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SET SPAIN PARTNERSHIPOPPORTUNITY

OCTOBER 2009

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Executive Summary

• DTT represents the largest channel distribution opportunity in Spain– Already at 96% coverage and 69% penetration– Compares to Pay TV at roughly 27% penetration

• Important to secure and maintain a foothold in this market today, but requires a significant investment

– In the near-term: Growth in ad revenues has been slower for smaller channels Fixed fees for distribution (in excess of €4.5MM per year) is difficult to offset

– In the long-term: Ad revenues are expected to grow rapidly with the April ‘10 analogue changeover

and full audience migration Players that come late to the game will find a limited number of slots being bid-up.

UK provides a relevant example of DTT slot prices increasing three-fold

• Partnering with Sony offers significant strategic advantages– Defray cost in the early, ramp-up phase– Combine programming resources to drive channel rank– Leverage Sony’s local expertise and relationships with advertisers

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DTT in Spain Today

• 96% of population has DTT coverage – the highest coverage of principal European countries

• DTT penetration reaches 69% of Spanish households, with rapid growth driven by upcoming analogue changeover

• More than 21 million DTT devices sold

• 73.7% of buildings that share a community antenna are ready for DTT

• DTT viewing nationwide overtook analogue with DTT screen share at 43%, while analogue TV’s share dropped to 39%

Source: implulsatdt Monthly Report Extract (September 2009), Sofres, Gfk, Abertis Telecom

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Aug '08

Sep '08

Oct '08 Nov '08

Dec '08

Jan '09 Feb '09 Mar '09

Apr '09 May '09

Jun '09 Jul '09 Aug '09

Sep '09

0%

10%

20%

30%

40%

50%

60%

70%

80%

37% 39% 41% 42% 44%47% 49% 51% 54%

59% 62%66% 67% 69%

Monthly DTT Penetration in Spanish Households

DTT Penetration Growth

DTT penetration in households is growing, with 96% coverage and 69% penetration in September ‘09

Source: implulsatdt Monthly Report Extract (September 2009), Sofres, Gfk, Abertis Telecom

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Jul '08 Aug '08

Sep '08

Oct '08

Nov '08

Dec '08

Jan '09 Feb '09

Mar '09

Apr '09

May '09

Jun '09 Jul '090

5

10

15

20

25

11.9 12.4 12.9 13.6 14.215.2

16.3 16.9 17.5 18.2 19.0 19.921.0

Sales of DTT Receivers (millions)

DTT Equipment Growth

Sales of DTT equipment are growing with fewer than 200 days remaining before April 3, 2010, which marks Spain’s transition to DTT

Source: implulsatdt Monthly Report Extract (September 2009), Sofres, Gfk, Abertis Telecom

Non-Integrated 215 163 175 201 164 369 368 180 233 219 326 385 513

Integrated 420 330 372 475 429 649 756 396 390 397 559 457 633

Total Monthly Units Sold 635 493 547 676 593 1018 1124 576 623 616 885 842 1146

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Jul '08 Aug '08

Sep '08

Oct '08 Nov '08

Dec '08

Jan '09 Feb '09 Mar '09

Apr '09 May '09

Jun '09 Jul '09 Aug '09

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

50%

16% 17% 17% 18%20% 22%

24%26% 27% 29%

32%35%

40%43%

Monthly DTT Screen Share

DTT Share (Analogue vs. DTT Share)

DTT viewing nationwide overtook that of analogue in July ‘09

Source: implulsatdt Monthly Report Extract (September 2009), Sofres, Gfk, Abertis Telecom

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Total Household Penetration

DTT penetration eclipses Pay TV penetration

DTT Pay TV0

2

4

6

8

10

1210

4

MM

# of Spanish Households % of Spanish Households

DTT Pay TV0%

10%

20%

30%

40%

50%

60%

70%

80%69%

27%

%

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DTT Ad Revenue Opportunity

Opportunity to capitalize on a growing ad market

• April 2010 analogue to digital changeover will help eliminate traditional impediments to growth in DTT advertising revenues

– Entrenched channel oligopoly will lose incentive (and ability) to concentrate audience and ad revenue in analogue market

– Media buyers will be offered a more robust bouquet of DTT channels

• Significant growth will be driven by:– Analogue TV viewers and channels will fully migrate to DTT

– Ad revenues will migrate along with TV viewers and channels

– Channels will be competing for TV viewers on DTT with compelling content offerings

– Media buyers and advertisers will focus on channels that have a growing audience base

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Spain TV Advertising Forecast

Spain TV Ad Spend Thematic DTT Ad Spend

2005 2006 2007 2008 2009 2010 2011 20120

500

1000

1500

2000

2500

3000

3500

4000

2,951

3,1883,469

3,082

2,455 2,344 2,4372,582

MM€

2005 2006 2007 2008 2009 2010 2011 20120

20

40

60

80

100

120

140

0

915

20

49

82

101

123

MM€

CAGR 55%*

Source: Infoadex , Zenith Media Vigia and SET Spain estimates.* CAGR based on 2006-2012.

In a large but likely flat overall TV advertising market, DTT represents the greatest opportunity for growth

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Sony – A Global Leader in Networks

117 feeds, 140 countries, 400MM households, 22 languages

KoreaKorea

LATIN AMERICALATIN AMERICA

Central EuropeCentral Europe

North AmericaNorth America

BrazilBrazil

SpainSpain

Spain / PortugalSpain / Portugal

RussiaRussia

SingaporeSingapore

AFRICAAFRICA

Southeast AsiaSoutheast Asia

JapanJapanASIAASIA

AustraliaAustralia

U.K.U.K.

IndiaIndia

GermanyGermany

ItalyItaly

PortugalPortugal

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Sony Spain Overview

• Sony’s Spanish networks leverage Sony’s global resources– Sony’s networks reach 400MM households in 140 countries and are broadcast in

22 languages

– Sony combines the strength of our content with operational excellence to make our channel brands leaders in local markets

• Sony is a leader in the Spanish market– 10+ year track record of success with AXN Spain

– AXN is the #1 cable channel in Spain

– Gives Sony brands high awareness with audiences and strong relationships with advertisers

• SET is an established general entertainment brand in Spain– Launched in Spain in September 2006 through a partnership with VEO TV

– Digital free-to-air channel with revenue driven primarily by advertising

– Offers high quality standards through digital technology and unique programming content

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SET Spain Programming Overview

• General entertainment channel with programming in multiple genres (Comedies, Dramas, Reality, Film):

SeaquestBrazil’s Next Top Model

Da Vinci’s Inquest

Married with Children

Becker

Ed Providence V.I.P. Will & Grace Amazing Race

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SET Spain Ratings

Source: Sofres. Temáticos Concesión TDT. Ind 4+

SET Spain ranks in the top 10

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Partnership Opportunity

• Access to one of a few available free DTT slots– Majority of current slots are captive to major broadcasters

– Only limited additional free slots available for sub-license after digital changeover

8 of 12 new slots will likely go to major broadcasters used for their own stations (or if sub-licensed, likely at a much higher price than Veo is charging)

Portion of 4 slots for Veo and Net we expect will be used for themselves 1-2 slots may be available for sub-license for free channels and will require bidding

against major U.S. media conglomerates

• Less expensive method of entry– Near-term opportunity to split expenses (including €4.5MM fixed fees per year to

Veo, programming and other expenses)

– Early entry significantly less expensive than when slots are bid up

• Ability to leverage Sony brand, market expertise, and content

– SET established as a top 10 channel

– Strong relationship with advertisers

– Deep library of TV and film content that can be utilized for the channel

Partnering with Sony provides…