– Interesting concepts re: “real-time TV”

– Interesting point about where there are dominant players (either on content or brand). I wouldn’t quite parse it they way they do

– In memo landscape section where we talk about dominance, be clearer about dominance in brands that have been around a while• Subscription film and TV – Netflix• Next day TV (ad-supported and, likely subs) – Hulu• Purchase of recent and library film and TV – iTunes, Amazon

– In memo where we talk about newer device based services trying to differentiate in the face of dominance, be clearer about what is emerging and has no dominant player• Real-time TV over IP to devices (e.g., MLB streaming)• Early Windows

– In memo– Sony section – clarify “real-time” TV on devices is as an opportunity as an area that we

compete and, in some cases lead

Thoughts on Next 3 Slides

Executive Summary – Real-time pay television is a significant opportunity for Sony

• Pay TV is the largest segment of media industry worldwide (6X video game & 4X film industry revenues)• Technology is enabling new players to compete with traditional Pay TV distributors (Cable, Satellite & Telco TV)• New players are not focused on real-time TV which represents over 60% of PayTV revenues & is growing

– We have identified 4-5 products to add to our current video services• Products are complementary to, & integrate with current VDS offering• Three types of live TV content offered: Live sports seasons, premium cable channels, basic cable bundles• 3rd party video services like VUDU, CinemaNow & exclusive Sony content to be introduced as well• Consumers & cable networks have expressed interest in these offerings

– A phased implementation is expected to positively contribute to the video services P&L• Products to be phased in over 2010-13 starting with sports & premium cable in the US• Remaining products & geographies to launch pending success of the initial offering• The combined offering is expected to contribute $3-5 M of op. profits in ‘10-11, growing to $30-40M by ’13• The broader video offering is expected to be a key differentiator for Sony products

– Specific competitive gaps need to be closed in order for us to succeed• Consistent & seamless user experience across devices is a key gap vs. competitors• Acceleration of TAM interface rollout, cloud storage & common video streaming protocols across devices essential

SNEI Business Model Options

3

Segment Market Size? (US Mkt. >$5B)

Digital Growth? (CAGR >10%)

Segment Economics

Dominant Player?

Sustainable Advantage? Business Model

Video

TV-Library Netflix Partner

TV-Catch Up* Hulu Partner

TV-Real Time - - 1st Party

Home Video- Library Netflix Partner

Home Video-New iTunes - 1st Party

Box Office - - 1st Party

Music

Radio Pandora - 1st Party

Music iTunes - 1st Party

Publishing

Newspaper - - Wait

Magazines - - Wait

Books Amazon - 1st Party

Other

Internet Search/Ads - - Wait

Video Games - - Compete

Market Landscape Profit Potential Competitive Landscape

The market and competitive landscape, along with profit potential, primarily determine if SNEI should BUILD, BUY or Partner

Thoughts on Next Slide

– Interesting concepts re: our services are only on our devices; competitors are across devices

– Get the concept into the memo:– Sony Section -- Today, our services are only available on Sony Hardware– Landscape Section – Another competitive advantage of 3rd party services is that they

are now available broadly across devices; hence more awareness / familiarity / popularity

5

Two feasible models for network svc & devices to compete together in a market

Network Service

Device

Exclusive•Network svc. on 1st Party devices only

Open•Network svc. on all devices

Exclusive•Competing 3rd party services have limited functionality•1st party svc. storefront integrated in device UX

Open•Multiple competing services• No preferential integration in UX

• Integrated model• Devices & service compete together

— Focus on differentiated & seamless user experience

e.g. iTunes and iPhone/iPad/iPod

• Mixed model• Devices compete independently• Service uncompetitive

— Competitor services work on 1st party devices + other devices as well

• Open model• Devices and Service compete

independently on their own merits

• Mixed model• Service competes independently

• Devices uncompetitive — Competitor devices offer same

service + other 3rd party services

e.g. Netflix svc. & original Netflix/Roku box

Incubation Strategy FeasibleSony can transition from an integrated to

open model at any time

No Going BackSony cannot move back to an integrated model

without alienating consumers and partners

Thoughts on Next Slide

– Interesting concepts re: we don’t seem to be taking a uniform approach to whether we only build services where there is not a dominant competitor

– Get the concept into the memo:– Sony section – call out that our “ambitious plans” include both competiting head-to-

head where there are dominant competitors (e.g., video stores) and competitng where there are limited competitors (e.g., real-time TV). Note that we should consider whether to take a more uniform approach to prioritization or whether we must build across categories if we want to offer integrated bundles and a killer UI

Sony has ended up adopting different market strategies by segment

7

Market Segment Sony Network Svc Potential Competitor on Sony Devices Market Strategy

Real time-Pay TV Premium & Cable Lite Google?, Boxee? Fully Integrated Model?

New-Home Video VDS/Q Video Vudu, CinemaNow, Alphaline, Amazon Open Model?

Box Office VDS/ Q Video- Early Window Vudu, CinemaNow, Alphaline, Amazon Open Model?

Video Games PSN Zynga? Fully Integrated Model

Radio Q Music Pandora, Napster, Iheartmusic Fully Integrated Model (Incubation Strategy)

Music Q Music Pandora, Napster, Iheartmusic Fully Integrated Model (Incubation Strategy)

Books eBooks Amazon? Fully Integrated Model

Is a consistent strategy needed going forward?