Sky Italia – Investor Field Trip
Transcript of Sky Italia – Investor Field Trip
Sky Italia – Investor Field Trip Milan, 3rd December 2014
Gomorrah
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This document contains certain forward looking statements with respect to Sky Italia’s financial condition, results of operations and business, and our strategy,
plans and objectives for Sky Italia. These statements include, without limitation, those that express forecasts, expectations and projections, such as forecasts,
expectations and projections in relation to new products and services, the potential for growth of free-to-air and pay television, fixed line telephony, broadband
and bandwidth requirements, advertising growth, DTH, OTT and IPTV customer growth, Multivision, Sky Online, My Sky, Sky HD, On Demand, Sky Go and other
services penetration, revenue, administration costs and other costs, advertising growth, churn, profit, cash flow, content, marketing and capital expenditure.
Although the Company believes that the expectations reflected in such forward looking statements are reasonable, these statements are not guarantees of
future performance and are subject to risks, uncertainties and other factors, some of which are beyond our control, are difficult to predict and could cause actual
results to differ materially from those expressed or implied or forecast in the forward looking statements.
All forward looking statements in this document are based on information known to the Group on the date hereof. The Group undertakes no obligation publicly
to update or revise any forward looking statements, whether as a result of new information, future events or otherwise.
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5
Countries
20 million
Customers
£11 billion
Revenue £4.6 billion
Content investment 31,000
Employees
30
Main sites
• Serving 20 million Sky customers in five countries
• Shared ethos of increased choice, better content
and superior TV experience
• Leveraging best-in-class capabilities
• Substantial opportunity
• Good for customers and shareholders
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• Expanded growth opportunity
• Platforms of choice
• Better for customers
• Enhanced value creation
– Greater long term revenue growth
– Earnings enhancing
– Progressive dividend
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• Transaction completed 12 November 2014
• Name changed to Sky Plc
• Acquired 90% of Sky Deutschland; Jeremy Darroch and Andrew Griffith appointed to Supervisory Board
(inc. Jeremy Darroch as Chairman)
• 9.9% equity placed at 870p
• All debt financing for the transaction completed with blended pre-tax cost of debt <3% pa
• Group leverage of c3.5x net debt/EBITDA
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Andrea Zappia,
Chief Executive Officer
• 2011: Sky Italia - CEO
• 2010: BSkyB - Managing Director
of Customer Group
• 2003: Sky Italia - VP Marketing,
Promotion and Business
Development
Domenico Labianca
Chief Financial Officer
• 2003: Sky Italia - CFO
• 2002: Stream - Financial Director
• 2002: Matrix (Telecom Italia
subsidiary) – Head of Credit
Control
Andrea Scrosati
Executive VP Programming
• 2013: Cinema, Entertainment
and Third Party Channels
• 2010: VP Programming and
Promotions
• 2007: Joined Sky Italia as VP
Corporate Communications
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1) Strong business executing clear strategy
2) Capturing growth opportunity with leading customer proposition
3) Enhanced potential as part of a bigger Sky group
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Source: Agcom, Bloomberg
1990 1993 1997 2000 2003 2004 2006 2012
Tele+
Pay TV enters
Italy with Tele+
A 2nd player,
Stream, enters
Pay TV
Tele+ owned
by Vivendi
(100%)
NewsCorp
joins Stream
in a 50% JV
Stream acquires 100% of Tele+
Sky Italia starts operations with 1.8m subscribers
NewsCorp
buys remaining
20% stake
from Telecom
Italia reaching
100%
Sky Italia reaches
EBIT break-even
with 3.8m
subscribers
Sky Italia
becomes the No
1 TV player in
terms of
turnover
Stream Canal+ NewsCorp Sky Italia NewsCorp
Sky EBIT break- even
Sky #1
–
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Source: Company data for FY14. Financial data as reported in Sky plc full year results announcement
Subscribers Monthly ARPU Revenues EBITDA Employees
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Broadcaster
Content creator
Aggregator
Multi-platform
(Pay & Free)
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• 163 pay channels, 66 HD, 28 PPV, 184 FTA
• 80% of customers watch Sky content in HD
• More than 50% of customers use Sky Go
• Almost 30% of boxes connected with c.3,000 hours
of On Demand content
Company data 2014
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Source: Source: Ericsson ConsumerLab TV & Media 2014 Study
NPS = Promotors-Detractors 23%
Sky Italia
18%
Sky Go by Sky
16%
Free DVB-T
(Telesione
Digitele)
5%
PremiumPlay
By Mediaset
5%
Infinity
By Mediaset
2%
Telecom Italia
(Altice TV &
Cubovision)
0%
Mediaset
-34%
Rai TV by RAI
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58% 55%
50%
38% 38% 35%
33% 33% 33% 30% 30%
B1 On a scale from 1 to 10 (1 = poor 10 = excellent), how would you judge the overall image/reputation of the following companies?
Source: Tracker Report 1H FY14
Base: Total population - Prospects and Sky Customers who gave an answer
% ratings 8-10
15
16
25 million homes
4.7m 1.7m
0.3m
18.6m
DTH
pay
DTT
pay
OTT FTA
only Platforms
PAY
~6m
(27%)
Main Player /
Propositions
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Source: IHS SD
Note: data are related to comparable pay TV offerings excluding pay light propositions
18% 19%
27%
33%
51%
65%
DE ES IT FR UK Netherlands
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Total TV revenues by nature
2.9 2.9
3.5 2.6
2.8
2.5
CY10 CY14E
Discovery
LA7
Rai
Mediaset
Sky
3.1 3.1
4.8 3.6
1.7
1.8
9.6
8.4
CY10 CY14E
Licence fee
Advertising
Pay TV
9.6
8.4
Source: IHS SD
TV revenue by type (€bn) TV revenue by player (€bn)
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43.4 42.1
41.2 42.5 42.8
FY10 FY11 FY12 FY13 FY14
4,742
4,972 4,901
4,756 4,725
FY10 FY11 FY12 FY13 FY14
ARPU (€) Subscribers (‘000)
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Household consumption (yoy % variation) GDP (yoy % variation)
Source: Internal estimates, ISTAT, Consensus forecast
(0.3%)
0.4%
0.7% 0.9%
0.9%
(1.2%)
(5.5%)
1.8%
0.4%
(2.4%) (1.9%)
08 09 10 11 12 13 14 15 16 17 18CY
(0.6%)
(0.3%)
0.7% 0.7%
0.8%
(0.5%)
(1.0%)
1.0%
(0.2%)
(3.9%)
(2.5%)
08 09 10 11 12 13 14 15 16 17 18CY
Latest Forecast Actual
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A neutral regulatory and political scenario is in place now
* Declared “discriminatory state aids” by EC and European Court of Justice
2003 2004 2005 2007 2008 2009 2010
EU undertakings
9-year commitments
- cannot enter pay
DTT
No exclusive deals
with Major Studios &
Sport rights
–
Digital Switch Off
DTT spectrum
assigned for free to
incumbents (MS, Rai)
DTT STB subsidized
with €200m state
contribution*
Pay TV DTT
MS acquires
exclusive pay TV
rights for 5 best
Serie A teams
Sky obliged to buy
Pay DTH rights
from MS for 90% of
total cost
Auditel
Audience
measurement
company
controlled by MS
& Rai
Sky audience
ratings not
measured till
2007
VAT
VAT on pay TV
doubled overnight
by government
decree
LCN
Sky launches Cielo on
Channel 10 but
Government forces
the channel to move
to Channel 26
Advertising on
Pay TV
Government lowers
adv thresholds only
for pay TV to 12%
keeping MS limits at
18%
Agcom approves
TivùSat
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Others*
Total
37.5%
31.8%
14.1%
20%
56%
12%
14 SD
+1 HD
12 SD
+ 3 HD
46 SD
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* Including: Sky, Cairo Communication, L'Espresso, De Agostini, Scripps, la Feltrinelli. Sky Pubblicità and Digitalia not included in Gross Adv Rev.
Players Landscape as of today (2014) No of FTA
channels
Audience
Share
Adv Rev
Share
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FTA
SVoD
TVoD
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What we achieved What we did
• Protected our best subs with a strong value
injection and TV superiority (Sky On Demand,
Sky Go, Restart)
• Invested in content exclusivity (F1, Moto GP,
Italia’s Got Talent, X Factor, Masterchef,
Gomorrah)
• Evolved commercial strategy from volume to
value, attracting only new prospects in line with
Sky profile
• Cut our cost base through a multi-year
efficiency program
• Churn from 13.4% in FY12 to 10.7% in FY14
• ARPU from €41 in FY12 to €43 in FY14
• Acclaimed original production and new
audience records
• Quality of sales improved dramatically
• €33m of savings secured in FY14, €120m run
rate by FY17
• Launched first ‘triple play’ offer: bundled BB
with Fastweb
• Bundled offer now 20% of sales and driving
positive churn characteristics
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1. Strengthen DTH
proposition through
increased product
penetration
Leverage market
leading proposition in
content & innovation
Drive operating
efficiency
Expand growth
opportunities with
diversified business
strategy
1 2
3 4
27
Italian households (m)
Source: Sky estimates
All HHS Have Sky Prospects Low income
Age <30; >65
Core
Prospects
55-70 High
Income
25 4.7
21 12
9.0 2.2
1.9
1.1
2.1
1.7
Families
with kids
Singles Other
families
No TV, DTH
obstructed
Of which 1.7m Mediaset Premium subs
28
(Broadband
with Fastweb)
29
11m Active Services
FY08 FY09 FY10 FY11 FY12 FY13 FY14
Multivision
HD
On Demand
SkyGo
0.9
4.1
2.2
1.1
MySky 2.8
30
49
57 64
FY13 FY14 FY15
22
40
50
FY13 FY14 FY15
5
16
27
FY13 FY14 FY15
28
38
61
FY13 FY14 FY15
18 19 19
FY13 FY14 FY15
Q1 penetration %
PVR HD Multiscreen VoD SkyGo
Note: HD penetration related to paying subs
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Note: Products are MySkyHD, HD, Multivision (paying), SkyGo, On Demand (free)
% Customer Base 26% 27% 20% 23% 4%
Churn benefit by number of products (% disconnection rate over 6 month period, indexed to 100)
100
130
90
70
40 30
Average TV only 1 product 2 products 3 products 4 products
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ARPU by number of products (€/ month)
26% 27% 20% 27%
42.8
34.9
42.4 46.0
48.5
Total CB TV only 1 Product 2 Products >3 Products
% customer base
Note: Products are MySkyHD, HD, Multivision (paying), SkyGo, On Demand (free)
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Interest in product/services influencing decision to subscribe to Sky
Source: Company data.
Influence on decision to subscribe to Sky
30% 30% 29%
26% 24%
21%
Movies/Tv
Series On
Demand
Restart My Sky Wide Offer HD Sky Go
20%
Football
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Expand growth
opportunities with
diversified business
strategy – Fibre, OTT, IPTV
Strengthen DTH
proposition through
increased product
penetration
Leverage market
leading proposition in
content & innovation
Drive operating
efficiency
1 2
3 4
35
39%
19%
7%
19%
1%
UK Italy
DTH DTT Cable / IPTV
% Pay TV penetration
58%
27%
Note: all types of pay TV offerings including pay light propositions
Source: IHS SD
• Cable has never been developed
• IPTV at early stage
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Source: Between (Ernst & Young)
BB subs
Q1 2014
Mkt
share % Fibre /4G roll out targets Partnership with Sky
5,390 49%
- 50% population coverage
by 2016
- LTE coverage 80% by 2016
- New IPTV
- Exclusive Sky channels (mobile only)
1,565 14% - 27% population coverage
by 2016
- Home pack (DTH+BB)
- Sky Online
6,955 63%
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Partnership Sky – Telecom IPTV 2.0
• Mirroring DTH offer and experience with IPTV offering delivered via TI broadband/ ultra-broadband network
• Retail model with revenue share – NPV neutral vs DTH
• Marketing through all TI channels but with Sky managing customer TV relationship
• Identified 1m+ prospects without access to satellite
• Targeting 3.5m TI BB customers who do not have Sky
• Live from April 2015
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• Launched April 2014
• Pricing options in two packs: – series €9.90, cinema €19.90
• Sport TVOD
• Opening up new market segments (young, heavy
digital users) and resonating strongly with
customers
• Live events and original production driving appeal
(X Factor, Gomorrah)
• Building on NOW TV experience in the UK
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Devices Partnership
Today Today By 2015
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Expand growth
opportunities with
diversified business
strategy –
FTA opportunity
Strengthen DTH
proposition through
increased product
penetration
Leverage market
leading proposition in
content & innovation
Drive operating
efficiency
1 2
3 4
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• Cielo launched in 2010
• Consistent with objective to capture all growth opportunities in
the TV landscape
• Strength in FTA supports pay TV strategy:
– Ability to cross promote pay TV offering
– Provides second monetisation window for original productions
• Optimise use of rights
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Source: Nielsen Data (YTD Sept 2014)
Cielo performance vs peers
Audience share (%)
1.38
0.53
1.77 Real Time
1.55 DMAX
1.24 IRIS
1.01 RAI 4
1.37 CIELO
Q1 FY13 Q1 FY14
Adv Revenues
-1%
+18%
-12%
PAY
FTA DTT
Total TV 100%
12%
9%
-16% FTA Generalists 79%
CAGR
CY11-'13
CY14
Mkt Share
Q1 FY15
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5.3% 5.8%
6.9% 6.7%
7.8%
8.9%
10.0%
FY 08 FY 09 FY 10 FY 11 FY 12 FY 13 FY 14
Market Share Sky Adv (%) Avg. Price per TV spot (30 secs)
-25%
-17%
+7%
-19%
-27%
-2%
-15%
-20%
+4% Var. CY14 vs CY13
Var. CY13 vs CY12
Var. CY12 vs CY11
Sky
Rai
Mediaset
Source: Nielsen Data (YTD Sept 2014)
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Italian households (m)
All HHS Have Sky Prospects Low income
Age <30; >65
Core
Prospects
55-70 High
Income
25 4.7
21 12
9.0 2.2
1.9
1.1
2.1
1.7
Families
with kids
Singles Other
families
No TV, DTH
obstructed
Source: Sky estimates
IPTV
DTH
OTT
FTA
Platforms/ business models
45
Leverage market
leading proposition in
innovation & content
Strengthen DTH
proposition through
increased product
penetration
Expand growth
opportunities with
diversified business
strategy
Drive operating
efficiency
1 2
3 4
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2003
2006
2010
2012
2013
2014
2015
–
47
•
•
•
•
•
48
•
•
•
•
Downloads
Q1 14 Q1 15
+100% 50m
24m
49
•
•
•
•
Life of Pi
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Strengthen DTH
proposition through
increased product
penetration
Drive operating
efficiency
Leverage market
leading proposition in
innovation & content
Expand growth
opportunities with
diversified business
strategy
1 2
3 4
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•
•
•
•
•
Fargo
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Sport – season 2014/2015
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Source: Serie A public records, domestic Pay TV live rights only
2010-12 2012-15 2015-18
• Matches: 380/380
• Exclusive matches : 56 /380
• Avg. cost p.a.: ca. €560m
• Matches: 380/380
• Exclusive matches : 132 /380
• Avg. cost p.a.: ca. €570m
• Matches: 380/380
• Exclusive matches : 56/380
• Avg. Cost p.a.: ca. €575m
Total (avg cost pa)
€795m €830m €940m
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F1 & Moto GP: a true Italian passion with year round great events
36 weekends in 2014 season
• Formula 1
20 races; 11 exclusive
• Moto GP
19 races; 10 exclusive
Source: Monitor Calcio 2013-2014 Italian Adult Population>14yo
Interested in sports (Individuals, million)
10.7
Italian
Football
9.3
Formula 1
7.6
UEFA
Champions
League
6.2
Moto GP
3.9
Tennis
3.6
Int’l Football
1.7
Rugby
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Qatar
Austin
Argentina
Spain
France Italy
Catalonia
Holland
Germany
Indianapolis
Czech Rep
UK S.Marino
Aragon
Malaysia
Japan
Australia
Valencia
Australia
Malaysia
Bahrain
China
Spain
Monaco
Canada
Austria
UK
Germany
Hungary
Belgium
Italia
Singapore
Japan Russia
U.S.A
Brazil
Abu Dhabi
March April May June July August September October November
15 22 29 5 12 19 26 3 10 17 24 7 14 21 27 31 5 12 19 26 2 9 16 23 30 6 13 20 27 4 11 18 25 1 8 15 22 29
In F1 since 1950
Record world titles: 16 manufacturers, 15 drivers
9 world championships
108 Grand Prix won
Only man to win all classes (125, 250, 500, Moto GP)
Valentino Rossi
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Italy’s leading movies service
• Exclusive deals with 4 out of 6 Hollywood majors
– Disney, Fox, Paramount and Sony
• Excellent movie offer with over 2,000 titles per year
– 4x more movie premieres than competition
• Strong Italian movies offering plus Sky Cinema original
production
• 12 HD channels and successful use of pop-up/event
channels:
– Bond channels, Oscar channels, Star Wars, Monsters Attack,
Christmas channel, Disney Princess
• All movies in HD, On Demand and available on Sky Go
• Over 70% of customers take movies proposition – among
highest level in pay TV industry
Thor
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• More exclusivity than any other platform
– 17 of the top 20 performers at the Box Office are available
on Sky Cinema of which 13 are exclusive
• Key partnerships with Italian movie distributors
– Deals granting significant exclusivity and ancillary rights on
strong titles (Dallas Buyers Club, The Wolf of Wall Street,
Rush, The Butler)
• Key franchises
– Bond, Indiana Jones, Star Wars, Transformers, Lord of The
Rings/Hobbit, Godfather
Data for period FY12 - FY14
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• Widening offer with branded channels in key genres
• Sky Uno is only pay channel in the world to show exclusive
franchises such as:
– X-Factor, Italia’s Got Talent, Masterchef, Masterchef Junior,
Hell’s Kitchen
• Exclusive agreement with HBO – backbone of Sky Atlantic
• Creating successful track record in original commissions
• No 1 Arts channel in Italy
• Exclusive deal with Fox giving strong portfolio:
– FOX, Fox Life, Fox Crime, Fox Animation, Fox Comedy, Nat Geo,
Nat Geo People, Nat Geo Wild)
Sky Branded Channels & Original
Productions as key differentiators
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Italia’s Got Talent
• Perfect companion
to Masterchef
franchise reinforcing
Sky Uno cooking
show line-up
Hell’s Kitchen
X Factor Italia
• Exclusive to Sky Uno
from FY15 (from
March 2015)
• Previously the top
talent show on FTA
for Mediaset for 3
years
• No 1 TV choice for
subscribers on
Thursday nights
• No 1 show for
interactive
• Highest rating show
on Sky Uno
• Consistently top
Italian cooking show
• Production cost fully
covered by product
placement and
advertising
Masterchef Italia
• Best talent show
debut on Sky Uno
• Over 80% of
production cost
covered by product
placement and
advertising
Masterchef Junior
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• Launched April 2014 – already receiving 95% positive feedback on Sky
• Home of HBO product and Sky Italia original production
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• Highest rating series on Sky
• Original production sold in over 100 countries to leading
broadcasters (e.g. HBO, Canal+, La Sexta)
• Season 2 re-commissioned for premiere in March 2016
• First ever sale of an Italian series into the US off the
pilot
“A Scorsese Goodfellas”
“One of the most hotly anticipated new international drama series”
“Forget The Sopranos, here are The Savastanos” “Italy’s answer to The Wire”
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STATUS Delivered
ON AIR April 2015
EPISODES 10x50’
The year 1992: Italy is in turmoil. The old political system ruled by Cristian
Democrats and Socialists is about to collapse under the biggest criminal
investigation in Italian history: Tangentopoli.
STATUS In post production
ON AIR May 2015
EPISODES 2x90’
STATUS In post production
ON AIR October 2015
EPISODES 35x30’
STATUS In development
ON AIR March 2016
EPISODES 12x50’
STATUS In development
ON AIR May 2016
EPISODES 8x50’
STATUS In development
ON AIR November 2016
EPISODES 10x50’
STATUS in development
ON AIR April 2017
EPISODES 10x50’
New mysteries to be solved by the unconventional barman detective
created by best selling author Marco Malvaldi.
Psycologist Giovanni Mari returns with new patients. Each episode focuses
on one (including Giovanni himself), each airing a different week night.
The Savastano’s saga will engage its worldwide audience for another
action-packed season, that will bring us into the darkest core of
Neapolitan mob.
Written and directed by Oscar winner Paolo Sorrentino. A new pope of
American origin is elected. He will bring unconventional and unsuspected
reforms to the Catholic Church.
The comic anti-hero that counts million of followers, will be finally brought to
the small screen in a high end international co-production.
Meet the Vatican Profilers, a mysterious organisation of the Catholic Church,
whose origins are shrouded in mystery. A modern thriller based on International
bestseller by Donato Carrisi.
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• 8 part series written and directed by Paolo
Sorrentino (Oscar winner for “The Great
Beauty”)
• €20-25M production budget – 80%
financed by international partners, driven
by success of Gomorrah
• Due in 2016
YOUNG POPE
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Key Partners Channels
66
Strengthen DTH
proposition through
increased product
penetration
Drive operating
efficiency
Leverage market
leading proposition in
content & innovation
Expand growth
opportunities with
diversified business
strategy
1 2
3 4
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Cumulative €170m delivered FY10-13… …€120m more to come
Gross Annual Savings (€m )
43
43
44
42 172
FY10 FY11 FY12 FY13 FY10 -FY13
FY14 -FY16
• New efficiency program launched in FY14
• Due to be completed in the next 18 months
• Targeting c.€120m run rate saving by FY17 equivalent to c.10% of cost base (ex-rights)
• €33m of savings already delivered in FY14
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* Self service transactions (Web / IVR) as % of total (net retention activities)
** Avg Calls per sub
Source: Customer Satisfaction survey (July 2013)
Customer care optimisation Supply Chain Excellence
18%
34% 42%
51%
4.3
3.9 3.8
3.2
Diversion rate*
Call Rate**
65% 48%
37% 21%
11.6%
8.1% 5.6% 3.9%
FY11 FY12 FY13 FY14
PVRHD Swap
No fault found
FY11 FY12 FY13 FY14
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• Launched in Nov 2013
• Strong progress to date:
– Reached c.0.6m unique users
– 1m downloads (47% Tablet, 53% Smartphone)
– 1.3m transactions
– Mobile App achieved 22% of total upgrades
on Self Service channels (Web, Mobile App, IVR)
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• 300bp improvement since FY11
• Achieved alongside multiple product launches
• Contributing to investment in the customer
proposition
• Continues to be an area of opportunity
for the future
Operating costs excluding programming
Other operating costs as % of sales
26%
25%
24%
23%
FY11 FY12 FY13 FY14
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72
• Well positioned for growth in an attractive market
• Delivering the best customer experience
• Building a more valuable and stable customer base
• Continued investment in content and innovation
underpinned by efficiency programme
• Unlocking multi-platform and product growth
opportunity
• Sky Italia is an exciting part of a significant growth
opportunity at the new Sky