Starz Deal
Overview of Benefits for Sony-owned Platforms
January 9, 2009
Confidential
Starz Deal Overview
• In exchange for substantial license fees, our previous Starz deal licensed exclusive rights to our films during
the Pay window through 2013
• Like other Pay TV channels (HBO, Showtime) Starz’ exclusivity placed restrictions on the studio’s ability to
offer on-demand services through traditional customers (MSOs, DBS) and owned platforms (BIVL, PSN)
• Under our new deal with Starz, we have significantly improved our ability to offer on-demand services
– PPV / VOD / EST
Cable / broadband / IPTV -- Broadened our rights to offer PPV / VOD / EST for final 3 months Pay 1 and Pay 2
New media – Retained ability to offer PPV / VOD / EST over the internet at any time during Starz window and
clarified that we can offer PPV / VOD / EST on mobile services at any time
– PPV / VOD viewing period -- extended viewing period from 24 hours to 72 hours
– Free on-demand -- Secured right to bundle 2 “free on demand” titles per year with Sony hardware
– Subscription on-demand -- Secured MFN, ensuring Sony can offer the Starz subscription on-demand channel on
Sony platforms with favorable terms
– Mobile -- obtained right to exhibit 6 titles (<$50m DBO) per year on our mobile SOD channels during network window
– EST -- Reduced EST pricing floor during Pay 2
– Open Market -- Clarified our right to offer digital locker re-delivery of PPV / VOD / EST
Confidential
1
PPV / VOD / EST During Starz Window
Previous Starz Deal
Deal Terms
• Deal prohibited PPV / VOD / EST
on cable, satellite, and IPTV
platforms during Starz window
• Permitted PPV / VOD / EST on
internet and new media services
any time during Starz window
Implications
• If BIVL or PSN operated as a
traditional open internet / web site
service they could offer PPV / VOD /
EST titles during Starz window
• If BIVL or PSN morphed into IPTV
providers (effectively cable
competitors) they were prohibited
from offering PPV / VOD / EST titles
during Starz window
Confidential
New Starz Deal
• Secured rights to offer PPV / VOD /
EST on cable, satellite, and IPTV
platforms during last 3 months of
Pay 1 and last 3 months of Pay 2
• Retains rights for PPV / VOD / EST
on internet (and adds rights for
mobile) at any time during Starz
window
• Retains BIVL and PSN right to offer
PPV / VOD / EST when operating
as an open internet service
• Adds rights for BIVL and PSN PPV
/ VOD / EST offerings to overlap
with Starz windows for six months
if these services become IPTV
providers
• Strengthens our mobile offerings
2
PPV / VOD Viewing Period
Previous Starz Deal
Deal Terms
Implications
• Sony’s PPV / VOD offerings
(through MSOs, DBS, and owned
platforms) was limited to a 24 hour
viewing period
• Sony’s PPV / VOD offerings
(through MSOs, DBS, and owned
platforms) extended to a 72 hour
viewing period
• Limited the value of potential VOD
offerings on BIVL and PlayStation
• Significantly increases the appeal
of PPV / VOD offerings on Sony
platforms and 3rd party providers
• Limited our ability to drive PPV /
VOD revenue through 3rd parties
Confidential
New Starz Deal
3
Free On-demand and Implications for Sony Hardware Bundles
Deal Terms
Previous Starz Deal
New Starz Deal
• Sony was not allowed to offer
pictures on a free-on demand basis
prior to the network window
• Sony is allowed to exhibit 2 pictures
per year on FOD basis if packaged
with a Sony consumer electronics
product priced > $100 and
promotion is up to 2 months in
length
• No box office restriction (can offer
our best titles)
• No timing restrictions (can offer at
any time after theatrical release)
Implications
Confidential
• “Hancock” was not able to be
bundled “free” with the purchase of
a BIVL
• Going forward, Sony can bundle a
free on-demand viewing of our two
biggest titles each year with the
purchase of a BIVL, PlayStation, or
other Sony hardware
4
Subscription on-demand during Starz Window
Previous Starz Deal
Deal Terms
Implications
Confidential
New Starz Deal
• Starz could make subscription
make subscription on-demand
offerings available on its own
platforms (e.g., Vongo) or through
third parties (e.g., Fancast for
Comcast cable customers) without
allowing Sony to offer Starz Play
on our own platforms
• Starz must make Starz Play
available for Sony platforms (e.g.,
PlayStation and BIVL) directly or
through partners
• Created risk of Starz Play channel
being available in multiple places
online, yet not on PSN and BIVL
• Ensures BIVL and PlayStation will
be able to offer a subscription
on-demand offering (Starz Play)
and provides leverage for favorable
deal terms
• MFN on service terms is in place
through February 2012
5
Mobile
Previous Starz Deal
New Starz Deal
Deal Terms
• Subscription on-demand was not
allowed during the network window
(between Pay 1 and Pay 2)
• Obtained right to exhibit 6 titles (with
under $50MM in domestic box) per
year on Crackle / Pix mobile
channels during the network window
Implications
• Crackle and Pix mobile could only
have library titles on non-ad
supported channels
• Enables Crackle and Pix to
introduce quality titles into
subscription mobile channels
earlier
Confidential
6
EST Pricing Floor During Pay 2
Previous Starz Deal
Deal Terms
• EST was allowed in Starz window
but with pricing floors
New Starz Deal
• Pricing floor during Pay 2 reduces
minimum wholesale price to $3.48
• Pricing floor during Pay 2 implied a
minimum wholesale of $6.95
Implications
Confidential
• Pricing floor was unrealistically
high for older (Pay 2) titles, limiting
the EST business
• More realistic pricing will help grow
EST during the Pay 2 window
7
Digital Locker and the Open Market Philosophy
Previous Starz Deal
Deal Terms
Implications
New Starz Deal
• Prohibited an Open Market “digital
locker” redelivery of a film
purchased via the internet
• Allows an Open Market “digital
locker” redelivery
• Titles initially purchased from BIVL
and PSN could not later be
re-delivered through other services
(e.g., cable STB or mobile carriers
to cell phones)
• Improves the value of EST on BIVL
and PSN platforms
• Provides benefits for the Open
Market initiative
• Restrictions limited the feasibility of
the Open Market initiative and
created a confusing consumer
offering
Confidential
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