DRAFT

Starz Subscription Pay Features Output Deal

Presentation to the Group Executive Committee January 16, 2013 Executive Summary

• Premium Output Deals • Every major motion picture studio in the has traditionally entered into a long-term license of its feature output with one of the major Premium Pay Television channels (, HBO, Showtime and the new channel, ). In recent years, Internet-delivered subscription-on- demand (SVOD) services (e.g., , Amazon and ) have also become potential output licensees • In 2012, Disney became the first studio to enter into an output deal with an exclusively Internet-delivered service (Netflix, starting with the 2016 slate) • These “output” deals provide stable, predictable license fees that form a foundation to each motion picture’s financial “greenlight” model • SPT ‘s current 3 year output deal with Starz was set to expire in 2016. Starz approached SPT to discuss a renewal of the output deal in consideration of the impending IPO and the ability to compete in OTT SVOD. SPT has an opportunity to extend its output deal with Starz to 2021 for improved pricing and greater flexibility • The Starz extension is estimated to generate $1.3B of revenue during the 5.0 year deal renewal term (2017-2021) plus incremental gains on the existing deal (2014-2016) of $18M bringing the total revenues to $2B over 8 years 2 Background Considerations

• Existing SPE-Starz Output Deal: • Prior to the 2005 slate, SPE’s output partner was HBO • SPE first closed an output deal with Starz in 2000, effective with the 2005-10 slates. This deal had an option for SPE to extend the deal for the 2011-13 slates • In 2009, SPE negotiated an extension with Starz for the 2014-16 slates

• New Output Discussions: • Starz approached SPE for an extension of the output deal in [2011]. SPE remained noncommittal as it explored other options in the market • After evaluating various options, SPE decided to enter into discussions with Starz to capitalize on favorable market dynamics, with SPE goals being to: • Maximize fees for feature product in the pay window • Preserve premium value of features in “network” window downstream either by (1) restricting the scope of any reduced-margin Internet exploitation or (2) securing sufficient compensation that SPE can be indifferent to wider exploitation • Retain flexibility for SPE to pursue key corporate initiatives (e.g., 4k, SENI, UltraViolet, )

3 Market Dynamics

• SPE evaluated market interest in whole/portion of ’s output with other Pay TV/SVOD players for all or part of the SPE theatrical slate, whether on an exclusive or shared basis, and decided Starz was our best potential partner • SPE solicited• Offered bids strongest from rate-card potential in the partners, market and including: an annual bonus • Financially viable with long-term cable carriage • Offered near-term modifications to existing deal • Reasonable rights requirements with Sony Service accommodations • Offered strong rate-card but no bonus • Financially uncertain prospects, if Sony were added to Disney as a Netflix output partner. SPE believes Netflix’s subscriber base must grow above 40M HHs by 2017 (larger than any US pay service), or Netflix’s pricing must increase, or some combination thereof • Rights requirements: included a long (24 month) first pay license window that creates negative downstream impact • Submitted a late bid for only. Competitive rate-card. No bonus • Regarded as financially viable • Rights requirements: believed to be comparable to Starz • Did not submit a bid. HBO regarded as more likely to drop to 2 studios if Universal leaves, or to renew with Universal • HBO’s rights requirements are more restrictive than Starz’s • Other potential buyers (EPIX, HuluPlus, Amazon, , StreamPix, DirecTV, Others Vutopia, SENI) • None submitted bids or were committed to the feature film output4 space Liberty Starz Overview

• Liberty Starz (formerly Starz Entertainment) is a wholly owned television programming subsidiary and a joint venture of Liberty Media, which owns 75% and The Weinstein Company, which owns 25% • Starz’s film content comes primarily from Disney (deal expires in 2015), Sony and Liberty subsidiary Overture Films. Starz also licenses library content from other studios • Liberty Starz is comprised of three distinct branded channel offerings: • Starz: the network with 6 channel offerings with and first-run output and library films (20.7M subs) • Encore: 8 channels, based on genre themes with first-run/classic films (34.2M subs) • : 3 channels with art house, indie and classic films (24.1M subs) • On August 8, 2012, Liberty Media and TWC announced that it would spin off Liberty Starz into a separate public company • The spinoff of the subsidiary is expected to be completed by the end of 2012

5 Deal Terms Summary

License Term and Rights • Theatrical releases from January 1, 2017 – December 31, 2021 (5 years) • Exclusive Subscription Pay Television (including SVOD) across all means of delivery, subject to usage rules and content protection. Starz can deliver its service via the Internet on a stand-alone basis (i.e., not tied to cable subscription), with incremental license fees due after certain subscriber counts are reached

Motion Picture Qualifications • All qualifying feature films theatrically released by an SPE label up to a maximum of 45 films per year, in the following categories: • 25 “A” Films”: Film must be released in the U.S. by Sony on over 800 screens • 15 SPC Films: Film must be released in the U.S. under the Classics label • 5 “B” Films: Films in excess of the “A” Film and SPC Film caps above, as well as up to 2 films theatrically released by a third party but for which SPE controls the Pay Television rights. The License Fee for “B” Films is 65% of the Rate Card • SPE may also require Starz to license up to 1 “Live Event” film (e.g., concert films) to Starz at 75% of the Rate Card License Fee. This is a new right that secures a Pay TV license fee revenue stream for Live Event films occasionally released by SPE • SPE also has the opportunity in the future to enter into a Library film deal for incremental license fees concurrently with the Output agreement • Additional SPC provisions including: relax on holdbacks, territory rights and delayed release of pictures

6 Deal Terms Summary (Cont’d)

License Periods/Exhibitions • License Periods – Starz will have two “windows” or license periods for each film: • A “Pay 1” window commencing 7-9 months after U.S. theatrical release (on average), and lasting 16 months (for 2013 releases) and 18 months (starting with 2014 releases) • A “Pay 2” window commencing between 1 year and 6 years after the end of Pay 1 (at SPE’s discretion), and lasting 13 months (for releases prior to 2017) and 15 months (starting with 2017 releases) • Exhibitions: • During Pay 1, 300 Exhibitions across all Starz channels • During Pay 2, 300 Exhibitions across all Starz channels • Starz also has the right to exhibit the Pictures on a Subscription Video-On-Demand basis during the Pay 1 and Pay 2 windows (i) as an enhancement to the linear Starz subscription, and (ii) as a stand-alone Internet-delivered SVOD service

Payment Terms • Per-Picture License Fees: 100% due 60 days after the start of Pay 1 for each Picture • Internet License Fees: Due and payable monthly following each month during which Starz had fee- generating Internet subscribers • Bonus Payments: One annual installment during the Term

7 Deal Terms Summary (Cont’d)

Holdbacks • Prior to Starz’ Pay 1 License Period: No Television exhibition (i.e., or ad-supported Television, free video-on-demand, or subscription television/SVOD) by any means. No holdback against Home Theater, PPV/VOD, DVD/Blu-Ray, theatrical, non-theatrical • During Starz’ Pay 1 and Pay 2 License Periods: No Television exhibition (i.e., free or ad-supported Television, free video-on-demand, or subscription television/SVOD), and no PPV/VOD delivered by means of Cable/Satellite/telco-IPTV • During Pay 1 and Pay 2, SPT retains Electronic Sell-Through rights, with lower wholesale price requirements: • During Pay 1: $5.95 per transaction (during 2013-2016) and $4.95 per transaction (during 2017-2021) • During Pay 2: $2.48 per transaction (during 2013-2016) and $1.98 per transaction (during 2017-2021) • Wholesale price minimums do not apply to EST bundled with electronic consumer products or for UltraViolet/disc-to-digital conversions • SPT has also secured the flexibility to distribute EST titles for free during limited promotions to drive interest in the EST business • Between Pay 1 and Pay 2: No Subscription Pay Television/SVOD, provided that as part of this new Output deal Sony has secured the right to exhibit certain films on Sony services on an SVOD basis via the Internet

Picture Availability Dates • Starz shall receive Pictures no later than the earlier of: (i) 10 months from US general theatrical release, (ii) 3½ months from U.S. PPV/VOD release, (iii) 4½ months from initial home video release (whether DVD/Blu-ray or EST) 8 • Home Theater does not trigger the start of the Pay 1 window Deal Term Highlights: License Fees

• Per-Picture License Fees: Per-picture License Fees are tied to local U.S. “film rentals,” which are a function of U.S. box office receipts for each film (film rentals are the amount SPE receives from theatrical exhibitors, and are approximately 50% of box office receipts)

• 2014-16 Financial Improvements • Increased annual bonus from $40M to $46.1M • Option to extract SPA pictures from the deal permanently if SPE can license for higher fees elsewhere. (The SVOD market is interested in animated product.) • Increased the Internet rate-card, which will produce additional license fees if Starz elects to pursue an OTT Internet distribution strategy (e.g., on Netflix) • Low volume rate-card provision is relaxed. Effective January 1, 2013, the low-volume rate card applies only if SPE’s output is 12/year or lower vs. 14/year or lower

• 2017-21 Financial Improvements: All of the above continue, together with an improved linear rate-card

Film Rentals: Incremental Percentage: Cum Fee at Highest Point in Range: <$1 million 87.5% $875,000 $1 ≤$2 million 74.38% $1.62 million $2 ≤$15 million 45.5% $7.53 million $15 ≤$30 million 26.25% $11.47 million $30 ≤$50 million 19.86% $15.44 million $50 ≤$175 million 0% $15.44 million $175 ≤$207.34 million 13.13% $19.69 million > $207.34 million 0% $19.69 million 9 Deal Term Highlights: Internet Provisions

• In the current Starz deal, Internet exploitation was heavily restricted because (a) SPE and Starz were not able to agree on the value of additional Internet exposure and (b) the SVOD market was new, and the limits of its growth were not apparent. In the new deal, SPE and Starz have reached agreement on an Internet rate-card, based on competitive SVOD licensing, and have seen SVOD service growth (e.g., for Netflix, Amazon, Hulu) appear to level off. [Not sure we need to say (b) but we can discuss]

• Effective immediately, the Internet rate-card increases as follows:

Current Starz Internet Rate-Card: New Internet Rate-Card: Subscribers Incremental Sub/ Month* 0 - 10m subs $0.030 > 10 - 15m subs $0.040 $0.225/sub/mo* > 15 - 20m subs $0.060 > 20 - 25m subs $0.080 > 25m $0.100 $20 million cap per year

• Certain restrictions that inhibit Starz from exploiting Internet SVOD in the current deal are removed in the new deal: • The cap of 50M+ subscribers who can get any form of Starz on the Internet (TV Everywhere, OTT, etc.). (Note: This cap reduces if the price of the Starz service is below certain thresholds.) • Restrictions on bundling the Starz service with DSL

* Incremental• Restrictions rate-card applies onceon bundlingStarz has reached with 25M products cable and Internetother subs than combined. programming For example: if[Note: Starz has Still 22M cablein discussion] subs and 20M Internet subs• Restrictions (42M subs combined), on theSPE willpercentage be paid on 42M-25M=17M of the license Internet subs. period The purpose (to 73%) for the 25Mduring subscriber which floor SVODis that Starz may pays SPEbe a fixed bonus and a flat linear rate-card irrespective of the number of cable subscribers it has. If Internet SVOD replaces cable (through “cord-cutting”), and decreases Starz’sexercised cable base, SPE agreed not to be paid “twice” for the Internet subscribers. These subscribers would not truly be “new”, they would be replacing Starz cable base. Also, SPE’s films would not be over-exposed in the cord-cutting scenario. [Not sure we need to explain10 this but let’s discuss] Deal Term Highlights: Sony Services/HE

Early EST for Sony Services SPT has secured the right to offer early EST (up to 30 days earlier than standard home video release) via Sony services without starting the clock on the Starz Pay 1 window. This right is available for up to 7 Pictures per year

Home Theater Window SPT retains the right to release Pictures via Home Theater earlier than the standard PPV/VOD date, at a price that is at least 200% of the average U.S. theatrical ticket price. This is a lower price than in the current Starz deal and gives SPE flexibility to release films in the Home Theater window without triggering Pay 1

Favorable Terms for Sony Services SPT secured the right for any Sony programming service in the U.S. (e.g., SNEI) to license the Starz services for distribution via the Internet on non-discriminatory terms compared to Starz’ other distribution partners (cable or internet)

11 Timing and Next Steps

• Sony Deliberations

• January 16, 2013: Group Executive Committee

• Sign Definitive Agreements

• Targeted on January 30, 2013

12 APPENDIX

13 Picture Availability Dates / Windows

Theatrical PPV / VOD Pay 1 Window: DVD / EST Pay 2 Window: Release (Standard or 13 months (to 2016) Day & Date): 60 16 months (2013) 15 months (2017+) – 90 days 18 months (2014+) Early EST Release (1-30 days prior to Home Video) Up to 7 pictures / year on Sony Service

Home Theater

No Pay 1 trigger

10 months from theatrical

4.5 months from Home Video

“Network Window” 3.5 months from PPV/VOD 6 Yrs. + 1 mos. from end of Pay 1

* Special rules apply to Thanksgiving, Chanukah and Christmas themed pictures. 14 Key Deal Terms Summary

Ratecard; Bonus $46m annual bonus starting 2014; higher OTT ratecard starting 2013; higher linear ratecard starting in 2017 Sony option to remove SPA and shop elsewhere (to be confirmed by Chris Albrecht; Sony’s acceptance of deal in SPA Arbitrage principle has been reserved) Reduce Low Volume Applies at 12 wide releases per year, reduced from 14

Financial Ratecard per year Maintain Liberty Applies through 2013 Corporate Guarantee Starting in 2017: lengthen Pay2 in by 2 mo (opportunity cost to SPE of $1.5m) in consideration for returning to Pay 2 2012 ratecard Internet Caps/Multipliers; Lift cap/bundling restrictions in return for higher ratecard Internet SVOD Bundling with Speed

Update Marketing / Promotion and Free Trial Maintain premium positioning Parameters Existing New Deal 25 As 25 As Maintain Output Volume 15 SPCs 15 SPCs 10 Bs (incl. 4 x Third Party RAS and 6 x Sony RAS) 5 Bs (incl. 2 x Third Party RAS) Motion Picture Qualifications Total: 50 Total: 45 Remove “Single Source” Improves utility of Third Party Rent-a-System titles Restriction Live Events with Concert Include one/year at 75% ratecard Footage Early EST Sony Services may offer early EST for 7 titles/year without triggering Pay1 Sony Services Eliminate SVOD Sony Services may exploit OTT SVOD for certain films during Network window Holdback Reduce minimum wholesale prices during pay windows Existing New Deal EST Wholesale Price; $6.95 Pay1 Pay1: $5.95 thru 2016; $4.95 2017--21 Hardware Bundles; $3.48 Pay2 Pay2: $2.48 thru 2016; $1.98 2017-21 Home Entertainment UltraViolet No minimum hardware for bundles or UV/disc-to-digital

conversions EST Promotions Permit free EST promotions during pay windows Home Theater Reduce minimum permitted ticket price to avoid triggering Pay 1 Relax Holdbacks Permit 1 foreign language title per year to have Canada/Mexico pay premiere SPC Territory Rights Relax rules for acquisition of T's & P's Delayed Release Extend permitted delay from completion of photography to release to 42 mo Pictures 15 Detailed Financial Analysis

STARZ EXISTING: NEW STARZ DEAL: NEW STARZ DEAL: 2014-2016 2014-2016 2017-2021 DBO ($M) % FEE ($M) DBO ($M) % FEE ($M) DBO ($M) % FEE ($M) $1.0 30.6% $0.3 $1.0 30.6% $0.3 $1.0 41.1% $0.4 $2.0 30.6% $0.6 $2.0 30.6% $0.6 $2.0 41.1% $0.8 $2.1 30.6% $0.7 $2.1 30.6% $0.7 $2.1 41.1% $0.9 $4.3 26.0% $1.2 $4.3 26.0% $1.2 $4.3 35.0% $1.6 $5.0 15.9% $1.3 $5.0 15.9% $1.3 $5.0 21.4% $1.8 $10.0 15.9% $2.1 $10.0 15.9% $2.1 $10.0 21.4% $2.8 $15.0 15.9% $2.9 $15.0 15.9% $2.9 $15.0 21.4% $3.9 $20.0 15.9% $3.7 $20.0 15.9% $3.7 $20.0 21.4% $5.0 $25.0 15.9% $4.5 $25.0 15.9% $4.5 $25.0 21.4% $6.1 $30.0 15.9% $5.3 $30.0 15.9% $5.3 $30.0 21.4% $7.1 $31.9 15.9% $5.6 $31.9 15.9% $5.6 $31.9 21.4% $7.5 $40.0 9.2% $6.3 $40.0 9.2% $6.3 $40.0 12.3% $8.5 $50.0 9.2% $7.3 $50.0 9.2% $7.3 $50.0 12.3% $9.8 $63.8 9.2% $8.5 $63.8 9.2% $8.5 $63.8 12.3% $11.5 $75.0 6.9% $9.3 $75.0 6.9% $9.3 $75.0 9.3% $12.5 $100.0 6.9% $11.0 $100.0 6.9% $11.0 $100.0 9.3% $14.8 $125.0 1.8% $11.5 $125.0 1.8% $11.5 $125.0 2.4% $15.4 $150.0 0.0% $11.5 $150.0 0.0% $11.5 $150.0 0.0% $15.4 $441.1 4.6% $14.6 $441.1 4.6% $14.6 $441.1 6.2% $19.7 $441.1 0.0% $14.6 $441.1 0.0% $14.6 $441.1 0.0% $19.7

ANNUAL FEE $163 ANNUAL FEE $163 ANNUAL FEE $219 8-YEAR ANNUAL BONUS $40 ANNUAL BONUS $46 ANNUAL BONUS $46 GRAND $1,955 GRAND TOTAL $203 GRAND TOTAL $209 GRAND TOTAL $266 TOTAL:

* Estimates based 5-year average slate. 16 Output Deals Summary

Annual Film Output Studios/Sellers Output Deal Expiration Date (2002 ► 2011 Releases)*

Sony Pictures Starz 2016 31 ► 23

SPC Starz 2016 19 ► 17

Warner Bros. HBO N/A – Sister company 28 ► 26

New Line HBO N/A – Sister company 10 ► 0

2017 (NOTE: Believe to have extended FOX HBO deal thru 2019 with lower fees and 14 ► 15 retrofitted EST/UV terms)

2017 (NOTE: Believe to have extended Searchlight HBO deal thru 2019 with lower fees and 7 ► 11 retrofitted EST/UV terms)

Universal HBO 2016 15 ► 15

Focus Features HBO 2016 7 ► 8

Paramount EPIX 2015 (est.) 19 ► 15 (3 P/DW)

Vantage EPIX 2015 (est.) 9 ► 1

Starz (inked a deal w/Netflix 2015 (NOTE: Believe Netflix is a 3 year 22 ► 14 Buena Vista beginning in 2016) deal thru 2019)

MGM / UA EPIX 2015 (est.) 19 ► 0

Lionsgate / Summit EPIX 2015 (est.) 13 ► 20

Note: Exhibit 34. BMO Filmed Entertainment Report. Source: Motion Picture Association of America, Hollywood Reporter, boxofficemojo.com, company reports and BMO Capital Markets and industry estimates. New Line tracked from 2002-2008. Paramount Classics/Vantage consolidated. /Summit consolidated. 17