FY2019 3Q Earnings Announcement
Event Summary

Date：January 31, 2020

15:30-16:30

Venue：Akasaka Park Building 21F, 5-2-20 Akasaka, Minato-ku, Tokyo 107-6121
Speakers ：Akira Tanaka President
Noriaki Kuromizu Vice President
Junichi Onoue Board Director

Presentation

Moderator: We will hold WOWOWʼs (WOWOW INC.) briefing on the results for the third
quarter of FY2019 as per schedule. Thank you for attending today. Please note that thecontent, questions, and answers that were discussed at todayʼs briefing will be distributedin full through an external organization and posted on our website.
First of all, I would like to introduce the participants here today. From the left, Mr. Akira
Tanaka, President and Representative Director; Mr. Noriaki Kuromizu, Director andExecutive Vice President; Mr. Junichi Onoue, Director of IR Accounting. The President, Mr.
Tanaka, will explain the financial highlights for the third quarter of FY2019.

1

Tanaka: Thank you everyone for coming here today. I will explain the highlights from thethird quarter of FY2019 up to the end of last year.
Please take a look at the materials on hand and the slide in front of you and ensure that you
have first signed up. As can be seen from this, there were 402,000 new subscribers and447,000 cancellations, resulting in a net decrease of 45,000 subscribers.
As shown here, in the third quarter, new subscriptions were driven by boxing by Naoya
Inoue and musical live shows by Southern All Stars, as well as continuous drama W, amongothers. Compared with the same period in the previous fiscal year, the number of new
subscribers decreased considerably YoY. The difference between the number of new
subscribers exceeded 0.1 million in the previous year when tennis player Naomi Osaka won
the championship last year and in the previous fiscal year.
In the same period of the previous fiscal year, although there were some special factors,
the net decrease in the number of subscribers led to severe results. This is undoubtedly
attributable to the significant increase in the number of options in viewing content as aresult of the spread of paid video distribution services.
Net sales increased by JPY261 million, mainly because of an increase in external sales ofsubsidiaries compared with the same period of the previous fiscal year. Ordinary income
increased by JPY902 million as a result of decrease in program expenses.
Mr. Onoue, the IR Accounting Representative, will explain the details of the figures.

2Onoue: I will explain the income and expenditure of the major consolidated companies on
page nine. Firstly, the status of subscriptions: the number of new subscribers totaled
402,000, a decrease of 87,000 from the same period in the previous fiscal year. The
number of cancellations was 447,000, a decrease of 18,000 from the previous year. The
net number of subscribers decreased by 69,000 compared with the same period of theprevious fiscal year, to a net decrease of 45,000.
The cumulative net number of subscribers was 2.85 million, a decrease of 44,000 from thesame period in the previous fiscal year. As Mr. Tanaka explained earlier, the net number ofsubscribers and the cumulative number of subscribers have declined compared to theprevious year, resulting in a very difficult situation for our Company.

3This is the change in the cumulative net number of subscribers since FY2014, whichmarked the 13th consecutive year of net increase from FY2006 to the previous year.

4This is the income and expenditure. I would like to explain the status of the consolidated
income and expenditures. Both sales and profits increased YoY. Net sales increased by
JPY261 million to JPY61,640 million, and ordinary income increased by JPY902 million toJPY8.21 billion compared to the same period of the previous fiscal year.

5The reasons for the differences will be explained on the following pages. Comparing net
sales with the same period of the previous year, I would like to explain the consolidated
sales on the left. This represents an increase of JPY261 million from the same period of
the previous fiscal year.
This is a breakdown. In the lower part of the graph, paid broadcasting revenue decreasedby JPY147 million because of a decrease in the number of subscribers compared with thesame period of the previous fiscal year. Other revenues increased by JPY408 million YoY,
mainly because of an increase in incidental business revenues, such as revenues from theevents by WOWOW itself, and an increase in non-group revenues of consolidated
subsidiaries.

6This is a factor behind the difference in the consolidated ordinary income. The left siderepresents factors for increasing profits, and the right side represents factors fordecreasing profits. The main reason for the increase is that program expenses decreasedby JPY1.25 billion. The details will be explained on the next page.
Retirement benefit expenses decreased by JPY333 million. In the same period of theprevious fiscal year, one-time expenses were recorded because of the change from thesimplified method to the principle method for calculating retirement benefits. This year, thedifference is due to the absence of such incidents. The share of profit of entities
accounted for using equity method increased by JPY155 million, which was attributable toan increase in earnings of entities accounted for using the equity method of theBroadcasting & Satellite Systems Corporation.
This was followed by a major negative factor. Foreign exchange gains and losses
decreased by JPY247 million YoY. Depreciation and amortization increased by JPY162
million from the previous year.
Depreciation and amortization increased because of the impact of the reconstruction ofsome broadcasting centers in the previous fiscal year to prepare for the launch of BS4K
broadcasting, which is scheduled for December of this year. Lower revenues from viewing
due to a decrease of JPY430 million in others, an increase in incidental expenses due to therebuilding of the broadcasting centers mentioned earlier, and an increase in system7

expenses due to an increase in expenses related to WOWOW members on demand areincluded in this.

8This is the change in program expenses and the difference from the same period of theprevious year in the third quarter. Program expenses decreased by JPY1.25 billion YoY.
The main breakdown of program expenses is shown with dark blue; the fee-based program
expenses are for programs other than major Hollywood companies.
In the same period of the previous fiscal year, there were large-scale musical live showssuch as that of Amuro Namie. However, in the current fiscal year, there were no programsof the same scale, and as a result, there was a decrease of JPY1.1 billion compared to thesame period of the previous fiscal year.
Picture distribution expenses, which are in light blue, are expenses related to movie
programs procured from major Hollywood companies. This was a decrease of JPY36
million from the same period of the previous fiscal year, mainly due to differences inprogram titles.
As shown at the top, other program expenses are expenses such as data broadcasting.
This represents a decrease of JPY116 million from the previous year because of thedecrease in costs and other factors.

9This is the status of the income and expenditure of the major consolidated companies.
WOWOW COMMUNICATIONS,Inc. is a telemarketing firm. Net sales and ordinary incomeare JPY6.63 billion and JPY186 million, respectively. Revenues increased because of anincrease in orders for telemarketing services from existing external customers. However,profits decreased because of an increase in costs associated with the incurrence of initialcosts for new orders.
Here is WOWOW PLUS INC. This Company is developing basic channels such as BS, 110
degrees CS, and cable television. Net sales and ordinary income were JPY3.89 billion andJPY187 million, respectively. Revenues and profits rose because of an increase in viewing
fees and other factors.
Thank you for your attention.
Moderator: Now, Mr. Tanaka, President of our Company, will explain our earnings forecasts
for FY2019.

10

Tanaka: First, I will provide a supplementary explanation about the VTR and its contents.
Needless to say, the Olympics and Paralympics are approaching this year, and there is no
doubt that sports will attract much attention. We at WOWOW will deliver the excitement ofseveral sports.
First of all, Six Nations Rugby, the game of the six European rivals of rugby, will open
tomorrow, and we will start broadcasting it tomorrow night.
Last year, the Rugby World Cup in Japan was very exciting. England won the firstchampionship, Wales won the Best Four, and Scotland and Ireland competed with Japanand the preliminary pool. All of these teams will appear on this program.
Furthermore, we have been broadcasting rugby since December, and we have also beenbroadcasting the Olympic events and rugby sevens since December. What we would like to
pay attention to here is that Kenki Fukuoka, who has played a major role in the 15-member
system of rugby, has announced that he will concentrate on the 7-member system, aiming
toward the Olympic Games; so we are very excited to see him enter the competition and tobroadcast it.
Furthermore, as for Olympic-related events other than rugby, it has been reported that weplan to acquire the right to participate in golf in the Olympics, which we will broadcast, andHinako Shibuyo will participate in LPGA to acquire the right to participate in the Olympics,
following Naho Hataoka.

11

The representative for tennis has not yet been decided. However, I heard that Kei Nishikoro
missed the Australian opening because of injury, but he has scheduled to participate in theATP tour from February next month with the right to participate.
In addition, on February 1st, free broadcasting will be carried out over a period of 17 hours
from 08:00 to 08:00 in the prime channel in WOWOW. As for free broadcasting during thisperiod, I would like you to see the Australian Open Tennis Womenʼs Final tomorrow and theopening game of the Six Nations Rugby that will finally start tomorrow, as I mentioned
earlier, free of charge. In addition to this prime channel, we will also simultaneously deliver
WOWOW online, except for a few programs, but not to the public. There are also talks
about how to do this, but I would like as many people as possible to experience theoutstanding contents of WOWOW.

12

In terms of other content, ATSUSHI is featured on the VCR, and Masaharu Fukuyama isplanning to hold a live show to celebrate the 30th anniversary of his debut as well.

13

First of all, the application plan in FY2019. Please refer to the documents.
As I mentioned earlier, one of the reasons for the net decrease in the third quarter was theincrease in video content viewing options for customers, because of the widespread use of
pay-per-view video distribution services. I would like to say that the impact of this has
greatly increased. Although we are not able to disclose the full-year projected number of
new subscribers, as we are currently in the process of careful examination, we are awarethat the net increase of 30,000 new subscribers, which was originally planned, is a very
difficult situation for us.

14In terms of the revenue and expenditure plan, although we are prepared to see a decline inviewing revenue in the full fiscal year because of a net decrease in the cumulative net
number of subscribers, we expect the profit outlook to remain unchanged as we willthoroughly control and grip costs.
This is the outline of our plan.

15

Question & Answer
Moderator: We will move on to the Q&A session. If you have any questions, please raise
your hand. Does anyone have any questions? Please raise your hand.
Questioner A: Thank you for your explanation. I have two questions.The first one is this:
you talked about yearly instruction in January, enhancing two original products, anddeveloping new categories that you talked about at the scheduled briefing on the otherday, and also about creating a strong axis for distribution. If possible, I would like you to
explain more specifically about the focus points for this year.
Second, you mentioned the cost grip earlier. What is the specific cost item? Although it
may be good if you look at it from this fiscal year, I would like to see if it is possible toexplain whether it will have an impact from the medium-term perspectives. Thank you.
Tanaka: I'll answer your questions. First of all, I would like to talk about two main issues thatI mentioned in my comments at a press conference at the beginning of this year, 2020. As
for the first question, we regard the strengthening of the original content and developmentof new categories as the main issues.
Specifically, we are currently in the process of introducing specific content; we believe that
we can achieve this within some time, but we would like to limit this to the present day.
We are now preparing to do this, so I hope that we will be able to introduce specificcontents after a while, but I cannot say any more today.
As for your second question, with regards to creating a strong axis for distribution, werefer to this at the press conference; we are now preparing it for next year's
announcement by December. We are now preparing to increase the number of entrances
to subscribe to WOWOW without registering the CAS, which is a Web-ID.
Of course, WOWOWʼs services can be seen on the three-channel broadcast, the web, or on
the same axis, either through radio or cable stations, but we are developing services thatallow these services to be seen on the internet as well.
The entry point for subscribers is virtually the entry point for CAS registration, but I would
like to create an entry point where the simultaneous distribution of these three channels
can be seen even in the registration of net IDs. Rather than simply launching an entirely
new OTT service, we are aiming to increase the number of subscribers to a single service
that we are currently offering.
In terms of costs, the biggest factor with regards to monetary value is to thoroughlymanage production costs and program costs, although there are general issues.
In the medium term, we are focusing on enhancing original content and cultivating new16

genres, so I think it would be better to refer to this as a scrap-and-build strategy, including
strategic investment. However, I would like you to understand that we will have a firm grip
on both the portion that we invest in and the portion that we control.
Moderator: Does anyone have other questions?
Questioner B:

I would like to ask about two points. The first point is whether or not thebusiness was started in cooperation with SKY PerfecTV! during the current fiscal year andwhether the two companies have begun referring customers to each other. How much ofthis fiscal yearʼs effects, do you think, have come from this? Although the figures are
somewhat difficult to obtain, the first point is the extent to which they are expected to havean impact.
Another point is that the spread of paid video distribution services was the cause of thecurrent net decline and the decline in the number of best-selling video subscribers. So far,two points have been raised. Do you think that WOWOW will grow amid the growth of paid
video distribution services based on these two points? In addition to these two points, isthere anything else that you are thinking about?
Tanaka: The first point is the cooperation with SKY PerfecTV. Currently, it is still in theprocess, and SKY PerfecTV! has not announced it, so we will refrain from the number oftransactions through SKY PerfecTV!, but we have been able to achieve a certain effect.
Although we have a good deal, we believe that we will be able to do more, and that we will
be able to cooperate with SKY PerfecTV! or with other broadcasters in SKY PerfecTV!
through SKY PerfecTV! We recognize that we will need to expand this further.
In addition, I think that there will be measures for the distribution of paid videos, but I do
not think that there are any weaknesses in WOWOW, and I would like to make full use ofWOWOWʼs strengths.
It only delivers pay-for-video content, but we have both broadcasting and distribution, so I
believe that doing this thoroughly will undoubtedly be one of our strengths.
In that sense, the entry point for video distribution is still weak, so I would like to build auser-friendly system towards December, which should not be subordinated to distribution,
while enhancing usability and services.
In addition to this, I believe that we can leverage WOWOWʼs strengths to compete in thecreation of original content by strengthening the relationships with producers andrights-holder's organizations that WOWOW has accumulated over the past 20 to 30 years.
Moderator: Does anyone else have a question? Please raise your hand.
There seems to be no more questions, so we will finish here. Finally, we have a message

17

from Mr. Tanaka, the President of our Company.
Tanaka: Thank you very much for your participation taking time from your busy schedule
today. Finally, I repeat the same thing: we recognize that our assets and strengths have notyet been fully leveraged.
As I have said, broadcasting and distribution is a great route, but it is no longer
user-friendly, so it is certainly going to be a strength if we get it right.
From that point on, the relationship with creators and rights holders, which has been built
so far, will undoubtedly be positive by continuing to build good relations. Above all, we have2.85 million in assets, and while we have these assets, we would like to advance a variety ofreforms as we subscribe to them. I would like to ask for your continued support.
I wish you continued success.
Moderator: Accordingly, we are closing the financial results briefing for the third quarterof FY2019.
We would like to thank you for attending the financial results briefing today.
[END]

18