TV1-SF-SET Australia Opportunity Overview May 2013 [PRELIMINARY - PowerPoint PPT Presentation

TV1-SF-SET Australia Opportunity Overview May 2013 [PRELIMINARY DRAFT]

Executive Summary Sony Pictures Television (“SPT”) is seeking approval to take over the assets and liabilities of the TV1 and Sci-Fi (SF) partnership and utilize the TV1/SF infrastructure and management team to launch a 3rd Sony branded Sony Entertainment Channel (“SET”) in Australia on the Foxtel platform • SPT, CBS Studios, and Comcast/NBC Universal are currently equal partners in Australian Pay-TV channels TV1 and Sci-Fi (SF) on the Foxtel platform • Recent affiliate renewal negotiations has Foxtel significantly reducing subscriber fees for both TV1 and SF which have historically contributed ~50% to total revenue • The fee reductions have forced the board/management to consider (1) dissolving the partnership or (2) reducing programming and operating costs to off-set the expected decline in subscription revenue • SPT is proposing a 3rd option which would have SPT take on the assets and liabilities of the TV1 and SF partnership (subject to legal structuring and tax issues), streamline their operations and utilize their infrastructure/team to launch a 3rd channel branded “SET” • SPT’s proposed SET channel would consist of TV and film product from various genres, leveraging Sony’s extensive content library • New SET channel to be created in parallel to running TV1 and SF and assumes a Jan 1, 2014 launch date • The current consolidated business plan has projected NPV of $32.8M (NPV of $3.2M for cash 2 flows w/o exit) and a DWM of ($2.0M). NPV of $37.6M (NPV of $8.0M for cash flows w/o exit) and (1) Incremental license fees assumes 75% of SET channel content will be SPE library content. Includes 15% for residuals and 40% in taxes. a DWM of ($99K) when including incremental license fees paid to SPE (1)

Situation Overview SPT is in a strong position to successfully take control of TV1 and SF while launching a Sony branded general entertainment channel in Australia • SPT is in discussions with CBS and NBCU to take over the partnership and to secure long- term output deals for TV1, SF and the new SET channel – The TV1/SF partnership will be dissolved with CBS and NBCU selling their stakes to SPT for $1/each – This allows viable product licensees to remain in the market, and creates a new one with SET – Further, it prevents a shutdown of the TV1/SF business and possibly Ignite Media Brands (TV1/SF has a 50% ownership stake in Ignite who is their 3rd party ad sales representative), and avoids significant write downs for the partners (NOTE: SPT is expecting an impairment of $5.1M) • SPT is negotiating with Foxtel to secure a long-term carriage agreement for the new SET channel – Foxtel has agreed to carry the newly formed channel on the basic tier, however, additional terms in the agreement still need to be discussed (i.e., content commitment, etc.) – SPT’s proposed channel will be fully ad-supported with no subscriber fees and be positioned as the home of addictive primetime dramas and long running daytime soaps from the U.S. and Australia • TV1/SF management has provided improved ad sales projections and cost reductions to the TV1/SF long-term business plan which have significantly off-set the reduction in subscriptions revenues from Foxtel 3 – Increased revenue forecasts by ~16% from the prior LRP plan to capture greater ad sales opportunity via increased unit volume and a 5.0% CAGR (vs. flat growth in the prior LRP)

Strategic Benefit to SPE SPT has an opportunity to expand our international network footprint and gain immediate operational control of TV1 and SF with limited capital investment • SPT to take ownership and operational control of TV1 and SF – Deal structured for SPE to consolidate earnings for TV1 and SF – Capitalize on restructured operations leading to significant cost savings and synergies • SPT to launch a wholly owned channel, creating long-term asset value, while leveraging TV1 and Sci-Fi’s pre-existing infrastructure Sony branded channel to be positioned as the home of addictive primetime dramas and long running daytime soaps from the U.S. and Australia Enhance brand value for SPE by introducing a Sony branded channel into the Australia market • SPT to capture a revitalizing ad market in Australia through 3 distinct channel brands Recently improved consumer confidence is driving higher growth in the overall ad market Pay TV advertising revenue is expected to continue to outgrow FTA with a forecast of $801M in 2015 and a 7.9% CAGR from 2012 (NOTE: TV1/SF/SET assumes 5.0% CAGR growth) Newly launched SET channel to generate ~$3–4M/year in incremental ad sales revenue • Generates incremental licensing revenue for SPE library product of approximately $2.4M/year or $12.0M cumulative over 5 years (1) – Channel will draw heavily on SPE titles – including library films and unique TV product that has yet to be seen in Australia 4 (1) Incremental license fees assumes 75% of SET channel content will be SPE library content. Revenue is not net of residuals or taxes. – All titles will be non-exclusive and licensed at market-rate terms

TV1-SF-SET (Consolidated) Financial Overview S ony Fis c al Year ending, Marc h 2014 2015 2016 2017 2018 R E VE NUE S ubscriber R evenue $13,841,150 $6,634,785 $6,773,103 $6,901,805 $7,033,093 Advertising R evenue $16,773,848 $26,245,866 $28,414,409 $29,916,380 $31,412,199 Advertising C osts ($5,986,850) ($7,558,652) ($7,254,278) ($7,310,611) ($7,492,262) Net Ad R ev $10,786,998 $18,687,213 $21,160,131 $22,605,769 $23,919,937 TOTAL R E VE NUE $24,628,148 $25,321,998 $27,933,234 $29,507,574 $30,953,030 C OS T S C ontent ($15,239,841) ($19,299,747) ($15,570,377) ($13,950,222) ($13,981,449) L ocal C ontent ($1,042,717) ($1,892,674) ($1,557,038) ($1,395,022) ($1,398,145) Opex ($7,437,730) ($8,707,331) ($8,734,250) ($8,948,975) ($9,170,142) Playout ($225,000) ($900,000) ($900,000) ($900,000) ($900,000) TOTAL C OS T S ($23,945,288) ($30,799,752) ($26,761,664) ($25,194,219) ($25,449,735) Depreciation ($256,000) ($334,001) ($334,001) ($334,001) ($334,001) E B IT $426,860 ($5,811,754) $837,568 $3,979,354 $5,169,294 C umulative E BIT $426,860 ($5,384,894) ($4,547,326) ($567,972) $4,601,322 ess: PPA (1) L $0 $0 $0 $0 $0 E B IT AF TE R PPA $426,860 ($5,811,754) $837,568 $3,979,354 $5,169,294 C AS H FL OW S PT E BIT (After PPA) $426,860 ($5,811,754) $837,568 $3,979,354 $5,169,294 Add: C hanges in Net Working C apital $1,021,583 ($86,097) ($841,511) ($431,820) ($254,301) Add: Depreciation $256,000 $334,001 $334,001 $334,001 $334,001 Add:PPA $0 $0 $0 $0 $0 Adjustment for C ontent Amortization $1,577,718 $586,341 $0 $0 $0 Adjustment for Australian C ontent $899,717 ($367,326) $0 $0 $0 L ess: C APE X ($380,000) ($334,001) ($334,001) ($334,001) ($334,001) L ess: Taxes ($128,058) $0 $0 $0 ($1,380,397) Total C as h Flow $3,673,820 ($5,678,836) ($3,943) $3,547,534 $3,534,597 xit Value (2) E $45,949,755 Total Net C as h F low $3,673,820 ($5,678,836) ($3,943) $3,547,534 $49,484,351 C umulative C ash F low $3,673,820 ($2,005,016) ($2,008,959) $1,538,575 $51,022,926 icense Fees (3) Add: S ony Incremental L $352,012 $1,553,734 $1,414,874 $1,368,872 $1,409,938 S PE View $4,025,832 ($4,125,102) $1,410,932 $4,916,406 $50,894,289 C umulative C ash F low $4,025,832 ($99,270) $1,311,661 $6,228,067 $57,122,356 C hannel S PE View Total Investment/DWM ($2,008,959) ($99,270) NPV of C ash F lows $3,214,481 $7,999,984 NPV of E xit $29,618,520 $29,618,520 ombined NPV (2) C $32,833,002 $37,618,504 (1) PPA currently assumed to be zero based on the premise that the average market participant would shut this business down - Sony is willing to carry on for 5 strategic/synergy reasons. (2) Assumes 12% discount rate and 4% perpetuity growth rate. Exit value based on perpetuity growth calculation with assumed EBITDA multiple of 8.3x. (3) Incremental license fees assumes 75% of SET channel content will be SPE library content. Includes 15% for residuals and 40% in taxes.

Additional Financial Considerations SPT has taken a look at financial outcomes based on possible downside assumptions Deep Water Mark (DWM) / NPV – Based on Channel View (1) Projected Ad Sales Growth 5.0% 3.0% 0.0% Current Rate ($2.0M) / $32.8M ($2.9M) / $26.9M ($4.2M) / $4.1M +10% ($2.9M) / $28.5M ($3.7M) / $13.9M ($6.3M) / ($5.0M) Progr ammi ng +20% ($3.7M) / $16.5M ($4.8M) / ($0.5M) ($9.8M) / ($7.5M) Rate s (2) +30% ($4.9M) / $2.2M ($8.0M) / ($6.2M) ($13.4M) / ($10.1M) +40% ($7.8M) / ($6.1M) ($11.6M) / ($8.8M) ($17.0M) / ($12.6M) Current Case NOTE: Boxed portion includes positive NPV results. 6 (1) Based on Channel View. Does not include incremental SET license fees back to SPE. Does not account for exit value if EBIT is not positive. (2) Assumes all programming rates for all channels increase at the same rate.