Confidential Draft

Embassy Row Acquisition Update

July 2008

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• Reality remains a critical growth area for SPE and requires further investment

– Sector offers attractive program economics and continues to grow

– Through 2waytraffic, SPE has secured strong international distribution

– Additional U.S. product is needed to fill 2way’s distribution capacity

– U.S. formats of 2way’s product will also create new value

• Michael Davies will serve as a cornerstone of our domestic strategy

– Davies has a strong track record, is credible internationally, and works well with 2way

– ER earnings are expected to be below CY08 budget. We continue to believe in Davies’ potential and do not anticipate a significant negative impact on overall economics

– Substantive terms have been agreed (in-line with previous discussions: $25MM at close, up to an additional $50MM of earn-outs)

• We recommend formalizing the term sheet to acquire Embassy Row

– Sign term sheet

– Finalize long-form and complete confirmatory diligence

– Target closing October 1

Executive Summary

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• Creates new formats that leverages 2way's distribution capacity

• Valuable sales asset for selling new ER formats, SPT library formats, and 2way formats in the U.S.

– Driving force behind 2waytraffic’s format “All-Star Mr. and Mrs.” being developed for the U.S. (likely with CBS)

Strategic Rationale

International Credibility• Well regarded both domestically and internationally

• Strong relationships with networks in multiple territories

Fit with 2waytraffic

Market Factors / Timing

• Reality producers / production companies are quickly being locked-up (Lisa Levenson, Tom Forman, Ryan Seacrest)

• Davies has one of the best track records amongst reality producers; may be acquired by another studio if not by SPT

Track Record

• History of success with shows like “Who Wants to be a Millionaire?” and “Wife Swap”

• Now focusing on reinvigorating Sony brands (e.g., “Million Dollar Pyramid” and “Newlywed Game”) and launching new shows with global potential (e.g.,

“Take the Money and Run”)

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• FY09 EBIT impact on SPE will be better than SPE budget, due largely to timing

– $118K including P10, ($1.0M) before P10 vs. budget of ($3MM)

– Later close of acquisition results in less deal amortization during the fiscal year

– Earlier quarters (pre-acquisition) included losses; December and March quarters expected to be more profitable

– Decreased estimates for incremental investment

Financial Performance

CY 08

• YTD is below budget, full year is expected to be below budget

– Earnings through May are ($378K) vs. prior year through May of $892K

– Full year profits estimated to be roughly $1MM vs. budget of $3.5MM

FY 09

Deal NPV• We believe Davies will still generate successful new shows and that the deal will remain NPV

positive under the current structure

CY 07• Operating income was in-line with previous projections

– $3.3MM actual vs. $3.4MM budget

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Deal Structure

• $25MM cash at close

• Up to $50MM of additional earn-outs

–Value of earn-outs would be calculated in Year 6 as: 7x (Average of Years 5-6 EBITDA) minus $25MM advance

• Earn-out payments would be made between Year 6 and Year 10

–10% of earn-out paid to employees in Year 6

–10% of earn-out paid to employees in Year 7

–80% of earn-out paid to Davies over Years 6-10 if Davies meets minimum EBITDA targets

–Earn-out payments can be accelerated if Davies exceeds EBITDA goals

Max Total Consideration: $75MM

PV(1) of Max Total Consideration: $41MM(1) - $45MM(2)

Note: (1) PV of up-front payment and maximum earn-outs fully vested in Years 6-10 at 16.5% discount rate

(2) PV of up-front payment and maximum earn-outs fully vested in Year 6 at 16.5% discount rate

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Financial Impact – Base Case

Notes: Difference between total EBITDA and Incremental EBITDA is the portion of shows we own under Davies’ current deal Old Cases assume ER is owned for all of FY09 while New Cases assume ER is owned as of October 1, 2008 Assumes a risk adjusted discount rate of 16.5% for all NPV calculations (1) If ER secures 5% chargebacks, EBIT in FY10 - FY13 would be ($0.1), $1.9, $3.6 and $6.1, NPV would be $19.1MM (2) Includes exit at 11x multiple (3) Includes $25MM up-front, incremental EBITDA less earn-outs, plus exit at 11x

Base Case (New)Base Case (Prior)

NPV (10-year)

Incremental EBITDA: $21.0

Value of Exit (2): $16.1

Total Consideration: ($25.0)

Net Present Value (3): $12.2

Nominal (10-Year)

Incremental EBITDA: $52.8

Terminal Value: $74.2

Total Consideration: ($25.0)

Consideration / EBITDA: 47%

NPV (10-year)

Incremental EBITDA: $18.8

Value of Exit (2): $12.9

Total Consideration: ($25.0)

Net Present Value (3): $6.7

Nominal (10-Year)

Incremental EBITDA: $45.0

Terminal Value: $59.4

Total Consideration: ($25.0)

Consideration / EBITDA: 56%

P&L FY09 FY10 FY11 FY12 FY13

EBITDA $1.9 $4.3 $9.6 $15.5 $21.6

Amortization ($4.4) ($4.4) ($4.4) ($4.4) ($4.4)

EBIT ($2.5) ($0.1) $5.2 $11.1 $17.3

Incremental EBITDA $1.4 $1.4 $3.7 $5.8 $6.7

Amortization ($4.4) ($4.4) ($4.4) ($4.4) ($4.4)

Incremental EBIT ($3.0) ($3.0) ($0.7) $1.5 $2.4

P&L FY09 FY10 FY11 FY12 FY13

EBITDA $2.1 $3.2 $4.5 $5.4 $5.8

Amortization ($2.0) ($4.4) ($4.4) ($4.4) ($3.2)

EBIT (1) $0.1 ($1.2) $0.1 $1.0 $2.6

Incremental EBITDA $2.1 $1.7 $3.8 $4.9 $5.4

Amortization ($2.0) ($4.4) ($4.4) ($4.4) ($3.2)

Incremental EBIT $0.1 ($2.7) ($0.6) $0.6 $2.2

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Cumulative Incremental EBITDA and NPV: New and Prior Base Case

• Value associated with properties currently on-air has decreased

– Largely offset by decrease in required investment in overhead and development as a result of the ability to leverage 2waytraffic and ER’s currently increased staff

• Value of properties in development is largely unchanged

• Values of new properties could be higher if ER network contracts include chargebacks (1)

Note: (1) If ER secures chargebacks of 5% of budget on new shows, NPV is $19.1M

(2) Includes only portion of P10 acquired from Davies.

Base Case (Prior) Base Case (New)NPV NPV Base Case (Prior)

Estimates for Properties On-air

10-yr EBITDA Impact Cash Flow Terminal Total

10-yr EBITDA Impact Cash Flow Terminal Total

Power of 10 (2) $36.5 $15.0 $10.4 $25.4 $5.3 $3.1 $0.8 $3.9Other TV $13.0 $9.1 $0.0 $9.1 $0.0 $0.0 $0.0 $0.0Interactive $13.9 $6.4 $3.5 $9.9 $12.9 $5.8 $3.3 $9.1

Sub-Total $63.4 $30.5 $13.9 $44.4 $18.2 $8.9 $4.1 $13.0

Estimates for Properties In-DevelopmentTV $81.4 $31.6 $26.2 $57.8 $79.8 $33.7 $22.4 $56.1Interactive $3.5 $1.6 $0.9 $2.5 $7.9 $3.7 $1.9 $5.7

Sub-Total $84.9 $33.2 $27.1 $60.3 $87.7 $37.5 $24.3 $61.8

ExpensesER Overhead ($40.8) ($18.4) ($10.5) ($28.9) ($40.6) ($18.5) ($10.3) ($28.7)Incremental Investment ($54.7) ($24.2) ($14.4) ($38.6) ($20.2) ($9.1) ($5.2) ($14.3)

Sub-Total ($95.5) ($42.6) ($24.9) ($67.5) ($60.9) ($27.6) ($15.5) ($43.1)

Deal Consideration N/A ($25.0) N/A ($25.0) N/A ($25.0) N/A ($25.0)

Total Acquired EBITDA $52.8 ($4.0) $16.1 $12.2 $45.0 ($6.2) $12.9 $6.7

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Key changes in Model: “Base Case”

Changes from PriorCurrent Approach

• Davies’ “New” slate, but eliminate chargebacks

on new shows

• New shows including 2 modest format successes

in the next 3-5 years

• P10 on GSN, declining format profits, no

syndication and no local language production

• Begins w/ Davies’ updated slate

– Smaller shows (WSOPC, Chain Reaction, Grand

Slam) no longer on-air

– New shows added (Newlywed, Pyramid)

– Format profits on new/library shows more modest

compared with format profits on network shows in

prior model

– P10 moved to GSN from CBS, formats/ syndication

fees and local language production reduced

Slate

• Reduced to $1.2MM - $2.2MM of investment in

HC and development

• Reduced investment from prior estimate of

$3MM - $6MM due to:

– Ability to leverage 2way for acquisition and

distribution

– Davies now has more HC in place

Incremental

Investment

• $1.9MM (CY07 actuals) growing at 5% • Increased from $1.5MM growing @ 5% based on

actual performanceInteractive

• Excluded • No ChangeAncillary

• Excluded • No ChangeSports and Film

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Incremental SPT Investment New Case vs. Prior

Incremental Investment (New)Incremental Investment (Prior)

• New incremental investment assumes ability to

leverage 2waytraffic

• Current ER and 2way working relationship is

already bearing fruit with the development of

“Celebrity Mr. and Mrs. “

• Reduced headcount costs to $700K-$1.7M

–2 Acquisition headcount

–1 Development headcount

–1-2 Administration headcount

–1 Finance headcount

–2 additional Embassy Row headcount

converted to a full-time employees

• $0 in self-funded pilot costs

• $500K for development and acquisitions

• Incremental investment was modeled prior to

2waytraffic acquisition

• $300K-$2.4M of headcount costs

–2-3 Acquisition headcount

–1-3 Development headcount

–1-3 Administration headcount

–An additional 5 Embassy Row headcount

converted to full-time employees

• $2.0-$2.5M of self-funded pilot costs

• $0.0-$2.0M for development and acquisitions

Incremental Investment (Old)

FY09 FY10 FY11 FY12 FY13

($2.8) ($4.7) ($5.2) ($5.9) ($6.0)

Incremental Investment (New)

FY09 FY10 FY11 FY12 FY13

($1.2) ($1.9) ($2.0) ($2.1) ($2.2)

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Date

Late July • Lynton / Hendler review

Early August • Formalize / sign term sheet

End Sept

• Finalize long-form confirmatory diligence (legal, tax, financial)

• Final approval from SCA

Early Oct • Close

Timing and Next Steps

S M T W T F S

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6 7 8 9 10 11 12

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S M T W T F S

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S M T W T F S

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S M T W T F S

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August 2008

September 2008

October 2008

July 2008

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APPENDIX

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Comparable Transaction Analysis

Note: (1) Based on expected Sony Base Case consideration of $353 and CY07E projections.

Davies CY07 EBITDA: $3.3MImplied Market Value at 11-12x: $36M - $40M

Total Initial Consideration: $25M

Transaction Value /

Date Target Acquiror Transaction Value Last FY Sales Last FY EBITDA Last FY EBIT

European Deals

07-Dec 12 Yard Productions ITV £35 3.0x 14.8x na

07-Sep Metronome Film & Television Schibsted £31.4 0.4x na 18.8x

07-Sep Twenty Twenty Productions Shed Media £18.0 1.9x 8.6x na

07-Aug Sparrowhawk Media NBC Universal £175.0 1.8x na na

07-Aug Objective Productions All3Media £50.0 2.2x na na

07-Jul Marathon Group De Agostini 250 3.6x na na

07-Jul Prospect Pictures DCD Media £7.1 0.9x na 3.9x

07-Jul September Holdings DCD Media £9.1 1.2x na 12.9x

07-Jul West Park Pictures DCD Media £3.0 2.7x na nm

07-May Endemol Investor group incl. John de Mol 3396.8 3.0x 19.2x 21.2x

07-Jan Princess Productions Shine £20.0 na 8.5x 8.6x

07-Jan Endemol France Endemol NV 450 2.6x na na

06-Dec WWTBAM & Cellador 2waytraffic £111.5 3.8x 7.3x na

06-Dec Kudos Shine £35.0 na 11.0x 11.3x

06-Aug All3Media Secondary buy-out (Permira) £320.0 1.4x 11.5x 12.3x

06-May Tiger Aspect Holdings IMG Media £27.0 0.4x 12.1x 15.1x

06-Apr Darlow Smithson Productions IMG Media £20.0 1.0x na na

06-Apr Odeon Film GFP Vermögensverwaltungs £15.6 0.4x 4.3x 4.5x

06-Mar Hurricane Spütz Na na na na

05-Dec IWC RDF £14.0 0.8x 17.5x 19.5x

05-Nov Ricochet Shed £30.0 2.0x na 14.1x

05-Oct TV Corp Tinopolis £27.7 0.6x 21.2x na

05-Aug Touchpaper Television RDF £4.2 0.9x 11.9x na

Median 1.6x 11.7x 12.9x

Average 1.7x 12.3x 12.9x

2waytraffic Deal

TBD 2waytraffic (1) Sony Pictures Entertainment $353.0 3.4x 11.4x nm

Recent US Deals

7-Dec Reveille Shine $155.0 2.0x 12.0x 12.0x