FY2019 2Q Earnings Announcement
Event Summary

Date：October 31, 201915:30-16:30

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: Well, itʼs about time to begin. So, letʼs start the financial results briefing ofWOWOW INC. for the second quarter of fiscal year 2019. Thank you all for taking time outof your busy schedule to be here today.
Please note that the entire text of todayʼs briefing and question-and-answer session will be
distributed through external organizations and posted on our website.
First of all, let us introduce to you our representatives joining the session today from left toright. Akira Tanaka, President and Representative Director of our company; Noriaki
Kuromizu, Executive Vice President; and Junichi Onoue, Executive Officer and General
Manager of Investor Relations, Finance, and Accounting.
Now, President Tanaka will report the financial results highlights for the second quarter offiscal 2019.

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Tanaka: Thank you very much for coming here in spite of your busy schedule. I am Tanaka.
I will give you a brief overview of the financial results in the form of highlights. After that,
Mr. Onoue, our General Manager of Investor Relations, Finance, and Accounting, will
provide you with more information.
Please see the handout given to you or the slide shown on the screen in front of you. First,
look at the number of subscribers. The total number of new subscribers in the second
quarter was 282,000, and the number of customers who cancelled their subscriptions was
303,000, resulting in a net decrease of 21,000 in the total number of subscriptions.
As can be seen from the handout, there are several major factors that prompted the new
subscriptions, including the boxing matches featuring Naoya Inoue. In addition, you can
see that the year-to-year difference in the number of new subscribers is quite large. Thisdifference was caused by the US Open Tennis Championships in September of last year, inwhich Naomi Osaka seized the impressive victory. Because of this dramatic event, we
gained over 100,000 new subscribers last year which we didnʼt have this year.
Now, letʼs move on to the revenue and expenses and the consolidated financial results. We
posted a sales growth of 386 million yen compared with the same period of the previous
fiscal year due to several factors, including an increase in revenue from viewing fees. This2

quarterʼs ordinary income increased by 500 million yen due to factors that promoted anincrease in sales. The first half of the fiscal year resulted in an increase in sales and profits.
Next, Mr. Onoue, who is in charge of Investor Relations, Finance, and Accounting, will
explain the numbers in detail.
Onoue: Let me go over the details of the status of revenue and expenditures of ourconsolidated companies on page nine of the handout.

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First, letʼs look at the subscription status. The number of new subscribers in this second
quarter was 282,000, which was a year-on-year drop of 65,000. Sports content, such as
boxing and tennis, has helped gain new subscriptions, but the number of new subscribers
was significantly smaller than the same period of the previous year.
As President Tanaka explained earlier, this difference resulted from the fact that in the lastyear we gained over 100,000 subscribers in September alone, prompted by Naomi Osakaʼs
victory in the US Open Tennis Championships.
The number of cancellations in this quarter was 303,000, which was an increase of 13,000
from the same period of the previous year. As a result, the net number of subscribers
dropped by 21,000, and the total number of subscribers decreased by 78,000 comparedto the same period of the previous year. The cumulative total number of subscribers in thisquarter is 2.881 million, down 53,000 from the same period of the previous fiscal year.

4This slide shows the changes in the cumulative total number of subscribers since FY2014.
Including the fiscal years not shown on this slide, our subscribers increased continuouslyfor 13 consecutive periods from FY2006 to FY2018.

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Now, letʼs move on to the status of revenue and expenditures. Please look at the upper halfof the table, showing the state of consolidated revenues and expenditures. This quarterʼs
net sales were 41.070 billion yen, up 386 million yen from the same period of the previous
fiscal year. Ordinary income of this quarter was 4.955 billion yen, which was a year-on-yearincrease of 500 million. We will go over these differences in sales and ordinary income
next.

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First, letʼs look at the difference in sales. I will go over the consolidated sales figures shownon the left chart. This quarterʼs sales increased by 386 million yen from the same period of
the previous fiscal year. As for the sales breakdown, the dark blue areas in the lower partsof the bars stand for the revenues from viewing fees and pay television services. This
revenue increased by 233 million yen in this quarter because the cumulative total numberof subscribers was generally larger than the same period of the previous fiscal year.
Then, look at the lower item of the chart. On the bar graph, itʼs the light blue parts of thebars. The figures stand for other income, which includes non-consolidated revenues fromWOWOWʼs secondary businesses including those from events and our subsidiariesʼ
non-group sales. Such other income increased by 152 million yen, mainly due to anincrease in the revenues from events, etc., from the previous year.

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Now, let me go over what brought the difference in the consolidated ordinary income. The
left half of the graph shows factors that brought an increase in profits. The right halfshows factors that brought a decrease in profits. Iʼll first talk about the major factors thatbrought an increase. The first such factor is retirement benefit expenses, which decreased
by 333 million yen. In the same period of the previous year, one-off expenses wererecorded because the method for calculating the severance benefits was changed fromthe simplified method to the principle method in the last year. The increase in profit was
brought about because such one-off expenses were not recorded in this quarter.
As for the increase in viewing fee revenue, we have explained the factors earlier.
The return on investments resulted from the equity method of accounting also increasedby 125 million yen. This was due to an increase in the profits of B-SAT or Broadcasting
Satellite System Corporation.
Program-related expenses also decreased by 112 million yen. We will explain this on thenext page.
The right half of the chart shows main factors that contributed to the profit decline. The
first such factor is depreciation expense that increased by 197 million yen in this quarter.
This is for the partial rebuilding of our broadcasting center in Tatsumi currently underway

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in preparation for the launch of BS4K broadcasting scheduled to begin in December ofnext year. The increase in depreciation costs was mainly due to this rebuilding work.
In addition, the loss of profits increased by about 106 million yen. The factors for this loss
include the increase in building management costs associated with the rebuilding of thebroadcasting center mentioned earlier.

9Letʼs move on to the difference in program-related expenses, which decreased by 112
million yen from the same period of the previous fiscal year. The main part of the
program-related expenses is shown by the dark blue areas of the bars in the graph, which
we call the expenses for pay television programs other than the ones by Hollywoodʼs major
studios. We had large-scale music live programs, including the one by Namie Amuro in thesame period of the last year but didnʼt have any programs of the same scale in this quarter,
resulting in the reduction of 53 million yen in the program-related expenses.
The light blue areas in the middle of the bars stand for movie program distribution
expenses that we pay for production studios. Specifically, these are the fees we pay tomajor studios in Hollywood for their movies, which increased by about 15 million yen
mainly because of the difference in program titles distributed.
The top parts of the bars, which are very narrow and hard to see, show the expenses fordata broadcasting, etc., which decreased by 74 million yen from the previous year.

10Next, letʼs look at the revenues and expenditures of our major consolidated subsidiaries.
The upper part of the table shows the figures of WOWOW COMMUNICATIONS INC.. The
companyʼs main business is telemarketing. Its net sales in this quarter were 4.409 billion
yen, and its ordinary income was 125 million yen. The sales increased due to an increase inorders from its existing external customers, but the cost has increased because of theinitial and other costs necessitated by the new orders. As a result, this quarter recorded a
decline in profits.
The lower table shows the numbers of WOWOW PLUS INC., a company engaging in theoperation of basic channels for broadcasting platforms including BS, CS110-degree, andcable televisions. Its sales in this quarter reached 2.573 billion yen, and ordinary income
was 142 million yen. The sales are almost the same as the previous year, but the ordinary
income has increased by 45 million yen due to factors including a decline in the cost of
sales compared to the previous year.
Thatʼs all from me.
Moderator: Now we're showing you a video summary of the programs we're going tobroadcast on the screen in front of you.
Moderator: Now, President Tanaka will talk about the earnings outlook for fiscal 2019.

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Tanaka: Let me explain a little about the VTR weʼve just watched. Please see this video first.
Taiwan Swinging Skirts LPGA championship is currently held in Taiwan and introduced in
the video. The championship has gone on-air today live on the WOWOW.
This video here is taken by the UniCamera set in close proximity with Hinako Shibuno andhas gone on-air on WOWOW Membersʼ On-Demand at 11 am today. Weʼve been following
her from the first hall. She has just finished the 15th hall, and it's two under, four strokes
behind the top player.
It's very unfortunate that we can only see her nose now in this critical timing. She wasplaying just now, right? Unfortunately, they canʼt hear what I am saying here. So, she may
appear on video at any moment while I speak. When that happens, please ignore me andfocus on her play. Oh, here she comes! WOWOW Membersʼ On-Demand is broadcasting
not only global contents but also closely following and broadcasting Miss Shibunoʼs play.
As explained in the narration for the VTR, this tournament features superstar players who
won the first-rated golf tournaments across the world. For instance, the lady over there is
Hannah Green, an Australian golfer who won the US Womenʼs PGA Championship. The
other one is Jeongeun Lee6, who won the US Womenʼs Open this year. This is the kind ofthing weʼve started broadcasting from today.
This event will continue until November 3, Sunday. Another fun point you should look for

12when watching these golf tournaments is that the rankings in the tournaments will partly
determine if the players will be able to participate in the Tokyo Olympic Games.

13Letʼs move on to the next screen. I would like to introduce a few new initiatives of ours.
In the middle, the title says “I Started Living on Mars for Some Reason.” This program was
not introduced in the VTR, but it is our original program linking the drama and the stage
play. The scripts for both TV drama and stage drama segments were written by Mr. Osamu
Suzuki, who has produced a number of hit TV shows.
The drama segment will go on-air on WOWOW in January of next year. The drama segment
will be played in two theaters in two places in May, in the Sunshine Theatre in Tokyo and theSankei Hall Breeze in Osaka. This is a new type of project we are pursuing that combines
TV broadcasting and stage play.
And then, on the right is Disney Broadway Hits. Some of you may have seen andremembered this event held last year. It was enthusiastically received by the audience. We
are rerunning that program. This event will offer a very attractive performance, in which
Broadway stars sing and dance to a number of Disney musical songs with theiroutstanding singing skills. This year, WOWOW will invite the stars once again and present a
wonderful opportunity for them to show their great performance and singing skills. The
event will be held on January 30 and 31 next year in the Tokyo International Forum.
These are two examples of events WOWOW presents along with broadcasting programs.

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You may have already seen our release, but Iʼd like to let you know once again that webegan offering the WOWOW broadcasting service at the major 110-degree broadcasting
services, Sky Perfect! from October 25 of last week.
We have been already offering WOWOW broadcasting services since 2006 in othersatellite waves of Sky Perfect!, such as 124-degree and 128-degree CS services.

But thisis the first time for us to offer our service the main services of Sky Perfect!, 110-degree
BS, and CS broadcasting. This allows more than 2.2 million Sky Perfect! customers to
subscribe to WOWOW service through customer centers or online on a one-stop basis,making it easier for us to introduce new initiatives.
In addition to that, we work with various content providers for Sky Perfect! and WOWOW,
including Golf Networks and J SPORTs, a sports channel. We can work with these providers
to develop new products and services that are useful and convenient for our customers.

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Then, for our plans for subscription including the future ones, the numbers we have are
the same as the ones we released in May.

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Then, for the performance forecast, we've already made an upward revision in the
consolidated performance forecast for Q2 on October 25. The ordinary income rose byapproximately 1.7 billion yen compared with the initially announced figure. However, thisrevision was made because it became certain that the accrual of program-related
expenses and other factors will be carried forward in Q3 or afterwards. Therefore, theperformance forecast for the current year has not been changed from the original
forecast.
That's all from me.

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Question & Answer
Moderator: We'll now move on to the question-and-answer session. If you have any
questions, please raise your hand. So, please let me know if you have any questions.
Questioner A: Thank you for your briefing. I want to ask you two questions.
The first question is about the number of subscribers in the second-half period. To achieve
the stated goal in your plan, I believe that you will probably need to acquire more than
50,000 new subscribers during the period. In the fourth quarter, you have tended to gain
more subscribers in years that saw not only weak but also negative growth. So, I think thatthe third quarter will hold a key in achieving this goal. In order to get a net subscription
count, please tell us your programs or points you would like to promote to gain thenecessary number of subscribers. This is my first question.
The second question is related to medium-to-long-term plans. I think that 4K, 8K, and othercosts will be incurred in the medium-to-long term. What kinds of expenses do you think will
be incurred? Could you go over the costs and update on them?
Please kindly answer my two questions.
Tanaka: I will answer the first question, and Mr. Onoue will answer the second question.
As you said, the number of subscribers declined by 20,000 in the first-half period, so weare planning to obtain a fairly large number to achieve our goal of adding 30,000
subscribers. Some of the specific programs we have in mind to promote this goal are not
yet announced, but to give you some examples, we are planning to promote the AustralianOpen in January and the Rugby World Cup that has captured the attention of people inJapan. We will be broadcasting the Rugby World Cup in the third season, I think. Rugby will
be in the third season. We will also be broadcasting the Six Nations Championship andother rugby events. So, we are planning to offer contents like these that we have been
showing every year, plus some content of large-scale music events.
The number 50,000 is not an easy goal to accomplish. We recognize that it will be toughbut would like to achieve it by harnessing these contents and combining marketing
initiatives and the like with Sky Perfect! with whom we became partners. This is our plan.
Mr. Onoue, please answer the second question
Onoue: You want to know what our expenses will be like for 4K broadcasting, right?
Questioner A: Yes, I want to know the expenses for mid-term, 4K, and 8K services. Can you
go over the figures you already announced and, if possible, update on them?
Onoue: We are still in the middle of considering the contents to broadcast and what theentire services will be like, so we canʼt give you specific figures yet. For now, Iʼd like to give
you some general ideas on your question, including what costs we are expecting.
The most important thing for us is to offer content. For this purpose, we need to give them18

in 4K or upconvert them into 4K, which will necessitate the expenses including suchproduction and editing costs.
In addition, relating to the partial reconstruction plan for our broadcasting center, etc., that
we talked about when giving you an overview of revenue and expenditures, we are planning
to introduce such 4K facilities, etc., as part of the reconstruction project. We have alreadyfinished the rebuilding and now are working on the facility introduction. This has increased
the costs for managing the building and depreciation that we talked about earlier.
In the future, we will introduce programming and other systems for 4K broadcasting alongwith transmission facilities. Once introduced and used, depreciation costs will be incurred,
which will affect the costs. Thatʼs all we can say now.
Questioner A: Thank you very much.
Moderator: Does anyone else have questions?
Questioner B: I remember that you said in the past that you were starting to see great
potential of WOWOW Membersʼ On-Demand for young users. I would like to know what
your current views are in regard to this point.
Probably relating to it, you saw the video of Ms. Shibuno distributed exclusively toWOWOW Membersʼ On-Demand subscribers. I also want to know your companyʼscontent-related policies including the reasons for producing the original contents like Ms.
Shibunoʼs and providing initiatives that incorporate your original contents andbroadcasting programs and if you intend to increase this kind of content in the future. I
would like to ask for further suggestions and policies regarding such content.
Tanaka: I will answer that question. WOWOW Membersʼ On-Demand is not exclusively
intended for young people but for all age segments. I believe that you are already familiar
with the details of our On-Demand program, but since December of last year, we started
operating three channels simultaneously along with broadcasting. In addition to that, we
now provide missed-program webcast, catch-up TV services, and an archive of
broadcasted programs.
These services enable WOWOW customers to see any program they like in their
WOWOW-installed devices anywhere and see any program they missed last week.
Among these initiatives, I will give you some examples of what we have done in the past foryoung people. Weʼve broadcasted some lives of musicians popular among young people
before any other platform based on the approval from the musicians or as appropriate
through WOWOW Membersʼ On-Demand, edit the content, and broadcast it a few months
after that on a regular WOWOW channel. We hope to continue doing this throughconsultation with musicians in ways that young people would find convenient and easy touse.
And about your question concerning the young peopleʼs response, I would like to introduce
one such example. Itʼs called Paravi, a platform used for this kind of simultaneous

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distribution. This is more like a simultaneous program delivery platform rather than amembership-based on-demand service, making Paravi an entry point for customers to
subscribe to WOWOW service by simply concluding subscription contracts online with noneed for obtaining B-CAS cards.
I canʼt give you precise figures for the Paravi service, but an overwhelmingly large
percentage of the customers coming from there belongs to the young age group. This
trend was particularly strongly seen when, for instance, we broadcasted boxing matchesfeaturing Naoya Inoue this May.
Therefore, we can say that video distribution system tends to attract young customers. We
will continue to actively promote WOWOW Membersʼ On-Demand.
Moderator: Does anybody else have questions?
It seems like nobody else has questions, so we will finish here. President Tanaka, pleaseconclude the session.
Tanaka: Thank you for gathering here in spite of your busy schedule. I believe that thehottest topic on television recently is the Rugby World Cup. It is a pity that we are not a
broadcaster for this championship but Nippon television network, a commercial
broadcaster; NHK, the public broadcaster; and J SPORTS, a pay television broadcaster,
have broadcasted the event by fully harnessing their respective strengths in ways that
contribute to viewers and society. These efforts by them have culminated and turned the
Rugby World Cup into such a hugely popular and successful event.
In other words, the recent surge in the popularity of rugby was brought about by the powerof television. It has resulted from the powers of television or broadcasting being fully
harnessed. As one of the broadcasters, we are very happy that the value of broadcastinghas been fully demonstrated through this event.
WOWOW, as a part of the broadcasting industry, is determined to provide attractive
content, like the Rugby World Cup, continuously. I believe that whatever we do, it all comes
down to this attitude.
I would like to finish this session now. Thank you for coming today.
Moderator: With this, we are concluding the financial results briefing session of WOWOW
INC. for the second quarter of fiscal 2019.
In the end, let me add that the book titled, “Who Am I?” based on WOWOWʼs documentary
series on Paralympic Games has been published for the first time. The materials about the
documentary series and its behind-the-scenes stories are provided to you in the handouts.
We hope that you will enjoy reading it.
Thank you again for attending the financial results briefing session today.
[END]

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