Battle of the TV Network Bundle You Get What You Pay For (Sometimes Even Less)

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RBC Capital Markets appreciates your consideration in the 2015 Institutional Investor All-America Research Team survey.

RBC Capital Markets, LLCDavid Bank (Analyst)(212) [email protected] Warmus (Associate)(212) [email protected]

Kutgun Maral (Associate)(212) [email protected] Kulp(Associate Analyst)(212) [email protected]

May 1, 2015

Battle of the TV Network Bundle: You Get What YouPay For (Sometimes Even Less)Media and Entertainment Deep Dive Series: OTT "Light" Bundles AndCord ShavingIn this deep dive analysis of the dynamic content distribution paradigm, we use proprietary analysisto examine:

• The economics of new OTT pay-TV bundle services such as Sling, as well as “synthetic” bundles withdirect-to-consumer products such as HBONow, CBS All Access, etc., and subscription SVOD servicescombined relative to the traditional linear pay-TV bundle;

• Consumer preferences for lighter bundles and key factors influencing those preferences from ourproprietary consumer survey;

• The evolution of the traditional linear pay-TV bundle (which is undergoing a “lightening” of its own);and

• The challenge in determining "winners and losers" in a rapidly evolving landscape.

The cost savings from migrating to OTT light (or synthetic) bundles probably isn’t as compellingas investor sentiment would seem to reflect, especially when considering the incremental cost ofunbundled broadband and change in utility (number of streams allowed, ability to DVR, etc.). As aresult, we think concerns over a sea change in distribution and how it might impact content companiesare somewhat overstated.

• Evolving technology and the ability to self-program probably drive change as much as economics do.

We think this call for greater “choice” in the bundle, has been demonstrated on a traditional linearbasis — While total pay-TV subscriptions have been largely unchanged for the past several years, mostfully distributed networks (ESPN, HGTV, TNT, MTV, FX, etc.) have lost 2-3 million subs during that period.Consumers, on some level, are shaving the cord.

• This traditional linear cord shaving, while potentially being offset by premiums paid by new entrantsinto pay-TV distribution, is still troubling and implies a persistent slowdown in the growth of affiliaterevenue for most cable network players.

• New OTT-based pay-TV providers will pay a premium on carriage fees, offsetting cord shaving on somelevel, but it's still too early to quantify the off-sets.

• Absolute growth in subscription-related revenues should continue for our investable time horizon,but the rate of growth will likely slow from current levels.

We don’t think inclusion or exclusion in the Sling bundle tells us much about long-term winners orlosers — The linear pay-TV world (with broader utility and a broader sample set) may tell us more.Additionally, we will learn more with the launch of new services as they arise (Sony PlayStation Vue,or potentially Apple, etc.).

• CBS emerges as the biggest winner to us. While virtually all fully distributed cable networks have lostlinear subscribers, broadcast Network O&O’s have not lost subscribers and CBS generates virtually allof it's affiliate revenue from a single source -- it's O&O's.

• Vulnerability to smaller bundles is lower for players with viewership and affiliate fees concentratedin a small number of channels, such as TWX and SNI, and stronger for larger network groups whereviewership and affiliate fees are less concentrated, such as Discovery and VIAB.

Priced as of prior trading day's market close, EST (unless otherwise noted).All values in USD unless otherwise noted.

For Required Conflicts Disclosures, see Page 68.

Table of Contents

Key Investment Theme: Battle of the Bundle ....................................................................... 3

Unbundling Cable: You (Only) Get What You Pay For, and Sometimes Even Less ................. 9

Synthetic Bundles ..................................................................................................................... 15

Dish’s Sling: A Case Study ................................................................................................... 17

Subscriber Trends: Accelerating Cord Shaving Currently Being Offset By Pricing ................ 29

Subscriber Trends by Company .......................................................................................... 49

21st Century Fox ...................................................................................................................... 49

AMC Networks ......................................................................................................................... 51

CBS ........................................................................................................................................... 52

Comcast Corp - NBCU ............................................................................................................... 53

Discovery Communications ...................................................................................................... 54

Scripps Network Interactive ..................................................................................................... 55

Time Warner ............................................................................................................................ 56

Viacom...................................................................................................................................... 57

Walt Disney Co. ........................................................................................................................ 58

Appendix: RBC Capital Markets Consumer Survey .............................................................. 60

Battle of the TV Network Bundle: You Get What You Pay For (Sometimes Even Less)

May 1, 2015 2

Key Investment Theme: Battle of the Bundle Media conglomerates and smaller channel operators have benefited for decades from the “full distribution” model of a bundle of basic channels over every major Multichannel Video Programming Distributor (MVPD) in the U.S. An MVPD was historically unable to cherry pick the channels it wanted to carry out of what a media operator aimed to make its most distributed package of channels. The MVPD essentially either carried (or paid for) all the channels the media operator was intent upon distributing or none. As a result, consumers had little ability to select customized channel packages and MVPDs had relatively strong ability to change pricing.

Bundling made things like new channel launches easier for existing players. It also gave media operators pricing power on less popular channels since, in a sense, they were tied to the ability to receive channels that are more popular. Media operators have had to serve as little more than “wholesale” bundlers to the MVPDs, without having to market directly to consumers. Further, as the MVPD distribution landscape morphed into a highly competitive field (one platform couldn’t compete without the popular channels another had), and a handful of players controlled ~90% of video subscription homes in the US, 10 or so distribution deals where the media operators had the upper hand would ensure full coverage of a basic bundle across ~100 million subscribers. Typically, an MVPD could offer a smaller bundle of channels, but channel operators would require that fewer than ~85% of subscribers would get access to it. The typical 1%-3% of sub growth investors came to expect would simply turbo charge the impact of the bundle and its pricing power.

Because of the bundled distribution offering, the pricing scheme for cable networks (and even broadcast O&Os) has become something of an allocation game from the media operator to the MVPD. On an individual basis, most Top 20 cable networks are priced at ~$0.50-$1.00 per month to the MVPD while most channels below that level are priced at $0.50 or less (some as little as a few pennies). Sports properties like ESPN or the Regional Sports Networks (RSNs) are exceptions, garnering much higher affiliate fees, while broadcast network owned and operated station affiliates are closer to $2.00/month. Pricing could be driven by many things: ratings, “rabidity” of viewers (maybe few viewers, but highly passionate ones), investment in content or simply relationship to the bundle overall (subsidy or subsidizer). If this seems complicated (or somewhat arbitrary) to the MVPD, imagine how it would feel for the consumer.

While it is sometimes popular to characterize the basic bundle as being, as Bruce Springsteen said, “57 Channels And Nothin’ On” because consumers typically regularly only watch ~20 channels, on average. However, one subscriber’s channels may be different from another’s. Only through the cross-subsidization of the bundle do the economics of more niche channels exist. We estimate that the current MVPD invests ~$40 billion in programming spend across the top 200 channels in the typical extended digital basic tier and closer to $35 billion in the slightly less extended ~70-channel lighter digital tier many MVPDs offer.

In other words, the consumer may not perceive value in having Animal Planet or MTV2 or TruTV, or even Disney Channel (even if you don’t have kids). However, for a small incremental cost per month, they had the potential to collide with those channels (or give access to visiting nieces and nephews) and get to content that just might be worth a half an hour of viewing.

The existing TV media ecosystem was born out of the extended bundle on traditional pay-TV; investors benefited from certainty in contractual distribution revenues and pricing power

Pricing in a large basic bundle has led to a somewhat opaque process for the consumer: they got channels they probably didn’t watch much, but they also got access to a massive amount of programming


May 1, 2015 3

The legacy of pricing and the bundle seems to be coming to an inflection point just as sub growth overall is expected decline. Historically, consumers were programmed in a linear fashion; shows were broadcast on TV and came on at a set point in time and you had to be in front of your TV (or at least “a” TV) when they did or you missed them. As a consumer, you didn’t have much input into that process except choosing which of the channels you would watch.

There have been some pretty big changes to the system, such as time shifting (as far back as the unwieldy VCR, but more recently with the easy-to-use DVR and even App-based Video on Demand) and platform shifting (you could watch a show not only on a cable app for your tablet, but you could view it on ad-supported websites such as ABC.com, Fox.com, NBC.com, CBS.com and Hulu.com, etc.).

The biggest change in self-programming and consumer choice probably came from the rise of online Subscription Video-on-Demand (SVOD) services such as Netflix, Amazon and HuluPlus. These services gave consumers access to libraries with millions of hours of titles and allowed (sometimes with the help of recommendation engines and algorithms) the consumers to pick what they wanted to watch. Further, the price of the SVOD service was relatively low (less than ~$10 per month) and it seemed to have “the best of TV” on it (though we would argue there is a fallacy in that interpretation).

The bottom line is that consumers began actively engaging in curating the programming they wanted, rather than taking what was being distributed to them. Further, they saw that they could do it at a much lower price than traditional pay-TV and could view it on almost any platform. We believe this is a critical element driving the changing consumer dynamics in the video market place. Our own proprietary survey indicates that 9% of consumers are seriously considering “cutting the cord” sometime during the next 12 months.

Media investors are facing a conundrum, as the tectonic plates of the ecosystem now seem to be in motion. Whether or not the vast majority of consumers want them, light bundles are now offered by both traditional linear MVPDs (the legality of mass distribution of such bundles, such as the one announced by Verizon Fios recently, is still being called into question) and IP-based or Over-the-Top (OTT) non-traditional streaming MVPDs.

Total overall pay-TV subscribers have not declined materially. However, there is a sense that as options increase for alternative sources of programming with more flexibility in pricing and content like OTT bundles such as Sling or even “synthetic” bundles (combining OTT services), we will see a decline in pay-TV subscriptions. Further, MVPDs are seeking ways to control the growth of programming costs as sub growth slows. This, in turn, is leading cable companies to push for lighter bundles and more a la carte-based options.

Many investors are taking it at face value that OTT light bundles will be adopted at rapid pace as soon as they are introduced. On an almost daily basis, it seems as if we see a new “light bundle” offering from a cable service, or a new OTT entrant (Sling, for example) or even an a la carte, direct-to-consumer offering from the networks themselves (such as CBS All Access, HBONow, etc.). Investors (and consumers) have been waiting for Godot for half a decade for an Apple subscription product as well. These products will complement streaming SVOD services (such as Netflix) which have been steadily gaining traction since the beginning of the decade. We find it remarkable that investor sentiment seemed convinced that consumer adoption of these services away from the traditional bundle would be swift and punitive to the existing ecosystem.

Belief that increased flexibility could halt cord cutting and lower costs is causing traditional MVPDs to push for change

Technology is giving consumers who have become increasingly comfortable programming for themselves a desire to construct their own bundle

Investors seemed convinced that a tsunami of ecosystem-altering demand is coming for new OTT light bundles

For OTT light bundles truly to be a threat, something else beyond economics has to be the driver


May 1, 2015 4

However, simple economic analysis and consumer surveys tell us one thing for sure. Logically, consumers would not choose these services simply to save money. The saving is too small to offset the utility and access to content lost. A household could save more money forgoing two bottles of wine in a month rather than replacing traditional cable TV with an OTT-based lighter bundle. They would also lose access to the most popular sports programming (or at least need to install rabbit ears and wouldn’t be able to DVR it), and in many cases, they wouldn’t be able to watch it on a television.

We would also note that other OTT linear subscription products have debuted (such as the Sony PlayStation Vue service) that offer OTT utility, but also have relatively full bundles. PlayStation Vue launched in several large markets last month with ~50-75 channels (including broadcast networks such as CBS). Pricing for the service runs between $49.99/month and $69.99/month, competitive with most bundled cable services. Utility and the bundle with Sony’s gaming products appear to be the consumer proposition as opposed to pure price.

Something else beyond simple economics would have to drive the decision, and we think that something else has to do with control and choice. In some cases, there might simply be a psychological income associated with not paying more (even if it is not much) for something you believe you do not consume, it means you can’t consume other things you do want even if you can’t get utility that you would miss. Our proprietary survey indicates that of those consumers who would consider cutting the cord, the most important reason (for about 70% of respondents) was cost. However, the balance argued that it was about a need for a more customized solution, or that they did not find value in pay-TV at any price since they had access to other content.

Before Sling, Apple or any other new OTT providers can affect the landscape in any real way, cord shaving (or light bundles) is already having an impact on the ecosystem. While the total reported pay-TV subscriber base in the U.S. has remained basically flat for the past several years, virtually every “mature” major media network, with the exception of the broadcast network O&Os, has lost 1-3 million subs. Media operators with emerging platforms (newly launched or rebranded networks – Discovery with ID, Disney with SEC, Fox with FS1, etc.) have been able to offset this somewhat. However, it is abundantly clear that with or without new platforms, consumers are cord shaving, making current levels of affiliate growth vulnerable not just to pricing, but to subscriber bases.

We ran regressions on several variables across major networks within each conglomerate and smaller channel operator to examine factors that could be affecting which networks are being dropped from the bundle today. Year-over-year (Y/Y) changes in ratings have ~0.5 R squared relative to sub count, which intuitively makes sense (if you don’t watch them, you probably don’t want to pay for them). Ironically, we find little correlation between affiliate fee per month and sub losses or even content spend versus sub losses. The sub losses seem universal across many major networks, which is surprising since overall pay-TV subscriptions aren’t experiencing Y/Y declines anywhere near the magnitude of these types of individual sub losses.

We are somewhat skeptical the inflection point on consumers choosing lighter (or “synthetic”) OTT bundles (combining various direct to consumer SVOD services with ad supported online content) will have a steep slope. We have analyzed the pricing and utility implications to consumers of terminating a traditional cable TV subscription and substituting it with lighter bundles and/or synthetic bundles. The cost savings, especially in light of the lost access to content and utility, just does not seem all that compelling.

While total pay-TV sub counts are not down, most major networks lost ~2mm subs last year, so clearly traditional MVPDs are allowing consumers to shave bundles

Consumers are often unaware of the impact on broadband pricing to unbundling from pay-TV

We ran regression analysis against key variables to help determine why channels were being “shaved” in the traditional ecosystem

Not all OTT pay-TV services will be light bundles and the launch of the PlayStation Prevue by Sony demonstrates that


May 1, 2015 5

We think there will be consumers who want the product, but they will tend to be more niche. They would be consumers who live alone and who don’t watch much mainstream TV.

Consumers probably have a lack of awareness of how much de-bundling will increase their cost of broadband. Additionally, from our proprietary survey, our sense is that a substantial proportion of consumers (at least 40%) do not fully comprehend that the incremental cost of moving to an unbundled broadband subscription could wipe out a fair amount of cost savings from moving to the OTT bundle. Additionally, simply paying “more” in principle for Internet service could dissuade consumers. That said, we could see more aggressive broadband pricing from the MVPDs.

Consumers do not appear to save much money by cutting the cord or moving to synthetic bundles, and they lose access to massive amounts of programming and utility. In our proprietary survey, 60% of respondents indicated that cancelling traditional pay-TV and substituting it with a light or synthetic OTT bundle would be compelling only if they saved at least $35. Another 10% would need to save at least $25. Our analysis suggests that the incremental cost of unbundled Internet and the cost of assembling a reasonable substitute would make those kinds of costs savings difficult to achieve.

Further, the utility lost (Sling, for instance, only supports a single stream with limited DVR capability) would also have to be factored into the equation, intrinsically affecting the economics negatively. For those seeking lighter bundle or solutions that exclude broadcast networks, utility to watch through the online cable app, according to our proprietary survey, would be missed at least moderately, by 50% of pay-TV subscribers with access to these services.

There probably is enough utility in the “middle” bundle to force some cord cutting. We do think cord shaving on traditional pay-TV will be a compelling option for consumers. Several of the premium light bundles (offering 70 channels, for example) in seem to achieve many of consumers’ goals. When we compare the Comcast Digital Starter Double Play product, for example, to the Sling product, we cannot understand why consumers would choose Sling. For ~$25 more (out of pocket, when adjusted for Internet), consumers get 100+ more channels, with (underlying program spend of about $40 billion) as well as multi-streaming capacity and DVR capability. The “medium” bundle in pay-TV makes too much sense.

We probably cannot use Sling as a case study of “winners” and “losers”. There is a temptation on the part of investors to look at the bundle of the first mass market (at least, as mass market as a service capped at ~2 million subscribers could be) OTT light bundle service and assume that whatever content is on that service is the content that will be on all OTT light bundle services. In other words, investors have asked us if the Sling bundle (which includes much of the Disney/ESPN bundles, the Scripps bundle, the Turner bundles and much of the AMC bundles) were chosen because they were viewed as “must haves” that were the only pieces of content consumers were willing to pay for. We do not believe the Sling basic offering was chosen because it contains the universal “must haves”. Remember, ESPN lost 2.4mm subs in 2014 largely through MVPD cord shaving, similar to most other major fully distributed franchise channels.

For starters, the Sling bundle does not include the broadcast TV networks. We suspect this represents an incomplete solution for many consumers. Further, we believe the Sling bundle was greatly influence by a combination of price and the reality that getting ESPN dramatically limited the amount of content budget allocated for the rest of the bundle, assuming the goal of Sling is to make a meaningful margin. With a $20/month revenue opportunity (the

Winners and losers probably cannot be determined by the Sling case study, but it could be a case study on ESPN a la carte pricing

To displace linear pay-TV in a meaningful way, Apple will probably need to offer more of a value proposition than it is likely to


May 1, 2015 6

monthly subscription cost), Sling’s programming budget for its ~20 basic channels is ~$14.68/month. Roughly half of the programming cost is allocated to ESPN.

If anything, we would argue that Sling is more a case study of what consumers are willing to pay for ESPN on an a la carte basis. Consumers clearly place a value on other content (even for sports, Turner offers MLB, NBA and NCAA March Madness). However, given that so much of the cost of the bundle is allocated to the ESPN bundle, whether or not consumers realize it, the one product they largely are buying is ESPN.

We think the appeal of the “synthetic bundle” has been overstated in the investment community. Our own analysis indicates that consumers would save only ~$29/month by dropping traditional pay-TV, purchasing unbundled broadband service, one or two SVOD streaming services and then a premium service such as HBONow. Almost above all, this “product” seems like a solution looking for a problem in that key content is missing, savings are not substantial, and utility is lost.

The presumption is that Apple will launch a subscription streaming OTT MVPD sometime in the near future. Press reports have indicated Apple is negotiating with numerous media operators for a light OTT streaming product. That product would cost $25-$35

1, and would

include ~25 channels. The product would be more expensive than the basic Sling product, but it would also include the broadcast networks. Our survey indicates that while many consumers would be interested in an Apple TV streaming service, it would need to have the same channel lineup as typical linear pay-TV services or it would need to result in 50% savings and still have more channels than media reports indicate Apple TV would actually launch with. So, while we think there is a market for Apple TV, we do not think it is the traditional pay-TV killer some view it as.

So calling winners and losers, especially at this early juncture, is tough, outside of the reality that we think a move away from full distribution of bundles is a negative for virtually any player. However, we will hypothesize that the media operators who stand to have the least disruption will be those players who enjoy concentration in affiliate revenue and viewership across the same group of channels (we will pick the relatively arbitrary number of three channels, but in a potentially light bundled world with 30-40 channels and at least 10 media operators, this seems logical). In this respect, CBS and SNI stand out the most favorably while VIAB and DISCA stand out as the most disadvantaged (they have 12-25 networks each and only garner ~55% of their affiliate revenues from their top three networks).

We are also concerned about the second derivative impact of growth slowing for those players who used secondary, and niche networks to “turbo charge” sub growth over the past decade. As the bundle begins to shrink, one thing seems certain: gaining carriage of a new network or expanding coverage of a nascent one, if it is not already fully carried, is probably going to get harder. It appears that DISCA and SNI and even DIS (the launch of SEC Network) and Fox (expansion of FS1, FXX, etc.) will face headwinds here while TWX, VIAB, CBS have benefited far less.

The broadcast network affiliates are the only the part of the ecosystem that we view as highly protected. Some might argue they could easily fall out of the bundle since viewers can simply pull them off the air; the reality is they have seen virtually no sub shrinkage versus the cable operators, which have had 2-3 million sub losses, on average. There is utility beyond the simple signal being pulled off the air (on-demand viewing, ability to have non-partitioned

1 Wall Street Journal

CBS is probably the single best-positioned channel in the push toward light bundles

Players with concentrated audiences and affiliate fees (overlapping) are positioned best as the bundle evolves


May 1, 2015 7

DVR/Tuner box, etc.). CBS, in particular, has always been sold as one single channel. Its economics haven’t benefited from a bundle historically (though we’d argue it has benefited from being adjacent to other bundles), so it essentially already is subject to “a la carte” pricing. NFL Football and the most watched shows in primetime as well other events (Grammy’s, etc.) would likely satisfy the consumer case at current pricing ($1.50-$2.00 per sub/month). We would note that CBS O&O’s MVPD subs are basically unchanged over the past year while most flagship cable networks have lost ~2 million subscribers. We believe other network O&O trends would be similar.

We might have thought that the sports networks would be the big loser in all this. After all, how many times have we heard the anecdote of the little old lady from Pasadena who gets charged in her cable bill $6/month for ESPN and $8/month for two RSNs that she never watches. Additionally, we are told time and again that while viewership might be passionate among sports fans, ratings on an RSN rarely go above a 10 rating (a remarkable result relative to TV, but still an indication that only 10% of TV households really care on any given night while 100% of them pay for it).

Surely, the light bundle would lead to liberation of from such a burden. In our proprietary survey, ~60% of respondents indicated they would give up sports channels such as ESPN or the RSNs if they could pay half as much for their cable bill. In other words, it would seem as if they would move to a light bundle (given the Sling pricing scheme) even if it didn’t have sports, for a significant savings.

However, this doesn’t necessarily seem to be playing out. The first major deal Sling cut was with ESPN. We could make the argument that Sling made it a priority to sign ESPN simply to catalyze the other channel operators (something we believe, on some level, is valid). However, it appears that Sling must have believed there was a genuine demand for sports, for its target market.

Sports may not be the loser many investors think it could be…but then again, maybe it will


May 1, 2015 8

Unbundling Cable: You (Only) Get What You Pay For, and Sometimes Even Less In a world where consumers have so many choices for viewing and accessing content, both live stream and on demand, what does it all mean? Today, consumers can choose from traditional cable, satellite, and telco carrier options, such as Time Warner Cable, Comcast, Dish, DirecTV, Verizon Fios, and AT&T U-Verse. As well, on demand over-the-top options, like Netflix, Amazon, and Hulu Plus, are seeing modest competition from single-channel options like CBS All Access, HBO Now, Noggin, and WWE Network. We are also seeing emerging live TV options with Sling, Apple TV, and PlayStation Vue.

Exhibit 1: Increasing Consumer Choice for Accessing Content – On Demand or Live Streams

Carrier Options On Demand Over-the-Top Options

Single Channel Over-the-Top Options Emerging Live TV Options

Source: Company websites, RBC Capital Markets

With so many options for accessing content today, does the consumer actually save enough money to warrant giving up the traditional cable bundle? We plotted the expected monthly out-of-pocket expense associated with linear and Over-the-Top viewing options and found that savings probably range from just $10 per month with Sling and $39 with CBS All Access.

Exhibit 2: Total Monthly Out of Pocket Expense Savings Associated with Downgrading from Cable Double Play

$79.99

$10.01

$25.01$29.02 $30.01

$36.75 $37.01 $37.01 $39.01

$0

$15

$30

$45

$60

$75

$90

CMCSA DigitalStarter DP

Premium Sling Sling Synthetic bundle HBO Now Amazon Netflix Hulu CBS All Access

Mo

nth

ly O

ut

of

Po

cke

t Ex

pe

nse

Sav

ings

We estimate that cutting cable and subscribing to internet and another video option saves a consumer between $10 and $39 per month

Includes $34.99 montlhly internet cost required for use of serviceIncludes 140 networks + 25 Mbps HSI

Source: Company websites, RBC Capital Markets estimates

While there are significant options outside of a traditional cable subscription, saving a small amount of money results in giving up significant utility


May 1, 2015 9

For some perspective, saving $25 per month by switching from the Comcast Double Play Starter package (140+ cable networks + 25 Mbps internet) to Sling equates to five fewer beers, about two fewer bottles of wine, or two and half fewer takeout lunches over the course of the month.

Exhibit 3: Average Cost of Select Goods or Event Tickets

Imported Beer Movie Ticket Lunch Bottle of Wine MLB Ticket Theme park ticket NFL Ticket

$5.00 $8.17 $10.08 $12.00 $27.93 $52.23 $84.43

Average Cost

$25/month of incremental savings from downgrading a cable package is the equivalent of 2.5 fewer takeout lunches or 2 fewer bottles of wine consumed each month

Source: MPAA, Forbes, Bureau of Labor Statistics, RBC Capital Markets

Based on responses from our proprietary survey, the most common response was that cutting or downgrading cable would be compelling at $45 per month. This is well above the cost savings we expect with Sling and OTT options.

Exhibit 4: What Would Be a Compelling Amount of Money to Save from Cancelling Your Pay-TV Service and Substituting it With Either Free Options (like YouTube) and/or Paid OTT Services (like Netflix, HBO Now, etc.)?

10.7%

8.7%

13.9%

45.2%

21.5%

$15

$25

$35

$45

Other (please specify)

Source: RBC Capital Markets Proprietary Survey

Two fewer bottles of wine over the course of the month would make up for the savings associated with downgrading a cable bundle to Sling plus Internet


May 1, 2015 10

The annualized savings associated with downgrading from the Comcast Double Play Digital Starter (25 Mbps + 140 networks) and unbundling Internet as a consumer moves to any of the other options ranges from annualized savings of $300 with Sling to $468 with CBS All Access. The cost savings range from 0.6% to 0.9% of U.S. median real household income. While this not insignificant, it is also not hugely impactful.

Exhibit 5: Annualized Savings of Downgrading and Unbundling

$300$348

$360

$441 $444 $444$468

0.6%

0.7% 0.7%

0.8% 0.9% 0.9%0.9%

$0

$100

$200

$300

$400

$500

$600

$700

$800

$900

$1,000

0.0%

0.2%

0.4%

0.6%

0.8%

1.0%

1.2%

Sling Synthetic bundle HBO Now Amazon Netflix Hulu CBS All Access

An

nu

aliz

ed

Do

llars

Sav

ed

% o

f U

.S. R

eal

Ho

use

ho

ld M

ed

ian

In

com

e

Annualized savings from switching (RHS) Savings as % of median real household income (LHS)

Annualized savings associated with downgrading cable and unbundling internet service would equate to savings of less than 1% of US median household income over the course of one year

Source: U.S. Census Bureau, RBC Capital Markets estimates

We would note that respondents from our proprietary survey overwhelmingly (69%) cited cost as the reason they were considering cutting their pay TV service. The desire for a more customizable or lighter bundle came in second at 36.8% of respondents.

Exhibit 6: Why Are You Considering Canceling Your Pay TV Service? (select all that apply)

69.4%

17.6%21.8%

36.8%

9.3%

0%

10%

20%

30%

40%

50%

60%

70%

80%

Cost (I want Pay-TV but it's justgetting too expensive to justify)

Just don't need the content Pay-TVgives access to because I don't

watch TV content

Have enough options available forfree given free broadcast options

and ad-supported internet options

Want a more customized or"lighter" bundle that isn't available

(current offerings are "all ornothing")

Other



May 1, 2015 11

While it is certainly understandable that saving a few dollars a month might be worth it to some consumers, but what is the cost in terms of utility lost? We went through a few standard cable options (at Time Warner Cable and Comcast), Dish’s Sling offering, and a few OTT options to see how much programming spend there is, and in turn, what programming utility is lost in terms of content that subscribers have access to.

Using data from SNL Kagan, we were able to estimate just how much content is available on each of the cable, broadcast, Sling, and online content viewing options. Based on the data available, we estimate that Comcast’s Premier Cable option, which consists of 180+ channels, provides consumers with the highest access to content.

Coming as no surprise, each of the higher-tiered traditional cable options has greater access to programing than do lower-priced Sling, Netflix, Amazon, or Hulu. We note each of these options does have the ability to access $14.3 billion of content via the broadcast networks over-the-air (but without any functionality such as on demand access).

This suggests that consumers do save absolute dollars when downgrading their cable package, but give up a tremendous amount of access to content as a trade-off.

Exhibit 7: Consumer Access to Content Spend Via Various Viewing Options

$43.6 bn

$39.7 bn$39.5 bn

$35.2 bn $35.1 bn

$14.6 bn $14.3 bn$12.9 bn

$2.8 bn$1.3 bn $0.8 bn

$0

$10

$20

$30

$40

$50

CMCSAPremier

TWCPreferred

TV

ComcastPreferred

TWCStandard TV

CMCSADigitalStarter

TWC StarterTV

Broadcast Dish Sling Netflix Amazon Hulu

20

14

Co

nte

nt

Spe

nd

(b

illio

ns)

Upper tier traditional cable packages TV provideconsumers with the highest degree of access to

programming content spend

Source: SNL Kagan, Sling.com, Timewarnercable.com, Netflix, RBC Capital Markets estimates

We’ve laid out a comparison of each of Time Warner Cable’s Cable options in the following exhibit. We can see that paying slightly more money to move to a higher-tier cable option results in a consumer having a significantly higher number of networks and content access. By moving from Time Warner’s Starter TV to Standard TV, subscribers gain access to $20 billion worth of more content and also gain significant on demand capabilities, all for about $20 per month.

Consumers do save absolute dollars when downgrading their cable package, but they give up a tremendous amount of access to content as a trade-off

consumers do save absolute dollars when downgrading their cable package, but give up a tremendous amount of access to content as a trade-off.


May 1, 2015 12

Exhibit 8: Time Warner Cable Television Subscription Options

Preferred TV Standard TV Starter TV

Cost per month (with

equipment)$61.24 $51.24 $31.24

Programming Access $39.7 bn $35.2 bn $14.6 bn

Number of networks 200+ 70+ 20+

Equipment rental required Yes Yes Yes

Watch online with app

Access to Broadcast On

Demand

Entertainment On Demand

Time Warner Cable

Consumers can gain access to more than $20 billion of content and roughly 50 Cable Networksby spending just $20 more per month

Source: Timewarnercable.com, RBC Capital Markets estimates

We plot our estimated access to programming versus the all-in estimated monthly subscription cost, including HD box rental for Time Warner Cable and the incremental Internet cost associated with unbundling for Sling and online services, in the following exhibit. We can see there is a general relationship between the annual programming spend and the monthly subscription cost of each option.

Exhibit 9: Access to Content Spend Across Various Options

$43.6 bn

$39.7 bn $39.5 bn

$35.2 bn $35.1 bn

$14.6 bn$11.6 bn

$5.0 bn $3.7 bn $2.8 bn $2.0 bn $1.5 bn $0.8 bn

0

10

20

30

40

50

60

70

80

0

10

20

30

40

50

CMCSAPremier

TWCPreferred

TV

CMCSAPreferred

TWCStandard

TV

CMCSADigitalStarter

TWCStarter TV

Sling Syntheticbundle

CBS AllAccess

Netflix HBO Now Amazon Hulu

Mo

nth

ly s

ub

scri

pti

on

co

st

Co

nte

nt

Spe

nd

(b

illio

ns)

Content Spend (LHS) Monthly Subscription Cost (RHS)

Source: SNL Kagan, Company websites, RBC Capital Markets estimates

For about $20/month, consumers gain significant utility by moving to a higher-tiered cable package


May 1, 2015 13

Next, we look at the ratio of total annual content spend at each product offering versus the total annual programming spend. We can see that consumers get the biggest bang for their buck with traditional cable options, while less so with over-the-air only options.

We would be remiss not to mention that for CBS All Access and HBO Now, we are only using the programming spend that each of the CBS Broadcast Network and HBO spent during 2014. However, each product has tremendous library content value available on them, which we have not shown here. As such, the value ratio for CBS All Access is probably significantly better than the 4.3x shown in the following exhibit and similarly for HBO Now.

Even by only including current content spend, we note that there is significant value to the consumer here (despite including an incremental unbundled Internet cost to the $5.99 subscription price).

Exhibit 10: Ratio of Annual Content Spend to Monthly Subscription Cost

1.4x 1.5x 1.5x 1.5x 1.6x 2.1x 2.6x4.3x

6.5x 7.4x

12.7x14.0x

24.0x

0x

5x

10x

15x

20x

25x

30x

35x

TWC

Stan

dar

d T

V

CM

CSA

Dig

ital

Star

ter

CM

CSA

Pre

ferr

ed

TWC

Pre

ferr

ed T

V

CM

CSA

Pre

mie

r

TWC

Sta

rte

rTV

Slin

g

CB

S A

llA

cces

s

Net

flix

Syn

thet

icb

un

dle

HB

O N

ow

Am

azo

n

Hu

lu

Sub

scri

pti

on

co

st t

o C

on

ten

t Sp

en

d

We believe consumers get the biggest "bang for their buck" with traditional cable subscriptions

Includes $9.99 monthly estimated incremental internet cost associated with unbundling cable + internet

Source: SNL Kagan, Sling.com, Timewarnercable.com, Netflix, RBC Capital Markets estimates

Consumers receive the biggest “bang for their buck” with traditional cable packages


May 1, 2015 14

Synthetic Bundles So how does the cost of the “synthetic bundle” compare to that of traditional linear cable? For our purposes, we define the synthetic bundle as that which is comprised of a Netflix, Amazon, and Hulu subscription. Keeping in mind that these services require an Internet connection, we consider the incremental cost associated with unbundling a cable and Internet bill. We estimate the bundled Internet cost to be $25 per month.

The current Time Warner Cable offering for unbundled standalone Internet (with speeds up to 50 Mbps, which should suffice for streaming content online) is $34.99 per month. As such, the incremental Internet cost associated with unbundling a cable and Internet subscription is $9.99 per month.

We note that the savings can range significantly depending on the bundle chosen, but roughly $10 seems to come out in the middle. As such, we use this as a general proxy figure.

Exhibit 11: Incremental Cost Associated with Unbundling Cable + Internet Subscription

$44.99

$19.99

$25.00

$0

$10

$20

$30

$40

$50

Starter TV + Internet Starter TV Bundled Internet

Co

st p

er

mo

nth

Starter TV + Internet Starter TV Bundled Internet

_ =

$34.99

$25.00

$9.99

Unbundled internet Bundled internet DeltaUnbundled internet Bundled internet Delta

_ =

Incremental cost of internet - associated with unbundling cable - is $9.99/month

Source: Timewarnercable.com, RBC Capital Markets estimates

Interestingly, our survey results showed that more than 40% of consumers would not expect their Internet cost to increase as the result of unbundling. 24% expected it would increase $10 or less, which matches our analysis in the previous exhibit. We think consumers overlook this incremental cost of Internet.

Exhibit 12: Do You Think Your Stand-Alone Broadband Bill Would Increase if You Stopped Paying for it as Part of a Pay-TV Bundle and if so, By How Much?

41.6%

12.1%

24.4%

12.1%

9.9%

No, I don't think it would increase

Yes, I think it would increase by $10 or less

Yes, I think it would increase by $10-$20


Yes, I think it would increase by $30 or more


Consumers should consider the incremental cost associated with unbundling their cable from Internet bill as part of the cost of moving to an OTT package


May 1, 2015 15

Rather than taking the total Internet cost and using it in the synthetic bundle, we use the incremental $9.99 monthly cost associated with unbundling cable and Internet (and therefore having to pay a higher rate for the Internet subscription). Next, we add the monthly costs for each of Netflix and Hulu subscriptions, and arrive at a total monthly cost estimate of $25.97 per month for a synthetic content bundle. We could also add HBO ($14.99 per month), Amazon ($8.25 per month) and CBS ($5.99 per month) to arrive at a premium synthetic bundle (including CBS and HBO) cost of $55.20 per month.

We estimate that the standard synthetic bundle – at $25.97 per month – gives a user access to roughly $3.5 billion of content ($2.8 billion at Netflix and $750 million at Hulu).

Exhibit 13: Incremental Cost of Synthetic Bundle

$9.99

$7.99

$7.99

0

10

20

30

40

50

60

70

Incremental internet

Mo

nth

ly s

ub

scri

pti

on

co

st

Synthetic Bundle

NetflixNetflix

Hulu

$25.97

Internet $9.99

$7.99

$7.99

$14.99

$5.99

$8.25

Incremental internetPremium Synthetic Bundle

Netflix

Amazon

Netflix

Hulu

$55.20

HBO

CBS

Internet

Source: Company websites, RBC Capital Markets estimates

Respondents to our survey overwhelmingly (88%) subscribe to Netflix, with Amazon Prime coming in second at 42%. Hulu came in at 18% and other products comprised 3%.

Exhibit 14: Which Video Services Do You Subscribe To? (Select all that apply)

87.6%

42.1%

18.4%

3.1%

0%

20%

40%

60%

80%

100%

Netflix AmazonPrime Streaming HuluPlus Other


A synthetic bundle is one comprised of incremental internet cost associated with unbundling and one or more OTT options


May 1, 2015 16

Dish’s Sling: A Case Study Adding to the previous few pages of analysis on linear cable bundles and synthetic OTT bundles, we next take a look at the recently launched Dish Sling product. We believe Charlie Ergen has been working on the Sling product for many years, and that many are concerned this is the beginning of breaking down the bundle into a more a la carte skinny version that has only those networks the consumer most wants.

We would note that our sense from the industry is that the service is capped at having no more than 2 million subscribers at any given time. As such, we wouldn’t expect it to pose a risk to the current ecosystem in terms of breaking the bundle down; however, we do think it provides an interesting case study, particularly in terms of a la carte pricing.

Sling’s main product offering, the Best of Live TV, is comprised of 20 networks at a cost of $19.99/month. Subscribers also have the option to add one or all of five packages, including Sports Extra, World News Extra, Kids Extra, Hollywood Extra, and Lifestyle Extra. While each add-on has a different number of networks included, the price is a uniform $5/month across each. Consumers most recently were given the option to add HBO for $15 per month, a similar cost as that paid with a more traditional cable bundle.

Exhibit 15: Sling Package Options

Best of Live TV Sling Sports Extra World News Extra Lifestyle Extra Kids Extra Hollywood Extra HBO

Cost per month $19.99/mo Add $5/mo Add $5/mo Add $5/mo Add $5/mo Add $5/mo Add $15/mo

Number of Networks 20 total 9 extras 7 extras 6 extras 5 extras 5 extras 1 extra

A&E

ABC Family

Adult Swim*

AMC

Cartoon network*

CNN Bases Loaded

Disney Channel beinsport HD HLN

El Rey Network ESPN Buzzer Beater Bloomberg Cooking Channel

ESPN ESPN SEC Network News 18 India DIY Baby TV epix

ESPN2 ESPNews EuroNews fyi Boomerang epix2

Food Network ESPNU NDTV 24x7 lmn Disney Junior epix3

Galavision Goal Line France 24 truTV Disney XD epix drive-in

H2 Universal Sports RT WeTV Duck TV Sundance TV

HGTV Univision TDN

History

IFC

Lifetime

Maker

TBS

TNT

Travel Channel

* Sister networks

HBO

For $45/month plus $9.99 for incremental unbundled internet cost,consumers can have access to ~50 total networks with Dish Sling,

for a total cost of $54.98/month.

Source: Source: Sling.com, RBC Capital Markets estimates

We do not believe Sling poses a risk to the current TV ecosystem, but that it has a niche target


May 1, 2015 17

Similar to the synthetic bundle concept, Sling also requires a high-speed Internet connection subscription from an MSO (and a high-speed one, at that, to avoid buffering or choppy feeds). As such, we add in $9.99 of incremental Internet cost associated with unbundling cable plus Internet. All told, we find that for $54.98 per month, Sling subscriber can have access to 52 networks, about 150 networks fewer than with Standard TV.

Below, we’ve laid out our estimated cost for Sling. At the Basic bundle level – including an Internet connection – we estimate Sling Basic costs $54.98 per month. Adding on HBO – the equivalent of three extras – brings this total to $69.98. If a consumer were to choose each of the add-ons, as well as HBO, the Premium plus HBO bundle would cost $94.98 per month.

Exhibit 16: Total Monthly Out of Pocket Sling Expense – Sling Plus Internet Plus Extras

34.99

19.99

15.00

5.005.00 5.005.005.00

0

20

40

60

80

100

120

1

Subs

crip

tion

co

st p

er

mon

th

Lifestyle Hollywood Kids World News Sports HBO Sling Internet

$94.98

Premium

$69.98 $54.98

Basic Sling

Source: SNL Kagan, Sling.com, RBC Capital Markets estimates

Interestingly, our survey showed that today, most consumers (57%) do not know what the Dish Sling product is.

Exhibit 17: Do You Subscribe to Sling TV?

0.3% 0.9%

41.9%

56.9%

Yes, and I canceled my Pay-TV subscription for it

Yes, and I didn't have a Pay-TV subscription in thepast six months before I signed up for Sling TV

No

I don't know what Sling TV is


While consumers could use an antenna to access the broadcast networks with Sling, there is significantly reduced utility, including no access to on demand content or recording


May 1, 2015 18

One major differentiating factor between Sling and Starter TV is the networks included. We’d note only two networks are included across both Sling and Starter TV: TBS and Galavision. Also, while the total network count is a bit lower for Sling (at ~17 versus 20+ for Starter TV), the networks included are more “premium” in nature. Starter includes the broadcast networks – ABC, CBS, FOX, and NBC – but little else (three CSPANs, for instance). Sling has ESPN, AMC, Food Network, TNT, Travel Channel, Disney Channel, among others. It does lack the broadcast networks at this time. At a cost of $20/month, we can see this being an attractive network mix to many customers.

The Negatives for Sling As laid out in the following exhibit, we think there are a number of positives and negatives for each of the cable options and Sling. We’ve marked the positives with green shading and the negatives with red shading. The three biggest negatives on the product are:

1. No functionality while accessing broadcast networks via an antenna. Sling does not have the broadcast networks at this time. However, we would note that consumers do have the option to use an antenna to access them, but would have no functionality (in terms of accessing content on demand, recording, pausing, etc.).

2. Single stream only on Sling. At this time, consumers can only access a single stream with Sling. This is a significant limitation to functionality versus cable, and probably not suitable for a family. However, for a single person, this would likely not pose too much of an issue. We would note consumers can access ESPN via the Watch app as a bit of a work-around.

Exhibit 18: Single Stream On Sling

Source: Sling.com

As shown in the following exhibit, one user complained that this was a “deal breaker” online (particularly versus Netflix, which now allows for multi-streams).

Exhibit 19: Consumer Complain on Reddit Regarding Single Sling Streams

Source: reddit.com

Single-stream only and limited functionality when accessing Broadcast networks via antenna are major limitations of Sling


May 1, 2015 19

3. Little access to on demand content. Arguably one of most convenient features of cable is the ability to access primetime on demand (with Starter TV, Standard TV, and Preferred TV) and entertainment on demand (with Standard and Preferred TV). With Sling, consumers can access live streams of content but have little access to an on demand library like with Cable. This is said to be something they are working to build, however.

The Positives for Sling We also think there are attractive positives for Sling as a product, including:

1. Feeling of control over the bundle. While not depicted in the following exhibit, we think one of the biggest draws to consumers is the sense of a feeling of control over what networks they are receiving. Rather than paying for 20 channels that only really include broadcast networks, or 70/200 channels that may have too many networks, we think consumers appreciate the bundle choices for Sling (especially in light of its add-on options).

2. Ease of subscribing and changing or canceling account. The ease with which consumers sign up for Sling is very attractive. If connected to the Internet, it takes only a few minutes to sign up for an account. Also, no contract is required, and neither is a social security number nor a credit card. This differs significantly from Time Warner Cable’s Starter TV, which requires equipment installation and an appointment, a 12-month contract, and personal information to sign up. Similarly, choosing add-ons or canceling your account requires only the click of a button at any time. No contracts, no phone calls.


May 1, 2015 20

Exhibit 20: Sling Versus Time Warner Cable Television Options

Sling Best of TV TWC Starter TV TWC Standard TV TWC Preferred TV

Live TV Yes Yes Yes Yes

App Sling app Watch TV on TWC TV app Watch TV on TWC TV app Watch TV on TWC TV app

TV cost per month $19.99/mo (excludes internet) $19.99/mo (excludes equipment rental) $39.99/mo (excludes equipment rental) $49.99/mo (excludes equipment rental)

Total monthly comparable cost

option estimate w/internet,

equipment

$29.98/mo - includes high speed internet

cost of $9.99/mo from unbundling cable +

internet

$31.24/mo - includes cost of HD Box rental

$44.49/mo - includes cost of HD DVR Box





Broadcast Networks No Yes Yes Yes

Multi-stream functionality No Yes Yes Yes

Access to On Demand No Yes Yes Yes

Installation

None required; users go online and sign up to

watch instantly. No social security number or

credit check required.

Installation and appointment necessary Installation and appointment necessary Installation and appointment necessary

Contract Cancel anytime online 12-month contract 12-month contract 12-month contract

Equipment cost

Fire Stick $39 - Free when you sign up

Amazon Fire TV $99 - $50 off (3-mo sign up)

Roku Stick $49.99 - Free with 3-mo sign up

Roku 3 $99.99 - 50% off with 3-mo sign up

HD Box; $11.25/mo or HD DVR for $24.50/mo HD Box; $11.25/mo or HD DVR for $24.50/mo HD Box; $11.25/mo or HD DVR for $24.50/mo

Source: Sling.com, Timewarnercable.com, RBC Capital Markets

Network Comparison Between Different Television Options In the following exhibit, we’ve laid a few of the simpler comparisons between Sling, Starter, Standard, and Preferred TV. Interestingly, the only networks that seem to be in common between Sling and Starter TV are Galavision and TBS. As we’ve mentioned, Sling does not currently have the broadcast networks available, while Starter TV has primarily broadcast networks.


May 1, 2015 21

Exhibit 21: Sling Versus Time Warner Cable Starter TV – Continued

Sling Best of TV TWC Starter TV TWC Standard TV TWC Preferred TV

Equipment requirement Internet connection required HD Box or HD DVR box rental required HD Box or HD DVR box rental required HD Box or HD DVR box rental required

Features

Rewind, fast-forward, pause on most

channels. Look back on certain channels for

up to 3 days. No DVR required.

Access to the Guide, Start Over, Look Back,

Parental Controls, On Demand and Pay-Per-

View; Prime Time On Demand



View; Prime Time and Entertainment On

Demand



View; Prime Time and Entertainment On

Demand

TV Equipment rentalAll Amazon FireTV players, Roku LT and

higherHD Box or HD DVR HD Box or HD DVR HD Box or HD DVR

Number of Networks ~20 20+ 70+ 200+

Galavision Galavision

TBS TBS

A&E

ABC Family ABC

Adult Swim* CBS

AMC CSPAN

Cartoon network* CSPAN 2

CNN CSPAN 3

Disney Channel CW

El Rey Network Fox

ESPN HSN

ESPN2 NBC

Food Network PBS

H2 QVC

HGTV Shop NBC

History TBN

IFC Telemundo

Lifetime Univision

TNT

Travel Channel

See following exhibit See following exhibitNetworks Included

Source: Sling.com, Timewarnercable.com, RBC Capital Markets


May 1, 2015 22

In the following exhibit, we’ve laid out which networks are in common between Time Warner Cable’s Preferred and Standard TV, which are unique to Preferred, and which are unique to Standard. We’ve also highlighted in blue those networks that are available on Sling’s Best of Television option.

Interestingly, most of the networks available on Sling come from the Standard TV (70+ networks options) package offered by Time Warner Cable. We have shaded these in blue. For those networks that can be added to Sling as an add-on, we’ve shaded those in purple. We can see most of those also lie within Time Warner Cable’s Preferred TV option.

Exhibit 22: Networks on Time Warner Cable’s Preferred Versus Standard TV

BBC America Lifetime Movie Network

A&E HGTV BIO Lifetime Real Women

ABC HISTORY Bloomberg Logo

ABC Family HLN CLOO Military Channel

AMC HSN CMT MLB

Animal Planet Lifetime CNBC World MTV 2

Azteca MSNBC Cooking Channel MTV Hits

BET MTV Destination America MTV Jams

Bravo National Geographic Discovery - Fit & Health National Geographic Wild

Cartoon Network NBC Disney Junior NBA

CBS Nickelodeon Disney XD NBC Sports Network

CNBC Oxygen DIY NFL NETWORK

CNN Palladia ESPN Deportes Nick JR

Comedy Central PBS ESPN News Nick Toons

CSPAN QVC ESPN University Outdoor Channel

CSPAN 2 Spike TV EWTN OWN

CSPAN 3 SyFy Fox Deportes REELZ

CW TBS Fox Movie Channel SCIENCE

Discovery TLC Fox Sports 2 SHOP NBC

Disney TNT FUSE SoapNet

E! truTV FXX Speed

ESPN TV Guide Network G4 Style

ESPN 2 TV Land Gospel Music Channel Sundance

Food Network Univision GSN TBN

Fox USA Hallmark TCM

Fox Business News Velocity Hallmark Movies & Mysteries Teen Nick

Fox News Channel VH1 ID Telemundo 2

Fox Sports Telemundo Independent Film Channel Travel Channel

FX The Weather Channel ION VH1 Classic

Golf Jewelry Television

Networks in Common Between Standard and Preferred

TVNetworks Unique to Preferred TV

Source: Timewarnercable.com, RBC Capital Markets

Most of the Sling standard network choices fall within the Standard linear option, while most of the premium Sling add-ons come from the preferred traditional offerings


May 1, 2015 23

Economics of Sling The previous analysis looked at Sling in terms of consumer value. How does it look from the providers’ perspective? By using Kagan data as a proxy, and applying a proportionate affiliate fee per network based on the total Sling bundle price of $19.99, we can derive illustrative affiliate revenues/month/subscriber for each network within the Sling bundle. This analysis suggests ESPN and ESPN2 are receiving a combined $10.13, more than half of the total bundle cost.

Exhibit 23: Illustrative Affiliate Fees for Best of TV Sling Basic Bundle

Sling Cost to

Consumer

Kagan Affiliate

Fee/sub/mo

Programming

Spend ($MM)

ESPN 9.00 6.61 6,231

+ ESPN2 1.13 0.83 562+ AMC 0.57 0.42 364

+ Food Network 0.27 0.20 314

+ A&E 0.42 0.31 441

+ Lifetime 0.46 0.34 435

+ History 0.38 0.28 341

+ El Rey Network 0.10 0.07 88

+ HGTV 0.23 0.17 340

+ H2 0.10 0.07 41

+ IFC 0.27 0.20 85

+ TNT 2.25 1.65 1,346

+ Travel Channel 0.19 0.14 230

+ TBS 1.16 0.85 702

+ Maker 0.00 0.00 0

+ Adult Swim 0.16 0.12 139

+ CNN 0.87 0.64 405

+ Disney Channel 1.82 1.34 345

+ Cartoon network 0.16 0.12 139

+ ABC Family 0.39 0.29 308

+ Galavision 0.04 0.03 47

= Total per month $19.99 $14.68 $12,903


From the following exhibit, we can see Disney is receiving the largest portion of the economics of the Sling bundle. We estimate almost 70% of the cost is being ascribed to Disney networks and 23% to Time Warner networks.

Our analysis suggests ESPN and ESPN2 comprise more than half of the economics of Sling, and Disney is receiving more than two-thirds, making it largely a Disney a la carte product


May 1, 2015 24

Exhibit 24: Illustrative Company Benefits on the Best of TV Sling Basic Bundle

69%

23%

5%3%

0%

20%

40%

60%

80%

100%

Po

rtio

n o

f to

tal b

un

dle

Disney Time Warner Other Scripps

$13.71

$4.60

$0.98 $0.69

$0.00

$5.00

$10.00

$15.00

$20.00

Sub

scri

be

r co

st p

er

mo

nth



May 1, 2015 25

When we surveyed consumers, 46% said having ESPN on Sling as a service was extremely important, while 15% said it was very important. 23% said it was not at all important.

Exhibit 25: How Important Was Having ESPN on the Service to Your Decision to Subscribe to Sling TV?

46.2%

15.4%

15.4%

23.1%

Extremely important

Very important

Moderately important

Slightly important

Not at all important


Sling Add-Ons Sling also offers five add-on options, each for an incremental $5/month. The add-ons include Sports Extra, World News Extra, Kids Extra, Hollywood Extra, and Lifestyle Extra. Subscribers also have the option to add HBO for $14.99 per month.

The Sports Extra add-on comes with six additional networks, including ESPNU, the SEC Network, ESPNews, beingsport HD, Universal Sports, and Univision TDN. Our analysis suggests the package costs roughly $1.57 but that the consumer pays $5.00.

Exhibit 26: Illustrative Costs for the Sports Extra Add-On

Sling Cost to

Consumer

Kagan Affiliate

Fee/sub/mo

Programming

Spend ($MM)

ESPNU $0.67 $0.21 $108

+ ESPN SEC Network $2.04 $0.64 $154

+ ESPNews $0.73 $0.23 $92

+ beIN SPORTS $0.45 $0.14 $18

+ Universal Sports $0.67 $0.21 $25

+ Univision TDN $0.45 $0.14 $49

= Total sports bundle $5.00 $1.57 $448

* excludes Bases Loaded, ESPN Buzzer Beater, and Goal Line


Even if consumers are overpaying for Sling networks, the power of having a choice over which networks they receive probably has some immeasurable utility to certain consumers


May 1, 2015 26

The Kids Extra add-on comes primarily with Disney Junior, Disney XD, and Boomerang. Our analysis suggests the package costs just $0.45 but that the consumer pays $5.00.

Exhibit 27: Illustrative Affiliate Fees for the Kids Extras Package Add-On

Sling Cost to

Consumer

Kagan Affiliate

Fee/sub/mo

Programming

Spend ($MM)

Disney Junior 1.89 0.17 $50

+ Disney XD 2.11 0.19 $147

+ Boomerang 1.00 0.09 $22

+ Duck TV - - -

+ Baby TV - - -

= Total Kids bundle $5.00 $0.45 $219


The Lifestyle Extra add-on comes with four additional networks, including The Cooking Channel, DIY, truTV, and WeTV. Our analysis suggests the package costs just $0.58 but that the consumer pays $5.00.

Exhibit 28: Illustrative Affiliate Fees for the Lifestyle Package Add-On

Sling Cost to

Consumer

Kagan Affiliate

Fee/sub/mo

Programming

Spend

Cooking Channel 0.78 0.09 $43

+ DIY 1.03 0.12 $69

+ truTV 1.98 0.23 $317

+ WeTV 1.21 0.14 $161

= Total Lifestyle bundle $5.00 $0.58 $590


The World News Extra add-on comes with seven additional networks, including HLN, Bloomberg, News 18 India, EuroNews, NDTV 24x7, France 24, and RT. It is a little more difficult for us to come up with estimates for most of these networks, given they are international in nature.

Exhibit 29: Illustrative Affiliate Fees for the World News Extras Add-On

Sling Cost to

Consumer

Kagan Affiliate

Fee/sub/mo

Programming

Spend ($MM)

HLN 0.00 $67

+ Bloomberg 0.07 $92

+ News 18 India - -

+ EuroNews - -

+ NDTV 24x7 - -

+ France 24 - -

+ RT - -

= Total World News bundle $5.00 $0.07 $159


The Hollywood Extra package comes largely with Epix and Sundance TV.


May 1, 2015 27

Exhibit 30: Illustrative Affiliate Fees for the World News Extras Add-On

Sling Cost to

Consumer

Kagan Affiliate

Fee/sub/mo

Programming

Spend ($MM)

Epix 4.63 1.61 $220

+ Sundance TV 0.37 0.13 $60

= Total Lifestyle bundle $5.00 $1.74 $279



May 1, 2015 28

Subscriber Trends: Accelerating Cord Shaving Currently Being Offset By Pricing Media conglomerates and smaller channel operators have benefited for decades from the “full distribution” model of a bundle of basic channels over every major MVPD in the U.S. An MVPD historically was unable to cherry pick the channels it wanted to carry out of what a media operator aimed to make its most distributed package of channels. The MVPD essentially either carried (and paid for) all the channels the media operator was intent upon distributing or none. As a result, consumers had little ability to select customized channel packages and MVPDs had relatively strong ability to change pricing.

Bundling made things like new channel launches easier for existing players and it also gave pricing power on less popular channels to media operators since, in a sense, they were tied to the ability to receive more popular channels. Media operators have had to serve as little more than “wholesale” bundlers to the MVPDs, without having to market directly to consumers. Further, as the MVPD distribution landscape morphed into a highly competitive field (one platform couldn’t compete without popular channels another had) with a handful of players controlling ~90% video subscription homes in the US, 10 or so distribution deals where the media operators had the upper hand would ensure full coverage of a basic bundle across ~100 million subscribers.

Typically, an MVPD could offer a smaller bundle of channels, but channel operators would require that fewer than ~85% of subscribers would get access to it. The typical 1%-3% of sub growth investors came to expect would simply turbo charge the impact of the bundle and its pricing power. The following chart shows the number of basic cable networks for each company.

Exhibit 31: Number of Basic Cable Networks by Company

42

16

22

1314

6

11

25

0

5

10

15

20

25

AMCX CBS CMCSA DIS DISCA FOXA SNI TWX VIAB

Number of Basic Cable Networks

Note: Excludes AMCX’s 49.9% interest in BBC America, CBS’ 50% interest in POP, and CMCSA’s <50% interests in six networks Source: Company reports, SNL Kagan, RBC Capital Markets estimates


May 1, 2015 29

Below, we include broadcast, premium, and RSN networks along with the basic cable networks illustrated above.

Exhibit 32: Basic Cable, Premium, Broadcast, and Regional Sports Networks by Company

4

2

16

22

1314

6

11

25

12

1 11 1

6

20

0

5

10

15

20

25


Cable Broadcast

Premium RSNsNumber of Networks

Note: Excludes AMCX’s 49.9% interest in BBC America, CBS’ 50% interest in POP, and CMCSA’s <50% interests in six networks Source: Company reports, SNL Kagan, RBC Capital Markets estimates


May 1, 2015 30

Meaningful Cord Cutting Hasn’t Occurred; U.S. Pay TV Subs Have Remained Flat Although the US pay TV industry is mature, we have seen little cord cutting and do not expect it to be a major factor for years. At the same time, we do not see much probability of core sub growth, even with the entry of new virtual MVPDs.

Exhibit 33: U.S. Pay TV Subs

-1%

0%

1%

2%

3%

4%

5%

6%

7%

40,000

50,000

60,000

70,000

80,000

90,000

100,000

110,000 Pay TV

Sub

s -Y

oY

% C

han

ge

Pay

TV

Su

bs

(00

0)

Pay TV Subs (000) Pay TV Sub Growth (right scale)

Source: SNL Kagan, RBC Capital Markets estimates

Exhibit 34: U.S. Pay TV Net Adds

(500)

0

500

1,000

1,500

2,000

2,500

3,000

Pay

TV

Ne

t A

dd

s (0

00

)

Pay TV Net Adds (000)

Source: SNL Kagan, RBC Capital Markets estimates

Thus far, we have seen little cord cutting…

…but more recently, net sub growth has begun to decline ever so slightly


May 1, 2015 31

Looking at quarterly results of the major distributors, we again highlight that, in the context of +100mm pay-TV subs, the ~300,000 decline in 2014 is not particularly ecosystem-shattering.

Exhibit 35: Quarterly Net Adds across the Major Distributors Hasn’t Shown a Material Decline in Pay TV Subs (000s)

1Q13 2Q13 3Q13 4Q13 2013 1Q14 2Q14 3Q14 4Q14 2014

CableCHTR - Total Video (35) (58) (25) (3) (121) 13 (35) (24) (3) (49)CMCSA (25) (161) (127) 46 (267) 24 (144) (81) 7 (194)CVC (5) (20) (37) (18) (80) (14) (28) (56) (34) (132)TWC - Total Video (118) (189) (304) (214) (825) (34) (147) (182) (38) (401)Cox- SNL (27) (56) (89) (66) (238) (13) (43) (37) (98) (191)Mediacom (1) (16) (23) (15) (55) (8) (18) (19) (10) (55)Suddenlink 1 (23) (3) (9) (34) 10 (19) 2 (33) (39)WideOpenWest Networks (WOW!) (11) (9) 9 4 (8) (0) 5 (45) 0 (41)Cable ONE (5) (12) (15) (22) (55) (14) (34) (14) (25) (88)Total Cable (227) (545) (614) (297) (1,683) (37) (463) (456) (234) (1,189)

SatelliteDISH 36 (78) 35 8 1 40 (44) (12) (63) (79)DTV 21 (84) 139 93 169 12 (34) (28) 149 99Total DBS 57 (162) 174 101 170 52 (78) (40) 86 20

TelcoT-U-verse 231 231 263 193 918 200 189 214 (125) 478VZ-FiOS 169 140 135 92 536 57 100 114 116 387Total Telco 400 371 398 285 1,454 257 289 328 (9) 865

Total Pay TV Subs 230 (336) (42) 89 (59) 272 (252) (168) (157) (304)

Source: SNL Kagan, RBC Capital Markets estimates, company reports


May 1, 2015 32

Cable Networks Have Been Seeing Subscriber Declines, Highlighting Concerns Over Cord Shaving While total Pay TV subs have been flattish, Cable TV Networks have generally been losing subs, likely driven by the migration of subs to lower-priced distributor tiers as well as erosion in the underlying basic cable universe

Looking deeper, we note that sub losses have been more prominent in mature networks that have full-distribution (i.e., +85mm subs), with 1-2mm sub losses in 2014. Growth at more broadly but not fully distributed networks (50-85mm subs) has also decelerated. While we have seen a few successful network launches over the last few years (e.g., the SEC Network, Disney Junior), we believe media companies will find it increasingly difficult to do so in a rapidly fragmenting ecosystem. We note that rebranding existed broadly distributed networks and ramping its content spend has also resulted in sub gains, most notably at FOX’s FS1, FS2 and FXX.

Exhibit 36: Y/Y Change in Subs – 2014 (mm)

(6.0)

(4.0)

(2.0)

0.0

2.0

4.0

6.0

8.0

10.0

Ch

ange

s in

Su

bs

Y/Y

(2

01

4;

mm

)

AMCX CMCSA DIS + A&E DISCA FOXA SNI TWX VIAB

12 63 14

(35) (66)

Note: Estimates are pro forma for acquisitions and reflect full ownership of networks. Subscriber numbers reflect Nielsen Household Estimates as of December for the years presented. SNL Kagan estimates have been incorporated (including applying their estimates of Y/Y sub count changes) when Nielsen figures were not available. Source: Nielsen, SNL Kagan, RBC Capital Markets

Cord shaving – not cutting – is real, but has been more than offset by rate increases


May 1, 2015 33

Sub Losses Have Been More Pronounced At Fully Distributed Networks; Broadcast O&Os Stable The broadcast network affiliates are the only the part of the ecosystem that we view as highly protected. Some might argue they could easily fall out of the bundle since viewers can simply pull them off the air; the reality is they have seen virtually no sub shrinkage versus the cable operators, which have had 2-3 million sub losses, on average. There is utility beyond the simple signal being pulled off the air (on-demand viewing, ability to have non-partitioned DVR/Tuner box, etc.).

Exhibit 37: Y/Y Change in Subs at Networks with +85mm Subs in 2014

(0.6)

(1.6) (1.8)

(0.9)

(1.5) (1.9) (1.8)

(3.2)

0.3

2 6 7 4 4 3 6 8

AMCX CMCSA DIS DISCA FOXA SNI TWX VIAB BroadcastO&Os

( CBS, FOXA,etc.)

(8.0)

(7.0)

(6.0)

(5.0)

(4.0)

(3.0)

(2.0)

(1.0)

0.0

1.0

Average = (1.9) mm

Network Count

Average Y/Y Change in Subs at Networks with +85mm Subs (mm; 2014)

Outsized impact from being taken off Cable One and Suddenlink

Excluding Investigation Discovery's 1.9mm sub gains, othernetworks at (1.8) mm


CBS, in particular, has always been sold as one single channel. Its economics haven’t benefited from a bundle historically (though we’d argue it has benefited from being adjacent to other bundles), so it essentially already is subject to “a la carte” pricing. NFL Football and the most watched shows in primetime as well other events (Grammy’s, etc.) would likely satisfy the consumer case at current pricing ($1.50-$2.00 per sub/month). We would note that CBS O&O’s MVPD subs are basically unchanged over the past year while most cable networks have lost ~2 million subscribers. We believe other network O&O trends would be similar


May 1, 2015 34

Exhibit 38: Broadcast Networks’ O&O TV Station Subscribers

Multichannel Video Subs (mm)Company Station Count 4Q13 4Q14 Y/Y Change Y/Y % Change

CBS 30 67.9 67.9 0.0 0.0%CMCSA-NBCU 26 59.2 59.3 0.1 0.1%DIS 8 22.6 22.6 (0.0) 0.0%FOXA 28 64.6 64.8 0.2 0.2%

Broadcastcast Networks' O&O TV stations have experienced virtually no changes in Multichannel video subs in 2014

Note: Multichannel video subs reflect the sum of cable, DBS, and telco video subs in each TV stations’ market. FOXA includes 10 MyNetworkTV affiliates and excludes one O&O satellite station in Minneapolis; CMCSA-NBCU includes 10 NBC and 16 Telemundo stations in the U.S. Source: SNL Kagan, RBC Capital Markets estimates

We are also concerned about the second derivative impact of growth slowing for those players who were using secondary, and niche networks to “turbo charge” sub growth over the past decade.

As the bundle begins to shrink, one thing seems certain: gaining carriage of a new network or expanding coverage of a nascent one, if it is not already fully carried, is probably going to get harder. It appears that DISCA and SNI and even DIS (the launch of SEC Network) and Fox (expansion of FS1, FXX, etc.) will face headwinds here while TWX, VIAB, CBS have benefited far less.

Exhibit 39: Y/Y Change in Subs at Networks with 50-85mm Subs in 2014

0.9 1.2

0.2

9.0

(0.4)

4.0

(0.4)

0.2

(1.0)

3 2 5 7 6 7 3 1 8


(4.0)

(2.0)

0.0

2.0

4.0

6.0

8.0

10.0

Average = 1.9 mm

Network Count Average Y/Y Change in Subs at Networks with 50-85mm Subs (mm; 2014)

Excluding the launch of the SEC Network, which had 63mm subs at the end of 2014, other networks' sub counts were were flat on average

Outsized impact from being takenoff Cable One and

Suddenlink



May 1, 2015 35

Affiliate revenue typically has grown at a high-single-digit rate over the last few years. We believe it likely will become increasingly difficult to sustain that level of annual increase due to more pressure on sub-fee pricing as well as an increased drag from subscriber declines at mature networks (which drive most of the network economics).

We estimate that "core" pricing recently has grown mid- to high-single digits supported by TV Everywhere rights. While the sustainability of pricing power and the next leg of growth are not as visible as a few years ago, it's possible we'll see high-single-digit growth in any given year due to carriage-agreements timing. We are incrementally more cautious on the drag that declining subscribers will have on total affiliate revenue growth. Depending on pricing growth and the rate of sub declines, affiliate revenue increases could very well decelerate to mid- or a bear-case low-single digits.

Exhibit 40: Affiliate Revenue Growth Breakdown (excludes SVOD revenue)

1.0%0.5% 0.2%

-0.9%

(1%) to (3%)

0.1%

-0.1%

0.3%0.7%

0.0%

7.6%

5.2%

8.5%

9.7%

3% to 9%

8.7%

5.6%

9.0%9.5%

0% to 8%

-4%

-2%

0%

2%

4%

6%

8%

10%

2011 2012 2013 2014 201XE

Sub Growth Network launches (closures), net

Pricing Growth Total affiliate revenue growth

Components of U.S. Affiliate Revenue Growth

Does not include carriage by new OTT services

and/or SVOD revenue

Note: Subscriber numbers used in the analysis reflect Nielsen Household Estimates as of December for the years presented. SNL Kagan estimates have been incorporated (including applying their estimates of Y/Y sub count changes) when Nielsen figures were not available. The affiliate revenue used are illustrative estimates based on the average sub count and average monthly affiliate fee per sub. Source: Nielsen, SNL Kagan, RBC Capital Markets


May 1, 2015 36

Sub Losses Could Potentially Be Offset by New Entrants In response to rising programming costs, including retransmission consent, and continued consumer adoption of SVOD services, smaller cable distributors have begun to either drop major network portfolios (e.g., Suddenlink and Viacom) or even exit pay-TV and switch to only providing Internet and phone services (e.g., Ringgold Telephone Co. in Georgia and BTC Broadband in Oklahoma).

We expect this trend to remain largely limited to smaller players that aren’t as well positioned to absorb rising programming costs compared to the leading scale MSOs. In this context, we highlight that operators with less than 1mm subscribers cumulatively account for ~5mm subscribers. While the success of the new (Sony) and other potential entrants (Intel, Google, etc.) into the pay-TV ecosystem is uncertain, it is possible that they could potentially offset losses from small cable MSOs dropping video (especially as they likely would have to pay higher affiliate fees than incumbents) or provide a relative benefit to networks that are more in-demand on the new offerings.

Exhibit 41: Video Subscribers – Smaller Cable MSOs (>1mm subs) represent ~5% of the Pay TV Universe

26.3

22.4

14.0

10.8 6.3 5.7

4.1 2.7 1.1

4.9

?

0

5

10

15

20

25

30

35

40

45

DTV+ AT&T

Comcast DISH Time WarnerCable

Charter +Brighthouse

Verizon Cox CVC Suddenlink Cable MSOsWith

<1mm Subs

PotentialNew Entrants

Vid

eo

Su

bsc

rib

ers

(m

m)

Smaller MSOs have been more aggressive in switching to broadband-only offerings;

Operators with less than 1mm subs represents ~5mm Subs...

...subs lost could potentially be offset by new entrants

coming to market (e.g., Sony, Intel, Google)

Distributors with scale are better positioned to absorb rising

programming costs

Note: Pro forma for pending/proposed mergers transactions between AT&T and DIRECTV as well Charter and Brighthouse. Data is as of 4Q14 for DTV, DISH, CMCSA, Charter, Brighthouse, Cox, CVC, Suddenlink, and Cable MSOs with <1mm subs; 1Q15 for T, TWC, and VZ. Source: Company Reports, SNL Kagan, RBC Capital Markets research.


May 1, 2015 37

Below, we have illustrated the annual affiliate fee per sub increases required to achieve various affiliate revenue targets. Assuming 1%-2% annual sub losses for a mature network, we estimate that affiliate fee per sub pricing would have to increase in the high-single to low-double digits in order to hit the low-end affiliate revenue guidance a number of our companies have provided (see Exhibit 45), above our estimate of the typical 5% “core” annual growth pricing increase.

Exhibit 42: Sub Loss Sensitivity - Required Annual Affiliate Fee Per Sub Increases To Achieve Various Total Affiliate Revenue Growth Targets

YoY % Change in Average Subscribers0.0% -1.0% -2.0% -3.0% -4.0% -5.0%

5% 5.0% 5.8% 6.7% 7.6% 8.5% 9.4%

6% 6.0% 6.9% 7.7% 8.6% 9.5% 10.4%

7% 7.0% 7.9% 8.7% 9.6% 10.6% 11.5%8% 8.0% 8.9% 9.8% 10.7% 11.6% 12.5%

9% 9.0% 9.9% 10.8% 11.7% 12.6% 13.6%10% 10.0% 10.9% 11.8% 12.7% 13.7% 14.6%

5-Year

Affiliate

Revenue

CAGR

We believe it's reasonable to assume modest sub losses at mature networks at 1%-2% going forward

With 1%-2% sub losses, all else constant, in order to drive high-single digit affilate revenue growth,

networks would need to command high-single to low-double-digit pricing increases, above the typical

5% "core" annual increase ex-incremental rights (e.g., TV Everywhere, multiplatform, etc.)

Source: RBC Capital Markets estimates


May 1, 2015 38

Affiliate Revenue Per Sub Increases Have More Than Offset Sub Declines In Recent Years Annual sub losses at the most distributed networks (+85mm subs) accelerated in 2014 from 1% to 2% while the sub growth at the Broadly but Not Fully Distributed Networks (50-85mm subs) decelerate d from 3% to 1% growth.

Exhibit 43: Total Subscriber Trends Across Cable Networks

Subscribers (mm) Subs Y/Y (mm) Subs Y/Y % Sub-Weighted Avg. Monthly Affiliate Fee ($)2010 2011 2012 2013 2014 2010 2011 2012 2013 2014 2010 2011 2012 2013 2014

Fully Distributed Networks (+85mm subs)21st Century Fox 342 353 361 366 360 4 11 8 5 (6) 1.1% 3.3% 2.3% 1.3% -1.7%AMC Networks 173 172 180 182 180 3 (1) 8 1 (1) 1.8% -0.4% 4.6% 0.6% -0.6%CBS 0 0 0 0 0 0 0 0 0 0 na na na na naComcast-NBCU 583 582 581 576 566 8 (1) (1) (5) (9) 1.4% -0.2% -0.2% -0.9% -1.6%Discovery Communications 367 373 375 376 372 17 6 2 1 (4) 5.0% 1.6% 0.5% 0.3% -1.0%Scripps Networks Interactive 295 293 293 290 284 2 (2) (0) (3) (6) 0.8% -0.7% -0.1% -0.9% -2.0%Time Warner 593 588 587 580 570 4 (5) (1) (7) (11) 0.7% -0.9% -0.2% -1.1% -1.8%Viacom 777 772 771 763 737 7 (5) (1) (8) (25) 0.9% -0.6% -0.2% -1.1% -3.3%Walt Disney - Incl. Equity in the Income of Investees 696 691 688 681 668 4 (5) (3) (8) (12) 0.6% -0.7% -0.4% -1.1% -1.8%Total Fully Distributed Networks 3,826.9 3,825.0 3,836.2 3,812.5 3,738.1 50 (2) 11 (24) (74) 1.3% 0.0% 0.3% -0.6% -2.0%

Broadly but Not Fully Distributed Networks (50-85mm subs)21st Century Fox 326 326 346 394 422 26 0 20 48 28 8.8% 0.0% 6.1% 13.9% 7.0%AMC Networks 170 180 200 206 209 16 10 20 6 3 10.6% 5.8% 11.3% 2.8% 1.3%CBS 120 125 125 128 130 4 5 0 3 2 3.4% 4.5% 0.0% 2.4% 1.8%Comcast-NBCU 348 365 371 365 367 16 17 5 (5) 1 4.8% 5.0% 1.5% -1.4% 0.3%Discovery Communications 350 362 393 407 405 19 11 31 15 (2) 5.7% 3.3% 8.4% 3.7% -0.6%Scripps Networks Interactive 170 176 180 181 180 3 6 4 1 (1) 1.5% 3.6% 2.0% 0.7% -0.7%Time Warner 81 81 82 82 82 1 0 1 (0) 0 0.9% 0.5% 0.6% -0.1% 0.2%Viacom 472 480 503 516 508 26 9 23 12 (8) 5.8% 1.9% 4.8% 2.4% -1.5%Walt Disney - Incl. Equity in the Income of Investees 503 514 573 578 588 30 11 59 6 9 6.3% 2.2% 11.4% 1.0% 1.6%Total Broadly but Not Fully Distributed Networks 2,539.1 2,609.8 2,771.7 2,857.0 2,889.0 140 71 162 85 32 5.8% 2.8% 6.2% 3.1% 1.1%

Total Large Cap Universe 6,973 7,079 7,289 7,377 7,325 220 105 211 87 (52) 3.3% 1.5% 3.0% 1.2% -0.7%

Annual sub losses at the most distributed networks (+85mm subs) accelerated in 2014 from 1% to 2% while the sub growth at the Broadly but Not Fully Distributed Networks (50-85mm

subs) decelerated from 3% to 1% growth

Total affiliate revenue per sub per month figures represent a sub-weighted average. Note: Estimates are pro forma for acquisitions and reflect full ownership of networks. Subscriber numbers reflect Nielsen Household Estimates as of December for the years presented. SNL Kagan estimates have been incorporated (including applying their estimates of Y/Y sub count changes) when Nielsen figures were not available. The affiliate revenue listed is an illustrative estimate based on the average sub count and average monthly affiliate fee per sub. Source: Nielsen, SNL Kagan, RBC Capital Markets


May 1, 2015 39

Fully Distributed Networks (+85mm subs) typically garner ~4x the affiliate fee per sub compared to less distributed networks. While sub losses were a drag to affiliate revenue growth, it has thus far been more than offset by continued strength in pricing gains.

Exhibit 44: Affiliate Fee Per Network and Mix of Impact to Changes in Affiliate Revenue From Sub Count and Sub Rate Variances

Total Affiliate Revenue Change in Dollars and the Contribution from Changes in Subs vs. Pricing ($mm)

Sub-Weighted Avg. Monthly Affiliate Fee ($) Affiliate revenue (calculated; $mm) Sub Count Impact ($mm) Sub Rate Impact ($mm) CHECK2010 2011 2012 2013 2014 2010 2011 2012 2013 2014 2010 2011 2012 2013 2014 2010 2011 2012 2013 2014

Fully Distributed Networks (+85mm subs)21st Century Fox 0.41 0.44 0.48 0.54 0.64 1,688 1,858 2,057 2,367 2,811 22 23 25 14 (13) 169 147 174 297 457AMC Networks 0.19 0.19 0.24 0.24 0.27 388 402 512 532 581 6 2 8 8 (6) 11 12 102 12 55CBS 0.00 0.00 0.00 0.00 0.00 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0Comcast-NBCU 0.31 0.33 0.35 0.37 0.41 2,188 2,337 2,424 2,585 2,793 24 9 (7) (14) (35) 292 140 94 175 243Discovery Communications 0.18 0.19 0.19 0.20 0.21 780 837 870 925 939 13 9 0 (2) (9) 55 48 33 57 24Scripps Networks Interactive 0.13 0.14 0.15 0.16 0.16 472 484 529 561 565 4 0 (2) (3) (8) 95 12 47 35 12Time Warner 0.41 0.45 0.46 0.49 0.55 2,914 3,224 3,249 3,401 3,766 30 (0) (23) (24) (54) 225 310 48 176 419Viacom 0.22 0.23 0.25 0.29 0.32 2,018 2,184 2,315 2,625 2,862 19 2 (10) (17) (62) 117 164 142 327 299Walt Disney - Incl. Equity in the Income of Investees 0.98 1.07 1.13 1.22 1.32 8,193 8,938 9,357 10,009 10,739 71 (5) (56) (91) (188) 475 751 475 743 918Total Fully Distributed Networks 0.59 0.63 0.67 0.72 0.79 18,639 20,263 21,312 23,004 25,057 189 40 (66) (130) (374) 1,440 1,584 1,115 1,822 2,427

Y/Y % Change 7.2% 8.1% 4.9% 7.8% 10.0% 9.6% 8.7% 5.2% 7.9% 8.9%

Broadly but Not Fully Distributed Networks (50-85mm subs)21st Century Fox 0.19 0.21 0.21 0.23 0.24 722 800 864 1,010 1,195 65 36 35 81 104 16 41 29 65 82AMC Networks 0.15 0.14 0.13 0.13 0.14 291 289 299 321 346 27 24 24 20 8 (2) (26) (14) 2 17CBS 0.08 0.09 0.10 0.10 0.11 108 124 143 149 168 15 11 9 10 13 4 5 10 (4) 6Comcast-NBCU 0.18 0.19 0.19 0.20 0.22 737 807 846 897 974 13 36 20 (2) (8) 52 34 19 54 85Discovery Communications 0.06 0.07 0.08 0.11 0.11 250 289 338 536 545 22 16 23 31 12 3 22 26 168 (3)Scripps Networks Interactive 0.04 0.05 0.06 0.07 0.07 86 95 126 142 157 3 2 3 2 1 13 6 27 14 14Time Warner 0.26 0.27 0.28 0.28 0.29 251 262 273 274 284 4 2 1 1 0 0 10 10 0 10Viacom 0.08 0.08 0.09 0.10 0.10 434 466 515 587 622 22 14 12 16 2 17 18 37 56 33Walt Disney excl. equity in the income of investees 0.16 0.17 0.17 0.18 0.27 560 608 672 757 880 63 13 17 23 39 24 35 47 62 84Walt Disney - Equity in the income of investees 0.09 0.09 0.09 0.09 0.09 204 229 239 241 249 17 15 10 2 (0) 0 10 0 0 8Walt Disney - Incl. Equity in the Income of Investees 0.11 0.11 0.11 0.11 0.11 764 837 910 997 1,129 80 28 27 25 39 24 45 47 62 93Total Broadly but Not Fully Distributed Networks 0.14 0.15 0.16 0.17 0.19 3,644 3,968 4,314 4,914 5,422 252 169 154 184 172 125 155 192 416 336

Y/Y % Change 4.2% 4.4% 3.1% 8.2% 12.9% 11.5% 8.9% 8.7% 13.9% 10.3%

Total Large Cap Universe 0.38 0.41 0.42 0.45 0.49 22,926 24,918 26,367 28,728 31,366 479 230 123 74 (208) 1,583 1,762 1,326 2,287 2,846Y/Y % Change 5.1% 6.3% 2.8% 6.5% 9.6% 9.9% 8.7% 5.8% 9.0% 9.2%

23% 12% 9% 3% -8% 77% 88% 91% 97% 108%

Fully Distributed Networks (+85mm subs) typically garner ~4x the affiliate fee per sub compared to less distributed Networks

While sub losses were a drag to affiliate revenue growth, it has thus for more than offset by continued strength in pricing gains



May 1, 2015 40

Exhibit 45: Annualized Impact of Sub Count Changes as a % of U.S. Affiliate Revenue (pro forma; excludes SVOD)

(0.2%)

(1.9%)(1.4%) (1.2%)

0.8%

(1.4%) (1.6%)

(2.9%)-4.0%

-3.0%

-2.0%

-1.0%

0.0%

1.0%

AMCX CMCSA DIS DISCA FOXA SNI TWX VIAB

Annualized Impact of Sub Count Changes as a % of Domestic Affiliate Revenue (PF; ex-SVOD)

Note: Estimates are pro forma for acquisitions and reflect full ownership of networks. Subscriber numbers used in the analysis reflect Nielsen Household Estimates as of December for the years presented. SNL Kagan estimates have been incorporated (including applying their estimates of Y/Y sub count changes) when Nielsen figures were not available. The affiliate revenues used are illustrative estimates based on the average sub count and average monthly affiliate fee per sub. Source: Nielsen, SNL Kagan, RBC Capital Markets

The exhibits below illustrate each company’s full network portfolio cost.

Exhibit 46: Cost of Full Network Portfolio by Company (2015E)

Basic Cable RSNs

ParentSum of Affiliate

Fee/Sub/Month

Sub-Weighted Avg. Affiliate

Fee/Sub/Month

Number of

Networks

Average Affiliate

Fee/Sub/Month

Number of

Networks

CBS $0.40 $0.12 3 - -

DIS $12.64 $0.73 23 $7.50 1

DISCA $2.06 $0.16 13 - -

FOXA $5.57 $0.48 14 $2.75 21

SNI $0.74 $0.13 6 - -

TWX $4.49 $0.52 11 - -

VIAB $4.17 $0.22 25 - -

Total RBC Large Cap Coverage $30.07 $0.40 95 nm 22

AMCX $1.00 $0.21 5 - -

Comcast-NBCU $4.47 $0.32 17 $3.16 5

Other Networks $11.83 $0.14 79 $3.74 22

Total Cable Networks $47.37 $0.32 196 $4.02 49

Illustrative of what acompany's full network portfolio could cost; not

weighted by subscriber per network

We estimate Retrans atthe O&Os per sub on new deals is at ~$1.76

Note: Estimates are pro forma for acquisitions and reflect full ownership of networks. Subscriber numbers reflect Nielsen Household Estimates as of December for the years presented. SNL Kagan estimates have been incorporated (including applying their estimates of Y/Y sub count changes) when Nielsen figures were not available. The affiliate revenue listed is an illustrative estimate based on the average sub count and average monthly affiliate fee per sub. Source: Nielsen, SNL Kagan, RBC Capital Markets


May 1, 2015 41

What’s Driving the Sub Losses? We ran regressions on several variables across major networks within each conglomerate and smaller channel operator to examine factors that could be impacting which networks are being dropped from the bundle today.

Y/Y changes in ratings has ~0.5 R squared relative to sub count, which intuitively makes sense (if you don’t watch them, you probably don’t want to pay for them).

Ironically, we find little correlation between affiliate fee per month and sub losses or even content spend versus sub losses. The sub losses seem universal across many major networks which is in turn surprising since overall pay-TV subscriptions aren’t experiencing Y/Y declines anywhere near the magnitude of these types of individual sub losses.

Exhibit 47: Viewership Y/Y % Change vs. Sub Count Y/Y % Change

-60%

-40%

-20%

0%

20%

40%

60%

80%

100%

120%

-6% -4% -2% 0% 2% 4% 6% 8% 10%

Vie

wer

ship

Y/Y

%%

Ch

ange

(2

01

4)

Sub Count Y/Y % Change (2014)


Correlation = .47

Note: Estimates are pro forma for acquisitions and reflect full ownership of networks; exclude new network launches or networks with <50 subs. Subscriber numbers reflect Nielsen Household Estimates as of December for the years presented. SNL Kagan estimates have been incorporated (including applying their estimates of Y/Y sub count changes) when Nielsen figures were not available. The affiliate revenue listed is an illustrative estimate based on the average sub count and average monthly affiliate fee per sub. Source: Nielsen, SNL Kagan, RBC Capital Markets


May 1, 2015 42

Exhibit 48: Affiliate Fee Per Sub vs. Sub Count Y/Y % Change

$0.00

$0.20

$0.40

$0.60

$0.80

$1.00

$1.20

$1.40

$1.60

$1.80

$2.00

-6% -4% -2% 0% 2% 4% 6% 8% 10%

Aff

iliat

e Fe

e P

er S

ub

($

)



ESPN: (2%); $6.10

Correlation = (0.12)

FOXA RSNs Average:0%; $2.54


Exhibit 49: Content Spend per Sub vs. Viewership Y/Y % Change vs. Sub Count Y/Y % Change

$0.00

$2.00

$4.00

$6.00

$8.00

$10.00

$12.00

$14.00

$16.00

-6% -4% -2% 0% 2% 4% 6% 8% 10%

Co

nte

nt

Spen

d P

er S

ub

($

)



ESPN: (2%); $66.06

Correlation = (0.12)

FOXA RSNs Average:0%; $22.10



May 1, 2015 43

Exhibit 50: Content Spend Per Sub vs. Affiliate Fee Per Sub

$0.00

$2.00

$4.00

$6.00

$8.00

$10.00

$12.00

$14.00

$0.00 $0.20 $0.40 $0.60 $0.80 $1.00 $1.20 $1.40 $1.60 $1.80

Co

nte

nt

Spen

d P

er S

ub

($

)

Affiliate Fee Per Sub ($)


ESPN:

Correlation = 0.98

FOXA RSNs Average:$22.10; $2.54

Note: Estimates are pro forma for acquisitions and reflect full ownership of networks. Subscriber numbers reflect Nielsen Household Estimates as of December for the years presented. SNL Kagan estimates have been incorporated (including applying their estimates of Y/Y sub count changes) when Nielsen figures were not available. The affiliate revenue listed is an illustrative estimate based on the average sub count and average monthly affiliate fee per sub. Source: Nielsen, SNL Kagan, RBC Capital Markets


May 1, 2015 44

With sub losses, heightened concern over skinny packages, etc., what’s the next leg of growth in affiliate fees? While this may prove to be challenging, incremental programming rights (e.g., TV Everywhere, out-of-home, mobile, etc.), emerging distribution partners (Sony, Google) and international growth could compensate for the estimated impact of sub losses.

Exhibit 51: Progression of Programming Rights

Live TV Catch-up TV Catch-up Plus Deep Library Out-of-Home Mobile

Rights: Live streaming of

linear TV

Rolling three-to-five

episodes on demand

Full current and

prior seasons on

demand

Older TV series and

movie libraries

Access content via

internet devices on

the go

Ability to access

content on mobile

Progression of Programming Rights

Content Rights

Source: DIRECTV investor presentation, RBC Capital Markets

We note that, while we believe that MVPDs continue to value TV Everywhere rights such that media operators should be able to continue to monetize them, especially for “must have” content such as sports, we also believe the MVPDs will be able to push back a bit more on compensation, especially for smaller players with less premium programming.

The reality is that viewership is moving more and more toward a non-linear pattern. As such, offering content on demand and everywhere offers something not just to the MVPD (increased utility for customers), but it also offers the media operator something powerful (the ability to monetize advertising-related viewership in a non-linear fashion that otherwise could not be monetized).

As dynamic advertising insertion becomes more of a practical solution (something that should evolve over the next few years), this point will be even more clear. As a result, distribution brings a bit more to the table than it probably used to, which would make it more difficult for networks to negotiate for incremental rights.


May 1, 2015 45

Long-term Affiliate Revenue Guidance Management teams have mostly provided long-term expectations for affiliate fees. In addition, networks generally stagger their agreements so a significant portion of their sub base is not up in any given year, which is a benefit when it comes to negotiating with distributors.

Exhibit 52: Affiliate Revenue Long-Term Guidance Summary

Company Revenue Component Guidance Time Frame Notes

CBSRetrans and Reverse

Comp$1 bn by 2017; at least $2 billion during 2020 By 2020 Management expects to achieve or exceed this $2 bn goal by 2020

DISU.S. Cable Affiliate

RevenuesHigh-single digit growth FY14-FY16 Has completed renewals with each of the 10 largest affiliates as of 2/03/15

DISCA U.S. Affiliate Revenues20% of deals renewing each year; expect modest acceleration each year (up

from 5% in 2013 and 6% in 2014)Forseeable future

Acceleration of US Affilite due to recent renewals with Suddenlink, NCTC,

Cablevision, Mediacom, as well as the inclusion of Sony

FOXA U.S. Affiliate Fees Low-double digit growth Through FY1660-70% of U.S. affiliate revenues are underpinned by deals in place (as of

11/10/14)

SNI Total Affiliate FeesExpect mid-single digit total Affiliate fee growth based on current escalators

and SVOD agreements2015

Affiliate fee renewals should begin to accelerate toward the end of 2015

and provide a lift to growth

TWX Global Affiliate Fees

Domestic Turner: Reacclerate well into the double digits in 2016 and 2017

and result in a double digit CAGR through 2018; Turner International to

grow double digits; HBO affiliate revenue growth expected to accelerated

from mid-single digits currently

Through 2018

Domestic trajectory is based on when renwals are coming in and MFNs

kicking in; As of 4/29/15, Turner had signed deals with eight of its top ten

affiliate partners

VIAB Global Affiliate FeesHigh-single digit to low-double digit growth at U.S. Networks; $8bn in

Global affiliate fees by 2020Long-term

From November 2013-2014, concluded renewals covering 25% of total

domestic subs; Have 70% of subs covered by affiliate agreements that wont'

expire for at least three years and go as long as eight

Source: Company reports and commentary, RBC Capital Markets


May 1, 2015 46

Many Factors Will Likely Determine Winners in a Lighter Bundle Scenario Our channel sources indicate that over time, MVPDs will seek more flexible packages more aggressively in the name of keeping the pay-TV ecosystem vibrant. We believe concentration of ratings combined with a concentration of affiliate fees is the optimal mix to sustaining carriage in a lighter-bundle economy.

CBS and SNI probably represent the best combination of viewership and fees, with CBS being the only true “a la carte” basic channel in big-cap media. On the flip side, VIAB, DISCA, and CMCSA-NBCU probably have the greatest dispersion between audience and affiliate fee concentration outside of their Top 3 channels versus the rest of the peer group.

Additionally, highly passionate endemic audience/content will be a driver for a lighter bundle even if it comes at higher price as long as that price isn’t a major outlier (TWX epitomizes this paradigm with MLB, NBA and NCAA coverage at relatively low price points, but viewership spread across many more networks).

Exhibit 53: Percentage of Affiliate Revenues Driven by Leading Networks

Affiliate Revenue Contribution from Cable Networks Share of Top 3 NetworksTop 1 Top 2 Top 3 Top 4 Top 5 Affiliate Fees Viewership

AMCX 47% 65% 80% 91% 100% 5 80% 84%CBS 79% 95% 100% - - 3 100% 100%CMCSA-NBCU 28% 38% 47% 55% 63% 17 47% 45%DIS 67% 81% 89% 92% 94% 12 89% 61%DIS + A&E 59% 72% 79% 82% 85% 23 79% 35%DISCA 32% 47% 59% 67% 74% 12 59% 45%FOXA ex-RSNs 29% 47% 63% 69% 76% 14 63% 60%FOXA incl-RSNs 17% 28% 38% 45% 49% 35 38% naSNI 31% 58% 78% 89% 98% 6 78% 87%TWX 42% 63% 80% 86% 93% 11 80% 52%VIAB 21% 36% 48% 55% 62% 25 48% 43%

Total Number

of Networks

More so than its relatively smaller cable networks listed here, the majority of CBS's economics are driven by its Broadcast Network along with Showtime, reflecting CBS's unique position as essentially an a la carte offering

Source: SNL Kagan, Nielsen, RBC Capital Markets estimates Note: Viewership is based on Total Day share . AMCX: AMC, IFC,WE tv,BBC America,SundanceTV; CBS: CBS Sports Network,Smithsonian Channel,POP; Comcast-NBCU: USA,CNBC,Syfy,Golf Channel, Bravo, E! ,NBCSN,MSNBC, Esquire Network, Universal HD, Oxygen Network, Sprout, Chiller, CNBC World, Cloo, NBC Universo; DIS: ESPN, Disney Channel, ESPN2, ABC Family Channel, ESPNews, ESPNU, Disney XD, Disney Junior, ESPN Classic, Fusion, ESPN Deportes (SEC Network excluded due to limited 2014 viewership data); A&E includes: Lifetime Television, A&E, History, LMN, FYI, H2, Military History Channel, Crime & Investigation Network, History en Español, Lifetime Real Women; DISCA: Discovery Channel, TLC, Animal Planet, Discovery Family Channel, Investigation Discovery, Velocity, Science, American Heroes Channel, Destination America, Discovery Life Channel, Discovery en Español, Discovery Familia (includes OWN which is not consolidated); FOXA: FOX News, FOX Sports 1, FX Network, FOX College Sports, BTN, National Geographic Channel, FXX, FOX Business Network, FOX Sports 2, FXM, Nat Geo WILD, Nat Geo Mundo, FOX Deportes, FOX Life; SNI: Food Network, HGTV, Travel Channel, DIY Network, Cooking Channel, Great American Country; TWX: TNT, TBS, CNN, Cartoon Network, TCM, truTV, Boomerang, CNN International, CNN en Español, HTV, HLN; VIAB: Nickelodeon/Nick At Nite, MTV, Spike TV, VH1, BET, Comedy Central,Nick Jr./NickMom, TV Land, CMT, TeenNick, Palladia, Nicktoons, MTV2, VH1 Classic, CENTRIC, CMT Pure Country, VH1 Soul, LOGO, Tr3s, BET Gospel, Nick 2, MTV Jams, MTV Hits, mtvU, BET Hip-Hop


May 1, 2015 47

Exhibit 54: Top Affiliate Fee-Generating Networks’ Viewership Share

Share ofCompany Top 3 Affiliate Fee Generating Cable Networks Affiliate Fees Viewership

AMCX AMC, IFC, WE tv 80% 84%CBS CBS Sports Network, Smithsonian Channel, POP 100% 100%CMCSA-NBCU USA, CNBC, Syfy 47% 45%DIS ESPN, Disney Channel, ESPN2 89% 61%DIS + A&E ESPN, Disney Channel, ESPN2 79% 35%DISCA Discovery Channel, TLC, OWN 59% 45%FOXA ex-RSNs Fox News, FS1, FX Network 63% 60%SNI Food Network, HGTV, Travel Channel 78% 87%TWX TNT, TBS, CNN 80% 52%VIAB Nick/NAN, MTV, Spike TV 48% 43%

Note: (1) Viewership is based on total day share. Estimates are pro forma for acquisitions. (2) ESPN excludes SEC Network given limited 2014 viewership; including an estimated ~$523mm for the SEC Network (2015E) would imply DIS and DIS + A&E top three affiliate share of 85% and 76%, respectively. (2) DISCA include OWN which is not consolidated; excluding it, top three affiliate and viewership share would be 62% and 54%, respectively, with the third network being Animal Planet. (3) The affiliate revenue derivations are estimates based on the average sub count and average monthly affiliate fee per sub from SNL Kagan. Source: SNL Kagan, RBC Capital Markets estimates

Exhibit 55: Top Affiliate Fee-Generating Cable Networks’ Viewership Share

AMCX

CBS

CMCSA-NBCU

DIS

DIS + A&E

DISCA

FOXA ex-RSNs

SNI

TWX

VIAB

20%

30%

40%

50%

60%

70%

80%

90%

100%

20% 30% 40% 50% 60% 70% 80% 90% 100%

Aff

iliat

e R

eve

nu

e C

on

trib

uti

on

fro

m t

he

To

p 3

Ne

two

rks

Viewership Share of the Top 3 Affiliate Fee Generating Networks

While this is specifically for the Cable Networks, CBS would retain its relative position at the top-right

if Broadcast Networks were also included

Note: (1) Viewership is based on total day share. Estimates are pro forma for acquisitions. (2) ESPN excludes SEC Network given limited 2014 viewership; including an estimated ~$523mm for the SEC Network (2015E) would imply DIS and DIS + A&E top three affiliate share of 85% and 76%, respectively. (2) DISCA includes OWN which is not consolidated; excluding it, top three affiliate and viewership share would be 62% and 54%, respectively, with the third network being Animal Planet. (3) The affiliate revenue derivations are estimates based on the average sub count and average monthly affiliate fee per sub from SNL Kagan. Source: SNL Kagan, RBC Capital Markets estimates

While we have seen a number of more niche-channel launches over the last decade, due in part to the growth of digital penetration discussed earlier, a number of cable networks have consolidated brands and programming rights to create and leverage scale not just in the number of networks in the portfolio but in the strength of its networks. For example, FOX consolidated its sports rights portfolio and converted Speed Channel to Fox Sports 1, rebranded Fuel as Fox Sports 2, and converted Fox Soccer into FXX (a general entertainment network).


May 1, 2015 48

Subscriber Trends by Company In this section, we lay out subscriber trends per company based on Nielsen Household Universe estimates and SNL Kagan data as well as illustrative affiliate revenue estimates per network. We categorize networks by their subscriber bases, with:

(a) fully distributed networks having +85mm subs;

(b) broadly but not fully distributed networks with 50-85mm subs;

(c) tertiary networks with 15-50mm subs; and

(d) nascent networks, which we typically would not expect to realistically significantly grow distribution, with less than 15mm subs.

21st Century Fox FOXA continues to benefit from increased distribution following repurposing its former networks Speed, Fuel TV, and Fox Soccer to Fox Sports 1, Fox Sports 2, and FXX, respectively, in late 2013. While FS1 saw Y/Y declines in 2014, FOXA saw material sub growth at its networks with 50-85mm subs, particularly at FXX, FS1 the Big Ten Network which saw 7-9mm Y/Y sub increases.

Exhibit 56: FOXA Domestic Cable Networks Sub Trends

Subscribers (mm) Subs Y/Y % Affiliate Revenue per Sub/ Month ($) Affiliate revenue (calculated; $mm) Average Subscribers Change Y/Y (M)Network Name 2010 2011 2012 2013 2014 2010 2011 2012 2013 2014 2010 2011 2012 2013 2014 2010 2011 2012 2013 2014Fully Distributed Networks (+85mm subs)FX Network 95.9 98.1 97.9 96.7 95.2 0.1% 2.3% -0.2% -1.2% -1.6% 0.43 0.45 0.48 0.53 0.58 494 524 564 619 668FOX News 98.9 98.0 97.8 96.6 94.7 0.9% -0.8% -0.3% -1.2% -1.9% 0.70 0.79 0.90 0.96 1.03 827 933 1,057 1,120 1,183FOX Sports 1 77.3 78.8 81.0 88.0 85.1 3.5% 1.9% 2.9% 8.6% -3.2% 0.21 0.22 0.22 0.38 0.68 191 206 211 385 706National Geographic Channel 69.9 78.3 84.5 84.7 84.8 0.3% 12.1% 7.9% 0.1% 0.2% 0.21 0.22 0.23 0.24 0.25 176 196 225 244 254Total Fully Distributed Networks 341.9 353.2 361.2 366.0 359.9 1.1% 3.3% 2.3% 1.3% -1.7% 0.41 0.44 0.48 0.54 0.64 1,688 1,858 2,057 2,367 2,811

Y/Y % Change 11.0% 6.9% 7.9% 13.3% 19.2% 12.8% 10.1% 10.7% 15.1% 18.7%

Broadly but Not Fully Distributed Networks (50-85mm subs)FOX Business Network 55.3 59.2 69.0 76.9 79.8 5.7% 7.1% 16.6% 11.5% 3.8% 0.12 0.14 0.15 0.17 0.19 77 96 115 149 179FXX 38.4 40.6 42.0 70.3 77.0 7.9% 5.7% 3.3% 67.4% 9.6% 0.16 0.17 0.17 0.19 0.21 71 81 84 128 186BTN 46.5 48.8 51.2 53.8 60.2 3.1% 4.9% 4.9% 5.1% 11.9% 0.36 0.37 0.37 0.37 0.38 198 212 222 233 260Nat Geo WILD 69.9 54.3 57.3 57.3 57.4 19.9% -22.3% 5.6% 0.0% 0.1% 0.09 0.10 0.11 0.12 0.13 69 74 74 83 89FXM 40.3 41.6 42.8 50.2 51.5 2.5% 3.2% 2.9% 17.4% 2.5% 0.16 0.17 0.17 0.18 0.18 76 83 86 100 110FOX College Sports 42.5 45.3 47.4 49.6 51.3 6.8% 6.6% 4.6% 4.6% 3.4% 0.36 0.37 0.39 0.41 0.43 178 195 217 239 260FOX Sports 2 33.2 36.4 36.3 36.0 44.6 13.3% 9.6% -0.3% -0.8% 23.9% 0.14 0.14 0.15 0.18 0.23 53 59 65 78 111Total Broadly but Not Fully Distributed Networks 326.1 326.2 346.0 394.2 421.9 8.8% 0.0% 6.1% 13.9% 7.0% 0.19 0.21 0.21 0.23 0.24 722 800 864 1,010 1,195

Y/Y % Change 0.6% 8.6% 3.1% 5.7% 8.3% 12.5% 10.7% 8.0% 16.9% 18.4%

Nascent Networks (<15mm subs)Nat Geo Mundo 0.0 5.0 8.2 7.4 7.5 0.0% 500.0% -180.0% -400.0% 90.0% 0.00 0.08 0.10 0.20 0.21 0 2 8 19 19FOX Deportes 5.7 6.2 6.6 6.7 6.4 5.6% 9.1% 6.7% 1.0% -4.2% 0.20 0.21 0.22 0.22 0.23 13 15 17 18 18FOX Life 1.9 2.3 3.5 4.2 4.0 109.8% 19.5% 53.9% 19.7% -6.0% 0.21 0.22 0.22 0.22 0.23 4 6 8 10 11Total Nascent Networks 7.6 13.5 18.3 18.3 17.8 20.7% 77.7% 36.0% -0.2% -2.3% 0.20 0.16 0.17 0.21 0.22 17 23 32 46 48

Y/Y % Change 5.0% -19.3% 1.7% 27.4% 4.6% 43.3% 36.1% 41.9% 43.1% 3.5%

Total 21st Century Fox Networks 675.5 692.8 725.5 778.4 799.6 4.9% 2.6% 4.7% 7.3% 2.7% 0.30 0.33 0.34 0.37 0.42 2,427 2,681 2,953 3,423 4,054Y/Y % Change 6.3% 7.4% 5.3% 8.7% 13.6% 12.9% 10.5% 10.2% 15.9% 18.4%

Note: Total affiliate revenue per sub per month figures represent a sub-weighted average. Estimates are pro forma for acquisitions and reflect full ownership of networks. Total affiliate fee per average sub for each category represents a sub weighted average. Subscriber numbers reflect Nielsen Household Estimates as of December for the years presented. SNL Kagan estimates have been incorporated (including applying their estimates of Y/Y sub count changes) when Nielsen figures were not available. The affiliate revenue listed is an illustrative estimate based on the average sub count and average monthly affiliate fee per sub. Source: Nielsen, SNL Kagan, RBC Capital Markets


May 1, 2015 49

Despite declines at ESPN and MSG, SNL Kagan data shows immaterial changes in sub counts at FOX’s RSNs.

Exhibit 57: FOXA RSN Sub Trends

Subs (mm) Subs Y/Y % Change Affiliate Fee/Sub/Month ($) Affiliate revenue (calculated; $mm)

Regional Sports Network Ownership 2010 2011 2012 2013 2014 2010 2011 2012 2013 2014 2010 2011 2012 2013 2014 2010 2011 2012 2013 2014

FOX Sports Arizona 100% 2.3 2.3 2.3 2.3 2.3 0% 0% 0% 0% 0% 2.29 2.41 2.75 3.04 3.24 63 67 76 84 89FOX Sports Carolinas 100% 4.0 4.0 4.0 4.0 4.0 0% 0% 0% 0% 0% 2.17 2.32 2.45 3.00 3.21 104 111 118 144 154FOX Sports Detroit 100% 3.5 3.5 3.5 3.5 3.5 0% 0% 0% 0% 0% 2.35 2.49 2.86 3.18 3.45 99 105 120 134 145FOX Sports Florida 100% 6.0 6.1 6.1 6.2 6.2 0% 2% 0% 2% 0% 1.03 1.11 1.20 1.30 1.37 74 81 88 96 102FOX Sports Indiana 100% 1.0 1.0 1.0 1.0 1.0 0% 0% 0% 0% 0% 1.30 1.50 1.53 1.65 1.79 16 18 18 20 21FOX Sports Midwest 100% 5.4 5.5 5.5 5.5 5.2 0% 2% 0% 0% -5% 2.02 2.17 2.33 2.44 2.54 131 142 154 161 163FOX Sports New Orleans 100% - - 0.3 0.3 0.3 na na na 0% 0% - - 1.40 1.50 1.60 - - 3 5 6FOX Sports North 100% 3.1 3.1 3.0 3.0 3.0 -3% 0% -3% 0% 0% 2.88 3.04 3.68 4.26 4.67 109 113 135 153 168FOX Sports Ohio 100% 5.0 5.0 5.1 5.0 5.0 0% 0% 2% -2% 0% 2.38 2.54 2.71 2.88 3.05 143 152 164 175 183FOX Sports Oklahoma 100% 0.6 0.6 0.6 0.6 0.6 0% 0% 0% 0% 0% 1.34 1.45 1.55 1.66 1.76 10 10 11 12 13FOX Sports San Diego 80% - - 1.2 1.7 2.2 na na na 42% 29% - - 2.75 2.74 2.25 - - 40 48 53FOX Sports South 93% 6.6 6.6 6.6 6.6 6.6 0% 0% 0% 0% 0% 2.17 2.31 2.45 2.98 3.17 172 183 194 236 251FOX Sports Southwest 100% 8.8 8.8 8.7 8.7 8.7 0% 0% -1% 0% 0% 2.22 2.42 2.54 1.64 1.70 234 256 267 171 177FOX Sports Tennessee 100% 1.8 1.8 1.8 1.8 1.8 0% 0% 0% 0% 0% 2.17 2.32 2.45 3.00 3.21 47 50 53 65 69FOX Sports West 100% 7.3 7.3 7.2 7.2 7.1 -1% 0% -1% 0% -1% 2.44 2.50 1.95 2.15 2.27 215 219 170 186 195FOX Sports Wisconsin 100% 1.5 1.5 1.5 1.5 1.5 0% 0% 0% 0% 0% 2.13 2.26 2.36 2.45 2.53 38 41 42 44 46Prime Ticket 93% 6.2 6.2 6.2 6.1 6.1 2% 0% 0% -2% 0% 2.39 2.47 2.56 2.71 1.35 176 184 190 200 99SportSouth 100% 8.8 8.8 8.8 8.8 8.8 0% 0% 0% 0% 0% 0.52 0.57 0.62 0.67 0.77 55 60 65 71 81SportsTime Ohio 100% 2.8 2.8 2.7 2.7 2.7 0% 0% -4% 0% 0% 1.62 1.73 1.85 2.07 2.32 54 58 61 67 75Sun Sports 100% 6.3 6.3 6.3 6.3 6.3 0% 0% 0% 0% 0% 1.58 1.61 1.69 1.81 1.76 119 122 128 137 133YES Network 80% 9.0 9.0 8.9 8.9 9.0 0% 0% -1% 0% 1% 3.44 3.71 4.00 4.27 4.57 372 401 430 456 491

Total 90.0 90.2 91.3 91.7 91.9 0% 0% 1% 0% 0% 1.99 2.13 2.30 2.43 2.46 2,231 2,372 2,526 2,664 2,714

Sub-weighted average

Note: Subscriber numbers reflect SNL Kagan estimates. Ownership as of April 2015. The affiliate revenue listed is an illustrative estimate based on the average sub count and average monthly affiliate fee per sub. Source: SNL Kagan, Nielsen, RBC Capital Markets


May 1, 2015 50

AMC Networks AMC’s flagship network experienced 2.5% Y/Y sub declines in 2014. While it generates a larger per-sub fee, we estimate the affiliate revenue impact was more than offset by increases in IFC (+3.7mm) and WE tv (+1.3mm). BBC America, which AMCX acquired a 49.9% interest in October 2014 and consolidates, had seen its base grow from 40mm in 2010 to 56mm in 2013, and was flat in 2014.

Exhibit 58: AMCX Domestic Sub Trends

Subscribers (mm) Subs Y/Y % Affiliate Revenue per Sub/ Month ($) Affiliate revenue (calculated; $mm) Average Subscribers Change Y/Y (M)Network Name 2010 2011 2012 2013 2014 2010 2011 2012 2013 2014 2010 2011 2012 2013 2014 2010 2011 2012 2013 2014Fully Distributed Networks (+85mm subs)AMC 96.4 96.3 98.9 97.4 95.0 1.3% -0.1% 2.7% -1.5% -2.5% 0.25 0.26 0.34 0.35 0.38 287 301 398 412 439WE tv 76.8 76.2 81.5 84.1 85.4 2.4% -0.8% 7.0% 3.2% 1.5% 0.11 0.11 0.12 0.12 0.14 100 101 113 119 142Total Fully Distributed Networks 173.2 172.4 180.4 181.5 180.4 1.8% -0.4% 4.6% 0.6% -0.6% 0.19 0.19 0.24 0.24 0.27 388 402 512 532 581

Y/Y % Change 2.9% 3.1% 24.2% 1.2% 9.4% 4.7% 3.6% 27.4% 3.9% 9.3%

Broadly but Not Fully Distributed Networks (50-85mm subs)BBC America 67.7 72.3 80.3 79.5 78.2 3.0% 6.7% 11.1% -0.9% -1.6% 0.11 0.11 0.10 0.10 0.10 88 92 92 96 95IFC 62.4 65.5 69.6 70.0 73.7 24.6% 4.9% 6.4% 0.5% 5.3% 0.19 0.16 0.16 0.17 0.19 128 123 130 142 164SundanceTV 39.9 42.1 50.2 56.3 56.6 5.3% 5.5% 19.3% 12.2% 0.6% 0.16 0.15 0.14 0.13 0.13 75 74 77 83 88Total Broadly but Not Fully Distributed Networks 170.0 179.8 200.1 205.8 208.5 10.6% 5.8% 11.3% 2.8% 1.3% 0.15 0.14 0.13 0.13 0.14 291 289 299 321 346

Y/Y % Change 10.6% 5.8% 11.3% 2.8% 1.3% 0.7% -9.0% -4.8% 0.8% 6.0% 9.3% -0.7% 3.4% 7.6% 7.8%

Total AMC Networks 343.2 352.2 380.5 387.3 388.9 6.0% 2.6% 8.0% 1.8% 0.4% 0.17 0.17 0.18 0.18 0.20 679 690 810 853 928Y/Y % Change 1.5% -2.7% 10.8% 0.7% 7.8% 6.6% 1.8% 17.4% 5.2% 8.8%

Total affiliate revenue per sub per month figures represent a sub-weighted average. Note: Total figures are pro forma for the acquisition of a 49.9% interest in BBC America in October 2014. Subscriber numbers reflect Nielsen Household Estimates as of December for the years presented. SNL Kagan estimates have been incorporated (including applying their estimates of Y/Y sub count changes) when Nielsen figures were not available. The affiliate revenue listed is an illustrative estimate based on the average sub count and average monthly affiliate fee per sub. Source: Nielsen, SNL Kagan, RBC Capital Markets


May 1, 2015 51

CBS CBS has seen steady increases in distribution for CBS Sports Network and the much smaller Smithsonian Channel. However, we note that cable networks affiliate fees (excluding Showtime) make up a much smaller portion of total company revenue (at ~1%) compared to CBS’ large cap peers. Instead, we would point to Exhibit 38: Broadcast Networks’ O&O TV Station Subscribers.

Exhibit 59: CBS Domestic Sub Trends

Subscribers (mm) Subs Y/Y % Affiliate Revenue per Sub/ Month ($) Affiliate revenue (calculated; $mm) Average Subscribers Change Y/Y (M)Network Name 2010 2011 2012 2013 2014 2010 2011 2012 2013 2014 2010 2011 2012 2013 2014 2010 2011 2012 2013 2014Broadly but Not Fully Distributed Networks (50-85mm subs)POP 80.4 80.9 79.0 77.0 75.3 -0.5% 0.7% -2.4% -2.5% -2.2% 0.02 0.02 0.02 0.01 0.01 19 19 19 9 9CBS Sports Network 39.1 44.0 46.0 51.0 55.0 12.4% 12.5% 4.5% 10.9% 7.8% 0.20 0.21 0.23 0.24 0.25 89 105 124 140 159Total Broadly but Not Fully Distributed Networks 119.5 124.9 125.0 128.0 130.3 3.4% 4.5% 0.0% 2.4% 1.8% 0.08 0.09 0.10 0.10 0.11 108 124 143 149 168

Y/Y % Change 10.8% 10.2% 11.9% 4.5% 9.5% 21.9% 14.9% 15.6% 3.9% 12.8%

Tertiary Networks (15-50mm Subs)Smithsonian Channel 11.4 14.4 17.0 21.0 30.0 58.3% 26.3% 18.1% 23.5% 42.9% 0.13 0.12 0.11 0.11 0.11 15 19 21 25 34Total Tertiary Networks 11.4 14.4 17.0 21.0 30.0 58.3% 26.3% 18.1% 23.5% 42.9% 0.13 0.12 0.11 0.11 0.11 15 19 21 25 34

Total CBS Networks 130.9 139.3 142.0 149.0 160.3 6.6% 6.4% 1.9% 4.9% 7.6% 0.08 0.09 0.10 0.10 0.11 123 143 164 174 202Y/Y % Change 8.3% 8.4% 9.4% 4.1% 8.0% 23.5% 16.4% 15.1% 6.1% 15.9%

Total affiliate revenue per sub per month figures represent a sub-weighted average. Note: CBS and Lions Gate Entertainment each own 50% of POP. Subscriber numbers reflect Nielsen Household Estimates as of December for the years presented. SNL Kagan estimates have been incorporated (including applying their estimates of Y/Y sub count changes) when Nielsen figures were not available. The affiliate revenue listed is an illustrative estimate based on the average sub count and average monthly affiliate fee per sub. Source: Nielsen, SNL Kagan, RBC Capital Markets


May 1, 2015 52

Comcast Corp - NBCU Consistent with its cable network peers, Comcast’s NBCU experienced 1-2mm sub declines at its fully distributed networks in 2014. While its average distribution across its networks with 50-85mm subs have been largely flat, the revenue impact of gaining 3.8mm subs at NBC Sports Network have been more than offset by losses at Golf Channel and Esquire. The drag from fully closing G4 TV was also a drag into 2014.

Exhibit 60: CMCSA-NBCU Domestic Sub Trends

Subscribers (mm) Subs Y/Y % Affiliate Revenue per Sub/ Month ($) Affiliate revenue (calculated; $mm) Average Subscribers Change Y/Y (M)Network Name 2010 2011 2012 2013 2014 2010 2011 2012 2013 2014 2010 2011 2012 2013 2014 2010 2011 2012 2013 2014Fully Distributed Networks (+85mm subs)USA 100.0 99.4 99.0 98.2 96.5 0.8% -0.6% -0.4% -0.7% -1.8% 0.72 0.76 0.81 0.88 0.97 861 909 964 1,041 1,133Syfy 98.2 98.1 98.0 96.9 94.9 1.9% 0.0% -0.2% -1.1% -2.0% 0.24 0.27 0.27 0.28 0.31 280 318 318 327 357MSNBC 95.2 95.3 95.5 95.8 94.6 2.4% 0.1% 0.2% 0.4% -1.3% 0.18 0.20 0.21 0.23 0.24 203 228 240 264 274E! 97.9 97.6 97.1 95.9 94.4 0.9% -0.4% -0.5% -1.2% -1.6% 0.21 0.22 0.23 0.24 0.26 246 258 269 278 297CNBC 98.2 97.4 96.8 95.5 93.7 0.6% -0.8% -0.6% -1.4% -1.8% 0.30 0.31 0.31 0.34 0.37 352 364 361 392 420Bravo 93.9 94.4 94.8 93.6 92.3 1.7% 0.5% 0.4% -1.3% -1.4% 0.22 0.23 0.24 0.25 0.28 246 260 273 283 312Total Fully Distributed Networks 583.3 582.1 581.1 575.9 566.5 1.4% -0.2% -0.2% -0.9% -1.6% 0.31 0.33 0.35 0.37 0.41 2,188 2,337 2,424 2,585 2,793

Y/Y % Change 15.3% 6.3% 3.9% 7.3% 9.4% 16.9% 6.8% 3.7% 6.6% 8.0%

Broadly but Not Fully Distributed Networks (50-85mm subs)NBCSN 75.2 76.0 77.8 77.6 81.5 18.6% 1.0% 2.4% -0.3% 4.9% 0.24 0.25 0.25 0.26 0.29 200 227 231 243 277Golf Channel 83.2 84.1 84.1 81.7 79.5 1.7% 1.1% -0.1% -2.8% -2.7% 0.27 0.29 0.30 0.31 0.34 267 291 303 308 329Oxygen Network 76.3 77.1 79.2 77.4 77.7 0.7% 1.1% 2.7% -2.2% 0.3% 0.12 0.12 0.12 0.14 0.15 110 110 113 132 140Esquire Network 66.1 75.3 76.4 71.9 70.2 1.1% 13.9% 1.4% -5.9% -2.3% 0.14 0.14 0.15 0.16 0.18 110 119 137 142 153Sprout 47.0 52.6 53.2 56.8 57.7 3.3% 11.9% 1.0% 6.8% 1.7% 0.09 0.10 0.10 0.11 0.11 50 60 63 73 76Total Broadly but Not Fully Distributed Networks 347.9 365.2 370.7 365.4 366.6 4.8% 5.0% 1.5% -1.4% 0.3% 0.18 0.19 0.19 0.20 0.22 737 807 846 897 974

Y/Y % Change 8.8% 3.2% 2.1% 5.9% 9.4% 9.6% 9.5% 4.8% 6.1% 8.6%

Tertiary Networks (15-50mm Subs)Chiller 40.7 41.9 43.1 41.0 39.0 13.7% 2.9% 2.8% -5.0% -4.8% 0.07 0.08 0.08 0.09 0.10 32 40 41 45 48CNBC World 39.0 40.0 35.0 36.0 38.0 20.0% 2.6% -12.5% 2.9% 5.6% 0.05 0.06 0.07 0.08 0.09 21 28 32 34 40Universal HD 23.8 25.7 27.8 29.3 31.0 21.4% 8.0% 8.2% 5.4% 5.8% 0.37 0.35 0.34 0.37 0.42 96 104 109 127 152Cloo 37.5 38.4 34.3 28.6 25.5 0.8% 2.4% -10.8% -16.6% -10.9% 0.08 0.09 0.09 0.11 0.12 36 41 39 42 39G4 * 59.2 60.7 62.0 34.5 0.0 -11.5% 2.5% 2.1% -44.4% -100.0% 0.09 0.09 0.09 0.09 0.09 68 65 66 52 19Total Tertiary Networks 200.2 206.7 202.2 169.4 133.5 4.3% 3.2% -2.2% -16.2% -21.2% 0.11 0.11 0.12 0.14 0.18 254 278 287 300 297

Y/Y % Change 5.9% 4.5% 3.7% 17.6% 25.5% 14.6% 9.4% 3.3% 4.5% -0.8%

Nascent Networks (<15mm subs)NBC Universo 7.0 7.1 7.3 7.7 7.6 7.6% 1.4% 2.6% 5.7% -2.0% 0.07 0.07 0.07 0.09 0.10 6 6 6 8 9Total Nascent Networks 7.0 7.1 7.3 7.7 7.6 7.6% 1.4% 2.6% 5.7% -2.0% 0.07 0.07 0.07 0.09 0.10 6 6 6 8 9

Y/Y % Change 16.7% 0.0% 0.0% 28.6% 11.1% 25.9% 4.4% 2.0% 33.9% 13.1%

Total Comcast-NBCU Networks 1,138.5 1,161.2 1,161.3 1,118.5 1,074.1 2.9% 2.0% 0.0% -3.7% -4.0% 0.24 0.25 0.26 0.28 0.31 3,184 3,428 3,563 3,791 4,074Y/Y % Change 12.3% 4.6% 3.5% 9.3% 11.9% 14.9% 7.7% 3.9% 6.4% 7.5%

Total affiliate revenue per sub per month figures represent a sub-weighted average. Note: Subscriber numbers reflect Nielsen Household Estimates as of December for the years presented. SNL Kagan estimates have been incorporated (including applying their estimates of Y/Y sub count changes) when Nielsen figures were not available. The affiliate revenue listed is an illustrative estimate based on the average sub count and average monthly affiliate fee per sub. Source: Nielsen, SNL Kagan, RBC Capital Markets


May 1, 2015 53

Discovery Communications ID has had significant success in expanding its distribution, and now has over 85mm subs compared to ~53mm in 2008. Similarly, Velocity has also seen sub growth going from 20mm in 2008 to 61mm in 2014. While the 1-2mm sub losses at Discovery’s mature networks is in-line with the rest of the industry, we note that the rest of secondary and tertiary networks have also seen similar declines compared to most other network portfolios’ subs being flat.

Exhibit 61: DISCA Domestic Sub Trends

Subscribers (mm) Subs Y/Y % Affiliate Revenue per Sub/ Month ($) Affiliate revenue (calculated; $mm) Average Subscribers Change Y/Y (M)Network Name 2010 2011 2012 2013 2014 2010 2011 2012 2013 2014 2010 2011 2012 2013 2014 2010 2011 2012 2013 2014Fully Distributed Networks (+85mm subs)Discovery Channel 100.5 99.7 99.1 98.3 96.6 0.7% -0.9% -0.5% -0.9% -1.7% 0.34 0.36 0.38 0.40 0.42 409 432 453 474 491TLC 99.5 98.6 98.5 97.3 95.1 0.7% -0.8% -0.1% -1.3% -2.2% 0.18 0.19 0.19 0.20 0.20 214 226 225 235 231Animal Planet 97.1 96.6 96.7 95.9 94.2 0.8% -0.5% 0.1% -0.9% -1.7% 0.09 0.10 0.10 0.11 0.11 104 116 116 127 125Investigation Discovery 70.0 77.9 80.2 84.2 86.1 27.8% 11.4% 2.9% 5.0% 2.2% 0.07 0.07 0.08 0.09 0.09 52 62 76 89 92Total Fully Distributed Networks 367.0 372.9 374.6 375.6 372.0 5.0% 1.6% 0.5% 0.3% -1.0% 0.18 0.19 0.19 0.20 0.21 780 837 870 925 939

Y/Y % Change 4.9% 4.5% 3.5% 5.8% 2.0% 9.5% 7.3% 4.0% 6.3% 1.6%

Broadly but Not Fully Distributed Networks (50-85mm subs)OWN: Oprah Winfrey Network 75.4 77.3 79.3 82.7 81.5 1.5% 2.6% 2.5% 4.3% -1.4% 0.02 0.02 0.01 0.18 0.19 18 18 9 175 187Science 67.2 68.8 76.6 76.3 75.7 12.9% 2.3% 11.3% -0.3% -0.8% 0.06 0.07 0.07 0.07 0.07 46 57 61 64 64Discovery Family Channel 60.6 61.4 71.1 71.6 69.0 -5.6% 1.2% 15.9% 0.8% -3.6% 0.06 0.07 0.11 0.13 0.13 45 51 87 111 110Velocity 34.0 39.1 44.6 55.7 61.3 13.3% 15.0% 14.1% 24.9% 10.0% 0.15 0.15 0.16 0.14 0.12 58 66 80 84 84American Heroes Channel 57.4 58.3 61.2 61.9 60.2 3.4% 1.6% 5.0% 1.3% -2.9% 0.06 0.07 0.07 0.07 0.07 41 49 50 52 51Destination America 55.9 57.1 59.8 58.9 57.1 16.2% 2.1% 4.7% -1.5% -3.1% 0.07 0.07 0.07 0.07 0.07 44 47 49 50 49Total Broadly but Not Fully Distributed Networks 350.5 362.0 392.5 407.2 404.8 5.7% 3.3% 8.4% 3.7% -0.6% 0.06 0.07 0.08 0.11 0.11 250 289 338 536 545

Y/Y % Change 2.7% 10.1% 10.9% 49.2% -0.4% 10.8% 15.2% 17.0% 58.9% 1.6%

Tertiary Networks (15-50mm Subs)Discovery Life Channel 48.1 48.8 48.8 47.7 46.2 4.6% 1.5% 0.0% -2.3% -3.1% 0.07 0.07 0.07 0.07 0.07 40 41 41 41 39Total Tertiary Networks 48.1 48.8 48.8 47.7 46.2 4.6% 1.5% 0.0% -2.3% -3.1% 0.07 0.07 0.07 0.07 0.07 40 41 41 41 39

Y/Y % Change 16.7% 0.0% 0.0% 0.0% 0.0% 18.0% 3.0% 0.7% -1.1% -2.7%

Nascent Networks (<15mm subs)Discovery en Español 4.0 4.1 4.2 4.4 4.3 25.4% 3.1% 2.7% 4.8% -2.6% 0.18 0.19 0.19 0.20 0.21 8 9 9 10 11Discovery Familia 4.9 5.2 5.5 4.1 4.0 4.3% 6.1% 5.8% -25.3% -3.2% 0.17 0.17 0.17 0.18 0.18 10 10 11 10 9Total Nascent Networks 8.9 9.3 9.7 8.5 8.2 12.7% 4.8% 4.4% -12.3% -2.9% 0.17 0.18 0.18 0.19 0.20 17 19 20 21 20

Y/Y % Change 6.4% 2.5% -0.1% 6.5% 2.7% 30.4% 11.4% 4.5% 1.6% -4.9%

Total Discovery Communications Networks 774.5 792.9 825.6 839.0 831.2 5.4% 2.4% 4.1% 1.6% -0.9% 0.12 0.13 0.13 0.15 0.15 1,087 1,185 1,269 1,522 1,543Y/Y % Change 4.7% 5.2% 3.6% 17.2% 1.1% 10.4% 9.0% 7.0% 20.0% 1.4%



May 1, 2015 54

Scripps Network Interactive Scripps Networks’ mature networks have mirrored the rest of the industry with 1-2mm sub losses. Great American Country has lost 3mm subs, ahead of other networks of similar distribution, although we note that financial impact is limited due to its low per-sub fee.

Exhibit 62: SNI Domestic Sub Trends

Subscribers (mm) Subs Y/Y % Affiliate Revenue per Sub/ Month ($) Affiliate revenue (calculated; $mm) Average Subscribers Change Y/Y (M)Network Name 2010 2011 2012 2013 2014 2010 2011 2012 2013 2014 2010 2011 2012 2013 2014 2010 2011 2012 2013 2014Fully Distributed Networks (+85mm subs)Food Network 100.2 99.6 99.4 98.8 97.0 1.0% -0.6% -0.2% -0.7% -1.8% 0.15 0.15 0.17 0.18 0.19 179 180 203 214 223HGTV 99.4 98.8 98.7 97.6 95.8 0.7% -0.6% -0.1% -1.1% -1.9% 0.14 0.15 0.16 0.17 0.17 166 178 190 200 197Travel Channel 95.6 94.8 94.7 93.9 91.6 0.5% -0.9% -0.1% -0.9% -2.4% 0.11 0.11 0.12 0.13 0.13 126 126 136 147 145Total Fully Distributed Networks 295.1 293.1 292.8 290.2 284.4 0.8% -0.7% -0.1% -0.9% -2.0% 0.13 0.14 0.15 0.16 0.16 472 484 529 561 565

Y/Y % Change 25.3% 2.5% 9.8% 6.6% 2.2% 26.6% 2.6% 9.3% 6.1% 0.7%

Broadly but Not Fully Distributed Networks (50-85mm subs)Cooking Channel 57.1 58.2 59.8 60.6 62.2 1.2% 1.9% 2.7% 1.4% 2.5% 0.05 0.05 0.07 0.08 0.09 34 35 50 58 66Great American Country 59.3 61.9 62.2 62.6 59.7 1.4% 4.3% 0.6% 0.7% -4.6% 0.02 0.02 0.02 0.02 0.02 14 15 15 15 15DIY Network 53.7 56.1 57.8 57.8 58.0 1.9% 4.6% 2.9% 0.1% 0.2% 0.06 0.07 0.09 0.10 0.11 38 46 62 69 76Total Broadly but Not Fully Distributed Networks 170.1 176.2 179.8 181.1 179.9 1.5% 3.6% 2.0% 0.7% -0.7% 0.04 0.05 0.06 0.07 0.07 86 95 126 142 157

Y/Y % Change 18.1% 7.4% 29.0% 11.0% 11.5% 22.4% 10.2% 32.3% 12.9% 10.7%

Total Scripps Networks Interactive Networks 465.2 469.3 472.6 471.4 464.3 1.0% 0.9% 0.7% -0.3% -1.5% 0.10 0.10 0.12 0.12 0.13 558 579 655 704 723Y/Y % Change 23.9% 2.4% 12.5% 7.2% 3.8% 25.9% 3.7% 13.1% 7.4% 2.7%



May 1, 2015 55

Time Warner Time Warner’s portfolio is largely composed of fully distributed networks that have seen sub declines in-line with the rest of the industry at 1-2mm in 2014. Despite this trend, we note that management has guided to low double-digit affiliate revenue CAGR through 2018 at the domestic Turner networks, having renewed long-term agreements with eight of its top ten affiliate partners through April 2015, deals with the remaining two expected to be completed by the end of 2015.

Strong pricing growth should more than offset the impact of sub losses for time being, as guidance incorporates modest sub erosion, and there could be an opportunity with increased carriage on new OTT offerings, at least relative to other network portfolios. We note that Turner Networks are predominantly featured on DISH’s Sling TV.

Exhibit 63: TWX Domestic Sub Trends

Subscribers (mm) Subs Y/Y % Affiliate Revenue per Sub/ Month ($) Affiliate revenue (calculated; $mm) Average Subscribers Change Y/Y (M)Network Name 2010 2011 2012 2013 2014 2010 2011 2012 2013 2014 2010 2011 2012 2013 2014 2010 2011 2012 2013 2014Fully Distributed Networks (+85mm subs)TBS 101.0 99.9 99.7 98.6 96.6 0.9% -1.0% -0.3% -1.1% -2.0% 0.53 0.60 0.60 0.64 0.73 639 723 719 761 855Cartoon Network 99.3 98.9 98.8 98.2 96.5 1.0% -0.4% -0.1% -0.7% -1.7% 0.19 0.20 0.21 0.22 0.23 225 238 249 260 269TNT 100.4 99.1 98.7 97.5 95.5 1.3% -1.3% -0.5% -1.2% -2.0% 1.09 1.22 1.24 1.29 1.50 1,305 1,461 1,472 1,518 1,737CNN 100.1 99.2 98.9 98.0 96.3 0.8% -0.9% -0.3% -0.9% -1.8% 0.52 0.55 0.56 0.59 0.61 622 658 666 697 711HLN 99.8 99.0 98.7 97.3 95.3 -0.1% -0.9% -0.3% -1.4% -2.0% 0.00 0.00 0.00 0.00 0.00 0 0 0 0 0truTV 92.6 91.9 92.2 90.8 89.6 0.4% -0.8% 0.3% -1.5% -1.3% 0.11 0.13 0.13 0.15 0.18 122 144 144 165 195Total Fully Distributed Networks 593.3 588.0 586.9 580.2 569.7 0.7% -0.9% -0.2% -1.1% -1.8% 0.41 0.45 0.46 0.49 0.55 2,914 3,224 3,249 3,401 3,766

Y/Y % Change 8.8% 10.5% 1.3% 5.5% 12.3% 9.6% 10.6% 0.8% 4.7% 10.7%

Broadly but Not Fully Distributed Networks (50-85mm subs)TCM 80.7 81.1 81.6 81.5 81.7 0.9% 0.5% 0.6% -0.1% 0.2% 0.26 0.27 0.28 0.28 0.29 251 262 273 274 284Total Broadly but Not Fully Distributed Networks 80.7 81.1 81.6 81.5 81.7 0.9% 0.5% 0.6% -0.1% 0.2% 0.26 0.27 0.28 0.28 0.29 251 262 273 274 284

Y/Y % Change 0.0% 3.8% 3.7% 0.0% 3.6% 1.8% 4.6% 4.3% 0.2% 3.6%

Tertiary Networks (15-50mm Subs)Boomerang 32.7 34.6 36.5 39.8 42.5 8.6% 5.8% 5.5% 9.0% 6.8% 0.08 0.08 0.08 0.08 0.09 30 32 34 37 44CNN International 11.1 14.1 15.7 16.6 17.7 26.1% 27.0% 11.3% 5.7% 6.6% 0.13 0.13 0.14 0.14 0.14 16 20 25 27 29Total Tertiary Networks 43.8 48.7 52.2 56.4 60.2 12.6% 11.2% 7.2% 8.0% 6.7% 0.09 0.09 0.10 0.10 0.10 46 52 59 64 73

Y/Y % Change 1.5% 1.9% 3.8% -0.4% 7.2% 15.9% 13.8% 13.9% 7.8% 14.9%

Nascent Networks (<15mm subs)CNN en Español 6.8 7.0 7.0 7.1 7.1 9.7% 2.9% 0.0% 1.4% 0.0% 0.14 0.15 0.16 0.16 0.17 11 12 13 14 14HTV 2.5 2.7 4.7 4.9 5.2 8.7% 8.0% 74.1% 4.3% 6.1% 0.14 0.15 0.15 0.16 0.16 4 5 7 9 10Total Nascent Networks 9.3 9.7 11.7 12.0 12.3 9.4% 4.3% 20.6% 2.6% 2.5% 0.14 0.15 0.16 0.16 0.17 15 17 20 23 24

Y/Y % Change 0.0% 7.1% 4.0% 2.6% 3.6% 11.3% 14.4% 17.5% 13.2% 6.3%

Total Time Warner Networks 727.1 727.5 732.4 730.1 723.9 1.5% 0.1% 0.7% -0.3% -0.8% 0.37 0.41 0.41 0.43 0.47 3,225 3,555 3,601 3,761 4,148Y/Y % Change 7.3% 9.1% 1.0% 4.3% 10.8% 9.0% 10.2% 1.3% 4.5% 10.3%



May 1, 2015 56

Viacom Viacom’s sub losses have been greater than the rest of the industry since their removal from Cable One and Suddenlink. Its mature networks were down 3mm 2014, with networks with 50-85mm subs declining ~1mm compared to gaining 1-2mm in 2013.

Exhibit 64: VIAB Domestic Sub Trends

Subscribers (mm) Subs Y/Y % Affiliate Revenue per Sub/ Month ($) Affiliate revenue (calculated; $mm) Average Subscribers Change Y/Y (M)Network Name 2010 2011 2012 2013 2014 2010 2011 2012 2013 2014 2010 2011 2012 2013 2014 2010 2011 2012 2013 2014Fully Distributed Networks (+85mm subs) 48.3% 1,781Nickelodeon/Nick At Nite 100.3 99.5 99.2 98.1 94.9 0.7% -0.8% -0.3% -1.1% -3.3% 0.47 0.51 0.55 0.62 0.68 564 612 656 734 788Comedy Central 99.0 98.3 98.3 97.4 94.7 0.9% -0.6% -0.1% -0.9% -2.8% 0.15 0.16 0.17 0.19 0.21 177 189 201 223 242Spike TV 99.5 98.7 98.1 97.0 93.6 0.7% -0.7% -0.6% -1.1% -3.5% 0.21 0.23 0.25 0.32 0.40 250 273 295 374 457MTV 99.2 98.5 98.1 96.8 93.3 0.7% -0.7% -0.4% -1.4% -3.5% 0.35 0.37 0.40 0.44 0.47 415 439 472 514 536VH1 98.7 98.0 97.2 96.1 92.8 0.8% -0.7% -0.8% -1.2% -3.5% 0.16 0.18 0.19 0.21 0.23 189 212 223 244 261TV Land 97.8 96.4 96.6 95.8 92.6 0.5% -1.4% 0.2% -0.8% -3.3% 0.12 0.13 0.13 0.16 0.18 140 151 151 185 204BET 90.7 91.1 91.6 90.8 88.1 1.2% 0.4% 0.5% -0.8% -3.0% 0.17 0.18 0.19 0.21 0.23 184 196 208 230 247CMT 91.9 91.5 91.8 90.6 87.2 2.1% -0.4% 0.3% -1.3% -3.8% 0.09 0.10 0.10 0.11 0.12 98 110 110 120 128Total Fully Distributed Networks 777.0 772.1 770.9 762.5 737.2 0.9% -0.6% -0.2% -1.1% -3.3% 0.22 0.23 0.25 0.29 0.32 2,018 2,184 2,315 2,625 2,862

Y/Y % Change 6.1% 8.1% 6.4% 14.1% 11.5% 7.3% 8.2% 6.0% 13.4% 9.0%

Broadly but Not Fully Distributed Networks (50-85mm subs)MTV2 78.3 78.0 80.2 80.8 79.5 1.7% -0.4% 2.9% 0.7% -1.6% 0.05 0.06 0.06 0.07 0.07 47 56 57 68 67Nick Jr./NickMom 73.2 73.2 75.5 75.9 75.6 5.3% 0.1% 3.0% 0.6% -0.4% 0.18 0.19 0.20 0.22 0.24 154 167 178 200 218TeenNick 70.2 70.2 72.4 73.4 72.4 2.3% 0.0% 3.1% 1.4% -1.4% 0.10 0.10 0.11 0.12 0.13 83 84 94 105 114Nicktoons 57.7 58.9 61.9 67.5 66.7 4.2% 2.1% 5.1% 9.0% -1.0% 0.07 0.07 0.08 0.09 0.09 48 49 58 70 72VH1 Classic 57.0 57.9 60.8 61.0 58.3 2.5% 1.6% 5.1% 0.2% -4.3% 0.07 0.07 0.08 0.08 0.08 47 48 57 58 57Nick 2 43.4 46.9 51.1 52.9 52.6 9.0% 8.1% 9.0% 3.5% -0.6% 0.01 0.01 0.02 0.02 0.02 5 5 12 12 13CENTRIC 45.2 46.8 50.6 51.9 51.4 29.1% 3.5% 8.1% 2.6% -0.9% 0.07 0.07 0.07 0.08 0.09 34 39 41 49 56LOGO 46.8 48.5 50.8 52.3 51.0 4.0% 3.7% 4.8% 2.8% -2.4% 0.03 0.03 0.03 0.04 0.04 17 17 18 25 25Total Broadly but Not Fully Distributed Networks 471.7 480.4 503.3 515.6 507.6 5.8% 1.9% 4.8% 2.4% -1.5% 0.08 0.08 0.09 0.10 0.10 434 466 515 587 622

Y/Y % Change 3.8% 3.1% 7.2% 10.2% 5.9% 9.8% 7.4% 10.6% 14.0% 6.0%

Tertiary Networks (15-50mm Subs)MTV Hits 32.7 35.8 39.2 43.4 43.4 5.8% 9.5% 9.5% 10.7% 0.0% 0.01 0.02 0.02 0.02 0.02 4 8 9 10 10CMT Pure Country 28.4 30.6 36.5 38.9 38.2 47.2% 7.7% 19.3% 6.6% -1.8% 0.05 0.05 0.05 0.05 0.06 14 18 20 23 28Palladia 24.2 29.8 35.3 37.4 37.2 11.0% 23.1% 18.5% 5.9% -0.5% 0.12 0.13 0.15 0.18 0.20 33 42 59 79 90Tr3s 33.5 34.2 34.4 36.4 36.8 1.8% 2.1% 0.6% 6.1% 1.1% 0.03 0.03 0.03 0.03 0.04 12 12 12 13 18VH1 Soul 23.4 26.4 30.6 34.9 34.8 16.4% 12.8% 15.9% 14.1% -0.3% 0.05 0.05 0.05 0.05 0.06 13 15 17 20 25MTV Jams 24.2 28.1 31.4 34.7 34.7 5.7% 16.1% 11.7% 10.5% 0.0% 0.02 0.02 0.03 0.03 0.03 6 6 11 12 12BET Gospel 10.1 15.2 20.3 22.7 22.3 102.0% 50.5% 33.6% 11.8% -1.8% 0.05 0.05 0.05 0.05 0.05 5 8 11 13 14Total Tertiary Networks 176.5 200.1 227.7 248.4 247.4 15.4% 13.4% 13.8% 9.1% -0.4% 0.04 0.05 0.05 0.06 0.07 86 109 139 168 196

Y/Y % Change 11.1% 10.5% 11.5% 7.4% 12.5% 24.6% 26.2% 27.1% 21.5% 16.7%

Nascent Networks (<15mm subs)mtvU 5.4 5.6 5.8 6.0 6.0 3.8% 3.7% 3.6% 3.4% 0.0% 0.06 0.07 0.07 0.08 0.08 4 5 5 6 6BET Hip-Hop 0.4 0.9 1.6 2.2 2.2 33.3% 125.0% 77.8% 37.5% 0.0% 0.07 0.07 0.07 0.07 0.08 0 1 1 2 2Total Nascent Networks 5.8 6.5 7.4 8.2 8.2 5.5% 12.1% 13.8% 10.8% 0.0% 0.06 0.07 0.07 0.08 0.08 4 5 6 7 8

Y/Y % Change 0.2% 15.3% 0.0% 10.5% 3.5% 42.7% 25.7% 13.0% 24.4% 8.4%

Total Viacom Networks 1,430.9 1,459.1 1,509.3 1,534.8 1,500.4 4.2% 2.0% 3.4% 1.7% -2.2% 0.15 0.16 0.17 0.18 0.20 2,542 2,764 2,974 3,387 3,688Y/Y % Change 3.9% 5.6% 4.5% 11.2% 9.8% 8.3% 8.7% 7.6% 13.9% 8.9%



May 1, 2015 57

Walt Disney Co. Disney’s affiliate revenue has significantly benefitted from the successful August 2014 launch of the SEC Network, which ended 2014 with ~63mm subs. We note that Disney’s affiliate revenue is highly dependent on ESPN sub trends and pricing, with a 1mm swing in its subs roughly equal to the impact of a similar variance across the entire portfolio (including A&E).

Exhibit 65: DIS Domestic Sub Trends at Consolidated Networks

Subscribers (mm) Subs Y/Y % Affiliate Revenue per Sub/ Month ($) Affiliate revenue (calculated; $mm) Average Subscribers Change Y/Y (M)Network Name 2010 2011 2012 2013 2014 2010 2011 2012 2013 2014 2010 2011 2012 2013 2014 2010 2011 2012 2013 2014Walt Disney excl. equity in the income of investeesFully Distributed Networks (+85mm subs)Disney Channel 99.4 98.7 98.4 97.5 96.2 0.0% -0.6% -0.4% -0.9% -1.3% 0.90 1.04 1.09 1.15 1.27 1,073 1,236 1,289 1,351 1,476ESPN 99.8 99.0 98.5 97.0 94.6 0.7% -0.8% -0.5% -1.6% -2.4% 4.39 4.77 5.04 5.54 6.10 5,241 5,692 5,975 6,499 7,012ESPN2 99.7 99.0 98.5 96.9 94.6 0.9% -0.8% -0.5% -1.6% -2.5% 0.58 0.64 0.67 0.70 0.77 691 763 794 821 885ABC Family Channel 98.5 97.5 97.0 95.8 94.5 0.1% -1.0% -0.5% -1.3% -1.3% 0.22 0.24 0.26 0.27 0.28 260 282 303 312 320Total Fully Distributed Networks 397.4 394.3 392.4 387.2 379.9 0.4% -0.8% -0.5% -1.3% -1.9% 1.53 1.68 1.77 1.92 2.10 7,265 7,973 8,361 8,983 9,693

Y/Y % Change 6.6% 9.9% 5.5% 8.4% 9.5% 7.4% 9.8% 4.9% 7.4% 7.9%

Broadly but Not Fully Distributed Networks (50-85mm subs)Disney XD 77.9 78.4 80.3 80.8 80.3 4.3% 0.7% 2.5% 0.6% -0.6% 0.14 0.15 0.16 0.17 0.18 128 141 152 164 174Disney Junior 0.0 0.0 54.7 63.1 74.9 na na na 15.4% 18.7% 0.00 0.00 0.12 0.13 0.16 0 0 39 92 132ESPNU 72.5 72.5 73.9 74.6 73.9 8.1% 0.0% 1.9% 1.0% -0.9% 0.17 0.18 0.19 0.20 0.21 142 157 167 178 187ESPNews 73.4 73.9 74.7 74.4 72.3 3.5% 0.7% 1.0% -0.4% -2.8% 0.18 0.19 0.20 0.21 0.23 156 168 178 188 202SEC Network 0.0 0.0 0.0 0.0 63.0 na na na na na 0.00 0.00 0.00 0.00 0.64 0 0 0 0 184SOAPnet 75.1 73.8 66.4 65.5 0.0 2.5% -1.7% -10.0% -1.4% -100.0% 0.15 0.16 0.16 0.17 0.00 134 143 135 135 0Total Broadly but Not Fully Distributed Networks 298.8 298.6 350.0 358.4 364.4 4.5% -0.1% 17.2% 2.4% 1.7% 0.16 0.17 0.17 0.18 0.27 560 608 672 757 880

Y/Y % Change 5.0% 6.3% -0.6% 5.3% 52.9% 18.6% 8.6% 10.4% 12.7% 16.3%

Tertiary Networks (15-50mm Subs)Fusion 0.0 0.0 0.0 25.9 40.3 na na na na 55.6% 0.00 0.00 0.00 0.05 0.08 0 0 0 8 32ESPN Classic 39.5 32.5 31.4 29.7 25.3 -35.6% -17.7% -3.4% -5.5% -14.7% 0.18 0.19 0.20 0.20 0.22 109 82 77 73 73Total Tertiary Networks 39.5 32.5 31.4 55.6 65.6 -35.6% -17.7% -3.4% 77.0% 18.1% 0.18 0.19 0.20 0.13 0.13 109 82 77 81 104

Y/Y % Change 0.0% 5.6% 5.3% -34.9% 3.0% -19.7% -24.7% -6.6% 5.7% 28.8%

Nascent Networks (<15mm subs)ESPN Deportes 5.1 5.2 5.5 5.8 6.0 30.6% 1.2% 5.3% 6.1% 3.3% 0.16 0.17 0.18 0.19 0.20 9 10 11 13 14Total Nascent Networks 5.1 5.2 5.5 5.8 6.0 30.6% 1.2% 5.3% 6.1% 3.3% 0.16 0.17 0.18 0.19 0.20 9 10 11 13 14

Y/Y % Change 6.7% 6.3% 5.9% 5.6% 5.3% 43.1% 21.1% 9.3% 11.6% 10.2%

Total Walt Disney excl. equity in the income of investees 740.9 730.6 779.3 806.9 816.0 -0.8% -1.4% 6.7% 3.5% 1.1% 0.89 0.98 0.98 1.01 1.11 7,943 8,674 9,121 9,834 10,692Y/Y % Change 7.4% 10.1% -0.8% 3.4% 10.1% 7.7% 9.2% 5.1% 7.8% 8.7%



May 1, 2015 58

Disney also consolidates its share of the financial results of A&E Networks (a 50%/50% JV with the Hearst Corp.) under its Cable Networks segment. While its revenue is not included in Cable Networks’ affiliate, advertising, or other revenue, the earnings contributed ~12% of the segment’s operating income.

A&E’s mature networks lost 1-2mm subs like its peers. Its portfolio of other networks saw greater sub growth than most other companies’, with solid increases at H2 and FYI as well as double-digit growth with its smaller networks, although the revenue impact is relatively muted given lower per-sub fees.

Exhibit 66: A&E Domestic Sub Trends (Financials Included in Disney’s Equity in the Income of Investees)

Subscribers (mm) Subs Y/Y % Affiliate Revenue per Sub/ Month ($) Affiliate revenue (calculated; $mm) Average Subscribers Change Y/Y (M)Network Name 2010 2011 2012 2013 2014 2010 2011 2012 2013 2014 2010 2011 2012 2013 2014 2010 2011 2012 2013 2014Walt Disney - Equity in the income of investeesFully Distributed Networks (+85mm subs)A&E 99.8 99.1 98.7 97.9 96.1 0.9% -0.7% -0.5% -0.8% -1.9% 0.26 0.27 0.28 0.29 0.30 310 322 332 342 349History 99.1 98.8 98.6 97.7 96.1 0.9% -0.3% -0.2% -0.9% -1.6% 0.23 0.24 0.25 0.26 0.27 272 285 296 306 314Lifetime Television 99.7 99.0 98.7 97.7 96.0 0.9% -0.7% -0.3% -1.0% -1.7% 0.29 0.30 0.31 0.32 0.33 345 358 368 377 384Total Fully Distributed Networks 298.6 296.9 296.0 293.4 288.2 0.9% -0.6% -0.3% -0.9% -1.8% 0.26 0.27 0.28 0.29 0.30 928 965 996 1,025 1,047

Y/Y % Change 4.0% 3.8% 3.7% 3.6% 3.4% 5.0% 4.0% 3.2% 3.0% 2.1%

Broadly but Not Fully Distributed Networks (50-85mm subs)LMN 80.2 82.5 84.7 83.6 81.9 7.4% 2.9% 2.7% -1.3% -2.1% 0.09 0.10 0.10 0.10 0.10 84 98 100 101 99H2 61.5 66.1 68.8 68.8 70.8 10.0% 7.6% 4.0% 0.1% 2.8% 0.06 0.06 0.06 0.06 0.07 42 46 49 50 59FYI 62.3 66.9 69.3 67.5 70.6 9.9% 7.4% 3.5% -2.6% 4.6% 0.11 0.11 0.11 0.11 0.11 79 85 90 90 91Total Broadly but Not Fully Distributed Networks 203.9 215.5 222.7 219.9 223.2 8.9% 5.7% 3.4% -1.3% 1.5% 0.09 0.09 0.09 0.09 0.09 204 229 239 241 249

Y/Y % Change 0.0% 4.3% -0.1% -0.2% 3.4% 9.0% 11.9% 4.3% 0.9% 3.4%

Tertiary Networks (15-50mm Subs)Military History Channel 10.6 13.3 16.0 18.7 21.4 7.1% 25.5% 20.3% 16.9% 14.4% 0.06 0.06 0.06 0.06 0.07 7 9 11 12 17Crime & Investigation Network 13.3 14.2 16.3 18.7 21.3 17.7% 6.8% 14.8% 14.7% 13.9% 0.06 0.06 0.06 0.06 0.06 9 10 11 13 14Lifetime Real Women 16.2 15.2 15.5 15.9 16.4 10.2% -6.2% 2.0% 2.6% 3.1% 0.04 0.04 0.04 0.04 0.04 7 8 7 8 8Total Tertiary Networks 40.1 42.7 47.8 53.3 59.1 11.7% 6.5% 11.9% 11.5% 10.9% 0.05 0.05 0.05 0.05 0.06 24 26 29 33 39

Y/Y % Change 0.2% 1.8% 1.2% 1.0% 7.5% 15.5% 10.1% 11.0% 12.9% 19.5%0.05

Nascent Networks (<15mm subs)History en Español 5.8 5.9 6.2 6.5 6.7 5.5% 1.7% 5.1% 4.8% 3.1% 0.09 0.10 0.11 0.12 0.13 6 7 8 9 10Total Nascent Networks 5.8 5.9 6.2 6.5 6.7 5.5% 1.7% 5.1% 4.8% 3.1% 0.09 0.10 0.11 0.12 0.13 6 7 8 9 10

Y/Y % Change 12.5% 11.1% 10.0% 9.1% 8.3% 24.6% 15.0% 13.8% 14.5% 12.6%

Total Walt Disney - Equity in the income of investees 548.4 560.9 572.7 573.1 577.2 4.6% 2.3% 2.1% 0.1% 0.7% 0.18 0.18 0.19 0.19 0.19 1,162 1,227 1,272 1,308 1,345Y/Y % Change 1.2% 2.3% 1.5% 2.1% 2.0% 5.9% 5.6% 3.7% 2.9% 2.8%

Total affiliate revenue per sub per month figures represent a sub-weighted average. Note: A&E Networks are a JV owned 50% by Disney and 50% by the Hearts Corporation. Disney’s share of the JV’s financial results are reported under “equity in the income of investees” within Cable Networks, and are not reported under the segment’s advertising , advertising, or other revenue. Subscriber numbers reflect Nielsen Household Estimates as of December for the years presented. SNL Kagan estimates have been incorporated (including applying their estimates of Y/Y sub count changes) when Nielsen figures were not available. The affiliate revenue listed is an illustrative estimate based on the average sub count and average monthly affiliate fee per sub. Source: Nielsen, SNL Kagan, RBC Capital Markets


May 1, 2015 59

Appendix: RBC Capital Markets Consumer Survey We completed a proprietary survey of approximately 1,000 clients with roughly 20 questions. While we have integrated some of the results into different sections of the previous portion of the note, we offer the full results below.

Exhibit 67: How likely are you to cancel your pay-TV subscription in the next 12 months?

3.0%

5.8%

16.0%

18.2%

57.0%

Extremely likely

Very likely

Moderately likely

Slightly likely

Not at all likely


Exhibit 68: Have you canceled your pay-TV subscription in the past 12 months?

15.7%

84.3%

Yes No



May 1, 2015 60

Exhibit 69: Why did you decide to cancel your pay-TV service? (select all that apply)

35.0%

27.7%29.9%

17.2%

36.9%

0%

5%

10%

15%

20%

25%

30%

35%

40%



watch TV content





Other


Exhibit 70: Why are you considering canceling your pay-TV service? (select all that apply)

69.4%

17.6%21.8%

36.8%

9.3%

0%

10%

20%

30%

40%

50%

60%

70%

80%



watch TV content





Other


Exhibit 71: Do you think your stand-alone broadband bill would increase if you stopped paying for it as part of a pay-TV bundle and if so, by how much?

41.6%

12.1%

24.4%

12.1%

9.9%

No, I don't think it would increase

Yes, I think it would increase by $10 or less



Yes, I think it would increase by $30 or more



May 1, 2015 61

Exhibit 72: If you were to cancel your pay-TV service, how would you go about watching live broadcast content such as NFL Football or Prime Time TV Series and Events, such as the Oscars? (Select all that apply)

27.1%

30.6%

36.2%

19.4%

0%

5%

10%

15%

20%

25%

30%

35%

40%

Attach an antenna (rabbit ears) to your TV Go to a friend's house or a bar I wouldn't miss any of that content Other


Exhibit 73: Rank the order of what you think a household of four or more would save the most money with over a month :

1.77

2.34

2.61

3.29

0.0 0.5 1.0 1.5 2.0 2.5 3.0 3.5

Downgrading your cable service to a discount bundle with ~70 channels instead of 200+

Packing lunch for each member of the family instead of buying lunch once per month

Going to the movies as a family one time less per month

Two adults drinking two fewer glasses of wine per month



May 1, 2015 62

Exhibit 74: Do you subscribe to a video service such as Netflix, Amazon Prime Streaming or HuluPlus?

54.3%

45.7%

Yes No


Exhibit 75: Which video services do you subscribe to? (select all that apply).

87.6%

42.1%

18.4%

3.1%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Netflix AmazonPrime Streaming HuluPlus Other



May 1, 2015 63

Exhibit 76: Do you subscribe to a premium TV service like HBO, Showtime, Starz, or Epix?

30.0%

70.0%

Yes No


Exhibit 77: Are the premium TV service like HBO, Showtime, Starz, or Epix the primary reason you subscribe to your broader pay-TV service?

75.0%

25.0%

No, these networks are not theprimary reason I have Pay-TV

Yes, these networks are theprimary reason I have Pay-TV


Exhibit 78: Would you rather pay 50% less for your cable TV subscription but lose access to dedicated sports networks such as ESPN or Regional Sports Networks like Fox Sports Southwest, The YES Network, etc.?

63.0%

37.0%

Yes No



May 1, 2015 64

Exhibit 79: Do you subscribe to Sling TV?

0.3% 0.9%

41.9%

56.9%

Yes, and I canceled my Pay-TV subscription for it

Yes, and I didn't have a Pay-TV subscription in thepast six months before I signed up for Sling TV

No

I don't know what Sling TV is


Exhibit 80: How important was having ESPN on the service to your decision to subscribe to Sling TV?

46.2%

15.4%

15.4%

23.1%

Extremely important

Very important

Moderately important

Slightly important

Not at all important


Exhibit 81: If Apple launched a pay-TV service, what would make you cancel your existing cable service to sign up for it?

3.91

3.21

3.28

0.0 0.5 1.0 1.5 2.0 2.5 3.0 3.5 4.0 4.5

It costs the same as your current cable service

It costs half as much as your current cable service

It costs 1/3rd as much as your current cable service



May 1, 2015 65

Exhibit 82 What would be a compelling amount of money to save from cancelling your pay-TV service and substituting it with either free options (like YouTube) and/or paid OTT services (like Netflix, HBO Now, etc.)?

10.7%

8.7%

13.9%

45.2%

21.5%

$15

$25

$35

$45

Other (please specify)



May 1, 2015 66

Ticker CBS DIS DISCA FOXA SNI TWX VIAB

CompanyCBS

CorporationWalt Disney

Discovery

Comm.

Twenty-First

Century Fox

Scripps

NetworksTime Warner Viacom

Price as of: 2015/04/30

Class A Shares N/A $108.72 $32.36 $34.08 $69.86 $84.41 $69.13Class B Shares $62.13 N/A $32.22 $33.35 N/A N/A $69.45

Class C Shares N/A N/A $30.23 N/A N/A N/A N/A

50 Day Average Volume 4,758,808 5,563,924 4,807,530 12,020,192 1,001,999 3,906,792 3,116,180

Enterprise Value Caluation

Total Diluted Shares Outstanding 489,916 1,703,284 676,371 2,195,000 128,942 830,256 405,400

Diluted Equity Market Cap $30,438,471 $185,181,090 $20,925,389 $74,222,680 $9,007,914 $70,081,876 $28,138,718

Total Enterprise Value $36,766,471 $197,633,090 $26,924,764 $74,127,847 $10,170,368 $88,022,876 $41,275,718

Key Financial Metrics

Net Revenues

2012A 12,820,000 42,840,000 4,521,000 25,635,500 * 2,307,182 25,325,000 13,249,000

2013A 14,005,000 46,009,000 5,535,980 26,882,000 2,532,968 26,461,000 13,677,000

2014A 13,806,000 49,895,000 6,265,200 27,382,000 2,665,456 27,359,000 13,930,000

2015E 14,171,731 53,109,402 6,539,004 28,692,990 2,787,161 28,685,598 14,202,844

2016E 14,828,629 56,953,282 6,952,834 30,899,764 2,938,537 30,340,827 14,803,3112013-14 Growth -1% 8% 13% 2% 5% 3% 2%

2014-15 Growth 3% 6% 4% 5% 5% 5% 2%

2015-16 Growth 5% 7% 6% 8% 5% 6% 4%

EBITDA2012A 3,091,000 10,589,000 1,976,000 5,993,500 * 1,040,873 6,428,000 3,913,000

2013A 3,315,500 12,006,000 2,240,980 5,915,000 1,079,946 6,954,000 4,238,0002014A 3,229,000 14,177,500 2,449,700 6,527,000 1,121,812 6,566,000 4,294,000

2015E 3,410,194 14,815,584 2,341,895 6,824,597 1,162,533 7,860,697 3,844,077

2016E 3,720,861 16,175,451 2,519,324 7,906,299 1,208,645 9,035,393 4,706,1362013-14 Growth -3% 18% 9% 10% 4% -6% 1%

2014-15 Growth 6% 5% -4% 5% 4% 20% -10%*2015-16 Growth 9% 9% 8% 16% 4% 15% 22%

EPS2012A $2.20 $3.06 $0.00 $1.34 * $3.28 $2.94 $4.06

2013A $2.79 $3.64 $1.58 $1.29 $3.62 $3.51 $4.99

2014A $2.87 $4.53 $1.84 $1.68 $3.83 $4.15 $5.502015E $3.64 $4.92 $1.80 $1.74 $4.33 $4.65 $6.37

2016E $4.48 $5.68 $2.11 $2.25 $4.94 $5.76 $6.712013-14 Growth 3% 25% 16% 30% 6% 18% 10%

2014-15 Growth 27% 9% -2% 3% 13% 12% 16%

2015-16 Growth 23% 15% 17% 29% 14% 24% 5%

FCF/Share

2012A $2.62 $2.43 $1.41 - $3.33 $2.52 $4.37

2013A $2.65 $3.47 $1.92 $1.33 $3.72 $3.38 $5.172014A $3.41 $4.36 $1.85 $1.67 $4.47 $3.91 $5.61

2015E $3.85 $4.31 $1.84 $1.67 $4.85 $4.43 $5.192016E $4.70 $5.08 $2.30 $2.15 $5.45 $5.73 $6.91

2013-14 Growth 29% 26% -3% 26% 20% 16% 9%

2014-15 Growth 13% -1% -1% 0% 8% 13% -7%*2015-16 Growth 22% 18% 25% 29% 12% 29% 33%

Trading/Valuation Multiples Average

EV/2012A EBITDA 11.9x 18.7x 13.6x 12.4x 9.8x 13.7x 10.5x 12.9x



EV/2015E EBITDA 10.8x 13.3x 11.5x 10.9x 8.7x 11.2x 10.7x 11.0x

EV/2016E EBITDA 9.9x 12.2x 10.7x 9.4x 8.4x 9.7x 8.8x 9.9x2013-14 EV/EBITDA To Growth NA 0.77 1.18 1.10 2.34 nm nm

2014-15 EV/EBITDA To Growth NA 2.96 na 2.38 2.41 0.57 nm

2015-16 EV/EBITDA To Growth 1.08 1.33 1.41 0.59 2.12 0.65 0.39

Price/2012A EPS 28.2x 35.5x N/A 25.4x 21.3x 28.7x 17.1x 26.0x

Price/2013A EPS 22.3x 29.9x 20.5x 26.3x 19.3x 24.1x 13.9x 22.3x

Price/2014A EPS 21.7x 24.0x 17.6x 20.2x 18.2x 20.4x 12.6x 19.2x

Price/2015E EPS 17.1x 22.1x 18.0x 19.6x 16.1x 18.1x 10.9x 17.4x

Price/2016E EPS 13.9x 19.1x 15.4x 15.2x 14.1x 14.7x 10.3x 14.7x2013-14 P/E To Growth 7.36 0.97 1.08 0.67 3.21 1.12 1.26

2014-15 P/E To Growth 0.63 2.56 na nm 1.23 1.49 0.69

2015-16 P/E To Growth 0.60 1.25 0.89 0.52 1.00 0.62 1.93

Price/2012A FCF 23.7x 44.8x 22.9x N/A 20.9x 33.5x 15.9x 27.0x

Price/2013A FCF 23.5x 31.4x 16.9x 25.6x 18.8x 24.9x 13.4x 22.1x

Price/2014A FCF 18.2x 24.9x 17.5x 20.4x 15.6x 21.6x 12.4x 18.7x

Price/2015E FCF 16.2x 25.2x 17.6x 20.4x 14.4x 19.1x 13.4x 18.0x

Price/2016E FCF 13.2x 21.4x 14.1x 15.8x 12.8x 14.7x 10.1x 14.6x2013-14 FCF/Share To Growth 0.63 0.96 na 0.79 0.77 1.39 1.45

2014-15 FCF/Share To Growth nm nm na na 1.71 1.44 nm

2015-16 FCF/Share To Growth 0.60 1.18 0.56 0.55 1.03 0.50 0.30

DISCA EPS estimates are GAAP

*VIAB EBITDA includes impact of restructuring charges

*FOXA calandar historicals are a blend of fiscal years where noted because quarterly breakdown has not been provided

Figures in thousands, except per share data. All multiples based on calendar year estimates/consensusFCF excludes changes in working capital and related items due to the high level of volatility in some large-cap media companies

Source: Company reports, RBC Capital Markets estimates


May 1, 2015 67

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Distribution of ratings

RBC Capital Markets, Equity Research

As of 31-Mar-2015

Investment Banking

Serv./Past 12 Mos.

Rating Count Percent Count Percent

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HOLD [Sector Perform] 713 41.05 125 17.53

SELL [Underperform] 115 6.62 5 4.35

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