DRAFT Sony Pictures Entertainment and SNEI Differentiating Sony

DRAFT Sony Pictures Entertainment and SNEI: Differentiating Sony Entertainment Networks November 18, 2011

DRAFT Executive Summary • Our goal is to take advantage of Sony’s common ownership of entertainment and network platform assets to differentiate Sony from competitors in the digital network entertainment space • We’ve agreed on key points of differentiation • We recommend further investment in a programmed video service including originals to drive usage • We recommend addressing technical constraints in Sony hardware to facilitate differentiated business models • We’ve agreed on “low hanging fruit” opportunities to drive traffic • After reviewing prioritization in this forum, we should pursue key initiatives on a more formal, project management basis with clearly defined work-streams and milestones page 1

DRAFT Agreed Desired Points of Differentiation • We seek to better differentiate SEN, drive brand awareness and attract customers through: – Programming: a carefully selected base of content that is regularly updated and targets the right demographic – Exclusive content: original or exclusively licensed – Earlier access to content vs. competing services – Low barrier to adoption: include content that is free and encourages initial trial – Ease-of-use: differentiated user interface with powerful easy search functionality that cuts across: • Content type: video, music, games • Business models: purchase, rental, ad supported / free – Increased marketing reach across Sony platforms SPE and SNEI have identified a range of opportunities to drive these points of differentiation page 2

DRAFT Strategies and Initiatives for Achieving Differentiation Strategy Initiatives • Take advantage of SPE programming and production expertise to drive traffic; business model should be free-to-consumer: – Customer acquisition: free-to-consumer offering has the lowest barrier to adoption and attracts the most customers – Cross-selling / monetization: new and newly engaged customers for free service will be cross-sold paid services and Sony hardware Crackle Plus – Budgetary consideration / competition: free-to-consumer services are still viewed as compelling with <$100 MM of content; users count on paid services like Netflix having $1 -2 BN of content • Take advantage of Sony devices’ unique characteristics: – Updatable: in many cases cable and satellite STBs are not – Secure: can feasibly implement security protocols faster than some competitors – "4 screen“: can reach consumers anywhere they seek entertainment – TV connected: more often connected to TVs in the living room than pure play services Unique Transactional Models – 3 D: supports playback of 3 D content – Gracenote and new user-interface (UI): provides a unique capability to search across multiple content types and business models • Leverage zero incremental cost marketing and content assets to drive traffic “Low Hanging Fruit” page 3

DRAFT Initial Categorization of Projects (1 of 2) • Crackle Plus: Fund and launch Crackle Plus as a service exclusively available to Sony customers with an estimated annual investment of ~$75 MM – Service highlights: • Premium and differentiated from broader Crackle service • Ad-supported / free-to-consumer to attract largest audience • License exclusive film and TV avails (i. e. , recent and library titles) • Develop slate of original content: “TV quality” series • U. S. -only launch with later international expansion – Investment recouped through and helps support: • SEN revenues: uplift in paid services (i. e. , Video Unlimited, Music Unlimited, PSN Plus subs) • SPE revenues: ad revenues and ancillary sales of originals • Hardware revenues: incremental hardware sales • Overall Sony / SEN spending on branding initiatives page 4

DRAFT Initial Categorization of Projects (2 of 2) • • Unique Transactional Models: Launch transactional models that offer early content, greater ease of use for consumers and leverages SEN’s strengths relative to cable and satellite – SEN as exclusive over-the-top provider for PVOD – SEN to offer early EST – PSN as the only game console compatible with Ultra. Violet “Low Hanging Fruit”: Leverage SPE marketing and existing base of content – SEN branding / messaging on all SPE platforms (i. e. , theatrical, home entertainment, TV) – Early / exclusive access to red band / extended trailers and DVD extras – Exclusive access to 3 D versions of SPT shows – Regular Discount Programs for VOD and EST page 5

DRAFT Recommended Process Going Forward • Today: – Review projects in more detail – Discuss broad parameters for projects requiring Corporate funding, including Crackle Plus – Discuss technical priorities for transactional models • Ongoing: – SPE and SNEI coordination to execute against overall project plan (on next page) • Quarterly update meetings with: – Corporate: Howard Stringer, Kaz Hirai – SNEI Lead: Tim Schaaff – SNEI Team: Shawn Layden, Mike Aragon – SPE Leads: Michael Lynton, Steve Mosko, David Bishop [Discuss] – SPE Team: • Corporate: Jim Underwood • Crackle Plus: Andy Kaplan, Eric Berger • Transactional: Jason Spivak • “Low Hanging Fruit”: [Confirming] page 6

DRAFT

DRAFT Crackle as a Platform to Leverage Sony already owns a premium content network, among only a handful in the market • Top ad-supported channel on key television platforms (Top 5 channel on Bravia, Blu-ray, and Roku) • Mobile downloads in line with major networks, e. g. comparable to HBO Go • Triple the audience of Hulu. Plus on connected devices • Recognized alternative to Hulu, Netflix, and Amazon: “People who’ve traded in pricey cable subscriptions for online alternatives like Netflix, Crackle, and Hulu have been a hot topic recently. —“ 25 Ways to Watch Movies and TV Online, ” PC Mag “A host of sites, including Hulu. com, Crackle. com and Xfinity, offer free movies and TV shows streamable to your computer or TV. ” —“Not Netflix: Better Sites for Movie Bargains, ” Wall Street Journal “Crackle leads the way for free online movie content for a second week in a row. Hulu, et al, you better step up your game. ” —“The Best Movies to Watch this Weekend, ” CBS Interactive page 8

DRAFT Video experiences optimized for the Sony networked device audience • Free service creates largest user base and “out of the box” premium content experience • Integrated upsell to PSN, Play. Station Plus, Video/Music unlimited (no 3 rd party services can do this) • Highly curated experience run by experts who Program target audiences worldwide • Premium TV caliber original series to differentiate the network page 9

DRAFT Programmed Service The service Offers a selection of premium movies with exclusive content and TV quality original series Inside Looks Music and Live Events Original Shows Curated Film and TV Content • Behind the scenes, movie and pilot premiers, new game releases, and coverage of most relevant pop culture gatherings (e. g. , Comic-Con, E 3, Sx. SW) – Cost: $2 MM for video coverage • Live concerts, music festivals, unplugged sessions with artists, “secret” shows – Cost: $3 MM to for video streaming and licensing • Two TV caliber series (22 eps) annually that leverage existing and related IP (e. g. , God of War) or build new IP for the company • Differentiated and premium series to attract and engage consumers on a regular basis – Cost: $30 MM per series for each season • Leverage short avails of 2 -3 year old movies in the Network window (free TV only) to have continuous current and driver titles • Pick up select shows in syndication window – Cost: $10 -20 MM to license more content for variety and volume page 10

DRAFT Deep Product Integration Drives Up-sell Actions on Crackle Plus… …Drives Actions on SEN Search: Gracenote drives discovery of paid content • Watch Spider-man as an adsupported movie option • Watch a sneak peek of the upcoming film • Watch episode from prior seasons of Community • Search also recommends: – Similar films for purchase or rental – Sign-up for Play. Station Plus to get Spider-man game content – Buy Spider-man Shattered Dimensions – Listen to the soundtrack on Music Unlimited – Purchase recent TV episodes View original series • Watch “God of War” the series on Crackle • Promotion spots encourage exploration on SEN – Buy the game – Sign-up for Play. Station Plus View a collection • Explore themes tied to: – Game content (e. g. , “Assassins, ” “Heroes” etc. ) – Music content (e. g. , celebrity playlists) – For sale / rental titles included in collection – See related games on Play. Station Plus – Explore the artist on Music Unlimited Watch a concert • Coldplay concert • Add Coldplay to your Music Unlimited favorites page 11

DRAFT Crackle Plus, Exclusive to Sony already owns a premium content network, among only a handful in the market An Out-of-the-Box Premium Video Experience, exclusive to Sony Devices A light version of the Network that provides network and marketing scale • Newer, high-quality, more movies • Smaller selection of movies • Premium TV Caliber original series • No or second window original series • Exclusive TV syndication window • Older, library TV • HD video delivery • Standard Def video delivery • Fully integrated products driving up-sell to other SNE services (transactional movie, games, video / music subscriptions) • Marketing driver back to Sony from high-traffic platforms • Branded exclusively to Sony • Keeps brand in competitive / mindshare space with Netflix, Hulu, Amazon, etc. page 12

DRAFT Preliminary Timeline: Crackle Plus Service with Original Content page 13

Unique Transactional Models

DRAFT Premium VOD DRAFT: SUBJECT TO FURTHER REVIEW Note: overall PVOD launch strategy and timing under review by SPE management • Provide SEN users with VOD offering in the premium window (e. g. , ~60 days post theatrical release – will vary by market) – Assumed deemed retail price of $20 -$30 Overview – Single view – For a limited time, exclusive vis-à-vis OTT-only providers (i. e. , i. Tunes, Xbox, Amazon, VUDU), but no exclusivity vis-a-vis cable/satellite providers (i. e. , Direc. TV, Comcast, SKY), even if such providers offer OTT services – Number of eligible titles to be determined Differentiation • During the period of exclusivity: • Only non-cable/satellite service offering PVOD • Ability to message a “digital exclusive” • Limited, per transaction cost only; not a major investment Cost – 80% SPHE share per transaction – Implementation of watermarking technology would have costs associated • Overall launch strategy and timing under review by SPE management – SNEI to have first OTT opportunity when strategy and timing is determined Issues to Address • Water marking technology (i. e. , Verance/Civolution) and additional content protection measures would be required • Exclusivity applicable to a limited number of titles • Pending SPHE legal review; product not available in all markets page 15

DRAFT Premium EST DRAFT: SUBJECT TO FURTHER REVIEW Note: overall premium EST launch strategy and timing under review by SPE management • Provide SEN users with an EST offering in the premium window (e. g. , ~60 days post theatrical release; will vary by market) Overview – Assumed deemed retail price of $25 or $30 – Exclusive vis-à-vis all EST providers for a limited time – Number of eligible titles to be determined Differentiation • During period of exclusivity: • Only retailer offering EST in theatrical window • Ability to message “exclusive EST” product • Provides a clear and compelling path to Ultra. Violet (UV) as a first mover (see UV offer) • Limited, per transaction cost only; not a major investment Cost – 80% per transaction share to SPHE – Implementation of watermarking technology would have costs associated • Overall launch strategy and timing under review by SPE management – SNEI to have first opportunity when strategy and timing are determined Issues to Address • Pending SPHE legal review; product not available in all markets, potential costs associated with de-valuation of existing VOD/EST licenses • Water marking technology (i. e. , Verance/Civolution) and additional content protection measures would be required • Exclusivity applicable to a limited number of titles page 16

DRAFT Ultra. Violet (UV) DRAFT: SUBJECT TO FURTHER REVIEW • Provide SEN users with UV EST storefront which includes SPHE’s full EST catalog Overview – Wholesale prices discounted vis-à-vis traditional EST – Joint marketing programs • First mover advantage with ability to become go-to destination in living room for UV accessed through game consoles, connected TVs and connected Blu-ray players • Leverage UV growth to drive SNEI adoption: Differentiation – In the next few months, millions of physical units with UV tokens will be sold and consumers will seek ways to access purchases in the UV cloud – Consumers will also be able and looking to convert their existing collections (i. e. , millions of discs) into UV lockers; SNEI can become the preferred destination for locker conversions with a PS 3 sitting next to DVD/Blu-ray collections • Creates stronger relationship with customers as they grow accustomed accessing the video they already have through UV locker access via Sony devices • Per transaction UV fulfillment costs borne by SNEI or passed on to consumer Cost Issues to Address – SPHE discounts wholesale prices in an effort to help SNEI offset such costs • Some UV licensing costs expected, depending on role played by SNEI in UV ecosystem • Hardware implementation of UV protocols • Integration with UV coordinator page 17

DRAFT Preliminary Timeline: Unique Transactional Models page 18

“Low Hanging Fruit”

DRAFT Leverage SPE Theatrical, Home Entertainment, Television Marketing • Integrate SEN brand messaging into relevant SPE marketing assets where possible – Theatrical: one-sheets, field promotions, in-film digital billboards, promotion of PSN or SENspecific tasks in films’ Alternative Reality Games – Home Entertainment: DVD/Blu-Ray inserts/packaging, sizzle/spot on head of product, sizzle/spot features on BD Live Overview – Television: In addition to off-air promotions, the Networks Group has committed media across channels • On-air: SNE TV spots to air worldwide, SNE display and video messages to be featured on channel websites • Off-air: Sony Times Square billboard, Sony Spotlight newsletter, Sony Facebook page, Sony Twitter handle, Sony Cierge newsletter – Cross-Divisional: Website (i. e. , sonypictures. com) Differentiation Cost Issues to Address • Increases awareness of SEN relative to its competition • Little to no incremental cost • Work closely with SNEI to develop appropriate branding, messaging and phasing for each avail page 20

DRAFT Red Band, Extended Trailers and DVD Extras • Provide SEN users with additional content – Launch exclusive versions of a subset of trailers on SEN first: Overview • • Red band Longer versions of trailers – Feature value-added content such as outtakes, behind the scenes, cast profiles – Prior to release of DVDs, make a subset of DVD extras exclusively available on SEN, subject to content restrictions and 3 rd party deals that can vary by title – Ensure SEN achieves parity with 3 rd party vendors (e. g. , when a trailer is first launched on Yahoo! the trailer is also available on SEN) Differentiation Cost Issues to Address • Provides a regular flow of exclusive content that can be easily promoted • Little to no incremental cost • SNEI to check with legal on ability to show red band trailers • Secure content to the network (e. g. , prevent upload of red band trailers to competing outlets such as You. Tube) page 21

DRAFT Exclusive Access to 3 D Versions of SPT Shows • Provide SEN users with exclusive access to 3 D versions of their favorite TV shows – Film selected episodes of broadcast or cable network shows in 3 D which will be featured exclusively on SEN Overview Differentiation Cost Issues to Address • Current shows that fit SEN demo include Happy Endings, Community, Rules of Engagement, Breaking Bad, Franklin and Bash, Justified, Pretend Time with Nick Swardson and Boondocks • 2 D versions air on original partner network • Network partner promotes availability of 3 D version exclusively on SEN • Provides a regular flow of exclusive content that can be easily promoted • Emphasizes SEN’s unique 3 D capabilities and helps drive further 3 D hardware sales • Incremental production cost of $100 K – $200 K per episode for existing TV series, subject to Director and DP that accept SPT guidance on equipment and workflow • TBD fee to buy-back exclusivity from the Network for an estimated 25%-50% of the license fee for the nonexclusive episodes • Confirm broadcast or cable network will allow 3 D version to be distributed off-network on an exclusive basis • Requires identifying shows that both address the demo and have Director/DP support page 22

DRAFT Regular Discount Programs for VOD and EST DRAFT: SUBJECT TO FURTHER REVIEW • Provide SEN users with regular (i. e. , weekly/monthly) programs featuring discounted EST and VOD titles Overview • EST: focus on new release product • VOD: focus on premium catalog product – Discounts to be funded by SPHE – Titles to be identified on a mutual and periodic basis – Stunts to be programmed around genres/seasons/events/holidays Differentiation Cost Issues to Address • When possible, discounts only available to SNEI for the duration of the applicable program • Should be viewed as a complement to other licensing programs • Limited cost, per transaction only; not a major investment • Title eligibility to be discussed on a market-by-market basis page 23

DRAFT Preliminary Timeline: “Low Hanging Fruit” page 24