DRAFT Changing TV Landscape June 2013 Sony Group Corporation Strategy Division 2010 MRP 1
Changing Television Landscape TV distribution and consumption are changing all over the world In the U.S. and other developed markets, new devices and platforms are driving increased programming consumption In international territories, traditional pay television platforms continue to grow, adding new channels and viewers Hit shows and formats created in the U.S. are finding a more global audience; at the same time, the market for local programming is thriving The result is an increased demand for new and library content, and programmed channel experiences Sony Group Corporation Strategy Division 2010 MRP 2
Connected Devices such as Tablets, Smartphones, Consoles, & Smart TV s are Enabling Ubiquitous Consumer Access to Content Over the next 4 years, connected device ownership is expected to grow at a 13% CAGR 102 85 13 70 12 52 10 26 35 16 8 19 20 18 7 16 13 6 2 9 5 7 10 13 16 19 22 2010 2011 2012 2013 2014 2015 (1) (2) (3) (4) Game Console Stand Alone Set-Top Box Internet Connected TVs and Blu-Ray Player PCs/Home Media Server Source: SNL Kagan. Number of devices in millions. (1) Applies to Internet-connected video game consoles used to access professionally produced content. Excludes multiple video game consoles per HH. (2) Stand-alone set-top boxes including, but not limited to, Apple TV, Roku, Boxee and TiVo. Excludes set-tops integrated with multichannel service (3) Internet capable TVs and blu-ray units that are connected and used for OTT video. Excludes overlap of devices. (4) Applies to households using a PC or media server to transfer OTT delivered content to the TV. Excludes households viewing content directly on PC screen. Sony Group Corporation Strategy Division 2010 MRP 3 11 36 48
Connectivity and Devices are Driving Online Viewing U.S. Online Video Viewing HHs (MMs) (1) 68 47 '12 '16 Penetration 40% 55% (1) Does not represent cord cutters but applies to households regularly viewing television shows or movies using Internet or over-the-top (OTT) delivery, most online/ott video HHs in the above graph also subscribe to multichannel services. Source: SNL Kagan, September 2012. Sony Group Corporation Strategy Division 2010 MRP 4
The Emergence of Online Viewing Has Created New Options as Consumers Seek Flexibility TV Everywhere Traditional MSOs (i.e., cable & satellite) and networks are adapting their services to accommodate online viewing Over-the-Top (OTT) New digital networks have emerged taking advantage of the ability to go directly to the viewer without an MSO middleman Sony Group Corporation Strategy Division 2010 MRP 5
US Landscape By Adding Digital Services to Traditional Linear Channels, There is Greater Demand for Content Digital services also create renewed demand for library programming Broadcast Basic/Premium Cable Digital Services Sony Group Corporation Strategy Division 2010 MRP 6
Networks are Under Greater Pressure to Distinguish Themselves and Attract Viewers Original programming is increasingly used to differentiate their content propositions Originals Exclusive licensed content Non-exclusive library product Sony Group Corporation Strategy Division 2010 MRP 7
Both Traditional Networks and Digital Services are Spending More on Programming Traditional Linear Networks New Digital Services Annual Content Spend Growth Est. Annual Content Spend $500MM+ 19% $2Bn+ $475MM+ $940MM 14% 10% $500MM $1Bn $650MM+ 1% $500MM Note: Content spend as of fiscal year ended December 31, 2012. Growth calculated as 2009-2012 CAGR. Sony Group Corporation Strategy Division 2010 MRP 8
Digital Services are Now Beginning to Compete with Linear October '11 June '12 Q1 2013 Rank Network P2+ Billion Hours/Month Rank Network P2+ Billion Hours/Month Rank Network 1 CBS 3.4 1 ABC 2.2 1 CBS 3.3 2 ABC 2.8 2 NBC 2.2 2 ABC 2.6 3 NBC 2.5 3 CBS 2.1 3 NBC 2.3 4 FOX 2.5 4 DISNEY CHANNEL 1.4 4 FOX 1.9 5 DISNEY CHANNEL 1.3 5 FOX 1.3 5 DISNEY CHANNEL 1.3 6 USA 1.0 6 NETFLIX 1.0 6 NETFLIX 1.2 7 ESPN 1.0 7 TNT 0.9 7 USA 1.1 8 UNIVISION 0.9 8 USA 0.9 8 UNIVISION 0.9 9 TBS 0.8 9 UNIVISION 0.8 9 TNT 0.8 10 NICKELODEON 0.8 10 FOX NEWS 0.8 10 NICKELODEON 0.8 11 FOX NEWS 0.8 11 NICKELODEON 0.7 11 FOX NEWS 0.8 12 PBS 0.7 12 ESPN 0.7 12 PBS 0.7 P2+ Billion Hours/Month 15 NETFLIX 0.66 Source: BTIG May 21, 2013. Sony Group Corporation Strategy Division 2010 MRP 9
Pay TV Also Continues to Grow Internationally, Creating New Opportunities for Programmed Channels Global Pay TV Households (MM) (1) 774.3 918.2 2012 2016 Penetration 54% 59% Source: Informa 2013. (1) Pay TV Subscribers include Digital Cable, Analog Cable, Pay IPTV, Pay DTH, and Digital Pay Terrestrial TV households. Sony Group Corporation Strategy Division 2010 MRP 10
The Proliferation of International Channels is Increasing the Demand for US Studio-quality Content Worldwide Market for U.S. Produced Programming ($BN) $61.2 $74.5 2012 2016 Source: SNL Kagan 2013. Sony Group Corporation Strategy Division 2010 MRP 11
Sony Pictures Television: Highlights SPT is well positioned to take advantage of the changing TV landscape Global Pay TV Growth Networks projected to have an EBIT CAGR of 23% across the plan, coming from all regions across the world as newer channels mature to profitability and more mature channels grow or maintain their margins New Distribution Opportunities Increased Demand for Content Distribution continues to grow given new buyers and opportunities with SVOD and a strong global Pay TV market International Distribution sells in over 300 countries/markets and US Distribution sells in over 200 US markets Crackle positioned as top ad-supported channel on multiple platforms; breaking new ground with original production, distribution across platforms, and global expansion Most successful production slate in a decade with SPT receiving orders for eight new scripted series Currently producing 33 programs for 17 US networks Sony Group Corporation Strategy Division 2010 MRP 12
SPT Embraces Change An industry leader constantly shaping and adapting to new trends, SPT has experienced significant growth and has become the largest contributor of profitability to SPE Profit FYE03 Profit FYE13 Total TV = 37% Total TV = 60% TV Production & Distribution 33% TV Networks 4% Motion Pictures 63% TV Production & Distribution 27% Motion Pictures 40% TV Networks 33% Sony Group Corporation Strategy Division 2010 MRP 13
SPT Networks: Global Expansion SPT is capturing the subscriber growth trend by continuing to expand our channel presence internationally through new channel launches and targeted acquisitions in key growth areas 159 COUNTRIES 804 MILLION HOMES 124 FEEDS 22 LANGUAGES EUROPE & RUSSIA KOREA NORTH AMERICA JAPAN ASIA AFRICA LATIN AMERICA AUSTRALIA Sony Group Corporation Strategy Division 2010 MRP 14
SPT Networks Adapting to Changes in Consumer Behavior SPT s broader network strategy also recognizes new distribution platforms and consumer behavior SPE already owns a premium content OTT digital network with Crackle Top ad-supported premium content service that is available across all platforms; broader audience reach than several top paid services, including Hulu+ and Amazon Top ad-supported channel on key platforms (Top 5 channel on Bravia, Blu-ray, and Roku) Crackle expanding device and territory footprint to capitalize on growth in alternative consumption models Expanding Reach of Linear Networks Evaluating direct-to-consumer apps (e.g., AXN Go in LATAM) with cable/sat partners Participating in existing local TV Everywhere offerings of cable/sat partners (e.g., Singapore) Sony Group Corporation Strategy Division 2010 MRP 15
SPT Distribution: Growing Buyer Pool International distribution continues to grow given new buyers and opportunities with SVOD and a strong global Pay TV market. The team has continued to build relationships with content buyers both domestically and internationally which is directly reflected in the growing number of SPT customers to whom we sell. Domestic 136 International 780 76 509 41 300 1990s 2000s Current Source: SPT analysis. Note: Domestic count does not include local affiliates of national networks already included. 1990s 2000s Current Sony Group Corporation Strategy Division 2010 MRP 16
SPE Distribution: Shift in our Revenue Mix SPE has capitalized on the shift in consumption patterns, and our revenue mix today reflects the emergence of new markets and partners (ex. Community on Netflix). U.S. Revenue Mix International Revenue Mix 14% 6% 20% 43% 86% 57% 94% 80% FY08 FY13 FY08 FY13 Free/Pay SVOD/VOD/EST/PPV Free/Pay SVOD/VOD/EST/PPV Source: SPT and SPHE finance. Sony Group Corporation Strategy Division 2010 MRP 17
SPT: U.S. Production SPT has had the most successful production slate in a decade with SPT receiving orders for seven new scripted series. SPT s increased production slate reflects our success creating original television content to satisfy a greater demand for our product 33 26 24 22 17 6 10 17 17 17 16 8 11 5 8 10 9 11 18 16 16 14 12 9 8 6 0 2005-2006 2006-2007 2007-2008 2008-2009 2009-2010 2010-2011 2011-2012 2012-2013 2013-2014 New Series Returning Series Note: Excludes Wheel of Fortune, Jeopardy!, The Young and the Restless, and Days of Our Lives. Sony Group Corporation Strategy Division 2010 MRP 18
SPT: International Production Building a Worldwide Presence Companies in 13 countries around the world covering multiple regions; Programs aired in 88 countries, 73 languages and counting London Paris Amsterdam Cologne Beijing Moscow ASIA Rome Culver City Beirut Cairo Miami (Latin America/USH) Dubai Hong Kong Bogota AMERICAS EMEA (Europe, Middle East, Africa) Sao Paolo Tuvalu Group Strategy Division 2010 MRP Sony Corporation 19
Q&A Sony Group Corporation Strategy Division 2010 MRP 20