Hancock on BIVL

June 12, 2008

DRAFT – PRIVILEGED AND CONFIDENTIAL

2

Executive Summary

• SPE has been asked to participate in an early window VOD test, making Hancock available exclusively on Sony Bravia TVs through the BIVL service

• This test provides SPE with an opportunity to achieve two goals– Support a Sony United initiative to generate market awareness for Bravia/BIVL– Establish market terms that support SPT’s efforts to launch an early window VOD offering

with cable, MSO, and DBS partners

• Prior to announcement, we will address the following issues– SPE to discuss the offering with Starz, Talent, and MSO/DBS partners– SPE agreement on list price ($19.99 or $29.99) and portion paid by viewers

(e.g., $3.99 or $7.99) after any coupons / discounts– Final validation of hosting and payment service partners by SEL

• Once these issues are addressed, we recommend moving forward with the test based on the following terms

– Viewing Period: 24 hour rental (streaming)– Availability: 4 weeks prior to DVD/Blu-ray street date for a two week period– Promote the availability of Hancock and other Blu-ray titles and include a trailer for a SPE

theatrical release at start of stream

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Recommended Offering and Rationale

Parameter Recommendation Rationale

Deemed Price $19.99 -- $29.99 At premium to day-and-date; within “Home Theater” pricing range

Cash Charge $3.99 -- $7.99

After any discounts or coupons, users must pay at least this amount with a cash equivalent for the offering to be considered PPV/VOD offering

Cash price would be in-line with current PPV offerings or proposed prices for new, day-and-date offerings

Viewing Period 24 Hours Viewing period longer than 24 hours would conflict with Starz deal

Availability 4 weeks, prior to DVD/Blu-ray window

Price and HD format are the primary drivers of consumer interest Timing is less of a driver and 4 weeks early appears to be

sufficient to generate interest and drive demand

Duration 2 Weeks Allows for blackout period before DVD/Blu-ray release window

Split Greater of 85% of the deemed or actual price

Increased percent split over current offerings is justified by increased revenue retained by distributor

Timing Distributor to announce availability no earlier than +60 days from theatrical

Market practice to not announce VOD before announcing DVD street date

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Pricing

1.7%

2.0%

3.0%

4.0%

0% 1% 2% 3% 4% 5%

$34.99

$29.99

$19.99

$14.99

Magid Early Window Analysis

$100

$150

$200

$250

$300

$350

$400

$3.99 $10.49 $16.99 $23.49 $29.99

• Optimal day-and-date pricing is $7.99 to $8.49 per Oliver Wyman study

• Early window HD should clearly be at a premium to day & date

• Between $14.99 and $34.99, buy rates for HD early window are comparable to standard VOD at $3.99 (1-4% depending on title/genre)

• At this stage, HD early window test pricing should at least be in the mid-range of early window analysis (e.g., it’s too early to go low)

• We are evaluating $19.99 or $29.99 for the Hancock early window test

Oliver Wyman Day-and-Date Analysis (1)

Offer Price

Incr

emen

tal R

even

ue ($

MM

)

Buy Rates

Offe

r Pric

e

(1) Relative to 2006 actuals, HD day-and-date rental at $8.49 yields net increase of $375MM (10%) in SPE U.S. Studio Revenue

Optimal at $8.49

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Wholesale

Pricing Format Model Split $ to Service Provider

$3.99 Standard Def Standard VOD 60/40 $1.60

$4.99 High Def Standard VOD 70/30 $1.50

$4.99 Standard Def Day-and-Date VOD 70/30 $1.50

$7.99 -- $8.49 High Def Day-and-Date VOD 70/30 $2.40 -- $2.55

$19.99 -- $29.99 High Def Bravia / BIVL Early Window(1 month early) 85/15 $3.00 -- $4.50

= Proposed pricing and split, no deals currently in place

• SEL would pay SPE on the same terms as MSOs and DBS partners, satisfying obligation to participants

• Greater of 85% of the deemed or actual retail price is generally consistent with the $ value retained by service providers in the HD day-and-date window

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Potential User Experience

Enter Payment Service credentials to pay $3.99 or $7.99

Coupon covers balance up to $19.99 or $29.99

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Hancock Windows

2008 2009

Jul Aug Sept Oct Nov Dec Jan Feb Mar Apr May Jun

Standard Hancock Windows

Theatrical Release 7/2

Hotel 10/1 4/11

Home Ent. 11/11

PPV / VOD (30-45 days post DVD)12/11

or12/26

4/11

Starz (through 8/10/2010) 5/11

FX (starts 10/11/2010 – 10/10/2015)

Early Hancock VOD Window

VOD on BIVL (2 wks) 10/1410/28

Starz Window 5/11

• Proposed Early VOD to run for 2-week period between Oct 14-28, 2008

– VOD must be dark for the two weeks immediately preceding HE release (11/11/08)

• Early VOD window does not affect Starz window as long as it starts later than 9/11/08

– Starz is the earlier of 6 months from HE release date, 8 months from VOD, or 12 months from theatrical release

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Messaging

Process

• SPE to preview the terms of the initiative with Starz, Talent, and MSO/DBS partners in advance of the announcement; conversations may alter recommendations

• SPE to review the June 26 announcement

• Promotion of the offering would commence after the normal black-out period extending 60 days from the theatrical release

Message Elements

• Hancock will be the first blockbuster movie streamed directly to TVs and available in an early window

• Address the quality and timing of this offer relative to the ultimate HD offering (Blu-ray)

• Blu-ray and theatrical trailer to run at the start of the stream

• Press release should clearly identify Hancock / BIVL as a test