Fact findings Strategic Options on Netflix relationship follow

Fact findings & Strategic Options on Netflix relationship - follow up on the breakfast meeting on December 16 th in New York Discussion Document April 6 th, 2011 Group Strategy Corporate Planning Division

Executive Summary • Netflix is gaining power acquiring approximately 20 million subscribers in US. • We need to consider how Sony group as a whole should work with Netflix Key Questions 1 　　 Should SPE raise the cap on Starz’ internet distribution? 2 　　 Should Qriocity Video Service compete head to head against Netflix? 　　 Should HE/SCE put button or icon of Netflix on H/W products and UI? 3 　 4 　How can / should Qriocity and SPE better collaborate? Impact on Sony’s Businesses HE Without compatibility with Netflix , difficult to sell TV and BD Players in US. TV, BDP, PS 3 receive bounty fees 17 mil USD per year. SPE Netflix is currently one of SPE’s distribution channels. SPE may receive additional fees from Starz by lifting the cap and enabling Starz to continue sublicensing SPE contents to Netflix. SNE Netflix is complementary to Qriocity, because Qriocity Video service focuses on early window (4 months after theatrical release) while Netflix does 8 -10 months. Strategic Option Hypothesis ü Receive maximum license fee from Starz by lifting cap ü Use those fee for strategic focus: - to acquire similar Starz sub-distribution rights for Qriocity / PSN with Netflix - to further differentiate Qriocity Video with original contents by SPE to SNE ü Seek No. 2 position in US market, but Aim to be No. 1 in other regions Business Strategy Department Group Strategy Division | 2010 MRP April 6, 2011 3

Aspiration of Netflix • Netflix is gaining customer touch points in Living Room TV equal to “Pay TV” Analyst Comments • Netflix has 20 mil subscribers by the end of 2010. - 2/3 of Netflix customers registered in online subscription service. - 30% of newly registered customers subscribe online service only. 　　 Number of Subscriber[*4] [Mil] CAGR 42% • Netflix is not far from surpassing Comcast subscriber base of 23 million cable subscribers. This would make Netflix the US leader in “pay TV”, ahead of players like Dish, Direc TV and Time Warner Cable. Aspiration of Netflix • No ambition to create early release windows [*1] [Mil$] Revenue and Profit [*4] Number of Subscriber CAGR - New release window is not available for Netflix since studios wish to preserve current sell-thru/ rental - Avoid pay-per-view, ad-supported, sports, news, adult, UGC • Intend to introduce lower price from $7. 99/mth to $4. 99 [*2] 　　 - Will continue to increase the amount of content and reduce the price. 　　 - Cost of content is fixed, so the more subscribers they have, the lower 　 they can price the service. • Aim to take current business model global [*3] - launched in Canada in fall 2010, - Will launch in Latin region in fall 2011 and Europe in 2012 22% Profit % 9% 8% 11% 13% Global Expansion Plan In 2010 Fall in 2012 in 2010 Fall *1: Source from Netflix Strategy Deck, May 2010. *2: At 1/8/11 dinner, Netflix VP of Business Development told D. Benefield (SNEI) and N. Colsey (HEo. A) *3: At 1/8/11 meeting, Netflix CEO told Bob Ishida and Tim Schaaff *4: Source from Netflix IR Report. Business Strategy Department Group Strategy Division | 2010 MRP April 6, 2011 Group Strategy Division 4

Key Implications & KSF Key Implications • In short term, potential revenue from Starz for sublicensing SPE contents to Netflix is attractive. However, unlimited expansion of Netflix to take price control power is unfavorable to our businesses in the long run. Business Area Content Network Service H/W Products Potential Threats Decrease of revenue and profit from content Lose presence in on-line video service Lose differentiation through Qriocity video service • Qriocity video service alone is unlikely to compete head-to-head against Netflix in terms of scale given Netflix’s first mover advantage, brand recognition and required investment. • To slow-down the growth of Netflix, need to further clarify unique value proposition of Qriocity video service and employ cross-business collective measures. Key Success Factor • Create unique value proposition of Qriocity video service. • Best utilize negotiation leverage between SPE and Starz - to maximize license fees from Starz - to acquire similar content licenses for Qriocity/PSN with minimum investment Business Strategy Department Group Strategy Division | 2010 MRP April 6, 2011 5

Recommended Strategic Options Q-Video End State 1 Compete against Netflix with subscription service in the U. S. Beat Netflix and become No. 1 online video service players globally. 2 Do not compete or rely on Netflix, Survive independently. Seek No. 2 position in US market, but Aim to be No. 1 in other regions. 3 Take advantage of Netflix to grow Qriocity Video Service. Do not seek a dominant position. Leverage Netflix to grow our businesses. Set of actions Responsible Entities Approach to Starz If Starz is interested and needs cap lifted, allow Starz to offer SPE contents to Netflix and acquire similar content license from Starz on Qriocity/PSN to match with Netflix. SPE UI, Icon & Button Improve ease of use by single sign-on and common UI among multiple devices Original Contents Create original contents for Qriocity and PSN SPE SNE Bundle Qriocity video service with other competing services under “Q+” scheme SNE Cable Lite Provide best channel at lower cost with better UX (Cable Lite) SNE Global Play Enhance PS+ with 30+ new movie titles refreshed monthly SNE Q+ Partner Business Strategy Department Group Strategy Division | 2010 MRP SNE SCE, HE April 6, 2011 6

Next Steps & Notable Read-out Meetings Alternative to next page Next Steps • SPE continues to lead negotiations with Starz – If Starz is interested and needs cap lifted, seek to maximize fees to SPE – Once fee is negotiated, seek to negotiate similar Starz sub-distribution rights for Qriocity/PSN as a reduction to that fee • Original content for Qriocity / PSN – Determine if a more robust original content budget is necessary to drive adoption of Network Services and sales of H/W products – Estimate required budget and associated ROI • Continue current SNEI initiatives – Create unique UX, Launch Cable Lite, Q+, etc. Notable Read-out Meetings • May 26 – Management Conference • June 2 – US Board Meeting • July 20 -22 – Strategy Roundtable #2 Business Strategy Department Group Strategy Division | 2010 MRP April 6, 2011 7

Next Step & Timeline April Today 4 th W 1 11 th W 2 17 th W 3 May 24 th W 4 2 nd W 5 9 th W 6 June 16 th W 7 23 st W 8 1 st W 9 6 th W 10 13 th W 11 July 20 st W 12 27 th W 13 4 st W 14 11 th W 15 18 th W 16 25 st W 17 Continue negotiation with Starz • Seek to maximize license fee from Startz Start 2 nd round negotiation • Negotiate right price to secure sublicense contents to Qriocity/PSN Invest on original content for Qriocity/PSN • Study what original content can drive sales of network service and H/W products • Estimate required budget to create these contents Continue current SNE’s initiatives • Create unique UX, Launch Cable Lite, Q+, etc Reporting • Set strategic direction and investment focus Feasibility Study, ROI simulation Reporting • Go/ No go decision April 5 -6 th (JPN) Strategy Roundtable #1 Business Strategy Department Group Strategy Division May 26 th (JPN) Management Conference | 2010 MRP June 2 nd (NY) US Board Meeting July 20 -22 nd (JPN) Strategy Roundtable #2 April 6, 2011 8