Acquisition of Additional Equity Stake
in Multi Screen Media
Presentation to the Group Executive Committee
October 12th, 2011
Executive Summary
• SPE believes it is important to the growth of its Indian Networks to buy out the current
minority partners in Multi Screen Media (“MSM”)
– Acquisition and launch of new operations are important elements to an India expansion strategy
– Minority partners have rights which allow them to block, slow down, or limit the funding of these
initiatives and to block the hiring/firing of MSM’s CEO
– Such rights have complicated and slowed MSM’s ability to maximize growth opportunities
– Independent of any increased flexibility on new channels or other significant growth initiatives, having
full control could help increase revenue by up to 5% and EBIT/cash flow by up to 10% by FYE15
• SPE has sought to buy out the current minority partners for some time and now has an
opportunity to do so, due in part to the minority shareholders’ liquidity issues
• Acquisition of the minorities' shares of MSM would be at an attractive valuation,
improve long-term cash flow and net income, and generate a 25% IRR
• SPE seeks approval to increase its MSM holdings from 62% to 100% for $311MM
– Payments spread over 4 years beginning in FYE13
2
Importance of SPT Networks & MSM India
•
SPE’s global portfolio of networks is a significant contributor to SPE’s overall revenue and EBIT
•
–
Diversifies SPE’s revenue and profit base with higher growth and margins than content business lines
–
Delivered 10-year CAGR of 21% for revenue and 41% for EBIT
–
Delivered close to $900MM of incremental EBIT through monetizations / one-off transactions over the past 10 years
MSM India is critical to the overall network portfolio
Revenue
1,800
–
Delivered 10-year CAGR of 20% for revenue and 53% for EBIT
–
Delivered $137MM in EBIT in FYE12
SPT Networks Revenue and EBIT
(excluding monetizations / one-off transactions)
EBIT
($MMs)
300
1,600
250
MSM India Revenue and EBIT
Revenue
700
EBIT
160
($MMs)
140
600
120
1,400
500
1,200
100
200
80
400
1,000
150
800
60
300
600
40
100
20
200
400
50
200
0
0
FYE02 FYE03 FYE04 FYE05 FYE06 FYE07 FYE08 FYE09 FYE10 FYE11 FYE12 FYE13
Fcst
Revenue
EBIT
0
100
-20
0
-40
FYE02 FYE03 FYE04 FYE05 FYE06 FYE07 FYE08 FYE09 FYE10 FYE11 FYE12 FYE13
Fcst
Revenue
EBIT
3
MSM India Business/Performance Highlights
• SET is currently the #1 general entertainment channel in Primetime and is close to taking the
#1 spot in All Day
• SAB is the #1 channel among the tier 2 general entertainment channels (overall #5 position)
and has overtaken all of its competitors
• SET MAX: Consistently ranked as the top 3 movie channel in India
– Locked in the rights for the strongest television property in India - IPL Cricket until 2017 (including the
10th season option)
Gross Rating Points: Prime Time
250
Sony Ent. TV
FYE12
200
Star Plus
Colors
150
Zee TV
100
Imagine TV
SAB
50
Star One
0
Wk39
Wk37
Wk35
Wk33
Wk31
Wk29
Wk27
Wk25
Wk23
Wk21
Wk19
Wk17
Wk15
Wk13
Wk11
Wk9
Wk7
Wk5
Wk3
Wk1
Sahara One
Star Utsav
4
Importance of Indian Marketplace
• India is an important growth market to Sony Corporation and SPE
– India is critical to Sony Corporation and SPE due to its size, growing middle class, growth potential , and
the value ascribed to the Sony brand by its population
– Sony and SPE have a history of working together to capitalize on this market, including exposing 350MM
viewers to the Sony brand via SPE’s Sony-branded channels
• Opportunities from synergies have already delivered significant benefits to MSM and
other Sony companies
– The Sony brand on MSM’s channels has increased brand awareness and helped electronics sales
– Implementation of one-click exclusive access to MSM’s library content on various hardware products like
Sony Bravia TVs and Sony Ericsson phones supported premium pricing for these products and crossmarketing for MSM
– Availability of exclusive ringtones from Indian Idol on Sony Ericsson phones provided a unique offering
• Sole ownership will increase the ability to exploit future opportunities and further build
on these past successes
– IPL: Utilize Sony equipment (e.g., broadcast cameras, etc.) including shooting IPL matches in 3D
– Exclusive window / early look for advertising opportunities or discounted ad pricing (value transfer)
– Integration of all Sony products on MSM programs (phones, cameras, computers, televisions, etc)
– Display Sony monitors on the current #1 primetime show on SET: Who Wants to Be a Millionaire (Monitors
are currently Samsung and prominently displayed)
5
MSM Historical and Projected Financial Results
• With strong historical growth and outlook, MSM is critical to SPT networks portfolio
–
MSM performance has improved significantly in recent years and is now consistently profitable
–
EBIT is projected to grow strongly over the next few years
–
In FYE11 MSM had $300MM in debt which will be repaid by FYE16
• MSM is generating positive cash flow and has started paying down its debt
US$ MMs
FYE10
FYE11
FYE12
Projection Projection Projection Projection
FYE13
FYE14
FYE15
FYE16
REVENUE
Bse Business
IPL
TOTAL REVENUE
216.9
142.9
359.8
320.3
75.8
396.1
398.1
195.1
593.2
424.8
97.9
522.7
456.8
193.3
650.1
505.8
236.2
742.0
555.9
279.5
835.4
COSTS
Base Business
IPL
TOTAL COSTS
229.0
114.7
343.7
279.1
51.6
330.7
311.7
143.7
455.4
327.8
84.8
412.6
348.3
155.2
503.5
384.0
186.0
570.0
410.7
220.0
630.7
EBIT
Base Business
IPL
TOTAL EBIT
(12.1)
28.1
16.0
41.2
24.2
65.4
86.6
51.2
137.8
97.0
13.1
110.1
108.5
38.1
146.6
123.7
48.3
172.0
145.3
59.4
204.7
(124.1)
(69.0)
11.5
62.9
(5.6)
73.2
91.2
Net Cash Flow*
- FYE13/FYE14 cash flow includes a cricket payment moved from March to April
*Includes interest and taxes
Note: WSG/Cricket debt and routine A/R financing may remain beyond FYE16
6
Man Jit Singh
Executive Summary

MSM is seeking approval to launch a sports channel in India - SONY SIX (“SIX”) in April 2012

SIX will capitalize on the 3rd largest genre in advertising spend and maximize full potential of
distribution revenues

Business plan for SIX has been developed on an incremental basis:
― IPL will be moved from SET MAX to SIX in FY14 and no revenues or costs are included in this business
plan except for some advertising revenue from the spill over effect of bundling of various sports properties on
SIX along with IPL
― Benefit of 2 months of SET MAX ad inventory freed up from IPL has been reflected annually in this business
plan

Key Properties assumed in the business plan:
― IPL Archive content
― UFC/Fight Sports: Library and live content (revenue share model)
― English Premier League (EPL): 3 years starting in FY14 (total license fee approximately $70M for 3 years)
― BCCI cricket rights have not been factored into this model
― Remaining schedule will be filled with miscellaneous wallpaper properties

SIX will be internally funded by MSM’s existing cashflow and/or existing credit facilities

SIX will turn positive in 3 fiscal years and has a deep water mark $20M, IRR 71% and NPV $91M
Quite apart from subscription revenues the Sports advertising market is large and
growing

India Sports Advertising Market*
Sports Advertising currently constitutes over
$350m (2010)

9.7%
It is the 3rd largest genre in terms of Advertising
revenue
after
Hindi
and
regional
GEC
12.2%
15.8%
22.1%
1000
–
CAGR
21%
800
Availability of high-definition televisions along
with digitization and growth in Indian TV homes
will increase the importance of Sports advertising

Sports offers advertisers unique male viewership
that commands a premium
USD M
constitutes 16% of the market

20.3%
600
400
200
CAGR
40%
182
242
2008
2009
904
569
356
0
2010
2011
2015
Share of Sports genre in TV advertising
* - FICCI-KPMG Indian Media and Entertainment Industry Report 2011
We have the #1 cricket sports property – IPL, but currently do not have the Sports
channel

Over 50% of Indian population follows cricket on TV, making cricket the cornerstone for a Sports
channel

LIVE Sports genre is perceived as premium content and a “must have”

Without a dedicated channel, we are unable to monetise the full potential of the LIVE IPL
broadcast in terms of:
― Releasing MAX inventory to be a movie channel
― Leveraging IPL to command a premium on other Sports properties
― Monetize Subscription revenues for the IPL property, which can only be achieved on a
dedicated Sports channel
MSM wants USD 11 Mn in FY13 to start SIX – India’s premiere sports channel and
the home of “Indian Leagues”
CAGR
17%
51
65
52
64

Acquiring a sports channel like Neo or starting a
home-grown sports channel is imperative
31

Key LIVE properties currently owned include:

BCCI Cricket rights: We will have to wait and
watch over the next few months and will
evaluate an aggressive bid

EPL opens up to bid in FY13 for the FY14-16
season
57
45
28
35
39
20
13
26
13
4
0
26
22
25
FY14
FY15
29
26
33
4
FY13
Net Ad Revenues
EBI (10.
T 1)
(1.2) 3.2
FY16
FY17
Distribution Revenues
6.0
13.8 16.6
DWM (USD M)
(20)
NPV (USD M)
91
IRR
FY18
71%
Timelines
Jan
CONTENT ACQUISTION & RENEWALS
FA Cup
Wallpaper Prog & OtherLive
UFC material
PRODUCTION
Channel ID & Graphics
Promo production
Footage based shows
POST & BROADCAST
Studio & Equipment
Test Signals
Launch
DISTRIBUTION
Seeding Boxes
Marketing
MARKETING
Creative / PR brief
Launch Campaign On Air
Launch Campaign On Air
OTHERS
HR / Team
Feb
Mar
2012
Apr
May
Jun
Jul
Back-up slides
Summary P&L - FY13-18
Summary PnL
P&L (USD Mn)
Revenues
Net Ad Revenues
Net Subscription Revenue (Domestic)
Net Subscription Revenue (International)
Other Income
Bad Debts, Discounts & Rebates
Total Revenues
FY 13
FY 14
FY 15
FY 16
FY 17
FY 18
Total (FY13-18)
3.5
0.0
0.0
0.0
(0.0)
3.5
21.6
13.0
0.0
0.2
(0.2)
34.6
24.9
20.1
0.0
0.2
(0.3)
44.9
25.5
25.5
0.0
0.1
(0.4)
50.8
29.0
28.4
0.0
0.1
(0.4)
57.1
32.9
31.4
0.0
0.1
(0.4)
64.0
137.6
118.4
0.00
0.76
(1.74)
254.9
Expenses
License Fee (Amortized)
Programming Cost
Broadcast Cost
Marketing Cost
Dealer Incentives
G&A
Bank Guarantee
Total Expenses
FY 13
4.9
0.8
0.8
4.6
0.1
2.1
0.0
13.3
FY 14
22.6
5.6
1.0
2.6
0.3
2.8
0.3
35.2
FY 15
27.3
6.2
1.0
2.8
0.4
3.1
0.3
41.1
FY 16
34.0
3.6
1.1
1.5
0.4
3.2
0.3
44.2
FY 17
31.9
4.1
1.1
1.6
0.5
3.5
0.3
43.0
FY 18
35.4
4.3
1.2
1.8
0.5
3.9
0.3
47.4
Total (FY13-18)
EBITDA
Depreciation
EBIT
(9.8)
0.31
(10.1)
(0.6)
0.6
(1.2)
3.9
0.7
3.2
6.6
0.7
6.0
14.1
0.4
13.8
16.6
0.0
16.6
30.8
2.7
28.1
156.2
24.7
6.1
14.9
2.2
18.6
1.5
224.2
Summary Cash Flow - FY13-18
Summary Cash Flow
CF (USD Mn)
FY 13
FY 14
FY 15
FY 16
FY 17
FY 18
Total (FY13-18)
Inflows
Net Ad Revenues
Net Subscription Revenue (Domestic)
Net Subscription Revenue (International)
Other Income
Total Inflow
FY 13
2.6
0.0
0.0
0.0
2.6
FY 14
19.4
10.8
0.0
0.2
30.4
FY 15
23.7
18.2
0.0
0.2
42.1
FY 16
24.9
23.5
0.0
0.1
48.5
FY 17
27.7
26.6
0.0
0.1
54.3
FY 18
31.4
29.4
0.0
0.1
60.9
Total (FY13-18)
129.6
108.5
0.00
0.71
238.9
Outflows
Capex
License Fee Payout
Programming Cost
Broadcast Cost
Marketing Cost
Dealer Incentives
G&A
Bank Guarantee
Total Outflows
FY 13
1.5
4.9
0.6
0.7
3.5
0.1
2.0
0.0
13.3
FY 14
1.0
26.4
4.5
1.0
3.1
0.3
2.7
0.3
39.3
FY 15
0.1
27.9
6.1
1.0
2.7
0.4
3.1
0.3
41.5
FY 16
0.0
29.7
4.2
1.0
1.8
0.4
3.3
0.3
40.8
FY 17
0.1
33.5
3.9
1.1
1.6
0.5
3.5
0.3
44.6
FY 18
0.0
35.4
4.3
1.2
1.7
0.5
3.9
0.3
47.3
Total (FY13-18)
2.7
157.8
23.6
6.0
14.5
2.2
18.4
1.5
226.8
Net Cash Flow
(10.7)
(9.0)
0.6
7.7
9.8
13.6
12.1
Terminal Value (based on FY18 NCF)
Total NCF
177.4
(10.7)
(9.0)
0.6
7.7
9.8
191.1
189.5