Key Trends Issues and Opportunities for SPEs MidRange

Key Trends, Issues, and Opportunities for SPE’s Mid-Range Plan August 30, 2010 CONFIDENTIAL

Entertainment Industry Megatrends (1 of 2) • Accelerating Pace of Digital Access In the next five years, digital technologies will accelerate as a means of accessing all forms of entertainment and media – Worldwide broadband households are projected to increase at a 7% CAGR from 487. 2 MM in 2009 to 677. 1 MM in 20141 – Proliferation of technologies for viewing video digitally • Worldwide 3 G-enabled smartphone shipments are expected to grow at a 50% CAGR from 131 MM units in 2009 to 656 MM units in 20132 • Worldwide households with connected game consoles are expected to grow at a 14% CAGR from 94. 8 MM in 2010 to 160. 7 MM in 20143 • Worldwide internet connected TV 3 households are projected to grow at a 51% CAGR from 49. 7 MM in 2010 to 255. 8 MM in 2014 Changing Consumption Patterns Source: 1 2 3 4 • Increasing consumption of filmed entertainment – Box Office grew through 2009, price growth outpaced admissions growth • Going forward, admission growth is expected to be limited with future revenue growth expected primarily from increased ticket prices • Portion of ticket price increases tied to 3 D premium may have risk if consumers opt to see 2 D versions rather than pay a premium for 3 D – HE total transactions were up through 2009 as customers adopted new business models and accessed content through new platforms • However, consumers are increasingly driven by convenience. Low-margin rental models evolved to meet this need, capturing much of the increased demand – Kiosk and subscription rentals are projected to continue to grow, accounting for 52% of the US consumer rental spending in 20134 • Global video piracy is still strong and is expected to increase, driven in part by rising broadband penetration Screen. Digest Morgan Stanley, "The Mobile Internet Report, " December 15, 2009 Parks Associates, Connected TV figure does not include digital video players, connected game consoles or connected Blu-ray players SPE Home Entertainment page 1

Entertainment Industry Megatrends (2 of 2) • Retail Partners Emerging Markets Source: 1 Physical retailers are converging with digital offerings (Wal-mart/Vudu, Best-Buy/Cinema. Now, Amazon) – Retailers evaluating how to coordinate between physical and digital to ensure smooth migration for consumers while maximizing profitability • Pure “rentailers” like Hollywood Video, Movie Gallery and Blockbuster have entered or are facing bankruptcy and studios are losing shelf space • Emerging markets will see the fastest growth in media spend, but cannot be handled with a uniform approach – Spending on M&E: Latin America 8. 8%, Asia Pacific 6. 4% CAGR (’ 10 -’ 14) vs. North America 3. 9% and Europe/Middle East 4. 6%1 – Not all markets work well for media: China’s media spend is forecast to grow at 12%, but piracy concerns, quotas, and poor retention for Western content results in limited profit opportunity 1 – India, by contrast, is showing rapid growth, including TV subscription revenue forecast to grow at 12. 3% CAGR through 20141 Pricewaterhouse. Coopers, Global entertainment and media outlook: 2010 -2014 page 2

Impact on Entertainment Economics and Industry Responses (1 of 2) Continued Importance of Physical Revenues Home Entertainment: Impact on Economics Home Entertainment: Experimentation w/ New Models Source: • Despite faster growth in digital revenues, traditional/physical revenue streams will remain significantly larger for the next five years • Declining home entertainment market driven by shift from higher-margin sell-through to lower margin kiosk and subscription rental – New release sell-through box office factor is 39% below 2006 peak 2 – Rental transactions are roughly flat, but margins down with shift to kiosk and subscription – Catalog revenues are declining at a concerning rate • Studios seek to sustain higher-margin physical models where possible, emphasizing Blu-ray and using superior functionality and bundles as drivers • Studios nurturing emerging digital transactional models (EST, VOD) – achieving high growth rates but off a small base • Studios are emphasizing higher margins within emerging models – Experimenting with windowing strategies, including day-and-date VOD and early windows – Segmenting product by window to limit cannibalization of higher-margin product 1 Screen Digest, August 2010. Digital includes “VOD/PPV” (total on-demand movie consumer revenues) and “On-line” (transactional movie retail and rental download/subscription consumer revenues) 2 Nielsen Home Scan, title-level analysis; box office adjusted for inflation and 3 D admissions page 3

Impact on Entertainment Economics and Industry Responses (2 of 2) Film Production TV Revenues • 3 rd party film financing sources are demanding improved economics under attractive terms, less capital is available • Franchises remain critical drivers of studio profits and must be maximized across all revenue streams • Studios are increasingly focused on tight cost management. However talent costs, production budgets, and marketing have not dropped sufficiently Networks • Network revenues are expected to see continued growth – Subscriber revenue has proven recession-proof – Key ad markets are rebounding • Competition is increasing to roll-out channels worldwide, but numerous opportunities still exist to launch new networks Distribution • New digital players in the U. S. (e. g. , Hulu, Netflix) are acquiring content in the premium subscription window, creating additional customers for SPE • Broadcast and cable partners are seeking expanded digital and cross-platform rights to remain competitive with emerging competitors Production • U. S. demand for dramas (procedurals) and comedies (including single camera) is on the rise; non-scripted is still in-demand but only a few series break-out • International production is rapidly consolidating but opportunities still remain page 4

SPE-specific Issues and Initiatives (1 of 3) Overall Economics • Pursue opportunities to generate cash with a goal of becoming cash flow positive • Increase margins and overall operating income to exceed $500 mil in FY 13 and FY 14 • Secure and fully exploit franchise films Film Economics • – Potential franchises in Girl with the Dragon Tattoo, Smurfs, Karate Kid, 21 Jump Street – Re-establish/continue to exploit existing franchises in Spider-Man, Men in Black, Ghostbusters, Ghost Rider, Dan Brown films, Resident Evil, Underworld Continue to reduce talent costs – • Talent compensation structures are shifting from first dollar to post-breakeven deals Emphasize films with international potential – Action, family and franchise films (e. g. Girl with the Dragon Tattoo, Men in Black 3, Smurfs) • Continue to pursue attractive financing options and deal structures • Prioritize investment in higher margin films page 5

SPE-specific Issues and Initiatives (2 of 3) Home Entertainment Physical • Continue to grow Blu-ray segment by promoting new product features (3 D, BDLive, digital copy) and adjacent initiatives (DVD 2 BLU, MOD) • Implement rigorous commercial planning approach to maximize the profit potential of each title – from manufacturing strategy to retail execution • Restructure organization to be more flexible and responsive to changes in the market, including CPG-like customer channel alignment Digital • Lead physical customers in transition to digital business model (Amazon, Wal. Mart/Vudu, Best Buy/Cinema Now) – be the ‘category captain’ for digital • Develop product features that make ownership model more attractive for consumers (Ultraviolet, short-form apps, e-fulfillment, digital extras, playlists) • Continue to experiment with release windows (day/date VOD, early windows) to drive higher-margin transactions page 6

SPE-specific Issues and Initiatives (3 of 3) Television Networks • Continue to invest in television networks internationally, including channels in India and other emerging markets • Continue to invest in U. S. channels and increase U. S. channels contribution • Competition is increasing and cost of content is rising Production • Increase television production presence in highly strategic markets including UK and expand to emerging territories • Expand number of television shows in syndication in the U. S. • Create a pipeline of scripted and nonscripted “hits” Distribution • Expand SPT's distribution presence in selected emerging markets (Middle East, Africa, Hungary, Central and Easter Europe) and key markets (Netherlands and Scandanavia) • Capitalize on new buyers and platforms (e. g. , SVOD) and accelerate international VOD and Pay TV windows Additional Growth Opportunities • Pursue growth opportunities in 3 D across entire business (theatrical releases, Blu-ray releases, television networks, and technology) • Leverage Sony United collaboration opportunities page 7

Opportunities for Sony to Facilitate SPE Growth • Launch a robust content service across all Sony devices – License existing SPE content to benefit devices – Provide a platform for launching new film and TV content • Ensure Sony hardware supports digital rights locker models, including Ultraviolet, that will help grow higher margin EST model • Include HDMI cables with all devices to support digitally secure offerings in earlier windows (e. g. premium home theater) • Leverage Sony playback device and connected device installed base to support growth in Blu -ray and electronic sell-through products – Joint promotions across product lines (e. g. , PS 3/BD ad campaign, 3 D TV/3 D BD spot in circulars, etc) – Content services that develop advanced sell-through specific features (digital extras, exclusives, etc) • Continued commitment of capital to enable ongoing investment in international networks, a key driver of the business' growth page 8