Modelo para el análisis estructural

Parental control on Premiere

The German Interstate Treaty on the Protection of Minors in the Media protects minors from offerings in the electronic information and communication media that could threaten or be harmful for their development or upbringing. This also includes protection from offer-ings that violate human dignity or other objects of legal protection. The programming of all TV channels in Ger-many must adhere to these regulations.

Program operators are aware of their responsibilities and take all necessary steps to comply with the legal provisions. Freiwillige Selbstkontrolle Fernsehen e. V., a self-regulated institution established by private broad-casters, makes recommendations on broadcast times.

Its standards provide broadcasters with legal and plan-ning certainty vis-à-vis the supervisory authorities with regard to possible broadcast times. Films released for persons over 18 (FSK 18) can generally only be shown in Germany after 11 p.m. FSK 16 films for persons over 16 are allowed in the German TV program after 10 p.m.

Premiere is breaking new ground with its own control facilities and a technically unique solution for parental control. The protection of minors on the pay-TV opera-tor’s programming is not limited to late transmission times. A secure advance blocking system is used for programs that are unsuitable for minors. The advance blocking system is regarded as a technical innovation and is currently the most effective TV minors’ protection measure available. When subscriptions are taken out, an individual four-digit PIN-code is issued to the contrac-tual partners that will enable a pre-blocked program to be encrypted. Premiere is therefore allowed to screen FSK 18 pre-blocked films already from 8 p.m. and films with FSK 16 around-the-clock. There is no risk that chil-dren or adolescents will be confronted with the contents unintentionally.

The high acceptance and easy use of the advance block-ing system used by Premiere was confirmed by the “Pra-xistest II” survey conducted by the state media autho-rities. In the investigation that was completed in the middle of 2001, two-thirds of the population and 86 per-cent of Premiere subscribers rated the technical advance blocking system as a more sensible protection measure than the regulation of transmission times. This opinion was shared by 94 percent of the subscriber households with children.

Promotion of young media talent

Premiere adheres to the principle, “Doing rather than holding back”, not only from a business but also from a social point of view.

Premiere places great importance on creativity and qual-ity in the promotion of young media talent, which is not least in the interests of the viewers. Only enjoyment in dealing with the medium of television and the compre-hensive know-how of the employees will ensure the fu-ture of the business in the long run.

Together with other well-known media companies, Premiere is supporting the training of journalists, pre-senters, directors and producers by participating in Aus-und Fortbildungs GmbH für elektronische Medien (AFK).

The institution in Munich teaches the basics of the TV in-dustry using practical methods. The young media trai-nees produce a program on their own responsibility on non-commercial training channels.

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In addition, Premiere is a sponsor of the BAF Bavarian Television Academy. At this intercompany training faci-lity, which is highly practice-oriented, BAF students are prepared for the media business in a one-year full-time course.

Premiere also has something to offer the very youngest.

An annual writing competition for fourth to seventh grad-ers is held with the project “Fantastic Film Factory” to-gether with the DISNEY CHANNEL, in which the school-children develop the basis for a script. The winning story is afterwards filmed and screened on Premiere’s DIS-NEY CHANNEL. In this way, young viewers not only con-sume the program passively, but experience media and television as a creative game.

Commitment beyond daily business

Sport plays an important role at Premiere. Since 2000, Premiere has also involved itself in social sponsoring in a suitably sporting manner. Thus, sporting souvenirs belonging to well-known sportsmen and other stars are sold every December in the Internet to the highest bid-ders in the “Premiere Charity Campaign”. Ebay, the world’s largest online marketplace, has been the cam-paign’s partner since December 2003. The proceeds in 2005 were donated to the S.O.S. children’s villages pro-ject “Six villages for 2006”.

Since 2003, Premiere has further expanded its social activities and has issued invitations every year to the

“Premiere Golf Trophy”. Celebrities from industry and sport come together to demonstrate their golfing ability for a good cause. The proceeds from this event go to the Franz-Beckenbauer-Foundation and the Michael-Stich-Foundation.

Soccer from fans, for fans

In 2005, Premiere organized the official German fan clubs’ championship, the “Premiere Fan Cup”, together with the fan representatives of the Bundesliga, for the third consecutive year. Twenty-four teams competed for the championship trophy and the title in June at the Bitburg Sports School. As well as the actual sports com-petition, the main emphasis is on togetherness. The Bundesliga fans compete and celebrate together over two days. The partners of the campaign include Deutsche Bahn AG, Bitburger and Pepsi.

The soccer stars of the future were, on the other hand, once again in the center of things in 2005 at the

“Premiere Jetix Kids Cup”, the only worldwide soccer tournament for under 13 year-olds. Premiere has entered into a wide-ranging alliance with UNICEF and the chil-dren’s station JETIX until 2006 to promote chilchil-dren’s soccer. The tournament is held every year under the UNICEF motto “Children have a right to play and to leisure time”.

Premiere Fan Cup 2005: the winner is awarded his prize

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Environmental awareness

Unlike industrial companies, Premiere as a TV operator does not have to comply with special legal standards of relevance for the environment. Premiere nevertheless feels obliged to meet environmentally friendly standards.

Used materials are therefore recycled to the greatest possible degree. Employees are encouraged to save resources, such as paper, as far as possible, by using electronic business and e-mail.

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Risk management

In order to make risk management an effective tool of corporate management, Premiere’s risk policy is based on its corporate strategy. Premiere’s most important aims include sustained increases in EBITDA and sub-scriber numbers, a long-term reduction in the churn rate, stabilization of the acquisition costs per new subscri-bers at the present level and to increase ARPU. The fol-lowing aims and general conditions further provide the basis for the risk policies:

• Establishment of a company-wide risk catalogue to support corporate management

• High transparency of the activitites of the management board, supervisory board, internal auditors, controlling and external auditors

• Fulfillment of legal obligations with regard to the documentation and transparency of the risk management (KonTraG)

• Compliance with the German Corporate Governance Codex

As the leading pay-TV operator in Germany and Austria, Premiere is exposed not only to general business risks but also to industry-specific risks. The risk policy permits Premiere to consistently exploit business opportunities that arise and to accept and manage the associated risks, to the extent that the risks are unavoidable for the purposes of value creation. Conscious control of oppor-tunities and risks is an integral element of corporate management.

Risk identification

To ensure effective risk management, all existing and potential risks of the Company must be identified. All areas of the Company are included in this process, to ensure that the risk inventory is complete.

Risk analysis

Following their identification, the risks are assessed with regard to their potential impact and the probability that they will occur. Accordingly, a risk should always be identified as such if its occurrence is uncertain and it harbors the potential for financial loss.

As part of the risk analysis, the respective causes are first of all determined and a distinction is drawn in par-ticular between internal risks, i.e. risks that the Com-pany itself can influence, and external risks. A so-called

“expert assessment” is used to quantify the risks. At Premiere, the expert assessment procedure follows the approach that the assessment is made by the area of the Company in which responsibility for the respective risk lies.

Risk controlling

On the basis of the evaluated risks, measures are defined for dealing with the risks. Basically, four possibilities are available in this connection: risk avoidance, risk reduc-tion, passing on the risk and accepting the risk. Under risk avoidance, the transaction associated with the risk is completely waived. This strategy can however only be used for individual risks, since this also excludes exploi-tation of potential opportunities. With risk reduction, an attempt is made to minimize the potential impact of the risk or the probability that it will occur by adopting suit-able measures. Further, the risks can be passed on by transferring them to others, such as insurance compa-nies. The final possibility of risk control involves accept-ing the risk and possibly settaccept-ing up commensurate visions. This strategy is suitable for risks where the pro-bability that they will occur is low, if the costs for pas-sing on or reducing the risks are high or if the risks are uncontrollable.

On the basis of the corporate strategy, Premiere generally consciously accepts risks that are typical for the industry, while operative risks are avoided or reduced wherever possible. Risks with third party responsibility or resulting from force majeure are insured as far as possible.

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In conjunction with the risk inventory, control measures and measures for ongoing monitoring of the risk situa-tion (early warning systems) are noted and the effective-ness of these measures is assessed.

Risk monitoring

Risk controlling is followed by monitoring of the risks, to control the effectiveness of the measures. At Premiere, the identified risks and the management measures adopted are compared with the Company’s risk strategy.

Depending on the results of this comparison, the risk strategy or the risk management measures may have to be adjusted.

Risk communication

Risk communication is a significant factor for the suc-cess of the risk management prosuc-cess. On the one hand, it helps ensure that the employees are sensitized to risks specific to the Company and are continuously informed about aspects of risk. On the other hand, risk communication ensures that information of relevance for decisions is communicated to the respective deci-sion-makers in good time.

Assignment of responsibilities and tasks

The salient points of the organizational structure of the Premiere risk management system are as follows:

• Primary responsibility for the recognition, assessment and control of risks lies with the management board.

The management board can delegate the tasks to ap-propriately qualified employees.

• The risk manager gathers the risk data from the various parts of the Company and reports them to the management board.

• The management board is ultimately responsible for risk management, defining risk policy and deciding on the total risks to be borne by Premiere and on the man-agement of significant risks.

Reporting period

A report on Premiere’s risk management is presented to the supervisory board each year. Moreover, the risk man-ager reports quarterly to the management board and to the head of strategic business planning. The basis for the reports is provided by the risk management manual and the risk management database, which has to be continuously updated by the risk manager.

In addition, an ad hoc reporting system has been estab-lished across the Company for significant risks that arise unexpectedly, in order to be able to react quickly to changed situations.

Early warning systems

Early warning systems are information systems that can draw attention, at the shortest possible notice, to chan-ges in the environment, the market and/or the competi-tion. In particular, changes should be identified here that could have a sustained influence on the Company’s development. Accordingly, the early warning systems used for all risks recorded in the risk management system are listed and described in detail. The person responsible for the risk is responsible for the effective-ness of the early warning system and for continuous observation of the early warning indicators.

Internal audit

The internal auditors audit the regularity, security and efficiency of the business processes and organizational procedures within the group at regular intervals.

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Risk categories

The following significant risks, which could influence the future development of Premiere, are therefore continu-ously monitored as part of the risk management system:

Market and competition risks

Risk: The number, the content and the attractiveness of free-TV channels influence the perception and accep-tance of pay-TV. The free-TV offering in German-speaking countries therefore has a direct impact on the increase in the subscriber base. In the recent past, infrastructure companies have also been positioning themselves in the market with program offerings.

Bids from infrastructure companies and other TV broad-casters could compete with those of Premiere on future extensions of the contracts in the film and sports area.

Measures: Exclusivity in the film and sports area is one of the key factors for the future development of Premiere.

Premiere will be the only broadcaster to show all 64 matches of the 2006 FIFA World Cup^TMlive. From Sep-tember 2006, all top games in the UEFA Champions League, plus top matches from England, Italy and Spain can be seen exclusively on Premiere. Premiere has a comprehensive sports offering. In addition to soccer, Premiere offers up to 2,600 hours of live sport per year, from ice hockey to golf, and from basketball to Formula 1.

In December 2005, DFL Deutsche Fussball Liga GmbH awarded the TV broadcasting rights for the first and sec-ond division matches of the soccer Bundesliga from the 2006/07 season to Arena Sport Rechte und Market-ing GmbH and the live broadcastMarket-ing rights in the Internet (IPTV) to Deutsche Telekom AG. Accordingly, Premiere has no broadcasting rights at present for the matches of the soccer Bundesliga from the 2006/07 season on-wards. However, following a detailed analysis of the cur-rent situation, Premiere assumes that it will succeed in cooperating with one of the holders of the rights, so that the soccer Bundesliga can continue to be seen on Premiere from August 2006.

Direct agreements with all major Hollywood studios and key independent studios guarantee Premiere access to all important top films. Premiere offers its subscribers a unique blockbuster guarantee. In the past financial year, the contract with Warner was extended by three years until the end of 2009. The contracts with the Hollywood majors have residual terms of between 9 and 48 months. The exclusive first broadcasting of major inter-national cinema highlights and top inter-national feature films on television means that Premiere stands out from con-ventional television more clearly than ever before. In ad-dition, Premiere is also positioning itself in the series area as a provider of exclusive premium programs.

On account of the high familiarity of Premiere and also its special position in the market with over 3.5 million sub-scribers in the German-speaking world, Premiere repre-sents an ideal and attractive exploitation platform for the licensors. In view of this, Premiere assumes that it will continue to be able to offer the unique blockbuster guar-antee and the comprehensive live sport coverage in the future.

In addition to the exclusive range of programming, Premiere also stands out from conventional television through the consistent utilization of digital technology.

With 28 TV channels, innovative presentation forms such as multifeed options, video-on-demand offers and multiplexing, i.e. the deferred broadcasting of programs, Premiere is a trailblazer in German digital television.

The parental control achieved through the use of digital technology is also unique.

Last but not least, the avoidance of interruptions in pro-gramming for advertising and long advertising islands means that Premiere will continue to be perceived in future as being largely free from advertising, which also sharply distinguishes it from other television.

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Technological risks

Risk: The operation of pay-TV is fundamentally exposed to risks from violation of the conditional access techno-logy (so-called pirating). No conditional access system can guarantee operation without violation of security.

In addition, the ending of the d-box monopoly and the opening of the technological reception platform for a free receiver market mean that a large number of differ-ent digital receivers are now available on the market.

This could lead to a risk that manufacturers might use technical standards that are incompatible with those promoted by Premiere.

Measures: Premiere uses the Nagravision conditional access system from the Swiss software company, Ku-delski, one of the world’s market leaders in the field of conditional access systems. The conditional access sy-stem was tailored especially to the needs of Premiere.

Through continuous further development of the encryp-tion technology, the risk of a violaencryp-tion of the encrypencryp-tion system is minimized. In addition, Premiere is monitoring possible violations of the encryption technology and com-bating digital pirating at a legal and political level.

Manufacturers that want to produce a Premiere compat-ible digital receiver are first of all given specifications, in accordance with which the device will have to work. The most important terms include support of the Premiere parental control system, correct reproduction of the pro-gram information, the faultless functioning of the multi-feed, for instance in the multi-channel broadcasting of Formula 1, and the guarantee of copy protection for PREMIERE DIREKT programming. For licensing law rea-sons, Premiere may only broadcast films in its pay-per-view offering if they are copy-protected, as it would other-wise be impossible to show cinema productions on tele-vision already three months after the video or DVD-version. Further standards, such as uniform user hand-ling or dynamic channel management primarily serve Premiere subscribers. The operating instructions for the devices are also subject to test procedures at Premiere, to ensure that buyers will be able to familiarize them-selves easily and quickly with the Premiere features. The

“Premiere compatible” grade label is finally awarded following several test runs and successful final checks at Test Solution Center GmbH, which is responsible for the certification.

Customer and sales-specific risks

Risk: The pay-TV market in the German-speaking world is still underdeveloped compared with other major Euro-pean countries and the USA. This is also reflected by the market penetration (ratio of pay-TV subscribers to all TV households) of only a good nine percent. The reasons for this certainly include the fact that German-speaking

Risk: The pay-TV market in the German-speaking world is still underdeveloped compared with other major Euro-pean countries and the USA. This is also reflected by the market penetration (ratio of pay-TV subscribers to all TV households) of only a good nine percent. The reasons for this certainly include the fact that German-speaking