Network Service Turbo-Charge Plan April 20, 2010 Discover Communicate Share Learn Create Play Listen Watch

Network ServiceTurbo-Charge

PlanApril 20, 2010Discove

rDiscover

CommunicateCommunicate

ShareShare

LearnLearn

CreateCreatePlayPlay ListenListen

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Transformation Management Office 2

AGENDA

Trends in the Consumption of Entertainment Content

Sony Network Service Summary

– Proposed Offering and Value Proposition

– Target Markets & Customer Segments

Operational and Implementation Summary

– Content Acquisition

– Hardware/Device Integration

– Marketing & Sales Strategy

Financial Plan

– Projected Financial Impact

Next Steps


AGENDA

We will discuss…

1. Shifts in how entertainment is consumed

2. How industry incumbents are adjusting to these shifts

3. Why these shifts create opportunities for Sony


KEY TRENDS IN THE CONSUMPTION OF ENTERTAINMENT CONTENT



CDs

MP3 downloadsof singles (iTunes)

Side loadedfrom PC to player Cloud storage

of personal content library

Subscriptionmusic from the

cloudContinuum of Music

Consumption

New physicalbusiness models: Red Box & Netflix

VOD and free with cable

subscription

VHS / DVD

PPVin limited

windows and show times

Continuum of Film

Consumption

Digital sell through and side loading

PersonalizedInternet radio (ad supported)

$19.95 / album $0.99 / single $9.95 / month

VHS/DVD: $19.95

PPV: $7.95

“Freemium”mostly free content with a

charge for premium content

Redbox: $1.00/nightNetflix:

$8.99+/month

$9.99 VOD: $4 to $6 / 24 hours

Some film content with subscription



Consumer preferences:

– Unbundling of film and music content in favor of an à la carte approach

– Escaping the frustrations of maintaining libraries in multiple formats and managing them via side loading

– Accessing content anywhere (cloud-based services are a solution)

– Flexibility in content access across all film “windows” Ability to enjoy film content earlier and on more devices

– Paying for purchase of content only once for use on multiple devices

– Higher quality experiences should no longer be sacrificed for convenience Examples: consumer preferences for higher bit rates for music, HD for video,

and 3D for video, as well as strong sales of higher quality headphones

Changing patterns in content consumption are weakening economics for content providers and distributors, but improving consumer experiences


INDUSTRY INCUMBENTS HAVE YET TO DEVELOP HOLISTIC SOLUTIONS



All have emerging strategies, but none is currently sufficient to meet consumer desires

Film Studios

Cable and Broadcast Networks

Cable / Satellite Operators

Retailers

CE Manufacturers

Consumers



Action Pursuing “TV Everywhere”

Rationale Trying to keep users from

“cutting the cord”

Film Studios



Retailers

CE Manufacturers

Consumers


Cable companies, through a project called “TV Everywhere”, are beginning to experiment with offering subscribers access to their cable content on devices other than televisions

– Comcast has begun operating Fancast XFinity TV, a program that allows subscribers to access 24 channels of TV shows and movies on up to 3 computers

Comcast is planning to extend these privileges beyond computers, to smart phones and tablets

Time Warner Cable is planning on launching a similar service to its subscribers “TV Everywhere” is an “interim” solution, as what consumers truly want is content without having

to purchase a full cable subscription These cable operator solutions do not address consumers’ desires for unbundling content Consumers are increasingly able to replicate (via the internet) much of the video content of the

traditional cable operators

REACTIONS TO KEY TRENDS: CABLE OPERATORS

Implications: Reduced overall revenue for cable operators over the long term

Revenue mix will shift from traditional cable programming to data services



Action Offering streaming content online on

ad-supported web sites

Rationale Exploring new business models that

accommodate consumer demands

Film Studios



Retailers

CE Manufacturers

Consumers


Hulu has emerged as the leading online ad-supported destination for viewing television content and is growing quickly

– Owned by the television broadcasting businesses of NBC Universal, News Corp, and Disney Hulu is pursuing subscription-based offerings on internet connected devices such as the iPad and

televisions

– First move beyond computer screens Hulu has been slow in moving from laptop to televisions because its owners are fearful of

antagonizing cable operators Concerns regarding Hulu:

– Monetization has been disappointingly slow for content owners

– Some content owners are removing content from the site YouTube and VEVO have also emerged as key video content destinations

REACTIONS TO KEY TRENDS: CABLE AND BROADCAST NETWORKS

Implications: As cable operators suffer declining revenues, they will have less money available to pay cable

programmers for content Broadcast and cable programmers will need to be much more aggressive with over-the-top TV

strategies and with monetizing content, representing an opportunity for new service offerings from Sony



Rationale Participating in service revenues by

dictating inclusion of their video and other services to CE manufacturers

Film Studios



Retailers

CE Manufacturers

Consumers

Action Walmart bought Vudu Best Buy bought Napster


Retailers that participate heavily in sale of physical forms of entertainment content, have begun acquiring digital delivery platforms

– Wal-Mart purchased movie streaming company Vudu

– Best Buy purchased music streaming company Napster Because major retailers have considerable power over CE manufacturers, they can

compel these companies to include the retailers’ services on their devices, resulting in increased revenues to the retailers

REACTIONS TO KEY TRENDS: RETAILERS

Implications: Retailers have historically not been successful service providers and content

aggregators As a result, these retailer strategies are not expected to have a large impact on

the value chain



Film Studios



Retailers

CE Manufacturers

Consumers

Action Pursuing a new, open standard for

making “buy once, play anywhere” a reality for consumers

Experimenting with new windows

Rationale Improving value proposition of

traditional packaged goods

Creating new revenue streams


Multiple new “buy once and play anywhere” solutions are emerging

– Two similar studio-led solutions store user’s content in “the cloud” for use on multiple devices Digital Entertainment Content Ecosystem (DECE)

Consortium of companies involved in digital entertainment whose purpose is to come up with technical specifications that content distributors and manufacturers can follow to ensure content compatibility across multiple devices

Disney’s “Keychest” Technology with similar goals to DECE

– DVD with electronic copy (interim solution) Experimentation with “Early Window”

– DVD release dates moved forward (Disney’s Alice in Wonderland, Paramount’s GI Joe)

– Films streamed directly to internet-connected TVs (Sony’s Hancock and Cloudy With a Chance of Meatballs)

Studios have been permitting services such as Vudu, Netflix, and Amazon On Demand to put their library content directly on televisions

REACTIONS TO KEY TRENDS: FILM STUDIOS

Implications: Given the fear of antagonizing theater owners, cable operators, and DVD retailers, studios have been

reluctant to make dramatic changes to the current window model As the monopoly positions of the traditional distributors weaken, content will become the key

differentiator for the new entertainment delivery ecosystem



Film Studios



Retailers

CE Manufacturers

Consumers

Action Adding apps an services to

televisions, BD players, game consoles, etc.

Rationale Margins are low in CE; apps are a

potential source of additional revenue


REACTIONS TO KEY TRENDS: CURRENT GENERATION OF INTERNET-CONNECTED TVs ARE AN INTERIM SOLUTION

Google TV(browser experience)

Widgets(e.g. weather)

True Over-the-Top TV(interactive TV

experience)Standard TV Apps for Services

Evolution of Internet-Connected TV

• Samsung: movie services like Vudu, Blockbuster and Netflix as well as social networking, news, and streaming music apps

• Panasonic: Amazon on Demand streaming movies and YouTube• Toshiba: Vudu movie rental service, as well as YouTube, Pandora, Facebook and Twitter• Vizio: Vudu movie service, Netflix, Amazon on Demand, Yahoo! Video, Pandora, Twitter, Facebook, and

more• Sony: video services on BIVL such as Netflix, YouTube, Sony Pictures Television, Yahoo! Video, and

internet apps such as Yahoo! Weather, Twitter, and Flickr

Other internet-connected set-top boxes (BD players, game consoles, etc) leverage similar approaches

The current lineups of all major consumer electronics manufacturers include internet-connected TVs that feature apps for movie, music, and social networking services:

2008 2009

2010

future


Potential incremental revenue-generating services

– Access to films in variouswindows

– Channel subscriptions

– Games / PS2 emulation

– Advertising / placement

– Monetization of consumer data

– Applications / e-retail / peripherals

– Music related purchases(video purchasing, concerts)

– Extended warranty

Potential incremental annual revenue from above services (based on currentPSN/Qriocity content offerings): $50

• Provides a true interactive TV experience– not an internet browsing experience

• Intelligent program recommendations and ad serving• Deep integration with social networking applications (on-screen

texting, chat and recommendation links, etc.)• Sorting of content choices based on popularity among social

network and previous behavior

Over-the-Top Televisionsdo not require cable or satellite

THE FUTURE OF TV IS OVER-THE-TOP

There are already 50,000 hours of broadcast and cable network content

available to consumers for free over the internet



All have emerging strategies, but none is currently sufficient to meet consumer desires. However, the CE industry is best equipped to aggressively compete in providing entertainment to consumers.

Film Studios



RetailersConsumers

CE Manufacturers


RECAP

Shifting consumer desires require changes in how CE companies, cable/satellite companies, cable networks, and content companies deliver entertainment experiences to consumers

These industry incumbents are not taking aggressive enough action in this regard

– Fear of traditional distributors limits their aggressiveness

– Traditional distributors are losing their monopoly status due the ubiquity of the high speed I/P Network

CE manufacturers are best positioned to be aggressive in addressing consumer desires

– CE manufacturers are not captive to cable and satellite operators or other incumbents

Within the CE industry, Sony is the best positioned to take advantage of this opportunity to provide a holistic approach that will attract consumers

– Sony has a large network of users across a broad range of connected products

– Sony Pictures and Sony Music are two of the world’s largest content companies


SONY’S OPPORTUNITY

If we provide superior entertainment experiences that are unique to Sony devices, we will deliver a strong value proposition to our consumers and enhance our

hardware margins

Sony needs to start treating its consumer base as a connected network of addressable users

Across our consumers’ network of enabled devices, Sony maintains relationships with more than 40MM connected users worldwide


AGENDA









Financial Plan


Next Steps


THERE IS A LOT OF EXPERIMENTATION AROUND BUSINESS MODELS AND CONTENT RIGHTS, BUT NO ONE HAS FIGURED IT OUT

Sony can take a leadership position and WIN if we move FAST and go BIG

With improvements in broadband technology and changes in customer buying behavior for digital content, market readiness for network services is high now

Our competitors are not standing still; the market is becoming increasingly crowded as many players try to enter this market

However, no competitor has figured out the “winning play”


THE TIME IS NOW: APPLE HAS A $10 BILLION CONTENT BUSINESS

Published Market Estimates

Published Growth Rates

$6.0 Billion Apps Estimate2,3

+55%

YoY GrowthYoY Growth

iPhones1

+34%Music & Video1

$5.2 Billion iTunes media sales5

$11.2 Billion 2010 Online Revenues$11.2 Billion 2010 Online Revenues

$3.0 Billion App run rate in Dec 20092,3

$4.0 Billion iTunes media sales in 20091

$7.0 Billion Total Run Rate, Dec 2009$7.0 Billion Total Run Rate, Dec 2009

2010 Revenue Forecast

+100%iTouch1

Most Analysts Believe Apps, Content Profitable

30% Gross Margins1

Well Controlled Costs

Estimated Operating Margins

Bandwidth costs 1-3%4

Infrastructure & operations costs 3-5%4

Payment processing around 5-8%3,4,5

14-22%6,7,8

Sources: (1) Apple annual reports & press releases (2) Gartner Group (3) GigaOm Analysts (4) New York Times (5) IBM Analysis (6) Seeking Alpha Financial Analysis site, (7) MacInsider (8) Pacific Crest Securities


Sources: Apple annual reports & press releases, iSuppli, Factiva, New York Times

Hardware Devices Gross Margin

iPad 32GB 3G 60%

iPhone 3GS 16GB 58%

iPod Shuffle 4GB 55%

iPod Classic 160GB 45%

iPod Nano 8 GB 45%

Mac Mini Desktop 22%

MacBook Pro 13 inch 2.53Ghz

15%

Apple Case Study

CONTENT HELPS APPLE TO DRIVE OUTSIZE RETURNS ON HARDWARE DEVICES

Retail Price: $599

Gross Margin: 22%

Retail Price: $199 Gross

Margin: 58%

Retail Price: $1,499Gross Margin: 15%

Retail Price: $79 to $249

Gross Margin: 45%-55%

Retail Price: $729

Gross Margin: 60%


Sources: “Apple Dominates Social Brand Ranking”. Adweek. Jan 4, 2010, Apple Press Releases, Microsoft Press Releases, Samsung Press Releases, CES Interviews

Apple‘Mega digital content aggregator’

Microsoft’s future play‘Xbox become altenarive to cable’

Extend “Live Anywhere” initiative for TV (Xbox), PC, Window Mobile based phones, Zune and other devices

23 million users (10 million paid)

Operates in 26 countries (16 for video)

Shifting to incorporate streaming, advertising and subscription models

Over 1 billion user accounts

Operates in 90 countries (13 for video)

Extensive content library– 10 billion songs /3 billion apps /200 million videos downloaded

Live Anywhere: ‘3 Screen, 1 Cloud’

Largest Digital Content Retailer & Top Social Brand in the World

Creating cable/satellite TV alternative package and is aggressively pursuing content/programming deals (e.g., ESPN for live sports streaming)

ABC's iPad app has 212,000 downloads, gets higher ad rates than network TV

Developing subscription TV service (ad-free TV for $30 per month)

KEY COMPETITORS ARE BUILDING ONLINE SERVICES & CONTENT OFFERINGS


KEY COMPETITORS ARE BUILDING ONLINE SERVICES & CONTENT OFFERINGS

Sources: “Apple Dominates Social Brand Ranking”. Adweek. Jan 4, 2010, Apple Press Releases, Microsoft Press Releases, Samsung Press Releases, CES Interviews

Apple‘Mega digital content aggregator’

Launched Fancast Xfinity TV service for online content access in Dec. 2009 for existing pay TV/cable subscribers

Programming from 30 content providers, including major cable channels HBO, Starz and Cinemax

Utilizes Move Networks’ adaptive streaming technology to deliver service

TV Everywhere: Multi-Screen Strategy (TV, PC, Mobile Phone)

Acquired NBC Universal

Launched Samsung Apps Store for mobile phones and PCs in September 2009

Partnerships with online content providers (e.g., Pandora, Vudu, Netflix, Blockbuster, etc.)

Plans to launch premium apps for purchase with Internet@TV feature on select HDTVs, Blu-ray players and home theater systems in July 2010

Device Dominance With Scale & Integrated Content

Global content team (600 resources) for securing content for emerging markets & HW integration


TURBO-CHARGE SERVICE OFFERING CONCEPT

Differentiated and exclusive content (e.g., films, TV, games, etc.)

Interactive online services (e.g., apps, social networking/communities

for Health & Wellness, Education, etc.)

TURBO-CHARGE PLAN

Key Features: “One-stop” shopping for multiple content types

(video, music, games, etc.) in a single account– Full-scale VOD & EST store– Music store powered by Omnifone

Easy to use, personalized user interface (e.g., design, search, recommendation)

Accessibility by a wide range of Sony devices

1

2

Uniquely bundled/personalized packages & pricing options

3

+Music

Films

TV

Books

Games

Apps

Service will include multiple content types

QRIOCITY

Infrastructure scalability and seamless hardware integration

Aggressive marketing campaigns to increase Qriocity’s visibility

4

5


• Access to select network and popular cable/satellite content available on demand online (e.g., ESPN, CNN, Disney, TNT, etc.)

• Ability to select, personalize/customize content/programming stack

• Innovative and flexible pricing options

OUR INITIAL FOCUS IS TO TURBO-CHARGE A COMPETITIVE OFFERING AND TO THEN DEVELOP A BETTER ALTERNATIVE TO CABLE/SATELLITE

Music

Films

TV

Books

Games

Apps

Service will include multiple content types

VISION: BETTER VALUE ALTERNATIVE TO PREMIUM

CABLE/SATELLITEDifferentiated and exclusive content

Interactive online services

TURBO-CHARGE PLAN1

2

Uniquely bundled/personalized packages & pricing options3

Infrastructure scalability and seamless hardware integration

Aggressive marketing campaigns to increase Qriocity’s visibility

4

5


TO TEST OUR SERVICE OFFERING, WE HAVE INITIALLY FOCUSED OUR MARKET RESEARCH ON THREE LARGE MARKETS

Sources: PricewaterhouseCoopers Global Entertainment & Media Outlook 2009-2013

2012 Online Entertainment Content Market Spend (US $ Billions)

U.S. Canada U.K. Germany France Japan S. Korea China India Brazil Russia Taiwan

TV

Films

Games

Music

eBooks

$115.5

$7.9

$21.9

$11.0

$21.0

$10.0

$15.8

$6.3

$2.9

$14.0

$5.3

$2.4

32

KEY FINDINGS FROM FOCUS GROUP RESEARCH

Preliminary Market Research Findings

Customers express interest in interactive online services and online apps (e.g., health & wellness, education, etc.)

Expect an easy-to-use, common user experience across devices and want personalization and community features

Dislike a closed platform, but majority would be willing to buy Sony devices to access content and services

Prefer multiple pricing options and flexibility to select change based on personalized or uniquely bundled content packages

1. “One-Stop” Service Concept

A ‘one-stop shop’ service with access to multiple content types (e.g., films/TV, games, music) is very appealing with customers

2. Differentiated, Exclusive Content

3. Interactive Online Services

4. Pricing/ Packaging

5. Features & Functionality

6. Sony Device Uplift

Customers want and are willing to pay for differentiated, exclusive (e.g., ‘hard-to-find’, ‘must-have’) content

Source: Directional feedback from customer focus groups

7. Scalability Scalable demand for global/US contents (Sports, US film/dramas) , but different price sensitivity among markets


CUSTOMERS ARE WILLING TO PAY FOR EXCLUSIVE, PREMIUM CONTENT


Premium TVPremium Movies

Early Release

Unlocked HBO

Target: All segments Target: All segments

Award Winning & Critics Pick

$20 per movie

$5-10

Oscar-nominated films, Indie films

HBO-quality OriginalProgramming

Best ComedySeinfeld, Family Guy, The Simpsons, Faulty Towers, etc. $10-20

‘Yes, especially for award-winning, critically acclaimed movies.’ (M35-49)

Mixed Martial ArtsUFC, Boxing $30-50

Exclusive Sports

‘I’d pay $50-60 a month for major prizefights and regular fights also.’ (M35-49)

Motor SportsNASCAR, Formula 1, IRL, MotoGP $10-20

Sports ClassicsClassic NBA, NFL, MLB $5-10

‘Love it. I will pay extra to avoid the hassle of going to theater.’ (F18-34)

‘This is appealing because TV lately is all reality, it is no longer creative.’ (M35-49)

‘Very appealing...I would want to be able to pick 3-4 comedies like every season of The Simpsons.’ (M35-49)

Target: Mostly male, all-ages

$5-10

$10-20


Soccer (Premier league)Tennis $10-20

Global Sports


Health & Wellness

Fitness & Exercise

Health & Wellness

‘If I could have different cooking shows and diet/exercise tips.’ (F50+)

‘It could mean replacing going to gym and that is very appealing for parents!’ (F35-49)

Yoga, Pilates, Fitness Instruction

Dr. OzDietary/Nutrition

$5-10

Education & Learning

Family & KidsSesame Street, Dora the Explorer, Disney, Anime(videos, games, books) $5-10

Education for AdultsLanguage classes, online tutorials, online classes

$5-10

$5-10

Ultimate 3D

3D Content 3D movies, concerts, interactive games

$5-10

‘Disney & educational content would be great for my grandkids.’ (F50+)

‘I’d like interactive shows like Sesame Street, LeapFrog.’ (F35-49)

‘Sporting events, concerts in 3D would be great.’ (M35-49)

‘Wow. I would be interested in, but I would need to test it out first.’ (M35-49)

‘If 3D is available across devices I’d pay 5,000 yen a month.’ (M18-34)

Target: Older male/females Target: Mostly younger males

CUSTOMERS ARE WILLING TO PAY FOR EXCLUSIVE, PREMIUM CONTENT

Target: Parents, Older males/females



CUSTOMERS EXPECT A WORLD-CLASS EXPERIENCE AND WANT PORTABLE DEVICE ACCESSIBILITY

Features/Functionality Device Integration

Easy-to-use, easy-to-navigate

Personalized recommendation

Advanced search capabilities

Ability to customize experience

Fast, reliable performance

Ability to access service and view content from multiple devices- Stream from digital locker (cloud)

Very strong interest in portable, mobile devices especially smartphone access


‘I like it , it’s easy to navigate. I’d like to get recommendations tailored to my interests.’ (M35-49)

‘I would want to be able access this service from all my devices. Portability is important….’ (M18-34)


FOCUS GROUPS CONFIRMED MAJORITIY OF CUSTOMERS WOULD BE WILLING TO BUY SONY DEVICES IF SERVICES DESCRIBED ARE AVAILABLE

• Customers like ability to access network service from a wide range of Sony devices, but dislike ‘closed’ platform

• Customers are willing to buy Sony devices for access, especially:

- When considering new purchases (difficult to ‘switch’ or replace existing TV just for the service)

- Adding ‘small ticket’ new devices (e.g., PS3, Blu-ray players, smartphones)

‘Yes, it would push me over the edge to buy Sony if buying new.’ (F35-49)

‘I wouldn’t replace anything currently, but would consider additional device.’ (F35-49)

‘If Sony’s the only one to offer the service, I’d buy a Sony…but I wouldn’t want to be locked in long term.’ M18-34)


‘It would push me towards Sony devices even though I am against proprietary devices.’ (M35-49)


AGENDA









Financial Plan


Next Steps



Movies

Sports

Original Productions

Health/Wellness

Education

Television Series


Other

- “HBO Quality” Series- Video Game-based Series- Digital Movies

- Educational TV programs (e.g., Sesame Street, Dora the Explorer in Spanish)- Online interactive games and services (e.g., online classes, tutorials)- Potential Acquisition

- Exclusive Rights to Iconic Series- Rights to other series target by demographic

- Health & Wellness TV programs (e.g., Dr. Oz)- Original Fitness Videos (e.g., Jillian Michaels)- Online interactive services (e.g., calorie counter, fitness tracker, etc.)

- Early Release Films - Unlimited Availability of Digital Download

- Exclusive Rights to Niche Sports- Premium Sports Packages (non-exclusive)

- Aggregate 3rd party cable networks (non-exclusive)

OUR CONTENT INVESTMENT WOULD BE ALLOCATED TO SPECIFIC CATEGORIES IMPORTANT TO CONSUMERS SPE Involvement


Bravia, Handycam, CyberShot, Blu-ray,

Smartphones

Target Demographic:Professional Families

Up and coming young professionals 35 to 49 yrs

Families with kids (core for HandyCam/CyberShot)

Wants “new” things / “wow” factor

BraviaBlu-ray, Smartphones

Target Demographic:Established Baby Boomers

Established 50+ year olds; affluent, power seekers

Loves TV (core for Bravia), brand conscious

Will pay premium for brand and quality

WE LOOK AT DEVICE SALES TO IDENTIFY CUSTOMER TARGET SEGMENTS

Illustrative - For Discussion Purposes Only

Target Demographic:Social Gaming Generation

18 to 34 year olds; mostly young males and females

Core for PS3 market

Want to exciting and new experiences and to share instantly with friends

PlayStation,VAIO, Walkman


Bravia, Handycam, CyberShot, Blu-ray,

Smartphones

Target Demographic:Professional Families

BraviaBlu-ray, Smartphones

Target Demographic:Established Baby Boomers

AND TARGET OUR CONTENT PROGRAMS TO SATISFY UNMET DEMANDS

Target Demographic:Social Gaming Generation

PlayStation,VAIO, Walkman

Multiple Early Release Movies Per MonthUnlimited Availability of Studio Films for Digital Download Movies

Ultimate Fighting Championship Sports Formula 1 Tour de France

Video Game Based SeriesOriginal Digital MoviesOriginal

“HBO Quality” Series

“HBO Quality” Series

Premium Sports Packages(Non-exclusive)Other

Education ServiceKey Networks (non-exclusive)

Health/WellnessKey Networks (non-exclusive)



CONTENT COMBINED WITH INTERACTIVE SERVICES CAN CREATE BETTER, DIFFERENTIATED CUSTOMER EXPERIENCES

International/ Ethnic Programming

• International news

• Ethnic programming (e.g., Korean dramas, tele-novelas)

• Foreign films (e.g., Bollywood)

• Translator• Dictionaries• Video foreign

language lessons

• World music (Latin music, African drums, Reggae, Celtic, Caribbean, etc.)

• Foreign language podcasts

• Download short foreign language lessons

• Local language books

• Spanish to English dictionary

• Make friends around the globe

Motor Sports (e.g. Formula 1, NASCAR, IRL)

• Watch races• Driver

interviews

• Race-related documentaries

• Track driver stats

• Car specs

• Soundtracks,• Driving playlists

• F1 games• Gran Turismo• MotorStorm

• Driver biographies

• Racing, car books, and magazines

• Auto racing rantasy leagues, standings

Music

Films

TV

eBooks

Games

Apps

Social

Networks



5-10 USD/month10-20 USD/month

WE WILL DESIGN FLEXIBLE, PERSONALIZED PRICNG MODEL (ILLUSTRATIVE EXAMPLE OF AN ‘A LA CARTE’ CONTENT STACK) 30-50 USD/month

eBooks

TV shows, News

3D films

Sport classic

Kids & Family

Learning: Other languages & cultures

Fitness & Exercise (e.g., yoga, Pilates, dance)

Mixed Martial Arts (UFC, Boxing)

Motor sports (NASCAR, F1)

Original

Indie Films

Best Comedy

Early release

Dr. Oz

Interactive Game Shows

Unlocked HBO

Base line($10-15/mo)

Ultimate 3D

PremiumTV/Films

Sports

Health & Wellness

Unlimited downloadPay per download or prepaid

VoD or prepaid

Facebook

Dietary/Nutrition and Healthy Cooking

3D TV 3D Concerts3D Games

Kids & family

/Education

Global sports

Cable alternative

Health Management Books, Podcasts, Apps

Music

Films

TV

Games

Apps

Social

Networks

Traditional, Out-of Market

Foreign Films

• Community• Experience• Sharing• Recom-mendations

Live/concert

• Subscription (Monthly, Annual),

• Pay per use

• Pre-paid

• Mix ofpay per download+subscription

Strong ‘personalization’ demand of customers

…with different payment preference



DEVICE STRATEGY TO BE FURTHER SYNCHRONIZED WITH TURBO-CHARGED NETWORK SERVICE PLAY

Home Entertainment Personal Devices

Define strategic position /roles of each device for network services play

- Android based devicesand non-Android based devices

- TV and BD players/DVR

Product roadmap to define ‘Symbolic’ personal device for network services

• Accelerate same UX development across all devices• Functionality and Software design for easy NW service usage• Synchronization across 3 (+1) screens (TV/PC/Smartphone +Tablet) is a must



COMPELLING CUSTOMER ACQUISITION / MARKETING STRATEGY TO BE DEVELOPED AND EXECUTED AS ‘ALL SONY EFFORT’

Attract withStrong ‘Hook’

Activatewith

‘All Sony’ effort

Retain/Expand

‘Killer feature’ to drag sizable customers (i.e. early film releases)

Exclusive contents appealing to each segment

Cool and stylish ‘symbolic ’ device

All Sony synchronized activation campaign

Subsidy for new device/free trial period

Sony Electronics/SCE/SPE/SME

Affiliation, Group discount, 3rd party partnership etc.

Uniquely designed, cross medium programs that ties to personalization and community

Flexible pricing/subscription

Continuous content renewal / events arrangement



FY2011 FY2012 FY2010

Lock in PSN users

• Bold, big bang marketing among entire SONY group

Basic one-stop- services( Movie VOD, music subscription, game subscription )

3D

Premium film/TV packages, Core sports packages

Interactive packages (Health & wellness, Education)

Application / services

Major cable/TV equivalent contents

Local contents

• Iconic’ Personal device launch for new service (NEO, Xperia. Tablet ?)

• Iconic personal device as alternative to TV/PC for major emerging countries?

• Create a buzz

•Service open to all non-Sony device


Markets

Competition

Contents / Services

Device Roadmap

Marketing

Launch Turbo-charged Qriocity

A top online service aggregator +

best device provider

A new global entertainment platform, alternative to

TV/cable/satellite

Expand to global marketsMilestones

• Android based device- TV/BD- Rachael 　 phone

• 3D/BIVL TV/BD

•New video PS3 UX

Client Software

Server infrastructure

•New UX for Mobile -Android + SEMC -Pivot middleware

•Stream media to all Sony devices

•Backup/sync to cloud services

Norway, Sweden, Finland, Benelux, Switzerland, Ireland, Denmark, New Zealand, Hong Kong, Korea and Taiwan

NW Platform

All countries where we run PSNUS, Australia, Italy, Canada

•New UX for Android TV/BD

•eBook Integration•Future personal device integration•Digital locker

•Capacity Enhancements• Global Registration / Acct. Mgmt• SonyStyle Single Sign-on

POTENTIAL ROADMAP FOR TURBO-CHARGED PLAN

Prepare for a big launch

Turbo play in red

• Continuous marketing


AGENDA









Financial Plan


Next Steps


KEY ESTIMATE: PATH TO LEADERSHIP

X X= $7

Billion

Number ofPotential Customers

Average Revenue Per Customer

Average Active Customer Ratio

Games $5

Music $3

eBooks $5

Video (Films/TV) $15- 20

Examples:• Early film window• Sports• Premium movie/TV

library• Health & Wellness• Education • Music• Games• E-book• Community / Apps APPS


135 million

350 mil Sony connectable devices*55-60% device connected ratio**

1.5 devices per user

15%** $20- 30 per month($240-$360 per year)

Note: *2-40% uptake from MRP assumed due to the turbo-charged play (assumption varies by device categories)**Varies by device categories.


TURBO-CHARGE COMPARISON

$772 $922

$3,711

$2,310

$441

Network Services Total Revenue ($ Million USD)

Games

Video

MusiceBooks

2010 2011 2012

$3,224

$6,534

2009BUD MRP MRPTurbo Turbo Turbo

x2.0

Connected Devices in Units

53 55 77 90 111 13535mil +3% +16% +22%



THIS SCENARIO REQUIRES INVESTMENT IN FY10, BREAKEVEN IN 2011 AND IS PROFITABLE IN 2012


Integrated Turbo Plan Revenue and Cost Model ($ Million USD)

Note: Financial projections have been developed using best available data and assumptions. Models are quite sensitive to changes in underlying assumptions.


TURBO CHARGE PLAN COMPARISON TO BASELINE

Revenue

OperatingProfit

Cash flow

FY10 FY11 FY12(Mil USD)

772

-145

-135

Base

922

-208

-405

Turbo

2,309

175

167

Base

3,711

-81

-116

Turbo

3,224

268

260

Base

6,534

769

747

Turbo

+61%+19% +103%

-86-63 +509

-116-270 +479


AGENDA









Financial Plan


Next Steps


EXECUTION ISSUES

Ongoing Management Structure

Human Resources Issues

Device Roadmap

Marketing Capability

Technical Execution

Alliances Strategy


WE NEED YOUR SUPPORT TO DRIVE THIS CRITICAL INITIATIVE FORWARD

Compelling customer

acquisition plan

Fast, and integrated Execution

Strong ‘hook’ design (early release, symbolic device)

Group-wide, bold marketing strategy

End-to-end, synchronized execution planning– Content/service– Device roadmap– NW platform– Marketing

Business Structure / Design

NEXT STEPS & DELIVERABLES FOR NEXT 3 MONTHS

ROI optimized content/service portfolio – ‘Exclusive’ contents acquisition plan– 3rd party contents/service aggregation

Recurring revenue, high retention, high margin business platform

– Optimized pricing/bundling design– Ad revenue model – Application platform

Sustainable ‘eco-system’ as business model

WHAT WE NEED

1. Dedicated, scaled up cross functional implementation team (Phase 1)

- Quantitative survey

- Content/Service strategy

- Business model refinement

- Execution

2. Authorization to begin content negotiations

3. Secured funding for next phase implementation (i.e. research etc)


Local teamsLocal teams

Steering Leadership Michael Lynton Dave Hendler George Bailey (Chair)

Hiroshi Yoshioka Kaz Hirai Tim Schaaff

PROPOSED DEDICATED TEAM STRUCTURE FOR PHASE 1 IMPLEMENTATION

Hiroko Sasaki (TMO)

Sean Carey (SCA) ・ Hiroko Sasaki (TMO)

Project Management

Marketing

TBDTBD

Integrated Service Execution/ Delivery Planning

TBD

Contents/Service Roadmap(SPE)

Marketing Strategy (Expert & SPE/GSMG/

BUMK/SNE/SME)

Content/Service Development

TBD

Integrated ServiceModel/Pricing

(SPE )

Programming/Packaging(SPE and/or expert )

Premium Content Acquisition(SPE)

3rd Party Application (SNE or expert)

Ad Revenue Strategy (SPE)

Game (SCE)/Music(SME)E-book (SNE)/

Social network(SNE)

Business Case/ FinancialJin Hagimoto

Customer Research(SPE/SNE)

Device Roadmap on NW Service

(CPDG/NPSG)

NW PF Roadmap(SNE concurrent)

Marketing Roadmap(TBD)

SPE marketing/SME marketingGSMG/BUMKSCE marketing

2-3

2-3

1

2-3

2-3

1

1

3-4 champions+11-15 dedicated team members

to be added

Local teams


Competitive market dynamics are changing dramatically– Customers are increasingly consuming more digital content and online content

availability is more widespread

– Consumers want entertainment solutions and quality experiences that combine both anywhere access to content and device form factor

Sony is the best positioned to take advantage of this opportunity to provide a holistic approach that will attract consumers

We can leverage our content assets/knowledge to acquire and manage exclusive, “must-have content” to develop differentiated offerings

The industry is moving fast and our competitors are not standing still – we need to accelerate investment in order to win

Sony can take a leadership position if we move fast and go big!

CONCLUSION


Network ServiceTurbo-Charge

PlanAPPENDIX

April 20, 2010

DiscoverDiscover

CommunicateCommunicate

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OUR PLAN CALLS FOR A INCREASED INVESTMENT IN CONTENT, SOME OF WHICH WILL BE ALLOCATED TO SPE

Movies

Sports

Original

Health Wellness

Education

TV

3rd Party Services

TotalTotal

Upfront Payment

Revenue Share

Upfront Payment

Upfront Payment

Revenue Share

Upfront Payment

Upfront Payment

Upfront Payment

Upfront Payment

SPE SHARE

0

200

65

0

45

560

250

0

FY11

239

88

120

73

45

30

146

974

165

68

FY12

530

159

257

121

49

49

0

1,773

513

95

TOTAL

795

272

398

219

119

89

216

3,000

683

208

FY10

26

25

20

25

25

10

253

70

6

45(Mil USD)

Upfront PaymentRevenue Share

Total

404 1,043 1,47932570 730 1,521221



ADDITIONAL OPERATING COSTS BREAKDOWN FOR TURBO PLAY

FY10 FY11 FY12

Contents / Services

Marketing

Infrastructure

Flat fee

Rev share

151 424 730

162 723 1,340

313 1,147 2,069

16 186 219

11 13 14

Total

Others 31 191 289

Turbo-chargePlan OP cost

Base line OP cost

Integrated OP cost

+

=1,765Total

129 227 404

500 2,996

(Mil USD)

Documents

Network Service Turbo-Charge Plan April 20, 2010 Discover Communicate Share Learn Create Play Listen Watch