Digital Distribution – Competitor Landscape CONFIDENTIAL DRAFT Digital Distribution – Competitor Landscape October 2007

Digital Distribution Raises New Strategic Issues Traditional Model Digital Models Studios Ad-supported Models Transactional Models Device to TV Focus Networks Owned 3rd Party Pay TV Operators (includes STB) XBOX PS3 TiVo Apple TV PC iPod PSP PC Owned or 3rd party? How many / How Big? Emerging Models? When Films? Risk of iTunes As Dominant? When Films? Likely Leader? TV

Studios’ Parent Company has an Influence Over Digital Strategy Sister Network Parent’s Other Businesses Parent’s Influence Over Studio Digital Strategy News Corp FOX Cable Networks, Satellite MSO, Publishing Own everything – MySpace; Hulu The Walt Disney Company ABC Cable Networks, Theme Parks, Travel, Merchandising Strong channel brands by demo has led to multiple owned online brands (Disney, ABC, ESPN) Jobs = Apple friendly Viacom CBS (incl. 50% of The CW) Cable Networks, Digital Platforms Channel proliferation offline leads to channel proliferation online Will never own devices, partner early for positioning SONY n/a Consumer Products, Electronics Lack of network makes us hungry to launch new channel brands and able to partner without conflict Device ties impacts willingnes to adopt competitors models (XBOX and iTunes) Time Warner 50% of The CW Cable MSO, Publishing, Networks Ties to a weakening online brand (AOL) and partial interest in a small network has hampered online channel evolution (e.g., In2TV and AOL video) They’re trying to make up for it by licensing aggresively NBC Universal NBC Cable Networks, Theme Parks Lack of consistent, strong parent has pushed them toward more partnership or acquisition focus (Hulu and iVillage)

Ad-Supported Services: Owned vs. 3rd Party Parent Example 3rd Party Streaming Comments Owned Sites Confident in abilities to attract users to ABC.com Established relationships with Yahoo and MSN that will be shifted to Hulu Hulu Capability to create owned sites for library product Committed to network partners for on-net product Establishing broad partnerships Leveraging strong network brands for owned streaming Established relationships with Yahoo and MSN that will be shifted to Hulu Hulu Networks are distributing first-run content broadly for promotional value and to maximize profits until owned sites reach greater scale

Ad-supported: Number and Scale of Owned Services Parent Supported Digital Channels Failed / Consolidated Digital Channels Comments Both ABC.com and ESPN.com are strong channels with scale Hulu Sub brand ‘dotcomedy’ failed Launching JV with Fox Working on building out depth and scale of existing brands (vs. launching wide variety of new brands) Sub brand ‘Inner tube’ failed Switching to CBS.com Strong focus on MySpace (master brand) Launching JV with NBCU Hulu Consolidating multiple web native brands (e.g., iFilm) under Spike.com In2TV Struggling, but AOL investing further Emerging trend toward fewer channels with a more concentrated marketing effort While smaller channels are consolidating, new “mega channels”, like Hulu, are looming

Owned Service Case Study: Hulu Company Overview Features Hulu is NBC Universal and News Corporation’s online video joint venture. The site is set to launch in the Fall of 2007 and will focus on professional content. Initial distribution partners include AOL, Comcast, MSN, MySpace and Yahoo. Programming will also appear on sites owned by the distribution partners. Hulu videos will be played in their own embeddable branded player. Besides the content of NBC Universal and Fox, Hulu will offer content from at least 12 other channels including: Comcast, including shows on the Style and Golf channels, as well as shows from small networks including the Oxygen network, Sundance Channel, TV Guide, and National Geographic. Other major networks such as CBS, Disney ABC, and Viacom have not signed on. Ownership/ Management Team JV between NBC Universal and News Corp CEO: Jason Kilar (former Amazon Executive)

Emerging Ad-Supported Models: Virtual Worlds Virtual worlds have proven highly appealing and have been embraced by kid-oriented networks and studios Club Penguin sold to Disney for up to $700MM ($350MM at close + $350MM of earn-outs); complements Disney’s Toon Town Viacom has a play in the space through Nick-Tropolis Other studios are beginning to invest in the space as well Turner struck a one-year deal with Kaneva to build virtual worlds for its properties Warner Brothers announced plans to launch “T-Works” in Spring 2008 Virtual worlds offer a unique opportunity for TV and Film distribution Sites can offer a truly immersive and social viewing experience Viewing becomes interactive and more engaging Sony is uniquely positioned to capitalize on opportunities in Virtual Worlds Negotiating investment and distribution relationship with Gaia; expected to be the first Virtual World to stream movies and TV in virtual theaters Targets the core teen demographic for our TV and films PS HOME will be a leader in the teen and older demographics

Case Study: Gaia Online Company Overview An online virtual “hangout” with a targeted demographic 65% of demo are 18 years old or younger 85% of audience is domestic Gaia has built an attractive and passionate community 7MM register users and ~2MM monthly unique users Average 2-3 hours per day on the site (more than MySpace or Second Life) An early stage company with significant upside potential Previous focus on building audience, now beginning to monetize user base ($1.8MM in Q1 ‘07) Raised ~$21MM to date; last round at $120MM valuation Extremely interested in Sony as a strategic partner Opportunities for SPE Fees from films and TV product aired in virtual theaters Ad inventory from branded digital channels (e.g. Minisodes) Sale of virtual SPE products (and possibly digital goods) Promote properties through immersive experience

Gaia’s Unique Characteristics Featured Activity = Curated Engagement Matrix Gaia Cash = Incentive Based

Gaia Cinemas

Transactional Models √ * Distributors Used for Film to PC Other: 5% Movielink: 4.6% Other: 5% Other new market entrants such as Wal-Mart’s Online Video platform, AOL Movies, or News Corp’s Direct2Drive hope they will be able to capture market share from Apple. Continues to retain market share, but possibly will lose ground to new entrants like Wal-Mart Amazon Unbox: 8.4% iTunes: 82% TiVo connectivity to TV set has helped to grow Amazon’s market share The success of Apple’s marriage of the iPod device to the iTunes online distribution store has boosted the success of the platform Distributors Used for Film to PC √ * iTunes dominates TV, but studios are leery of creating a single distributor for film product Sell-through of TV content has proven more appealing than rental of films to date Market share source: Screen Digest research.

Installed TV-Connected Broadband Capable Devices Delivery to the TV Set Trends Installed TV-Connected Broadband Capable Devices PS3 timing of market entry is uncertain Success of Bravia too soon to tell Xbox is already experiencing early success in this area Xbox Live has already inked deals with Paramount, Warner Brothers, and Disney Content is only being offered on a rental basis Apple TV has also begun to establish a presence in the market It is rumored that iTunes might begin to offer some titles on a download-to-burn basis Disney and NBCU have voiced their support of DVD burning but a legal method for this has yet to be put in place Fiber services receiving positive reviews, but will this lead to exceeding forecast targets? Europe ‘Big 5’ USA Source: Screen Digest research.