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

2. 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

3. 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 rd 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

4. 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

5. 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

6. 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

7. 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

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
Targets the core teen demographic for our TV and films
PS HOME will be a leader in the teen and older demographics

9. 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

10. Gaia’s unique characteristics make it a compelling teen proposition
Featured Activity = Curated
Engagement Matrix
Gaia Cash = Incentive Based

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

12. 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.

13. ‘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