▪ Why early window exploitation is possible

1) Cooperative Local Theatrical Team - A One Sony-minded SPRI head who engages in discussions for early window possibilities of Sony titles. - We share our revenue numbers (per title) to implement the most effective release strategy for each theatrical release title (release timing/number of screens/etc).

2) Stabilized Consumer Usage of Digital Media - Korean box office for our movies is declining, while digital media consumptions are increasing. : Thanks to the early window titles in 2013, we were the #2 studio on digital platforms while theatrical’s BO market share was only 6% (No.5 among Hollywood studios). - Well-established platforms with 15mil subs (as of Mar ’14) on IPTV and Digital Cable : The platforms provide accurate and transparent reporting of sales and we see true uplifts when we move the windows up as most of the platforms are recouping.

3) Less Resistance from Theater Chains - CJ, who owns the largest multiplex cinema chain in Korea, is also the primary producers of local films. As they have engaged in pursuing early windows on digital platforms first, they have less leverage to complain on studios’ involvement in it.

Korean Market Background

Media Spotlight on WSJ Hollywood’s New Screen Test | WALL STREET JOURNALBy BEN FRITZ and JEYUP S. KWAAK (06/24/2013)

Two Hollywood studios have quietly begun testing a controversial business model in South Korea after years of failed efforts in the U.S.: renting movies via video on demand while they are still playing in theaters.

The experiments, by Walt Disney Co. and Sony Pictures Entertainment, mark the first time major American studios have offered viewers anywhere the option of buying a ticket to see a movie or to rent it at home from a cable, Internet or satellite-television provider. Sony Pictures is owned by Japan’s Sony Corp.

Sony’s “Django Unchained” was available to rent online or via cable just three weeks after premier-ing in Korean theaters in April. Disney’s animated “Wreck-it Ralph” and “Brave” came five and four weeks, respectively, after launching at cinemas in December and September. In both cases the films were still playing broadly in theaters throughout South Korea, the world’s eighth-largest film mar-ket.Executives at the four other major Hollywood studios said they are watching Disney and Sony’s tests in Korea and may follow suit.

In the U.S., top cinema chains including Regal Entertainment Group and AMC Entertainment Holdings Inc. refuse to play films without at least a 90-day “window”—industry jargon for the time between the theatrical and home-entertainment release—out of concern people will choose to wait for the movie at home rather than go to the theater. “A short window or simultaneous release muddies the value proposition being offered to consumers,” said Patrick Corcoran, a spokesman for the National Associa-tion of Theatre Owners trade group.Small distributors commonly release low-budget movies in independent theaters at the same time they are on VOD. But major studios, which need to work with AMC, Regal and other chains to blanket the country with their big-budget releases, rarely even come close to doing so.In 2011, Disney conducted a VOD test in Portugal with a six-week window on the animated feature “Tangled.” Until South Korea, it hadn’t repeated the experiment. The same year, Sony, Time Warner Inc.’s Warner Bros., Comcast Corp.’s Universal Pictures and News Corp’s 20th Century Fox each offered a few movies on VOD through satellite broadcaster DirecTV but not until 60 days after their U.S. debut. Even then, the movies cost $30 to watch, six times the normal price for VOD after 90 days.The results of the DirecTV test were widely considered disappointing.

Again that year, Universal proposed offering its Eddie Murphy comedy “Tower Heist” on VOD in two cities with a three-week window for $60. It backed down due to fierce opposition from exhibitors.

Korea Window Summary

▪ What is it?: - Super Premium VOD (SPVOD): VOD window created during a title’s theatrical run. Retail Price: KRW10,000 ($10). Sony Share: 70% . KRW7,000 ($7) - Early EST (EEST): EEST between SPVOD & PVOD (or start with EEST for non-SPVOD titles) to generate the maximum revenue from the early window. $3 more margin than PVOD per transaction. Sony WSP: KRW5,950 ($5.9) - Premium VOD (PVOD): VOD window created before Home Video street date

Retail Price: KRW4,000 ($4). Sony Share: 70% . KRW2,800 ($2.8)

▪ How long is it?: - SPVOD: Ranges from start date through title’s last date in theaters (minimum 2 weeks run) - EEST: Starts right after SPVOD window - PVOD: 3 weeks to 4 weeks prior to local HE street date

▪ What have we been trialing?: - SPVOD: Tested 5 titles (DJANGO, ELYSIUM, CAPTAIN PHILLIPS, 2GUNS, CLOUDY 2) in FY14 - PVOD: Most theatrical releases in FY14 (10 titles, more info on Slide 10) ** 80%-90% of the total title’s revenue results from the early windows when the title is released as SPVOD/PVOD.

▪ How do we see it changing going forward?: - SPVOD: Most local titles. More studios are getting engaged. DISNEY started in 2013, FOX started in 2014. NBCU will be releasing SPVOD for all theatrical titles within 30 days of the local theatrical start date from Summer 2014. - PVOD: A norm for all studios’ and local distributors’ titles

DEFINITIONS OF NEW WINDOWS

SONY’S WINDOW STRUCTURE AND PRICING

▶ Newly Established Window

→ LVR Starts

→ Premium SVOD → 2nd Tranche SVOD

Window

Theatrical Window Digital Window Pay TV Window Free TV Window

3months 7months 12months 24months

Theatrical Run(1month)

　 　 　 　 　 　 　 　 　 　 　 　 　 　 　 　 　 　 　 　 　 　 　 　 Pay TV Free TV

EST

　 　 　 　 Early EST(Tier0) EST Tier 1(O≤LVR≤7) EST Tier 2(LVR>7)

　 　 　 　 RP: 8,000-9,900 RP: 6,500 - 9,900 RP: 3,500 - 6,500

　 　 　 　 WSP: 5,950 WSP: 4,400 WSP: 3,000

VOD

　 　 SPVOD(2weeks)

　 　 　 　 PVOD(avg. 1month)

Current VOD Non-Current VOD Library VOD

　 　 RP: 10,000 (70%) 　 　 　 　 RP: 4,000 (70%) RP: 2,500(HD) / 1,800 (SD) (70%) RP: 2,500 (HD) / 1,800 (SD) (65%) RP: 1,200(HD) / 900(SD) (60%)

　 　Sony:7,0

00 　 　 　 　 Sony:2,800 Sony: 1,750(HD) / 1,260(SD) Sony: 1,625 (HD) / 1,170 (SD) Sony: 720(HD) / 540(SD)

DVD　 　 　 　 　 　 　 　 　 　 　 　 RP: 20,000 RP: 8,000

　 　 　 　 　 　 　 　 　 　 　 　 WSP: 15,130 WSP: 6,052

BD　 RP: 29,000 RP: 14,800

　 　 　 　 　 　 　 　 　 　 　 　 WSP: 21,938 WSP: 11,141

* Sony = Sony's Share

* unit = KRW

* RP = Retail Price

* RP & WSP for BD & DVD is in net (excl. tax)

▪ Strategic Release Planning - Check the U.S. Theatrical & DVD dates and local territory’s theatrical & DVD dates - Check the competition before setting on a release date (aiming for full exposure for the 1 st week) - Take advantage of holidays, long weekends and vacation season

▪ Material Preparations (Agreement from DigiPol in FY14. Under review) 1) Burnt-in Subtitles - 6-8 weeks ahead of US DVD date is fine. (The earliest we have trialed this was with ELYSIUM where we went 8 weeks before US DVD date.) - Burn-in must be in active video (WPF needs a minimum of 2 weeks to prepare) - No need for watermark - DigiPol to be informed - Approval from SPHE, SPT and Theatrical

2) An English Clean version OR a Dubbed version (no burnt-in subs) - Launch no earlier than 6 weeks before US DVD date. - Title to be WM’d with service mark for tracking. - DigiPol to be informed - Approval from SPHE, SPT and Theatrical

** Content is generally pirated 14- 21 days ahead of local release date so we can provide the CLEAN VERSION if the launch is within 2 weeks of the local DVD date or if Early EST is DVD – 3 weeks

EARLY WINDOW GUIDELINES

Early Window Highlights

FY14 Key Achievements

Original FY14 forecast was $4.2M but through the exploitation of SPVOD/PVOD windows for digi-tal platforms, we were able to exceed the forecast by 142% (FY14 Total Revenue: $6M) and gener-ate overages of $1.8M.

FY14 Budget FY14 Actuals0

1000

2000

3000

4000

5000

6000

7000

120 116

4,118

5,900

4,238

6,016

New MediaRVODTOTAL

In USD

FY14 DIGITAL REVENUE

(Googleplay)

Early Window Titles in FY14

　 KR THEATRICAL KR DIGITAL DATE US LVR SPVOD (KRW) PVOD (KRW) REVENUE (KRW)

SONY SHARE (KRW) Notes

DJANGO UNCHAINED 2013-03-21 2013-04-11 No rights 240,620,000 195,485,900 436,105,900 305,274,130 First trial title for SPVOD

AFTER EARTH 2013-05-30 2013-08-08 2013-10-08 X 1,066,274,500 1,066,274,500 747,481,160Took advantage of the Summer Vacation period (PVOD started Aug 08 for 60 days) and was promoted as FAMILY ACTION ADVENTURE to target kids & family

WHITE HOUSE DOWN 2013-06-27 2013-09-25 2013-11-05 X 596,569,600 596,569,800 417,812,740 　

ELYSIUM 2013-08-29 2013-10-03 2013-12-17 848,530,000 521,524,500 1,370,054,500 959,530,400Started SPVOD right before the long holiday weekend (Oct 3-9) which resulted in maximum marketing commitment from platforms.

THE SMURFS 2 2013-08-01 2013-11-01 2013-12-03 X 249,764,500 249,764,500 170,702,930Was not able to pursue SPVOD due to early local theatrical release (DigiPol doesn't allow dubbed versions to be released 2 months ahead of US DVD).

CAPTAIN PHILLIPS 2013-10-24 2013-11-28 2014-01-14 288,070,000 176,517,200 464,587,200 325,094,840Tracked the watermark for illegal copies, minimal impact.　

2GUNS 2013-11-07 2013-11-14 No rights 44,040,000 245,134,700 89,175,700 62,102,630Limited theatrical release (58 screens) which meant people had less awareness of the title, therefore only reached 32.6% of the forecast.

CLOUDY 2 2013-11-21 2013-12-23 2014-01-28 876,960,000 409,877,100 1,286,837,100 885,741,180First animation title to try SPVOD (with dubbed version). Was able to test this titles due to a late local theatrical release (2 months later than the US – Disney’s strategy for most titles to pursue SPVOD).

INSIDIOUS 2 2013-12-05 20131-01-22 2013-12-24 X 253,143,600 154,568,400 107,877,270 　TOTAL

　 　 　 2,298,220,000 ($2.29M)

3,714,291,600 ($3.7M)

5,713,937,600 ($5.7M)

3,981,617,280 ($3.9M) 　

FY15 SPVOD/PVOD Titles Forecast

(in KRW)

　 Theatrical Release Date (KR) SPVOD EEST PVOD VOD TOTAL (SONY SHARE)

ASM223-Apr-14 　 100,000,000 400,000,000 200,000,000 700,000,000

DELIVER US FROM EVIL 28-Aug-14 220,000,000 15,000,000 100,000,000 50,000,000 385,000,000

THE EQUALIZER 09-Oct-14 400,000,000 12,000,000 150,000,000 100,000,000 662,000,000

FURY 23-Oct-14 300,000,000 12,000,000 150,000,000 65,000,000 527,000,000

ANNIE 08-Jan-15 400,000,000 200,000,000 150,000,000 132,000,000 882,000,000

TOTAL 1,320,000,000 339,000,000 950,0,000,000 547,000,000 3,156,000,000 ($3.1M)

• SPVOD can only be pursued for locally theatrically released titles. (4 titles for FY15: Deliver us from Evil, The Equalizer, Fury, Annie)

• Due to internal policy, ASM2 can only be released as PVOD/EEST a month ahead of LVR, start-ing from July 14.

OPPS

Super Premium VOD&EST

• SPEST (RT: KRW15,000) can be offered simultaneously with SPVOD (RT:KRW10,000) and this can work well for certain genre films like Kids or Animation.

• Determine optimum window/date for digital release on a title-by-title basis and test Super Premium EST with the appropriate title.

Early EST • Create an EEST window between SPVOD & PVOD (or start with EEST for non-SPVOD titles) to generate the maximum revenue from the early window ($3 more margin than PVOD per transaction).

Online Theater

• Releasing NRP’ed titles on digital platform as the first window.

• DRP: KRW10,000 (USD9) – Same as SPVOD

• Need to be released as close to the US theatrical release as possible

• Genre: Action, Comedy, Drama (eg. 22 JUMP STREET, SEX TAPE)

• Four digital platforms have started with NBCU (47 RONIN) & Disney (THE 5th ESTATE).

RISKS

Stricter regulations enforced on SPVOD titles

• Due to the increase of unfiltered SPVOD movies, SPVOD is losing credibility and revenue.

• Stricter enforcement of SPVOD selection: Have to be released in more than 20 theaters in Seoul (including multiplexes) and have to be in more than 5 theaters during SPVOD service.

• SPVOD dates could be earlier than 75 days prior to US LVR as not many titles can last in theaters for more than 4 weeks.

More studios pursuing early windows (SPVOD)

• Less substantial support from platforms as there will be more competition for placement

• Platform’s marketing commitment dependent on the studio’s marketing support

Opportunities and Challenges in FY15

THANK YOU