SPT Business Overview
November 16, 2012
DRAFT – FOR DISCUSSION ONLY
1 Sony Pictures Television
Business Overview
Sony Pictures Television
Distribution & Ad Production Networks Sales
• Development, acquisition, • Distribution handles the sale • Management and distribution and production of television of SPE’s film and television of branded networks and programs for broadcast, basic content to television and channels worldwide cable, and premium cable digital customers networks • International brands include • Ad sales handles inventory AXN, SET, and Animax • Program genres include and integration opportunities scripted comedies and in SPT’s syndication series, dramas and non-scripted SPE’s digital businesses in the reality, talk, and game shows US – including Crackle, and PlayStation
2 SPT Organization Overview
Steve Mosko President, Sony Pictures Television
Andy Kaplan Andrea Wong John Weiser Michael Davies President, Worldwide President, Int’l President, Distribution President, Embassy Row Networks Production
Corii Berg Harry Friedman Zack Van Amburg Jamie Erlicht Sr. EVP, Production Executive Producer President, Programming President, Programming Business Affairs
Amy Carney Chris Elwell Sheraton Kalouria Keith LeGoy Paula Askanas President, Ad Sales, EVP, Distribution Business EVP and Chief Marketing President, Distribution EVP, SPT Communications Strategy & Research Operations Officer
3 What We Do Well, Where We Need Improvement- U.S. Production
What we do really well What we need to work on
• Consistently strong pilot orders, pilot to series • Keeping existing series on air. Would be helped conversions and series renewal rates greatly by having a U.S. network
• Launch and monetize cable dramas • Breakout hit: broadcast comedy or procedural
• Strong growth of series on air on a small • Increase investment in writers and development development budget • Collaborate better with international production in development/exploitation of scripted and unscripted formats
• Lead assertively in control of production costs and in improving series economics vis-à-vis network buyers
4 What We Do Well, Where We Need Improvement- International Production
What we do really well What we need to work on
• Expanding footprint of international production • Breakout hit format businesses • Achieve scale and pipeline in major format • Early footholds in growth markets (e.g., Russia, generating territories (UK, Netherlands, LATAM) Scandinavia)
• Increasingly streamlining production administration and collaboration within and across territories
5 What We Do Well, Where We Need Improvement- U.S. Distribution and Ad Sales
What we do really well What we need to work on
• Good at building and a product-centered approach to • [to come from Steve] distributing TV and movies: customized release plans and windowing across platforms for different types of TV series and features
• Strong sales planning, forecasting, analytics and business affairs.
• Strong collaboration across SPT groups and SPE divisions – ensuring that Distribution deals support and are coordinated with Networks carriage deals; leveraging TV deals for home video deals where clients are in both businesses; repping inventory for PlayStation
• Have integrated program and format sales in international markets
• Strong syndication sales/ad sales organization compared to others in market
• Leverage traditional TV ad sales along with digital inventories/platforms (FearNet, PlayStation)
6
What We Do Well, Where We Need Improvement- International Distribution
What we do really well What we need to work on
• Strong output agreements for film and TV • Improve and streamline marketing, business affairs, planning and admin support • Close integration with U.S. Production compared to competition
• Leverage across media/lines of business with large consolidated buyers on behalf of transactional, SVOD and traditional TV
• Collaborate on transactional businesses with SPHE
7 What We Do Well, Where We Need Improvement- Networks
What we do really well What we need to work on
• Strong record of launching new channels, • Stronger network brand and programming moving early in growth markets identities for existing channels
• Strong EBIT margin and growth trajectory • Increase investment in U.S. market for a flagship network (e.g., merge with AMC) • Establishing Crackle as a market leader in its category • Increase investment in new channels in international growth markets (e.g., Indian regional channels, Middle East) and select mature markets (e.g., Italy movie channel; SET Germany)
• Digital strategy – build a bouquet of digital networks
8 Note: Distribution EBIT discussion not provided as it is largely a pass through Television Business is Growing
SPT EBIT continues to grow at a rate of 15% year-over-year
SPT Consolidated EBIT • Networks – Networks has an EBIT CAGR of 23% across $MM Monetization the plan, breaking earnings records in each and every $859 900 year. The growth comes from all regions across the world as newer channels mature to profitability and $765 800 more mature channels grow or maintain their margins
700 $625 • U.S. Production & Ad Sales– EBIT grows 21% over the $564 plan from $290MM to $351MM driven by a steady 600 pipeline of programming sold to SVOD and Off-net 11 syndication: Last Resort, Happy Endings, Justified 500 553 • International Production – International Production 400 has an EBIT CAGR of 78% across the plan. Moderate 300 organic growth from existing operating companies is supplemented by EBIT contributions from recent 200 acquisitions Left Bank and Silver River as well as the inclusion of a hit format starting in FY15 100
0 FY13 FY14 FY15 FY16 Frcst Current Current Current
9 Sony Pictures Television
Revenue and EBIT – Today and Tomorrow
Gross Revenue Net revenue EBIT ($MM) FYE13 FYE16 FYE13 FYE16 FYE13 FYE16 U.S. Distribution 778 632 48 40 34 25 Int'l Distribution 1,630 1,895 9 5 (45) (54) Int'l Production 233 513 294 573 6 34 U.S. Production & Ad Sales 1,058 1,450 1,761 2,191 290 351 Networks 1,518 2,482 1,536 2,580 268 503 Total $ 5,217 $ 6,972 $ 3,648 $ 5,389 $ 553 $ 859 ($MM) ($MM) $8,000 Revenue $1,000 EBIT $7,000 $900 $6,972 $6,000 $800 $859 $700 $5,000 $5,217 $5,389 $600 $4,000 $500 $553 $3,000 $3,648 $400
$2,000 $300 $200 $1,000 $100 $- $- FYE13 FYE13 FYE16 FYE16 FYE13 FYE16 Gross Net Gross Net 10
Note: EBIT excludes monetization of $11MM in FY13 and 3NET EBIT of ($6MM) in FY13 and ($2MM) in FY16. U.S. Production
11 U.S. Production: Forecast
Strong and Consistent Earnings Growth Revenue EBIT
($MM) Current Series, Pilots & Development Costs Wheel of Fortune, Jeopardy! and Daytime Drama 500 167 180 1,600 120 155 113 450 151 144 160 1,400 101 100 400 140 1,200 350 120 80 1,000 78 300 68 100 800 60 250 1,500 429 80 1,289 1,352 200 402 397 411 600 60 1,144 40 150 400 100 40 20 200 50 20
- - - - FY13 FY14 FY15 FY16 FY13 FY14 FY15 FY16 Embassy Row Library & All Other Product 90 9 180 85 8 81 80 8 78 77 80 7 175 76 70 7 75 6 170 70 60 5 6 65 50 5 165 83 60 40 76 4 174 160 55 30 3 53 164 163 50 20 2 155 33 159 45 10 1 150 40 - - FY13 FY14 FY15 FY16 FY13 FY14 FY15 FY16 12 U.S. Production: Organization Overview
Steve Mosko President, Sony Pictures Television
Jamie Erlicht Zack Van Amburg President, U.S. President, U.S. Programming Programming
Holly Jacobs Suzanne Patmore Gibbs Glenn Adilman Dawn Steinberg EVP, U.S. Reality & EVP, U.S. Drama EVP, U.S. Comedy & EVP, U.S. Talent & Casting Syndication Programming Development Animation
Steve Kent Kim Rozenfeld Helen Verno Ed Lammi Sr. EVP, U.S. Format EVP, U.S. Current EVP, U.S. MOWs / Minis EVP, U.S. Production Production Programming
13 • Community sold to SVOD and Cable SPT Timeline: 2005 – 2012 • Rules sold in syndication in 97% of U.S. • SPT achieves 39 Emmy • 7 shows on 2011 primetime fall schedule (most since 2002) nominations (excluding Wheel of Fortune, Jeopardy!, Days of Our Lives, • SPT has broadcast programming on 6 of 7 nights of the 2011 • 4 new series premiering on all 4 Young & The Restless) fall schedule major broadcast networks
• Highest volume year in SPT history with 13 stand-alone profitable series • Three primetime broadcast reality series • Rules of Engagement • SPT has more new broadcast comedy series than becomes primetime’s any other studio #2 comedy 25series • SPT becomes the #1 • The Shield becomes 24 series producer of scripted SPT’s first cable-to- cable series cable series sale; • SPT successfully launches Dr. Oz 22 Mob Doctor • SPT achieves 29 Emmy $32MM • Rescue Me sells into U.S. syndication and has an ultimate profit of $55MM nominations series Charlie’s Angels Last Resort
Pan Am Made In Jersey Happy Endings Unforgettable Save Me • Only studio to get a 17 Mad Love Necessary The Job new series on each of 17 17 series Mr. Sunshine Roughness Men At Work the 5 broadcast series Breaking In Re-Modeled Masters of Sex networks series 16 Plain Jane Substitute Client List series Canterbury’s Law Breaking In Pyramid Sit Down, Shut Up Brothers The Big C Cashmere Mafia Franklin & Bash Franklin & Bash The Unusuals Community Franklin & Bash Big Day Power of 10 Happy Endings Happy Endings The Beast Shark Tank Nate Berkus Heist Spider-Man The Big C The Big C Newlywed Game The Sing-Off Community Kidnapped Viva Laughlin Rules of Nate Berkus Necessary 11 Judge Karen Drop Dead Diva Rules of Breaking Bad Engagement Community Roughness Rules of Hawthorne series Engagement Damages Shark Tank Community Engagement Justified Rules of Runaway Judge David Young The Sing-Off Engagement Rules of Spider-Man Make My Day Book of Daniel Til Death Rules of The Boondocks Shark Tank Engagement Til Death Dr. Oz Emily’s Reasons 10 Items or Less Engagement The Sing-Off Unforgettable 10 Items or Less Rules of Breaking Bad Love Monkey My Boys Til Death The Boondocks Shark Tank The Boondocks Engagement Damages Beautiful People Judge Maria Lopez 10 Items or Less Breaking Bad The Boondocks Breaking Bad Til Death Drop Dead Diva The Boondocks Greg Behrendt The Boondocks Damages Breaking Bad Damages The Boondocks Hawthorne King of Queens The Boondocks My Boys Drop Dead Diva Damages My Boys Breaking Bad Justified Huff Huff Rescue Me My Boys Hawthorne Drop Dead Diva Rescue Me Damages Rescue Me King of Queens The Shield Rescue Me Justified Justified The Shield My Boys Strong Medicine Rescue Me Judge Hatchett Newlywed Game Rescue Me Substitute Judge David Young Rescue Me The Shield The Shield Judge Maria Lopez Dr. Oz Dr. Oz Dr. Oz Judge Hatchett Newlywed Game Judge Hatchett Judge Hatchett Newlywed Game Newlywed Game
2005–2006 2006–2007 2007–2008 2008–2009 2009–2010 2010–2011 2011–2012 2012–2013 Pilots 16 16 15 8 12 14 14 9
Inv. Pool $(81)MM $(96)MM $(78)MM $(63)MM $(72)MM $(85)MM $(86)MM $(80)MM 14 Current Series, Pilots & Development Costs: Challenges and Opportunities
MRP Assumptions Challenges Opportunities
• Growth is driven by a steady • Keep shows on network to • Investment in A-list writers, directors and pipeline of programming sold reach syndication producers for future drama / comedy / to SVOD and Off-net unscripted development syndication: Last Resort, • Pressure on networks to deal • Develop series with broad international Happy Endings, Justified with own studios appeal with globally marketable talent to • Each year, 3 new network • Proper promotion from sell in the US and abroad series premiere with 1 networks • Grow international revenue through returning for multiple exploring co-production opportunities and seasons • Programming to evolving maximizing tax credits consumer viewing habits • Production cost control • Broadcast Network decline in • Position SPT at the forefront of the total output with 26 this burgeoning subscription VOD market season vs. 30 last year, as well (Netflix, DirecTV) to sell and develop series as new series pick-ups (-3) • Further identify and develop businesses around Shark Tank, Dr. Oz, and Queen Latifah
15 Wheel of Fortune/Jeopardy!/Daytime Drama: Challenges and Opportunities
MRP Assumptions Challenges Opportunities
• Assumes all 4 series • Maintain viewership • Brand extension into cable and digital remain on air through levels and high licensing through ancillary programs Sports the MRP period with fees for mature assets in Jeopardy!, Rock and Roll Jeopardy! little change in the face of declining and/or Kid's Wheel economics over the syndicated television • Brand expansion into other arenas period viewing including physical gaming devices • Maintain viewer loyalty (slot machines), branded lottery • IGT renewal in FY16 when on-air talent retires tickets and other technologies
• Lack of direct control over • Exploitation of digital rights in domestic and numerous categories online and on international sales multiple devices organizations at CBS • Establishment of an international • Programming to evolving gaming platform using the branded consumer viewing habits shows with the anticipation of legalization of digital gaming in the U.S.
16 Embassy Row: Challenges and Opportunities
MRP Assumptions Challenges Opportunities
• Develop docu-reality series, • Programming to evolving • Cable expansion continues with talent-based, and real-life consumer viewing habits USA adding unscripted competitions programming. Docu-reality series, • Develop broad appeal series talent-based, and real-life • Grow international revenue competitions are the most • Utilize capacity; work-for-hire successful on cable through exploring opportunities projects have lower margins and maximizing tax credits • Develop own broad appeal series / • Grow in IP / owned series minimize work-for-hire • Product mix shifts towards IP / production with limited
owned series which grow from 6 development fund to 10 over the MRP period
17 Library and Other: Challenges and Opportunities
MRP Assumptions Challenges Opportunities
• Steady distribution revenue • Receive premium pricing on • Expand integration / growth aging assets collaboration with International Distribution for • Programming to evolving maximum global impact of consumer viewing habits U.S. product • Monetize library through expanded distribution into new platforms (SVOD, FOD)
18 International Production
19 International Production: Forecast
Int’l Production Revenue and EBIT
Revenue EBIT ($MM) ($MM) 700 40
34 600 35
30 500 28 25 400 20 300 573 13 530 15 200 433 10 294 6 100 5
- - FY13 FY14 FY15 FY16
Note: EBIT excludes FY13 monetization of $11MM
20 International Production: Organization Overview
Steve Mosko President, Sony Pictures Television
Andrea Wong President, Int’l Production
Wayne Garvie Donna Cunningham Astrid Quentill Mary Chan Nathalie Civrais Chief Creative Officer EVP Operations SVP & MD – Germany VP Production – Asia SVP Production – France
Open Maria Smirnova Jeff Lerner Ziad Kebbi SVP & GM – Latin MD Production – Russia SVP, Scripted Dev & President, SPT Arabia America / U.S. Hispanic and Lean M Production
21 International Production: Challenges and Opportunities
MRP Assumptions Challenges Opportunities • Moderate organic growth from • Marketplace is becoming • Continue to exploit Millionaire, existing operating companies is increasingly competitive develop a stable base of other supplemented by EBIT successful formats • Challenging economic climate in contributions from recent key markets • Make more focused and sustained acquisitions Left Bank and Silver investment in development, River executives, producers, production companies, and new content • Inclusion of a hit format starting especially in the UK in FY15 • Foster a more creative culture to • Included $50MM annual develop intellectual property by: investment fund for FY14-FY16 − Realigning the organization, including a new President and a creative head − Combining the print sales and format sales teams to better serve our buyers − Creating a strategically centralized development fund − Implementing a competitive incentive plan
• Simplify admin, operational process • Opportunities in emerging markets 22 U.S. Distribution and Ad Sales
23 U.S. Distribution & Ad Sales: Forecast
U.S. Distribution Revenue and Profit U.S. Ad Sales, Strategy & Research Contribution Revenue and Profit Contribution
($MM) WWAG MPG TV Profit Contribution ($MM) Revenue Profit Contribution 900 450 140 $128 800 400 120 700 350 $103 285 100 600 367 300 270 500 256 250 $61 80
400 200 352 $392 60 323 298 $330 300 281 150 $34 453 $260 40 365 368 200 347 100 $184 20 100 50 46 - 40 33 29 - - FY13 FY14 FY15 FY16 FY13 FY14 FY15 FY16
24 U.S. Distribution and Ad Sales: Organization Overview
Steve Mosko President, Sony Pictures Television
John Weiser Amy Carney President, U.S. President, Ad Sales, Distribution Strategy & Research
Richard Burris Thanda Belker Flory Bramnick Stuart Zimmerman EVP, Strategic Planning & EVP, U.S. Pay & TV Sales EVP, U.S. Cable EVP, Ad Sales Analysis
Phil Martzolf Alan Daniels Travis Howe Chris Kiriakatis EVP, U.S. Syndication SVP, Distribution Planning SVP, Digital Ad Sales SVP, Digital Ad Sales Sales
David Mumford EVP, Planning & Research
25 U.S. Distribution: Challenges and Opportunities
MRP Assumptions Challenges Opportunities
• Increase feature library sales driven • Starz spin-off and uncertainty • Opportunity to renegotiate Starz by regarding original programming output deal I. Strategic use of driver inventory strategy • Sell library film and TV series into to leverage broad package sales • Less reliance on library product non-exclusive subscription deals II. Hyper-targeted offerings with premium pricing • Split library windows, license multiple rights, structure non- III. Multiple nonexclusive buyers exclusive deals and bulk buys to drive low-rated product • Aggressively sell slate carve-out windows utilizing more aggressive • Leverage SVOD licensing and inventory tracking and planning strategic product planning for U.S. channel carriage • Develop consistent flow of first- run product with top talent • Revenue and corresponding profit contribution volatility is largely driven by release timing, size of theatrical slate and timing of off-net syndication avails (e.g., Rules of Engagement, Community, Happy Endings) 26 Ad Sales: Challenges and Opportunities
MRP Assumptions Challenges Opportunities
• Drive additional revenue for first • Year-over-year growth in TV ad • Diffuse volatility in TV ad run through pricing increases and revenue is limited by available revenue market by growing a advertiser integrations shows strong digital base
• Increase share in TV market • Continue to drive additional upfront • Opportunities for 3rd party ad revenue for first run through sales representation in TV are advertiser integrations declining • Dedicated Crackle team driving • Expand current base of revenue from $45MM in FY14 to advertisers for :30s and :10 to $98MM in FY16 off-nets • Find new 3rd party • Expanded list of advertisers for representation opportunities 30s / 10s • Continue to support cable / • Sell out levels of 70% or higher in network properties through upfront and sell remaining Branded Entertainment inventory at premium CPMs • Develop and pioneer high value-rich media placements on connected devices
27 International Distribution
28 International Distribution: Forecast
Strong and consistent growth
Int’l Distribution Revenue and Profit Contribution
($MM) WWAG MPG TV Profit Contribution 2,000 800
1,800 685 662 700 634 1,600 653 707 600 567 634 1,400 510 500 1,200
1,000 400
800 300 975 963 1,008 600 960 200 400 100 200 160 170 175 180 - - FY13 FY14 FY15 FY16
29 International Distribution: Organization Overview
Steve Mosko President, Sony Pictures Television
Keith LeGoy President, Int’l Distribution
Ed Louwerse Paul Littman Mike Wald SVP, Product SVP, Global Sales EVP, Distribution EMEA Management
Alex Marin Angel Orengo Kevin Byles SVP, Distribution, Latin EVP, Distribution, SVP, Distribution, Canada America Asia/Pacific
30 International Distribution: Challenges and Opportunities
MRP Assumptions Challenges Opportunities
• Sustained delivery of network • Shift in MPG film slate • Broaden scope of broadcaster relationships to explore English dramas drives TV product • Lack of a breakout / hit Drama revenue growth language, European content, co- • Ensure we keep rights to key production opportunities • Broaden scope of broadcaster revenue-driving feature film • Take full advantage of relationships to explore English franchises opportunities with emerging language, European content, SVOD players co-production opportunities • Close long-term deals in key • Investments in International markets over the plan Distribution • Focus on select emerging markets to expand SPT’s presence and • New market entrants help drive better capitalize on opportunities revenue pipeline (Netherlands, Scandinavia, • Stronger relationships in key Poland, Hungary, South Africa) markets
31 Networks
32 Networks: Forecast
Strong and Consistent Earnings Growth
EBIT reaches over $500 million in FY16, growing at a 23% As a result of recent investments, North America and Europe grow as a CAGR over the MRP period percentage of Networks’ EBIT from 24% in FY13 to 36% in FY16
FY13 EBIT by Region ($MM) Revenue EBIT Rest of North America, $3,000 600 Asia/Australia, 17% 16% Europe, 7% 503
$2,500 500 Latin America, India, 39% 21% $2,000 410 400
328 $1,500 $2,580 300 268 $2,258 $1,000 $1,961 200 FY16 EBIT by Region $1,536
$500 100 Rest of North America, Asia/Australia, 23% 12% $- - FYE13 FYE14 FYE15 FYE16 India, 36% Europe, 13%
EBIT Margin: Latin America, 17.4% 16.7% 18.2% 19.5% 16%
33 Networks: Organization Overview
Steve Mosko President, Sony Pictures Television
Andy Kaplan President, Worldwide Networks
Marie Jacobson Eric Berger Masao Takiyama George Chien EVP, Programming & EVP, Digital Networks SVP, Japan SVP, Networks, Asia Production
Superna Kalle Bob Billeci T.C. Schultz Ricky Ow SVP, GM, Sony Movie EVP, Technical Operations EVP & MD, Latin America EVP, Singapore Channel & Cine Sony
Kate Marsh Lyle Stewart SVP, Western Europe SVP, Central EMEA
34 Networks: Brands
Highly successful network brands benefiting from global infrastructure
SET GENERAL AXN GENERAL ANIME/YOUTH DIGITAL MOVIES ENTERTAINMENT ENTERTAINMENT LIFESTYLE/MUSIC
PARTNER NETWORKS
35 Networks: Challenges and Opportunities
MRP Assumptions Challenges Opportunities
• Buy out Indian regional partners • Growth comes from all regions • Global pressure on ad sales driven across the world as newer by macro economy • Selectively launch channels in new and existing territories channels mature to profitability • Economic volatility and political and more mature channels grow uncertainty in Latin America • Increase investment in Crackle U.S. ad and technical infrastructure or maintain their margins • Growth strategy for smaller up and coming territories • Maximize value in Crackle US and • Focus next 18 months on expand internationally (Latin • Rising content costs maximizing efficiencies in existing America, Brazil, Canada) operations • Expand SPTL Asia facility to service • Increased investment in Crackle EMEA channels U.S. advertising and technical • Possible merging of back room infrastructure with GSN • Growth in digital through new or add-on acquisitions • Increase investment in U.S. market for a flagship network (e.g., merge with AMC)
36 Closing
37 TO COME Television: Big Ideas for Change
• SPHE digital distribution • Management of the lot • Outside financing • AMC • Expand Embassy Row west coast • Ad Sales synergies
38