SONY PICTURES ENTERTAINMENTSPE Innovation LAB

October 2013Proposal to launch a Collaborative Innovation program to help grow

Sony’s Entertainment Business

The Need

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There remains a substantial disconnect between technology startups and old media companies. The two continue to exist in fundamentally different worlds and at times have a contentious relationship

Goal: Help SPE identify disruption early & engage with startups

Innovators & industry disrupters Traditional Media companies+

Our Proposed Solution: SPE Lab

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Mission

Identify external innovation that can help SPE strengthen existing businesses and identify disruptive trends that can fuel future business

Key Tasks

1. Strategic Partnerships with startups Help identify startups that are relevant to strategic needs of SPE divisions. Help divisions engage with startups via:

• Licensing agreement• Co-Development• Co-Marketing agreement• Commercial/Distribution • Warrants/equity investment

2. SPE IncubatorCreate an environment and a process where SPE will be able to engage with and nurture high-quality startups in the Entertainment industry

Create environment to nurture innovation

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Utilize underutilized space on the lot to host startups and nurture innovation

SPE Lab – Potential Structure

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Motion Pictures Group Corporate TechnologiesHome Entertainment Television / Crackle Digital Productions

SPHE Pod SPT Pod MPG PodSPDP Pod

SPE Lab

SP Technologies

PodStartup 1Startup 2

SPEDivisions

Incubators/Accelerators

Venture Capitalists

StartupsUniversities /

R&D Labs

Sony Growth Ventures & Innovation team (part time)SPE Lab Coordinator (full time)

Shared Resources

Startup 3

Employees from various divisions

collaborating together, but

representing their individual divisions’

needs and engaging with innovative

startups

Startup 4

1. Process for Strategic Partnerships with startups

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• Release marketing and promotion

• Digital influence, social targeting and analytics

• App developers• Online advertising• Discovery &• Recommendation

Social TV & 2nd Screen

• Automatic content recognition and sync

• Foreign language dubbing

• Remote collaboration tools

• Real time image Acquisition

• Energy management

Understand BU Needs Start-up Radar Match with BU Needs BU Filter

# Start-ups 100+ 20+ 8+

Timing 1 day

Online Video

Discovery & Recommendation

Social TV

Social Analytics

Production Optimization

New Biz Models

2-3 Months 15-30 days

Release Marketing & Promotion

Introduce selected startups to SPE divisions

SPE Lab

Help SPE division engage with startup

3-5

3-4 months

Divisional Participation

Optional Mandatory

ILLUSTRATIVE ONLY

As Needed Recommended

2. SPE Lab benefits

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ACCELERATOR

Accelerate Innovation

• Harness fresh thinking from the outside

• Drafts off of flexibility and nimbleness of start-ups to make quick decisions and pivot often to find the right solution

Lower Investment Risk

• Necessitates only small amounts of project funding for many ideas/startups

• Requires no commitment to engage in a partnership or provide follow-up funding

Strategic Partnerships

• Facilitates screening and access to early stage ideas

• Provides opportunity to engage in strategic partnerships, e.g., contract work, commercial and co-marketing agreement, investment or acquisition

Positive Image Effect

• Increase SPE brand presence• Increase buzz and positive press

through hosting accelerator on SPE lot

Benefits go beyond revenues…

Employee Development

• Provide opportunity for employees to engage with entrepreneurship and negotiations with start-ups

• Maintain exposure to external innovation

Organize for success

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R. BergerM. Corcoran

SPHE

K. LeGoyC. Mansoliollo

M. Fisk ?

MPG SPDP

C. Taylor

SP Technologies

Directors (part time) : M. Singer , S. StephensCoordinator(full time) ??Venture Advisor (part time): A. Noronha

SPE LabTbd – if needed

Steering Committee

SPT

B. Franke ?

Owners

1) Each BU assigns 1-2 of their most innovative employees to spend 10% of their time to experience ‘innovation in action’

2) These individuals work with and leverage the broader Sony Ventures & Innovation team to access startups and the Venture ecosystem

3) Each employee has a 3-6 mo. assignment – the rotation helps more BU employees experience entrepreneurship and innovation

4) Encourages BU’s to work as ‘One SPE’ and ‘One Sony’ to leverage engagement with startups

Fund for success

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Key activities Annual Budget

Funding for Shared resources- Full-time Coordinator- Part-time venture partners- Organize min. of 4 events/year- Misc. Market Research

$500K*

5-6 projects – engagements with startups and/or Universities @ $75K each- tbd

(note: SPE would also likely receive some option to take warrants in the company at completion of the program)

$450K**

Total $950K

* Does not include charges for employees working part time within the SPE Lab – this will be born by their individual business group; Also does not include facilities costs for SPE Lab** Reserves – Average of 1 project/division. Also, budget does not get used if the project is not launched

Sponsor Operational Budget

Project Budget

SPHE $100K $100K

SPT $100K $100K

MPG $100K $100K

SPDP $100K $100K

Corporate $100K $50K

Total $500K $450K

Innovate collaboratively and leverage shared resources and expertise

Proposed timeline

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• Planning, BU sponsors etc: Oct. 28, 2012 – April 1, 2013

• Announce & Launch SPE Lab: April 1, 2014

• Startup Selection: April – June 2014

• SPE Incubator Session: July – Dec 2014

• SPE Innovation Demo Day: January 2014

Appendix

Trend: Growth of accelerators

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Mentorship

• 1-on-1 mentors

• Subject matter expert

coaches• Biz guidanceConnections

• Expert speakers

• Hacker/ Strategist matching

• Free legal & accounting• Typically a 3-4 month program

• Startups are given ~$25K in exchange for 3-6% in convertible notes & right to invest 8-25% of Series A

• A mentor-driven approach – each startup gets at least one dedicated mentor

• DEMO Day is scheduled end of program to attract investors and partners

Accelerators provide intense, hands-on, boot camp approach to venture creation

Community

• Free office space with

fellow entrepreneur

s• Alumni

network

Capital• Pre-seed

funding up to $25K

• Access to angels & VCs

Independent Accelerators

Corporate Accelerators

1. Independent Accelerators

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Most prominent:– Y Combinator, Mountain View, CA – Tech Stars, Boston MA, Boulder CO, NYC, Seattle WA, – 500 Startups, Mountain View, CA – DreamIt Ventures, Philadelphia, Austin TX & NYC, Israel

Today there are least 20-30 around the country, with a few focused on specific domains (healthcare, energy, mobile etc)

Requires $0 as budget. Depending on the relationship with the Accelerator, corporate may get access to startups. Follow on investment in the startup is also restricted

Unfortunately, Corporates have no say in setting accelerator theme/focus, do not get access to all submitted ideas, and do not have a say in selecting the startups in the program

2. Corporate (operated by 3rd party)

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Microsoft Kinect Accelerator funded and hosted by Microsoft, managed by TechStars

• Microsoft had the final say in setting theme, had a first look into all ideas and was involved in selection process

• Microsoft hosted the accelerator, but paid TechStars to manage the program; The XBOX team, Microsoft R&D, the Emerging Business teams were actively involved in the program

• Microsoft did not take any financial stake in the startups• Demo day was well attended by press from around the world, investors, entrepreneurs, mentors (total

attendance of about 250)Smaller budget, but no direct financial upside into success of startup

2. Corporate (operated by 3rd party)

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• Not a typical incubator or accelerator. This isn’t an investment move and Red Bull is not looking for a partial ownership, instead consider it to be a marketing spend

• Red Bull is seeking innovative, creative, change-the-face-of-music startups and like-minded people to work together with us to make music experiences better

• Successful applicants to the accelerator will gain access to the Red Bull's global network of Red Bull Studios, the Red Bull Music Academy, the brand's artists and audience (brand claims it has more than 35 million followers across its social channels)

• Criteria is broad and appears to include interest in possibilities from the hack level to the ready for market exposure level

• Red Bull is working with design and innovation consultancy Sidekick Studios on the accelerator program

Red Bull startup Accelerator funded by Red Bull, managed by Sidekick Studios

Smaller budget, but no direct financial upside into success of startup

3. Corporate (operated by Corporate itself)

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Darcy AntonellisPresident, Technical Operations, and

Chief Technology Officer, Warner Bros.

Debra Baker, SVPGlobal Business Development,

Warner Bros. Home Entertainment

Thomas Gewecke, President, Warner Bros. Digital Distribution

Don Loheide, VP Advanced Video, Turner Broadcasting System

Scot M. Safon, EVPCNN Worldwide, Turner Broadcasting

THE MENTORSMedia camp Accelerator funded and managed by Turner Broadcasting & Warner Bros. A Turner/Warner Bros. initiative Comprehensive accelerator program

Educates entrepreneurs and enables them to build innovative media businesses.

Campuses: SF + LA Provides early stage startups creating disruptive

innovations an opportunity to: Access Warner Bros. executives Mentors Gain valuable insight into the Studio’s business Develop next-generation technologies and

products for the entertainment industry. Startups worldwide who are selected to participate will

receive:o 12 weeks of mentorship.o Guided insights and access to executives.o Financial incentives ($20,000 by way of

convertible note) including partnerships and vendor relationships

Growth Ventures & innovation GroupSony Confidential

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Program has much greater benefit to the Corporate. But requires a large corporate team and significant $$