1. Sony Pictures Entertainment Procurement Assessment & Wave 1 Status Update
August 20, 2013
2th August 2013

2. Executive summary: achieving savings
SPE has a significant procurement cost reduction opportunity:
FY14 impact could be $20M to $24M if implementation is launched in August 2013.
Cumulative cost reduction of $72M to $98M (excluding media planning and placement) by the end of FY15.
A procurement “surge” could contribute an additional $240M in cost reduction over 5 years (according to the SPE cost benefit analysis1). At a 6.5% margin this is equivalent to $3.7B in additional revenue over the same period.
Achieving these surge savings will require 25 FTEs for the balance of CY13 (and fewer in CY14).
Successful implementation will require communications, change management and continued governance by the Procurement Operating Committee (DCFOs + Legal).
Cost reduction opportunities would be pursued in waves, attacking the categories with the best return on investment in the first wave.
Note: Savings are gross cash flow calculated as the difference between baseline costs and estimated future costs.
1Cost benefit analysis calculated on midpoint of the savings range.

3. $4.4B considered non-addressable for driving procurement savings
Approximately $3.6B of SPE spend is potentially addressable by procurement, based on CY12 data.
Development finance
Inter-company receivables
Third-party share payable
Credit union clearing
Walt Disney
Castle Rock
MGM Holdings
CBS
Comcast NBC
Paramount
DW Studios
Warner Bros
Others
Entertainment Partners
Beachwood Services
Rights
Participations
Unions and guilds
Royalties
Residuals
Licensing
Sony Corporation of America
SPE Corporate Services
Sony Pictures Television Intl.
Sony
Sony Pictures Releasing
Corday Productions
Others
MPG M&D:
$978.1M
MPG:
$875.6M
TV:
$719.0M
HE:
$479.9M
$4.4B considered non-addressable for driving procurement savings
Corp:
$590.1M
Source: Ariba Spend Visibility Tool; EY analysis, CY 2012 data

4. Addressable spend segments into six discrete category families that cross divisional boundaries.
Production – $608M
Post production – $348M
Marketing – $1,441M
Distribution – $348M
Technology – $189M
SG&A – $501M
Rental equipment, $72M
Lighting rental, $23M
Camera equipment, $15M
Audio/visual equipment, 11M
Heavy equipment, $15M
Production trailers, $8M
Visual effects and 3D, $120M
Creative, $109M
Packaged media creation, $121M
Media planning and placement, $1,001
Post production, $103M
Language dubbing, $26M
Duplication, $19M
Transcoding, $13M
Subtitling, $13M
Audio fulfillment , $9M
File transfer, $6M
Encoding, $5M
Miscellaneous, $5M
Quality control, $4M
Film scan/transfer, $3M
Pick, pack, $40M
Merchandising, $19M
Basics, $79
Marketing print, $29M
Corrugate displays and standees, $23M
Promotional items, $9M
TV and radio spots, $9M
Print ads, $3M
Trailer creation, $6M
Production payroll services, $39M2
Film prints and trailers, $168M
Stage rentals, $29M
Site locations, $19M
Services, $68M
Wardrobe purchases and rentals, $16M
Broadcast, $34M
Production catering, $16M
Publicity and events, $92M
Post production other, $125M
Telecom, $32M
Production security, $5M
Market research, $42M
Makeup, $2M
Hardware, $30M
Set design, $30M
Promotions, $17M
Software, $23M
Production other1, $380M
Marketing other, $101M
IT other, $2M
Travel – $88M
Commercial air, $18M
Lodging, $17M
Private jets, $9M
Limo, $9M
Rentals cars, $3M
Travel other, $32M
Labor-based services – $176M
Finance, $78M
Legal, $61M
Consulting, $20M
Temp staffing,$17M
Facilities – $207M
Freight, $64M
Rent, $69M
Food service, $4M
Janitorial, MRO and building maintenance, $18M
SG&A other, $21M
HR – $30M
Compensation and benefits Planning, $23M
Health and welfare, $4M
HR services, $3M
Utilities, $12M
Reprographics, $6M
Office supplies and furniture, $5M
Corp. security, $8M
Source: Ariba Spend Visibility Tool; EY analysis, CY 2012 data
Note: $139M of spend is unclassified
1Production Other includes Vista spend not classified in Ariba Spend Visibility(ASV), production advances and other production related spend.
2Production payroll services are estimated at 6% of the related salaries from Entertainment Partners ($648M).

5. Implementation roadmap sequences capability development over three years to capture and sustain benefits.
Strategy and governance
SPE Procurement future vision
Governance and Change Mgmt
Transactional staff additions
SRM
Policy refresh
Organizational design and staffing
FY16
Category sourcing
wave 4
People and organization
Category sourcing
wave 3
Organizational design and staffing
Category management implementation
eSourcing tools
Category sourcing wave 2
FY15
Category management and SRM
Category sourcing
wave 1
Optimize the spend channels
Ongoing monitoring and reporting
Category sourcing
wave 0
Refresh Ariba Spend Visibility tool
Working capital improvements
Implement
KPIs
FY14
Technology
Internal stakeholder management
Purchase-to-pay
Performance management

6. A rigorous category sourcing approach is critical in achieving best terms and pricing for SPE purchases 1
Develop category profile
Develop category savings strategy 2 3
Execute TOC reduction strategy 4
Implement and realize benefit 5
Sustain the results
Objectives
Deep dive assessment of category profile and supply market condition
Develop strategies to reduce Total Operational Cost (TOC)
Prioritize cost savings strategies, develop execution plan then execute accordingly
Implement change and operationalize for sustainable results
On-going reviews of the market and business needs to refine program(s)
Key activities
Understand business requirements
Develop demand profile
Confirm business requirements
Assess category spend usage, compliance level and potential savings leakage drivers
Review industry and supply markets
Conduct initial assessment of supply base for rationalization, SRM strategy and risk management
Conduct category profile analysis across spend and compliance
Determine TOC reduction opportunities (e.g. policies, enablement, processes, KPIs, demand mgmt, compliance, etc.)
Identify potential risks, challenges and opportunities to implement savings strategies
Operational Cost:
Prioritize and select appropriate strategies to execute
Develop execution plans, determine resource needs and gain stakeholder buy-in
Engage with internal and external stakeholders
Conduct appropriate analysis and assessment
Sourcing:
Determine appropriate sourcing strategy, techniques & tools (e.g. RFx, offshore, eTools)
Engage suppliers
Define supplier assessment criteria and approach
Develop appropriate implementation plan(s)
Develop appropriate change management plan
Develop strategies around contract mgmt, buying channels, etc.)
Identify risks and challenges to change and develop & execute against mitigation plan
Define KPIs , metrics and tracking tools
Define savings realization strategy
Define SRM strategy (governance, segmentation, development, etc.)
Monitor market conditions
Assess technology and leading practices impact
Determine opportunities to re-assess category
Conduct on-going performance review and process improvement initiatives with internal stakeholders and with suppliers
Review performance reports and develop plans to drive continuous improvement

7. Implementation is structured in four waves that prioritize savings opportunities and balance workload.
Wave 0
Reprographics
DADC-Manufacturing
DADC-Manufacturing, ROW
Merchandising - SPAR
Wave 0
Wave 3
Aug 1
Jan 1
FY14
May 1
Sep 1
FY 15
Wave 1
Wave 4
Wave 2
Wave 1
Media planning and placement
SG&A compliance (freight, office supplies and furniture, temporary staffing, software, and hardware)
Publicity and events
Telecommunications
Marketing print, corrugate and promotional Items
Production - Equipment and rentals (lighting, heavy equipment, audio-visual, trailers and camera equipment)
Travel (lodging, private jets, commercial air and limo)
Post production (subtitling, audio fulfillment, file transfer, film scan and transfer, and miscellaneous)
Wave 2
Market research
Facilities (utilities, building maintenance, janitorial, MRO and corporate security)
Production (wardrobe, security, makeup, stage rentals, catering and set design
Post production (VFX, 3D, transcoding, film prints and trailers)
Wave 3
Merchandising (non-SPAR)
IT services
Professional services (HR services, legal and consulting)
Marketing basics and creative
Wave 4
Post production (language dubbing, duplication, encoding, QA)
Real estate and rent
Distribution - pick, pack
HR (compensation and benefits planning, health and welfare)
Site locations
Broadcast
Marketing - promotions
Food service (Wolfgang Puck)
Rental cars
Source: Ariba Spend Visibility Tool, EY analysis, CY 2012 data

8. Wave 1 project team structure (1/3)
Media Planning and Placement ($687M)
TV spend is less than 1%
SG&A – Compliance
($59M)
Publicity & Events, and Promotional Items
($76M)
Marketing Print, Displays ($39M)
MPG M&D
MPG M&D
Corp
MPG
48%
47%
MPG M&D
90%
44%
18%
18%
10% 1%
Corp 3%
Corp
10% HE 9%
18% TV HE
28%
12%
31%
26% 2%
MPG TV HE HE
MPG TV
Sheraton Kalouria
Kathy Shane
Bill Stellman
Stephen Andujar
Ron McNair
28%
Andre Caraco
Nigel Clark
Sheraton Kalouria*
Kathy Shane*
Drew Shearer
Sheraton Kalouria
Kathy Shane
Drew Shearer
Bill Stellman
Mark Weinstock
Lexine Wong
Sponsors
Stefanie Napoli
Lexine Wong
Finance: TBD
Lucienne Hassler *
HR: Paul Martin *
Dave Mastalski*
IT: Manish Saraswat*
Finance: TBD
TV: Joy Husband*
MPG: TBD
Finance: TBD
HE: Steve Belmont
TV: Vanessa Gottlieb
Greg Shack
HE: Corinne Tuttle
MPG: Mark Walker*
DADC: TBD
Stakeholders
W/S Lead: TBD
SMR: Rick Gonzalez
Sourcing: Helen Chao
Procurement: Nozomi Okabe
Jane Mohon
W/S Lead: Arun Casuba
Sourcing: Arun Gajendran
Analyst: TBD
W/S Lead: John McAleer*
Sourcing: Mike Brown
Sourcing: Phil Liu
Procurement: Crystal Ryu
Analyst: Nicole Radcliffe
Analyst: Tilmann Gruber (or Irene Christiansen?)
W/S Lead: Nozomi Okabe
Sourcing: AJ Prabhu
Sourcing: Jared Ward
Kenneth Glover
John McAleer
Joan Villaros
Core Team
MP M&D Rep
HE marketing rep
IT: Jeff Ballard
HR: Jim Bogard
Freight: Mark Muramoto *
MPG marketing rep
HE marketing rep
TV marketing rep
MPG corrugate rep
TV corrugate rep
MPG marketing print rep
TV marketing print rep
Part Time
Team
SPE Procurement EY
Corporate
MP M&D TV HE
MPG
Note:
Spend in category heading reflects anticipated impacted spend.

9. Wave 1 project team structure (2/3)
Production Equipment & Rentals ($53M)
Travel
($34M)
Post Production
($27M1)
Corporate spend makes up 75% of the $27M and the remaining divisions make up the remaining 25%.
Telecommunications
($12M)
Corp
MPG
Corp TV
15%
48%
42% 8%
MPG
47%
38%
14%
Corp
18% 8%
30%
32% HE
MPG HE TV TV
Ed Lammi
Stefan Litt
Drew Shearer *
Scott Valentine *
Ron McNair/Mickey Corcoran*
Chris Cookson *
Ed Lammi
Stefan Litt
Stephen Andujar
Sponsors
Glenn Gainor
Andrew Given/ William Corral *
Greg Manson *
Dawn Taylor *
TV Operations TBD
Michael Hernandez*
Finance: TBD
MPG TBD
Grover Crisp *
Terri Davies
Greg Manson *
John Naveira
IT/Telco: TBD
Finance: TBD
Stakeholders
W/S Lead: Thomas Hershey *
Procurement: Nathan Constantinescu
Sourcing: Michael McCreary
Sourcing: Jonathan Volta
Analyst: Trevor Rubatzky
Prodn Finance: Wing Hom
W/S Lead: Pamela Aberg or Gary Stevenson*
Procurement: Susan Ross
Sourcing: Ray Paragas
Analyst: Lisa Dodd*
Martin Lowery
W/S Lead: Arjun Grover
Category SMR
Sourcing: Alex Bust
Analyst: MPG
W/S Lead: Dennis Bond (or IT nomination)
Sourcing: Charlotte Yates
Core Team
Line coordinators
Production coordinators
Janel Clausen
MPG rep
TV rep
WPF rep: John Carlson (or delegate)
Production rep
Jeff Grover
Part Time
Team
Notes:
Spend in category heading reflects anticipated impacted spend.
1Post production spend shown does not yet include MPG post production spend.
SPE Procurement EY
Corporate
MP M&D TV HE
MPG
Other 3rd party

10. Wave 1 project team structure (3/3)
Working Capital
Nielsen
($12M) TV
MPG M&D
35%
Corp
35%
15% HE HE
13% 5% 1%
MPG
MPG
64%
51% TV
Lawrence Aldridge
Ron McNair/Mickey Corcoran*
Amy Carney
David Kaminow
Sponsors
Dave Mastalski
Niloo Rezai
James Petretti*
Dawn Taylor*
Sony Music TBD
Stakeholders
IT: Kate Davies
PCard: Anthony Kimball*
Accounts Payable: Kristine Milanes*
Treasury: John Tholen*
Laurie Thumin
W/S Lead: Ted Svehlik
MP M&D: Andrew Ferguson*
TV: Wayne Goldstein*
MP M&D: Abe Recio*
TV: Chad Woodrick*
Analyst: Tilmann Gruber*
EY: Jeanette Ho
Core Team
Part Time
Team
Corporate:TBD
SMR: Ted Block
Sony Music TBD
SPE Procurement EY
Corporate
MP M&D TV HE
MPG
Other 3rd party
Sony Music