SONY Online Content Discussion

March 2010

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Executive Summary

• Type and volume of content selected may vary depending on our goals for a service

– Hardware focus – seek content and/or viewing experience that differentiates our hardware and drives new purchases

– Service / network focus -- seek content that provides existing Sony hardware owners a compelling addition to (or alternative to) Cable / Broadcast Nets, Netflix, Hulu, and cable VOD

• Although $1-$2BN of content would not provide the range of content available through cable service or broadcast TV, it would eclipse the spend of current online pure-plays

– To provide a full range of channels, MSOs spend $7-$8BN in affiliate fees

– Broadcast networks spend roughly $3BN on programming

– Cable network programming spend varies widely (from tens of millions to several billion)

– Hulu and Netflix Streaming are spending an estimated $100 to $225MM on content

• In the near-term, Sony should allocate spending across a mix of approaches to provide a compelling experience

– License existing content (e.g., films, sports, TV series)

– Commission compelling originals as HBO, Fox, and AMC have done to build their brands

• Costs to a nascent digital network may be nearly twice as much as for established networks as producers may be less likely to bear a deficit

– Offer content under new on-demand models (e.g. early window)

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Programming Spend by Provider ($ MM)

$8,808

$7,046

$4,559

$2,846

$1,460

$879

$223

$117

$31

$226

$100

$0 $2,000 $4,000 $6,000 $8,000 $10,000

DirecTV

Comcast

ESPN

Avg. Big 4

HBO

TNT

Syfy

NESN

Fine Living

Hulu

Netflix Streaming

Subscription TV Providers

Basic Cable / Regional

Sports Networks

Affiliate Fees

Source: SNL Kagan, SEC filings, Wall Street research, SPE Corporate Development research(1) Represents LTM programming expenses for US and Latin America as of 9/30/09. Source: SEC filings(2) Represents LTM programming expenses as of 12/31/09. Source: SEC filings(3) Represents content owner revenue share for 2009. Between 70% and 75% of total ad revenues are taken by content providers. Source: SNL Kagan(4) Streaming content acquisition costs for 2009 only. Source: Wedbush Morgan analyst report

.

(1)

(2)

Broadcast / Leading

Cable Networks

Premium Cable Net.

Online

Affiliate Fees

Content Provider Revenue Share

License Fees for Streamed Content

License Fees for Programming incl Originals

(3)

(4)

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$713

$367

$108

$32

$57

$0 $100 $200 $300 $400 $500 $600 $700 $800

NFL / Fox

NBA / TNT

BCCI Cricket

Broadcast

Cable

Source: SNL Kagan, Company filings, Wall Street research, SPE Corporate Development research(1) Annual figures. Fox paid $4.27BN for a 6 year NFL deal; TNT paid $2.2BN for a 6 year NBA deal. Four years of BCCI Cricket world-wide rights went for $430MM (2) Assumes $2.6MM total spend on 22 episodes(3) Assumes $2.1MM total spend on 15 episodes .

TV Series Prog. Costs

BCCI Cricket

(1)

(1)

(1)

Broadcast Network Rights for a Major Sport

Cable Network Rights for a Major Sport

International Sports Rights

Broadcast Network-Quality TV Programming

TV Sports Broadcast

Rights

Broadcast Series

Cable Series

Cable Network-Quality TV Programming

(2)

Cost to License Selected Properties for a Single Year ($ MM)

(3)

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$1,600

$298

$50

$0 $500 $1,000 $1,500 $2,000

Comcast

TNT

Hulu

Source: SEC filings, SPE Corporate Development research, Wall Street analyst reports

Online

Subscription TV Provider

Marketing Expenses ($ MM)

Basic Cable Network

23%

% of Programming Expenses

34%

22%