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

Digital delivery creates a more complex distribution landscape Traditional Delivery Digital / IP Delivery Studios ‘STB’-Style Device Owners Ad-Supported “Networks” Digital “Retailers” Networks PC / Portable (iTunes) Owned (Hulu, Crackle) 3rd Party (Yahoo, Joost) Virtual Worlds MSOs (STB Owners) PC Focus (MovieLink) Consoles & STBs PC Portable TV

Digital distribution forces new strategic decisions Traditional Delivery Digital / IP Delivery Studios ‘STB’-Style Device Owners Ad-Supported “Networks” Digital “Retailers” Networks Invest in owned or 3rd Party Networks? What is the risk of iTunes gaining scale? Will there be a single leader? MSOs (STB Owners) How many channels to support? What scale is needed to be viable? Should films be held back to retain leverage or made available to capture profits? Who stands to gain most from alternative routes to the PC? Will emerging models (like virtual worlds) become full-scale distribution outlets? When should ad-supported films be made available? TV

Ownership appears to influence the studios’ digital strategy Parent Company Sister Network Parent’s Other Businesses Parent’s Influence Over Studio Digital Strategy News Corp FOX Cable Networks, Social Networks, Int’l Satellite MSO, Publishing News Corp’s history of building large, successful channels quickly underpins Fox’ tendency to invest heavily in proprietary channels for digital distribution (e.g., MySpace) The Walt Disney Company ABC Cable Networks, Theme Parks, Travel, Merchandising Strong channel brands across several demographics has led to multiple owned online brands (Disney, ABC, ESPN) Steve Jobs’ position on Disney board facilitates collaboration with Apple Viacom1 CBS (incl. 50% of The CW) Cable Networks, Digital Platforms, Cinemas1 TV-centric brands have driven Paramount to strike device-based partnerships Strong TV channel brands offline are being tested online Sony n/a Consumer and Business Electronics, Game Consoles Lack of traditional network led to investment in new online channel brands Ties to electronics (consoles, TVs) impacts strategy to partner with other device players (Xbox, Apple for films) Time Warner 50% of The CW Cable MSO, Publishing, Networks Relationship with AOL drove initial ad-supported network decisions with limited success As a counter-balance, WB has been significantly more aggressive in licensing to 3rd party digital “retailers” GE2 NBC Various Electrical and Hardware, Finance Lack of consistent, strong parent has made proprietary development and acquisitions difficult Sought out a strong partner such as Fox (Hulu) Notes: 1. Viacom owned by privately held parent National Amusements (which owns Showcase cinemas) 2. NBC Universal owned 80% by GE and 20% by Vivendi

Competitive Commentary until owned sites reach greater scale Ad-supported Networks: Third party sites provide reach while proprietary brands grow in the online space Parent Example Owned Sites Third Party Streaming Competitive Commentary 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 Hulu Established relationships with Yahoo and MSN that will be shifted to Hulu Networks are distributing first-run content broadly; securing promotional value and maximizing profits until owned sites reach greater scale

Ad-supported Networks: Investment is beginning to focus on brands with scale Parent Supported Digital Channels Failed / Consolidated Digital Channels Competitive Commentary 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

Key current event: Announcement of Hulu Company Overview Partner strategy JV between NBC Universal and News Corp for online video Expected to launch in calendar Q4 2007 Focus on professional content Own embeddable branded player Providence Equity Partners invested $100 million for a 10% stake in Hulu, implying a $1b valuation (Aug 07) Use of proprietary and third party distribution partners Proprietary: MySpace Third Party: AOL, Comcast, MSN, and Yahoo Programming will also appear on sites owned by the distribution partners Content partners include: the Style and Golf channels, Oxygen, Sundance Channel, TV Guide, and National Geographic Founding Principles Distribute premium, professionally produced video content online There is huge value in aggregating content Belief in ubiquitous distribution Significance: Hulu Tests Industry Dynamics A major push for control of consumer experience through proprietary distribution channels Potential conflict (or co-existence) with iTunes’ EST model for studios’ TV products Fox continues to sell through iTunes but NBCU has withdrawn TV content

Emerging ad-supported models: Virtual Worlds Virtual worlds have proven highly appealing and 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 To date, virtual worlds have been embraced by networks and studios with strong children’s brands Disney grew its Toon Town organically and then bought Club Penguin for up to $700MM ($350MM at close + $350MM of earn-outs) Viacom has a play in the space through Nick-Tropolis Warner Bros. announced plans to launch “T-Works” in Spring 2008 Other studios are beginning push into older age demographics (teen and young adult) Turner struck a one-year deal with Kaneva to build virtual worlds for its properties Sony has the opportunity to break new ground in this space Negotiating investment and distribution relationship with Gaia Targets the core teen demographic for our TV and films PS HOME will be a leader in the teen and older demographics

Key current event: 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 Raised ~$21MM to date; last round at $120MM valuation 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 make it a compelling teen proposition Featured Activity = Curated Engagement Matrix Gaia Cash = Incentive Based

Gaia cinemas are expected to break new ground in premium content streaming

Digital Retailers: iTunes remains dominant, even in film sell-through, despite lack of film product from most studios Paid Film Content to PC – Market Share by Distributor Movielink: 4.6% Other: 5% Continues to retain market share, but possibly will lose ground to new entrants like Wal-Mart 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. Amazon Unbox: 8.4% A strong legacy brand in online retail and TiVo connectivity to TV set has helped to grow Amazon’s market share iTunes: 82% 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 √ * * * Competitive Commentary: Most studios concerned about giving Apple too much leverage and thus have withheld film for sell-through Steve Jobs’ presence on Disney board fosters partnership with iTunes; Paramount has taken a device-centric strategy Market share source: Screen Digest research.

‘STB’-Style Devices: Networked TV devices, particularly game consoles, create an alternative to the pay TV operators’ proposition Installed TV-Connected Broadband Capable Devices Device Trends Xbox Live has launched its service Existing deals with Paramount, Warner Bros. and Disney Content is being offered on a rental basis only Apple TV has also begun to establish a presence in the market May also bridge the PC to the TV by offering a download-to-burn service on iTunes Competitive Commentary Warner Bros. early participation in Xbox live service suggests it will support a service which competes with the TW’s cable proposition Disney and Paramount can exploit their channel and content brands via another path to the TV which creates leverage against the pay TV operators Fox and NBCU are less likely to partner with a dominant 3rd party channel (particularly for their film product) SPE can leverage the anticipated success of its sister company device, the PS3 Europe ‘Big 5’ USA Source: Screen Digest research