Subscription Internet Rights to SPE Films: Overview of Starz Deal and Options for Qriocity/PSN

1. Subscription Internet Rights to SPE Films: Overview of Starz Deal and Options for Qriocity/PSN October 2010

2. Overview • Pay TV output deals are a key source of revenue for studios and have been entered into by all the major studios • An output deal guarantees subsequent downstream revenues essential to motion picture greenlight economics • Competitor deals include Warner Bros., Fox, Universal, DreamWorks Animation, New Line with HBO; IFC Films, Summit, The Weinstein Company, DreamWorks SKG with Showtime; Paramount, MGM, Lionsgate with EPIX (as owners); and Disney, Overture with Starz • Linear pay continues to be lucrative and SPE’s deal with Starz is believed to be above market compared to HBO, Showtime and EPIX • Starz has licensed exclusive subscription pay TV rights to SPE's theatrical motion pictures, during the pay TV window, in an output deal • The current output deal contributes roughly $300-400MM of cash fees and roughly $200 to $300MM of profits per year, depending on the performance of the SPE slate, and runs through 2016 releases • Starz must license (and has licensed) all of SPE’s theatrical films and SPE must make these features exclusively available to Starz for the duration of the deal • Starz has the right to sub-license internet rights and has negotiated a non-exclusive deal with Netflix that allows Netflix to offer streaming of SPE’s films to subscription customers through the end of February 2012 • SPE has placed limits on Starz's ability to sub-distribute to Internet customers capping the number of end-users to which Starz may grant digital access • While Starz holds rights in the pay TV window, multiple avenues exist for Sony platforms to offer subscription streaming of SPE’s films in the window • Starz/Netflix non-exclusive thru February 2012 • Sony hardware can and currently does offer Netflix, including SPE films • Sony can secure a Netflix-like deal through Starz on a non-exclusive basis now • Sony can secure a Netflix-like deal through Starz on an exclusive basis post February 2012

3. Current Discussions of Internet Streaming Rights • With the growth in Netflix subs and the addition of TV Everywhere customers, Starz is approaching the internet subscriber cap • EPIX (Paramount, MGM, Lionsgate) signed a licensing deal with Netflix for $900MM dollars over 5 years with the studios, as content owners, dividing the proceeds • EPIX fee of roughly $180MM per year included rights that Starz may not match • EPIX terms included 2 years of internet exclusivity and white labeling • For a similar deal, Starz’s higher quality content will increase the fee while more restrictive terms could decrease the fee • SPE is exploring an increase in the Starz internet subscriber cap to allow Starz to extend its Netflix deal under lucrative terms • Starz would negotiate directly with Netflix as Starz remains our primary pay TV partner under the current deal • Working assumption is that Starz’s Netflix deal would remain non-exclusive • Starz would secure incremental funds (public sources target $235MM per year) and remit a portion to SPE • SPE would seek additional benefits from Starz during renegotiations (e.g., increasing the number of titles SPE can put through the deal, securing a larger library deal, etc.)

4. Options for Offering Subscription Rights to SPE Films on Qriocity/PSN Under the Current SPE/Starz Relationship • Impact + Price • Low • Medium • High Approach: • SPE films under a non-Sony brand (e.g., Netflix) • SPE films under the Qriocity/PSN brand; non-exclusive (e.g., on Netflix and Qriocity, perhaps no other platforms) • SPE films under the Qriocity/PSN brand; exclusively Aligns with a strategic view that: • Aggregate 3rd party services • Sony devices need to be a one-stop-shop for all services customers demand • Access to SPE content can be secured without incremental investment by Sony • Aggregate 3rd party services and build owned services • In addition to aggregating other services, Qriocity matches content of other services under its own brand • Requires Qriocity to match Netflix content offering • Likely requires Qriocity to create a hook (beyond subscription streamed films) to attract customers • Build a leading owned service • Qriocity’s own service becomes the draw, as much or more than the 3rd party services it aggregates • Qriocity exceeds leading brands (e.g., Netflix) in key categories • Requires aggregation of content from other studios, not just aggregation of services

5. Options for Offering Subscription Rights to SPE Films on Qriocity/PSN Under the Current SPE/Starz Relationship Approach Required Steps and Potential Economics SPE films under a non-Sony brand (e.g., Netflix) • Qriocity/PSN customers have access to Starz Play through Netflix today • No incremental fee SPE films under the Qriocity/PSN brand; non-exclusive (e.g., on Netflix and Qriocity, perhaps no other platforms) • Cut a market rate deal directly with Starz for non-exclusive rights • Market rate estimated at $235MM per year. However, Qriocity/PSN fees could be lower if amount is tied to active subs (~$50-200MM per year) • Sony could offer these rights under a Sony brand (e.g., Qriocity) and on Sony devices, however, Netflix would be able to offer them too since this is a non-exclusive deal SPE films under the Qriocity/PSN brand; exclusively • Cut a market rate deal directly with Starz for exclusive rights (~$300MM per year, a premium above a Netflix deal) • Netflix deal would end February 2012 and Sony platforms/devices would be the only place to secure these rights online • Note: Need to reach agreement quickly if this is the preferred approach as Starz wants to commence negotiations on the Internet cap on October 21st

6. Altering the SPE/Starz Relationship to Reclaim Internet Rights would Require a Significant Investment and May Not be Feasible • A complete renegotiation of the SPE/Starz deal to re-claim internet rights is likely not workable with Starz • We believe Starz is unlikely, and potentially unable to do this given 3rd party obligations to provide SPE films through long-term agreements • SPE would forego a substantial portion of roughly $300-400MM o f fees per year and would be the only major studio without an output deal with a Pay TV partner • May not be necessary. If the intent is to decrease the fees Sony receives from Starz on a net basis to secure internet rights for Qriocity, this can be achieved by Qriocity licensing those rights through a competitive bidding process • An acquisition of Starz from Liberty Media would provide greater flexibility on rights, but may not be feasible and presents financial risks • Likely price tag ($2.2B Enterprise Value for Liberty/Starz tracking stock, before any control premium) • Starz is not thought to be for sale • Liberty may be unwilling to sell for cash; has history of tax-favored asset swap transactions • There is significant risk in acquiring a pay television channel given the threat posed by Internet subscription services • Access to Disney films for Qriocity in the Pay window under either a renegotiation or acquisition is uncertain beyond Disney's current term • SPE does not have direct visibility into digital rights granted by Disney to Starz, but believes Disney's current term continues through 2015 and would allow Qriocity to sub-license Disney films as part of the Starz service during the Disney-Starz term • There is risk that Disney would not renew beyond 2015, requiring Starz to license feature films from Universal, Warner Bros. or Fox when their deals with HBO expire later in the decade [~2016-18]