Download SPT Business Overview

SPT Business Overview
November 13, 2012
DRAFT – FOR DISCUSSION ONLY
Sony Pictures Television
Business Overview
Sony Pictures Television
Production
• Development, acquisition,
and production of
television programs for
broadcast, basic cable,
and premium cable
networks
• Program genres include
scripted comedies and
dramas and non-scripted
reality, talk, and game
shows
Distribution
Networks
• Sale of SPE’s film and
television content to
television and digital
customers
• Management and
distribution of branded
networks and channels
worldwide
• Customers include U.S. and
international broadcast
and cable networks, U.S.
local television stations,
and digital services, e.g.,
Netflix
• International brands
include AXN, SET, and
Animax
Make sure right slide
Television Business is Growing
SPT EBIT continues to grow at a rate of 15% year-over-year
SPT Consolidated EBIT
$MM
Monetization
900
•
Networks – Networks has an EBIT CAGR of 23% across
the plan, breaking earnings records in each and every
year. The growth comes from all regions across the
world as newer channels mature to profitability and
more mature channels grow or maintain their margins
•
U.S. Production & Ad Sales – EBIT grows 21% over the
plan from $290MM to $351MM driven by a steady
pipeline of programming sold to SVOD and Off-net
syndication: Last Resort, Happy Endings, Justified
•
International Production – International Production
has an EBIT CAGR of 78% across the plan. Moderate
organic growth from existing operating companies is
supplemented by EBIT contributions from recent
acquisitions Left Bank and Silver River as well as the
inclusion of a hit format starting in FY15
$859
800
$765
700
$625
600
$564
11
500
400
553
300
200
100
0
FY13
Frcst
FY14
Current
FY15
Current
FY16
Current
3
Update with slide 4 of
SPT MRP Deck numbers
to show full US and Int’s
distribution for FY13 and
Fy16
Sony Pictures Television
Today and Tomorrow
($MM)
U.S. Distribution
Int'l Distribution
Int'l Production
U.S. Production & Ad Sales
Networks
Total
($MM)
Revenue
FYE13
FYE16
48
40
9
5
294
573
1,761
2,191
1,536
2,580
$ 3,648 $ 5,389
FYE13
FYE16
34
25
(45)
(54)
6
34
290
351
268
503
$ 553 $ 859
($MM)
Revenue
$6,000
EBIT
$5,389
EBIT
$1,000
$859
$900
$5,000
$4,000
$800
$700
$3,648
$600
$3,000
$553
$500
$400
$2,000
$300
$200
$1,000
$100
$-
$-
FYE13
FYE16
FYE13
FYE16
Sony Pictures Television
Market Update
●
Growth opportunities exist across the television industry
− The global number of television households continues to grow
− There are a greater number of distribution customers in the marketplace
− Affiliate fees are generally stable; ad sales have rebounded since the 2008 downturn,
although economic conditions in some territories have slowed growth
− International consumption of U.S. TV dramas continues to be strong
− SVOD customers are creating greater demand for studio content
●
The television industry also faces a number of challenges
− European economic issues have slowed the growth of the ad sales market in many
territories
− Studio programming prices are expected to rise creating margin pressure on networks
− Volatility of foreign currencies creates uncertainty for predicting financial results in U.S.
dollars
− Competition across the global TV industry remains strong
Television
Strategic Priorities
Marry with next slides
Strengthening economics of existing businesses
• Develop new content and keep SPT’s domestic slate of original TV series on the
air to drive substantial syndication profits
• Focus on maximizing operational efficiencies for networks and international TV
production
• Generate more international local language TV series with the intent of
creating a global hit
• Grow Crackle’s U.S. ad business by increasing investment in its infrastructure
6
Television
Strategic Priorities
Marry with next slides
Pursue Growth Opportunities
• Build on syndication success (The Dr. Oz Show) to expand with A-list talent (Queen Latifah)
• Capitalize on opportunities with emerging SVOD players (e.g., Netflix, Amazon, Hulu) to
drive incremental value for new and library product for film and TV
• Expand in key markets with our branded networks, local and international TV series, and
production ventures
− Complete a regional channel acquisition in India and pursue channel
acquisitions in other select markets
− Continue to invest in international production companies that create content
with specific focus on the UK but also possibly in Scandinavia, Israel, Australia
and other content rich territories; in addition, identify potential opportunities
to expand into emerging markets with strong TV growth potential where SPT
does not currently have a presence
7
Television
Strategic Priorities
Marry
Pursuing One Sony Collaboration
• Become the primary ad sales organization across Sony
• Draw on SPE’s development, production and programming expertise to create
content for Sony’s networked devices
• Leverage our significant and expanding networks presence in India and Latin
America to benefit Sony as a whole
• Utilize our networks’ global reach to assist in marketing initiatives
8
US Production
U.S. Production & Ad Sales: Forecast
Make this just US
Production
Strong and Consistent Earnings Growth
MRP Assumptions
U.S. Production & Ad Sales Revenue and EBIT ($MM)
Revenue
($MM)
EBIT
($MM)
400
2,000
$351
$351
1,500
1,000
350
$298
300
$290
$1,761
$1,911
$2,011
$2,191
250
500
FY13
FY14
FY15
• Leverage slate of network
dramas
FY16
• Capitalize on new market
entrants to help build future
revenue pipeline
200
• Develop organization
150
• Build stronger relationships in
key markets
U.S. Production
Current Series, Pilots & Development
Format
Significant contribution from current series as they enter off-network syndication
MRP Assumptions
EBIT from Current Series,
Pilots & Development
•
Rules of Engagement sold to Netflix
and U.S. syndication market for Fall
2012
•
Community sold to Comedy Central
and U.S. syndication market for Fall
2013 launch. Already sold to Hulu
with an initial availability in FYE12
•
Build on our syndication success with
new Queen Latifah series for Fall
2013
•
Initial off-net syndication availabilities
for Happy Endings, Last Resort, Mob
Doctor, Big C and Justified in FYE14
and Franklin and Bash in FYE15
$140
$120
$120
$109
$100
$80
$73
$84
$60
$40
$20
$0
FYE13
FYE14
FYE15
FYE16
Excludes Wheel of Fortune, Jeopardy!, Days of Our Lives and Y&R
($ in Millions)
11
U.S. Production
Library, Game Shows and Daytime Serials
Format
Maximizing the contribution to EBIT from Core Programs
EBIT ($ in Millions)
Library
$253
Wheel of Fortune and Jeopardy!
$248
32
32
119
112
$258
31
124
Daytime Serials
MRP Assumptions
$271
31
136
102
104
103
104
FYE13
FYE14
FYE15
FYE16
•
Wheel of Fortune and Jeopardy! are
renewed through 15/16 season
•
The Young and the Restless is renewed
through 12/13 season and Days of Our
Lives is renewed through 13/14 season
•
Production cost control and reduction
efforts continue on all programs
12
Make sure right slide
U.S. Production – Strategic Priorities
• Continue to grow our broadcast drama slate and support our current primetime dramas Charlie’s Angels, Pan Am and
Unforgettable to secure syndication opportunities
• Nurture our broadcast comedies Community and Happy Endings to reach syndication
• Invest heavily in A-list writers, directors and producers for future drama/comedy/unscripted development
• Continue to maximize international revenues through exploring co-production opportunities and maximizing tax credits
- Develop series with broad international appeal with globally marketable talent to sell in the US and abroad
• Continue to be on the forefront of the burgeoning subscription VOD market (Netflix, DirecTV) to sell and develop series
• Build on our syndication success (Dr. Oz, Nate Berkus) to expand into the daytime market with A-list talent
• Expand our prime time broadcast reality slate off the success of Sing Off, Shark Tank and Re-Modeled and continue to sell
formats abroad
• Continue to maintain a balanced portfolio across the cable and broadcast business to secure SPT’s position as a prime
destination for premiere talent in scripted and non-scripted programming
13
U.S. Production: Challenges and Opportunities
U.S. Production: Organization Overview
• TBD
Org chart highlights select individuals
U.S. Production: Where we can we do better
• TBD
Ad Sales
Make this just Ad Sale
U.S. Production & Ad Sales: Forecast
Strong and Consistent Earnings Growth
MRP Assumptions
U.S. Production & Ad Sales Revenue and EBIT ($MM)
Revenue
($MM)
EBIT
($MM)
400
2,000
$351
$351
1,500
1,000
350
$298
300
$290
$1,761
$1,911
$2,011
$2,191
250
500
FY13
FY14
FY15
• Leverage slate of network
dramas
FY16
• Capitalize on new market
entrants to help build future
revenue pipeline
200
• Develop organization
150
• Build stronger relationships in
key markets
U.S. Ad Sales – Strategic Priorities
•
Continue to drive additional revenue for first run through advertiser integrations
–
Television
Priorities
Make sure this is right
slide
i.e., The Dr. Oz Show: Walgreens, Subway, Weight Watchers
•
Expand current base of advertisers for :30s and :10 to off-nets
•
Develop emerging Cable Networks business
–
Amount of potential revenue growth tied to sub growth
•
Find new 3rd party representation opportunities
•
Continue to support cable/network properties through Branded Entertainment
•
Activate cross-platform sales of Seinfeld to grow TV and digital dollars
–
Working with Nielsen to create cross-platform ratings (extended screen)
Digital
•
Drive dollars to Crackle with connected device strategy
Priorities
•
Increase PlayStation Network revenue through enhanced reporting
•
Seek new opportunities/platforms to grow digital portfolio
–
–
•
BIVL, PSN, iPad, Android
i.e. Sharecare
Find new 3rd party representation opportunities
19
U.S. Ad Sales – Growth Strategy
Current
Environment
Opportunity
Strategy
Make sure this is right
slide
•
Year-over-year growth in TV ad revenue is limited by available shows
•
Opportunities for 3rd party ad sales representation in TV are declining
•
Diffuse volatility in TV ad revenue market by growing a strong digital base
•
Digital markets are continuing to emerge through an increase in digital
platforms (i.e., mobile devices, game consoles, handheld tablets)
•
Client base extends beyond traditional entertainment markets which
allows for a more diverse portfolio – e.g., Sharecare
•
Consolidate inventory across platforms to create a digital ad network
•
Initiate video only digital upfront market
•
Utilize audience tracking to optimize CPMs
•
Grow 3rd party and digital revenue from $32MM to $106MM over the plan
years resulting in profit contribution growth of almost 200%
20
U.S. Ad Sales: Challenges and Opportunities
U.S. Ad Sales: Organization Overview
• TBD
Org chart highlights select individuals
U.S. Ad Sales: Where we can we do better
• TBD
International Production
International Production: Forecast
MRP Assumptions
Int’l Production Revenue and EBIT ($MM)
Revenue
($MM)
EBIT
($MM)
700
40
$34
600
30
$28
500
35
25
400
20
300
200
100
$13
$530
$573
$433
10
$294 $6
5
-
-
FY13
•
15
FY14
FY15
EBIT excludes FY13 monetization of $11MM
FY16
• Continue investment into companies which
create IP with focus on UK; review
opportunities in Scandinavia, Israel, Australia
and other content rich countries
• Strategically deploy central development fund
• Launch competitive incentive plan to foster
creation of global IP and multi-territory
format exploitation and to attract/retain
talent
• Streamline daily administrative/operational
processes allowing managing directors to
focus on content creation
• Increase collaboration between operating
companies
• Establish culture that fosters creativity
centrally and across operating companies
International Production
Operating Companies
Fix format
Production companies in 13 countries around the world covering multiple regions;
to date, SPT productions have aired in 88 countries and 73 languages
Hilversum
London (WW Production capacity)
Beijing
Cologne
Paris
Moscow (Russian speaking market)
Rome
Culver City
Beirut
Miami
(Latin America & U.S. Hispanic market)
Cairo
Dubai
(Arabic speaking
market)
Hong Kong (Asia market excl Japan)
Bogota
Sao Paolo
26
Make sure right slide
International Production – Strategic Priorities
Drive development of blockbusters and continue to expand global network
Develop and
produce hit
format
Build scale
via strategic
investments
Launch
competitive
incentive
program
•
Develop new break-out hits by focusing creative, operational and financial efforts on a few
high potential formats (e.g., Exit List, Angry Birds, Famous)
•
Identify and attach new creative talent to group (in any form or shape), be competitive in
remuneration, and initiate start-ups
•
Initiate, coordinate and intensify light entertainment collaboration between US and
International Production businesses to drive more synergies and production flow on both
sides
•
UK is top priority – imperative to develop significant local production presence
•
Strengthen presence in major European markets and expand to emerging territories
•
Drive interactive extensions and revenue opportunities and innovative multiplatform
businesses
•
Pursue strategic partnerships to expand market share in key markets (especially the U.K.) and
opportunistically enter new markets in Eastern Europe and Asia
•
Important for hit format creation, multi-territory format exploitation and talent retention
•
SPT’s major competitors all benefit from similar programs – e.g., Banijay, Zodiak
27
International Production
Key Initiatives to Drive Earnings Growth
Marry with previous
slide
The current MRP is based upon more reasonable expectations for the volume of
series and margins that can be achieved with both internally developed and
acquired product
• Continue to exploit Who Wants to Be a Millionaire and develop a stable base of
other successful formats
• Make more focused and sustained investment in development executives,
producers, production companies, and new content especially in the UK
− The acquisition of Left Bank gives SPE a stronger foot-hold in the UK
• Foster a more creative culture to develop intellectual property by:
− Realigning the organization, including a new President and a creative head
− Combining the print sales and format sales teams to better serve our buyers
− Creating a strategically centralized development fund
− Implementing a competitive incentive plan
• Simplify administrative and operational processes
28
International Production: Challenges and Opportunities
International Production: Organization Overview
• TBD
Org chart highlights select individuals
International Production : Where we can we do better
• TBD
U.S. Distribution
U.S. Distribution: Forecast
U.S. Distribution Revenue and EBIT ($MM)
Revenue
($MM)
EBIT
($MM)
900
800
40
$34
$36
35
700
30
$28
600
25
$25
500
400
20
$778
$778
300
$671
$632
15
200
10
100
5
-
• Increase feature library sales
despite the ‘flat’ market
• Leverage SVOD licensing and
strategic product planning for
U.S. channel carriage
FY13
•
MRP Assumptions
FY14
FY15
FY16
Revenue and corresponding profit contribution volatility is largely driven by release timing, size of theatrical slate and timing of off-net
syndication avails (e.g., Rules of Engagement, Community, Happy Endings)
Make sure right slide
U.S. Distribution – Strategic Priorities
• Although uncertain, an opportunity may exist to modify the Starz pay TV deal
Pay TV
Subscription
– Internet caps in the existing Starz deal have created the renegotiation opportunity
– Negotiating directly with Netflix on consideration
– If the Starz deal is not renegotiated, an opportunity exists to make deals directly with Netflix that are
not related to the content included in the Starz pay TV deal
• Sell library film and TV series into non-exclusive subscription deals
• Complete WWAG deal with Netflix
• Split library windows, license multiple rights, structure non-exclusive deals
Cable TV
• Aggressively sell slate carve-out windows utilizing more aggressive inventory tracking and
planning
• Sell offnet cable series: Drop Dead Diva (linear avail FY14), Justified (avail FY14),
Damages (linear avail FY15)
• Develop consistent flow of first-run product with top talent
Syndication
• Sell all offnet syndication series: Rules of Engagement (avail FY13), Community (avail
FY14), Happy Endings (avail FY15)
• Sell library film and TV series onto broadcast digital platforms
• Acquire 3rd party distribution rights with minimal financial risk (e.g. Right This Minute)
34
U.S. Distribution: Challenges and Opportunities
U.S. Distribution: Organization Overview
• TBD
Org chart highlights select individuals
U.S. Distribution: Where we can we do better
• TBD
International Distribution
International Distribution: Forecast
Strong and consistent growth
Int’l Distribution Revenue and Profit Contribution ($MM)
Revenue
($MM)
EBIT
($MM)
2,000
700
1,900
$685
1,800
$662
$1,895
$634
$1,712
1,500
660
$653
1,700
1,600
680
640
$1,772
620
$1,630
1,400
600
FY13
FY14
FY15
FY16
MRP Assumptions
• Leverage slate of network
dramas
• Capitalize on new market
entrants to help build future
revenue pipeline
• Develop organization
• Build stronger relationships in
key markets
Make sure right slide
International Distribution – Strategic Priorities
Exploit market trends and broadcaster relationships to maximize content value
•
Sustained delivery of network dramas will enable revenues for TV product to double to >$500MM by
FYE15 and amplify feature film revenue
Leverage Slate of
Network Dramas
–
–
–
Capitalize Upon New
Market Entrants
Build Secure Pipeline
of Future Revenue
Develop
Stronger
Relationships
in Key Markets
•
•
Continue to work closely with SPT U.S. Production to secure and sustain strategically important network
dramas
Broaden scope of broadcaster relationships to explore English language, European content, co-production
opportunities
Look for key series acquisition opportunities
Take full advantage of opportunities with emerging SVOD players
Work with a wide range of partners to develop deal structure options to help them maximize value of
their offerings and compete with traditional businesses
•
•
Close long-term deals in key markets over the plan
•
Focus on select emerging markets to expand SPT’s presence and better capitalize on opportunities
(Netherlands, Scandinavia, Poland, Hungary, South Africa)
•
Deepen relationship with clients to ensure success through partnering on launches, promotions
Ensure we keep rights to key revenue-driving feature film franchises
40
International Distribution: Challenges and
Opportunities
International Distribution: Organization Overview
• TBD
Org chart highlights select individuals
International Distribution: Where we can we do better
• TBD
Networks
Networks: Forecast
Strong and Consistent Earnings Growth
EBIT reaches over $500 million in FYE16,
growing at a 23% CAGR over the MRP period
Networks Revenue and EBIT ($ in Millions)
Revenue
MRP Assumptions
EBIT
3,000
600
$503
2,500
500
$410
2,000
$328
1,500
$268
1,000
$1,536
400
$2,580
$2,258
300
200
$1,961
500
100
0
• Focus next 18 months on maximizing
efficiencies in existing operations
• Continue to selectively launch
channels in new and existing
territories
• Increase investment in Crackle U.S.
advertising and technical
infrastructure
0
FYE13
FYE14
FYE15
FYE16
18.2%
19.5%
EBIT Margin:
17.4%
16.7%
• Volatility of foreign currencies has
had a particularly harsh impact on
Networks earnings
Networks
EBIT by Region
Format
As a result of recent investments, North America and Europe grow as a percentage
of Networks’ EBIT from 24% in FYE13 to 36% in FYE16
EBIT FYE13
Rest of Asia
/ Australia
16%
India
39%
North
America
17%
Latin
America
21%
EBIT FYE16
Europe
7%
Rest of Asia
/ Australia
12%
India
36%
North
America
23%
Latin
America
16%
Europe
13%
46
Networks: Brands
Highly successful network brands benefiting from global infrastructure
SET GENERAL
ENTERTAINMENT
AXN GENERAL
ENTERTAINMENT
ANIME/YOUTH
LIFESTYLE/MUSIC
PARTNER NETWORKS
DIGITAL
MOVIES
Networks – Strategic Priorities
Make sure this is right
slide
•
Buy out Indian partners and realize an Indian regional opportunity
•
Explore ways to leverage studio relationship with GSN
•
Carry on launching channels in new and existing territories to increase scale and increase sales leverage
and program buying power
•
Continue to invest in ad and affiliate sales infrastructure (Dolphin, AXN Central Europe, Russia Channels,
Crackle Latam)
•
Continue to secure programming supply through studio output deals and investment in original
programming (The Firm). Increase 3rd party acquisitions for US businesses
•
Carry on expanding U.S. channels (CineSony, FEARnet buy up) and increase U.S. channels’ contribution to
portfolio throughout the MRP period
•
Maximize value in Crackle US and expand internationally (Latam, Brazil, Canada)
•
Expand SPTL Asia facility to service EMEA channels
48
Make sure this is right
Networks – A Continuation of Strong Sustainable
slide
Growth
Networks strong year-on-year earnings and revenue growth is forecast to continue
•
Breaking through the $200MM milestone in FY12 (1 year ahead of plan) and the $300MM and $400MM milestones will also be
achieved within the MRP period
•
EBIT CAGR of 28% across the plan
•
Revenue CAGR growth of over 14%, breaking both the $1.5B and $2B barriers within the plan
Margin* pressure continues but expected to rise from 18% to 22% across the plan
•
MSM India is forecast to have double digit margins (18%)
•
Rising content costs, increased broadcasting costs from HD roll outs and the investment in ad sales and affiliate infrastructure keeps
margins in check
Continued annual investment in new operations will underpin future earnings growth
•
Thirteen investments from prior years are expected to become profitable in the next 3 years
•
Separately, the six planned launches/acquisitions in FY12 are expected to collectively generate $13MM of positive earnings in FY15
* Margin excludes GSN PPA to normalize year-on-year progression
49
Networks: Challenges and Opportunities
Networks: Organization Overview
• TBD
Org chart highlights select individuals
Networks: Where we can we do better
• TBD
Closing
Television: Big Ideas for Change
• TBD