Summary of Simon Cowell Partnership Opportunities November 2007.

Summary of Simon Cowell Partnership Opportunities

November 2007

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Agenda

• Overall Deal Structure

• Syco and Sony BMG Contributions

• Sony Pictures Television Contributions

• Sony Pictures Entertainment Contributions

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Overall Deal Structure

Sony BMG

- SiCo revenues, 2010 – 2015

- Record deal

All creative energies on exclusive basis

NewCo

Development staff

- Film

- TV

Producer fees from productions

Copyright ownership in NewCo

Forecast ultimate profits, by line of business

- SiCo: $__

- TV: $__

- Film: $__

- GSN: $__

5 year net profits, after overhead and costs

$__

SPE

- Film (production and distribution)

- TV (production and distributionn)

- Scripted

- Non scripted

- Crackle

- GSN

Simon Cowell

SiCo revenues

- $__

Production costs

$XX mm cash paid directly to SC

Crackle and GSN equity paid directly

50% equity

Producer fees

Facilities

50% equity

Pilot and production funding $__

Producer fees

Distribution fees

SCA

- Overhead funding

- Facilities

- Internal equity division TBD

In $, mm over 5 years, except as noted

Distribution fees

Overhead funding

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NewCo Operating Assumptions

• Staff– Headcount

• TV• Film• Merchandising• Other

• Facilities• Development budget

– TV– Film– Other (eg – Games, merchandising)

• Cowell equity vesting over 5 years based on performance

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Agenda





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Sony BMG pages…

• SiCo value

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Agenda





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Potential Value of Partnership Opportunities

Deal ComponentEntity Value

% to Simon / SBMG

Implied Value

Entity Value BasisSimon / SBMG

Equity Basis

Sony Pictures Television JV

$45MM -$100MM

50% $22MM -

$50MM

• 2 successful shows w/ network, sponsors, and syndication

• Funding for pilots required to yield 2 shows

• OH funding

• Based on % of development and OH funding provided

Crackle $62.5MM22.5% -

30% $15MM -

$20MM• Acquisition price

• 5% at close for cash• 15.5% based on EBIT

funding• 7.5% based on financial

milestones

GSN $600MM -

$700MM5%

$30MM -$35MM

• Negotiated value between Sony and Liberty Media

• Warrants• Based on financial

milestones

Partnership opportunities with SPE would provide $70-100MM in equity plus additional income to Simon / Sony BMG

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SPT is the top independent studio for network and cable television• Creator and distributor of top comedies, dramas, and game shows:

– #1 comedy of all-time (Seinfeld)– #1 primetime comedy last season (Rules of Engagement)– #1 daytime drama (Young and the Restless)– #1 and #2 game shows of all time (Wheel of Fortune and Jeopardy!)– #1 producer of TV movies, won 3 Emmys for Broken Trail this year

• Broad range of on-air shows, including 10 network shows, 8 cable shows, 5 syndicated shows, and 6 made-for-TV movies

• Industry leader in television distribution with records for shows like Seinfeld and King of Queens• Large ad sales organization with over $200MM in annual revenues

• Establish a JV with Simon and Sony Pictures Television

• Provide Simon access to SPT’s drama and comedy writers as well as our creative executives

• Cover multiple genres as well as scripted and non-scripted formats

• Provide Simon screen credits including Executive Producer, Logo Credit, and paid ads

Television Production

Sony Pictures Television Business Overview

Deal Overview

Simon will tap into Sony Picture Television’s resources, industry leadership, and expertise to expand the range of his television offerings

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TV Production Company Overview

• Reality Shows (e.g., America’s Got Talent, Cupid)• Game Shows (e.g., Power of 10)

Organizational Structure

Business Model

Content Focus

• $7 MM annually required for development budget, 6 pilots (50% license fees covered by networks), and overhead in Year 1; growing to $12 MM by Year 5

• Only network shows assumed without need for deficit financing (i.e., no cable shows modeled)• Reality shows assumed to generate incremental revenue from sponsorship and format sales• Game shows assumed to generate incremental revenue from First Run Syndication,

Advertising (syndication barter), and international format sales

• JV headed by Simon Cowell with 10 professionals in the first year growing to 20 professionals by Year 5

• Wholly owned by SCA and SyCo (50/50 JV)

Key Success Factors

• Pilot pickup rate throughout the plan period in line with industry averages (33%)• Successful first run syndication of best game shows (e.g., Who Wants to be a Millionaire)• Reality formats attract significant sponsorship ($20 MM/Year by Year 3)• NewCo earns all EP fees at 10% of production budget (60-85% of PV)

PV of production company cash flows ranges from $45 MM to $100 MM driven by Simon’s ability to continue to create exciting television content

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Slate Assumptions

• 6 pilots per year with a 33% pick-up rate for both reality and game shows

General Assumptions

• Mix of successful (3+ seasons, syndication and format sales) and under performing (average 1-2 seasons, limited sponsorship, no syndication) game show and reality programming

• Successful shows reach steady state economics in Year 3

• 100% network shows with license fees equal to production budgets

Case Specific Assumptions

Aggressive Case

Industry Average

Year 1 to 2 60% 27%30%

Year 2 to 3 50% 61%67%

Year 3 to 4 67% 67%50%

Base Case

Aggressive Case

Reality Success 22

Reality Underperform 23

Game Show Success 32

Base Case

Success Rates Overall Programming Mix*

Game Show Underperform 3 3

Show Type

*Numbers represent picked-up shows

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Crackle is a premier destination for online video, focused on high-quality short-form video

• Crackle is elevating the quality of online video and attracting the best creators of short-form video

• Crackle has attracted a large and loyal audience, making it the ideal destination to extend Simon’s brand online

• Crackle’s model is an ideal fit for identifying talent, with a brand built on offering fame-based incentives to emerging talent

Crackle-based Online Partnership

Crackle Overview

Deal Specifics

With no cash investment, Simon would participate in creating the leading online destination for talent and extend his brand to a site that reflects his style of straight talk and celebrity

• Sony would grant equity in Crackle as part of the venture

• Crackle would provide technology, infrastructure, and management team

• Partnership would include marketing support and music video distribution

• Simon would receive cash compensation for his services, including contribution of his expertise in developing the Network concept

• Simon would contribute his name and likeness, public relations support, and on-going interaction with audience members

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Collaborate with Simon to build a game-based business around his brand

• With the backing of Sony Pictures, Liberty Media, and new management, GSN is redefining its brand

• GSN is building on its position as a leader in TV game shows (reaching 66MM households) to expand into online and casual games

• GSN’s affiliation with Fun Technologies uniquely positions it to be the leader in games across platforms

GSN-based Game Partnership

GSN Overview

Deal Specifics

Leverage GSN and FUN Technologies to extend Simon Cowell’s brand into both television game shows and skill-based casual video games

• GSN would guarantee exclusive carriage for a defined number of Simon’s game shows each year

(number of shows / format would be negotiated)

• Partnership would provide equity to Simon

• Simon would have a dedicated programming block one night per week

• Simon, GSN, and FUN Technologies would collaborate in developing online skill-based games

• Deal would build on Sony’s partnership with IGT and history of introducing the most successful gaming

machines of all time to offer slot machines based on Simon’s game shows

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Agenda





SPE Deal Components(Overall Film Deal)

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Preliminary Proposal for an Overall Feature Film Deal

Sony Pictures Overview

Sony Pictures is Hollywood’s leading studio

• #1 in openings (2006 & 2007)

• #1 in market share (2006 & 2007)

• #1 in opening day receipts / weekend receipts (Spider-Man 3)

• 12 Best Picture Oscars

Deal Overview

• A multi-year first look deal with Columbia Pictures for all theatrical projects• Deal would cover Simon’s overhead and fringe• Deal would be non-exclusive for Simon with regards to production services / producer

commitments• Pay-or-play for fixed compensation would be based on SPE’s election to proceed to production• Contingent consideration would be the same as existing deal at Columbia (“William Davies /

Untitled Simon Cowell Project”)

Simon will leverage Sony Pictures’ resources and feature film production expertise, providing Simon a vehicle to bring his theatrical projects to the screen

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Key SPE Assumptions - Film

• Films– Number developed– Number produced

• Average budget• Average Box office• Average ultimate

– Upside value to a hit

• Greenlight and development process• Contingent consideration (per William

Davies/untitled Simon Cowell project)

Summary of Simon Cowell Partnership Opportunities November 2007.

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