Confidential

Starz Deal Summary

January 5, 2009

2Confidential

Deal Overview

3Confidential

Deal Summary

• Secured 3 year extension to the Starz deal

• Original deal expired December 2013; New deal provides Sony security of a Pay TV deal through December 2016 (Disney through 2012; Paramount, MGM, Lionsgate – no Pay TV deal)

• License fees and bonus continue to be above market

• New deal provides framework for Starz services on the internet, ensuring premium access and premium messaging

– Minimum bundle pricing

– Also available on a la carte basis Rate card for “Open Internet” subscribers only

– Cap on number of subscribing households

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Overall Deal Terms

License Fees and Bonus

Current term (2009 – 2013)• Rate card unchanged 2009 – 2011; Rate

card reduced 12.5% 2012 – 2013• Annual Bonus of $47.5MM unchanged

• Sony maintains the only studio bonus in the industry• Rate card remains well above market throughout current term • Although reduced, rate card in extension continues to be above

market

Extension term (2014 – 2016)• Rate card reduced 35%• Annual Bonus of $38.7MM

Extension valued at $500MM - $600MM

Annual Qualifying Films

• Up to 50 films per year • All studios have Pay TV title caps; ours is the highest and offers greater flexibility within our slate

• Cap exceeds historical and projected SPE slates

InternetSOD • Premium pricing / access

• Premium branding Incremental fees

• Structure is in the spirit of traditional Pay TV flat fee mode l; but provides clear definition for “Pay TV on the internet”

• Potential additional upside for Sony

OtherBenefits

• 72 hour PPV/VOD viewing• Reduce Pay 2 EST Floor to $3.50• Pay 2 Black Periods eliminated• Mobile/Cellular rights for Sony subscription

offering between Pay 1 & 2 for up to 6 pictures /year at less than $50MM DBO

• SCA allowed to exhibit up to 2 pictures /year on FOD basis if packaged with a Sony consumer electronics product >$100 / transaction

• Increases Sony value in pre-Pay TV windows• Creation of 1 additional month of network window for Sony to

monetize• Improves Sony’s mobile/cellular offering• Improves Sony’s consumer electronics offering

Terms Comments

5Confidential

Title Caps / Qualifications [Thanda / Chris]

Section would include one or two slides explaining the applicable title caps,

Qualifications, ability to move between “A” and “B” – through 2013 and thereafter

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Rate Card and Bonus [James]

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Rate Card

CREATE TABLES FOR THE FOLLOWING

Current rate card; note that it is unchanged (except for elimination of supercaps?) and how long it is in effect

12.5% reduced rate card and when it’s in effect

35% reduced rate card and when it’s in effect

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Bonus

$47.5MM and when it’s paid (note this is not a change)

$38.7MM vs. $40MM (what are the options, when would it be paid)

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Bonus

Show the financial (DCF / Revenue) impact of selecting the various payment options

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Internet Terms [Jim and James Update / Complete / Streamline]

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Overview of Internet Approach

• Overall philosophy is to ensure that online Starz is offered on a premium basis, primarily by video-based services

• A cap on total digital subscribers ensures service is offered to no more than roughly half of broadband households

• Suggested retail prices ensure service is positioned as premium

– Online services may offer below suggested retail prices; however doing so will use the cap more quickly

• Marketing and messaging further ensures premium positioning

[Jim and James to Draft]

12Confidential

Examples

Incremental Compensation

Premium

TV + Broadband DSL Only Open Internet

(cable TV + broadband)

(DSL)

Starz Play only marketed as part of packages that include TV (e.g., double play / triple play).

MUST INCLUDE AN ALC OFFER WITH SUGGESTED PRICING

NO “FREE” OFFERS

Available as an a la carte “add-on” or part of a premium tier EACH with SUGGESTED minimum pricing

NO “FREE” OFFERS

Available as a la carte “add-on” or part of a premium tier EACH with SUGGESTED minimum pricing

NO “FREE” OFFERS

SUBSCRIBER Caps to Ensure Premium

Internet SOD: Overview

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Suggested Retail Prices

Cable DSL Open Internet

Bundles

Not applicable; but may only bundle with

packages that include basic cable

Greater of $33 ($29.99 Verizon) or

Basic+$5.99+$.01

$33 threshold moves up and down with market

changes

$13.99 through 2012

$16.99 thereafter

A La Carte in addition to a video service

N/A

$5.99 through 2012

$7.99 thereafter

A La Carte without an

underlying video service

$5.99 through 2012

$7.99 thereafter

$13.99 through 2012

$16.99 thereafter

Note: through June 2009, Netflix SRP will be $7.99 ALC, $8.99 bundled. Thereafter, Netflix SRP will be the same as other Open Internet services

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Year HH Cap

2009 35MM

2010 40MM

2011 45MM

2012 50MM

2013 50MM

• Cap applies to all instances of Starz Play (TV+BB, DSL Only, and Open Internet)

• Household cap for Starz Play is 35MM in 2009; growing to 50MM in 2013

• Post 2013, cap grows as a % of growth in high-speed internet households (but never less than 50MM)

Subs Rate CardIncremental/

Max Total

0-10MM $0.33/yr $3MM / $3MM

10-15MM $0.50/yr $3MM / $6MM

15-20MM $0.75/yr $4MM / $10MM

20-25MM $1.00/yr $5MM / $15MM

25-30MM $1.25/yr $5MM / $20MM

• Rate card applies to Open Internet subscribers only (i.e., excludes TV+BB and DSL Only and excluding Netflix)

• Total annual fees to SPE capped at $20MM (expected value is less than $20MM as much of cap likely to be filled by TV+BB and DSL Only subs)

• Separate Netflix settlement: $2MM per year for next 3 yrs (if Netflix terminates, SPE receives single $2MM payment)

Rate Card

HH Cap

Internet SOD: Household Cap and Rate Card

[Jim and James Combine with Next Page]

15Confidential

Year HH Cap

2009 35MM

2010 40MM

2011 45MM

2012 50MM

2013+ % growth

• Cap applies to all instances of Starz Play (TV+BB, DSL Only, and Open Internet)

• Household cap for Starz Play is 35MM in 2009; growing to 50MM in 2012

• Post 2012, cap grows as a % of growth in high-speed internet households (but never less than 50MM)

% Decrease from Retail Price

Subscriber Multiplier

0 – 10% 1.75x

10 – 20% 2.5x

20 – 50% 3.25x

50 – 80% 4x

80 – 100% 10x

• Subscribers purchasing below suggested retail price are subject to a lower cap than other subscribers

• Example:

Subscriber Cap Adjustment

HH Cap

Adjusted Cap Mechanism

10M subs at retail price 10.0M

10M subs at 15% below retail price

25.0M

(10.0 x 2.5 = 25.0)

Total Subs 35.0M

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• May only be marketed as a bundle with offering that includes cable TV service

• Can not be marketed as a bundle with data only by cable companies

• A la carte pricing made available

• No pricing restrictions for Starz Play as a result of it being bundled with TV

• Must maintain Starz branding

• Household cap applies

• Rate card does not apply

Acceptable Marketing Messages

• “Sign up for Comcast ‘Double Play’ and get TV, Starz Play, and Broadband”

Unacceptable Marketing Messages

• “Get Starz Play when you sign up for HSIP”

• Bundling with TV likely within Starz’ rights; nearly all cable broadband households have cable TV service

- May offer Starz Play to these households without incremental fees to SPE

- Marketing must still focus on access included with TV or premium packages

- Cap on total households reinforces premium access

Basic Terms

Rationale

Examples

SOD Scenario 1: TV (Cable/Sat/IPTV) + Broadband

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Cable and Telco owned Web Sites

• Explain what SRP and multipliers apply for sites run by Telcos and Web Sites

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• Can be bundled with any tier above basic as long as minimum price is $33/month [$29.99 for Verizon]

- Today, only allows Starz Play to be bundled with highest of 3 tiers on Verizon and highest of 4 tiers on AT&T

• Can be offered a la carte for $7.99 [$5.99] on top of any tier

• Can not be positioned as “free” to consumer; value must be clearly identified

• Must maintain Starz branding

• Household cap applies

• Rate card does not apply

Current Verizon DSL Plans

• “Starter” plan: $19.99 Starz Play available a la carte at $7.99 [$5.99]

• “Power” plan: $29.99 Starz Play available a la carte at $7.99 [This price was grandfathered: Starz Play can be bundled at no extra charge]

• “Turbo” plan: $42.99 Starz Play can be bundled at no extra charge

Potential Verizon DSL + Starz Bundled Plan

• “Power Plus” plan: $33.00 Starz Play plus “Power” plan

• DSL providers shifting to cable-like offerings of IPTV + broadband (e.g., FIOS)

• Starz views cable-like treatment as critical; rate card does not apply

• $33 minimum price ensures premium position even if DSL prices fall

Basic Terms

Rationale

Examples

SOD Scenario 2: DSL Only

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Basic Terms

Rationale

Examples

• Limited to content provider websites

• Can be offered a la carte for $7.99 [$5.99] in addition to basic video subscription of $4.99

• Minimum bundled price of $16.99[$13.99]

• If website has no subscription, Starz Play can be offered a la carte for $16.99[$13.99]

• Must maintain Starz branding

• Household cap applies

• Rate card applies

Hulu (no base subscription)

• Starz Play costs $16.99[$13.99]

Blockbuster

• “1 at a time” minimum plan for $9.99 Starz Play available a la carte for $7.99 [$5.99]

• “2 at a time” premium plan for $16.99[$13.99]

• Starz Play can be bundled

• Applying rate card acknowledges that rights are incremental to output deal

• Subscription requirement is analogous to cable

- Ensures Starz continues to bundle with content (not software)

- Today, $4.99 basic video, $7.99 [$5.99] a la carte fee, plus $20 for BB requires customers pay ~ $33 before Starz Play is bundled

- As BB prices decline, $16.99[$13.99] price ensures Starz Play remains premium

SOD Scenario 3: Open Internet (excluding Netflix)

20Confidential

Windows

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Timeline of Current and Proposed Windows

Theatrical Release

Theatrical Release

DVD / VOD Day & Date

DVD / VOD Day & Date

PPV / VOD Standard

PPV / VOD Standard

10 months from theatrical (was 12 months)

3.5 months from VOD (was 8 months; not necessary with home theater carve-out)

4.5 months from DVD (was 6 months)

3.5 months from PPV (was 6 months)

Home Theater / Early WindowHome Theater / Early Window

Pay 1 Triggers

Pay 1 Window: No Black; 16 mos. current,

18 mos. in extension (was 15 plus black)

Pay 1 Window: No Black; 16 mos. current,

18 mos. in extension (was 15 plus black)

No Pay 1 trigger