Cable Operators Ought Not Be Afraid of OTT A Financial View of the Content & Distribution Businesses David C. Joyce, CFA Miller Tabak + Co., LLC [email protected]

Cable Operators Ought Not Be Afraid of OTT

A Financial View of the Content & Distribution Businesses

David C. Joyce, CFAMiller Tabak + Co., [email protected]

212-370-0040

mailto:[email protected]

2

3

What Consumers are Paying

ARPU/Month, Yearly Avg.

$50

$70

$90

$110

$130

$150

$170

$190

$210

$230

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

Cablevision Systems Corp. Charter Comm., Inc. Comcast Corp. Knology, Inc. Time Warner Cable

4

What OTT Issue?

Nielsen's A Week in the Life: Time Spent Viewing TVReport released week of 10/3/2011; Hours:Minutes

2-11 12-17 18-24 25-34 35-49 50-64 65+On Traditional TV 26:31 24:21 26:28 30:34 36:23 44:54 49:17Watching time-shifted TV 1:49 1:31 1:30 3:11 3:11 2:48 1:40Using the Internet on a computer 0:40 1:45 5:31 8:29 8:34 7:20 3:55Watching video on the internet 0:07 0:20 0:48 0:57 0:38 0:25 0:12Mobile subs watchting video on mobile phone NA 0:20 0:15 0:10 0:05 0:02 minimal

2Q10 2Q11 growthAvg American TV usage 143:35 146:20 1.9%DVR viewing 24:28 24:30 0.1%TV HH w/ DVRs 45.3 mm % of total 39%TV HH paying for TV service 90%

% of pop.Online viewing 3:55 4:30 14.7% 48.0%Mobile viewing 3:37 4:20 19.8% 10.0%

Online Viewing is a Fraction of Traditional

5

TV Usage Time Leads & Is Stable

Media Usage Time Share vs. US Ad Spending Share, 2010Source: eMarketer, December 2011

Time 2011 AdSpent SpendingShare Share

Television 42.5% 42.2%Internet 25.9% 21.9% likely to take shareRadio 14.6% 10.9%Mobile 10.9% 0.9% likely to take shareNewspapers 4.0% 15.0% likely to lose shareMagazines 2.8% 9.7% likely to lose share

Internet & Mobile Will Take Ad Share from Other Media, Though.

6

Where the Costs are Going

Entertainment Conglomerates' Representative Expense MarginsSource: company filings, Miller Tabak + Co. estimates. As of 4/23/12.

EBITDAMargin Programming Production Distribution Selling Labor

Broadcast Networks 16% 24% 15% 15% 18% 22%Cable Networks 41% 19% 12% 10% 11% 9%

Production Other Op Ex & Exhibitor Mrktg & DVDCost Amort Participations Fees Distribution Production

Film & TV Studios 12% 40% 22% 11% 6% 7%

Video Transmission DataProgramming & Production Network Marketing Corporate

Cable Operators 43% (% Vid Rev)39% 26% (% Tot Rev) 17% 14% 4% 2%

Expenses

7

Where Content Costs are Going

Media Conglomerate Ad, Affiliate, & Ancillary Revenue Composition (Television Properties Only)Source: Miller Tabak + Co. est. $ in mm.Affiliate = cable network carriage, subscription & broadcast retransmission feesAncillary = TV program syndication and home entertainment (DVD, VOD & streaming) revenue

Advert. % Total Affiliate % Total Ancillary % TotalAMC Networks 496$ 41% 656$ 55% 46$ 4%CBS 5,779$ 58% 1,671$ 17% 2,443$ 25%Comcast/NBCUniversal Broadcast 5,451$ 69% 1,780$ 23% 668$ 8%

Cable 3,608$ 39% 4,755$ 52% 808$ 9%Overall 9,059$ 53% 6,535$ 38% 1,476$ 9%

Discovery Domestic 1,463$ 52% 1,241$ 44% 110$ 4%International 560$ 35% 978$ 61% 61$ 4%Overall 2,023$ 46% 2,219$ 50% 171$ 4%

Disney 8,060$ 42% 9,840$ 51% 1,456$ 8%News Corp. Broadcast 4,831$ 86% 279$ 5% 489$ 9%

Cable Domestic 2,146$ 30% 4,595$ 64% 489$ 7%Cable International 178$ 13% 1,221$ 87% -$ 0%Overall 7,155$ 50% 6,095$ 43% 977$ 7%

Scripps Networks 1,564$ 71% 634$ 29% 20$ 1%Time Warner 4,389$ 30% 8,981$ 62% 1,186$ 8%Viacom 5,153$ 53% 3,923$ 40% 612$ 6%

Average 47% 46% 7%

Total Co. TV % ofAdvertising Tot Adv

CBS 10,709$ 54.0% incl interactive, radio, outdoorComcast/NBCUniversal 11,261$ 80.4% incl cable opsDisney 8,292$ 97.2% incl interactiveNews Corp. 9,505$ 75.3% incl papers, inserts, sat. tv adsTime Warner 6,416$ 68.4% incl filmed ent., publishing

2012E

Networks Rely on Affiliate Fees for ~46% of Revenue

8

Where Content Costs are Going

Film Studios Relative CompsSource: Miller Tabak + Co. estimatesCalendarized results & estimates. $ in mm

Yr End 2011 2012E growth 2011 2012E 2011 2012E growthCBS Films CBS Dec 77$ 82$ 6.5% (10)$ (67)$ -13.0% -81.7% 570.0%NBCUniversal CMCSA/K Dec 4,592 4,557 -0.8% 24 91 0.5% 2.0% 279.2%Walt Disney Studios DIS Sept 6,351 6,106 -3.9% 754 754 11.9% 12.3% 0.0%DreamWorks Animation DWA Dec 751 718 -4.3% 167 160 22.2% 22.2% -4.1%Lionsgate Motion Pictures LGF Mar 1,125 1,383 22.9% 91 188 8.1% 13.6% 106.6%Fox Entertainment Group NWS/A June 6,899 7,451 8.0% 1,038 1,183 15.0% 15.9% 14.0%Sony Pictures Entertainment SNE (a) Mar na na na na na na na naWarner Bros. Entertainment TWX Dec 12,638 12,337 -2.4% 1,759 1,581 13.9% 12.8% -10.1%Paramount Pictures VIA/B Sept 5,923 5,619 -5.1% 430 315 7.3% 5.6% -26.7%

Note: DWA and SNE are not officially covered by Miller Tabak + Co.(a) using Y=78.445/$

MarginRevenue OIBDA

Studios Have Much Lower Margins, with Greater Volatility – Looking for Margin Help?

9

Where Else can Content be Monetized?

2011E Media Conglomerate Syndication and Home Entertainment ExposureSource: Miller Tabak + Co. est. $ in mm.

Film, Cable ContentTotal % of & Bdcst TV Synd. TV DVD Movie Licensing Home Ent Online Online % of

Home Ent. Peer Total Revenue % Total % Total % Total % Total % Total % Total Home EntAMC Networks 12$ 0% 1,218$ 0% 1% 0% 0% 1% 1% 50%CBS 583 3% 14,740 14% 3% 0% 0% 4% 1% 25%Discovery 31 0% 3,922 0% 1% 0% 0% 1% 0% 0%Disney 2,909 14% 24,424 13% 0% 10% 0% 12% 2% 15%Lionsgate 788 4% 1,537 21% 4% 40% 0% 51% 8% 15%NBCUniversal (d.n.incl. Comcast cable) 4,876 23% 20,850 7% 7% 8% 7% 23% 3% 11%News Corp. 2,628 12% 19,714 5% 1% 9% 2% 13% 2% 13%Time Warner (film HE incl electr deliv) 5,727 27% 26,549 12% 3% 10% 6% 22% 2% 9%Viacom (Cable Syndic & HE discl together) 3,509 17% 14,574 2% 2% 12% 9% 24% 1% 5%

21,062$ 100% 127,528$ 9% 3% 9% 4% 17% 2% 11%

OTT May Be Only 2% of Home Entertainment Revenue

10

1Q12 Cable Net Viewership

Top-Viewed Cable Networks, 1Q12 (through 3/25/12)Source: Turner Research analysis of Nielsen data

Top-Viewed Cable Networks among Adults 18-49 (mm)Network 1Q12 1Q11 % Chg Owner

TBS 1.230 0.923 33% TWXUSA 1.090 1.200 -9% CMCSA/KESPN 1.020 1.050 -3% DISHistory 1.035 0.899 15% A&E Networks (a)TNT 0.887 1.010 -12% TWXA&E 0.827 0.818 1% A&E Networks (a)FX 0.775 0.915 -15% NWSAMTV 0.767 0.948 -19% VIABDiscovery 0.712 0.653 9% DISCA/K

(a) DIS 42.5% / Hearst 42.5% / CMCSA's NBCUni 15%

NBA & NCAA Helped TBS, but a Networks Need a Constant Lineup Refresh Lest Ratings Drop

11


Average Viewers in Primetime, 1Q12 (mm)Network 1Q12 1Q11 % Chg Owner

USA 3.00 3.16 -5% CMCSA/KDisney 2.40 2.61 -8% DISHistory 2.30 1.95 18% A&E Networks (a)ESPN 2.20 2.27 -3% DISTBS (b) 2.10 1.59 32% TWXTNT 1.90 2.11 -10% TWXFox News 1.80 1.82 -1% NWSAA&E Netwk 1.70 1.63 4% A&E Networks (a)Adult Swim 1.40 1.41 -1% TWXFX 1.40 1.67 -16% NWSA

(b) TBS was also #1 A18-49, +33%. #1 A18-34, +28%

12


Average Viewers Total Day, 1Q12 (mm)Network 1Q12 1Q11 % Chg Owner

Nickelodeon 1.80 2.37 -24% VIABDisney 1.60 1.67 -4% DISUSA 1.30 1.37 -5% CMCSA/KAdult Swim 1.30 1.37 -5% TWXCartoon Net 1.10 0.96 14% TWX

Consistent Measurement Quality Is Necessary, or “Ratings” Could Become Less Meaningful – The

Rentrak vs. Nielsen Debate

13

Recent Top Cable Network Share

Prime-time Avg Viewers (Live+SD) Wk Ending 4/8/12 Prime-time A18-49 Viewers (Live+SD) Total Day Average Viewers (Live+SD)PT Share of Top 25 Networks Share Top 25 Share Top 25 ShareAMCX 935 3.0% (4.7)% AMCX 366 2.7% 6.7 % AMCX 543 2.7% (12.6)%CMCSA 3,738 12.0% 2.0 % CMCSA 1,846 13.7% 8.7 % CMCSA 1,173 5.8% 1.6 %CRWN na na na CRWN na na na CRWN na na na DIS 5,648 18.1% 16.6 % DIS 2,008 14.9% 27.2 % DIS 3,038 14.9% 10.4 %A&E Nets (a) 4,218 13.5% 1.4 % A&E Nets (a) 1,901 14.2% 1.1 % A&E Nets (a) 2,094 10.3% 1.7 %DISCA 2,643 8.5% 40.1 % DISCA 936 7.0% 4.2 % DISCA 1,546 7.6% 43.8 %NFL na na na NFL na na na NFL na na na NWSA 3,165 10.1% (2.3)% NWSA 693 5.2% (35.4)% NWSA 1,758 8.6% (1.9)%SNI 2,336 7.5% 4.1 % SNI 994 7.4% 0.9 % SNI 1,269 6.2% (1.9)%TWX 5,157 16.5% (6.8)% TWX 2,515 18.7% (9.0)% TWX 4,275 21.0% 1.9 %VIAB 3,371 10.8% (36.6)% VIAB 2,173 16.2% (12.0)% VIAB 4,663 22.9% (12.8)%

31,211 100.0% (2.1)% 13,432 100.0% (1.9)% 20,359 100.0% 0.4 %

(a) DIS 42.5% / Hearst 42.5% / CMCSA's NBCUni 15%

Week-to-Week Slippage is Common, but Viacom Had a Particularly Challenging Time – Is it Programming or

Measurement?

14

Broadcast Ratings Also Challenged

Media Conglomerates w/Broadcasting Networks: Season-to-date Ratings vs. Stock PerformanceWeek 29 2011-12 TV Year ending 4/8/12 (Most Current DVR viewing = Live+7-day and Live+Same-day) Week 29 RankingsAn Adults 18-49 rating point = 1.279 mm of that demographic

Ranked by % Chg in Total Ranked by TotalA18-49 Rating Viewers Stock Pr A18-49 ViewersRating Y-O-Y avg (mm) 3-Mo Chg Rating avg (mm)

1 FOX (NWS/A) 3.2 (8)% 2 8.96 (0.4)% 1 CBS 2.5 10.26 2 CBS (CBS) 3.1 3 % 1 11.99 13.8 % 2 FOX 2.1 6.64 3 NBC (CMCSA as proxy) 2.6 8 % 4 7.59 9.5 % 3 ABC 1.8 7.72 4 ABC (DIS) 2.4 0 % 3 8.29 7.8 % 4 NBC 1.6 5.03 5 UNI (Televisa (TV) as proxy) 1.5 0 % 5 3.60 1.4 % 5 UNI 1.5 3.65

(Entravision (EVC) as proxy) (14.5)%6 CW (50/50 CBS/TWX) 0.8 (14)% 6 1.75 13.8 % 6 CW 0.4 0.99

13.6 42.2 9.9 34.3

15

Ad Growth Outlook for 2012

Ad Revenue Growth, By Segment: (a) 2009A 2010A 1Q11A 2Q11A 3Q11A 4Q11A 2011A 1Q12E 2012ETV Broadcasting (Stns & Nets) (11)% 11 % 1 % 4 % 2 % (6)% 2 % 5 % 13 %Cable TV Networks - Domestic 3 % 18 % 17 % 12 % 7 % 6 % 9 % 9 % 9 %Cable TV Networks - International 3 % 23 % 24 % 15 % 22 % 18 % 22 % 10 % 9 %Radio (21)% 9 % 4 % 4 % 0 % (5)% 1 % 1 % 2 %Outdoor-Domestic (17)% 5 % 6 % 6 % 4 % 0 % 4 % 6 % 7 %Outdoor-International (21)% 3 % 7 % 19 % 11 % 6 % 11 % (4)% 0 %Newspapers (15)% 9 % (2)% 1 % 1 % (9)% 1 % (7)% (4)%Publishing (magazines) (22)% 3 % 0 % 1 % (3)% 0 % (1)% (1)% 0 %Online (13)% (3)% 3 % 10 % 7 % 8 % 6 % 5 % 5 %

(a) among media companies covered by Miller Tabak + Co.

Political Ad Spending & Olympics Should Help Broadcasting, but Cable Networks Should Demonstrate

Consistently Leading Growth

16

OIBDA Growth Should Follow

OIBDA Growth, By Segment: (a) 2009A 2010A 1Q11A 2Q11A 3Q11A 4Q11A 2011A 1Q12E 2012ETV Broadcasting (Stns & Nets) (16)% 54 % 69 % 48 % (1)% (47)% 36 % 40 % 24 %Cable TV Networks - Domestic 16 % 20 % 14 % 10 % 8 % 12 % 11 % 9 % 7 %Cable TV Networks - International 16 % 21 % 18 % 31 % 20 % 7 % 18 % 12 % 13 %Radio (38)% 69 % 26 % 8 % (6)% (17)% (2)% 7 % 15 %Outdoor-Domestic (42)% 41 % 28 % 12 % 1 % 13 % 12 % 13 % 7 %Outdoor-International (40)% 62 % 41 % 35 % 15 % 11 % 22 % 14 % 8 %Newspapers (34)% 500 % (34)% 38 % (38)% (43)% (14)% (23)% 8 %Publishing (magazines) (50)% 34 % 16 % 6 % (15)% (7)% (3)% (1)% (3)%Online (14)% 3 % (3)% (4)% (14)% (6)% (13)% (6)% (2)%

(a) among media companies covered by Miller Tabak + Co.

17

Cable Network Margins Already Quite Strong

Cable Network Margins (incl Dom & Int'l Ad & Affil revenue)

20.0%

25.0%

30.0%

35.0%

40.0%

45.0%

50.0%

55.0%

60.0%

65.0%

2007 2008 2009 2010 2011 2012E 2013E 2014E 2015E 2016E

DISCA (dom. only)

SNI

DISCA VIAB

AMCX

DIS

NWSA

NBCUniversal (CMCSA)

TWX

18

ARPU Growth Necessary for Programming Cost Growth Far Above CPI

ARPU Growth

-15%

-10%

-5%

0%

5%

10%

15%

20%

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017


19

Residential Cable Revenue GrowthResidential Revenue Growth

0%

5%

10%

15%

20%

25%

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017


20

Ad Revenue Growth – Cyclical, but Cable Can Capture More

Advertising Revenue Growth

-30%

-20%

-10%

0%

10%

20%

30%

40%

50%

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017


21

Residential Revenue Driven by Market Exposure

Residential Revenue / HP / Year

$0

$200

$400

$600

$800

$1,000

$1,200

$1,400

$1,600

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017


22

Resi Revenue / Video SubResidential Revenue / Basic Video Scription / Yr

$500

$1,000

$1,500

$2,000

$2,500

$3,000

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017


23

Resi Margins – What Cost to Retain Subscribers?

Residential EBITDA Margin

25%

27%

29%

31%

33%

35%

37%

39%

41%

43%

45%

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017


24

Resi EBITDA GrowthResidential EBITDA Growth

-10%

0%

10%

20%

30%

40%

50%

60%

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017


25

Resi EBITDA / HP: A Bifurcation of Dense Markets vs. Overbuilder Model

Residential EBITDA / HP / Year

$50

$100

$150

$200

$250

$300

$350

$400

$450

$500

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017


26

Resi Video Revenue / HPResidential Video Revenue / HP / Year

$100

$200

$300

$400

$500

$600

$700

$800

$900

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017


27

Resi Broadband Revenue / HPResidential Broadband Revenue / HP

$50

$100

$150

$200

$250

$300

$350

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017


28

Resi Voice Revenue / HP: What is the Legacy Differentiator?

Residential Voice Revenue / HP

$0

$50

$100

$150

$200

$250

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017


29

Resi Video EBITDA / HPResidential Video EBITDA / HP

$0

$50

$100

$150

$200

$250

$300

$350

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017


30

Resi Broadband EBITDA / HPResidential Broadband EBITDA / HP

$20

$40

$60

$80

$100

$120

$140

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017


31

Resi Voice EBITDA / HPResidential Voice EBITDA / HP

$0

$10

$20

$30

$40

$50

$60

$70

$80

$90

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017


32

Resi Cap Ex Declines as Cheaper CPE is the Main Driver

Residential Cap Ex / HP

0

20

40

60

80

100

120

140

160

180

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017


33

Resi Cap Ex / Video Sub: Mature vs. Expanding Footprint

Residential Cap Ex / Basic Video Subscriber

$100

$150

$200

$250

$300

$350

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017


34

Commercial Revenue Growth: Still Young and Growing Strong

Commercial Revenue Growth

0%

10%

20%

30%

40%

50%

60%

2009 2010 2011 2012 2013 2014 2015 2016 2017


35

Commercial Revenue / RGU: Complexity of Client Counts

Commercial Revenue / RGU

$0

$500

$1,000

$1,500

$2,000

$2,500

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017


36

Commercial EBITDA Growth: Far Outpacing Resi for the Future

Commercial EBITDA Growth

-10%

0%

10%

20%

30%

40%

50%

60%

70%

2010 2011 2012 2013 2014 2015 2016 2017


37

Healthy Commercial Margins Depend on Density

Commercial EBITDA Margin

0%

10%

20%

30%

40%

50%

60%

70%

80%

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017


38

Commercial EBITDA / RGU: What Size Client Targeted?

Commercial EBITDA / RGU

0

100

200

300

400

500

600

700

800

900

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017


39

Commercial Cap Ex / RGU: Client Complexity Counts, Again

Commercial Cap Ex / RGU

$0

$100

$200

$300

$400

$500

$600

$700

$800

$900

2009 2010 2011 2012 2013 2014 2015 2016 2017


40

HSD Net Adds: Cable is Taking Share

High-Speed Data Subscriber Adds Since Q2:01Note: Cable and telcos had been adding similar amounts of price-sensitive,

slower-speed subs in 2007, but superior cable speeds have been winning even vs. the entry of similar-speed FiOS offerings.

-40%

-20%

0%

20%

40%

60%

80%

100%

120%

140%

6/30

/200

1

6/30

/200

2

6/30

/200

3

6/30

/200

4

6/30

/200

5

6/30

/200

6

6/30

/200

7

6/30

/200

8

6/30

/200

9

6/30

/201

0

6/30

/201

1

% N

et A

dd

Sh

are

-0.500

0.000

0.500

1.000

1.500

2.000

2.500

Net

Ad

ds

in m

illi

on

s

% Major Cablers % RBOCs Major Cablers' Modem Adds RBOCs' Adds

41

Digital Video Net Adds: The Sooner All-Digital, the Better

Digital Video Net Adds since Q2:01Note: Cable had led the share for 13 straight quarters until 4Q08

(Price Sensitivity, Fewer Moves = Less Opportunity to Add Connects)

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

6/30/20016/30/20026/30/20036/30/20046/30/20056/30/20066/30/20076/30/20086/30/20096/30/20106/30/2011

% N

et

Ad

d S

ha

re

-

0.200

0.400

0.600

0.800

1.000

1.200

1.400

1.600

1.800

2.000

Net

Add

s in

Mill

ions

% Major Cablers % Satellite & RBOCs Major Cablers' Adds Satellite & RBOCs' Adds

Beat the 7/1/07 FCC removable security set-top box deadline

42

Digital Voice Net Adds: Cable Still Taking Share with Bundle

Digital Voice Net Adds since Q1:04Note: Cable has clearly taken share directly from RBOCs, but so too

have other VoIP and Wireless providers; Wireless-only Substitution is Now a factor

(3.500)

(3.000)

(2.500)

(2.000)

(1.500)

(1.000)

(0.500)

0.000

0.500

1.000

1.500

2.000

3/31

/200

4

3/31

/200

5

3/31

/200

6

3/31

/200

7

3/31

/200

8

3/31

/200

9

3/31

/201

0

3/31

/201

1

% N

et

Ad

d S

ha

re

(2.500)

(2.000)

(1.500)

(1.000)

(0.500)

0.000

0.500

Net

Lo

sse

s in

Mill

ion

s

Major Cablers' Voice Adds RBOCs' Voice Adds Total Net Adds

43

HSD Becoming More Important than Video

Major Product Share/Penetration Projections

0.0%

10.0%

20.0%

30.0%

40.0%

50.0%

60.0%

70.0%

80.0%

90.0%

100.0%

2002

A

2003

A

2004

A

2005

A

2006

A

2007

A

2008

A

2009

A

2010

A

2011

E

2012

E

2013

E

2014

E

2015

E

2016

E

As of Year End

% o

f Tot

al P

rodu

ct P

enet

ratio

n

Traditional Telephony

Cable Video

Satellite Video

Cable HSD

Telco HSD

Cable Telephony

RBOCVideo

44

Cable Can Monetize Its Avails Better With or Without Canoe

Major US MSOs Ad Revenue

-

1,000

2,000

3,000

4,000

5,000

6,000

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011E 2012E 2013E 2014E 2015E 2016E

$ i

n m

illio

ns

45

Free Cash Flow is ImprovingCable Industry - Multiple System Operators (MSOs)Free Cash Flow Breakeven Analysis - $ in millionsMiller Tabak + Co. estimates as of: 3/5/2012

US Public Private Private Private PrivateCVC (c) CHTR CMCSA (b) KNOL TWC (a) Totals COX MCCC RCNI Cequel

2011AEBITDA 2,294 2,675 18,458 187 7,226 30,840 4,240 607 240 707 Cap Ex 815 1,311 4,873 99 2,937 10,035 922 269 139 368 Int. Exp., Taxes, WC 896 880 5,783 34 1,543 9,136 573 212 38 247 Free Cash Flow 583 484 7,802 54 2,746 11,669 2,745 125 63 91

Return on 4Q11E Capital 11.4% 3.7% 9.1% 7.7% 9.4% na 3.8% 8.1% 11.7%2012EEBITDA 2,260 2,819 19,425 199 7,746 32,449 4,240 640 256 749 Cap Ex 832 1,453 4,835 96 3,028 10,244 941 275 142 377 Int. Exp., Taxes, WC 868 780 6,862 45 2,645 11,200 573 204 38 247 Free Cash Flow 559 586 7,728 59 2,073 11,005 2,726 161 76 124

Return on 4Q12E Capital 11.0% 4.4% 9.1% 8.4% 7.1% na 4.9% 9.7% 15.9%2013EEBITDA 2,379 3,018 20,876 213 8,365 34,851 4,240 679 274 801 Cap Ex 670 1,243 4,680 97 3,172 9,862 906 265 142 387 Int. Exp., Taxes, WC 907 714 7,087 64 3,208 11,980 573 204 38 247 Free Cash Flow 803 1,061 9,109 52 1,985 13,009 2,761 210 94 167

Return on 4Q13E Capital 15.8% 8.0% 10.7% 7.4% 6.8% na 6.3% 12.0% 21.4%

(a) Pro forma for unwinding of TWE/A-N partnership, the Adelphia and Comcast acquisitions.

(b) Includes content (cable channel) results, Adelphia, Time Warner, Insight and NBC Universal ('11+) acquisitions.

(c) 2011+ excludes AMCX for the spin.

Return on Capital = FCF/ (most recent qrtr Net Debt + Book Equity)

46

Public Cable Operators: Increasingly a Scale Business

Cable Industry - Multiple Systems Operators (MSOs)Miller Tabak + Co. LLCValuation - Figures in Dollars Cable-

Price MT Target Net Debt Market Total Only Ent. EnterpriseRating 4/20/12 ST Targ. Apprec. ($mm) Cap Cap Value Value

Larger-Market Cable Television Peers (U.S.)Cablevision Systems Corp. CVC Buy 13.78 18$ 31% (10,547) 3,835 14,994 14,382 14,382Charter Comm., Inc. CHTR Buy 61.78 76$ 23% (12,827) 7,222 20,078 20,049 20,049

Comcast Corp. (incl NBCU) CMCSA,K Buy 29.46 35$ 19% (37,689) 80,750 120,059 99,123 118,439Knology, Inc. KNOL Neutral 19.43 19.75$ 2% (679) 760 1,527 1,438 1,438Time Warner Cable TWC Buy 81.96 90$ 10% (21,565) 26,473 53,215 47,264 48,038Average (US Publicly Traded MSOs)

47

Public MSOs: Moderate Leverage, Attractive FCF Multiples

Debt/12E '12E Tot '12E '12E '12E '12E '12EDebt / Cable OIBDA Free FCF FCF FCF/ FCF/

Total Cap OIBDA Coverage Csh Flw Yield Mult Share Net DebtCable Television Peers (U.S.)Cablevision Systems Corp. 74% 4.6 x 3.1 x 583 15.2% 6.6 x 2.09$ 5.5%Charter Comm., Inc. 64% 4.6 x 3.0 x 484 6.7% 14.9 x 4.14$ 3.8%

Comcast Corp. (incl NBCU) 33% 2.5 x 7.8 x 7,802 9.7% 10.3 x 2.85$ 20.7%Knology, Inc. 50% 3.8 x 5.4 x 54 7.1% 14.0 x 1.38$ 8.0%Time Warner Cable, Inc. 50% 3.5 x 4.7 x 2,746 10.4% 9.6 x 8.50$ 12.7%Average (US Publicly Traded MSOs)54.3% 3.8 x 4.8 x 9.8% 11.1 x 3.79$ 10.1%

48

Recent Revenue History and Estimates, Public & Private

Cable Industry - Multiple Systems Operators (MSOs)Valuation - Figures in $mm

2008A 2008A 2009A 2010A 2011A 2011A 2012E 2012E 2013E 2013ECable Television Peers (U.S.) total cable cable cable total cable total cable total cableCablevision Systems Corp. 7,230 5,165 5,432 5,736 6,701 6,286 6,885 6,458 7,244 6,795 Charter Comm., Inc. 6,479 6,479 6,754 7,003 7,204 7,204 7,482 7,482 7,903 7,903

Comcast Corp. (incl NBCU) 34,256 32,443 33,742 35,762 57,661 37,226 62,286 39,763 65,954 42,647 Knology, Inc. 410 410 426 460 519 519 543 543 568 568 Time Warner Cable (w/Insight '12+)17,200 17,200 17,868 18,868 19,675 19,675 21,342 21,342 22,659 22,659

US Average Growth 9.9% 9.5% 4.1% 5.6% 28.3% 4.5% 7.4% 6.6% 5.9% 6.6%RCN Corp. (private) 739 739 764 783 831 831 869 869 913 913 Mediacom (private) 1,402 1,402 1,458 1,499 1,550 1,550 2,325 2,325 2,442 2,442 Cequel (Suddenlink) (private) 1,579 1,579 1,689 1,692 1,901 1,901 1,996 1,996 2,096 2,096 Insight Comm. Co. 917 917 981 1,053 1,075 1,075 now in TWC

Revenue ($mm)Cable Only

49

Recent OIBDA History and Estimates, Public & Private

Cable Industry - Multiple Systems Operators (MSOs)Valuation - Figures in $mm

2008A 2009A 2010A 2010A 2011A 2011A 2012E 2012E 2013E 2013Ecable cable total cable total cable total cable total cable

Cablevision Systems Corp. 2,036 2,228 2,581 2,358 2,294 2,496 2,260 2,434 2,379 2,526 Charter Comm., Inc. 2,319 2,493 2,587 2,587 2,675 2,675 2,819 2,819 3,018 3,018

Comcast Corp. (incl NBCU) 13,170 13,695 14,596 14,561 18,458 15,288 19,425 15,985 20,876 17,042 Knology, Inc. 137 145 159 159 187 187 199 199 213 213 Time Warner Cable (w/Insight '12+) 6,187 6,489 6,875 6,875 7,226 7,226 7,746 7,746 8,365 8,365

US Average Margins 38.7% 39.0% 39.1% 39.3% 38.6% 38.7% US Average Growth 9.8% 5.0% 6.0% 5.0% 4.7% 6.8%RCN Corp. 194 219 220 220 240 240 256 256 274 274 Mediacom 512 542 548 548 607 607 640 640 679 679 Cequel (Suddenlink) (private) 524 561 617 617 707 707 749 749 801 801 Insight Comm. Co. 280 310 344 344 356 356 now in TWC

OIBDA ($mm)Cable Only

50

Cable OIBDA Multiples Below Growth Parity = Upside

Grwth Cable OIBDA2007A 2008A 2009A 2010E 2011E 2012E 2013E Rate Subs EV/Sub Per Sub ('12)

CVC 7.9 x 7.1 x 6.5 x 6.1 x 5.8 x 5.9 x 5.7 x 4.7% 3.3 4,425 749$ CHTR 9.5 x 8.6 x 8.0 x 7.7 x 7.5 x 7.1 x 6.6 x 7.0% 4.3 4,633 652

CMCSA,K 8.3 x 7.5 x 7.2 x 6.8 x 6.5 x 6.2 x 5.8 x 6.4% 22.3 4,435 715 KNOL 13.6 x 10.5 x 9.9 x 9.0 x 7.7 x 7.2 x 6.8 x 7.6% 0.3 5,602 776 TWC 8.2 x 7.6 x 7.3 x 6.9 x 6.5 x 6.1 x 5.7 x 7.4% 12.1 3,919 642

EV/ OIBDACable Only

Basic Cable

mm

12/31/2011

51

1Q12E Net Add Expectations

Cable Industry - Multiple Systems Operators (MSOs)Miller Tabak + Co., LLC1Q12E Subscriber Net Adds Vs. 1Q11

% % % Reporting: 1Q11A 1Q12E Chg 1Q11A 1Q12E Chg 1Q11A 1Q12E Chg 1Q11A 1Q12E

Cablevision Systems CVC (8) (7) 13% 12 26 117% 32 26 -19% 40 32 Charter Comm., Inc. CHTR (24) (21) 13% 28 6 -79% 92 79 -14% 29 28 Comcast Corp. CMCSA,K (39) (16) 59% 301 390 30% 496 422 -15% 260 228 Knology, Inc. KNOL (0.6) 0.4 167% 5.3 3.9 -26% 5.2 3.6 -31% 2.1 2.4 Time Warner Cable (& New Wave) TWC (137) (130) 5% 361 136 -62% 814 99 -88% 415 53 Average (US Publicly Traded MSOs) (208) (174) 17% 708 562 -21% 1,439 630 -56% 746 343

Mediacom private (65) (10) 85% 15 5 -68% 189 2 -99% 84 1 Suddenlink private (4) (8) -100% 10 18 80% 20 15 -25% 17 10 Other NCTC operators, est. 7,136 (93) (24)

(370) (215) 1Q11A Est: Actual Diffrnc Est: Est:

DirecTV DTV 110 20 -82% - DISH Network DISH 40 15 -63% - |DSL Losses: (1,908) 67 AT&T T 218 190 -13% - - 300 - - (500) Verizon VZ 192 160 -17% - - 200 - - (400)

560 385 |DSL Losses: (103) - 132 Industry adds (loss) 170 0.1% of total TV homes

Total TV households (Nielsen est.) 114,600

Basic Net Adds Dig. Vid. Net Adds Tot. HSD Net Adds Dig. Voice Net Adds

52

1Q12E Net Add Expectations

Cable Industry - Multiple Systems Operators (MSOs)Miller Tabak + Co., LLC1Q12E Subscriber Net Adds Vs. 1Q11

2012E% Cap Ex

1Q11A 1Q12E Chg 1Q11A 1Q12E Grwth (bp) % of RevCVC 76 77 1% 10.0% -2.7% (1,397) 12.9%CHTR 125 92 -26% 4.7% 4.9% 22 19.4%CMCSA,K 939 1,024 9% 7.7% 4.1% (396) 12.0%KNOL 12.0 10 -14% 11.4% 6.7% (517) 17.6%TWC 1,374 158 -89% 7.5% 4.9% (284) 18.6%Avg. 2,526 1,361 -46% 8.3% 3.6% (514) 16.1%

Mediacom 223 (2) -101% 0.7% 4.9% 462 21.5%Suddenlink 43 35 -19% 10.0% 7.0% (330) 15.0%

Est.DTV 110 20 -82% 8.0%DISH 40 15 -63% 9.0%

Total RGU Net Adds OIBDA Growth

53

Primary US Cable Operators 4Q11 Operating StatisticsPublic acq 2/29/12

Miller Tabak + Co. Buy Buy Buy Neutral Buy U.S. Peer private by TWC privateEquity Research CVC CHTR CMCSA/K KNOL TWC TOTAL MCCC ICCI Suddenlink (Cebridge)2011 (in millions) Data As Of: 12/31/11 12/31/11 12/31/11 12/31/11 12/31/11 12/31/11 12/31/11 12/31/11 12/31/11Capital Expenditures 2009A 810.3 1,134.0 5,117.0 55.9 3,231.0 10,348.2 236.7 169.3 247.4 Capital Expenditures 2010A 840.5 1,208.6 4,961.0 76.8 2,930.0 10,017.0 237.4 191.1 354.1 Capital Expenditures 2011A 815.0 1,311.0 4,873.0 98.9 2,937.0 10,034.9 269.2 185.7 368.0 Capital Expenditures 2012E 832.0 1,453.0 4,835.0 95.6 3,028.0 10,243.6 274.8 190.3 377.2 Capital Expenditures 2013E 670.0 1,243.0 4,680.0 97.0 3,172.0 9,862.0 264.6 195.1 386.7 2011A Free Cash Flow / Sub 179$ 112$ 349$ 211$ 228$ 225$ 117$ 130$ 73$ 2012E Free Cash Flow / Sub 172$ 135$ 346$ 229$ 172$ 221$ 151$ na 99$ Homes Passed (HP) 5.584 11.960 52.544 1.192 27.904 99.2 2.810 1.344 2.899 '12E Cap ex / HP 149$ 121$ 92$ 80$ 109$ 112$ 98$ 142$ 130$ Homes Upgraded (HU) for Digital 5.361 11.960 52.544 1.087 27.904 98.9 2.803 1.330 2.899 Net Adds for the Quarter 0.012 0.032 0.159 0.006 7.179 7.4 (0.000) 0.006 % HU for Digital 96% 100% 100% 91% 77% 100% 100% 99% 100%HU for Internet 5.361 11.634 52.544 1.087 27.814 98.4 2.803 1.328 2.899 Net Adds for the Quarter 0.012 0.032 0.159 0.006 0.270 0.479 (0.000) 0.012 % HU for Internet 96% 97% 100% 91% 100% 99% 100% 99% 97%HU for Telephony 5.361 10.871 52.544 1.087 27.381 97.2 2.654 1.322 2.899 Net Adds for the Quarter 0.012 0.022 0.159 0.006 0.267 0.466 - 0.001 % HU for Telephony 96% 91% 100% 91% 98% 98% 94% 98% 90%Basic Video Customers (Basic Subs) 3.250 4.325 22.343 0.257 12.061 42.2 1.069 0.670 1.252 Net Adds for the Quarter (0.014) (0.046) (0.017) (0.001) (0.048) (0.126) (0.031) (0.010) (0.016) Video Penetration (of HP) 58% 36% 43% 22% 43% 43% 38% 50% 43%Estimated Share of MVPD Market 4% 5% 25% 0% 14% 48% 1% 1% 1%Digital Customers 3.177 4.325 20.556 0.156 9.227 37.4 0.718 0.646 0.767 Net Adds for the Quarter 0.023 0.924 0.301 0.007 0.145 1.400 0.015 (0.004) 0.014 Digital Penetration (of HP) 57% 36% 39% 13% 33% 38% 26% 48% 26%Digital Penetration (of HU) 59% 36% 39% 14% 33% 38% 26% 49% 26%Digital Penetration (of Basic Subs) 98% 100% 92% 61% 77% 89% 67% 96% 71%Internet Customers 2.969 3.655 18.147 0.262 10.344 35.4 0.851 0.550 0.999 Net Adds for the Quarter 0.020 0.075 0.336 0.003 0.177 0.611 0.001 0.006 0.015 Internet Penetration (of HP) 53% 31% 35% 22% 37% 36% 30% 41% 34%Internet Penetration (of HU) 55% 31% 35% 24% 37% 36% 30% 41% 34%Internet Penetration (of Basic Subs) 91% 85% 81% 102% 86% 84% 80% 82% 80%Telephony Customers 3.022 1.870 9.342 0.277 4.707 19.2 0.339 0.290 0.457 Net Adds for the Quarter 0.038 0.032 0.146 0.000 0.077 0.293 0.001 (0.003) 0.014 Telephony Penetration (of HP) 54% 16% 18% 23% 17% 19% 12% 22% 16%Telephony Penetration (of HU) 56% 17% 18% 25% 17% 20% 13% 22% 16%Telephony Penetration (of Basic Subs) 93% 43% 42% 108% 39% 46% 32% 43% 36%Total RGUs 12.418 14.175 70.388 0.951 36.339 134.3 2.977 2.156 3.475 OCF/Customer $65.20 $52.87 $58.77 $60.12 $52.21 $57.83 $47.87 $45.37 $188.11EBITDA Margin 42.2% 37.4% 41.6% 35.8% 37.8% 39.0% 39.7% 33.8% 37.2%Avg Mthly Rev / Basic Customer 154.10$ 140.69$ 141.24$ 131.33$ 133.20$ 140.11$ 118.70$ 133.60$ 119.68$

54

Disclosures• REGULATION ANALYST CERTIFICATION

• I, David C. Joyce, CFA, hereby certify that the views expressed in this research report accurately reflect my personal views about the subject company and its securities. I also certify that I have not been, and will not be receiving, direct or indirect compensation in exchange for expressing the specific recommendation in this report.

• IMPORTANT DISCLOSURES• Historical price data designating ratings changes and/or price targets for all covered stocks mentioned in this report is available upon request.

• Miller Tabak + Co., LLC is a registered market maker in the following securities: No companies mentioned in this report.

• The analyst does not have equity positions in any of the stocks mentioned.

• No individual at Miller Tabak + Co., LLC holds a position on the board of directors of a covered company, nor does an individual at a covered company do so at Miller Tabak + Co., LLC. Miller Tabak + Co., LLC does not own one percent or more of the outstanding shares of the company discussed in this report.

• Ratings Distribution—Media, as of April 23, 2012

• Coverage Universe # / % Total Expected Total Return for One Year• Buy 15 65% Buy = 15% or more• Hold 8 35% Hold = + or - 15%• Sell 0 0% Sell = -15% or more

• OTHER DISCLOSURES

• Although the information contained in this report (not including disclosures contained herein) has been obtained from sources we believe to be reliable, the accuracy and completeness of such information and the opinions expressed herein cannot be guaranteed.

• This report is for informational purposes only and under no circumstances is it to be construed as an offer to sell, or a solicitation to buy, any security. Any recommendation contained in this report may not be appropriate for all investors. Trading options is not suitable for all investors and may involve risk of loss. An options disclosure document may be obtained from Mr. Jay Stenberg, Chief Compliance Officer, Miller Tabak + Co., LLC, 331 Madison Avenue, New York, NY 10017.

• ©2012 Miller Tabak + Co., LLC, All Rights Reserved. Member SIPC. Member NYSE, NYSE Arca, FINRA, CBOE, PHLX, ISE, NFA. www.millertabak.com

• Additional information is available upon request.

Documents

Cable Operators Ought Not Be Afraid of OTT A Financial View of the Content & Distribution Businesses David C. Joyce, CFA Miller Tabak + Co., LLC [email protected]