DRAFT

Starz Subscription Pay Television Features Output Deal

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

• SPE is seeking approval to extend the feature film output agreement in the US market with Starz for five additional slate years (2017-21) • The agreement provides an essential component for the financing of SPE’s feature films through the 2021 slate • SPE strongly recommends executing an agreement now when we have the greatest leverage over Starz. This leverage may dissipate if the negotiations are postponed • The five year term extension (2017-21) is estimated to generate an additional $1.3BN in license fees and bonus and presents the opportunity for significant additional compensation from Internet exploitation and the ability to carve-out certain titles • Starz also offers additional compensation in the near term (2014-16) (e.g., an increased bonus and Internet fees and the ability to carve-out titles ) that wouldn’t be offered by other partners • The value of the new Starz deal from 2014 – 2021 represents an improvement of $331M as compared to the license fees and bonus of the current Starz deal ($739M if an additional 25M Internet subscribers are assumed) • The Starz deal provides better flexibility for Sony content services than those offered by other providers in the market and the current2 Starz deal, including more favorable terms for EST/Home Theater, SVOD and carriage of Starz service Background Considerations

• Premium Pay Television Output Deals • Major motion picture studios rely on long-term feature film output licenses to secure financing for film production • Pay TV channels include Starz, HBO, Showtime and the relatively new channel EPIX • Internet-delivered subscription-video-on-demand (SVOD) services (e.g., Netflix, Amazon and Hulu) have also recently become potential buyers • In 2012, Disney became the first major studio to enter into an output deal with an exclusively Internet-delivered service (Netflix, starting with the 2016 slate)

• Existing SPE-Starz Output Deal • SPE’s output partner was HBO prior to the 2005 slate • 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

NOTE: Feature film output deals are typically negotiated several years in advance for financial planning of film slates and are long-term in nature 3 Timing Considerations

• SPE now has leverage in the negotiation with Starz • SPE deliberately waited until now to negotiate this deal • Starz announced it will be ‘spun out’ as a separate company in early 2013 and needs to show investors it has secure access to movies • Starz recently lost Disney films to Netflix starting in 2016 • Recently closed Pay TV deals between Fox and HBO; Universal and HBO; Disney and Netflix; and EPIX and Netflix provide SPE significant leverage in its negotiations • This leverage may dissipate if SPE postpones negotiation of an extension • SPE believes the leverage it currently enjoys may be reduced after the Starz ‘spin-out’ (e.g., if Starz is acquired) • Starz currently lacks a strong original programming slate. If Starz succeeds in developing an original series hit (like HBO did with The Sopranos), it may place a lower value on feature films • Because of the favorable financial and other terms available at this time, SPE strongly recommends closing a new deal through the 2021 slate

4 Market Dynamics

• SPE Sought and Obtained Competing Bids • During 2012, SPE actively discussed a potential output deal with every willing partner in the market. Starz emerged as the strongest partner: • Offered strongest rate-card in the market and an annual bonus • Financially viable with long-term cable carriage • Offered near-term modifications to existing deal that are favorable to SPE • Reasonable rights requirements with potential Sony Service accommodations • Offered strong rate-card but no bonus. Plus, a long payment plan for each license • 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 in order for Netflix to afford output agreements with two major studios • Rights requirements: included a long (24 month) first pay license window that creates negative downstream impact • Submitted a late bid for Screen Gems films only. Competitive rate-card. No bonus • Regarded as financially viable • Rights requirements: believed to be comparable to Starz • Did not submit a bid. HBO recently renewed with Universal • HBO’s rights requirements are more restrictive than Starz’ • Other potential buyers (EPIX, HuluPlus, Amazon, Redbox, StreamPix, DirecTV, Others Vutopia, SENI) • None submitted bids or were committed to the feature film output licenses 5 Summary of Key Changes

• Linear license fees for the 2017-21 slates are 35% ($56M/year) higher than the 2014-16 license fees

• Increase the annual bonus from $40M to $46M (15%) beginning in Calendar 2014

• Eliminate the Internet subscriber caps in exchange for significant uncapped Internet fees – e.g., $54M assuming 25M additional Internet subs vs. $3M for current deal (assuming current $7.99 Netflix pricing and subs)

• Option to remove SPA titles from the deal and license them to a different buyer instead of Starz

• Reduce minimum annual movie volume from 14 to 12

• Reduce maximum annual movie volume from 50 to 45 (starting with 2014 slate)

• Improve rights for Sony Services/offerings during the Starz term

6 Sony Content Services

Improvements for Sony Services/Home Entertainment • SVOD for Sony Services: Sony Internet-delivered Services may have access to certain films on an SVOD basis earlier than before (as early as 2 years from theatrical release), between the two Starz windows • Early EST for Sony Services: Sony Services may offer EST 30 days earlier than standard date for up to 7 Pictures per year without restriction • Theatrical Window Pay-Per-View/Transactional VOD: SPT may offer Pictures during the Theatrical Window with greater pricing flexibility than before to develop this new market • Favorable Terms for Sony Services: A Sony service may carry the Starz channels via the Internet on non-discriminatory terms compared to Starz’ other distribution partners (cable or Internet), subject to good faith agreement with Starz

7 Overall Deal Value

Existing Extension Output Deal: ($ in MMs) 2014 2015 2016 2017 2018 2019 2020 2021 Total • Improved linear rate Output Deal * Fees $163 $163 $163 $163 $163 $163 $163 $163 $1,304 card effective in 2017 Starz Existing Bonus $40 $40 $40 $40 $40 $40 $40 $40 $320 Terms • Increased annual Total $203 $203 $203 $203 $203 $203 $203 $203 $1,624 bonus from $40M to Fees $163 $163 $163 $219 $219 $219 $219 $219 $1,586 $46M effective Starz Proposed Bonus $46 $46 $46 $46 $46 $46 $46 $46 $369 immediately Terms Total $209 $209 $209 $265 $265 $265 $265 $265 $1,955

Fees $0 $0 $0 $56 $56 $56 $56 $56 $282 Improvement Bonus $6 $6 $6 $6 $6 $6 $6 $6 $49 / Variance Total $6 $6 $6 $63 $63 $63 $63 $63 $331

Additional Opportunity: Potential Additional Internet Opportunity Starz Existing OTT Upside** $3 $3 $3 $3 $3 $3 $3 $3 $24 • Additional Internet Terms Total $3 $3 $3 $3 $3 $3 $3 $3 $24 fees apply if Starz distributes over the Starz Proposed OTT Upside** $54 $54 $54 $54 $54 $54 $54 $54 $432 Internet through an Terms Total $54 $54 $54 $54 $54 $54 $54 $54 $432 over-the-top “OTT” Improvement OTT Upside** $51 $51 $51 $51 $51 $51 $51 $51 $408 service (e.g., on / Variance Total $51 $51 $51 $51 $51 $51 $51 $51 $408 Netflix)

* Estimates based on an average slate over a historical 5-year period. • SPE has the option to ** Assumes for illustration only a "Netflix" sized deal (25M additional subs) at current Netflix pricing ($7.99/mos). license SPA pictures elsewhere for higher fees

8 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 released in the U.S. by Sony on over 800 screens • 15 SPC Films: Film released in the U.S. under the Sony Pictures 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 to enter into a Library film deal for incremental license fees

9 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 (and not per channel) • During Pay 2, 300 Exhibitions across all Starz channels (and not per channel) • 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

10 Deal Terms Summary (Cont’d)

Internet Rights • Effective immediately, Starz may offer the linear or SVOD services over the Internet in consideration for paying an incremental license fee to SPE. The license fee applies to so-called “over the top” subscribers (e.g., Netflix, Amazon, Hulu) and not to subscribers who get Internet rights as part of their cable/satellite Starz subscription.

Holdbacks

• Permitted at any time (but triggers Starz first window), but  Some restrictions on pricing during the theatrical window and during Pay-Per-View / the Starz windows Transactional VOD  Prohibition on delivery over cable/satellite during a portion of the first Starz window • Permitted at any time (but triggers Starz first window) • Sony service may offer EST early for 7 titles/year without triggering Starz first EST/DVD window • Some restrictions on pricing during the Starz windows • UltraViolet and sales bundled with hardware are permitted • Sony service may exhibit certain pictures on an SVOD basis between the Subscription Starz windows. Linear or SVOD • Otherwise, SVOD is restricted until the end of Starz second window for other (TV or Internet) services Free Linear or • Permitted between the Starz windows, but not before or during Free-on- • Sony may offer Free-on-Demand exhibitions packaged with other goods, Demand/AdVOD including Sony hardware (TV or Internet) 11 Timing and Next Steps

• Sony Deliberations

• January 16, 2013: Group Executive Committee

• Sign Definitive Agreements

• Targeted for January 30, 2013

12 APPENDIX

13 Starz Entertainment Overview

• Starz Entertainment is a wholly owned television programming subsidiary of Liberty Media • Starz’ film output content currently comes from Disney, Sony and Liberty subsidiary Overture Films. Disney’s output films will move to Netflix starting with the 2016 slate • Starz Entertainment is comprised of three branded channel line-ups: • Starz: Premium brand. 6 channels. Includes original programming and output films. (20.7M subs) • Encore: Genre/library offering. 8 channels. (34.2M subs) • movieplex: Library/art house/independent. Limited distribution. 3 channels. (24.1M subs) • Liberty Media was expected to finalize its spin-off of Starz LLC which owns Starz Entertainment, into a separate public company on January 14, 2013 and analysts predict that the spin-off will likely be acquired thereafter

14 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

FOX HBO 2021 14 ► 15

Searchlight HBO 2021 7 ► 11

Universal HBO 2021 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. Lionsgate/Summit consolidated. 15 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 DVD/EST

“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. 16 Summary of Changes

Financial:

Increased Linear Linear license fees for the 2017-21 slates are 35% ($56M/year) higher License Fees * than the 2014-16 license fees Increased Bonus Increase annual bonus from $40M to $46M, effective with 2014 slate Increased “OTT” Increase the incremental fees payable for “Netflix”-style Internet Internet Fees subscribers Right to Sony granted option to exclude SPA pictures and license them Arbitrage SPA elsewhere, effective immediately Titles Reduce minimum output to 12 wide releases per year from 14, Reduce Low effective immediately, even if SPA titles are extracted. (Note: Below 12 Volume Ratecard titles/year, the Linear License Fees are reduced)

Starting in 2017: lengthen Pay 2 window by 2 mos. (opportunity cost to Lengthen Pay 2 * SPE of $1.5M) in consideration for increasing linear license Fees

* Estimates based on an average slate over a historical 5-year period. 17 Summary of Changes (Cont’d)

Film Qualifications: Output Volume Reduce maximum film cap from 50 to 45 Liberalize Permits SPE to put 2 titles/year through the Starz agreement even Qualification though such titles were theatrically released by another company. Criteria For Prior agreement imposed technical restrictions that made this right “Rent-A-System” difficult to use Pictures Live Events with Right to include one concert film/year at 75% fee Concert Footage Starz requires that Canadian and Mexican Pay TV cannot premiere a Relax Holdbacks title before Starz. This rule is being relaxed for one foreign language for SPC picture per year. [Example: This permits a French language picture to premiere on TV in France and Quebec before the USA.] Starz requires all US territories and possessions (Ts&Ps) to be granted Territory Rights exclusively to Starz. This rule is being relaxed for occasional for SPC omissions of all Ts&Ps. [Example: SPC fails to acquire the Marianas Islands.] For a picture to qualify under the deal, Starz has required each picture Delayed Release to be theatrically released within 36 months of completion of Pictures production. Under the new deal, this permitted delay is extended to 42 months 18 Summary of Changes (Cont’d)

Internet Subscribers: Internet Subscriber Remove cap/bundling restrictions on Starz’ Internet-based Caps/Multipliers; Bundling distribution in return for higher fees Rules Update Marketing / Promotion Maintain premium positioning. Update “free trial” rules and Free Trial Parameters Sony Services/Home Entertainment: Early/Exclusive EST for Sony Sony Services may offer early/exclusive EST for 7 titles/year Services without restriction Eliminate SVOD Holdback for Sony Services may exploit Internet SVOD for certain films between Sony Services the two Starz windows Financial incentive for Starz to make its channels available to Sony Carriage of Starz on Sony for Internet delivery (e.g., PlayStation) and obligation for Starz to Internet Platform offer terms in non-discriminatory manner Reduces the minimum wholesale price permitted for EST sales EST Pricing during Starz’ windows. [NOTE: Wholesale pricing below these minimums triggers a financial penalty payable to Starz.] EST Promotions Permit free EST promotions during Starz windows Reduces the price at which SPE may offer pictures during the Theatrical Window Pay-Per- theatrical window without triggering the start of Pay 1. This View/Video-on-Demand change helps SPE to have sufficient time to exploit EST, DVD and PPV/VOD prior to the start of Pay 1 19