SCE 093 Twentieth Century Fox

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Good afternoon. I’d like to take you thru just a few slides to explain how we’re trying to
create digital ecosystems to stimulate ownership of our content
We know that media consumption is going digital, hi def, to all screens small and large,
and offering instant access to content.
What we don’t know is whether consumers will continue to want to own the media
experience (what we call sell-through) or merely to rent or subscribe to it through
streaming services. The sell-through business model accounts for the large majority of
the revenue and profit of any given film, meaning that the success of the movie industry
depends heavily on persuading consumers to want to own content.
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And there are many options today that compete for our entertainment time and money.
On this chart, we can see how many consumers are engaging in social networks and
using the internet to stream movies and TV shows: about 3M consumers of the
Netflix/Lovefilm streaming service, 40M annual Paid transactions of On demand VOD ,
and of course hundreds of millions to billions of video streams and social network
participants globally.
Consumers in the UK also have invested in a wide array of technology products, many of
which can be used to watch our content, much of which is transitioning to various digital
formats. And this device penetration, which is as high in the UK as anywhere in the
world, creates a significant amount of consumer demand for content.
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indeed this device penetration in the UK is rather impressive, essentially matching that
of the US for many device classes and certainly exceeding France and Germany, two
markets by contrast that have extensive private copy regimes.
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To capture the consumers’ attention with digital products, we need to understand
what’s good and what needs to be improved for consumers to invest their hard earned
time and money. What’s good is mobility—using the Cloud to watch whenever you want
and wherever you want and even to share digital content, but it’s still not easy enough
to buy content in the first place and get it to the big screen TVs that people are buying in
ever greater numbers. And there remain concerns about the safety and privacy of
information stored in the Cloud and not in our own homes on our own devices.
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Since our success depends on satisfying new consumer demands, particularly with
respect to sell-through content, we’ve seen an evolution of technologies that give
consumers what they’re asking for with digital content, including with respect to
additional copies of the purchased content.
Since 2008 in the UK we’ve provided digital copies, or the means to quickly transfer a
lower-resolution copy of the movie from a disc they’ve purchased to their computers
and portable devices. E-Copy, starting in 2011, gave another option to download copies
over the Internet to these devices.
UltraViolet, now in half a million UK households, stimulates digital purchase by allowing
consumers to stream content they own to any device at home or on the road as well as
to make copies on up to 12 owned devices and to share with up to 5 family members.
This content will be available through many UK retailers in the near future.
And our newest venture, Phenix, which will continuously improve the entire digital
experience by giving the best quality experience in the home on the large screen TV but
also easily watching or copying content on the consumer’s portable devices. As simple
as buy the content, hit play and instantly watch the highest quality movie possible,
behaviors the consumer has come to enjoy over the past several decades.
UV together with Phenix takes advantage of the best consumer experiences with the
Cloud and with the latest developments in device technology, thus stimulating takeup/sales of each.
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We are hopeful that the end result of all our efforts to enhance the sell-through
experience will be that consumers want to buy our content. But there is a substantial risk
that they will prefer to rent or subscribe to it instead.
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And this is how we quantify these opportunities vs. risks. On this last slide we have two
perspectives on how consumer spending will play out over time depending on how
successful our digital initiatives become. I should add that neither scenario takes
account of the negative impact of a new private copy exception.
This first perspective is the forecast for the UK that extends recent trends without
substantial consumer take-up of the digital programs we just reviewed. In this scenario,
we’d expect the continued decline of consumers buying our content on disc formats or
simply not beginning to buy electronically, which you see below the black dividing line
here. These declines would exceed 10% per year. Instead, the ownership behavior of
the past would be substituted in large fashion by lower cost rental or subscription
options, primarily VOD and streaming services, which you see in the top 2 bars.
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And this is how we quantify that interest. On this last slide we have two perspectives
on how consumer spending will play out over time depending on how successful our
digital initiatives become. I should add that neither scenario takes account of the
negative impact of a new private copy exception.
This first perspective is the forecast for the UK that extends recent trends without
substantial consumer take-up of the digital programs we just reviewed. In this scenario,
we’d expect the continued decline of consumers buying our content on disc formats or
simply not beginning to buy electronically. These declines would exceed 10% per year.
Instead, the ownership behavior of the past would be substituted in large fashion by
lower cost rental or subscription options, primarily VOD and streaming services.
On the right is the much more favorable scenario if we can persuade large numbers of
UK consumers to take up the digital ecosystems we outlined, with all their flexible usage
rights and extra features, including with respect to additional copies. Now we see
tremendous growth in total below the black line—consumers buying our content largely
driven by digital ownership. Although we would still face long-term challenges, we
would at least see our industry return to growth in the UK.
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