Communications Industry Communications Industry Spending & Consumption TrendsSpending & Consumption Trends

John Suhler

Overview of VSS Verticals thatOverview of VSS Verticals that comprise the

VSS Communications Industryy

2

Information Education

Communications Industry Verticals

Information Education Professional Information & Services Business Information Services Business Services

K-12 Materials and Services College Materials and Services For Profit Schools

Marketing Services

Corporate Training

Targeted Media Promotion Agencies Custom Publishing PR and Word-of-Mouth

Internet (Search & Advertising) Mobile Advertising and Content Digital Out-of-Home Subscription TV (Cable &

Direct Marketing Tradeshows and Events

Entertainment Traditional Media

Satellite Television) Advertising B2B Magazines

Newspapers TV Radio Yellow Pages Consumer Magazines

Film & TV Content Movie Theaters Music Videogames Cable & Satellite Television

3

Consumer Magazines Cable & Satellite Television

I f ti Ed ti

Representative Companies Comprising VSS Verticals

Information Education

Marketing Services Targeted Media

Entertainment Traditional Media

4

I f ti Ed ti

Industry Spending by Vertical

Information Education

$168$249$200

$300

($ Millions)

$224$311

$200

$300

$400($ Millions)

Marketing Services Targeted Media

$113$168

$0

$100

2004 2009 2014

$165$224

$0

$100

2004 2009 2014

Industry Spending

$71 $71 $77$50

$100

($ Millions)

$152$187

$266

$100

$200

$300($ Millions)($ Millions) % of GDP

‘04 $879 7%‘09 $1,054 7%‘14 $1,416 8%

10 yr CAGR:

Entertainment Traditional Media

$02004 2009 2014

$02004 2009 2014

($ Milli )($ Milli )

COMM Industry:4.9%

GDP: 4.7%10 yr CAGR:

$176$143 $159

$100

$200($ Millions)

$203$261

$354

$100

$200

$300

$400($ Millions)

20% h

14% h

11% h

-1.0%

5

$02004 2009 2014$0

2004 2009 2014

share share share

Source: VSS Communications Industry Forecast 2010

Communications Industry yGrowth Trends

6

Communications Spending vs. GDP

Industry-wide spending on communications has well outpaced GDP

Communications Industry Spending vs. Nominal GDP Index35 Year CAGRs

Industry wide spending on communications has well outpaced GDP– 2% incremental annual growth due to expanding platforms and increasing consumer engagement

Nominal GDP

Communications Industry Spending

Nominal GDP

Comms.Spending+8.4%

exed

to 1

00)

+6.5%

(inde

x

Time Spentwith00

) Time Spent with Consumer Media Per Person

Time Spent with Media Index

with Consumer

Media+0.5%

(inde

xed

to 1

0 Media Per Person

7Source: VSS Communications Industry Forecast 2010, VSS Communications Industry Historical Database 1975-2010

Time Spent with Consumer Media

Time Spent with Consumer Media: Hours per Person per Year

8

Source: VSS Communications Industry Forecast 2010, VSS Communications Industry Historical Database 1975-2010

Time Spent Online

350

400

Time Spent Online with Consumer and Institutional Media

At H d S h l

Total Time Spent Online

Consumer Media

• Broadcast TV and Radio

• Cable & Satellite TV• Pure-play Internet*• Newspapers

250

300

350

per

Year

Time Spent Online 10.5% of Total Time

Spent with Media

Time Spent Online 4 0% f T t l Ti

At Work

At Home and School • Newspapers• Recorded Music• Out-of-Home• Consumer Magazines• Videogames• Consumer Books• Home Video and In-Flight Entertainment

• Pure-play Mobile

150

200

250

er P

erso

n p 4.0% of Total Time

Spent with Media

Pure play Mobile• Box Office• Yellow Pages• Educational Books

Institutional Media

50

100

Hou

rs p

e

• Professional & Business Information

• Training & For-Profit Education

• Business to Business:−Magazines−Tradeshows, Conferences &

0

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010E

Seminars−E-media

• Business-related:−E-mails, instant messaging and text messaging−Online and mobile search

9

Source: VSS Communications Industry Forecast 2010

*Internet and mobile use of traditional media (such as downloaded music, newspaper websites or info alerts, e-books, cable modems, online video of TV programs and internet radio) was included in the traditional media segment, not in pure-play internet or mobile content. Pure-play internet and mobile services includes telecommunications access (such as DSL and dial-up, but not cable modems), pure-play content (such as eHarmony, GameSpy and MobiTV), and mobile instant messaging and e-mail alerts.

−B-to-B e-commerce and m-commerce

Spending on Pure-Play Internet and Mobile Advertising

Resilience in search spending and strong growth in video and social media offset

Pure-Play Internet and Mobile Advertising Spending($ billi )

Resilience in search spending and strong growth in video and social media offset declines in classifieds and display

$40.0

$45.0

$50.0

Pure-Play Internet Advertising

Pure-Play Internet and Mobile Advertising Spending($ billions)

$25.0

$30.0

$35.0

$Pure-Play Mobile Advertising

Total Pure-Play Internet and Mobile Advertising

$10.0

$15.0

$20.0

$0.0

$5.0

10

Source: VSS Communications Industry Forecast 2010, VSS Communications Industry Historical Database 1975-2010

Consumer Media Spending & Industry Spend as a % of Disposable Income

Consumer end user media spending per household has grown rapidly since 1975

Consumer Media Spending per Household and as % of Disposable Income

Consumer end-user media spending per household has grown rapidly since 1975– Consumer media spending now represents approximately 2% of disposable income

$2,000

$2,400

2.0%

2.3%

(

Consumer Media Spending as a % of Disposable Income

--------

$1,200

$1,600

1.4%

1.7%

er h

ouse

hold

)(%

of disposab

Doubled in 35 years

$800 1.1%

($ s

pent

pe

ble income)

Consumer Media Spending per Household ($)

--------10x bigger in 2010 than it

was in 1975

$0

$400

1975 1980 1985 1990 1995 2000 2005 2010E0.5%

0.8%as 9 5

11

Source: VSS Communications Industry Forecast 2010, VSS Communications Industry Historical Database 1975-2010

Communications Spending by Industry

Traditional Consumer Advertising has lost substantial market share

Total Communications Spending by Industry

Traditional Consumer Advertising has lost substantial market share– Both Entertainment & BIS have expanded, while Education & Training has contracted as a % of total

($ millions)

$1,000,000

$1,200,000

p g y y

1975 2010% of Total:

29% 13% -55%

Industry Sectors

Entertainment & Leisure

Traditional Consumer Ad Media

Relative Change

$600,000

$800,000

31% 22%

11% 25%

-29%

227%Education & Training

Marketing

Business Information & Services

T d

$200,000

$400,0007% 16%

8% 6%

29%

228%

-25%

Targeted

$0

$ 00,000

1975 1980 1985 1990 1995 2000 2005 2010 E

14% 18% 128%

12

Source: VSS Communications Industry Forecast 2010, VSS Communications Industry Historical Database 1975-2010

VSS Communications Industry Forecast

Please contact John Suhler at suhlerj@vss com Please contact John Suhler at suhlerj@vss.comfor more information about this presentation and for access to our newsletter

More information about the VSS Communications Industry Forecast can be found at www.vss.com/forecast

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As an industry research leader for over 25 years, VSS publishes and distributes various forecasts

d t hi hli hti t d d j tiand reports highlighting trends and projections including the VSS Communications Industry Forecast and the VSS Communications Industry Historical Database

– This research informs not only investment decisions but enables performance monitoring of portfolio companies compared to peer groups

6 Industry Sectors 4 Revenue Streams 20 Segments 100 Sub Segments

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100 Sub-Segments 395 Charts and Graphs