Sony Pictures Entertainment and Sony Network Entertainment Project

Sony Pictures Entertainment and Sony Network Entertainment: Project Update: Crackle Plus February 13, 2012

Crackle Plus Goals and Business Model The Sony Experience Hardware Services Purpose / Considerations • Acquire customers • Retain customers • Free; low barrier to trial/adoption • Monetize customers • Programmed experience focused on men 18 -34 • Primarily an investment Economics • Increases in service and hardware revenue ultimately offset Crackle Plus investment, albeit likely not in 1 st year • Limited ad revenue • Not profitable on standalone basis 1

Crackle Today Films • ~200 library titles • 2 -3 year-old driver titles in the network window refreshed monthly TV Originals Television • ~1, 800 full-length and short-form television episodes Off-Net TV Series • >40 original series featuring notable talent Reach Recent Films • 10 MM+ monthly unique users across all platforms • 10 MM+ Crackle app downloads in 6 months Crackle is a fully programmed and widely available service today The “Plus” in Crackle Plus can be one of several types of content 2

Crackle Plus Cost Considerations Original Content $ $$ $$$ Behind the scenes, concerts, valueadded content etc. Scripted, half-hour (i. e. , web series) Scripted, one hour drama (i. e, TV quality) Library titles; non-exclusive Network window titles (i. e. , 2 -3 years old); exclusive Partial rights (e. g. AVOD); non-exclusive Partial rights (e. g. , AVOD); exclusive As Discussed Previously Films Additional Identified Opportunities Off. Network TV 3 Full off-network rights (except vis-à-vis commissioning network); exclusive

Crackle Plus Recommended Programming Mix $ Original Content Behind the scenes, concerts, valueadded content etc. Films ~100 non-exclusive library titles $$ $$$ 1 half-hour scripted dramedy, 13 eps 2 one hour drama series, 13 eps each As Discussed Previously Additional Identified Opportunities 15 exclusive network window titles 2 exclusive series on AVOD (perhaps SVOD as well) Off. Network TV Note: Above is incremental to existing Crackle service. 4

Original Series Assumptions Series Timing Budget Comparables(1) Budget comparables represent season 1 production costs, net of any incentives, for all included titles. Source: product ultimates. 5

Examples of “Driver” and Library Titles $$$ $ “Driver Titles” High Profile Library Titles • 100 lower cost non-exclusive library titles will bolster current Crackle offering • 15 higher cost exclusive network-window titles will drive traffic for the enhanced service Note: Representative titles only and subject to availability once licensing discussions commence. 6

Off-Net TV Opportunities 7

Windows for Television Content Early Years Later Years Current Seasons Linear Rights On commissioning network (e. g. NBC) AVOD Limited number of episodes on commissioning network’s site (e. g. NBC, Hulu) SVOD Generally not made available Past Seasons Off-Net Linear Rights Licensed to a second network (e. g. , TBS) and/or for broadcast syndication AVOD Sometimes split, with some eps to second network and some held back SVOD May or may not be licensed to a digital player (e. g. , Netflix) Licensing all or a subset of these rights represents an opportunity for SEN 8

SPT Off-Net Avails, Costs and Considerations Rights $ $$ $$$ Partial rights; non-exclusive Partial rights (e. g. exclusive AVOD or narrow windows); exclusive Full off-net rights, including Linear, SVOD, AVOD; exclusive Title # of Eps at Avail Date(1) Avail Date Seinfeld Community Rescue Me Boondocks(2) 180 93 93 43 Immediate 5 on 10 on Crackle Immediate today starting 2015 The Shield(3) Justified Happy Endings 80+ 65 75+ Immediate Q 1 CY 2014 Q 3 CY 2014 • Crackle already leverages partial, non-exclusive rights (e. g. , Seinfeld) and could supplement with additional, recognizable titles (e. g. , Rescue Me) at a relatively low cost • Partial, exclusive rights (e. g. , Boondocks, The Shield) are also available and can likely be accommodated in budget as previously presented • Opportunity to buy full series, off-network rights (e. g. , Justified) requires increased investment and is a decision for future years (1) Note: Episode counts at date of availability represents estimate for early season titles. (2) Exclusive digital / on-demand rights subject to Turner approval; Turner would still retain linear rights. (3) Creates de facto exclusive against all rights if Spike does not air on linear network. 9

Additional Opportunities • SPE can also explore opportunities around content under license, including: − TV shows that are in early seasons (e. g. , Justified) and/or shows that have recently been licensed off-net (e. g. , Breaking Bad) − Films before or as they enter the Pay TV window • These opportunities require engaging with current licensees (e. g. , Netflix for Breaking Bad, FX for Justified and Starz for films in the Pay window) • If current licensees are interested, securing rights for SEN would require an investment in buyingback rights Films TV Shows 10

Budget Considerations 11

Budget Considerations • The investment levels presented here are based on the initial recommendation for Crackle Plus, inclusive of original series • The initial investment can be decreased if the investment in originals is decreased or deferred • The budget can also be adjusted up or down to pursue the other content opportunities recently presented • In addition to discussing the investment level, we should discuss the resulting benefit to SNEI, SCEI, and CPSG 12

Crackle Plus Economics FYE 13: Partial Year ($MM) FYE 14: Full Year FYE 13 ($MM) Revenue FYE 14 Revenue SPE Incremental Revenue $6 SPE International Sales $18 SPE Ad Revenue 4 Sub-total Gross Investment Content Gross Investment ($55) Headcount/Tech Sub-total Net Investment in SNEI and SPE Budgets Content (7) ($88) Headcount/Tech ($62) Sub-total ($56) Marketing Total Sony Investment $22 (13) ($101) Net Investment in SNEI and SPE Budgets (15) ($79) Marketing ($71) Total Sony Investment (30) ($109) • $56 MM investment to be incorporated in SNEI and SPE budgets as described on the next page To be mitigated by benefits not yet quantified including: • SNEI and SPE anticipated budget impact excludes $15 MM of marketing ‒ New customer acquisition ‒ Service revenue per user uplift • Need to discuss alternatives for addressing marketing, either as a dedicated Corporate effort, shared across Hardware and Service divisions, or housed in a single division ‒ Hardware sales growth 13

Crackle Plus Budget Impact • Economics would be incorporated in SPE and SNEI FYE 13 budget submissions; specifics being resolved but preliminary proposal is: • Pays SPE a flat fee equal to estimated content costs less estimated ancillary revenues (e. g. , international, video etc. ) and also bears bandwidth, data center and cloud costs SNEI • Retains uplift in service revenues • FYE 13 SNEI budget impact of this approach being finalized; currently estimated to be ($50 MM) • Responsible for its own investment in headcount and infrastructure • Retains ad revenue SPE • Bears actual content cost and execution risk on ancillary revenue opportunities • FYE 13 SPE budget impact of this approach being finalized; currently estimated to be ($6 MM) Note: Above are SNEI and SPE specific budget impacts and are before the recommended $15 MM of marketing. Need to discuss approach to marketing. 14

Consolidated Sony View Note: Consolidated Sony impact assumes elimination of license fee revenue for SPE and license fee expense for SNE Assumptions: (1) FY 13 includes production costs for 19 episodes (1 entire series and half a season of second series and 70% of international revenue only of first series) (2) FY 14 represents “steady-state” 39 episodes and captures production costs and associated revenue for all 3 series (2 one hour dramas and 1 half hour dramedy - each 13 episodes) 15