Digital Distribution – Competitor Landscape October 2007 CONFIDENTIAL DRAFT

2 Digital Delivery – Divergent Strategies Across Studios TV Traditional Delivery Networks MSOs 3 rd Party (Yahoo, Joost) Virtual Worlds Content Consumer Studios PC Owned (Hulu, Crackle) Ad-Supported Models Transactional Model Portable Devices iTunes Device Back To TV Digital distribution gives rise to more varied strategies across studios

3 TV Networks Content Consumer Studios Ad-Supported Models Transactional Model Device Back To TV Owned v. 3 rd Party? How many channels & how much scale is needed? Which emerging models will be most attractive for distribution? What is the risk of iTunes gaining scale? Will there be a likely leader in this space and how critical is it to place the right bet? When should ad- supported films be made available? Impact of withholding film content from iTunes? Studio’s current key questions for digital distribution Digital Delivery Traditional Delivery MSOs

4 News Corp The Walt Disney Company Viacom 1 Time Warner GE 2 Cable Networks, Satellite MSO, Publishing Cable Networks, Theme Parks, Travel, Merchandising Cable Networks, Digital Platforms Cable MSO, Publishing, Networks Various Electrical and Hardware, Finance FOX ABC CBS (incl. 50% of The CW) 50% of The CW NBC News Corp’s broad reach across media underpins Fox tendency to use more proprietary channels for distribution Strong channel brands across several demographics has led to multiple owned online brands (Disney, ABC, ESPN) Steve Jobs’ position on Disney board supports collaboration with Apple Investment in Viacom’s strong channel brands offline is being tested in the online space No apparent aspirations in delivery devices has encouraged Paramount to seek device-based partnerships Relationship with AOL and partial interest in a CW likely dissuaded WB from more proprietary online channel evolution Rather, WB has chosen to license through many 3 rd party partners Lack of consistent, strong parent has made proprietary development and acquisitions difficult Sought out a strong partner such as Fox (Hulu) Parent Company Sister Network Parent’s Other Businesses Parent’s Influence Over Studio Digital Strategy Sony Consumer Products, Electronics n/a Lack of network led to launch new channel brands Relationship to electronics (consoles, TVs) dissuades SPE from partnering with other strong device players (XBox, iTunes) Notes:1.Viacom owned by privately held parent National Amusements 2.NBC Universal owned 80% by GE and 20% by Vivendi Ownership influence on studios’ digital strategy

5 Capability to create owned sites for library product Committed to network partners for on-net product Third Party Streaming Confident in abilities to attract users to ABC.com Established relationships with Yahoo and MSN that will be shifted to Hulu Leveraging strong network brands for owned streaming Competitive Commentary Example Owned Sites Hulu Networks are distributing first-run content broadly for promotional value and to maximize profits until owned sites reach greater scale Established relationships with Yahoo and MSN that will be shifted to Hulu Hulu Establishing broad partnerships Parent Third party sites providing eyeballs while proprietary brands grow in the online space

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

7 Partner strategy JV between NBC Universal and News Corp for online video Expected to launch in calendar Q Focus on professional content Own embeddable branded player Providence Equity Partners invested $100 million for a 10 percent stake in the joint venture Company Overview Key current event: Announcement of Hulu Distribute premium, professionally produced video content online There is huge value in aggregating content Belief in ubiquitous distribution Founding Principles 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 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 Testing Industry Dynamics

8 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; 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

9 Current events: Gaia Online 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 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 Company Overview Opportunities for SPE

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

11 Gaia Cinemas

12 Most studios are weary about film through iTunes Disney is a supporter due to Apple’s Jobs on the Board; Paramount has taken a device-centric strategy iTunes Dominance, Particularly in the Film Space The success of Apple’s marriage of the iPod device to the iTunes online distribution store has boosted the success of the platform 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. iTunes: 82% Other: 5% Amazon Unbox: 8.4% Movielink: 4.6% TiVo connectivity to TV set has helped to grow Amazon’s market share Continues to retain market share, but possibly will lose ground to new entrants like Wal-Mart Market share source: Screen Digest research. √√√√√√√ √√√√ √√√√√√√ √√√√√√ √√√√√√ √√√√√ Distributors Used for Film to PC * * * Paid Film Content to PC – Market Share by Distributor

13 Networked TV devices, particularly game consoles, create an alternative to the pay TV operators’ proposition 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 Source: Screen Digest research Device Trends 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 3 rd party channel (particularly for their film product) SPE can leverage the anticipated success of its sister company device, the PS3 Competitive Commentary Installed TV-Connected Broadband Capable Devices Europe ‘Big 5’USA