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The X Factor
Andrea Zappia CEO – Sky Italia
2
This document contains certain forward looking statements with respect to the Group’s financial condition, results of operations and business, and our strategy,
plans and objectives for the Group. These statements include, without limitation, those that express forecasts, expectations and projections, such as forecasts,
expectations and projections in relation to new products and services, the potential for growth of free-to-air and pay television, fixed line telephony, broadband and
bandwidth requirements, advertising growth, DTH and OTT customer growth, On Demand, NOW TV, Sky Go, Sky Go Extra, Sky+ HD, Sky Q, Sky Store, Sky Online, mobile,
Multiscreen and other services penetration, revenue, administration costs and other costs, advertising growth, churn, profit, cash flow, products and our broadband
network footprint, content, wholesale, marketing, synergies and integration, and capital expenditure.
These statements (and all other forward-looking statements contained in this document) are not guarantees of future performance and are subject to risks,
uncertainties and other factors, some of which are beyond the Group's control, are difficult to predict and could cause actual results to differ materially from those
expressed or implied or forecast in the forward-looking statements. These factors include, but are not limited to, the fact that the Group operates in a highly
competitive environment and faces competition from a broad range of organisations, the effects of laws and government regulation upon the Group's activities, the
fact that the Group’s business is based on a subscription model and its future success relies on building long-term relationships with its customers, its reliance on a
complex technical infrastructure which is subject to risk of failure, change and development, failure of key suppliers, the Group’s exposure to financial market risks, the
fact that the Group must protect its customer and corporate data and prevent breaches of security, risks inherent in the implementation of large-scale capital
expenditure projects, the fact that the Group relies on intellectual property and proprietary rights which may not be adequately protected under current laws or
which may be subject to unauthorised use and the fact that people at Sky are critical to the Group’s ability to meet the needs of its customers and achieve its goals
as a business.
Information on the significant risks and uncertainties is provided in the “Principal risks and uncertainties” section of Sky’s Annual Report for the full year ended 30
June 2016. Copies of the Annual Report are available from the Sky plc web page at www.sky.com/corporate and in hard copy from the Company Secretary, Sky plc,
Grant Way, Isleworth, Middlesex TW7 5QD. All forward looking statements in this document are based on information known to the Group on the date hereof. The
Group undertakes no obligation publicly to update or revise any forward looking statements, whether as a result of new information, future events or otherwise.
3 Source: Agcom, Bloomberg
1990 2003 2006 2011 2013
Pay TV enters
Italy with
Tele+
A 2nd player,
Stream, enters
Pay TV
NewsCorp
joins Stream in
a 50% JV
Stream acquires 100% of Tele+
Sky Italia starts
operations with 1.8m subscribers
1993 2000
Sky Italia reaches
EBIT break-even with
3.8m subscribers
Sky Italia becomes
the No 1 player in
terms of turnover
Sky Italia
launched 1st
triple play offer
in bundle with
Fastweb
2016
NowTV launch
2015
Sky Italia acquired
TV8 FTA channel
Tele+ Sky Italia EBIT
break-even Stream Newscorp Triple play Sky #1 OTT FTA Sky Go &
On Demand
2012
Sky Italia launch
Sky Go and On
Demand
4 Source: Ampere Analysis
€19.6bn
Ad revenue 1.5
2.0
Subscription
revenue
Public TV
license fee
TV households 42m 28m 25m 18m
TV market in top European countries (CY 2015)
27m
5.2
8.4
6.0
4.6
5.2
4.5
2.5
5.3
3.2
1.8
3.0
3.2
1.7 1.4 2.0
€14.3bn
€11.0bn
€8.0bn
€5.1bn
5
2.7 2.8 2.7
2.5 2.4 2.4
2.8 2.2 2.2
Sky Italia RAI Mediaset Group Other
4,742 4,725 4,742
Source: Ampere Analysis Source: Company data
Sky Italia Customer base (‘000) TV revenue by player
€8.9bn
€7.9bn €8.0bn
2010 2014 2016 2010 2014 2015
6
• 154 pay channels, 65 HD, 22 PPV
• 80% of customers have a Sky+ HD box
• More than 50% of customers use Sky Go
• c. 52% of boxes connected and 5m downloads per week
• #3 advertising sales player
Revenues Operating profit Subscribers Monthly ARPU Employees
Company data 2016 – exchange rate £/€ at 1.34
7
c.a. 6,5m 1.0m 18.6m
DTH pay
DTT pay
OTT FTA
only
Platforms
Pay - 7.5m
(Penetration - 27%)
Main Player /
Propositions
25 million homes
c.a. 6.5m
8
Leader in core PAY TV Fastest growing
Free-to-Air player
First to launch IPTV and with
distribution deals with all telcos
Highest quality offer in
nascent OTT arena
1. 2. 3. 4.
9 Source: Company data
*including Sky On Demand + Sky Go + NOW TV (exc. Overlaps)
4,688
4,764
1.7m
3.2m*
13.9%
11.1%
Residential churn
Growing in the last 12 months (‘000) Lower churn
Biggest connected base in the country Growing ARPU
€42.5
€42.9
Residential ARPU
Closing base Q1 2016 Closing base Q1 2017
2013 2016 2013 2016
2013 2016
On Demand connected box
10
22
13
9
-1 -4 -5
-8
-17
Source: internal research
NPS Benchmarking
11
• Grow revenues at the expenses of our competitors
becoming a key player in the FTA advertising base
segment
• Cross promote Sky pay TV offer
• Optimize monetization of sport rights with
mandatory FTA exposure (MotoGP/Europa League)
and of original productions
12 Source: Auditel
0.1
-0.2
-0.5
Sky FTA Discovery Rai (state-
owned public
broadcaster)
Mediaset
Sky FTA share growth Yoy growth in share of viewing
Q1FY17 vs Q1FY16
1.91
3.08 1.2
Q1 2016 Q1 2017
13
7% 12%
25% 21%
65% 56%
3% 4% 6%
Discovery
Cairo
Mediaset
Rai
Sky Media
Source: Nielsen
2010 2016
5
-4
-9
1
5
Sky Media Rai Mediaset Cairo Discovery
Market share by player Variance FY10-FY16 (pp)
14
TV series and Movies on pay window
As many new series as Netflix
Strong Kids offer
Streaming to TV with NOW TV box
Football and Sport Monthly passes
15
Leading content creator and
unrivalled breadth of content
choice
Best customers platforms Disciplined cost management Most loved media brand and
passion for customers
1. 2. 3. 4.
16
A strong portfolio of basic channels Best offer of exclusive third party
channels, only available on Sky
Italian TV company with some of
the most popular shows
17
Video
SkyUno
A unique approach
(3 mins)
18
• More than 70% of our customers takes Sky Cinema
• Superior movie offer with 2,000 titles/year and 3x
more movie premieres than competition
• Exclusive deals with 5 Hollywood studios
• 12 HD channels and successful use of pop-up/event
channels (i.e. Rocky channel in Nov.)
• All movies in HD, On Demand and available
on Sky Go
• Key partnerships with Italian movie distributors
• Strongest Italian movies offering
International
Studios
Italian
Distributors
Strongest movies offer
19
Video
Cinema
Italy’s leading Movies service
(2:06 mins)
20
Football MotoSports Basketball Golf Other sports
Sport – season 2016/2017
21 Source: Serie A public records
2010-2012 Total average cost p.a. index at 100
Series A rights overview and costs
2010-12 2012-15 2015-18
• Matches: 380/380
• Exclusive matches : 56 /380
• Avg. cost p.a. index: 70
• Matches: 380/380
• Exclusive matches : 132 /380
• Avg. cost p.a: 71
• Matches: 380/380
• Exclusive matches : 56/380
• Avg. Cost p.a. index: 72
Total (avg cost pa)
100 104 118
22
• Nearly one in two of all Italians watching at the time watched
2015 MotoGP season finale on Sky channels
• This year MotoGP at +19% vs PY, and F1 viewing is +9% vs PY
33 weekends of great Sport between Spring and Autumn
23
Video
Sport
(1:44)
24
74
86 91 90 89 86
Avg cust sat Football Moto GP F1 Tennis Basketball
Satisfaction with Sports on Sky (%)
25
26 Source: Company data.
On Demand
Sky Go
HD
Multivision
MySky
Products & Services
12m 11m
10m
9m
7m
5m
2011 2012 2013 2014 2015 2016
27
2011/2012 2013/2014 2012/2013 2015/2016 2014/2015
Connected Multivision
New EPG
restart
On Demand HD
28
54
36 36
29
33 33
29
25
71 70
72
73
74
Source: Internal research – August 2016
Brand perception (%) Customer satisfaction with Sky (%)
2012 2013 2014 2015 2016
29
”I love the new eXtra program, in
particular the fact I can watch movies
and TV series in advance”
(5-year tenure sub)
”eXtra program allows the old tenure
client to always have more. Great”
(10-year tenure sub)
• Customers receive exclusive Sky benefits
including
– discounts to Sky products and to partners
– unique service and caring
– attendance to Sport events and Sky programs
• More than 1.6m enrolled customers (1m
redemptions)
• 34% benefit in churn
Source: Company data
30
Video
eXtra
Sky loyalty Angels
(1:00 min)
31
32% 39%
49% 51% 52%
3.8 3.9 3.1
2.7 2.6
Q1 FY17
at 2.5
Diversion rate
Call rate
Source: Company data
2012 2013 2014 2015 2016
32
€33m
€68m
€98m
€126m
Source: Company data
Achieved
Ongoing
€28m
€98m
Net EBIT impact of Efficiency program
2014 2015 2016 2017
33
Strengthening
our TV
experience
1. Leveraging our
multiplatform
strategy
2. 3. Broadening our
revenue growth
34
Strengthening
our TV
experience
1.
35
1.1 Sky families have
at least one kid
2.2m
Sky Go users
2..2m
On Demand customers
2.2m On Demand
customers
Sky Go Plus Sky Go Plus HD On Demand Sky IP only Sky Q product
line & evolution
MySky content
discovery
New group
platform
Cinema relaunch
Next 18 months will deliver more innovation than ever building further gap vs competition
36
Smartphones Roku 4 TV box HD Chromecast
NOW TV will introduce some step changes to become more attractive than ever
37
Highest ratings ever for a scripted show on Sky
Season 2 averaged c.2.3m viewers (more than
2x Games of Thrones)
Sold in more than 130 countries all over the world
“Italy’s answer to the Wire” (Variety)
“Gomorra: the most important TV series
on mafia with the Sopranos’’ (Le Monde)
In co-production with HBO/Canal Plus
Director “Academy Award-winner” Paolo Sorrentino.
Starring Jude Law, Diane Keaton
A great success at the Venice Film Festival
Second best ratings for a TV Series on Sky behind
Gomorrah
Sold in 80 countries
‘’The Young Pope feels unique. It’s arthouse
TV’’ (Esquire)
‘’It could well be Sorrentino’s masterpiece’’
(The Economist)
“1992 is an exciting piece of work’’
(Hollywood Reporter)
‘’It seems like House of Cards but it’s Clean
Hands Italy ’’ (Corriere della Sera)
38
Video
Original Productions
Internationally acclaimed TV series
(2:22 mins)
39
Gomorra 3 1993 1994 The Young Pope 2
40
Leveraging our
multiplatform
strategy
2.
41
Local Marketing Cities
Local Marketing
37 Cities 75% of
Sky Target
Multiplatform
Experience
Digital First &
Now Retail
Sky Core Target
Lower income areas
Retail Right sizing
• Only kept retail stores
where needed
Tiering offer for the
South (Sky Start)
South – Italy Areas
From national to local, unique capability to address healthy growth opportunity
42
17%
19%
27%
21%
16% Other Clusters
Heavy linears
Sport lovers
Independent
Ladies
Media Pioneers
c.5m
Headroom target
% on Sky base
31%
17%
24%
10%
18%
How we target them
Media
Pioneers
Independent
Ladies
Sport
Lovers
Heavy
Linears
Sky Sky Start Telcos Bundles NOW TV
This strategy allows us to target different groups with different propositions
Source: Internal research data
43
Bu
nd
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2 p
ac
ks
En
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TV
Se
rie
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Cin
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a
TV
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En
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+
Fo
otb
all
Tie
r 2
Sk
y S
tart
En
tert
ain
me
nt
+ F
am
ily
+ H
D
Monthly Calcio & Sport packs at €19.99 and €29.99
€19.90 €21.90
€30.90
TV
Se
rie
s
En
tert
ain
me
nt
+ F
am
ily
+ H
D +
1 P
ac
k
€44.90
€9.99 €9.99 €9.99
€14.99
TV
Se
rie
s
En
tert
ain
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nt
+ F
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ily
+ H
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+ 2
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€58.90
En
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ily
+ H
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+ 3
Pa
ck
s
€73.90
3 p
ac
ks
+ H
D
€22.98
Sky Box Sets included
Bu
nd
le
3 p
ac
ks
€19.99
We offer a clear and comprehensive pricing for all the target
44 Source: E&Y 2016 data
Value-for-money offer
through bundle Sky pay TV,
Fastweb Broadband & Calls
5-year non-exclusive
SKY over IPTV agreement
effective since spring 2015
NOW TV bundle with mobile
and fixed Broad Band
NOW TV bundle with Mobile
5.5m broadband customers 1.8 broadband customers
1.7m broadband customers
2.0m broadband customers
(inc. H3G ITA)
We offer choice of platforms through relationship with all leading telcos
45
3. Broadening our
revenue growth
46
0
0.5
1
1.5
2
2.5
3
3.5
4
Sep
FY15
Dec
FY15
Mar
FY15
Jun
FY15
Sep
FY16
Dec
FY16
Mar
FY16
Jun
FY16
Sep
FY17
Source: Nielsen 2016 data
TV8 launch
3.1 3.3
PAY
FTA
€3.6bn €3.8bn
Source: Auditel
We have ambitious and achievable targets to grow and monetize our presence in FTA
We target a 4% National Share The big Ad Revenue opportunity is in FTA
2015 2016
Target 4%
47
Nov ‘16 Dec ‘16 Jan ‘17 Feb ‘17 Mar ‘17 Apr ‘17 May ‘17 Jun ‘17
Kids Got
talent
FTA Content roadmap
We have a clear content roadmap building on dedicated programs and synergies with pay TV
48
Growing on advertising revenues further thanks to new Sky Adsmart technology
•
•
•
•
49
Newco partners account for c.40%
of Box office Italian movies
In FY16, 28% of total Box Office
revenues were from Italian titles…
16.8%
10.1%
9.2%
6.6%
0.3%
Other
FY15 FY16
Italian titles
Non-Italian
titles
€605m €681m
Overall 9 of top 10 most viewed
titles on Sky channels were Italian
25% 28%
Project objectives
• Expand our incremental
revenues growth
• Guarantee access to top
Italian movies
• Introduce a new model in
the market
• Tie up relationship with
partners and talents
Source: Cinetel
Source: Cinetel
Launching a new movie distribution with five major Italian independent producers
2015 2016
50
Leadership in online
Sports and News
Portfolio of digital assets
worth of Sky brand
Digital leadership Pillar
Monetizing traffic on
web and new apps
Deploying new
monetization models
Revenues generation
Use Digital to enrich
Customer data & insights
Simplify & improve
customer and prospect
digital interactions
Customer centricity
Objectives • Ranking Top 1 in Sport Digital Audience and Top 3 in News
• Ranking Top 1 in Sport and News Apps
Key
actions
We are at the beginning of our digital monetization journey
51
Gomorra 2
• Italy is one of the biggest European markets in the media sector
• Our diversified strategy is in place and is working
• Best in content and able to manage with discipline sports
rights choices
• State of the art platforms
• Leading brand
• Driving low single digit revenue growth and an accelerating
profit profile