:00

Supernanny

Ugly Betty

20/20


Figure 10. ABC 2009 2010 Mid-Season Prime Time Broadcast Schedule Sunday Monday Tuesday Wednesday Thursday Friday Saturday

ABC

Hank

The Middle

Scrubs Modern Family

Better Off Ted Cougar Town

MID-SEASON

7:00-7:30 America's Funniest

Home Videos7:30-8:00

8:00-8:30 Extreme Makeover:Home Edition8:30-9:00

The Bachelor

TBA Flash Forward Supernanny

TBAGrey's Anatomy Ugly Betty

Castle

9:00-9:30Desperate Housewives

9:30-10:00

10:30-11:00Brothers & Sisters

10:30-11:00The Forgotten Eastwick Private Practice 20/20



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CBSCBS is the only network to demonstrate any ratings growth during the 2008 2009 season, as it is the only network to have grown ratingsfor total households, adults 18-49, and adults 18-34. Key returning shows/ franchises include The Mentalist , CSI , and NCIS . Given that itsline-up remains relatively steady, we believe CBS could continue to post the largest total audiences of the networks. Furthermore, with NBCno longer programming the 10 11PM hour, the continued strength of CBSs lineup could potentially provide greater audience share for the

network. Additionally benefitting CBS in the upcoming season, the network will be broadcasting the Super Bowl in 2010 which provides apowerful platform for program promotion. CBS is launching the fewest number of programs of any of the major networks with just 3 dramasand 1 comedy. The addition of Medium , previously on CBS, provides a solid programmer on Friday nights, which have been dominated byCBS over the past few years. NCIS has demonstrated increasing success, and will be complimented by a spin off show NCIS: Los Angeleson Tuesday nights. This strategy has proven very successful for CBS with its CSI franchise, and for NBC with its Law & Order franchise. Wanticipate that the new NCIS spin-off is likely to be the best performing show of the season for any network.

Figure 11. CBS 2009 2010 Fall Prime Time Broadcast Schedule Sunday Monday Tuesday Wednesday Thursday Friday Saturday

CBS

How I Met Your Mother The New Adventures of

Old Christine

Accidentally OnPurpose

Gary Unmarried

Two and a Half Men

The Big Bang Theory

60 Minutes

The Amazing Race

CSI: Miami

NCIS: Los Angeles

NCIS

The Good Wife

Criminal Minds

8:00-8:30

8:30-9:00

7:00-7:30

7:30-8:00

9:00-9:30

9:30-10:00

10:30-11:00

10:30-11:00

Three Rivers

Cold Case CSI: NY The Mentalist

CSI: Crime SceneInvestigation

Crime Time Saturday

48 Hours Mystery

Survivor

Medium

Ghost Whisperer

Numb3rs

Source: Variety, Futon Critic, Mediaweek.


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12

FOX For FOX, we continue to expect the 2009 2010 season to again be weighted to the back-half of the year as American Idol the mostwatched show on television runs only during January May. We believe American Idol continues to be the best performing show on anynetwork, and any programs demonstrating success during the first half of the season on Tuesday/Wednesday nights will likely facesignificant competition come January. Even with a significantly reduced schedule of baseball in the fall, the network continues to lose nearly

2 full weeks of programming for one of the baseball Championship series and The World Series, which makes consistent schedulingdifficult. As has been the case over the past several years, FOX has lost ground during the first half of the season, as baseball hasinterrupted the development of many of its entertainment programs. We believe FOX is likely to launch its prime time slightly earlier than theother networks to allow for its programs to gain a foothold before the disruption of baseball playoffs begins. As American Idol continues topull back from its peak ratings levels, we believe FOX could face increasing pressure as the top A18-49 network.

Figure 12. FOX 2009 2010 Fall Prime Time Broadcast Schedule

FALL Sunday Monday Tuesday Wednesday Thursday Friday Saturday

FOX

The Simpsons Brothers Cops

The Cleveland Show 'Til Death Cops

Family Guy

American Dad

The Wanda Sykes Show

Animation DominationEncores

Local StationProgramming

Local Station ProgrammingLocal StationProgramming12:00-12:30

9:00-9:30

9:30-10:00

10:30-11:00

10:30-11:00

7:00-7:30

7:30-8:00

8:00-8:30

8:30-9:00

The OT (NFL Post-Game)


House

Lie to Me

So You Think You Can

Dance? (Results Show)

America's Most Wanted

So You Think YouCan Dance?

(Performance Show)Glee



Bones

Fringe Dollhouse


Local Station Programming Local Station Programming

11:00-12:00 Local StationProgramming





Figure 13. FOX 2009 2010 Mid-Season Prime Time Broadcast Schedule

Sunday Monday Tuesday Wednesday Thursday Friday Saturday

FOXAnimation Domination

Encores

American Dad

The Simpsons Brothers Cops

Sons of Tucson 'Til Death Cops

Family Guy

The Cleveland Show

The Wanda Sykes Show

Animation DominationEncores

Local Station

ProgrammingLocal Station Programming

Local Station

Programming

11:00-12:00 Local Station

Programming

Local Station

Programming

Local Station

Programming12:00-12:30


Local Station ProgrammingLocal StationProgramming


9:30-10:00

10:30-11:00 Local StationProgramming

Local StationProgramming10:30-11:00

Past Life24


America's Most Wanted9:00-9:30 Human Target (January) /

Glee (Spring)Fringe Dollhouse

8:00-8:30House

American Idol (ResultsShow)

Bones8:30-9:00

American Idol(Performance Show)

7:00-7:30

7:30-8:00

MID-SEASON



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NBC Of the major networks, we believe NBC remains the weakest of the majors, especially given its decision to no longer feature entertainmentprogramming during the 10 11PM prime time hour. NBC has moved Jay Leno from the 11:30 PM 12:30 AM late night slot to a primetime slot, saving the network tens of millions of dollars in content costs, but potentially costing the network viewers. NBC has suggested thatthe move could increase the audience for Jay Leno by nearly 50% above that of the original late night slot. As it is live programming, the

show likely becomes DVR proof meaning that any viewers who will watch the show will do so live, benefiting the advertisers on theprogram, and potentially allowing the network to charge more for the show than for the dramas that were previously in its place. While weare relatively positive on the potential success of the prime time Jay Leno show, we believe it may be more interesting to see what happenswith the network if the show does not succeed. There does not appear to be a broad slate of shows waiting in the wings to replace Leno,which likely means NBC will stay with the show at least until next season. Beyond the Leno shift, we think the NBC schedule continues toface difficulties, as Heroes and the Law & Order franchise continue to decline, opening another 3 hours of prime time to difficult competition.Heroes is facing Foxs hit House on Monday nights, while Law & Order: SVU is facing CBSs Criminal Minds .

Figure 14. NBC 2009 2010 Fall Prime Time Broadcast Schedule

FALL Sunday Monday Tuesday Wednesday Thursday Friday Saturday

NBC

SNL Weekend UpdateThursday


The Office

Community






11:30-12:30The Tonight Show with

Conan O'BrienThe Tonight Show

with Conan O'BrienThe Tonight Show with

Conan O'BrienThe Tonight Show with


with Conan O'BrienSaturday Night Live

12:30-1:30Late Night with Jimmy

FallonLate Night withJimmy Fallon

Late Night with JimmyFallon



Poker After Dark

1:30-2:30 Last Call with CarsonDaly Last Call with CarsonDaly Last Call with CarsonDaly Last Call with Carson Daly Last Call with CarsonDaly Local Station Programming

11:00-11:30


The Biggest Loser 9:00-9:30

9:30-10:00

10:30-11:00

10:30-11:00

7:00-7:30

7:30-8:00

8:00-8:30

8:30-9:00Heroes

Trauma

The Jay Leno Show The Jay Leno Show

Dateline NBC

Football Night inAmerica

Sunday Night Football

Parenthood

Law & Order: SVU

T he Jay L eno Show T he Ja y Le no Show

Law & Order

Trauma (Encore)

Law & Order: SVU (Encore)

Southland

The Jay Leno Show


Figure 15. NBC 2009 2010 Mid-Season Prime Time Broadcast Schedule

MIDSEASON Sunday Monday Tuesday Wednesday Thursday Friday Saturday

NBC

Community


The Office

100 Questions 30 Rock






11:30-12:30The Tonight Show with


with Conan O'BrienThe Tonight Show with

Conan O'BrienThe Tonight Show with


with Conan O'BrienSaturday Night Live

12:30-1:30Late Night with Jimmy

FallonLate Night withJimmy Fallon




Poker After Dark

1:30-2:30Last Call with Carson

DalyLast Call with Carson

DalyLast Call with Carson

DalyLast Call with Carson Daly

Last Call with CarsonDaly


11:00-11:30


Dateline NBC

The Marriage Ref

The CelebrityApprentice10:30-11:00

The Jay Leno Show The Jay Leno Show The Jay Leno Show10:30-11:00

7:00-7:30

7:30-8:00

8:00-8:30Chuck Mercy Law & Order Dateline NBC

The Biggest Loser 8:30-9:00

9:00-9:30Day One Law & Order: SVU Southland

9:30-10:00Southland (Encore)

The Jay Leno Show The Jay Leno Show Law & Order: SVU (Encore)



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14

The CW The CW weblet continues to focus on its core young female demographic and has pulled together another very targeted schedule. Of itsthree new programs, each is a direct complement of the show sharing its programmed night. The Melrose Place re-launch on Tuesdays isfollowing 90210 . During the 1990s both shows in earlier incarnations aired in the same order on FOX. Americas Next Top Model onWednesdays is followed by The Beautiful Life a soap-opera focusing on models living in New York City. Finally on Thursday, Vampire

Diaries will lead into the long running Supernatural . As is true for the entire CW schedule, the new programs are tightly targeted andmarketed to a female 12 34 audience. The CW has also pulled back on programming weekend evenings, and has given both Saturdaysand Sundays back over to the affiliate stations for programming.

Figure 16. The CW 2009 2010 Fall Prime Time Broadcast Schedule

Sunday Monday Tuesday Wednesday Thursday Friday Saturday

CW






Smallville


7:00-7:30

8:00-8:30

8:30-9:00

9:00-9:30

7:30-8:00

Gossip Girl

One Tree Hill The Beautiful Life9:30-10:00

10:30-11:00

10:30-11:00

Vampire Diaries

SupernaturalAmerica's Next Top

Model (Encore)

90210

Melrose Place

America's Next TopModel


Analyst Certification:We, Anthony J. DiClemente, CFA and George L. Hawkey, hereby certify (1) that the views expressed in this research report accuratelyreflect our personal views about any or all of the subject securities or issuers referred to in this research report and (2) no part of our compensation was, is or will be directly or indirectly related to the specific recommendations or views expressed in this research report.

Other Team Members:Pollack, Nathaniel (BCI, New York) 1.212.526.9425 [email protected]

On September 20, 2008, Barclays Capital acquired Lehman Brothers North American investment banking, capital markets, and privateinvestment management businesses. We have endeavored to provide conflicts of interest disclosures on a combined basis. All ratings andprice targets prior to the acquisition date relate to coverage under Lehman Brothers Inc.


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Equity Research

15

FOR CURRENT IMPORTANT DISCLOSURES REGARDING COMPANIES THAT ARETHE SUBJECT OF THIS RESEARCH REPORT, PLEASE SEND A WRITTEN REQUEST TO:

BARCLAYS CAPITAL RESEARCH COMPLIANCE745 SEVENTH AVENUE, 17TH FLOOR, NEW YORK, NY 10019

ORREFER TO THE FIRM'S DISCLOSURE WEBSITE AT www.lehman.com/disclosures

Important Disclosures Continued:The analysts responsible for preparing this report have received compensation based upon various factors including the firm's totalrevenues, a portion of which is generated by investment banking activities.

Mentioned Company Ticker Price Price Date Stock / Sector RatingCBS Corp. CBS US$ 6.98 27 May 2009 2-Equal weight / 2-NeutralCBS Corp. CBSA US$ 7.05 27 May 2009 2-Equal weight / 2-NeutralNews Corporation NWS US$ 10.59 27 May 2009 2-Equal weight / 2-NeutralNews Corporation NWSA US$ 9.26 27 May 2009 2-Equal weight / 2-NeutralTime Warner Inc. TWX US$ 23.00 27 May 2009 2-Equal weight / 2-NeutralViacom Inc. VIA US$ 23.60 27 May 2009 1-Overweight / 2-NeutralViacom Inc. VIAB US$ 22.13 27 May 2009 1-Overweight / 2-NeutralWalt Disney Co. DIS US$ 23.87 27 May 2009 1-Overweight / 2-Neutral

Guide to the Barclays Capital Fundamental Equity Research Rating System:Our coverage analysts use a relative rating system in which they rate stocks as 1-Overweight, 2-Equal weight or 3-Underweight (seedefinitions below) relative to other companies covered by the analyst or a team of analysts that are deemed to be in the same industrysector (the sector coverage universe). Below is the list of companies that constitute the sector coverage universe:

CBS Corp. (CBS) CBS Corp. (CBSA)Cinemark Holdings Inc. (CNK) Discovery Communications Inc. (DISCA)National Cinemedia Inc. (NCMI) News Corporation (NWS)News Corporation (NWSA) Regal Entertainment Group (RGC)Scripps Networks Interactive, Inc. (SNI) Time Warner Inc. (TWX)Viacom Inc. (VIA) Viacom Inc. (VIAB)Walt Disney Co. (DIS)

In addition to the stock rating, we provide sector views which rate the outlook for the sector coverage universe as 1-Positive, 2-Neutral or 3-Negative (see definitions below). A rating system using terms such as buy, hold and sell is not the equivalent of our rating system.Investors should carefully read the entire research report including the definitions of all ratings and not infer its contents from ratings alone.

Stock Rating1-Overweight - The stock is expected to outperform the unweighted expected total return of the sector coverage universe over a 12-monthinvestment horizon.2-Equal weight - The stock is expected to perform in line with the unweighted expected total return of the sector coverage universe over a12- month investment horizon.3-Underweight - The stock is expected to underperform the unweighted expected total return of the sector coverage universe over a 12-month investment horizon.RS-Rating Suspended - The rating and target price have been suspended temporarily due to market events that made coverageimpracticable or to comply with applicable regulations and/or firm policies in certain circumstances including when Barclays Capital is actingin an advisory capacity in a merger or strategic transaction involving the company.Sector View


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1-Positive - sector coverage universe fundamentals/valuations are improving.2-Neutral - sector coverage universe fundamentals/valuations are steady, neither improving nor deteriorating.3-Negative - sector coverage universe fundamentals/valuations are deteriorating.

Distribution of Ratings:Barclays Capital Equity Research has 1204 companies under coverage.36% have been assigned a 1-Overweight rating which, for purposes of mandatory regulatory disclosures, is classified as a Buy rating; 38%of companies with this rating are investment banking clients of the Firm.47% have been assigned a 2-Equal weight rating which, for purposes of mandatory regulatory disclosures, is classified as a Hold rating;31% of companies with this rating are investment banking clients of the Firm.14% have been assigned a 3-Underweight rating which, for purposes of mandatory regulatory disclosures, is classified as a Sell rating; 23%of companies with this rating are investment banking clients of the Firm.

Barclays Capital offices involved in the production of Equity Research:LondonBarclays Capital, the investment banking division of Barclays Bank Plc (Barclays Capital, London)

New YorkBarclays Capital Inc. (BCI, New York)

TokyoBarclays Capital Japan Limited (BCJL, Tokyo)

So PauloBanco Barclays S.A. (BBSA, So Paulo)

This publication has been prepared by Barclays Capital; the investment banking division of Barclays Bank PLC, and/or one or more of its affiliates asprovided below. This publication is provided to you for information purposes only. Prices shown in this publication are indicative and Barclays Capital is notoffering to buy or sell or soliciting offers to buy or sell any f inancial instrument. Other than disclosures relating to Barclays Capital, the information contained inthis publication has been obtained from sources that Barclays Capital believes to be reliable, but Barclays Capital does not represent or warrant that it isaccurate or complete. The views in this publication are those of Barclays Capital and are subject to change, and Barclays Capital has no obligation to updateits opinions or the information in this publication. Barclays Capital and its affiliates and their respective officers, directors, partners and employees, includingpersons involved in the preparation or issuance of this document, may from time to time act as manager, co-manager or underwriter of a public offering or

otherwise, in the capacity of principal or agent, deal in, hold or act as market-makers or advisors, brokers or commercial and/or investment bankers in relationto the securities or related derivatives which are the subject of this publication.The analyst recommendations in this report reflect solely and exclusively those of the author(s), and such opinions were prepared independently of any other interests, including those of Barclays Capital and/or its affiliates.Neither Barclays Capital, nor any affiliate, nor any of their respective officers, directors, partners, or employees accepts any liability whatsoever for any director consequential loss arising from any use of this publication or its contents. The securities discussed in this publication may not be suitable for all investors.Barclays Capital recommends that investors independently evaluate each issuer, security or instrument discussed in this publication and consult anyindependent advisors they believe necessary. The value of and income from any investment may fluctuate from day to day as a result of changes in relevanteconomic markets (including changes in market liquidity). The information in this publication is not intended to predict actual results, which may differ substantially from those reflected. Past performance is not necessarily indicative of future results.This communication is being made available in the UK and Europe to persons who are investment professionals as that term is defined in Article 19 of theFinancial Services and Markets Act 2000 (Financial Promotion Order) 2005. It is directed at, and therefore should only be relied upon by, persons who haveprofessional experience in matters relating to investments. The investments to which it relates are available only to such persons and will be entered into onlywith such persons. Barclays Capital is authorized and regulated by the Financial Services Authority (FSA) and member of the London Stock Exchange.Barclays Capital Inc., US registered broker/dealer and member of FINRA (www.finra.org), is distributing this material in the United States and, in connectiontherewith accepts responsibility for its contents. Any U.S. person wishing to effect a transaction in any security discussed herein should do so only bycontacting a representative of Barclays Capital Inc. in the U.S. at 745 Seventh Avenue, New York, New York 10019.Subject to the conditions of this publication as set out above, ABSA CAPITAL, the Investment Banking Division of ABSA Bank Limited, an authorised financialservices provider (Registration No.: 1986/004794/06), is distributing this material in South Africa. Any South African person or entity wishing to effect atransaction in any security discussed herein should do so only by contacting a representative of ABSA Capital in South Africa, 15 ALICE LANE, SANDTON,JOHANNESBURG, GAUTENG, 2196. ABSA CAPITAL IS AN AFFILIATE OF BARCLAYS CAPITAL.Non-U.S. persons should contact and execute transactions through a Barclays Bank PLC branch or affiliate in their home jurisdiction unless local regulationspermit otherwise.In Japan, this report is being distributed by Barclays Capital Japan Limited to institutional investors only. Barclays Capital Japan Limited is a joint-stockcompany incorporated in Japan with registered office of 2-2-2, Otemachi, Chiyoda-ku, Tokyo 100-0004, Japan. It is a subsidiary of Barclays Bank PLC and aregistered financial instruments firm regulated by the Financial Services Agency of Japan. Registered Number: Kanto Zaimukyokucho (kinsho) No. 143.Barclays Bank PLC Frankfurt Branch is distributing this material in Germany under the supervision of Bundesanstalt fr Finanzdienstleistungsaufsicht(BaFin).IRS Circular 230 Prepared Materials Disclaimer: Barclays Capital and its affiliates do not provide tax advice and nothing contained herein should beconstrued to be tax advice. Please be advised that any discussion of U.S. tax matters contained herein (including any attachments) (i) is not intended or written to be used, and cannot be used, by you for the purpose of avoiding U.S. tax-related penalties; and (ii) was written to support the promotion or marketing of the transactions or other matters addressed herein. Accordingly, you should seek advice based on your particular circumstances from anindependent tax advisor.


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