1. Internet Bypass
CONFIDENTIAL

2. SPE/Sony and/or Partner
Internet Bypass Creates Opportunities for New Licensing/Syndication Relationships and Potential for a Customer-facing Service
Broadcast Model
Production
Aggregation
Distribution
Customer
SPE
Broadcast Network
Local Affiliate
Broadcast TV
Cable Model
SPE
Cable Network
Cable MSO
Cable TV
Digital Distribution – Licensing/Syndication
SPE
Portal
Broadband ISP
PC or TV
Customer-facing Service
SPE
SPE/Sony and/or Partner
Broadband ISP
PC or TV

3. Capitalizing on IP Delivery Requires a Full End-to-End Solution
Advertisers
Detailed Customer Data
For Addressability
Content TV
Film
Commercial Short-form
User-generated
Infrastructure
Web Design
E-Commerce
Servers
Storage
User Experience
Programming
Search
Features & Community
Online Brand / Audience
Playback PC TV
Mobile
Portable
Hollywood has traditionally been resistant to new market opportunities brought on by new technology
Despite this hesitancy, the industry has consistently benefited as technology has ultimately been adopted
Two-way Communications
For Interactivity
Customers

4. Areas of Strength for Portals and Cable MSOs
Strong for Cable MSOs
Strong for Portals
Advertisers
Detailed Customer Data
For Addressability
Content
Infrastructure
User Experience
Playback TV
Web Design
Programming PC
Film
E-Commerce
Search TV
Commercial Short-form
Storage
Features & Community
Mobile
User-generated
Servers
Online Brand / Audience
Portable
Hollywood has traditionally been resistant to new market opportunities brought on by new technology
Despite this hesitancy, the industry has consistently benefited as technology has ultimately been adopted
Two-way Communications
For Interactivity
Customers

5. Areas of Strength for Portals and Cable MSOs
Strong for Cable MSOs
Strong for Portals
Advertisers
Detailed Customer Data
For Addressability
Content
Infrastructure
User Experience
Playback TV
Web Design
Programming PC
Film
E-Commerce
Search TV
Commercial Short-form
Storage
Features & Community
Mobile
User-generated
Servers
Online Brand / Audience
Portable
Hollywood has traditionally been resistant to new market opportunities brought on by new technology
Despite this hesitancy, the industry has consistently benefited as technology has ultimately been adopted
Two-way Communications
For Interactivity
Customers

6. Areas of Strength for Sony
Advertisers
Detailed Customer Data
For Addressability
Content
Infrastructure
User Experience
Playback TV
Web Design
Programming PC
Film
E-Commerce
Search TV
Commercial Short-form
Storage
Features & Community
Mobile
User-generated
Servers
Online Brand / Audience
Portable
Hollywood has traditionally been resistant to new market opportunities brought on by new technology
Despite this hesitancy, the industry has consistently benefited as technology has ultimately been adopted
Two-way Communications
For Interactivity
Customers

7. Implications for Sony Pictures
SPE should consider alternatives to enter the network business directly and is uniquely positioned among studios to do so
Unencumbered by distribution platform or network relationships (vis-à-vis Viacom, Time Warner, Disney, Universal, Fox)
Not yet significantly committed in VOD content distribution
The only studio with a relationship to hardware
However, Sony’s limited experience building online offerings requires partnering to build a true end-to-end solution
Partnerships should focus on established online players whose assets and needs are complementary to our own
Established online brands bring audience reach, interactivity, a path to the PC, and technology
Focus on emerging players most in need of our content, opening the door to an exchange of content for equity participation
Sony compliments online brands by bringing a path to the TV via the PS3

8. Appendix – Impact on Competitors
CONFIDENTIAL

9. Impact of Internet Bypass on Key Players
Online Destinations
Networks and Infrastructure Providers
Leverages established brands and large audience base
Adds direct relationship with customers for video content
Capitalizes on ability to provide interactivity
Taps into base of user-generated content
Shifts basis of competition from traditional content to community features and new capabilities
Advantages
Capitalizes on ability to provide detailed customer data (advertising addressability)
Builds on ability to provide a direct pathway to the TV
Challenges
Inability to provide advertisers detailed customer data (limited data on unique users)
Technical barriers to transfer of video content from PC to the TV
Limited experience with interactivity and community features
Commoditization of broadband ISPs as customers identify more with online brands and consumer-facing services

10. Internet Bypass: Online Portal Reaction
Established online brands extending presences into video offerings
Google Video
Yahoo Video Search
iTunes Video
New entrants rapidly gaining scale and credibility through unique capabilities, community features, and user-generated content
Nearly half of all Internet users visited a social-networking Web site in April
Youtube and Myspace building large customer bases in a short time period
Portals increasing advertising addressability
Adding subscription-based services and targeted offerings (MLB.com and ESPN.com)
Introducing new platform to offer targeted, interactive advertising tools (new Yahoo! solution)
Online destinations cutting deals for access to commercial content
Studio sell-through deals with MovieLink and CinemaNow
MySpace offering ad-supported and sell-through episodes of 24
BitTorrent / Warner Brothers licensing deal for motion picture and television content

11. Internet Bypass: Infrastructure and Network Reactions
STB and DVR manufacturers improving path to the TV for internet-based content and enhancing advertising capabilities
Motorola investing in IP-enabled STBs
Cisco / Scientific Atlantic investing in ethernet-enabled STBs and hedging with investment in Moviebeam
TiVo partnering with Brightcove to add internet-based videos and adding interactive ad capabilities (e.g, Lexus Car Configuration Tool)
Enhancing infrastructure to offer direct measurement / targeting capabilities
Cable Co’s and Networks extending brands online (Comcast.net, ABC.com, NBC.com, CBS.com)
Cable and telco industry lobbying against net neutrality laws
As broadband ISPs, cable and telcos seek right to block, degrade, or charge premiums for access to Web-based content
Telcos investing in interactivity
Fiber-to-the-home initiatives for full interactive TV
AT&T introduction of “Homezone” STB from 2Wire; includes Akimbo and Dish satellite TV service

12. Resulting Competitive Landscape
Source: Nielsen NetRatings and comScore Media Metrix, May 2006.
Note: * MTV Overdrive connected to directly through MTV.com.