Estoril 2010 1 VOD in the English

Estoril 2010 1

VOD in the English Context Introduction Excitement over VOD • Rise of VOD/EST and death of Video • Reality – Not delivered what was “promised” • Functionality, teething problems, consumer scepticism, resistance of sales agents • Majors vs independent/art house labels Estoril 2010 2

VOD in the English Context Business Models Ideal • Choose our own business models Reality • Business model is platform led – take it or leave it attitude, • Two types of models 1. Two tier pricing system Different pricing for Current Film and Library titles No advance 50/50 share of revenue per transaction Encoding costs sometimes the platform pays these Estoril 2010 3

VOD in the English Context 2. Advance system Business Models Advance paid for a group of recent and library titles Recoupment from licensor’s share of revenue (typically 40% to 50%) Usually both transactional and subscription Encoding costs paid by platform Similarities • Level playing field • Difficulty in getting titles on the sites Premium Model • Premium pricing for day and date VOD release with theatrical • Title by title basis Estoril 2010 4

VOD in the English Context New Curzon Site Day Curzon Cinemas site • Operational in next few weeks • Will host all of Artificial Films catalogue over time • rate) • Lower pricing tier during normal VOD window • Transactional VOD only at the moment; may move to include subscription • Open to other distributor’s art house, independent and foreign language titles • Available in the United Kingdom – Estoril 2010 5

VOD in the English Context UK VOD Platforms Film. Flex • • i. Tunes • • • Love Film • • BT Vision • • Sky • Joint venture between Sony & Disney Transactional VOD Platform producing the best results for AE Cable (limited to 500 films) and internet Relatively new for AE Internet based Transactional & subscription VOD and EST Transactional & Subscription VOD Internet based Transactional VOD via Satellite – Estoril 2010 6

VOD in the English Context Trends Disappointing results • Film. Flex only platform generating significant income • Restrictions on what titles can be exploited Trends • Small increase from year to year • Average VOD return is about 2 to 6 percent of theatrical box office • Platforms becoming easier to access by consumers • However becoming restrictingareon platforms congested titles so they taking with predominance of studio titles; some platforms simply refusing to deal with new licensors as they do not have the capacity Anomalies • The letter “A” – Estoril 2010 7

VOD in the English Context Obstacles & Problems Sales Agents • Some still refusing to grant VOD rights • Need grant of all VOD rights including Free VOD (even if exploitation is frozen) on an exclusive basis so can meet the conflicting demands of the various platforms • Back catalogue clearance and clarification of VOD rights – Generic clearance language – Not high priority with a lot of sales agents Platform Access • Relatively new for AE • Internet based • Transactional & subscription VOD and EST Competition between VOD and Pay TV • Pay TV demands – Estoril 2010 8

VOD in the English Context Opportunities Aggregators • Fusion • Access to platforms Specialist Sites • New Curzon site • Past experience (Auteurs and MK 2 VOD site) Estoril 2010 9

VOD in the English Context Outlook i. Tunes • Challenge to the market • Ease of access and familiarity Increased revenue • Gradual inroads into the DVD • Revenue increases not as dramatic as expected Estoril 2010 10

VOD in the English Context Legal context Strictly Speaking there are no regulation of the various windows in the United Kingdom • Cinema chains such as the Odeon, Cineplex, Vue have through their Cinema Association have agreed that they will only release films for which the Video exploitation will be delayed at least by 4 months from theatrical • Pay-TV will insist that there be no VOD and EST two months prior to and during its Pay TV window so limits VOD and EST exploitation to a 5 month window. The momentum for change: • Has come from the distributors themselves, mainly the independent and smaller distributors, • To maximize the revenue from as fast as possible from as many media as possible, • Shorten the delay for television exploitation, so that money can come in faster. Estoril 2010 11

VOD in the UK context Windows Delay for a first exploitation Distribution Channel No holdback unless against another territory Theatrical exploitation 4 months or no holdback if not being released by a chain Video distribution 6 months - being reduced to 4 months (d &d for certain titles) Video on Demand 6 months – being reduced to 4 months (d &d for certain titles) Pay per view 12 months Pay TV 27 months (reduced to 12 to 18 months if no Pay Television sale) Free TV Estoril 2010 12