Hancock Early Window Strategy

May 2008

DRAFT – SPT INTERNAL

2

Executive Summary

• SPT has been asked to participate in an early window VOD test, making Hancock available exclusively on Sony Bravia TVs through the BIVL service

• This test provides SPT with an opportunity to achieve two goals

– Support a Sony United initiative to generate market awareness for Bravia/BIVL

– Establish market terms that support SPT’s efforts to launch an early window VOD offering with cable, MSO, and DBS partners

• We recommend moving forward with the test based on the following terms

– Deemed Price: [$14.99] – [Note we’re still discussing if this is high enough]

– Viewing Period: 24 hour rental (streaming)

– Availability: 4 weeks prior to DVD/Blu-ray street date

– Length of window: 2 weeks

– Split: The greater of [83%] of the deemed price or actual retail price

– Infrastructure: Sony to host and manage e-commerce (as required)

DRAFT – SPT INTERNAL

3

Pricing

• Early window HD should clearly be at a premium to the HD day-and-date price of $7.99 to $8.49

• Appropriate price for early window HD has been under debate

– Proposed Spider-Man 3 on PS3 was discussed at $29.99

– Initial guidance from SPT to SEL on Hancock was for a lower price of $19.99

– Oliver Wyman analysis suggests $14.99 can be supported for HD early window

Coupon

• A free offer (or a coupon that is effectively a free offer) jeopardizes a multi-million dollar Pay TV license fee from Starz

• Coupon strategy will likely be used by partners in equivalent test; Hancock test will set precedent

• We recommend no coupon as it confuses the message of a premium offering at $14.99

Wholesale

• SEL would pay SPE on the same terms as MSOs and DBS partners

• Greater of 83% of the deemed or actual retail price is consistent with the $ value retained by service providers in the HD day-and-date window ($2.55 at $14.99 price point)

Pricing, Coupons, and Wholesale for Hancock Test DRAFT – SPT INTERNAL

4

Marketplace Offerings

Pricing Format Model Split$ to Service

Provider

$3.99 Standard Def Standard VOD 60/40 $1.60

$4.99 High Def Standard VOD 70/30 $1.50

$4.99 Standard Def Day-and-Date VOD 70/30 $1.50

$7.99 -- $8.49 High Def Day-and-Date VOD 70/30 $2.40 -- $2.55

$14.99 High Def Early Window 83/17 * $2.55

= Proposed pricing and split, no deals currently in place

* Implied split based on $14.99 price pointGoal to hold $ value to service provider consistent regardless of price

DRAFT – SPT INTERNAL

5

Overall Recommendations for Early VOD Window

Parameter Recommendation Rationale

Deemed Price [$14.99] [see previous]

DiscountingSPT to have approval rights over coupons / promotions (recommend no coupon on first offers)

A completely “free” via a coupon or other promotion would conflict with Starz deal

Viewing Period 24 Hours Viewing period longer than 24 hours would conflict with Starz deal

Availability4 weeks, prior to DVD/Blu-ray window

Price and HD format are the primary drivers of consumer interest Timing is less of a driver and 4 weeks early appears to be

sufficient to generate interest and drive demand

Duration 2 Weeks Retain ability to lengthen window Allows for blackout period before DVD/Blu-ray release window

SplitGreater of [83%] of the deemed or actual price

Maintain same $ split for distributor as HD day-and-date window

TimingDistributor to announce availability no earlier than +60 days from theatrical

Earlier announcement could affect box office

• Under existing contracts, cable / MSO / DBS partners have a matching right for an “equivalent” early window test

• Terms for the Bravia / BIVL test will set a market precedent and therefore must support SPT’s long-term interests with respect to a early VOD window

• Terms must not trigger existing Starz or other deals

DRAFT – SPT INTERNAL

6

Hancock Windows

2008 2009

Jul Aug Sept Oct Nov Dec Jan Feb Mar Apr May Jun

Standard Hancock Windows

Theatrical Release 7/2

Hotel 10/1 4/11

Home Ent. 11/11

Residential 12/26 4/11

Starz (through 8/10/2010) 5/11

FX (starts 10/11/2010 – 10/10/2015)

Early Hancock VOD Window

VOD on BIVL (2 wks)10/1410/28

Starz Window 5/11

• Proposed Early VOD to run for 2-week period between Oct 14-28, 2008

– VOD must be dark for the two weeks immediately preceding HE release (11/11/08)

• Early VOD window does not affect Starz as long as it starts later than 9/11/08

– Starz is the early of 6 months from HE release date or 8 months from VOD

DRAFT – SPT INTERNAL

7

Other Issues

Exclusivity

• Our ability to offer this exclusively on BIVL is partially based on Cable and Satellite providers’ inability to match our security (i.e., they are unable to block their analog outputs)

• This assumption is still being confirmed

Messaging

• Release needs to clearly identify Hancock / BIVL as a test

• SPT needs the opportunity to contact its cable / MSO / DBS partners in advance of release in order to minimize any potential backlash

• At SPE’s discretion, the test may be announced prior to the black-out period that extends 60 days from theatrical release

• Release can not mention the name of any 3rd party backend provider for hosting / e-commerce, if necessary (e.g., Amazon)

Back End

• E-commerce requirements need to be settled based on final payment / coupon strategy

• Need to determine how (or if) no analog out requirement would affect matching right

DRAFT – SPT INTERNAL