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

2. 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

3. 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)

4. 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

5. 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

6. 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)

7. 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

8. 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

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

10. Gaia Cinemas

11. 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.

12. 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.