The power of television Capital Markets Day October 13, 2016 Keynote Thomas Ebeling
Our Vision Become a leading international Omnichannel Entertainment & Commerce Brand Powerhouse Our Mission Delight, inspire and support consumers with our Entertainment and Commerce products 2
Combining Entertainment and Commerce is our unique advantage Entertainment Pushing digital commerce assets with TV maximizes the value of our idle ad inventory and results in tangible TV synergies Combining transactional commerce data and TV usage data enables superior targeted advertising products Commerce 3
We introduce new strategies to leverage this unmatched position... Ad Sales Broadcasting Content Production Digital Entertainment Digital Ventures & Commerce Push new innovative and targeted sales offerings Expand channel and genre portfolio Build (Digital) Content Ecosystem Grow Digital Entertainment businesses internationally Build Lifestyle Commerce Ecosystem and leading verticals 4
Group Entertainment & Commerce Content Ad Sales and these strategies will allow us to significantly create value We will create value by Maximizing the value of our ad inventory Increasing loyalty of our ad customers driven by our own commerce platforms by providing data/consumer insights and sales potential for our customers Optimizing the return of our content investments by using it on multiple platforms and channels Reducing marketing and product development costs by exploiting the potential of our brands/products across different platforms Increasing supply chain efficiency and economics by selling our products via multiple distribution channels and focusing on 3rd party supply Using data efficiently across different platforms/businesses Driving and accelerating significant revenue synergies with our TV and commerce platforms and our acquired companies 5
Product & Tech development Operational excellence We had great operational achievements and launched new products Leading TV audience share 1) Leading TV advertising share (gross) 2) New and extended distribution deals Dynamic performance of acquired companies TV TV 27.8% 42.4% + VoD 3) Expanded AdTech business New Addressable TV and HbbTV offerings New Channel Apps New linearized online video platform New international content marketplace 1) 9M 2016; All German TV households (German-speaking), A 14-49; Mon-Sun, 3-3 h; Source: AGF in cooperation with GfK/TV Scope/ProSiebenSat.1 TV Deutschland 2) H1 2016; Gross values; Source: Nielsen Media Research/SevenOne Media 3) maxdome cooperation with Deutsche Bahn is a closed circuit service 6
Key M&A deals and significantly improved our competitive position though M&A New leading subscriptionbased asset in Dating Lifestyle Commerce Ecosystem expansion Anchor assets in Health & Wellbeing Games merger with gamigo Red Arrow expansion in US Note: Band of Outsiders is a Minority Investment 7
Our M&A deals support our strong dividend yield P7S1 Group, 2016E 1) We deliver attractive free cash flow and dividend yields and M&A is a key driver with strong FCF ROIs P7S1 acquisitions 2) >8% ~6% ~5% P7S1 Group FCF yield P7S1 Group Dividend yield P7S1 M&A FCF ROI 1) Source: Bloomberg consensus estimates as of October 6, 2016 2) Note: FCF-ROI calculated as proportional FCF 2016 estimate (proportional to ownership share) divided by invested cash to date based on active portfolio (incl. IC loans and capital increases), FCF as external FCF excluding internal TV media expenses, as per 2016 estimates (Red Arrow entities/ Smartstream FCF on entity basis). For majority acquisitions (active) closed until H1 2016, i.e. excluding Games (deconsolidated end of Q2 2016) and excluding recent acquisitions of Parship Elite Group, Windstar, Stylight, 44Blue. Excludes partially small Red Arrow transactions (e.g. Snowman, NERD) and internally transferred assets from EPIC to P7S1 (Valmano, Discavo) 8
We have continued our strong revenue and earnings performance Revenues (CAGR 2009 - H1 2016 LTM) +10% Recurring EBITDA (CAGR 2009 - H1 2016 LTM) Recurring EBITDA margin (H1 2016 LTM) Underlying net income (CAGR 2009 - H1 2016 LTM) Dividends paid (cumulated 2009-2015) 1) Financial leverage (June 30, 2016) +11% +27% +25% EUR 2.7bn 2.1x 1) Including dividend for 2015, paid out in July 2016 Note: CAGRs calculated based on annual growth rates of continued operations at the time 9
We combine outperformance in EPS growth and dividend yield Our unique profile Dividend yield EPS growth 2013 2014 2015 600 600 600 15% 10% 5% 0% 4% 7% 3% -3% 3% 10% 4% 4% 5% 12% 4% 4% -5% Continued operations Note: FCF ROI based on FCF corresponding to equity stake in portfolio company, i.e. after minority interest, and invested capital; dividends reinvested in security, December 28, 2012 to October 5, 2016 Source: PS71 dividend yield taken at AGM date pre ex-dividend. Stoxx 600 based on Bloomberg estimate data 10
Agenda I II III IV V How we push new innovative and targeted ad sales offerings Broadcasting Content Production Digital Entertainment Digital Ventures & Commerce VI Financial Outlook 11
I II III IV V VI Ad Sales: How we push new innovative and targeted sales offerings We maintain our leading position in the German market Gross market, H1 2016 [in %] Share of advertising Others 19.5% +8.9%pts lead vs. key competitor Public Broadcaster 4.6% 42.4% 33.5% Source: Nielsen, SevenOne Media 12
I II III IV V VI Ad Sales: How we push new innovative and targeted sales offerings TV is by far the most used video medium in Germany [2015, in minutes] Daily video usage A14-49 86% of daily video usage is linear TV 11% of daily video usage is non-linear online video 3% of daily video usage is DVD, Blu-ray and Cinema 176 10 19 4 5 2 TV classic TV alternative 1) Free online videos 2) Pay VoD DVD & Blu-ray Cinema 1) Linear TV viewing on PC, laptop, tablet or smartphone via online stream, recording or broadcast signal 2) Free online videos incl. YouTube, Catch-up TV Base: A 14-49; Source: AGF in cooperation with GfK/TV Scope/SevenOne Media, Viewtime Report SevenOne Media/forsa (2015) 13
I II III IV V VI Ad Sales: How we push new innovative and targeted sales offerings and also remains the dominating reach medium in Germany Monthly net reach and usage Monthly net reach 100% Private TV TV Total 50% 0% 0 10 20 30 40 50 60 70 80 90 100 110 120 Usage (hours/month) 130 140 Base: A14+ Source: AGF in cooperation with GfK, TV scope, Nielsen, Viewtime Report SevenOne Media/forsa (Q1/2016), SevenOne Media estimates 14
I II III IV V VI Ad Sales: How we push new innovative and targeted sales offerings mainly driven by the specific characteristics of the German market Ad break intensity Channel fragmentation Content quality in Free TV Language Studio contracts Windowing Low intensity highly regulated (max. 12 min/h) Less fragmentation strong lighthouse channels >50 high/good quality channels in Free TV with top US & sport content Dubbed version preferred Free TV with strong negotiation position with supporting rights (incl. holdbacks) Free TV widely protected vs. VoD High intensity no ad break regulations (15-20 min/h) High fragmentation premium TV package incl. >300 channels High quality & top sport content not in basic TV service Pay TV a Must Have English language preferred Broad syndication model Parallel windowing of top content Distinct characteristics of the German TV market secure dominant position of Free TV compared to the US 15
I II III IV V VI Ad Sales: How we push new innovative and targeted sales offerings Low penetration of alternatives supports linear TV in Germany Alternative offerings Pay TV penetration 1) 20% 83% 59% 91-97% Monthly spend per Pay TV subscriber 2) USD 28 USD 97 USD 47 USD 27 Share of time shifted usage (vs. live TV) 3) 2% 12% 13% 5-7% SVoD penetration 4) 11% 50% 24% 32-69% Internet-enabled TV usage 5) 33% 36% 43% 30-46% Daily online video usage 5) 24% 36% 34% 28-31% Share of broadband connections >15 Mbps 6) 26% 35% 36% 37-50% Low penetration of pay offerings and alternative video technologies strengthen the position of linear Free TV in Germany compared to other countries 1) GER: VPRT Pay TV in Germany (2015); USA: SNL Kagan (2015); UK: ofcom international CMR 2015 (2014); Nordics: Digital TV research as cited by Statista, w/o FIN 2) GER: VPRT Pay TV in Germany (2015); USA: SNL Kagan (2015); UK: ofcom international CMR 2015 (2014); Nordics: (SWE only) ofcom international CMR 2015 (2014) 3) GER: AGF TV Scope (Q1 2015); USA: Nielsen (Q1 2016); UK: Thinkbox annual review 2015 (2015); Nordics: FIN Finnpanel Oy, TAM 2014 (2014); NOR TNS Gallup TVmeterpanel (2014) 4) GER: P7S1 analysis, 2015 EoY; USA: Nielsen (Q1 2016) UK: BARB UK Television Landscape Report Q4 2015 (2015) 5) TNS Google The Connected Consumer Survey (2016) 6) AKAMAI Q1 2016 16
I II III IV V VI Ad Sales: How we push new innovative and targeted sales offerings YouTube usage stagnates in Germany Daily usage of YouTube stagnates and is driven by few heavy users Daily YouTube usage 1) Germany [in min. per day] A 14-29 A 14-49 Share of YouTube users by usage 2) Germany [in %] 19 23 17 22 18 18 9% of YouTube users account for 67% of YouTube usage 9 12 10 12 10 10 91% 33% 67% Q1 15 Q2 15 Q3 15 Q4 15 Q1 16 Q2 16 9% 1) Source: Viewtime Report, SevenOne Media/forsa (2016) 2) Base: Total reach adults 14+ in Feb 2016; Source: Double Play; SevenOne Media calculation 17
I II III IV V VI Ad Sales: How we push new innovative and targeted sales offerings and reach of Facebook in young target group is even shrinking Facebook total user base Germany [in %] A 14-29 A 14-49 77 77 77 74 78 70 61 62 59 63 54 56 Q1 15 Q2 15 Q3 15 Q4 15 Q1 16 Q2 16 Facebook seems to have overstated average time spent watching videos for the last two years by 1) 60% to 80% 1) Wall Street Journal report Facebook Overestimated Key Video Metric for Two Years (22/09/2016) Note: Total user base = usage at least seldom Source: Viewtime Report, SevenOne Media/forsa (2016) 18
I II III IV V VI Ad Sales: How we push new innovative and targeted sales offerings Thus, TV will continue to dominate video Daily TV and video consumption Commercial target group (A 14-49) [Ø daily video viewing in minutes] Young segment (A 14-29) [Ø daily video viewing in minutes] 209 23 10 176 236 45 29 162 +3% TV-related 175 41 16 118 201 65 32 104 +1% TV-related 2015 2020E 2015 2020E Non-linear online video (Free & Pay VoD) 1) TV alternative 2) TV classic 3) Online video usage is incremental to TV related consumption 1) Free online video incl. YouTube, PayVoD and Catch-up TV; Source: SevenOne Media estimate based on Viewtime Report, SevenOne Media/forsa (2016) 2) Linear TV viewing on PC, laptop, tablet or smartphone via online stream, recording or broadcast signal; Source: SevenOne Media estimate based on Viewtime Report, SevenOne Media/forsa (2016) 3) Source: AGF in cooperation with GfK/TV scope/sevenone Media estimate Base: All German-speaking TV households 19
I II III IV V VI Ad Sales: How we push new innovative and targeted sales offerings Compared to UK and US, German TV has significant growth potential International advertising media mix comparison 1) [2015, media mix of net advertising market, in %] 10% 9% 13% 34% 14% 78% 14% 73% 56% 50% 35% Others 33% Print Digital TV 23% 28% 38% 2015 2015 2015 1) Overall media mix not 100% for UK due to roundings Source: Magna Global forecast (June 2016), Digital including Google and Facebook Note: Excluding POS budgets 20
I II III IV V VI Ad Sales: How we push new innovative and targeted sales offerings particularly from print advertising TV usage share 1) clearly higher than print while TV advertising share 2) still lagging behind [share of usage, in %] [net share of advertising, in %] 47% 6% +41 %pts -11 %pts 23% 34% TV usage Print usage TV advertising Print advertising 1) Media usage 2016 (n = 3,003); based on adults 14+ years; Source: Media Activity Guide 2016, SevenOne Media/forsa 2) Source: Magna Global forecast (June, 2016) 21
I II III IV V VI Ad Sales: How we push new innovative and targeted sales offerings TV is well positioned against digital weak points Ad Fraud Viewability Autoplay Quality Ad Clutter Ad Blocker Engagement Up to 10% of digital reach fraudulent due to robot traffic 60% of digital video advertising not viewable More than one third of digital videos not started by consumer ~15% of digital video advertising in environments with risks to brands Digital advertising not effective due to ad clutter ~25% ad block usage in Germany Lasting impact of digital engagement doubtful Source: Integral Ad Science report on media quality (Q1/2016); ComScore UDM (2015) 22
I II III IV V VI Ad Sales: How we push new innovative and targeted sales offerings P7S1 targets all large media budgets with strong offerings Net market potential [in EUR bn] 26.9 New initiatives Classical levers 7.6 POS 1) New POS offerings (Marktguru, Shopkick) 0.8 Radio Attractive packages for radio customers 6.4 Digital Addressable TV Data Targeting Premium video ad business 1.8 1.1 Freesheets OOH 2) Marktguru Digital OOH Attractive packages for OOH customers 4.8 Print 3) Addressable TV Data Targeting Attractive packages for print-focused customers 4.4 TV Content Marketing Increasing share of advertising with new channels 1) Point of sale only; Source: SevenOne Media Market Insights estimate based on commerce volume released by HDE/Federal Statistical Office of Germany 2) Total Out of Home, including DOOH and cinema 3) Print excluding freesheets Source: Magna Global (June 2016); ZAW Yearbook 2016 Note: Total market potential of EUR19bn for radio, digital, freesheets, OOH, print & TV 23
I II III IV V VI Ad Sales: How we push new innovative and targeted sales offerings Our sales strategy aims to strengthen & expand our leading position Key market dynamics TV with stronger position in Germany than in most other markets Still comparably high print ad share in Germany TV and digital remain complementary but with increasing convergence Our strategic priority Defend and broaden our core TV business Gain advertising business from print with TV Exploit synergies between TV and our digital business 24
I II III IV V VI Ad Sales: How we push new innovative and targeted sales offerings translating into five priority actions for SevenOne Media Attack print Expand data targeting proposition Establish Addressable TV Develop Digital Out of Home business Create new advertising products 25
I II III IV V VI Ad Sales: How we push new innovative and targeted sales offerings EUR 1.4bn net print advertising spendings are addressable by TV German print advertising market 2015 [in EUR bn] = 8.2 Magazines 3.5 3.3 Daily newspapers 4.7 Gross total Not directly addressable 1) 2.1 Gross regional potential 2.8 Gross core TV market potential 1.4 Accessible net market for TV ~30% of the EUR 4.8bn net print market 2) accessible 1) Customers not directly addressable: Media, tobacco, classifieds, publishers, marketers 2) Magna/ZAW (net figures) and Nielsen (gross figures) with different coverage of print titles Note: Print = newspapers and magazines only (excl. professional magazines) Source: Nielsen Media Research (2015), SevenOne Media estimates, Magna Global forecast (June 2016) 26
I II III IV V VI Ad Sales: How we push new innovative and targeted sales offerings and we have identified key levers to attack national print Shift national reach campaigns to TV (reach, efficiency) New channels to address specific niche print segments Homogeneous small thematic ad breaks (beauty, luxury) New print relevant TV formats (travel, beauty, health magazine) Push Stylight as fashion and home & living smartchannel Develop HbbTV advertorial products (e.g. microsites) New business sales force coverage (1,000 contacts/year) 27
I II III IV V VI Ad Sales: How we push new innovative and targeted sales offerings We leverage data from our broad portfolio for improved ad products From context buying to audience buying Advertisers used to target their audiences based on context of the ad now, data-driven advertising enables advertisers to target specific users (one-to-one), independent from specific context We leverage data from our broad Digital Entertainment, Commerce and TV portfolio to fully exploit opportunities arising from targeted advertising 28
I II III IV V VI Ad Sales: How we push new innovative and targeted sales offerings We have already implemented our first Addressable TV products Overlay within spot Switch-In Spot Fullscreen Overlay Advertising overlay fading over running TV spot or during program Digital ads placed when switching to a P7S1 channel during running program Targeted user profile based fullscreen overlay of linear TV advertising spots Implemented Implemented In preparation 29
I II III IV V VI Ad Sales: How we push new innovative and targeted sales offerings Our improved HbbTV product enables new business opportunities CONCEPT Brand adapted look and feel Improved product propositions Individualized welcome screen News & entertainment Sweepstakes Advertising Games HbbTV driver for Addressable TV: Hybrid proportion allows to profile user behavior and collect data Additional monetization: Games, integrated shops, cross selling via commerce assets and advertising 1) Shop Enhanced consumer offering: New info and entertainment service world around sports, news and stars 1) HbbTV technique enables playout of Addressable TV formats like Switch-Ins and Spot Fullscreen Overlay (mid-term) 30
I II III IV V VI Ad Sales: How we push new innovative and targeted sales offerings We complement the customer journey to the POS with Digital Out of Home At Home Out of Home TV spot Digital DOOH/POS Intelligent cross-screen campaign bundles (direct & programmatic) POS = Point of Sale 31
I II III IV V VI Ad Sales: How we push new innovative and targeted sales offerings We have built a powerful unparalleled multichannel reach TV market share 27.8% 9M 2016, A 14-49 1) Addressable TV Digital Out of Home Online platforms Social media & influencer Mobile platforms ~320m contacts/month 240m contacts/month ~288m VV/month >160m contacts/month ~82m VV/month 1) Base: All German TV households (German-speaking), A 14-49, Mon-Sun, 3-3 h Source: SevenOne Media Research, AGOF/AGF, GFK, DMI, Market Research, Magna Global 32
I II III IV V VI Ad Sales: How we push new innovative and targeted sales offerings and now offer innovative 360 campaigns serving key advertiser needs We build 360 campaigns from a portfolio of >60 ad products to serve advertiser needs TV platforms Digital platforms Social media & influencer TV special ads Digital Out of Home Own social media & testimonials Awareness Engagement Addressable TV Online & mobile platforms 3 rd party social media Conversion 33
I II III IV V VI Ad Sales: How we push new innovative and targeted sales offerings Outlook: Solid growth potential for German net TV ad market Market drivers Net market growth potential 2020 vs. 2015 [in EUR m] Growth 1 Basic market growth/net price increase ~290 Media mix 2 3 4 5 National print cannibalization Addressable TV TV/mobile offers for freesheet market New ad segments (e.g. POS) 6 Shift to digital video -350 Overall growth potential ~340 ~125 - tbd ~45 1) ~50 ~500 (CAGR 2-3%) Additional upside for digital advertising through HbbTV product P7S1 profits from online video advertising growth 1) Freesheet potential for TV/mobile offers calculated on top of Magna market growth Note: Estimate based on Magna Global (June 2016), SevenOne Media own estimate 34
Agenda I II III IV V Ad Sales How we expand our channel and genre portfolio in broadcasting Content Production Digital Entertainment Digital Ventures & Commerce VI Financial Outlook 35
I II III IV V VI Broadcasting: How we expand our channel and genre portfolio We maintain our leading position in the German TV market [9M 2016, in %] Audience share 27.8 +3.5 %pts 24.3 Base: All German TV households (German-speaking), A 14-49, Mon-Sun, 3-3 h; RTL Mediengruppe since June 2016 incl. RTLplus; w/o RTL II minority; Source: AGF in cooperation with GfK/TV Scope/ProSiebenSat.1 TV Deutschland 36
I II III IV V VI Broadcasting: How we expand our channel and genre portfolio Our TV strategy aims to strengthen & expand our leading position Key market dynamics TV with stronger position in Germany than in most other markets Increasing fragmentation of TV landscape through thematic channels Millennials using TV content in new ways and on new devices Our strategic priority Defend and expand our leading TV position Increase grid ownership by leveraging Red Arrow Introduce new offerings for Millennials 37
I II III IV V VI Broadcasting: How we expand our channel and genre portfolio and translates into five priority actions for Broadcasting Strengthen core channels Launch new thematic magazines, windows and channels Leverage Red Arrow synergies Build reach with new distribution platforms Develop new consumer offerings 38
I II III IV V VI Broadcasting: How we expand our channel and genre portfolio We continue to strengthen our core channels Channels Investment priority Core channels A New channels Further new thematic channels under evaluation B Focused channels C 39
I II III IV V VI Broadcasting: How we expand our channel and genre portfolio and broaden our channel portfolio with new channels Our channel portfolio in Germany MALE Key target groups A 14-59 Market shares 9M 2016 8.6% Launch in Q3 2016 A 14-39 10.3% A 14-49 5.1% OLD YOUNG F 14-39 1.4% F 40-64 1.4% M 14-39 1.0% FEMALE M 40-64 1) 0.2% New Further thematic channel, window and magazine concepts under evaluation 27.8% 1) Since launch 22 September 2016 (not included in audience share total) Base: All German TV households (German-speaking), A 14-49; Mon-Sun, 3-3 h; Source: AGF in cooperation with GfK/TV Scope/ProSiebenSat.1 TV Deutschland 40
I II III IV V VI Broadcasting: How we expand our channel and genre portfolio We increase the share of Red Arrow productions for our channels Increasing share of own productions Launched YTD 2016 1) Red Arrow share of BC GS s commissioned content [as % of commissioned spendings] >20% Joint format development process with BC GS Ran an den Mann Up to 11.2% Pipeline 2016/2017 So tickt der Mensch New Target 8% 10% Kiss Bang Love Up to 14.1% The Taste New season H1 2015 LTM H1 2016 LTM 2018E 1) Base: All German TV households (German-speaking), A 14-49 years, Mon-Sun, full day 3-3h 41
I II III IV V VI Broadcasting: How we expand our channel and genre portfolio We secure broad multichannel distribution of our TV brands Distribution partners across all platforms and devices DTH, Cable, IPTV, DVB-T, web, mobile, >30 partners >99% German TV households reached with our Top 3 channels via DTH, Cable, IPTV and DVB-T Mobile downloads of new TV Channel Apps in first month after launch >0.8m 8m Smart TVs with Top shelf positioning of P7S1 TV Apps 1) Coverage of mobile platforms (ios and Android) with our TV Channel Apps >90% >32m Monthly active users on web, mobile and Smart TV platforms 2) 1) Smart TV installed base: Estimate for end of year 2016; referring to 7TV and/or ProSiebenSat.1 Channel Apps 2) MAU as of September 2016; gross values, not corrected for double usage of multiple services 42
I II III IV V VI Broadcasting: How we expand our channel and genre portfolio We launched seven new TV Apps on mobile and Smart TVs Strengthen TV brands & increase reach Launched in August 2016 (on ios, Android and Samsung Smart TVs) Free 24/7 live stream Free 7 day catch-up Online exclusive bonus & newsroom content Second screen features for TV program ping-pong First month after launch 800k total mobile downloads 2.2m Ø monthly active users 1) 4.9m total video views 2) Enable vertical thematic channels within apps and converge with commerce offerings (also for P7S1 assets) 1) MAU on all TV channel and smart TV apps in first month since launch (28.08.-28.09); gross values, not corrected for double usage of multiple apps 2) Video Views (full+short+live) on all TV channel and smart TV apps in first month since launch (August 28, 2016 September 28, 2016) 43
Monthly Reach Monthly Reach Viewing time [in minutes per day] Viewing time [in minutes per day] I II III IV V VI Broadcasting: How we expand our channel and genre portfolio Outlook: TV will continue to dominate video viewing Video viewing 2015 Video viewing 2020E A 14-49 A 14-49 176 162 10 23 29 45 TV Classic 1) TV Alternative 2) Non-linear Online Video 3) TV Classic 1) TV Alternative 2) Non-linear Online Video 3) 93% 46% 57% We expect to maintain a leading position in the TV market 1) Source: AGF in cooperation with GfK/TV scope/sevenone Media estimate 2) Linear TV viewing on PC, laptop, tablet or smartphone via online stream, recording or broadcast signal; Source: SevenOne Media estimate based on Viewtime Report, SevenOne Media/forsa (2016); Base: All German speaking TV households 3) Free online video incl. YouTube, PayVoD and Catch-up TV; Source: SevenOne Media estimate based on Viewtime Report, SevenOne Media/forsa (2016) 44
Agenda I II III IV V Ad Sales Broadcasting How we build a (Digital) Content Ecosystem Digital Entertainment Digital Ventures & Commerce VI Financial Outlook 45
I II III IV V VI Content Production: How we build a (Digital) Content Ecosystem We have extended our US production footprint since last CMD High-quality US investments New New New New 1) US accounts for 72% of CP&GS revenues 2) 1) Minority investment 2) Share of H1 2016 LTM external revenues generated by US production entities 46
I II III IV V VI Content Production: How we build a (Digital) Content Ecosystem and build our production strategy upon key market dynamics Key market dynamics Increasing number of digital video platforms US continues to be the largest TV production market Market consolidation is leading to more studio attention on non-scripted shows Our strategic priority Increase Red Arrow share of P7S1 commissioned content Build Digital Content Ecosystem Further expand English scripted catalogue and valuable non-scripted IP library 47
I II III IV V VI Content Production: How we build a (Digital) Content Ecosystem Our five priority actions for Content Production Leverage synergies with TV channels Expand US portfolio of production companies Create and own blockbuster formats Expand digital production capabilities Build Digital Content Ecosystem 48
I II III IV V VI Content Production: How we build a (Digital) Content Ecosystem Our vision is to build an integrated TV and Digital Content Ecosystem CONTENT PRODUCTION THEMATIC PACKAGING MULTICHANNEL CONTENT DISTRIBUTION MONETIZATION/ CUSTOMERS Professional TV content Thematically focused content P7S1 thematic digital platforms Consumers (ads & subscriptions) Health & wellbeing Food Lifestyle & fashion Thematic TV formats P7S1 and Media Alliance Digital content Health & wellbeing Food Lifestyle & fashion Thematic TV channels/windows TV platforms and broadcasters Health & wellbeing Food Lifestyle & fashion Webstar content Media Exchange Publishers Beauty Outdoor Bridal Ramp-up digital content production (low cost, high volume) Monetize globally and feed our Entertainment Ecosystem 49
I II III IV V VI Content Production: How we build a (Digital) Content Ecosystem Outlook: We continue to increase our catalogue and production volume Shows in catalogue 1) Number of productions 2) Number of hours produced Red Arrow share of BC GS commissioned content 3) >870 >1,000 >330 >450 >1,200 >1,700 >20% 10% H1 2016 2018E H1 2016 2018E H1 2016 2018E H1 2016 LTM 2018E 1) Cumulative 2010 to 2016 2) Incl. pilots, new and returning productions, multiple seasons counted as separate productions 3) As % of commissioned spendings BC GS = Broadcasting German-Speaking 50
Agenda I II III IV V Ad Sales Broadcasting Content Production How we grow our Digital Entertainment businesses internationally Digital Ventures & Commerce VI Financial Outlook 51
I II III IV V VI Digital Entertainment: How we grow our Digital Entertainment businesses internationally We strengthen Digital Entertainment locally and internationally Key market dynamics Video entertainment is becoming a global market US remains the biggest single market Programmatic advertising and video are main growth drivers of digital advertising market Our strategic priority Strengthen Germanspeaking video advertising business Scale our Digital Entertainment assets internationally (with AdTech as key priority asset) and build an integrated digital video ecosystem 52
I II III IV V VI Digital Entertainment: How we grow our Digital Entertainment businesses internationally Our Digital Entertainment growth strategy at a glance Strengthen current portfolio assets Build international ecosystem together with (broadcasting) partners Create value through attractive minority investments Content Production Multichannel Distribution Partnerships Additionally, leverage synergies with Broadcasting, Red Arrow, TV sales, own commerce vertical assets and Media Alliance 53
I II III IV V VI Digital Entertainment: How we grow our Digital Entertainment businesses internationally Our five priority actions for Digital Entertainment Expand local digital ad sales portfolio Build international scale in AdTech Grow international scale of Studio71 Expand international footprint with invest in Pluto.tv Establish key local partnerships for maxdome 54
I II III IV V VI Digital Entertainment: How we grow our Digital Entertainment businesses internationally We continuously expand our innovative digital ad sales portfolio Instream, display & content marketing 360 Programmatic 7Screen New Addressable TV New Grow targeted video display ads, and branded entertainment concepts in premium environment Established premium programmatic private marketplace in Germany Launched ad special sales unit 7Screen to secure stake in fast growing DOOH 2) market Pushed HbbTV top product Switch-In for Addressable TV +54% video views Double digit Top 3 market growth 1) revenue growth 1) >40 campaigns position 3) realized 4) 1) H1 2016 vs. H1 2015 2) DOOH = Digital Out of Home 3) P7S1 estimation 4) All Switch-In campaigns (incl. Switch-In XXL) Jan-Aug 2016 55
I II III IV V VI Digital Entertainment: How we grow our Digital Entertainment businesses internationally Our end-to-end AdTech solution ensures control of the full value chain Budget AdTech Media & Data Demand Side Platform Supply Side Platform Ad server Agency Access to exclusive media Designed for premium customers Top-notch local service Neutral & transparent technology EU data protection compliant 56
I II III IV V VI Digital Entertainment: How we grow our Digital Entertainment businesses internationally Studio71 continues its international track to expansion >100 new top creators 2) Signed more top creators Realized bigger productions Top 10 movies 3) 27bn video views in H1 2016 1) 38 campaigns Excelled at ping-pong Built best-practice branded >35% with TV entertainment business revenue realized 4) growth 5) 1) Based on global video views of Studio71 in H1 2016 2) New creators signed with more than 250k subscribers 3) Top 10 TVoD movies with Natural Born Pranksters being top 10 movie in 18 countries 4) In 2016 5) Based on branded entertainment/integrations revenue H1 2016 vs. H1 2015 57
I II III IV V VI Digital Entertainment: How we grow our Digital Entertainment businesses internationally We launched the new linearized online video platform Quazer Transforms content to linear streams for individual and niche audiences >60 factual channels live and promising take up of users with focus on 29-49 yrs First product version on Web, App Store, Play Store and on Apple TV4 First results from consumer testing 1) : 430k live test user 45 min avg. viewing time/mau 2) Advertising funded business model with targeted short instream ad breaks 1) KPIs based on September 2016 2) Monthly active user 58
I II III IV V VI Digital Entertainment: How we grow our Digital Entertainment businesses internationally and now merge Quazer into US OTT service Pluto.tv Free, linearized, lean-back video streaming We have acquired a strategic minority stake in U.S. based Pluto TV and merged it with our German linear VoD platform Quazer Pluto.tv is a new generation of linearized, lean-back video streaming and best positioned in U.S. linear VoD market ~14% P7S1 stake in combined business +5 m Pluto TV active users Scripps co-investor Together with other strategic investors, we plan to further grow Pluto.tv and Quazer and distribute relevant P7S1 content 59
I II III IV V VI Digital Entertainment: How we grow our Digital Entertainment businesses internationally We have secured key local distribution partnerships for maxdome Deep product integration with leading cable operators in Germany 10m potential households 1) First mover for in-train entertainment in Germany providing maxdome service 2) to ICE train passengers of Deutsche Bahn 80m passengers per year 3) Tariff bundling with leading mobile reseller in Germany 9m mobile customers 4) 1) Combining total potential household reach of unitymedia, telecolumbus 2) Note: 50 titles for free, 1,000 titles in SVoD train package, TVoD titles to be selected, access via Deutsche Bahn Wifi on train 3) Source: Deutsche Bahn 4) Source: Freenet Group Reporting 60
I II III IV V VI Digital Entertainment: How we grow our Digital Entertainment businesses internationally Outlook: How we will improve our margins for Studio71 and maxdome Key profitability measures for Studio71 global Key profitability measures for maxdome 1 Broaden revenue streams by widening content distribution 1 Push new, unique customer proposition as curator and content guide 2 Further expand branded entertainment sales 2 Utilize B2B best-in-class distribution deals 3 Grow premium content ownership and internationalize own brands 3 Further exploit potential of concept sales 4 Continue to internationalize business (e.g. through partnerships) Profitable in Q4 2017 and FY 2018 4 Invest in own IP through strong synergies with RedArrow and TV Profitable in Q4 2017 and FY 2018 61
Agenda I II III IV V Ad Sales Broadcasting Content Production Digital Entertainment How we build a Lifestyle Commerce Ecosystem and leading verticals in Commerce VI Financial Outlook 62
I II III IV V VI Digital Ventures & Commerce: How we build a Lifestyle Commerce Ecosystem and leading verticals We have set up a unique combination of TV and Commerce elements Reach/awareness Engagement/interest Conversion/action Product (physical & non-physical) TV & Online Lead Gen platforms Engagement platforms E-commerce platforms Retail We push both our own products and our customers products Through our TV and online channels we generate massive reach On our online Lead Gen and Engagement platforms we can convince the consumer to buy a product Products are sold on our e-commerce platforms and through retail partners 63
Products Platforms TV I II III IV V VI Digital Ventures & Commerce: How we build a Lifestyle Commerce Ecosystem and leading verticals We structure our Commerce portfolio in verticals We build vertical market leaders and an ecosystem in Lifestyle Commerce Online Travel Online Price Comparison Online Dating Fashion Beauty & Accessories Health, Wellbeing & OTC Food & Functional Nutrition TV channels, advertising, infomercials Lead Generation (Stylight) Commerce platforms (Flaconi, Vitafy) Engagement platforms (7NXT) Physical goods (Windstar, Teatox) 64
I II III IV V VI Digital Ventures & Commerce: How we build a Lifestyle Commerce Ecosystem and leading verticals which we have selected based on clear investment criteria Criteria fit High Medium Low Selection criteria for verticals Online Travel Online Price Comparison Online Dating Lifestyle Commerce Attractive market financials Robust business model Structural growth market Attractive rev. and EBITDA margin potential Asset-light business model potential Digital transformation potential Highly TV responsive Strong TV synergies Non-TV synergies Manageable risk exposure Additional ad sales potential Data synergies Sales Platforms for products of our customers Omnichannel sales potential Protected from tech disruption Entry barriers for global giants 65
I II III IV V VI Digital Ventures & Commerce: How we build a Lifestyle Commerce Ecosystem and leading verticals We continue our Ventures & Commerce growth strategy Key market dynamics Convergence of TV and Commerce E-commerce market growing double-digit globally Local digital niche markets growing, e.g. for health Our strategic priority Leverage our unique combination of TV and Commerce capabilities Expand existing and build new commerce verticals Pursue bolt-on M&A of profitable assets 66
I II III IV V VI Digital Ventures & Commerce: How we build a Lifestyle Commerce Ecosystem and leading verticals by focusing on five priority actions for Digital Ventures & Commerce Grow Travel into European leader Expand Online Price Comparison market share Extend Dating market leadership Build Lifestyle Commerce Ecosystem Continue String of Pearls M&A strategy 67
I II III IV V VI Digital Ventures & Commerce: How we build a Lifestyle Commerce Ecosystem and leading verticals Etraveli s growth in Travel is driven by internationalization Growth strategies 1. Embrace strong Meta development with superior consumer offering 2. Further improve data driven and operational excellence 3. Continue profitable international expansion active in countries 46 68
I II III IV V VI Digital Ventures & Commerce: How we build a Lifestyle Commerce Ecosystem and leading verticals We launch new verticals on our core online comparison portal Verivox Verticals Energy TelCo Insurance Financial Services OTA Car Rental New Dual Portfolio synergies brand that we strategy leverage We integrate existing portfolio products into Verivox to push existing and build new verticals Depending on success, we focus on either one brand or a dual brand strategy 69
I II III IV V VI Digital Ventures & Commerce: How we build a Lifestyle Commerce Ecosystem and leading verticals We acquired Parship as the cornerstone for Dating Market with exceptional margins 1) #1 Online dating service in Germanspeaking countries focused on attractive matchmaking segment Margin potential of 25-30% 2) 21% 27% 38% Purely digital, subscription-based and asset-light business model High renewal rate indicates high customer satisfaction High synergy potential with P7S1 High upside potential for penetration Parship Elite Group subscriber penetration 3) 14% 25% Paid Online Matchmaking 4) 1) % EBITDA of revenue, Parship Elite Group 2016 figure; Mötesplatsen 2014 figure; Match.com (segment, not Group) 2015 figure; Source: Company information 2) Ent. rec. EBITDA margin potential 3) German-speaking countries penetration 4) Matchmaking users among US adult single internet users; Source: Consumer Survey 70
I II III IV V VI Digital Ventures & Commerce: How we build a Lifestyle Commerce Ecosystem and leading verticals We will scale Stylight through new segments and internationalization Existing verticals Potential new verticals Expand through internationalization Expand through building new verticals Launched in 15 countries already Fashion is core vertical, Home & Living launched in H1 2016 Next to come: Ireland Next to come: Beauty New markets & verticals can be entered at low cost through central operations and strong tech platform 71
Products Platforms TV I II III IV V VI Digital Ventures & Commerce: How we build a Lifestyle Commerce Ecosystem and leading verticals Where we stand with our Lifestyle Commerce Ecosystem Lifestyle Commerce verticals Lifestyle Commerce Ecosystem Fashion Beauty & Accessories Health, Wellbeing & OTC Food & Functional nutrition TV reach Selected examples of TV formats Lead Gen platforms Engagement platforms 7NXT 7NXT Omnichannel sales approach 1) 1) Physical goods 1) 1) 1) Minority shareholdings 72
I II III IV V VI Digital Ventures & Commerce: How we build a Lifestyle Commerce Ecosystem and leading verticals and how everything works together in the ecosystem TV Lead Gen Engagement platform Digital Sales platform Physical product TV formats and ads create awareness Stylight health and beauty content leads users to our 7NXT engagement platforms which include nutrition recommendations... based on our physical products A full-fledged product and service portfolio locks the user in our ecosystem and maximizes CLV CLV = Customer Lifetime Value 73
I II III IV V VI Digital Ventures & Commerce: How we build a Lifestyle Commerce Ecosystem and leading verticals Lifestyle verticals we focus on Ecosystem levers Fashion Beauty & Accessories Health, Wellbeing & OTC Food & Functional nutrition TV fit Synergies with TV content Difficult to disrupt Intervertical synergies Omnichannel sales potential High margin products Strong defensive, non-cyclical properties Strategic benefit for ad sales clients (e.g. data, sales platforms) 74
I II III IV V VI Digital Ventures & Commerce: How we build a Lifestyle Commerce Ecosystem and leading verticals We create value in Commerce through accretive deals and TV synergies Active majority portfolio 1) Online Price Comparison [in EUR m] Revenue growth of assets since acquisition 2) Ext. rec. EBITDA increase of assets since acquisition 2) [in EUR m] Online Travel ~1.8x ~2.2x Lifestyle Commerce LTM at entry H1 2016 LTM LTM at entry H1 2016 LTM 1) Excludes internally transferred assets from EPIC to P7S1 (Valmano, Discavo). Excludes transactions closed in 2016 2) Entry LTM figures partly based on local GAAP and management reports. LTM entry EBITDAs include air-time cost. For companies without monthly reporting prior to closing, figures based on full year of acquisition year; 2016E EBITDAs exclude airtime cost; EBITDA partly entity based 75
I II III IV V VI Digital Ventures & Commerce: How we build a Lifestyle Commerce Ecosystem and leading verticals Outlook: We expect to continue our strong growth in Commerce Digital Ventures & Commerce CMD target (ext. revenues) [in EUR m] 863 CAGR +13% 1,172 Rec. EBITDA margin target range of 20 25% 108 2012 H1 2016 LTM pro forma 1) New DV&C CMD Target 2018 Vast majority of our future growth will be organic 1) incl. recent acquisitions, e.g. Parship Elite Group Note: Based on new segment structure; 2012 as reported 76
Agenda I II III IV V Ad Sales Broadcasting Content Production Digital Entertainment Digital Ventures & Commerce VI How these strategies translate into our financial targets 77
I II III IV V VI Financial outlook: How these strategies translate into our financial targets We confirm our financial policy and acquisition strategy Financial leverage target range 1) 1.5-2.5x Dividend pay-out ratio 2) 80-90% Acquisition strategy Bolt-on and media investments 1) Net debt/ltm recurring EBITDA (respective year-end) 2) Based on underlying net income 78
I II III IV V VI Financial outlook: How these strategies translate into our financial targets We will continue our value creation focused M&A approach We pursue a two-fold investment strategy combining media and cash investments We use M&A to drive profitability and cash generation of P7S1 We pursue active portfolio management to maximize the value of our portfolio We focus on businesses where TV unlocks significant growth We maintain a strong balance sheet discipline across all M&A activities We are able to build firepower organically 79
I II III IV V VI Financial outlook: How these strategies translate into our financial targets We raise our 2018 Group revenue and recurring EBITDA targets 2012-18 revenue growth target [in EUR m] Revenue growth since 2012 Reported Group revenue 2012 2,356 2,356 182 Actuals 2012 3,522 +1,165 2,356 Actuals H1 2016 LTM 63% of growth target achieved 1) 4,206 +1,850 2,356 Current 2018 Target 4,506 +2,150 2,356 New 2018 Target Growth target raised by EUR 300m Rec. EBITDA growth target vs. 2012: EUR +400m Growth target raised by EUR 50m We raise our 2018 target to reflect key acquisitions and our current overachievement of the pro-rata 2018 target 1) Pro-rata target achievement for H1 2016 LTM at 58% Note: For H1 2016 LTM, actuals 2012 and revenue growth since 2012 do not sum up to EUR 3,522m due to rounding 80