Background Data for December 16, 2010 Sony Network Services Strategy Meeting

Materials distributed in conjunction with memo dated December 10, 2010

CONFIDENTIAL

CONFIDENTIAL

page 2

(1) ScreenDigest 2010.(2) Strategy Analytics 03.10, SEL.(3) Parks Associates 08.10.

WW Broadband HHs(1) (MM) WW Smartphone Shipments(2) (MM)

WW Connected Game Console HHs(3) (MM) WW Internet Connected TV HHs(3) (MM)

535 579 616 648 677

2010 2011 2012 2013 2014

CAGR: 6%

244

426536

641

2010 2011 2012 2013

CAGR: 38%

95116

138151 161

2010 2011 2012 2013 2014

CAGR: 14%

50

95138

188

256

2010 2011 2012 2013 2014

CAGR: 51%

Growth in Digital Access Expanding Beyond the PC

CONFIDENTIAL

page 3

Video Viewing by Platform in the U.S.

41%

16% 15%12%

7% 6%

2%

51%

7%

15%13%

4%6%

3%

64%

4%

10% 10%

2%5% 4%

0%

10%

20%

30%

40%

50%

60%

70%

Live TV Online source DVDs DVR fromcable/satellite

Streaming video(e.g., Netflix)

Cable/satelliteVOD

Other

% o

f T

ota

l TV

/Vid

eo

Vie

we

d b

y U

S In

tern

et

Us

ers

18-34 years old 35-54 55+

Note: numbers may not add up to 100% due to roundingSource: Morpace, "Omnibus Report," Aug 25, 2010

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Small But Growing Group Of U.S. Consumers Says Online Video Has Them Seriously Thinking About Canceling Cable/Satellite Subscription

Source: 2010 Frank N. Magid AssociatesBase: Respondents 18-64 with a basic or digital TV service, N=1,72010.3 How much do you agree with the following statement: Now that online video is available, I am seriously thinking about canceling my cable/satellite subscription.

Agree (4+5)2010: 16% agree (4+5)2007: 6% agree (4+5)

TOTAL

25-64

12-17

18-24

16%

14%

15%

25%

CONFIDENTIAL

page 5

TheatricalHotel & Airline

DVD and Blu-Ray Disc Sell-through

Standard PPV/VOD

Pay 1(HBO, Starz, SHOW, EPIX)

Pay 2(HBO, Starz, SHOW, EPIX)

Broadcast/Cable (F/X, TNT, USA, AMC)

EST (Starz Studios)

EST (HBO Studios)

+2 Months

+4 Months

+5 Months+8-8.5 Years0 Days

Generally +8

Months(1)

HomeTheater

Day & Date PPV/VOD

EST (HBO Studios)

EST (HBO Studios)

Broadcast/Cable(F/X, TNT, USA, AMC)

Library PPV/VOD

Library PPV/VOD

Library SVOD (NFLX)/FOD (Hulu)

+2-2.5 Years

Proposed New Window

Subscription Disc Rental (Netflix) / Kiosk Rental (Redbox)A subset of titles avail. day & date

Pay 1 SVOD* (Starz/EPIX w/NFLX, HBO GO)

Pay 2 SVOD* (Starz/EPIX w/NFLX, HBO GO)

SVOD(F/X, TNT, USA, AMC)

Physical Rental/

Sell-through/EST

PPV/VOD

Linear TV

SVOD/FOD

* In order for Netflix to get an earlier window, they must either buy-out the Pay window or carry another pay service (Starz, HBO, EPIX or Showtime)

Current and Potential Windows for U.S. Film Content

(1) Pay 1 commences the earlier of 10 months from general theatrical, 4.5 months from initial home entertainment street, and 3.5 from PPV/VOD. It is feasible for Pay 1 to commence as early as 6.5 months post theatrical (assuming day-and-date VOD at 3 months post theatrical), but this is still an infrequent scenario.

CONFIDENTIAL

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Available U.S. Models for Viewing Film (Post Theatrical)Example Providers

(U.S. and Not Comprehensive) Pricing Selection of Content at Any Moment of Time

Blu-ray and DVDSell-thru Best Buy, Wal-mart, Target $5 - $25 (Approx. Selling Price, Not

List Price) Nearly all titles

EST iTunes, Amazon VOD, PSN, Xbox $9.99 (SD, Library) - $19.99 (HD, NR) Nearly all titles

Subscription Rental – Physical Netflix $9.99+/mo. Nearly all films

Kiosk Redbox $1.00/night 70 – 200 titles per kiosk

PPV/VOD – Day & Datewith DVD

iTunes, Amazon VOD, DirecTV, Comcast, Verizon $3.99 - $5.99 < 25 titles during any two week

window

PPV/VOD – Standard window (28-30 days after DVD release)

iTunes, Amazon VOD, DirecTV, Comcast, Verizon $3.99 - $5.99 Approximately 40 titles

PPV/VOD – Library (Post-Pay 1)

iTunes, Amazon VOD, DirecTV, Comcast, Verizon $1.99 - $2.99 Hundreds of titles

Pay TV – Current (1st and 2nd Windows)1 HBO, Starz, Showtime, Epix ~$15/mo. Dozens of films

Broadcast/Basic Cable DirecTV, Comcast, Verizon Free (Ad-supported) Hundreds of titles

Subscription – Streaming (during Pay 1 and Pay 2) Netflix2 $7.99/mo. Dozens of films

Subscription – Streaming (Library) Netflix $7.99/mo. ~6,000 movies

1) The Pay TV Library window offers hundreds of titles2) For SPE titles, Starz content via Netflix

CONFIDENTIAL

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Consumers Face a Complex Landscape for Finding & Viewing TV Content

Program Type

Initial TV Run EST Ad-supported

Internet DVD TV Off-net SVOD

BroadcastScripted

4-8 yrs exclusive but limited runs

Next day

Episodes are commonly available for ad-

supported streaming during the month after

air date; however, availability date on

network owned sites vs. Hulu varies show to

show

1 yr. (1 season) delay

Starting season 5 (prior season only)

Starting season 5 (prior season only)

Unscripted Perpetual N/A N/A N/A N/A (very little)

Daytime Soaps

Run of show (exclusive 4+

years)N/A N/A N/A N/A

Basic CableScripted

5-6 years exclusive, 15-26 runs

Next day 1 yr. (1 season) delay

Starting season 5 (prior season only)

Starting season 5 (prior season only)

Unscripted Perpetual N/A N/A N/A N/A (very little)

Premium Pay

Scripted only5-6 years exclusive, unlimited

runs

Starting 6 mos. from last

episode of season

On networks own internet services for

subscribers only

Starting 6 mos. from last episode of

seasonStarting season 5

(prior season only)Unclear – Probably starting season 5

(prior season only)

First Run Synd. Unscripted

onlyDuration of

show N/A N/A – clips only N/A N/A N/A

• Television content is not windowed as consistently or rigidly as film content

• Windows vary by genre and networks, making it difficult for users to know when and where TV content is available

• Availability of ad-supported streaming is particularly variable and confusing for consumers

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Leading Services Are Known for Providing the Most Content Under a Well-defined Payment Model

Segment Leading US Player

Customer Value Proposition Supported Devices Number of Users Countries

Video

TV-Real Time No dominant player to date

TV-Catch UpStreaming access to ~900 TV series (free ad-supported or

$7.99/mo. subscription)PC, TV, BD, Xbox, PS3 19.7MM Monthly US

Uniques US

TV-LibraryUnlimited streaming access to

600 TV series on multiple devices ($7.99/mo.)

PC, Xbox, TV, BD, Roku

20.2MM Monthly US Uniques US

Home Video-New

User interface & integration with apple devices

(Computers, iPad, iPhone, etc.)PC, Apple TV, iPod,

iPhone, iTouch, iPad11.5MM Monthly US

UniquesUS, CA

UK, DE, AU, JP, 5 EU, 2 APAC

Home Video- Library

Unlimited streaming access to 5,000 films on multiple devices

($7.99/mo.)PC, Xbox, TV, BD,

Roku20.2MM Monthly US

Uniques US

Music

Radio 40 hours of free streaming with ads

PC, TV, BD, Western Digital, Boxee, Mobile

20MM Monthly US Uniques (300K paying

subs)US

MusicUser interface & integration

with apple devices (Computers, iPad, iPhone, etc.)

PC, Apple TV, iPod, iPhone, iTouch, iPad

11.5MM Monthly US Uniques

US, CAUK, DE, AU, JP, 5 EU,

2 APAC

Video

Games

Video Games No dominant player to date

CONFIDENTIAL

Device Manufacturers Broaden Range of Content and Purchase Models to Drive Adoption

First Generation Second Generation

Device Price $229 - $299 $99

1st Party Business Model iTunes purchase (buy-and-store) iTunes streaming rental only (no storage capability)

1st Party Content Pricing TV: $2.99 purchaseNR Film: $14.99 - $19.99 purchase

TV: $0.99 rentalNR Film: $4.99 rental

3rd Party Offerings Flickr, Mobileme, Youtube Netflix, Flickr, Mobileme, Youtube

Media Server Functions/Device Integration

PC OnlyRemote Control: iPhone, iPad, or iPod

Airplay: Stream videos, music and photos from computer, iPhone, iPad, iPod to Apple TV

Units Sold Estimated 2MM+ in the first 12 months (1) Estimated 4.5MM in the first 12 months (2)

(1) News articles and blogs(2) Stifel Nicolaus estimates, September 2, 2010

Second generation box is roughly a quarter of the size of the original

Case Study: Apple TV

page 9

CONFIDENTIAL

page 10

Expansion of iTunes from music to video1

0 100 250

1,500

3,000

5,000

8,600

10,000

0

2,000

4,000

6,000

8,000

10,000

12,000

2003 2004 2005 2006 2007 2008 2009 2010

WW

Un

its

So

ld (

Un

its

in M

illi

on

s)

0

10

20

30

40

50

60

70

80

90

iTu

nes

Fil

m a

nd

TV

Ep

iso

des

So

ld (

Un

its

in M

illi

on

s)

WW Songs Sold WW Films Sold WW TV Episode Bundles Sold

Strong Service Brands Have Expanded Beyond Their Traditional Core Offerings

1) Source: ScreenDigest. ScreenDigest reports 1 bundled transaction as 1 TV transaction, although 1 bundle actually converts to multiple single episodes purchased as a package2) Source: FastCompany, Netflix CEO: We’re a Streaming Company, 10/21/2010

Expansion of Hulu from free/ad-supported model into paid model

• Hulu launches in 2008 and with ad-supported model and hits 100MM video streams first year

• By 2010, Hulu reached over 900MM streams

• Hulu Plus (monthly subscription) launches 2010

– Service includes commercials, but offers expanded library of content and use on a wider range of platforms

Expansion of Netflix from physical to digital rental

• “By every measure, we are now primarily a streaming company that also offers DVD-by-mail.”1 – Reed Hastings

• 66% of subscribers have streamed content, up from 41% year-over-year

• “Next quarter the majority of members will watch more content streamed than delivered on DVD.”2

iTunes Hulu

Netflix

CONFIDENTIAL

SONY QRIOCITYVideo Sports Games Information Lifestyle Others

Amazon Fifa World Cup Concierge Berliner Philharmoniker PhotobucketBlip.tv eHow.com Dr. Oz: tips PicasaCBS Howcast.com Epicurious.com Picture Frame

Crackle Podcasts Flixster ShutterflyDailymotion Wired Ford Models

Fearnet Golflink.comHulu Plus Livestrong.com

Netflix LollapaloozaON Networks Michael JacksonPongalo.com Myplace Music

Videocast.com NPRYoutube Pandora

Singing FoolSlacker

Sony Digital CinemaStyle.com

Tara Stiles Yoga

SAMSUNG APPSVideo Sports Games Information Lifestyle Others

Blockbuster Do Squats DALPHY! AccuWeather Facebook Dido's StorybookCinemaNow ESPN Next Level Dracluas Coffin AP News Fine art in Bible Giggly DictionaryDaily Motion HelloCoach DrBrain Google Maps Fineart in Film Giggly O or XExplore 3D MLB.TV Dynamic Bowling Hello, World! For Children Kidney BeanHulu Plus Power Breathing Freezeup Rovi TV Getty Images Matching CardsMakingof Push-up Master Happy Fruits SPS TV Greek and Roman Math Magic

Netflix Six-Pack Pro Magic Cube USA Today Gustav Klimt Phonics GameSBS Drama Yoga Helper Mahjong Fruits Yahoo Historical Moment Skype

SBS Ent. MiniGame Pack Napster World MagicTED tv Quizmaster Painter's Women

Thecooltv Sudoku PandoraVudu Sudoku Picasa

YouTube Survival Bakery RelaxT-Crew Rural Life

Texas Hold-em The mythWise Star Twitter

22 Additional Apps 24 Additional Apps

page 11

Overview of U.S. Third Party Service Premium and Entry-level Offerings – Sony Qriocity vs. Samsung

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page 12

Overview of U.S. Premium PSN and Xbox Live Third Party Service Offerings

PSN Xbox Live

(App)

Access requires a subscription to the services above, and to Xbox Live Gold

($50 / year)

Access requires a subscription to the services above, but not to PlayStation

Plus

(App)

CONFIDENTIAL

page 13

Overview of PlayStation and Xbox Owned Service Offerings

PlayStation Network Xbox Live

Live Gold

• For $49.99/year, users receive exclusive features such as online multi-player gaming, party chat, video chat, Netflix streaming, ESPN3, and personalized music from Zune and Last.fm, among others

Zune Video

• A la carte film & TV rental and purchase (2,500 films and 900 TV series)

• Users have the ability to purchase and access content across three screens: the TV through Zune on Xbox LIVE, the PC through Zune Marketplace, and on the Zune HD device

Zune Pass (Music)

• Streaming access to millions of songs for $14.99 / month

• Ability to download 10 MP3s per month

PlayStation Plus

• For $49.99/year or $13.99/quarter, users receive exclusive features such as full game trials, PS store discounts, automatic firmware downloads, free games & downloads, priority beta invitations, and exclusive offers, among others

PSN Video

• A la carte film & TV rental and purchase (6,000+ films and 900 TV series)

• Users have the ability to purchase and access content across the following devices: PlayStation, PlayStation Portable, and PC

Music Unlimited Powered by Qriocity

• Streaming access to millions of songs for $9.99 / month

• Provides cloud rights to existing library

page 14

Comparison of Digital Video Services

(streaming)

Primary Business

Model:N/A N/A

Purchase of recent and library film

and TV

N/ASubscription film and TV

Purchase of recent and library film

and TV

Next day TV (ad-

supported and, likely

subs)

N/A N/A

Major Studio

Support

Yes, Worldwide

No Fox/Dis in EU

No Disney Yes, US onlyYes, but no

new releasesYes,

Worldwide

Yes, Worldwide (no CBS)

Yes, Worldwide

Yes, Worldwide

# of Films 6,134 2,500Approx1 10,000

2,300+Approx 5,000

Approx 10,000

957 4,458 8,352

# of HD Films

3,071 1,100+ +100 0 Approx 1000 Approx 800+ 0 350+ 2,000+

# of TV Series

700(19,000+ episodes)

900(23,000+ episodes)

4,700+(80,000+ episodes)

170(4,000+

episodes)

600(12,000+ episodes)

3,000 +(50,000+ episodes)

927 (23,700+ episodes)

151 Titles(13,000 + episodes)

N/A

Next Day TV

Yes Yes Yes Limited N/A Yes Yes Yes N/A

Countries/Regions

US, CA, UK, FR, DE, AU,

IT, SP, JP

US CA, UK, FR, DE, AU, IT, IR, 6 EU, 2

APAC

USUSAU

US

US, CAUK, DE, AU, JP, 5 EU, 2

APAC

US N/A US

Supported Devices

PS3, PSP, PC, TV, BD,

Sony Ericsson Mobile

Xbox, Zune

PC, TV (SONY,

Samsung, Vizio,

Panasonic)

PC, TV (Vizio,

Samsung), STB (Tivo)

PC, Xbox, TV, BD, Roku

PC, Apple TV, iPod, iPhone,

iTouch, iPad

PC, TV, BD, Xbox, PS3

PC, TV, BD, Tivo

Archos

TV, BD, VUDU

devices, PS3

1) Excludes video clips

CONFIDENTIAL

Exclusive Content on Select Digital Offerings

Examples of Exclusive Content & Services

Notes

ESPN3, Games (Halo, Fables, etc.)ESPN 3 requires an Xbox Live

subscription and internet access from an ESPN3.com affiliated provider

The Tester (1), select content from the Sports Illustrated Swimsuit edition, Games

(Gran Turismo)Sports Illustrated exclusivity limited to a

subset of video clips

MTV app exclusively on the Galaxy TabApps come with one episode each of 5

shows: The Hills, Jersey Shore, The Dudesons, Pimp My Ride and Cribs

(1) Reality TV series

Note: Examples only and not comprehensive

page 15

CONFIDENTIAL

page 16

Third Party Services Are Widely Available Across Connected Devices

Netflix Hulu Pandora

Connected TVs LG, Sanyo, Sharp, Sony, Toshiba, Vizio Samsung, Sony, VIZIO

LG, Mitsubishi, Panasonic, Sanyo,

Toshiba, VizioMitsubishi, Samsung,

Toshiba, VizioMitsubishi, Panasonic,

Samsung, Sharp, Toshiba, Vizio

Home Theater Systems (Includes BD Players)

Insignia, LG, Samsung, Sony, Vizio Samsung, Sony, VIZIO Insignia, LG,

Panasonic, Sony, Vizio Samsung, Sony Samsung, Sony

Game Consoles Xbox 360, PS3, Wii Xbox 360, PS3 PS3 Xbox 360, PS3 (1) Xbox 360, PS3 (1)

Digital Media Players

Roku, Boxee, Seagate, TiVo Premiere, WD TV

LiveRoku, Boxee, Tivo

PremiereRoku, Boxee, Tivo

Premiere, WD TV LiveRoku, Boxee, Tivo

Premiere, WD TV Live Boxee, Tivo Premiere

(1) Accessible through PS3’s web browser (compared to direct links on Xbox Live)

Devices are examples only and not comprehensive

CONFIDENTIAL

page 17

Overview of Samsung’s App Store

Apps Store

• Apps available for download today span information, video, lifestyle, games, and sports (both free and paid)

• Pricing for premium apps will be similar to smartphone apps

• Popular free apps include Netflix, Blockbuster, Hulu, YouTube, Napster, ESPN, Cinemanow, Pandora, Facebook, Twitter, Vudu, and soon-to-come Amazon VOD

• Samsung is projecting over 200 apps by the end of 2010

Application Platform

• Open platform that allows apps from premium content owners and individual developers

• Store lets content owners and developers gain access to multiple device types with a single app

In March 2010, Samsung opened the first ever HDTV-based application store for its TV sets, Blu-ray players, and home theater systems

CONFIDENTIAL

page 18

UGCUGCMusic

&Video

Music&

Video

3rd Party

3rd Party

3rd Party

3rd Party

QriocityQriocity

PSNPSN

BIV for all partnership

PS Experience

Sony Experience

• Fragmented value proposition• Duplicated contents category offer

• UGC separately managed• 3rd party not well integrated

Relationship between Qriocity and PSN: Today

Qriocity Limited exposure

PSNMarketing vehicle

Source: SNEI Mid-range Plan

CONFIDENTIAL

page 19

UGCUGC

Qriocity – as a platform/venueQriocity – as a platform/venue

Enhance Sony Value Proposition

Relationship between Qriocity and PSN: FY2013

Reading Contents

Reading Contents

Music&

Video

Music&

VideoApp

&Other

App&

Other“PS”Game

“PS”Game

3rd Party

3rd Party

3rd

Party

3rd

Party3rd

Party

3rd Party

PSNon-game

PSNon-game

“xxx powered by Q” “PlayStation”

• Registration/ID• Security• Reporting•

Recommendation

Drive additionalRevenue & traffic

BIV for legacy partnership

Qriocity Clear brand definition

PSNGaming experience

Source: SNEI Mid-range Plan

page 20

Near-term Alignment of Qriocity and PSN Service Brands

Service PlayStation TV Blu-ray

PlayStation Video powered by Qriocity(“Powered by” branding will be launched in the coming months)

Qriocity Video-on-Demand

PlayStation Games

Music Unlimited powered by Qriocity(Qriocity branded service available across devices in the coming months)

CONFIDENTIAL

page 21

Sony Network Services Roadmap for Premium Content in the Americas

Sony Owned Services 3rd Party Services on Sony Devices

Segment Dominant Player Current Planned Current Planned

Video

TV-Library Netflix PSN Video, Qriocity VOD N/A Netflix, Vudu (Limited) Cinemanow, HBO Go,

Showtime, Crackle

TV-Catch Up Hulu PSN Video, Qriocity VOD N/A Hulu/Hulu Plus N/A

TV-Real Time - N/A N/A MLB.TV, NHL Gamecenter

NBA Game Time, NFL, Turner March

Madness, MLS, UFC

Home Video- Library Netflix PSN Video, Qriocity

VOD N/A Netflix, VuduCinemanow, HBO Go,

Showtime, Epix, Crackle

Home Video-New iTunes PSN Video, Qriocity VOD N/A Vudu Cinemanow

Music

Radio Pandora N/A N/A Pandora N/A

Music iTunes N/A Music Unlimited powered by Qriocity N/A Vevo (ad-supported

music videos)

Video

Games

Video Games - PSN Games N/A N/A N/A

Note: Services are examples only and not comprehensive. Excludes 24 current 3rd party services and 7 planned 3rd party services in Asia.