GSN: Initial Hypotheses and Next Steps

April 18, 2008

2

• New information provided by management indicates that the benefits of integrating GSN and FUN accrue to GSN under both the merger and partnership scenarios

• Most merger synergies accrue to FUN technologies and assume significant growth as well as the development of a new business model (Free Games)

• Based on the information provided, SPE should simply retain its interest in GSN rather than investing FUN and pursuing a merger

Information Provided by Management Suggests GSN Will Receive FUN Integration Benefits Even Without Merger

3

• Non-Merger will reduce the ability of GSN and FUN executives to seamlessly coordinate (e.g., no co-location, increased difficulty in selling multi-platform buys to advertisers)

• Non-Merger will require duplication of some assets and key personnel thus reducing potential cost synergies

Asset Duplication

Coordination

On a Practical Basis However, GSN Would Require Merger to Maximize Integration Benefits

Potential Lost Value Under Partnership Model

Decision to merge will be informed by quantifying the true cost implications of a partnership and an analysis of FUN EBITDA growth projections

4

• Ad Sales – Reduced CPM rates– Reduced multiplatform

sponsorships– Shift ad mix away from direct

response

Asset Duplication

Coordination

Potential Levers

• Marketing Spend Effectiveness– Show specific marketing– Other marketing spend

• Headcount– Increased FTE cost for second

management team

• Facilities– Increased facilities cost driven

by ending co-location of GSN/FUN management

Hypotheses

• Partnership will limit opportunities for multiplatform ad buys which yield higher CPMs

Impact with Strawman Assumptions($MM 2010 EBITDA)

• $1-$3MM (TBD for sponsorship and ad mix)

• Increased marketing cost driven by lost purchasing scale and customer acquisition synergies

• $0.5-$1MM

• Additional management team required once GSN/FUN are de-merged

• $0.5-$1.5MM

• Additional management team required once GSN/FUN are de-merged

• GSN Income from FUN– Licensing revenue– Ad sales rev share

• Licensing and ad sales relationships structured at arms length and unlikely to change under partnership

• $0MM

Initial Hypotheses Regarding Lost GSN Value Under a Partnership Model

Total Likely Impact on 2010 EBITDA • $2.1-5.7MM +TBD

• $0.1-$0.2M

5

$37.9

$47.2

$60.3

$34.4

$41.2

$51.1

$20.0

$25.0

$30.0

$35.0

$40.0

$45.0

$50.0

$55.0

$60.0

$65.0

2008 2009 2010

EB

ITD

A $

MM

GSN Case SPT Case

Preliminary Analysis of the Partnership Model With Strawman Assumptions Suggests Lost Value to SPE Share of GSN Would Be Less Than $50MM

• CPM Growth: Reduce all CPM growth rates by 50%

• Marketing Spend: Increase by 5% (excluding re-brand)

• Management Headcount: Hire second management team (8 FTE)

• Facilities Cost: Increased office space and related expenses for second management team at $120K per year

Assumptions Impact

• Lost Value to GSN Under Partnership

• GSN Case Valuation: $486.8 M

• SPT Case Valuation: $415.2 M

$35.8 M• All other drivers constant

• Total Lost Value: $71.6 M

6

However There Are Additional Levers Which May Impact GSN Value Under a Partnership

- Drivers Flexed in Strawman AnalysisPotential Levers

ADVERTISING SALES AFFILIATE SALES

Applicable to Daytime / Fringe / Prime / Subcriber RateLatenight / Weekend Categories Licensing Fees

Upfront / ScatterNielsen SubsHH Ratings PROGRAM DEVELOPMENT VPVH AND AMORTIZATIONCPM Rate

Programs - AcquisitionsPrograms - Original Development

Direct Response / Infomercials Roll-out RateCPM Rate Pilot Success Rate

Spot Mix% of Upfront OPERATING EXPENSES% of Scatter% of Direct Response Marketing% of Infomercials Show Specific Marketing

Brand Image (Marketing Rebrand)Creative/Affiliate/Ad Sales/Other

GeneralSponsorships G&AAdvertising Minutes per Hour (# of Spots) Headcount / Additional Management Team

Infrastructure / Facilities

7

More Work is Required to Validate Model Assumptions

• How will CPM rates be affected by loss of multiplatform offering?Ad Sales

Key Questions Proposed Approach Timing

Affiliate Sales

Program Development and Amort.

Operating Expenses

• Are lucrative sponsorships at risk under a partnership scenario?

• Will management be able to shift the ad mix away from D.R. without FUN?

• Interview SPT ad sales team to gauge likely market response to loss of integration with FUN

• Analyse Q1 ’08 actuals for evidence of sponsorship growth driven by FUN integration

• Review ad mix strategy and implications with GSN management

• Confirm hypothesis of negligible impact on subscriber rates and sub fees

• Confirm and validate the specific marketing synergies that are listed in aggregate in the GSN/FUN management projections

• Finalize incremental headcount required under partnership model

• Identify incremental facilities costs and asset leasing required under partnership

• Request submitted to GSN for detailed backup—awaiting response

• Determine reasonable salaries based on SPE actuals

• Identify actual costs based on GSN current leases and gross-up based on headcount analysis

• Interview affiliate experts (SPT Research, IBB, FEARnet execs)

• Confirm hypothesis of negligible impact on programming economics (e.g. acquisitions, development, pilot pick-ups)

• Interview GSN Development team and/or SPT Production and Programming

• Week of April 21

• Upon receipt of Q1 ’08 actuals from GSN

• Week or April 21

• Upon receipt of data from GSN

• Week of April 14

• Week of April 21

• Week of April 21

• Week of April 21

8

$8.1

$6.8

$8.9$9.3

$13.6

$0.0

$2.0

$4.0

$6.0

$8.0

$10.0

$12.0

$14.0

$16.0

2002 2003 2004 2005 2006

Rev

enu

e $M

MFor SPE to Lose No More Buying FUN Than It Would Under The Partnership Model, FUN Revenue Must Increase at a CAGR of 8.9% Over The Plan Period

Worldwinner (FUN Games) Historical Revenue

• FUN acquisition valuation:

13.8% • Acquisition cost to SPE:

• FUN DCF Value at 8.9% Revenue CAGR 2008-2010:

$200MM

($100MM)

$128.4MM

• SPE Share of DCF Value

$64.2MM

• Net SPE Investment Loss

($35.8MM)

Note: Due to acquisitions 2007 revenue increased 314% over 2006. 2007 excluded from CAGR calculation as it is not indicative of organic growth in the business

9

Given the Estimated Impact of Lost GSN Synergies, FUN Valuation Will Likely Determine Merger Attractiveness

GSN/FUN Valuation Under Multiple Scenarios

• At 8.9% EBITDA growth and a $200MM acquisition valuation, FUN would represent a $36 MM loss to SPE

• $36MM is equal to the expected lost GSN value under a partnership model

*

* SPT Strawman case introduced on pg. 4

• FUN acquisition is accretive for SPE only if revenue CAGR exceeds 8.9% over the plan period**

CY08 CY09 CY10 DCF SPE Share SPE Gain/LossGSN As Provided (Partner or Merger) 37,903 47,191 60,308 Exit Value (10x) 603,083$ $486,863 $243,432 N/A

GSN if Synergies Lost (SPT Case) 34,405 41,190 51,085 Exit Value (10x) 510,850$ $415,274 $207,637 ($35,795)

Fun Grow @ 8.9% CAGR on Revenue 10,859$ 13,400$ 15,699$ Exit Value (10x) 156,991$ $128,411 $64,205 ($35,795)

Fun Grows at Management Proj. 10,859$ 19,734$ 30,046$ (28.8% CAGR on Revenue) 300,460$ $232,888 $116,444 $16,444Exit Value (10x)

Fun Management Proj. + Free Games 13,013$ 26,035$ 39,420$ (28.8% CAGR on FUN Revenue ) 394,200$ $304,593 $152,296 $52,296(90.1% CAGR on Free Games Revenue)Exit Value (10x)

10

Next Steps

4/21 4/28 5/5 5/12

Business Diligence

– Develop financial model based on senior management input

– Submit and receive incremental diligence request

Legal Diligence

– Gather priority documentation

– Review priority documentation

– Visit and review Boston data room

– Finalize model assumptions and assess impact

– Finalize legal diligence and develop recommendations

Present findings to Mosko

Present findings to Mosko

If findings suggest merger…

• Prepare legal documentation

• Prepare and submit deal for GEC review

If findings suggest partnership…

• Structure arms length agreements between GSN and FUN

• Develop roadmap for separation of operations (e.g. management team, facilities)

• 3-4 weeks to determine at an SPT level if we want to buy or partner with GSN• 2-3 months to formalize

merger or partnership

Review model with Carey, Shearer and Calkins