OOH ONLY MEDIUM GROWING SHARE OTHER THAN DIGITAL

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1 OOH ONLY MEDIUM GROWING SHARE OTHER THAN DIGITAL The World of Linear TV and Radio Advertising Will Be Over Mark May 9, 2018

2 PJ SOLOMON FIRM AND APPROACH Founded in 1989 We are an independently operated investment bank with proprietary access to research, financial capabilities and international coverage available through our parent company Natixis. We advise on mergers, acquisitions, divestitures, restructurings, recapitalizations, capital markets solutions and activism defense across a range of industries Our principal shareholder, Natixis, is part of Groupe BPCE, a top European and global bank 85 EMPLOYEES 21 MANAGING DIRECTORS 63 INVESTMENT BANKERS 8 SENIOR ADVISORS 1

3 MEDIA SERVICES Overview and Areas of Focus We advise clients in the following areas: Global Out of Home Media Global Retail Tech / In-Store Media Background Music Smart Cities / Urban Infrastructure Back-Office Software In-Store Media and Tech Classic Out of Home Advertising Sports / Stadium Marketing Digital Menu Boards Kiosk Solutions Digital Out of Home Point of Care Media Transit Media Digital Signage and Interactive Displays E-Commerce Platforms Payments Retail Analytics 2

4 AS FACEBOOK AND GOOGLE TAKE ALL NEW AD SPEND Facebook Google Rest of Market UNITED STATES AD MARKET, ($ BILLIONS) / 5.7% CAGR $5 $8 $27 $31 $143 $144 FB / Google Market Share: 18% 21% $12 $18 $37 $44 $145 $146 FB / Google Market Share: 26% 30% 3

5 MOBILE / DIGITAL AND OOH ONLY FORMATS PROJECTED TO GROW IN NEXT FIVE YEARS (Amounts in Billions) $180 $ $ $ $70 $68 $61 Traditional Media Categories 40 $30 $ Yr Compound Growth Rate ( 17-22): $12 $11 $6 $6 Television Mobile + Other Digital = Total Digital Newspaper Magazine Radio Directories (1%) 17% 6% 14% (13%) (10%) 0% $14 $15 $2 (17%) $1 $8 $9 OOH Digital OOH: 4% DOOH: 10% Why are traditional media channels declining? Source: Wall Street research. 4

6 TODAY S YOUNG ADULT (THE FABLED MILLENNIAL ) Takes a lot of selfies and pictures of food Love experiences not things Often lives at home with parents well into their 20s TRENDS OF THE MILLENNIAL Has short attention span (similar to that of ADHD) Doesn t like to spend money (if they even have any) Source: Wells Fargo Securities. 5

7 CONTENT STREAMING SAVING MILLENNIALS AND GEN Z FROM SIGNIFICANT EXPOSURE TO COMMERCIALS One Hour of Television Contains Average Child Watches 76% Content 24% Commercials 980 hours of TV per year 230+ hours of commercials avoided in Streaming only homes Source: Exstreamist. 6

8 Number of Hours HOW CONSUMERS SPEND THEIR TIME Digital Media TV Radio Print hrs hrs hrs hrs hrs 1.1 hrs 1.4 hrs 0.4 hrs Source: emarketer. Digital Media Print Radio TV 7

9 TRADITIONAL MEDIA IS DYING Television: No more appointment programming due to Netflix and other OTT options Time spent with television continues to decrease annually Cable: Consumers are cutting the cord Household penetration of cable TV fell below 80% in November 2017, the lowest figure in 15 years Newspapers: Consumers are moving nearly entirely to digital formats Weekday circulation has fallen below 40mm, from highs of 60+mm in the 80s and 90s Radio: Traditional consumption has held up despite the proliferation of Spotify, Pandora, itunes, and Amazon Growth in terrestrial radio is gone and should start declining Source: Publicly available information and Wells Fargo Securities. 8

10 MAJOR TV EVENT AUDIENCES STAGNATING OR FALLING (Amounts in Millions of TV Viewers) 2010 Total: 174 million 2018 Total: 149 million 120 8% % 20% Super Bowl Oscars Grammys Source: Publicly available information. 25 million Viewers Lost in Media Fragmentation and Changing Tastes for Content 9

11 AND RISING CPMs FOR MAJOR TV EVENTS (Amounts in Dollars per Thousand Viewers) $100 $ $ $33.57 $ $27.93 $ Super Bowl Oscars Grammys Source: Publicly available information. 10

12 Pay TV Households in the United States PAY TV HOUSEHOLDS SLOWLY DISINTEGRATING Consumers opting out of traditional TV advertising for Netflix, Hulu and other ad-free or adblockable options (Amounts in Millions) A 2015A 2016A 2017A 2018A 2019A 2020E Source: emarketer. 11

13 Total Circulation (Weekday) for U.S. Newspapers NEWSPAPER CIRCULATION DECLINING Includes print circulation and digital subscriptions (Amounts in Millions) million Declines Accelerating (22% since 2011) million Source: Pew Research Center. 12

14 RADIO AUDIENCES HAVE STAGNATED 94% Radio Listners as % of Population 93% 92% 91% 92% 90% 2012A 2013A 2014A 2015A 2016A 2017A 2018E 2019E 2020E % of Population Radio maintaining audiences likely due to satellite radio listeners, not AM/FM radio Note: Represents ages 18+ who listen to radio at least once per month; includes terrestrial AM/FM radio and satellite radio; excludes digital. Source: emarketer. 13

15 Year over Year Growth IT S NOT ALL ROSES FOR OOH COMING OUT OF THE RECESSION, OUT OF HOME GROWTH OUTPACED GDP AT TIMES 9% 6% 3% -- (3%) (6%) (9%) (12%) 2009A 2010A 2011A 2012A 2013A 2014A 2015A 2016A 2017A OOH Advertising Spend Nominal GDP Source: MAGNA and Wells Fargo Securities, LLC. 14

16 Year over Year Growth HOWEVER, IT HAS LAGGED GDP GROWTH SIGNIFICANTLY IN THE LAST 18 MONTHS AND WE EXPECT IT TO CONTINUE TO LAG GDP GROWTH 6% 5% 4% 3% 2% 1% E 2019E 2020E 2021E 2022E 2023E OOH Advertising Spend Nominal GDP Source: MAGNA and Wells Fargo Securities, LLC estimates. 15

17 Year Over Year Growth LOCAL HAS LAGGED NATIONAL BY ~670BPS AND GDP BY ~560BPS 10% 5% -- (5%) (10%) (15%) (20%) (25%) 2009A 2010A 2011A 2012A 2013A 2014A 2015A 2016A 2017A Local Advertising National Advertising Nominal GDP Source: MAGNA and Wells Fargo Securities, LLC. 16

18 Year Over Year Growth WE ESTIMATE LOCAL WILL LAG NATIONAL AND GDP BY 600BPS+ 7% 6% 5% 4% 3% 2% 1% -- (1%) (2%) (3%) 2018E 2019E 2020E 2021E 2022E 2023E Local Advertising National Advertising Nominal GDP Source: MAGNA and Wells Fargo Securities, LLC estimates. 17

19 MEDIA AND TECHNOLOGY COMPANIES INVEST IN OOH OOH allocation for media and technology companies exceeds average spend by top 100 advertisers (~2.5% of total) SELECT MEDIA BRANDS % SPEND ON OOH (Amount in Millions) 6.7% Average OOH OOH Spend Spend 6.1% 6.0% 5.3% 4.4% 4.0% Paramount Pictures Walt Disney Universal Pictures Warner Bros Pictures 20th Century Fox Pictures Sony Pictures SELECT TECHNOLOGY BRANDS % SPEND ON OOH (Amount in Millions) 9.0% 9.0% Average Average OOH OOH Spend Spend 6.7% 4.4% 4.4% 3.1% Google Apple Dell Amazon Microsoft Samsung Source: PJ SOLOMON Wall Street research, Kantar Media, OAAA. 18

20 POSITIVES FOR OUT OF HOME Limited competition and ability to aggregate an audience No OTT companies, no ad-blocking users cannot opt out Digital and mobile adding growth, but slowing down and has own challenges Potential M&A Overindexed by top brands indicative of underlying ROI? Source: Wells Fargo Securities. 19

21 NEGATIVES FOR OUT OF HOME Little revenue growth Secular? Need for next big thing once digital penetration stabilizes Potential for cannibalization Autonomous vehicles present potential long term risk (but only in the long term) Market perspective stretched balance sheets especially CCO Still difficult to prove out ROI, but companies are getting there Source: Wells Fargo Securities. 20

22 OOH GAINING FAVOR Out of home is becoming more versatile... It's growing share in 2018, 6.3% of measured advertising, we think, the highest it's been since 1993 and the only medium growing share other than digital. - WPP, Q Earnings Call 21

23 CONCLUSIONS Digital currently taking all new ad spend, but might it take more? The music has stopped (other than streaming!): a reckoning is coming for traditional media formats Print, TV, and radio ad spend are stagnating or contracting, with declines likely to accelerate Audiences are shrinking as consumers spend more and more time online, less time with traditional formats With continued investment in tech, OOH is positioned to grow share and spend in the face of these other media channel declines Consumers spending more time mobile and on the go Can not be avoided Audience-selling and attribution will be key for future growth 22

24 DISCLAIMER This document is a marketing presentation. It has been prepared by personnel of PJ SOLOMON or its affiliates and not by Natixis research department. It is not investment research or a research recommendation and is not intended to constitute a sufficient basis upon which to make an investment decision. This material is provided for information purposes, is intended for your use only and does not constitute an invitation or offer to subscribe for or purchase any of the products or services mentioned. Any pricing information provided is indicative only and does not represent a level at which an actual trade could be executed. Natixis may trade as principal or have proprietary positions in securities or other financial instruments that are the subject of this material. It is intended only to provide observations and views of the said personnel, which may be different from, or inconsistent with, the observations and views of Natixis analysts or other Natixis sales and/or trading personnel, or the proprietary positions of Natixis. Observations and views of the writer may change at any time without notice. This presentation may contain forward-looking statements and comments relating to the objectives and strategy of PJ SOLOMON. Any such projections inherently depend on assumptions, project considerations, objectives and expectations linked to future events, transactions, products and services as well as on suppositions regarding future performance and synergies. Certain information in this presentation relating to parties other than PJ SOLOMON or taken from external sources has not been subject to independent verification, and PJ SOLOMON makes no warranty as to the accuracy, fairness or completeness of the information or opinions in this presentation. Neither PJ SOLOMON nor its representatives shall be liable for any errors or omissions or for any harm resulting from the use of this presentation, the content of this presentation, or any document or information referred to in this presentation. Nothing in this presentation constitutes investment, legal, accounting or tax advice, or a representation that any investment or strategy is suitable or appropriate to your individual circumstances. Each individual or entity who receives this document or participates in any future transaction shall be responsible for obtaining all such advice as it thinks appropriate on such matters and shall be responsible for making its own independent investigation and appraisal of the risks, benefits and suitability of the transactions as to itself. Any discussions of past performance should not be taken as an indication of future results, and no representation, expressed or implied, is made regarding future results. No person shall have any liability whatsoever (in negligence or otherwise) for any loss arising from any use of this document or its contents or otherwise arising in connection with this document or any other written or oral communications transmitted to the recipient in relation hereto. PJ SOLOMON and/or its affiliates, officers, directors and employees, including persons involved in the preparation or issuance of this material, may, from time to time, have long or short positions in, and buy or sell, the securities or derivatives mentioned in this material. The information contained herein may be based in part on hypothetical assumptions and for certain models, past performance. These assumptions have certain inherent limitations, and will be affected by any changes in the structure or assets for this transaction. This material is confidential and any redistribution is prohibited. PJ SOLOMON is not responsible for any unauthorized redistribution. 23