BUDGET PRESENTATION Fiscal Year 2015 January 2014 DRAFT: 1/24/2014
FY14 Accomplishments TBD UPDATED: 1/24/14 Networks Distributio n/ Ad Sales Grown revenue year over year and maintained total EBIT despite significant FX headwinds (in excess of $25MM) Simple margin maintained in high teens territory at 17% After adjusting for FX, all regions of the portfolio increased their revenue performance year over year producing a total portfolio increase of over 10% Achieved earnings stability while launching/acquiring several new operations across the world Europe: SET Germany, Animax UK SVOD and UK Freeview expansion Asia: Dori Indonesia was acquired and GEM Vietnam launched Americas: Kalixta was launched in Latin America and Get TV makes its bow in the US in February Rationalized operations where appropriate with the profitable sale of SPT interests in Dolphin Ad Sales (UK) and FEARnet (completion pending), as well as a profitable and very strategic pending deal with SPT s SPIN properties in Latin America and Brazil Global programming initiatives Hannibal and Crossing Lines earned critical and ratings successes on various SPT channels around the world with both properties recommissioned for season 2 s In spite of ad revenue shortfalls, Crackle is up 50% in terms of unique visitors, enjoyed over 35MM app downloads on mobile and TV and achieved more than 20MM views on its top-rated show, Comedians In Cars Getting Coffee Negotiated 1st ever substantial guild residual changes, freeing up library product and cable-to-cable product to sell Sold 5th cycle Seinfeld and 3rd cycle King of Queens Sold Young & the Restless to TVGN as Soapnet shutdown US & International Distribution teams combined efforts to create the first global Netflix deal for Saul and Breaking Bad International Distribution generated another record breaking year of revenue at $1.74BN Struck significant long-term deals in major markets with key partners such as HBO Latam, TF1, Sogecable, Foxtel, Seven Network, Shaw, Televisa, Globo, Azteca Sold and launched The Blacklist around the world, generating record ratings and the highest revenue ever for an SPT one hour drama Generated over $40MM in revenue for Russian sitcoms (Everybody Loves Raymond, Happy Together) Pursuing One Sony opportunities with Playstation (France/Japan) and Sony Electronics (China) Added 11 new advertisers to the 2013-14 upfront with an overall increase of upfront dollars of $13.1MM The Queen Latifah Show garnered the highest CPMs of any new talk show Successfully sold integrations in The Queen Latifah Show to Cover Girl, Pantene, and SC Johnson Revenue for doctoroz.com continued to grow (all calendar year): $3.6MM (2011); $5.1MM (2012); $6.3MM (2013) Increased FEARnet s revenue across all platforms for 2013 vs 2012. VOD was up 26%, Linear was up 33% and Digital was up 6% Secured ad sales representation of the Rural Media Group s two television networks, RFD-TV and FamilyNet, with a target of $15MM for CY14
FY14 Accomplishments UPDATED: 1/24/14 Int l Productio n US Productio n Successful UK (ITV) launch of Release The Hounds followed by US (FOX) and German (RTL) orders Drove Left Bank US co-pros (Outlander, Mad Dogs US, Craving) and supported development and sale of The Crown (5 season drama series) Held WWTBAM summit with key license holders and instigated quarterly review to optimize format Identified territories for expansion: Scandinavia, Turkey, Netherlands, Australia, N. Ireland and launched Electric Ray in UK Latin America: Hired new LatAm MD; acquired 100% of Teleset; launched Mexico production; in conjunction with SPT International Distribution, negotiated volume deals with Televisa, RCN and pan regional cable channels to fortify 5 year business plan for high quality Spanish language programming Restructured Silver River, integrated Left Bank into SPT, and divested interest in Tuvalu Collaborated across Sony divisions and companies to maximize business opportunities with SPT International Distribution, SPT Networks, Sony Music, Sony ATV, and Sony Technology Networks Breaking Bad approaches $275MM profitability mark, winning the first Emmy and Golden Globe awards for Best TV Series drama Shark Tank rose to record ratings dominating ABC s Friday night successfully launched into syndication with highest ratings for CNBC in 6 years Pre-sold Better Call Saul to Netflix and it will be profitable from year one SPT has orders for six direct-to-series shows; Helix, Outlander, Better Call Saul, KZK, Battle Creek, Before Crack The Blacklist became the highest rated new series this season and has received an early second season order from the network, where the Blacklist is their highest rated series among total viewers in a decade The Blacklist also broke US DVR records with live +3 figures adding over 5MM viewers for the first time, scored the highest rating telecast in the history of the Sky Living channel in the UK, and the best new series launch in Germany since 2009 The Goldbergs emerges as self starter breakout hit series for ABC consistently beating it s competition, My Girl Capitalizing on the global market by creating original programming for new global platforms like Netflix where SPT has sold KZK Family Murder Series project and Before Crack. Both series are expected to be profitable year one and projected to generate over $100m in profit Young and the Restless and Days of Our Lives have been renewed through the 16/17, and 15/16 broadcast seasons, respectively
UPDATED: 1/24/14 Gross Revenue Generated by SPT For All Product Gross Revenue Summary Gross Revenue by Product
SPT Financial Summary UPDATED: 1/24/14 TV Product & Channel Revenue TV Consolidated EBIT
SPT Financial Summary UPDATED: 1/24/14
EBIT FY14 Forecast vs. FY14 Budget NOT YET UPDATED ($MM) [DRAFT]
EBIT FY15 Budget vs. FY15 MRP NOT YET UPDATED ($MM) [DRAFT]
NOT YET UPDATED EBIT Before Monetization FY14 vs. FY15 ($MM) [DRAFT]
Net Overhead Summary UPDATED: 1/24/14
1. Networks
Networks FY15 Outlook UPDATED: 1/24/14 FY15 will see Networks cross the $300MM EBIT threshold, over a 34% CAGR across eight consecutive years of record earnings Major new financial milestones will be achieved by SPT Networks in FY15 Revenue will surpass $1.9BN EBIT will exceed $300MM This represents year-on-year growth of 19% (Revenue) and 20% (EBIT) Despite the year over year progress, Networks EBIT is projected to be ($78MM) behind the MRP target for FY15 due to variances from two businesses MSM is ($48MM) behind MRP following a ($30MM) EBIT miss in FY14 as a result of a very difficult ad market and lower ratings on the flagship channel and the inclusion of launching MAX2 (movie channel) in FY15 ($4MM) GSN is ($29MM) behind plan due largely to a lower outlook for the Digital business based upon lower performance levels than anticipated in FY13 ($19MM) and the MRP assuming that the Bash Games acquisition would be completed in FY14 ($10MM) Branded channels are on MRP The year over year earnings growth will be achieved while also continuing to invest in the business to help sustain the strong growth profile into the future. Specific growth opportunities factored into the Budget include: A GEC channel in India An Indian movie channel CineSony France Dori Israel Included within the Budget are several significant assumptions that add an element of risk to the outlook The MSM Budget assumes that there will be significant ratings growth on the flagship channel The UK operation has an inflection point year as it seeks to fully monetize the new investment in Freeview distribution Latin America has an aggressive outlook with EBIT growth underpinned by channel ratings increases across the region Crackle US is projected to become profitable based largely upon a 30%+ increase in base business ad revenues year over year
UPDATED: 1/24/14 Networks Financial Summary vs. Budget/PY MRP Revenue EBIT Revenue and EBIT targets missed across the portfolio in FY14 with material EBIT downside in MSM (-$25MM incl. HO Challenge), Crackle (-$8.5MM), and GSN (-$11MM) FY15 downside versus MRP largely from MSM (-$48MM) and GSN (-$29MM including Bash Gaming) Note: Revenue unfavorable FX variance is ($93MM) in FY14, ($52MM) in FY15; EBIT unfavorable FX variance is ($38MM) in FY14, ($17MM) in FY15. Note: EBIT excludes 3Net EBIT of ($4MM) and ($2MM) in FY14 and FY15, respectively.
Networks Financial Summary UPDATED: 1/22/14
2. Distribution & Ad Sales
US Distribution FY15 Outlook UPDATED: 1/22/14 Broadcast: Cable: SVOD: Renew Queen Latifah Create new development/syndication model with Hearst or Tribune Increase licensing of library product in diginet space (Antenna, Cozi, Bounce, MeTV, GetTV) Maximize and secure top offnet value for The Blacklist Further progress on guild waiver negotiations to free up residually-locked current and library TV product for monetization in broadcast, cable and diginet space Working with FX to close feature slate output deal Looking to split rights with Turner to sell an additional Seinfeld window License English language product to US Spanish networks Sell second window of Days of Our Lives and cable-to-cable shows based on residual waivers Close SPA output deal Negotiate AVOD/SVOD Amazon deal Negotiate OTT Comcast library deal Maximize offnet value for The Blacklist and Helix Concentrate efforts on building sales team TBD
US Distribution Financial Summary UPDATED: 1/23/14
US Distribution Motion Picture Revenue UPDATED: 1/22/14 Library/Flow Motion Picture Revenue Current Motion Picture Revenue Pay DBO ($B) $0.97 $0.91 $0.92 $0.86 Note: Based on film slate as of 1/22/14.
US Distribution TV Revenue UPDATED: 1/23/14 TBD
US Ad Sales FY15 Outlook UPDATED: 1/24/14 Upfront volume key to growth in pricing Marketplace Low upfront volume created challenging scatter market Q4 was extremely slow with reduced pricing Direct response was critical to Q4 Lining up new upfront prospects for 14/15 to improve volume Broadcast Cable Only new entry to syndication daytime will be Meredith Vieira. Cancellation of Katie should boost revenue for Queen Latifah and Dr. Oz Sell advertisers across slate of comedy (Seinfeld, King of Queens, Community, and Rules of Engagement). Increase variety of clients in Rules of Engagement and Community :10 s challenge of $2MM with new 20 second unit Integrations critical to delivering budget goals Representing RFD Channel for CY 2014 Rural Entertainment in 50MM homes Deliver $15MM budget with a combination of direct response and general rate
US Ad Sales Financial Summary UPDATED: 1/14/14 $MM FY14 FY15 FY14 vs FY15 Budget Forecast Variance MRP Budget Variance Variance Gross Revenue KING OF QUEENS 15 13 (2) 13 13 -- -- TIL DEATH 4 3 (1) 2 1 (1) (2) RULES OF ENGAGEMENT 23 21 (2) 22 22 -- 1 COMMUNITY 8 4 (4) 13 7 (6) 3 SEINFELD 30 29 (1) 27 27 -- (2) DR OZ 52 49 (3) 50 50 -- 1 NATE BERKUS -- -- -- -- -- -- -- QUEEN LATIFAH 25 14 (11) 55 30 (25) 16 TBD SYNDICATED SERIES -- -- -- -- -- -- -- WHEEL OF FORTUNE, JEOPARDY! 14 13 (1) 13 13 -- -- :10s CHALLENGE -- -- -- 2 2 -- 2 All Other 4 2 (2) 2 1 (1) (1) Subtotal 175 148 (27) 199 166 (33) 18 Playstation 25 20 (5) -- -- -- (20) Fearnet 3 2 (1) 4 3 (1) 1 RFD -- -- -- 15 15 -- 15 Other Third Party Distribution 8 7 (1) 9 8 (1) 1 Total Gross Revenue $211 $177 ($34) $227 $192 ($35) $15 Costs Related to Revenue (184) (160) 24 (188) (172) 16 (12) Ad Sales Overhead (16) (16) -- (14) (13) 1 3 Profit Contribution $11 $1 ($10) $25 $7 ($18) $6 Transfer to Product Owner (19) (11) 8 (35) (16) 19 (5) EBIT ($8) ($10) ($2) ($10) ($9) $1 $1
UPDATED: 1/23/14 International Distribution FY15 Outlook Outperforming historical high revenue in FY14, reaching a new record in FY15 Revenue of $1.83BN projected in FY15 US and International scripted TV product sales are the main drivers of growth While performance for some feature releases are lower than planned, we are still delivering higher value through better exploitation of flow/library content Maximize growth opportunities across SVOD and Emerging Markets: Netflix and Amazon are rolling out services to more countries, plus more local SVOD players (e.g., DLA, Avex, Rogers) Buying patterns are evolving away from bulk to more targeted buying (e.g., Netflix Breaking Bad/Saul deal) Partner with new SVOD and AVOD platforms and grow in emerging markets (e.g., China, Indonesia, Russia, India and Africa) Work within SPT to find new ways to create shows EMEA co-productions with US Production Look for local content creation opportunities (e.g., UK, Russia, LatAm) Key Deal Road Map Partnering with Crackle to create original content Country/ Deal Estimated Completion Estimated Term Value ($MM) Collaborate across Sony divisions to maximize opportunities Russia/ FTV Q3FY15 3 Years $100 - $120 S. Korea/ BC/ Pay Q4FY15 3 Years $75 - $100 Negotiate carve-outs (SEN) Italy/ Pay Extension (Sky) Q3FY15 3 Years $100 - $120 Develop Millionaire Project in India, Middle EastItaly/ FTV Q4FY15 3 Years $50 - $80 Tie in with Playstation in Japan and France The Blacklist opportunity with Sony Mobile Total $325 - $420 Supplement resources in key markets to support continued growth
UPDATED: 1/22/14 International Distribution Financial Summary
International Distribution Motion Picture Revenue Library/Flow Motion Picture Revenue UPDATED: 1/22/14 Current Motion Picture Revenue
International Distribution TV Revenue UPDATED: 1/22/14 TBD
Key Feature and TV Drivers FY15 UPDATED: 1/24/14
3. Production
International Production FY15 Outlook UPDATED: 1/21/14 Create IP that travels Support creation, launch and sales of formats that travel: The Patch, Fan Band, Popheads, Beat Shazaam Maximize prelaunch of The Crown through integrated sales, marketing and publicity campaign Rebuild SPT Russia s capacity to produce enduring sitcoms and dramas that travel Support development of SPT Arabia infrastructure to produce and deliver high quality dramas Explore expansion opportunities for network of production companies in key strategic markets Scandinavia, Turkey, Netherlands, Australia, N. Ireland Support and strengthen existing production companies TBD Support SPT Latin America/Teleset to execute 5 year plan to build high quality, sustainable library of Spanish language programming for the region Monitor progress of Toro Italy, Floresta (Brazil), SPT Arabia Seek extension of HUASO (China) license and restructure operation Support startup and integration of Electric Ray into SPT Continue internal collaboration to drive business across Sony companies SPT International Distribution: Continue close collaboration to maximize profits from new and library programming SPT Networks: Expand original production opportunities with SPT s network group Sony Music: Continue to work on individual projects and build wider strategic partnership
UPDATED: 1/24/14 International Production Financial Summary Revenue EBIT
UPDATED: 1/24/14 International Production Detailed Revenue
International Production Detailed EBIT UPDATED: 1/21/14
US Production FY15 Outlook UPDATED: 1/24/14 Further strengthen portfolio by creating and selling content in all genres Drama Maximize value of worldwide appetite for quality drama across all outlets with continued emphasis on broadcast and cable and additional focus on new platform opportunities Comedy Maintain and support a strong comedy strategy as part of our overall portfolio business as comedy continues to maintain strong value in the syndicated marketplace First Run Syndication Stabilize and grow the Queen Latifah daytime series for the 14/15 broadcast season and look to expanding the business into new lower cost opportunities Long Form Continue to be the industry leader in MOW and limited series production, expanding our partners to include networks like FX, SyFy, Starz and Cinemax Non Scripted Capitalize on growth opportunities in cable (USA, TBS, AMC, WE) and continue to strengthen our foothold in broadcast Content will continue to be created and sold across all platforms Digital / Online Capitalize on growth opportunities in emerging platforms (Amazon, Netflix, Hulu) Cable Consistently profitable with some of the most critically acclaimed and respected series in the industry Broadcast Global market creates increased demand for content Leverage the strength of our international partners to increase global demand and extend life of series on air in the US Continue to invest in top tier creative talent
US Production Assumptions UPDATED: 1/23/14
Projected Value of Shows in Syndication UPDATED: 1/13/14 Attractive returns with upside potential for shows that prove to be a hit Current Examples Show in Syndication / Expected to Syndicate Breaking Bad Dr. Oz (6 Seasons) Justified Drop Dead Diva Rescue Me Damages Rules of Engagement Community Anticipated Value to SPE(1) $275MM $90MM $53MM $49MM $45MM $33MM $30MM $21MM Projected Examples Family Murder Mystery (KZK) Dr. Oz (8 Seasons) Better Call Saul Unforgettable Masters of Sex New Network series such as: The Goldbergs or The Blacklist (1) Values are on an ultimate basis; current and projected values are as of January 2014. $109MM $105MM $100MM $65MM $30MM $75MM $145MM
US Production Current Series, Pilots & Development Cost UPDATED: 1/23/14 Revenue EBIT
US Production Current Series, Pilots & Development Cost UPDATED: 1/23/14
US Production New Series Investment & Development UPDATED: 1/23/14 Represents ONLY development expense and deficit pilots/series and EXCLUDES profitable series
UPDATED: 1/24/14 US Production FY14 Q4 New Series Investment & Development Note: Includes allocation of departmental overhead.
UPDATED: 1/24/14 US Production FY15 Budget New Series Investment & Development Note: Includes allocation of departmental overhead.
UPDATED: 1/24/14 US Production Library, Net Overhead & Challenge
US Production Product Library UPDATED: 1/23/14 Revenue EBIT
SPT Cash Flow UPDATED: 1/24/14 Note: MRP cash restated for WPF spend previously held by product owners.