CONFIDENTIAL

Digital Services and DistributionAcquisition Strategy

November 28, 2006

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Executive Summary

• SPE committed to digital services to help address challenges with core businesses

– Accelerates revenue growth through participation in online advertising

– Offers higher margins than traditional business lines

• Grouper provides a solid foundation. Incremental investment will help further develop Grouper and expand SPE’s presence to achieve overall digital services strategy

– Grouper offers technology, infrastructure, management, and initial traction with customers

– Consolidation is raising the threshold for minimum audience size and content offering

– Online video syndicators are building networks of loyal advertisers and distribution partners

• We would like to move ahead to evaluate leading targets, with deal proposal targeted before the end of the calendar year

– Break ($75MM- $125MM) and Heavy ($150MM - $200MM) control quality content with large audiences in a key demographic

– Roo ($125MM - $150MM) combines a large base of aggregated content, syndication partners, and monetization capabilities

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Grouper Provides a Solid Foundation, But Requires Time and Resources to Achieve Stated Goals

ContentContent

AudienceAudience

FunctionalityFunctionality

• Small base of UGV • Original digital content• Licensed content• Prosumer content

Grouper at Acquisition 1st Year Development

• Demonstrated traction with targeted audience

• Leverage SPE marketing and promotions

• Build distribution network

• Differentiated user experience

• Robust infrastructure

• Enhance feature set• Improve embedded player

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Market Evolution Raises Minimum Success Requirements and Requires Accelerated Execution

• Google’s acquisition of YouTube raised the bar for minimum base of content and users required to succeed

• Ongoing investments by new media (Yahoo!) and traditional media competitors (Viacom, NewsCorp) increases competition for content and audience

• Sites like Break and Heavy control a large base of targeted, high-quality content and are building leading brands while capturing audience

• Aggregators / syndicators like BrightCove and Roo are licensing content and building relationships with advertisers

• Other larger opportunities, like PhotoBucket, could bring value to Sony more broadly but would require additional commitment and coordination

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ContentContent

AudienceAudience

FunctionalityFunctionality

SPE Response to Market Evolution Must Address Increased Competition for Content and Audience

Market Inception

Develop or License

Acquire

• Prioritize services that pair owned content with large high value audience

• Avoid sites with audience but no differentiated content

• Wide range of sites, little content focus

• Multiple sites growing in lock-step, no critical mass

• Limited functionality

• Media companies pair studio content with UGV sites (Viacom/Atom; NewsCorp/MySpace)

• Sites with large base of owned content capture high value demographics (Break, Heavy)

• Functionality is increasing but is not the primary draw

• Acquisitions raise the bar for minimum audience size (Google/YouTube)

Market ConsolidationRecommendedSPE Response

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Content + Audience

Break.com (3.3)

eBaum’s World (3.0)

Bolt.com (2.9)

Heavy.com (2.7)

Roo Media (N/A)

BrightCove (N/A)

Functionality + Audience

PhotoBucket (12.0)

Six Apart (10.4)

Image Shack (9.3)

Xanga (5.5)

Reunion (4.7)

MetaCafe (3.1)

Digg (2.1)

Putfile (1.4)

Friendster (1.0)

May be ProhibitiveContent

College Humor (0.9)

JibJab (0.6)

Revver (0.5)

Broadband Sports (0.1)

RocketBoom(0.04)

Revision3 (0.02)

Channel 101 (0.02)

Content + Functionality

Pure Video (0.9)

Castpost (0.2)

Now Public (0.09)

Bix (0.08)

Blip.tv (0.06)

Dave.tv (N/A)

Functionality

Meetup (0.7)

Piczo (0.5)

Text America (0.5)

Imeem (0.2)

VideoEgg (0.2)

eyeSpot (0.2)

MotionBox (0.2)

Competitive Landscape and Acquisition Candidates

Tier 1 Candidates

Tier 2 Candidates

Audience

Putfile (1.4)

DailyMotion (0.8)

vMix (0.8)

vidiLife (0.8)

ManiaTV (0.6)

Vimeo (0.5)

• Monthly unique users per Nielsen Net Ratings; may under represent audience for smaller sites• Although audience for independent sites generally remains a fraction of YouTube’s 30MM unique users;

sites with compelling content have built larger audiences than niche content or pureplay functionality sites

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• Leader with male youth, ages 15-35

• Owns a large base of compelling content

• Strong advertiser relationships

9.2MM • $75MM-$125MM

• Based on early guidance from Montgomery

• Large, syndicated audience

• Relationships with content providers, advertisers, and web site partners

5.8MM • $125MM - $150MM

• Public but thinly traded, will want a premium

• Audience skews toward males age 15-35

• Owns all content including mix of video, animation, and games

7.8MM • $150 - $200MM

DescriptionDescription Valuation RangeValuation RangeUsers(1)Users(1)CompanyCompany

Leading Acquisition Candidates

(1) Monthly Unique Users for Break.com based on Nielsen SiteCensus audit; RooTV users based on Comscore estimate of unique video streamers on-site and through third parties; Heavy.com based on Comscore Media Metrix; PhotoBucket based on Comscore Media Metrix

Tier 1

May be CostProhibitive

• Hosts photos and videos, enables publishing to sites like MySpace and Blogger

14.5MM • $250-$450MM

• Based on rough guidance from Jeffries

• Content aggregation and distribution (competes with Roo)

• Strong content/advertiser relationships

N/A • $230 - $255

• Guidance is for venture round, acquisition price may be higher

Viable acquisition candidates combine content and an attractive audience at valuations below $150MM

PriorityPriority

Potential Cross-Sony Opportunity

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Next Steps

• Initiate conversations with Tier 1 acquisition candidates

• Analyze and value acquisition targets

• Reconvene in two weeks to discuss potential acquisition offers