Crackle Investment Review November 2007 Industry and Crackle

Crackle Investment Review November 2007

Industry and Crackle Changes Since Acquisition • Although P&L and investment metrics are down relative to the acquisition model, Crackle still offers an attractive return – Changes to revenue forecasts are largely due to a delay rather than a decrease in the size of the opportunity – • The NPV ($42 MM) and IRR (25%) are still highly attractive Changes are largely due to market dynamics and events not foreseen at the time of acquisition – – – Litigation shut down key Crackle features and created management and operational distractions Google’s acquisition of You. Tube redefined “scale” and significantly increased its dominant position Advertisers have been slow to adopt UGV as a major ad platform, although this is changing • Crackle has repositioned itself for future growth and continues to be a important means for exploiting emerging digital platforms and audiences – Shifted its focus from technology to content and programming; differentiating itself in a highly competitive market (esp. vis-à-vis You. Tube) – Represents a valuable opportunity for SPE to capture a share of the growing online ad spend – Fulfilling promise of reaching a younger demo and creating new distribution outlet for SPE content • Crackle is emerging as an early leader in this new market niche – Booked over $800 k in revenue since re-launch with major, blue-chip advertisers – Becoming a top online destination for aspiring writers, actors, and directors producing “the best content not on TV” (1) com. Score; (2) e. Marketer 2 2

Industry and Crackle Changes Since Acquisition • Crackle has faced a changing market dynamic and events not foreseen at the time of acquisition – Litigation shut down key Crackle features and created management and operational distractions – Google’s acquisition of You. Tube redefined “scale” and significantly increased its dominant position in low-end UGV – Advertisers have been slow to adopt UGV as a major ad platform, although this is changing • Crackle has responded to changing market conditions to position itself for future growth and success – Shifted its focus from technology to content and programming – Service re-launched in July with emphasis on higher quality, short-form UGV and fame partnerships to attract top talent and advertisers – Strategy differentiates Crackle in a highly competitive market (esp. vis-à-vis You. Tube) • Crackle is emerging as an early leader in this new market niche – Secured blue chip advertisers, including Honda, Pepsi, Ford, and Sony HDNA – Booked over $800 k in revenue since re-launch – Becoming a top online destination for aspiring writers, actors, and directors producing “the best content not on TV” (1) com. Score; (2) e. Marketer 3 3

Crackle Strategy Overview Service re-launched in July with emphasis on higher quality, short-form UGV and fame partnerships to attract top talent and advertisers • Focus on differentiated content that plays to the strength of the medium • Focus on channels that appeal to the online community Programming Partners / Distribution Monetization • Strengthen relationships with current partners through applications and co-marketing • Grow partner base across platforms and devices • Develop relationships with top advertisers to sell inventory and sponsorships on-site and throughout the network Goals Differentiate service Build audience Generate revenue 4 4

Growth in Online Advertising • Advertising is a $200 MM business for SPE • Online advertising is forecasted to reach $43 bn by 2011, capturing an increasing share of total advertising spending • Crackle provides an excellent opportunity to capitalize on the growing online video advertising market – Estimated to be $4. 3 bn by 2011 (60% CAGR) – Growing to 10% of total online spending • Since re-launch, Crackle has secured several blue-chip advertisers for sponsorships and video advertising – Pepsi ($100 k) – Honda ($125 k) – Sony HDNA ($325 k) – Ford ($200 k) * e. Marketer (2007) US Online Advertising ($bn)* US Online Video Advertising ($bn)* 5

Crackle Has Been a Strong Supporter of “Sony United” • Unique SPE content offering -- Screen. Bites Integrated with SPE • DVD promotion for Seinfeld Season 7 • Contests for SPE theatrical releases (Pursuit of Happyness & Spider-Man 3) • Firehouse channel tie-in with Rescue Me • Crackle in the PSP firmware Integrated Across Sony • Crackle service on IP-enabled Bravia (BIVL) • Crackle screensaver on all VAIOs FY 08 Initiatives • Integrating Crackle for video sharing with Sony Ericsson and Sony Digital Imaging • Delivering content to PS 3, including the HOME initiative Digital Imaging 6

Returns Analysis Acquisition Model Revised Model Methodology 4 Yrs 6 Yrs Discount Rate 16. 5% DCF of Cash Flow from Operations & Exit $150 $100 MM Decreased revenue estimates DCF of Investment $61 $58 MM Re-negotiated earn-outs and portion of escrow returned * NPV $89 MM $42 MM IRR 47% 25% $76 MM TBD Metric Deepwater Variance Rationale Delayed launch of advertising * $2. 8 MM of escrow returned in FY 07 7

Crackle Acquisition Model (1) (2) (3) (4) EBIT reflects operating profit less estimated amortization of technology/software assets totaling $20 MM over 7 years. Initial estimate requires third party review for final figures. Assumes transaction close at 9/30/2006. 4 year discounted pre-tax cash flow analysis (2006 -2009) performed with a discount rate of 16. 5% (in-line with SPE’s normal rate); terminal EBIT multiple of 8. 0 x. Total consideration includes $52. 5 m at closing; $12. 5 m contingent on performance and paid over the course of 2007 through 2009. Deepwater mark represents cumulative cash position. 8

Revised Crackle Model 9

Variance Analysis 10

Change in Earn-Out Payments / Structure • Earn-outs renegotiated to focus on EBIT rather than revenue and streams • Total potential earn-outs reduced by $1 MM Acquisition Earn-Outs Renegotiated Earn-Outs Mechanism (1) Value Metric Mechanism (2) Value Initial Revenue $2. 5 MM $4. 2 MM annual revenue Initial Revenue $2 MM 2007 Revenue $1. 875 MM $9. 8 MM annual revenue FY 08 EBIT $2. 25 MM ($22. 75 MM) EBIT 2008 Revenue $1. 875 MM $35 MM annual revenue FY 08 EBIT $2 MM ($20. 5 MM) EBIT 2007 Streams $1. 875 MM Average 284 MM streams (3 consecutive months) FY 08 EBIT $1 MM ($18. 2 MM) EBIT 2007 Streams $1. 875 MM Average 612 MM streams (3 consecutive months) FY 09 EBIT $0. 75 MM TBD (=>120% of budget) FY 09 EBIT $1 MM TBD (=>100% of budget) Total: $11 MM (1) Calendar year basis; (2) SPE fiscal year basis Metric $0. 1 MM revenue (9 mos ending 10/1/07) Total: $10 MM 11