Crackle Growth Acceleration Strategy Recommendations for the International Expansion (Early Draft – Pre-Financial Analysis)

Crackle Growth Acceleration Strategy Recommendations for the International Expansion (Early Draft – Pre-financial Analysis)

IBSG SP Media & Entertainment Practice June 2011 DRAFT

. Executive Summary . Country Attractiveness and Prioritization . Offerings – By Waves and Countries . Operational Considerations . Financial Outcomes . Next Steps . Appendix

. Based on Country Attractiveness and Ease of Entry, Sony Crackle should consider international expansion in three “waves” — Wave 1: Expand in these regions / countries near-term (~ 1 year) to take advantage of existing large markets, with relative ease of entry — English-speaking (UK, Canada, Australia, New Zealand, Ireland, Sweden, Denmark, Norway, Netherlands) — German-speaking (Germany / Austria) — Spanish-speaking LatAm (Mexico, Argentina, Colombia, Chile, Venezuela) — Brazil — Wave 2: Expand in medium term (~ 2-3 years) to take advantage of existing large markets, which are more complex and requires greater focus — Countries: Japan and South Korea — Wave 3: Monitor these markets, further evaluating attractiveness over next 1-2 years — Countries: Russia, India, Italy, France / Belgium, China . Country excluded: Spain – relatively small market, requiring local content

. Executive Summary . Country Attractiveness and Prioritization . Offerings – By Waves and Countries . Operational Considerations . Financial Outcomes . Next Steps . Appendix

Cisco IBSG © 2011 Cisco and/or its affiliates. All rights reserved. Cisco Confidential Internet Business Solutions Group 4 DRAFWeT further prioritized companies identified in Phase 3, through a set of qualitative and quantitative assessments

Initial Ranking Fine Assessment Final Ranking 12000 English speaking countries include UK, Top Nine Countries/ Canada, Scandinavia, Netherlands, 10000 Regions without the Australia, NZ, Ireland US . Key Market Analysis (61% of WW Market) 8000 Spanish language countries include Spain, Argentina, Mexico, Venezuela, Chile (quant) 6000 Mobile • BB adoption/quality/use Display 4000 Countries included for Strategic fit • Device adoption 2000 Countries excluded for lack of Strategic fit • Online advertising 0 (detail) • Online paid content

*Source: PWC, IBSG Analysis . Competitive Analysis LINGUISTIC (qual.) Final Ranked List CONSIDERAT 1 • . English-speaking: UK, Canada, ONS Consumer's behaviors Australia, New Zealand, Ireland, Working List • Local Providers analysis Sweden, Denmark, Norway, Netherlands . English Speaking: UK, Canada, Australia, NZ, . Entry Hypothesis . German-speaking: Germany, Ireland Austria . Other English Speaking: Netherlands, Denmark, • Potential content offer . Spanish-speaking LatAm Finland, Iceland, Norway, Sweden • Leverageable SPE's (Mexico, Argentina, Colombia, . German Speaking: Germany, Austria, Chile, Venezuela) Switzerland assets . Brazil . Spanish Speaking: Spain, all Spanish LatAm • Partnerships/affiliations . Japan . Portuguese Speaking: Brazil, Portugal . South Korea . French Speaking: France, Belgium • Specific considerations . French-speaking: France, . China Belgium . Japan . Business Case . Russia, India, Italy, China . South Korea (Countries dropped: Spain, . India 2 • Investments to enter 3 Finland, Iceland, Portugal, . Italy each country Switzerland) . Cisco IBSG © 2011 Cisco and/or its affiliates. All rights reserved. Cisco Confidential Internet Business Solutions Group 5 Russia (New countries added) • EBIT impact to Crackle . Overal strategic fit DRAFTCountries with common language and shared culture were combined into groups – to be served by a common product

Approach

Three natural country groupings were defined so that each group may be served by a common Crackle offering

Natural Groupings

English Language German Language French Language

UK, Canada, Australia, NZ, Germany, Austria France, Belgium Nordic Countries • Common language • Common language • Large percentage of 18-44 • Shared political border • Shared political border segment in Nordic countries is English-speaking • No content licensing issues • No content licensing issues • • • High GDP (PPP) per capita Localization needed Localization needed (dubbing or subtitling) (dubbing or subtitling) • No content licensing issues

• Some localization needed, but no dubbing or subtitling

Country attractiveness is judged on two categories: Country Prioritization Matrix

1. INTERNET PROPENSITY

Broadband s s

Penetration e n e

Broadband Quality v i t c

Online Video a r

Consumption t t A

y r t n u

2. ADVERTISING AFFINITY o C

Overall Advertising Spend

Online Advertising Spend Ease of Deployment

Ease of deployment is judged on three categories:

1. MACRO ECONOMIC 2. OPERATIONS 3. CONTENT

Regulatory Local SPE Local Content Environment Operations Requirements

Localization Competition Cost of Local Content Requirements

Cisco IBSG © 2011 Cisco and/or its affiliates. All rights reserved. Cisco Confidential Internet Business Solutions Group 7 AFT DR Country attractiveness is based on infrastructure availability, online video consumption and ad spend

Regions / Broadband Broadband Online video Overall Online Ranking Country Population Quality consume/capita advertising advertising* UK, Canada, Australia, NZ, Ire, Sweden, 5 4 5 5 5 5 (4.8) Denmark, Norway, NL Japan 4 5 5 5 5 5 (4.8) South Korea 3 5 5 2 3 4 (3.6) Germany, Austria 4 4 4 4 4 4 (4.0) France, Belgium 3 4 4 3 3 3 (3.4) Italy 2 3 2 3 3 3 (2.6) Spain 2 3 2 2 2 2 (2.2) China 5 3 3 4 4 4 (3.8) India 3 2 3 2 2 2 (2.4) Russia 3 4 4 2 2 3 (3.0) Spanish-speaking LatAm 3 2 3 2 1 2 (2.2) Brazil 3 2 3 2 1 2 (2.2) Source: IDC 2010, PWC 2011, Screen Digest 2011, IBSG analysis * Online advertising not including search

Cisco IBSG © 2011 Cisco and/or its affiliates. All rights reserved. Cisco Confidential Internet Business Solutions Group 8 DRAFEaseT of deployment depends on factors including local content, localization, affordability, competitive and regulatory barriers Local Regions / Limited Local content Low Regulatory SPE conent Ranking Country localization affordability competition barriers* Operations need* UK, Canada, Australia, NZ, Ire, Sweden, 5 5 5 1 5 5 4 (4.3) Denmark, Norway, NL Japan 1 1 3 3 3 5 2 (2.7) South Korea 1 2 4 4 3 3 3 (2.8) Germany, Austria 3 4 3 3 3 5 4 (3.5) France, Belgium 3 2 3 3 2 2 2 (2.5) Italy 3 3 3 4 3 3 3 (3.3) Spain 3 3 4 4 3 5 4 (3.7) China 1 4 4 4 1 1 2 (2.5) India 3 2 4 3 3 5 3 (3.3) Russia 3 4 4 4 2 3 3 (3.3) Spanish-speaking LatAm 3 3 4 4 2 5 3 (3.4) Brazil 2 2 4 4 1 5 3 (3.0) Source: PWC 2009, IBSG analysis * Rating: 5= No barriers, 1= High barriers

Cisco IBSG © 2011 Cisco and/or its affiliates. All rights reserved. Cisco Confidential Internet Business Solutions Group 9 DRAFT There are three distinct approaches that could be followed to develop a phased international rollout strategy

. Objective: to enable Crackle to become the most recognizable, profitable ad-supported movie brand . Profitability driven by both revenues and costs . Potential launch priority criteria —Attractiveness —Deployment ease —Portfolio approach . Guiding principles and constraints —Need to rapidly grow revenue and achieve profitability in 2-3 years —Leverage resources: content, operational, brand and TV networks for low cost / high impact marketing opportunities —Opportunity to take advantage of underserved markets —Finite scaling resources . Portfolio approach best addresses objectives and constraints

Cisco IBSG © 2011 Cisco and/or its affiliates. All rights reserved. Cisco Confidential Internet Business Solutions Group 10 DRAFEnglish-speaking,T German-speaking, Spanish-speaking LatAm and Brazil are the Wave 1 deployment candidates

High English- Japan speaking

Wave 2 Germany / Austria

China South Korea Attractiveness Wave 1 France / Belgium Russia

Wave 3 Italy Spanish-speaking India LatAm Spain Brazil -

Low Low Deployment Ease High Source: IBSG analysis

Cisco IBSG © 2011 Cisco and/or its affiliates. All rights reserved. Cisco Confidential Internet Business Solutions Group 11 DRAFT A phased rollout will help Crackle expand by prioritizing market entry, managing risks whilst maximizing market opportunity

Wave Country / Region Rationale

English-speaking Ease of deployment, very high market potential Germany / Austria 1 Spanish-speaking LatAm Ease of deployment Brazil

Japan High market potential, although needing focus 2 South Korea Significant requirement for local content and mobile focus

Take advantage of underserved market which is relatively easy to enter Russia from product perspective Opportunity to take advantage of underserved market and relatively India easy deployment Relatively easy deployment and underserved market, although smaller 3 Italy opportunity Relatively difficult deployment due to regulatory requirements including France / Belgium content

China Challenging deployment due to regulatory barriers and competition

NO Spain Relatively small market requiring local content

Loc Crac al kle's (co) Prod Pro ucti duct on ion

Japan, South Korea Loc Cont al ent Spanish LatAm China India Con Loca tent lizati Russia, Italy, Spain Syn on France, Belgium dica Germany, Austria tion Nordics, Netherlands  Us US Cont Canada, Australia, New Zealand, Con ent United Kingdom, Ireland tent  United States Sony Pictures Entertainment External to SPE (Movies, selected TV classics) (Movies)

Source: IBSG analysis

. Executive Summary . Country Attractiveness and Prioritization . Offerings – By Waves and Countries . Operational Considerations . Financial Outcomes . Next Steps . Appendix

Wave 1 Wave 2 Wave 3

Target segment M 18 – 44 M 18 – 44 M 18 – 44 Business Model Ad supported Ad supported Ad supported Content Original Sony Crackle US original library ~ 25% of Sony Crackle US ~ 10% of Sony Crackle US originals originals Movies Common content elements Common content elements Common content elements • Library / recent movies • Library / recent movies • Library / recent movies • 700+ titles, high % of AAA, AA • 500+ titles with some AAA and • 250+, some AA, most A & • High refresh: 10%+ / month AA and rest blend of A and lower Considerations for countries lower • Medium refresh: 5 % / month • Germany/Austria: 20% local • Medium refresh: 5-7% /month Considerations for countries • Spanish-speaking LatAm & Considerations for countries • Russia: High local Brazil: Significant local • Japan: 30%+ local • India: High local, Bollywood requirements • S. Korea: 30%+ local • China: Significant local, blend of Korean, Japanese, Chinese TV Most US classic SPE TV shows US classic SPE TV shows, US classic SPE TV shows, dubbed dubbed Other Movie reviews, news summary, Movie reviews, news summary, Movie reviews, news summary, not much sports as expensive not much sports as expensive not much sports as expensive Localizatio Common localization Common localization Common localization n elements elements elements Minimal regulatory compliance Regulatory compliance / Full localization / dubbing Specific considerations dubbing Specific considerations: • Germany/Austria: Subtitling • India: Only some content • LatAm: dubbing of all content dubbed DevicesCisco IBSG © 2011 Cisco and/or its affiliates. All rightsPCs, reserved. connected TVs, InternetCisco ConfidentialPC, connected TVs, InternetInternet BusinessPC, Solutions connected Group TVs, Internet15 adapters, mobile phones, iPad, adapters, mobile phones, iPad, adapters, mobile phones, gaming consoles gaming consoles iPad, gaming consoles DRAFT Wave 1 sample offer and rationale English-speaking countries including UK, Canada, Australia, NZ, Ireland, Sweden, Denmark, Norway, NL

Offer Rationale

Segments • M 18 – 44 • M 18 – 44: Currently, there are no major players focusing on this segment • In several English-speaking countries e.g. Australia , New Zealand and Scandinavia, 18-44 M segment is very interested in action, sports, extreme adventure and international content Business • Ad supported • In UK, significant amount of OTT video available from Model existing players e.g. BBC iPlayer, Sky UK • Competing with a paid OTT model would be expensive • Significant amount of catch-up OTT video content is available (e.g. Scandinavia) – creating consumer expectations that OTT content is free. Content • Original production: None • Appetite for original content is mostly for local TV serials specially developed for this • Catch up TV window is ~1 month. Any online video region; offer US original content content (movies, TV shows) older than that is only • Movies: Movies 6+ months and offered via PPV/DTO older, library and current movies • While there is an opportunity to provide archived TV • TV: None specific to local serials (due to 30 day expiry window of catch-up TV), the country; offer selective US TV content is expensive to offer series / episodes of international • Research indicates that consumers prefer to use catch- popularity up TV to see recent TV episodes, missed on regular TV. • Other content: None This content is expensive to acquire • Localization: Limited to regulatory • Paid TV incumbents (especially satellite) have significant compliance advantage in sports; also live Sports content is expensive Devices • PC, Internet-connected TVs, • OTT longform video largely viewed on PCs and TVs iPad, PS3, Xbox, Wii Increasing viewing of movies on tablets, especially iPads

Offer Rationale

Segments • M 18 – 44 • 18-44 more interested in localized international content; however this content should be subtitled at least minimally through sub-titling Business • Ad supported • Significant amount of OTT content available through TV Model broadcasters (catch-up TV), as well as Paid TV providers offering OTT content to subscribers, as part of overall subscription Content • Original production: None specially • Appetite for original content is mostly for local TV developed for this region; offer US serials original content • The catch up TV window is approximately 1 month. • Movies: movies 6+ months and Any online video content (movies, TV shows) older than older, library and current movies that window is either offered via PPV/DTO or not • TV: none specific to Germany or available Austria; offer selective US TV • OTT TV series / episodes demand is mostly to catch-up series episodes of international missed current TV episodes. This content is expensive popularity and is available through catch-up TV services. • Other content: movies reviews, Therefore not sufficiently worthwhile to offer Germany- news summaries, not much sports specific TV series. • Localization • Sports content too expensive to purchase; local public • All content adapted to TV as well as Paid TV (e.g. Sky) has significant German regulations and penetration subtitled • Wide range of genres (10+) to compete with extensive local online content Devices • PC, internet-connected TVs, iPad, • OTT longform video largely viewed on PCs and TVs PS3, Xbox, Wii

Cisco IBSG © 2011 Cisco and/or its affiliates. All rights reserved. Cisco Confidential Internet Business Solutions Group 17 DRAFT Germany / Austria Opportunity (1) Ad supported (2) international movies (3) little to no local content (4) 18-44 segment

Key Competitive Insights Key Learnings for Sony Crackle

• Part of large publishers . Deep pockets: Germany / Austria public TV, Competitors • TV Broadcasters offering Catch Up TV 1 publishers and pay TV companies have in- • Part of TV networks e.g. N-TV, PGMEDIA and rationale depth local content of high quality • Some niche portals (GMX-UGC), Web.de etc. . Public TV has limited windows to show ads • Ad supported, subscription, PPV/DTO during the day; usually no ads during Prevalent • Non-ad (subscription / PPV) e.g. Maxdome movies 2 Business • VOD / PPV services (e.g. DT’s Videoload) . Publishers are providing more information- Models • Lovefilm has ad supported content based content e.g. documentaries, news . Satellite providers are developing online Content Depth, • Extensive short form content i.e. clips, trailers) • Some German local content desired; typically competitive edge in Sports; while they also 3 Breadth, ~30% of overall content provide movies, but largely Sports driven Availability • Foreign content must be subtitled . Maxdome has subscription plus PPV. Basic subscription is € 9.99/month; movies are 18- • Good quality content on TV, & catch-up TV Main 24 months old. Recent releases are by PPV reduces propensity to pay for online contents 4 Offerings / • International content usually through PPV / . TV producers are mass market focused price points DTO @ € 0.50 - € 5.99/movie and up . Austria is a smaller market, concentrated with good Public TV. ORS.Ad is # 5 in • Consumer 18-44 more interested in localized international popularity in Austria (after YouTube) – and content; however should be sub-titled 5 segment / produces 90% of scripted content in Austria • Consumers get local content from domestic . other details OED24.ad (Liberty Global) and Chello.ad TV providers; low appetite from any new are local brands of media companies sources

Regions / Special Considerations Countries

English . Considerations . Possibility of using the same programming as US, rights permitting Speaking (UK, for country . Some commonality of culture could justify common marketing campaigns (except Canada, grouping for Nordic Countries) Australia, NZ, Ireland, . Considerations . Mature OTT environment; established incumbents Sweden, for UK and . Sony Crackle offering should be differentiated with US movies not available on Denmark, Ireland other online, ad supported services Norway, NL) . Potential to take advantage of “Cash Cow” US TV classics . Presence of Sony hubs and Sony Networks could be leveraged . Sony should OEM Crackle with Sony Electronic connected devices like Sony Bravias, Playstations, tablets and build stronger service awareness in this manner

. Germany / . Enough similarity in language and culture to deploy same service in both countries Austria . Crackle Germany could capitalize on the local appetite for international movies, recent and classic US movies should fare well and give strong service identity . The service could benefit from content partnership with Deutsche Telecom . Considerations . Crackle can capitalize on low barriers to entry created by English-speaking for Australia population that loves American films and New . Opportunity to strike an alliance with local SP incumbent Telstra for co-marketing Zealand of service and quota-unbundling of Crackle traffic

. Considerations . Crackle should take advantage of Teliasonera’s interest in alliances with OTT for Nordic players for bundling services Countries . Possibility that US / English language content not dubbed or sub-titled may not be viable for full ad supported model; however some ads could be sold through ad networks, even at lower prices, to bring incremental revenues with marginal costs

Cisco IBSG © 2011 Cisco and/or its affiliates. All rights reserved. Cisco Confidential Internet Business Solutions Group 19 DRAFT Wave 2 Offer and rationale South Korea - (1) Ad Supported (2) localized international movies (3) on multiple devices (4) 18-44

Key Competitive Insights Key Learnings for Sony Crackle

• conTing: An online video service jointly owned . Most Korean consumers have experienced Competitors by 3 broadcasters KBS, MBC, SBS 1 paid-TV services; though price sensitive, • Each has its own site for online content as well and rationale they are also used to paying for online • Portals – GOMTV, Africa TV, DaEum TV content through subscription services

• . Significant part of TV viewers (17%) Prevalent conTing, GOMTV provide subscription based services for unlimited download regularly watch video using Internet 2 Business • Many portals offer ad-supported Korean video . Consumers use diverse range of devices to Models content, sometimes pirated watch video; while 99 % watch video on TV; . ~ 43% also watch on the Smartphone Content Depth, • Extensive Korean content e.g. Korean / English 3 Breadth, subtitled movies, TV episodes, game shows. . ~ 25% also watch on Notebooks • All content that is broadcasted is available on Availability the OTT services; sufficient breadth / depth . ~15% watch on navigation devices . ~ 41% watch on PMP/MID/PDA • conTing’s subscription service @ $13-15 / Main . Depth and wide variety of Korean local / month for unlimited content download 4 Offerings / • GOMTV’s $9/month service for one localized content, on different platforms is price points broadcaster contents, $20 for all three tablestakes; potential for ad supported services, for latest Western content dubbed in Korean • No target segmentation; mass market appeal Consumer • High price sensitivity – lower price points . Difficult to compete with the three main 5 segment / exacerbated by P2P services, that provide broadcasters on Korean content only other details pirated content for cents

Regions / Countries Special Considerations

South Korea . Opportunity of launching a service that takes advantage of the high penetration of Internet-connected portable viewing devices (PMP, smart phones and tablets) – To differentiate, the Crackle service should be optimized for these devices

Offer Rationale

Segments • M 18 – 44 • 15-24 are most active online video consumers; ~ 33% view Catch Up online TV • 18-44 M more interested in localized international content; however need content to be dubbed Business • Ad supported • Significant amount of free content, particularly locally Model produced, available from Public/ Paid TV Broadcasters to subscribers • Short clips, UGC and growing international premium content available from popular portals e.g. Dailymotion. • Consumer expectation that online video is free • Current pay models are limited to PPV/DTO. There is no successful subscription model Content • Original production: None • Appetite for original content is mostly for local TV serials • Movies: Movies 6+ months and • High demand for international (especially American) older, library and current movies movies. Movies that are out of theatre release window • TV: None specific to France or have limited availability, through DVDs, and PPV/DTO Belgium; offer selective US TV • OTT TV series / episodes demand is mostly to catch-up series missed current TV episodes. This content is expensive • Other content: movies reviews, and is available through catch-up TV services. Therefore news summaries, not much not sufficiently worthwhile to offer Germany-specific TV sports series. • Localization: • Paid TV incumbents (especially satellite) have significant • Subtitling in French is advantage in sports; also live Sports content is essential expensive • Regulatory compliance Devices • PC, internet-connected TVs, • OTT longform video largely viewed on PCs and TVs. iPad, PS3, Xbox, Wii Increasing viewing of movies on tablets, especially iPads

Cisco IBSG © 2011 Cisco and/or its affiliates. All rights reserved. Cisco Confidential Internet Business Solutions Group 22 DRAFT France/Belgium Opportunity (1) Ad supported (2) international localized movies (3) 18-44 segment

Key Competitive Insights Key Learnings for Sony Crackle

• TV / IPTV players’ online sites: Orange, SFR . French OTT market is crowded, dominated Competitors • TV Broadcasters: (Free –TF1, France TV, A2, 1 by incumbent TV providers (including Pay TV: Canal+) and rationale French TV), deploying catch-up TV • Online OTT service provider: Dailymotion . No successful subscription model, for an in- depth, extensive international content Prevalent • Mostly Ad supported, free content library; Netflix has market entry plans 2 Business • Catch Up TV very popular, ad-supported Models • Limited subscription trials / PPV: Canal+, TF1 . Viability of ad- supported model: French ad spend is largely captured by TV incumbents offering catch-up TV, may be hard to get Content Depth, • Catch UP TV displays mostly local content; sufficient ad volume to support a successful usually international rights are not included 3 Breadth, business model • Dailymotion: Content by “channels” e.g. Sports , Availability News; UGC, clips, trailers, some premium . A differentiation could be a breadth/depth of classic movies provided by Sony library • Dailymotion: Free content, limited movies, Main . Consumers are accustomed to good focus on UGC videos 4 Offerings / quality /in-depth local OTT content – e.g. • PPV for movies is typically € 2-4 per view Orange price points • Subscription trial pricing unclear . Hence less appetitive for • Subscription Consumer 15-24 segment active online video consumers; ~ 33% view Catch Up TV on multiple devices . 5 segment / Increasing price sensitivity • DM: Targeted to 18-34, with mature content; other details 32nd most visited, 93M UVs over 6 months . Local quota regulations unclear for OTT

Regions / Countries Special Considerations

France and . In spite of crowded competitive environment, Crackle France could benefit from the relative current gap in Belgium US movies (current and classic) and build an identity around the provision of this type of programming; some original English versions subtitled in French would be acceptable . Possibility of segmenting offer to higher earning demographics and target ad avails accordingly . Strong interest on the part of Orange France Telecom (France) and of Belgacom (Belgium) in striking partnership arrangements with new OTTs should be explored, as well as a possible alliance with Dailymotion to effectively compete against the planned introduction of Netflix to the French Market

Russia . Most of the video content is available free, and a high percentage is legal. While this is an issue for paid models, it poses least threat to Crackle’s ad supported model, with content past most of paid windows . Sony operations are relatively new, and not fully established and mature

India . Capitalize on English speaking audience segment and appetite for American movies and TV shows presented in their original language . Also capitalize on the presence of a Sony hub and of the popularity of the Sony networks to source content from these . Possibility of sourcing inexpensive local content (Bollywood) for local distribution China . Need to secure license prior to operating creates additional burden and possible delay in deployment . Possibility of aligning with the right local partner to get immediate market traction . Censorship requires review and approval of each title; may increase timing for content publishing on the portal, lower refresh rates and alter contents . Difficult to “remove money” Italy . Crackle Italy could capitalize on the Italian public’s taste for international movies with a strong US movie identity (subtitled or dubbed offering)

. Executive Summary . Country Attractiveness and Prioritization . Offerings – By Waves and Countries . Operational Considerations . Financial Outcomes . Next Steps . Appendix

Cisco IBSG © 2011 Cisco and/or its affiliates. All rights reserved. Cisco Confidential Internet Business Solutions Group 25 DRAFTProposed international operational changes from content acquisition to hosting

U.S. Video Process (Future State)

9 FTEs 6 FTEs Outsourced Outsourced Editing / Video Encoding / Ingest Post Prod./ Hosting Programming Transcoding DRM

U.S. Content Deal Content licensing is negotiated simultaneously for multiple countries

Country Video Process (Future State) X Each country may independently opt in/out of a content deal, depending on potential local interest 1-2 FTEs 1-3 FTEs Outsourced Outsourced Editing / Video Encoding / Ingest Post Prod. / Hosting Programming Transcoding DRM • Dubbing • Sub-titles • Ratings Local Content Deal

Objectives Identify which operational processes and associated resources and systems need to be country-local, versus regionalized

Proposed Approach

Cost Drivers Rationale • Local content ingested locally • Flexibility to license some content locally Content Licensing Acquisition / Editing Local Processes • Rev. share with local partners, if applicable and Partner Rev. Share Hosting & BW • Hosting will be performed locally Resources • In the beginning, outsource ad-sales or use Video Operations Ad Server Fees ad networks to get running start Sales & Marketing G&A • Marketing campaigns need local know-how • Legal, programming etc. needs local teams

Cost Drivers Rationale • U.S. content licensed centrally in deals Product Dev. Engineering covering multiple countries Regional Processes • US content ingested in US and Content Licensing • Common product development and Resources engineering can be performed centrally (e.g. by U.S. team); only incremental localization required (e.g. skins, language) • Maintain consistent product look & feel

. Executive Summary . Country Attractiveness and Prioritization . Offerings – By Waves and Countries . Operational Considerations . Financial Outcomes . Next Steps . Appendix

BUSINESS CASE SUMMARY Project ID Project Name Sony Crackle Acceleration Project ‐ USA Dependencies None

Key Revenue Assumptions Key Cost Assumptions Grow to 66% of Hulu yearly visits by FY16 Grow to 705 titles by FY16 (235 SPE, 470 External); 10% price inflation Ad load: 13 ads per hour. Viewing time per visit growing from 10 to 55 minutes Technical headcount doubles every 2 years (engineering, video production) CPM growing from $13 to $22 over 5 years Sales & Marketing doubles every 2 years

Financial Analysis YEAR FY12 FY13 FY14 FY15 FY16 $80.0 Video ad revenues $ 8.0 $ 27.0 $ 64.4 $ 139.8 $ 303.4 Other revenues $ 2.0 $ 3.8 $ 7.5 $ 14.9 $ 30.1 $60.0 Total Revenue $ 10.0 $ 30.8 $ 71.9 $ 154.7 $ 333.5 $40.0 Content costs $ (6.1) $ (9.7) $ (20.6) $ (49.8) $ (132.2) $20.0 Other expenses $ (21.0) $ (31.9) $ (47.9) $ (77.6) $ (137.8) Total Costs $ (27.1) $ (41.6) $ (68.5) $ (127.4) $ (270.0) $‐ FY12 FY13 FY14 FY15 FY16 Free Cash Flow $ (17.1) $ (10.7) $ 3.4 $ 27.3 $ 63.4 $(20.0) Project Breakeven $ (17.1) $ (27.8) $ (24.4) $ 2.9 $ 66.3 Internal Cost of Capital 12% $(40.0) NPV (5‐Year) $31.9 ROI 46% Free Cash Flow Project Breakeven Breakeven 3 years Risk rating (Difficulty of implementation) Scope (e.g.process) M Misc. Notes and Reference: Content costs M Hulu monthly visits on 2/11: 143M Complexity (e.g. technology) L Netflix viewing time per visit on 1/11: 94 min External Dependencies L Average M

All figures in US $ Million

. Executive Summary . Country attractiveness and prioritization . Offerings – By Waves and Countries . Operational Considerations . Financial Outcomes . Next Steps . Appendix

. Finalize overall financial model based on CPMs to be provided by Sony Crackle Team . Validate the final recommendation based on NPV and EBIT impacts determined from financial model . Design Pilot — Agree on the elements of recommended strategy that need to be tested and the process — Define approach to test — Assist in defining implementation approach — Assist in selecting partner(s) — Help design tests — Help in interpreting pilot outcome and adjust recommendations . Socialize final recommendations with SPE executives as needed

. Executive Summary . Country Attractiveness and Prioritization . Offerings – By Waves and Countries . Operational Considerations . Financial Outcomes . Next Steps . Appendix

Cisco IBSG © 2011 Cisco and/or its affiliates. All rights reserved. Cisco Confidential Internet Business Solutions Group 32 Scandinavia Opportunity DRAFT (1) Ad supported (2) Recent international movies and TV serials with CC relevant for each country (3) On multiple devices (4) 24-44 segment

Key Competitive Insights Key Learnings for Sony Crackle

• Video/Cable providers - Teliasonera, Comhem . Sweden has best BB penetration and Competitors • 1 Swedish national TV: Catch Up TV for 1 month quality in Nordics region; most providers • and rationale Emerging OTT video providers: Voddler, Canal offer unlimited Broadband, with no monthly Digital, Letswatch.com caps; mature platform for OTT content providers Prevalent • Cable providers offer OTT subscription, PPV • Viasat is an on-demand OTT service . IPTV players e.g.Teliasonera , bundling OTT 2 Business • Voddler is ads based (like Hulu) aggressively; rent~ 6000 movie titles / day Models • Canal like Netflix, Letswatch (like MTV online) . Consumers extensively use catch-up TV- mostly driven by Sports events Content Depth, • Local content (in local language) ~ 25% • . Home video rental market is fragmented. 3 Breadth, Global content in English; usually with subtitles • Deep breadth / depth – with all genres, due to Teliasonera, Canal Digital etc. run small Availability large local production from Swedish TV home video rental business, and OTT distribution competes with these • PPV: Typical price for new movie $ 5-7 / view Main . Potential opportunity to bundle local content • Monthly online subscription: ~$ 15/ month 4 from Teliasonera Offerings / • Most TV providers and national TV bundle price points online content with Triple pay (~$30/month) . Main competition will be existing TV companies bundling OTT as part of • Significant online video viewing, largely for tripe/quad play offerings / catch-up TV Consumer younger population, both males and females . 5 segment / Voddler and other OTT player have • 25-44 segment more interested in international small footprints other details content, vs. 44+ interested in local content . Growing Device use (SVTplay.se)

Cisco IBSG © 2011 Cisco and/or its affiliates. All rights reserved. Cisco Confidential Internet Business Solutions Group 33 UK Opportunity DRAFT (1) Ad supported with Sony classic content of archived TV episodes / movies (2) across all Sony devices (3) mass market segment

Key Competitive Insights Key Learnings for Sony Crackle

• BBC iPlayer and Sky UK are market leaders in . Consumers are accustomed to deep, good Competitors UK, Virgin Media is an aggressive new entrant 1 quality content, as it is extension of the • and rationale Emergence of SkyGo – merging live sports linear TV offerings of established players with Sky Portal on variety of devices . Players like BBC and Sky TV have deep • BBC iPlayer: Free for TV subscribers libraries; leverage for quality OTT content Prevalent • Sky UK: Free for Sky UK TV subscribers, . Between iPlayer / Sky UK, most TV content 2 Business subscription for Non-Sky consumers is online – so bar is really high for entry Models • Virgin Media free to its linear TV subscribers . Most non-ad OTT models are largely limited to mobile VIDE – E.G. Sky mobile @ 8 Content Depth, • Extensive content as extension of Linear TV p/month on iPhone or 35p/month on iPad • E.g. iPlayer: 10 channels, programs from 12 3 Breadth, . Sony connected TVs, PSN have high other channels, 14 genres penetration; recently Sony tablet launched; Availability • Sky TV: 32 channels, including 3 for movies need to align Crackle with overall Sony UK strategy to avoid consumers’ confusion • BBC iPlayer, Virgin media : Free for TV Main . subscribers or ad suppported Consumers are accustomed of using on-line 4 Offerings / • Sky UK: Free to Sky TV subscribers, $ 24+ for video content without ads; indirectly paying price points non-subscribers, PPV movie rental - $ 5.60 for online content through TV license fees . Most catch up TV is for 2-3 weeks, • Channels dedicated to different viewer’s needs subscription based providers (e.g. Netflix) Consumer e.g. Sky TV ‘s 3 movie / 4 for sports channels. or Amazon not available. Hence there is a 5 segment / • Most players are for mass market; some gap for TV shows more than a month older other details satellite providers (SKY) are sports focused

Cisco IBSG © 2011 Cisco and/or its affiliates. All rights reserved. Cisco Confidential Internet Business Solutions Group 34 France Opportunity DRAFT (1) Hybrid – Ad supported with subscription for more premium content on devices (2) Premium, international localized movies /TV episodes (3) 24-44 segment

Key Competitive Insights Key Learnings for Sony Crackle

• TV / IPTV players’ online sites: Orange, SFR . French OTT market is crowded, dominated Competitors • TV Broadcasters: (Free – France TV, TF1 Paid 1 by incumbent TV providers (including TV:, Canal+) and rationale French TV), deploying catch-up TV • Online OTT provider: Dailymotion . No successful subscription model, for an in- depth, extensive international content Prevalent • Mostly Ad supported, free content library; Netflix has plans to enter shortly 2 Business • Catch Up TV very poplular, ads-supported Models • Limited subscription trials / PPV: Canal+, TF1 . Viability of Ads supported model: French ad spend is largely captured by TV incumbents offering Catch Up TV. IPTV and DM is also • Content Depth, Catch UP TV has mostly local content; usually competing; may be hard to get sufficient ads do not have online rights for international shows Breadth, to support a successful business model, if 3 • Dailymotion: Content by “channels” e.g. Sports , not sufficient differentiation Availability News; UGC, clips, trailers, some premium . A differentiation could be a breadth/depth of • Dailymotion: Free content, limited movies, classic movies, which Sony Library has Main focus on UGC videos, to be quickly uploaded 4 Offerings / . Consumers are accustomed to good • PPV for movies is typically € 2-4 per view quality /indepth local OTT content – e.g. price points • Subscription trial pricing unclear Orange . • Hence less appetitive for Consumer 15-24 segment active online video consumers; ~ 33% view Catch Up TV on multiple devices Subscription 5 segment / • DM: Targeted to 18-34, with mature content; . Increasing price sensitivity other details 32nd most visited, 93M UVs over 6 months . AV Terminal Regime : local content regulation for TV; unclear for OTT

Key Competitive Insights Key Learnings for Sony Crackle

. Italy does not have subscription or PPV Competitors • No direct competitors with scale and focus 1 OTT content providers; efforts to launch and rationale • Some ISP portals getting traction (e.g. Chili) • TV broadcasters entering into OTT content these services have not been successful . Italian customers’ buyer values (i.e. free content, long form, movies) plays well to Prevalent • ISP content providers have advertising Sony Crackle’s value proposition 2 Business supported business models Models • Broadcasters provide OTT free to subscribers . Most of the OTT players are focused on mass market; 1-2 players do provide some focus on 30-40+ segment Content Depth, • Limited libraries, content is mostly short-form, 3 Breadth, complemented by with limited movie titles . None of the players are focused on young Availability • A combination of clips, trailers, some UGC male, 18-34 segment; opportunity for Sony Crackle to establish a toe-hold in this segment Main • Largely ads supported, free content . Key competition is from TV providers’ portal 4 Offerings / • PPV / VOD launched by some entrants, but e.g. WIND, Alice, Terra – provide their linear price points largely failed TV content online; do not have a differentiated proposition like Sony Crackle Consumer 5 segment / other details

Cisco IBSG © 2011 Cisco and/or its affiliates. All rights reserved. Cisco Confidential Internet Business Solutions Group 36 DRAFT South Korea Opportunity (1) Subscription (2) Premium, international localized movies and TV episodes (3) On multiple devices (4) 24-44 segment

Key Competitive Insights Key Learnings for Sony Crackle

• conTing: An online video service jointly by 3 . Most Korean consumers have experienced Competitors broadcasters KBS, MBC, SBS 1 paid-TV services; though price sensitive, • Each has its own site for online content as well and rationale they are also used to paying for online • Portals – GOM TV, Africa TV, DaEum TV content through subscription services

• conTing, GOMTV and other portals provide . Prevalent Significant part of TV viewers (17%) subscription based services for unlimited regularly watch video using Internet 2 Business download and owning of content Models • Many offer Korean video content, often pirated . Consumers use diverse range of devices to watch video; while 99 % watch video on TV;

Content Depth, • Extensive Korean content e.g. Korean / English . ~ 43% also watch on the Smartphone 3 Breadth, subtitled movies, TV episodes, game shows. • All content that is broadcasted is available on . ~ 25% also watch on Notebooks Availability the OTT services; sufficient breadth / depth . ~15% watch on navigation devices • conTing’s subscription service @ $13-15 / Main . ~ 41% watch on PMP/MID/PDA month for unlimited content download 4 Offerings / • GOMTV’s $9/month service for one . Depth and wide variety of Korean content, price points broadcaster contents, $20 for all three on different platforms is tablestakes; potential for subscription based services, for • No target segmentation; mass market appeal latest Western content dubbed in Korean Consumer • High price sensitivity – lower price points 5 segment / exacerbated by P2P services, that provide . Difficult to compete with the three main other details pirated content for cents broadcasters on Korean content only

Cisco IBSG © 2011 Cisco and/or its affiliates. All rights reserved. Cisco Confidential Internet Business Solutions Group 37 China Opportunity DRAFT (1) Ad supported (2) Blend of localized /local movies, TV episodes and sports (3) Partnership with independent, OTT Portal (4) On PCs (5) 24-44 segment

Key Competitive Insights Key Learnings for Sony Crackle

• Youku, Todou, 56 . Content originally weighted to UGC. Now Competitors • Drive large online video use. Youku is #1 video 1 providers e.g. Youku have ~ 70% copyright portal (~20% OTT video market),Todou ~ and rationale content, ~ 20% UGC , ~10% original videos 16% • Other competitors: government owned entities produced by the SP . 3 Types of OTT providers – (1) Independent Prevalent • Youku is largely ad supported • Youku is also developing subscription-based OTT Video SPs e.g. Youku, 56.com (2) 2 Business model with premium contents (e.g. Avator), Online Broadcasters usually state-owned Models music and educational contents e.g. China Network TV (3) niche integrated portals e.g. Sina.com, Tudou.com and (4) • Download sites (Pirated/Legal content) Content Depth, Youku has extensive Chinese, Japanese and Korean content, TV episodes, original Breadth, . High regulations, particularly for foreign 3 production with ~50,000 hours content library content; must be approved through Censor. Availability • Moving from UGC to premium content . Extensive licensing: Separate licenses • Most content is free; ad supported needed to TV, PC and Mobile distribution; Main • Youku price point for subscription not available foreign companies almost required to work 4 Offerings / but expected to be < $ 3 / month with Chinese partners, mostly govt. owned price points • Emerging subscription sites, price unlcear . Price of local content very low; however due to monopoly, BW leasing cost are high • Most consumers have low propensity to pay Consumer for OTT; as regular TV costs 2-3 $/month . While emerging younger segment desires 5 segment / • Emerging, untapped 15-30 years segment professional content; monetization uncertain other details • Movies, dramas and long TV episodes favored

Cisco IBSG © 2011 Cisco and/or its affiliates. All rights reserved. Cisco Confidential Internet Business Solutions Group 38 India Opportunity DRAFT (1) Ad supported (2) Blend of localized /local movies, TV episodes and sports (3) Superior, safe and secure user experience (4) On PCs (5) 24-44 segment

Key Competitive Insights Key Learnings for Sony Crackle

• YouTube is the market leader for online video . Low Broadband penetration and sub- Competitors • Fragmented market with niche sites (Rajshree 1 standard speed / QOS likely to be reduced HindiTVshows, Indiatimes, Aajtak.com etc.) and rationale over 3 years; government’s policy to cover • Bharti Airtel’s online TV 70% of population at BB of 2 Mbps or above . Extensive 3.5/4G deployment plans Prevalent • Most OTT video sites are ad-supported between 2012-14; spectrum auction 2 Business • Indications of some subscription based offers Models e.g. sports IPL (Cricket), NBA, BPL (British) completed . None of the video entertainment players e.g. DtH (Tata Sky, Dish ), Cable (Hathway), Content Depth, • Extensive content, usually not categories by Genres, but by movies, TV serials, sports IPTV (Airtel) or terrestrial broadcasters have 3 Breadth, • Extensive local content - ~ 70%+. Localized established online video distribution Availability content is less due to English speaking . segment Low barriers to entry due to minimum regulation / enforcement , pirated video • No established players in the video distribution Main content abundantly available across value chain have formal, establish offerings 4 different websites, and a heavily Offerings / • Most of the online content is free; some real- price points time content (e.g. IPL) is ad-supported fragmented market . Sony networks have high visibility in India • Consumer English speakers concentrated in ~ 20 Metros and SET in a well known, popular brand – savvy and require globally sourced content 5 segment / • Majority of other consumers require heavy . Local content (Bollywood-created) sourcing other details local content costs are low for online distribution

Cisco IBSG © 2011 Cisco and/or its affiliates. All rights reserved. Cisco Confidential Internet Business Solutions Group 39 DRAFT Russia Opportunity (1) Ad supported (2) Localized movies, TV episodes and sports (3) dubbed to Russian (4) On PCs (5) 24-44 segment

Key Competitive Insights Key Learnings for Sony Crackle

• BitTorrent largest player (~ 80% video market) . Broadband infrastructure quality / availability Competitors • TV providers (e.g. BTTPK, NTV, One TV) 1 is inconsistent: High quality and penetration • Content aggregators (e.g. Amedia, RWS) and rationale in Moscow and selected other large cities; • Private channels (e.g. STS, Home Channel) sub-standard in regional cities with population of < 1 million people • Prevalent Most OTT content is ad supported • P2P of video content sharing prevalent; most . 2 Business Many regional cities have only ADSL low content is first downloaded, than viewed later Models speed BB connections, and penetration • PPV / Subscription models still not successful could be < 25% . Mobile broadband access is inconsistent; Content Depth, • Extensive / in-depth local content; mostly Russian Soaps, Serials, Movies from high cost of access; mobile video content is 3 Breadth, government-entities and private companies not available at scale, or in depth Availability • Lack of localized content (translation issues) . Any new entrant will face intense competition from local players with locally • No successful subscription services Main produced content • BitTorrent, RuTube, NOW, Zoomby, TVZavr 4 Offerings / etc. are all ad-supported, free video content . Market fragmentation; leakage of video price points providers content on different websites; pirated portals

• . Local business environment not always Consumer 25-44 segment interested in global, action oriented, localized interesting content transparent 5 segment / • 45+ segment interested mostly in traditional other details local content, oriented towards drama/soaps

Cisco IBSG © 2011 Cisco and/or its affiliates. All rights reserved. Cisco Confidential Internet Business Solutions Group 40 Australia Opportunity DRAFT (1) Ad supported, with possibility of subscription (2) Video library of classics from US / UK (3) On PCs (4) 24-44 segment, deeply interested in action, adventure

Key Competitive Insights Key Learnings for Sony Crackle

• Leading OTT content providers are sponsored . TV stations do not offer catch-up TV in Competitors by incumbent TV broadcasters (e.g. Bigpond 1 Australia - limited catch-up TV of ABC by Telstra, Foxtel by TV provider) and rationale recent TV episodes through iView • iView by ABC, some Catch Up TV content . Large local TV / movies local industry; more • Most transactional services are download to based on local TV episodes and some Prevalent international movie production 2 Business own on PC; 7 days viewing window expiry • Bigpond /Foxtel are ad supported model Models . Consumers’ preferences, content • No subscription based service requirements similar to UK; opportunity to leverage classic TV / movies catalog being Content Depth, • Bigpond and Foxtel have limited movies ~ used in US / UK 3 Breadth, 500, but deep TV episodes catalog • Channel 10,9,7,ABC : Extensive online TV . Download rather then streaming video Availability episodes, including archived sessions services for movies . Extensive TV content; but limited filmed • BigPond: PPV model $5.95 for new movies; entertainment content available online Main $3.95 for classic (older) movies 4 Offerings / • Foxtel is usually as part of TV subscription . Australia and New Zealand seen as price points • Hulu may plan to enter, unclear which model extensible markets for the UK/USA . National Broadband Network (NBN) Consumer • 41% internet users stream or download videos providing FTTH will increase access • 48 % men, 34% women watched online video 5 segment / . • 18-44 very interested in outdoors, sports, Most internet plans have traffic caps which other details adventure; no focused OTT player in segment are throttled after limit exceeded

Cisco IBSG © 2011 Cisco and/or its affiliates. All rights reserved. Cisco Confidential Internet Business Solutions Group 41 LatAm Opportunity DRAFT (1) Ad supported (2) Localized / dubbed Sony classic movies and TV shows (3) On PCs only (4) mass market with some additional focus on 24-44 segment

Key Competitive Insights Key Learnings for Sony Crackle

• Es.Mas, Terra, Fox.Mundo . Leading OTT players in LatAm are backed Competitors • 1 Leading LATAM TV providers’ catch-up TV by parent Telco companies with deep • and rationale Some ad supported portals offering a variety pockets. Also means that of video content; none subscription based . High quality content, with high breadth / depth because of Telco ownership Prevalent • Es.Mas has subscription based, catch-up TV • Tvolucion has Ad-supported, free content 2 Business . Financial support: (Televista, Telefonica) • Terra TV also provides ad-supported content Models • PPV, DTO models are not common . Consumers are very price sensitive , with low propensity to pay for Online content

Content Depth, • Extensive Spanish content in a range of genres . Market leaders typically have one site, that • 3 Breadth, Extensive long-format episodes e.g. 600K hrs spans across different countries in LatAm of soap, films (~ 700 titles), game shows etc. Availability • Access to TV content OF Televista & Telefonica . Typical content includes Spanish movies, Spanish full seasons top-rated TV • Ads supported, free e.g. Tvolucion, Terra episodes, as well as archived past seasons Main • Subscription limited to catch-up Es.Mas TV: . Industry leaders offer mobile products e.g. 4 Offerings / ($149 / month, or $1090 per year MEX) Es.Mas Mobile; Telenovalas Mobile price points • No established standalone subscription offer . Low propensity to pay for subscription, PPV or DTO – hence ad supported model is • ~ 26M users / month for all domains of Es.Mas Consumer attractive • ~ 15M vistors / month for Terra TV 5 segment / • All LatAm players focus on mass market other details • Consumers have high price sensitivity

Cisco IBSG © 2011 Cisco and/or its affiliates. All rights reserved. Cisco Confidential Internet Business Solutions Group 42 Spain Opportunity DRAFT (1) Ad supported (2) Localized Sonic classic movies and TV shows (3) On PCs (4) 24-44 segment, more interested in international content with broader interests

Key Competitive Insights Key Learnings for Sony Crackle

• 3 TV Broadcasters – Tvespisona (etv.es), . Spanish consumers have great interest in Competitors Telecino.es and Antenna3.com (Telefonica) 1 local content, even going back last 40-50 • Canal+ (with best digital player, available to its and rationale years. A lot of popular soaps, movies and subscribers, for mobile devices) dramas (e.g. Agela Negra, a 1 hour TV show, with 24 yearly episodes) Prevalent • Most OTT video is free, with some ad support (e.g. rtv.es was free , now ad support) . 2 Business Low devices penetration. e.g. Hybrid STBs • Transactional services are DTO; e.g. Canal+ Models are minimal, connected TVs only recently • No established subscription based service launched, no Roku like successful service. Smartphones are not typically used for Content Depth, • Extensive local content: ~ 30% for movies, video watching, except some YouTube clips and ~ 50%+ for TV episodes, developed by a 3 Breadth, thriving local movie industry . Due to low availability of devices, the Availability • Extensive dubbed international content current portable video market is small; time- shifted/ place shifted viewing of TV content • Price points not established for DTO/PPV; AS is small Main significant amount of content leaked through 4 . Sports is becoming dominant, along with Offerings / piracy, and commonly available on local sites price points • Subscription services not available reality shows; accounting for a significant amount of OTT video content • Propensity to pay for online content is very low . Heavy market influence from large, well Consumer • Pirated content: expectation of free OTT 5 segment / video established leaders e.g. Telefonica; who set other details • <34 have more international/broader interests; consumer viewing trends / expectations 44+ more interested in older Spanish titles

Key Competitive Insights Key Learnings for Sony Crackle

• Netflix, Hulu / Hulu Plus, Amazon Instant Video . Subscription based premium content Competitors 1 • These three sites drive signifiant US online segment is heavily contested between and rationale premium video usage Netflix, Amazon and Hulu Plus – with additional inroads by entrants like CinemaNow Prevalent • Netfix: Subscription . High cost of content due to investments 2 Business • Hulu: Hybrid (Ad Supported / Subscription) made by Netflix Models • Amazon: Subscription / PPV/ DTO . Established players have a mass market • TV content breadth and depth is extensive; approach – no specific focus on 18-34 Content Depth, segment 3 Breadth, with 18 or more genres • Extensive array of TV episodes e.g. full Availability . Sony Crackle should continue to strengthen seasons, latest, archived sessions existing brand positioning by • Subscription model @ $7.95/month Video . Increasing availability of movie titles Main • Rent for 48 hours @ $2.99 SD, 3.99-4.99 HD, 4 from SPT catalog Offerings / buy for $ 9.99 - 19.99 price points • Amazon Prime @ $ 79, allows free streaming . Offering content for ethnic groups e.g. Hispanics, by leveraging its international content Consumer 5 segment / other details

Key Competitive Insights Key Learnings for Sony Crackle

• conTing: An online video service jointly by 3 . Most of the Korean population uses paid-TV Competitors broadcasters KBS, MBC, SBS 1 services; additionally the consumers are • Each has its own site for online content as well and rationale used to paying for online content through • Portals – GOM TV, Africa TV, DaEum TV subscription services . Significant part of TV views (17%) regularly Prevalent • conTing, GOMTV and other portals provide watch video using Internet 2 Business subscription based services for unlimited Models download and owning of content . Consumers use diverse range of devices to watch video; while 99 % watch video on TV;

Content Depth, • Extensive Korean content e.g. Korean / English . ~ 43% also watch on the Smartphone 3 Breadth, subtitled movies, TV episodes, game shows. • All content that is broadcasted is available on . ~ 25% also watch on Notebooks Availability the OTT services; sufficient breadth / depth . ~15% watch on navigation devices • conTing’s subscription service @ $13-15 / Main . ~ 41% watch on PMP/MID/PDA month for unlimited content download 4 Offerings / • GOMTV’s $9/month service for one . Adopting multiple platforms for Korean price points broadcaster contents, $20 for all three market is tablestakes; opportunity to differentiate in 18-44 male segment • No target segmentation; mass market appeal Consumer • High price sensitivity – lower price points 5 segment / exacerbated by P2P services, that provide other details pirated content for cents