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Background Data for December 16, 2010 Sony Network Services Strategy Meeting
Materials distributed in conjunction with memo dated December 10, 2010
CONFIDENTIAL
CONFIDENTIAL
page 2
(1) ScreenDigest 2010.(2) Strategy Analytics 03.10, SEL.(3) Parks Associates 08.10.
WW Broadband HHs(1) (MM) WW Smartphone Shipments(2) (MM)
WW Connected Game Console HHs(3) (MM) WW Internet Connected TV HHs(3) (MM)
535 579 616 648 677
2010 2011 2012 2013 2014
CAGR: 6%
244
426536
641
2010 2011 2012 2013
CAGR: 38%
95116
138151 161
2010 2011 2012 2013 2014
CAGR: 14%
50
95138
188
256
2010 2011 2012 2013 2014
CAGR: 51%
Growth in Digital Access Expanding Beyond the PC
CONFIDENTIAL
page 3
Video Viewing by Platform in the U.S.
41%
16% 15%12%
7% 6%
2%
51%
7%
15%13%
4%6%
3%
64%
4%
10% 10%
2%5% 4%
0%
10%
20%
30%
40%
50%
60%
70%
Live TV Online source DVDs DVR fromcable/satellite
Streaming video(e.g., Netflix)
Cable/satelliteVOD
Other
% o
f T
ota
l TV
/Vid
eo
Vie
we
d b
y U
S In
tern
et
Us
ers
18-34 years old 35-54 55+
Note: numbers may not add up to 100% due to roundingSource: Morpace, "Omnibus Report," Aug 25, 2010
CONFIDENTIAL
page 4
Small But Growing Group Of U.S. Consumers Says Online Video Has Them Seriously Thinking About Canceling Cable/Satellite Subscription
Source: 2010 Frank N. Magid AssociatesBase: Respondents 18-64 with a basic or digital TV service, N=1,72010.3 How much do you agree with the following statement: Now that online video is available, I am seriously thinking about canceling my cable/satellite subscription.
Agree (4+5)2010: 16% agree (4+5)2007: 6% agree (4+5)
TOTAL
25-64
12-17
18-24
16%
14%
15%
25%
CONFIDENTIAL
page 5
TheatricalHotel & Airline
DVD and Blu-Ray Disc Sell-through
Standard PPV/VOD
Pay 1(HBO, Starz, SHOW, EPIX)
Pay 2(HBO, Starz, SHOW, EPIX)
Broadcast/Cable (F/X, TNT, USA, AMC)
EST (Starz Studios)
EST (HBO Studios)
+2 Months
+4 Months
+5 Months+8-8.5 Years0 Days
Generally +8
Months(1)
HomeTheater
Day & Date PPV/VOD
EST (HBO Studios)
EST (HBO Studios)
Broadcast/Cable(F/X, TNT, USA, AMC)
Library PPV/VOD
Library PPV/VOD
Library SVOD (NFLX)/FOD (Hulu)
+2-2.5 Years
Proposed New Window
Subscription Disc Rental (Netflix) / Kiosk Rental (Redbox)A subset of titles avail. day & date
Pay 1 SVOD* (Starz/EPIX w/NFLX, HBO GO)
Pay 2 SVOD* (Starz/EPIX w/NFLX, HBO GO)
SVOD(F/X, TNT, USA, AMC)
Physical Rental/
Sell-through/EST
PPV/VOD
Linear TV
SVOD/FOD
* In order for Netflix to get an earlier window, they must either buy-out the Pay window or carry another pay service (Starz, HBO, EPIX or Showtime)
Current and Potential Windows for U.S. Film Content
(1) Pay 1 commences the earlier of 10 months from general theatrical, 4.5 months from initial home entertainment street, and 3.5 from PPV/VOD. It is feasible for Pay 1 to commence as early as 6.5 months post theatrical (assuming day-and-date VOD at 3 months post theatrical), but this is still an infrequent scenario.
CONFIDENTIAL
page 6
Available U.S. Models for Viewing Film (Post Theatrical)Example Providers
(U.S. and Not Comprehensive) Pricing Selection of Content at Any Moment of Time
Blu-ray and DVDSell-thru Best Buy, Wal-mart, Target $5 - $25 (Approx. Selling Price, Not
List Price) Nearly all titles
EST iTunes, Amazon VOD, PSN, Xbox $9.99 (SD, Library) - $19.99 (HD, NR) Nearly all titles
Subscription Rental – Physical Netflix $9.99+/mo. Nearly all films
Kiosk Redbox $1.00/night 70 – 200 titles per kiosk
PPV/VOD – Day & Datewith DVD
iTunes, Amazon VOD, DirecTV, Comcast, Verizon $3.99 - $5.99 < 25 titles during any two week
window
PPV/VOD – Standard window (28-30 days after DVD release)
iTunes, Amazon VOD, DirecTV, Comcast, Verizon $3.99 - $5.99 Approximately 40 titles
PPV/VOD – Library (Post-Pay 1)
iTunes, Amazon VOD, DirecTV, Comcast, Verizon $1.99 - $2.99 Hundreds of titles
Pay TV – Current (1st and 2nd Windows)1 HBO, Starz, Showtime, Epix ~$15/mo. Dozens of films
Broadcast/Basic Cable DirecTV, Comcast, Verizon Free (Ad-supported) Hundreds of titles
Subscription – Streaming (during Pay 1 and Pay 2) Netflix2 $7.99/mo. Dozens of films
Subscription – Streaming (Library) Netflix $7.99/mo. ~6,000 movies
1) The Pay TV Library window offers hundreds of titles2) For SPE titles, Starz content via Netflix
CONFIDENTIAL
page 7
Consumers Face a Complex Landscape for Finding & Viewing TV Content
Program Type
Initial TV Run EST Ad-supported
Internet DVD TV Off-net SVOD
BroadcastScripted
4-8 yrs exclusive but limited runs
Next day
Episodes are commonly available for ad-
supported streaming during the month after
air date; however, availability date on
network owned sites vs. Hulu varies show to
show
1 yr. (1 season) delay
Starting season 5 (prior season only)
Starting season 5 (prior season only)
Unscripted Perpetual N/A N/A N/A N/A (very little)
Daytime Soaps
Run of show (exclusive 4+
years)N/A N/A N/A N/A
Basic CableScripted
5-6 years exclusive, 15-26 runs
Next day 1 yr. (1 season) delay
Starting season 5 (prior season only)
Starting season 5 (prior season only)
Unscripted Perpetual N/A N/A N/A N/A (very little)
Premium Pay
Scripted only5-6 years exclusive, unlimited
runs
Starting 6 mos. from last
episode of season
On networks own internet services for
subscribers only
Starting 6 mos. from last episode of
seasonStarting season 5
(prior season only)Unclear – Probably starting season 5
(prior season only)
First Run Synd. Unscripted
onlyDuration of
show N/A N/A – clips only N/A N/A N/A
• Television content is not windowed as consistently or rigidly as film content
• Windows vary by genre and networks, making it difficult for users to know when and where TV content is available
• Availability of ad-supported streaming is particularly variable and confusing for consumers
CONFIDENTIAL
page 8
Leading Services Are Known for Providing the Most Content Under a Well-defined Payment Model
Segment Leading US Player
Customer Value Proposition Supported Devices Number of Users Countries
Video
TV-Real Time No dominant player to date
TV-Catch UpStreaming access to ~900 TV series (free ad-supported or
$7.99/mo. subscription)PC, TV, BD, Xbox, PS3 19.7MM Monthly US
Uniques US
TV-LibraryUnlimited streaming access to
600 TV series on multiple devices ($7.99/mo.)
PC, Xbox, TV, BD, Roku
20.2MM Monthly US Uniques US
Home Video-New
User interface & integration with apple devices
(Computers, iPad, iPhone, etc.)PC, Apple TV, iPod,
iPhone, iTouch, iPad11.5MM Monthly US
UniquesUS, CA
UK, DE, AU, JP, 5 EU, 2 APAC
Home Video- Library
Unlimited streaming access to 5,000 films on multiple devices
($7.99/mo.)PC, Xbox, TV, BD,
Roku20.2MM Monthly US
Uniques US
Music
Radio 40 hours of free streaming with ads
PC, TV, BD, Western Digital, Boxee, Mobile
20MM Monthly US Uniques (300K paying
subs)US
MusicUser interface & integration
with apple devices (Computers, iPad, iPhone, etc.)
PC, Apple TV, iPod, iPhone, iTouch, iPad
11.5MM Monthly US Uniques
US, CAUK, DE, AU, JP, 5 EU,
2 APAC
Video
Games
Video Games No dominant player to date
CONFIDENTIAL
Device Manufacturers Broaden Range of Content and Purchase Models to Drive Adoption
First Generation Second Generation
Device Price $229 - $299 $99
1st Party Business Model iTunes purchase (buy-and-store) iTunes streaming rental only (no storage capability)
1st Party Content Pricing TV: $2.99 purchaseNR Film: $14.99 - $19.99 purchase
TV: $0.99 rentalNR Film: $4.99 rental
3rd Party Offerings Flickr, Mobileme, Youtube Netflix, Flickr, Mobileme, Youtube
Media Server Functions/Device Integration
PC OnlyRemote Control: iPhone, iPad, or iPod
Airplay: Stream videos, music and photos from computer, iPhone, iPad, iPod to Apple TV
Units Sold Estimated 2MM+ in the first 12 months (1) Estimated 4.5MM in the first 12 months (2)
(1) News articles and blogs(2) Stifel Nicolaus estimates, September 2, 2010
Second generation box is roughly a quarter of the size of the original
Case Study: Apple TV
page 9
CONFIDENTIAL
page 10
Expansion of iTunes from music to video1
0 100 250
1,500
3,000
5,000
8,600
10,000
0
2,000
4,000
6,000
8,000
10,000
12,000
2003 2004 2005 2006 2007 2008 2009 2010
WW
Un
its
So
ld (
Un
its
in M
illi
on
s)
0
10
20
30
40
50
60
70
80
90
iTu
nes
Fil
m a
nd
TV
Ep
iso
des
So
ld (
Un
its
in M
illi
on
s)
WW Songs Sold WW Films Sold WW TV Episode Bundles Sold
Strong Service Brands Have Expanded Beyond Their Traditional Core Offerings
1) Source: ScreenDigest. ScreenDigest reports 1 bundled transaction as 1 TV transaction, although 1 bundle actually converts to multiple single episodes purchased as a package2) Source: FastCompany, Netflix CEO: We’re a Streaming Company, 10/21/2010
Expansion of Hulu from free/ad-supported model into paid model
• Hulu launches in 2008 and with ad-supported model and hits 100MM video streams first year
• By 2010, Hulu reached over 900MM streams
• Hulu Plus (monthly subscription) launches 2010
– Service includes commercials, but offers expanded library of content and use on a wider range of platforms
Expansion of Netflix from physical to digital rental
• “By every measure, we are now primarily a streaming company that also offers DVD-by-mail.”1 – Reed Hastings
• 66% of subscribers have streamed content, up from 41% year-over-year
• “Next quarter the majority of members will watch more content streamed than delivered on DVD.”2
iTunes Hulu
Netflix
CONFIDENTIAL
SONY QRIOCITYVideo Sports Games Information Lifestyle Others
Amazon Fifa World Cup Concierge Berliner Philharmoniker PhotobucketBlip.tv eHow.com Dr. Oz: tips PicasaCBS Howcast.com Epicurious.com Picture Frame
Crackle Podcasts Flixster ShutterflyDailymotion Wired Ford Models
Fearnet Golflink.comHulu Plus Livestrong.com
Netflix LollapaloozaON Networks Michael JacksonPongalo.com Myplace Music
Videocast.com NPRYoutube Pandora
Singing FoolSlacker
Sony Digital CinemaStyle.com
Tara Stiles Yoga
SAMSUNG APPSVideo Sports Games Information Lifestyle Others
Blockbuster Do Squats DALPHY! AccuWeather Facebook Dido's StorybookCinemaNow ESPN Next Level Dracluas Coffin AP News Fine art in Bible Giggly DictionaryDaily Motion HelloCoach DrBrain Google Maps Fineart in Film Giggly O or XExplore 3D MLB.TV Dynamic Bowling Hello, World! For Children Kidney BeanHulu Plus Power Breathing Freezeup Rovi TV Getty Images Matching CardsMakingof Push-up Master Happy Fruits SPS TV Greek and Roman Math Magic
Netflix Six-Pack Pro Magic Cube USA Today Gustav Klimt Phonics GameSBS Drama Yoga Helper Mahjong Fruits Yahoo Historical Moment Skype
SBS Ent. MiniGame Pack Napster World MagicTED tv Quizmaster Painter's Women
Thecooltv Sudoku PandoraVudu Sudoku Picasa
YouTube Survival Bakery RelaxT-Crew Rural Life
Texas Hold-em The mythWise Star Twitter
22 Additional Apps 24 Additional Apps
page 11
Overview of U.S. Third Party Service Premium and Entry-level Offerings – Sony Qriocity vs. Samsung
CONFIDENTIAL
page 12
Overview of U.S. Premium PSN and Xbox Live Third Party Service Offerings
PSN Xbox Live
(App)
Access requires a subscription to the services above, and to Xbox Live Gold
($50 / year)
Access requires a subscription to the services above, but not to PlayStation
Plus
(App)
CONFIDENTIAL
page 13
Overview of PlayStation and Xbox Owned Service Offerings
PlayStation Network Xbox Live
Live Gold
• For $49.99/year, users receive exclusive features such as online multi-player gaming, party chat, video chat, Netflix streaming, ESPN3, and personalized music from Zune and Last.fm, among others
Zune Video
• A la carte film & TV rental and purchase (2,500 films and 900 TV series)
• Users have the ability to purchase and access content across three screens: the TV through Zune on Xbox LIVE, the PC through Zune Marketplace, and on the Zune HD device
Zune Pass (Music)
• Streaming access to millions of songs for $14.99 / month
• Ability to download 10 MP3s per month
PlayStation Plus
• For $49.99/year or $13.99/quarter, users receive exclusive features such as full game trials, PS store discounts, automatic firmware downloads, free games & downloads, priority beta invitations, and exclusive offers, among others
PSN Video
• A la carte film & TV rental and purchase (6,000+ films and 900 TV series)
• Users have the ability to purchase and access content across the following devices: PlayStation, PlayStation Portable, and PC
Music Unlimited Powered by Qriocity
• Streaming access to millions of songs for $9.99 / month
• Provides cloud rights to existing library
page 14
Comparison of Digital Video Services
(streaming)
Primary Business
Model:N/A N/A
Purchase of recent and library film
and TV
N/ASubscription film and TV
Purchase of recent and library film
and TV
Next day TV (ad-
supported and, likely
subs)
N/A N/A
Major Studio
Support
Yes, Worldwide
No Fox/Dis in EU
No Disney Yes, US onlyYes, but no
new releasesYes,
Worldwide
Yes, Worldwide (no CBS)
Yes, Worldwide
Yes, Worldwide
# of Films 6,134 2,500Approx1 10,000
2,300+Approx 5,000
Approx 10,000
957 4,458 8,352
# of HD Films
3,071 1,100+ +100 0 Approx 1000 Approx 800+ 0 350+ 2,000+
# of TV Series
700(19,000+ episodes)
900(23,000+ episodes)
4,700+(80,000+ episodes)
170(4,000+
episodes)
600(12,000+ episodes)
3,000 +(50,000+ episodes)
927 (23,700+ episodes)
151 Titles(13,000 + episodes)
N/A
Next Day TV
Yes Yes Yes Limited N/A Yes Yes Yes N/A
Countries/Regions
US, CA, UK, FR, DE, AU,
IT, SP, JP
US CA, UK, FR, DE, AU, IT, IR, 6 EU, 2
APAC
USUSAU
US
US, CAUK, DE, AU, JP, 5 EU, 2
APAC
US N/A US
Supported Devices
PS3, PSP, PC, TV, BD,
Sony Ericsson Mobile
Xbox, Zune
PC, TV (SONY,
Samsung, Vizio,
Panasonic)
PC, TV (Vizio,
Samsung), STB (Tivo)
PC, Xbox, TV, BD, Roku
PC, Apple TV, iPod, iPhone,
iTouch, iPad
PC, TV, BD, Xbox, PS3
PC, TV, BD, Tivo
Archos
TV, BD, VUDU
devices, PS3
1) Excludes video clips
CONFIDENTIAL
Exclusive Content on Select Digital Offerings
Examples of Exclusive Content & Services
Notes
ESPN3, Games (Halo, Fables, etc.)ESPN 3 requires an Xbox Live
subscription and internet access from an ESPN3.com affiliated provider
The Tester (1), select content from the Sports Illustrated Swimsuit edition, Games
(Gran Turismo)Sports Illustrated exclusivity limited to a
subset of video clips
MTV app exclusively on the Galaxy TabApps come with one episode each of 5
shows: The Hills, Jersey Shore, The Dudesons, Pimp My Ride and Cribs
(1) Reality TV series
Note: Examples only and not comprehensive
page 15
CONFIDENTIAL
page 16
Third Party Services Are Widely Available Across Connected Devices
Netflix Hulu Pandora
Connected TVs LG, Sanyo, Sharp, Sony, Toshiba, Vizio Samsung, Sony, VIZIO
LG, Mitsubishi, Panasonic, Sanyo,
Toshiba, VizioMitsubishi, Samsung,
Toshiba, VizioMitsubishi, Panasonic,
Samsung, Sharp, Toshiba, Vizio
Home Theater Systems (Includes BD Players)
Insignia, LG, Samsung, Sony, Vizio Samsung, Sony, VIZIO Insignia, LG,
Panasonic, Sony, Vizio Samsung, Sony Samsung, Sony
Game Consoles Xbox 360, PS3, Wii Xbox 360, PS3 PS3 Xbox 360, PS3 (1) Xbox 360, PS3 (1)
Digital Media Players
Roku, Boxee, Seagate, TiVo Premiere, WD TV
LiveRoku, Boxee, Tivo
PremiereRoku, Boxee, Tivo
Premiere, WD TV LiveRoku, Boxee, Tivo
Premiere, WD TV Live Boxee, Tivo Premiere
(1) Accessible through PS3’s web browser (compared to direct links on Xbox Live)
Devices are examples only and not comprehensive
CONFIDENTIAL
page 17
Overview of Samsung’s App Store
Apps Store
• Apps available for download today span information, video, lifestyle, games, and sports (both free and paid)
• Pricing for premium apps will be similar to smartphone apps
• Popular free apps include Netflix, Blockbuster, Hulu, YouTube, Napster, ESPN, Cinemanow, Pandora, Facebook, Twitter, Vudu, and soon-to-come Amazon VOD
• Samsung is projecting over 200 apps by the end of 2010
Application Platform
• Open platform that allows apps from premium content owners and individual developers
• Store lets content owners and developers gain access to multiple device types with a single app
In March 2010, Samsung opened the first ever HDTV-based application store for its TV sets, Blu-ray players, and home theater systems
CONFIDENTIAL
page 18
UGCUGCMusic
&Video
Music&
Video
3rd Party
3rd Party
3rd Party
3rd Party
QriocityQriocity
PSNPSN
BIV for all partnership
PS Experience
Sony Experience
• Fragmented value proposition• Duplicated contents category offer
• UGC separately managed• 3rd party not well integrated
Relationship between Qriocity and PSN: Today
Qriocity Limited exposure
PSNMarketing vehicle
Source: SNEI Mid-range Plan
CONFIDENTIAL
page 19
UGCUGC
Qriocity – as a platform/venueQriocity – as a platform/venue
Enhance Sony Value Proposition
Relationship between Qriocity and PSN: FY2013
Reading Contents
Reading Contents
Music&
Video
Music&
VideoApp
&Other
App&
Other“PS”Game
“PS”Game
3rd Party
3rd Party
3rd
Party
3rd
Party3rd
Party
3rd Party
PSNon-game
PSNon-game
“xxx powered by Q” “PlayStation”
• Registration/ID• Security• Reporting•
Recommendation
Drive additionalRevenue & traffic
BIV for legacy partnership
Qriocity Clear brand definition
PSNGaming experience
Source: SNEI Mid-range Plan
page 20
Near-term Alignment of Qriocity and PSN Service Brands
Service PlayStation TV Blu-ray
PlayStation Video powered by Qriocity(“Powered by” branding will be launched in the coming months)
Qriocity Video-on-Demand
PlayStation Games
Music Unlimited powered by Qriocity(Qriocity branded service available across devices in the coming months)
CONFIDENTIAL
page 21
Sony Network Services Roadmap for Premium Content in the Americas
Sony Owned Services 3rd Party Services on Sony Devices
Segment Dominant Player Current Planned Current Planned
Video
TV-Library Netflix PSN Video, Qriocity VOD N/A Netflix, Vudu (Limited) Cinemanow, HBO Go,
Showtime, Crackle
TV-Catch Up Hulu PSN Video, Qriocity VOD N/A Hulu/Hulu Plus N/A
TV-Real Time - N/A N/A MLB.TV, NHL Gamecenter
NBA Game Time, NFL, Turner March
Madness, MLS, UFC
Home Video- Library Netflix PSN Video, Qriocity
VOD N/A Netflix, VuduCinemanow, HBO Go,
Showtime, Epix, Crackle
Home Video-New iTunes PSN Video, Qriocity VOD N/A Vudu Cinemanow
Music
Radio Pandora N/A N/A Pandora N/A
Music iTunes N/A Music Unlimited powered by Qriocity N/A Vevo (ad-supported
music videos)
Video
Games
Video Games - PSN Games N/A N/A N/A
Note: Services are examples only and not comprehensive. Excludes 24 current 3rd party services and 7 planned 3rd party services in Asia.