Starz Deal Summary
January 21, 2009
Privileged and Confidential
Deal Overview
Privileged and Confidential
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Deal Summary
• Secured 3 year extension to the Starz deal
• Original deal expired with December 2013 theatrical releases; new deal provides
Sony security of a Pay TV deal through December 2016 theatrical releases
• License fees and bonus continue to be above market
• New deal provides framework for Starz services on the internet, helping to
ensure premium access and premium messaging
– Suggested list price at premium levels
– Cap on number of subscribing households
• Deal expands Sony’s rights to offer on-demand services before and during the
Starz windows
Privileged and Confidential
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Overall Deal Terms
Terms
License Fees
and Bonus
Current term (2009 – 2013)
• Rate card unchanged 2009 – 2011
• Rate card reduced 12.5% 2012 – 2013
• Annual Bonus of $47.5MM unchanged
Comments
• We believe bonuses at this level are rare
• Rate card remains well above market throughout current term
• Although reduced, rate card in extension continues to be above
market
Extension term (2014 – 2016)
• Rate card reduced 35%
• Annual Bonus of $38.7MM
Extension valued at $500MM - $600MM
Annual
Qualifying Films
• Up to 50 films per year
• We believe all studios have Pay TV title caps and that ours is the
highest and offers greater flexibility within our slate
• Cap exceeds historical and projected SPE slates
Internet
SOD
• Premium pricing / access
• Premium branding
• Incremental fees
• Structure is in the spirit of traditional Pay TV flat fee model; but
provides clear definition for “Pay TV on the internet”
• Potential additional upside for Sony
Other
Benefits
•
•
•
•
• Increases Sony value in pre-Pay TV windows
• Creation of 1 additional month of network window for Sony to
monetize
• Improves Sony’s mobile/cellular offering
• Improves Sony’s consumer electronics offering
72 hour PPV/VOD viewing
Reduce Pay 2 EST wholesale to $3.48
Pay 2 Black Periods eliminated
Mobile/Cellular rights for Sony subscription
offering between Pay 1 & 2 for up to 6
pictures/year at less than $50MM DBO
• SCA allowed to exhibit up to 2 pictures /year
on FOD basis if packaged with a Sony
consumer electronics product >$100 /
transaction
• MFN for PSN to offer Starz Play
Privileged and Confidential
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Title Caps / Qualifications
Privileged and Confidential
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Title Caps/Qualifications for 2009 – 2013 Theatrical Releases
A Total Cap of 50 Films Released Per Year
Acquired from up to 2
sources per Year
(unless MGM)
SPC Films
“A” Films
(Sony Releases - e.g.,
Columbia or Screen
Gems)
“B” Films
(e.g., Acquisitions)
15
25
10
(lower rate card than
“A”/SPC titles)
(SPC films can fill “A”
slots if there are open
“A” slots in that Year)
(Excess “A” films
may fill “B” slots if
available)
≤6 Sony Rent-ASystem Films
≤4 Third Party RentA-System Films
Acquired from a
single source per
Year
(SPC films can also fill “B”
slots if there are open “B”
slots in that Year)
Privileged and Confidential
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Qualifications Chart for 2009 – 2013 Theatrical Releases
CAP
(on # of films Starz must
license)
Theatrically
Released by
Meet at least 1
Additional
Element
Meet at least 1
Minimum
Requirement
License Fee
Provision
“A” Films
25 releases per Year
(Excess “A” films may fill “B”
slots if available)
Any SPE label
on at least
800 screens[1]
Yes
Yes
Full Fee
“B” Films
10 releases per Year
Any SPE label
Yes
Yes
65% of Rate
Card
Sony RentA-System
(categorized
as “B” films)
No more than 6 “B” films can
be Sony RAS acquired from
up to 2 sources per Year (if
any MGM franchise film is
designated a Sony RAS,
then # of sources can be 3)
Any SPE
Group
Member
Does not
satisfy any of
the “Additional
Elements”
Yes
65% of Rate
Card
Third Party
Rent-ASystem
(categorized
as “B” films)
No more than 4 “B” films can
be acquired from a single
source per Year.
Not
Theatrically
Released by
an SPE Group
Member
Does not
satisfy any of
the “Additional
Elements”
Yes
65% of Rate
Card; $7M cap
per Picture
SPC Films
15 releases per Year
(overflow “A” category films
or “B” category films if there
are open “A” film or “B” film
slots in that Year)
SPC or
successor
label
Yes
Yes
Full Fee
(1) The 800 screen minimum does not apply to (A) SPC films designated as overflow “A” category films, or (B) up to 3 qualifying films per Year, provided those films have EITHER
(i) P&A greater than $20M OR (ii) release on at least 550 screens at widest point of theatrical release in the Territory.
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Film Qualifications
Film Qualifications. Subject to the exceptions or exclusions described below, the new Starz agreement covers films that:
• Are Feature Length (75 mins., including credits)
• Are Theatrically Released by an SPE Group Member in the Territory (except for Third Party RAS Pictures), meaning that SPE
Group member did ANY 3 of the following:
– Booked US theaters
– Selected US release date
– Controlled 100% of US theatrical Film Rentals*
– Controlled/had final approval over US theatrical marketing plans*
– Controlled/had primary responsibility for US theatrical ad buys*
* Note: SPE may engage third parties under SPE control
• Are Rated “R” or less restrictive.
• Have an Initial Theatrical Release during the Term.
– A narrow exception to Initial Theatrical Release exists for Home Theater exhibitions.
• Meet the “Minimum Requirements”: each film must have EITHER (a) P&A of at least $250k and theatrical release on at least 20
screens OR (b) at least $4.5M negative cost.
• No recorded live event programs (concerts, stage plays, musicals, dance performances and sports), but motion pictures that are
not recordings but are documentaries or dramatizations are included.
• “Additional Elements” with respect to a Picture are:
– 50% or more of total P&A expenses incurred by SPE Group Member, either directly or via financiers/investors.
– Arises out of script/screenplay/property developed by SPE Group Member
– Produced under control/direction/supervision of an SPE Group Member
– SPE Group Member was responsible for at least 25% of negative costs
– Picture based on underlying property owned/controlled by SPE Group Member
– At time of Theatrical Release, all US Home Video and TV rights are owned/controlled by SPE Group Member.*
* Note: If a Picture only satisfies the final Additional Element and is produced by a Major Studio, Lionsgate or Weinstein,
or any company with a home video distribution unit, it shall be classified as a Sony Rent-A-System Film.
• Right of First Negotiation/Refusal: Starz has a right of first negotiation and first refusal for pictures (other than Third Party Rent-ASystem Films) that exceed the caps above, or fail to meet the Minimum Requirements, or are not Feature Length.
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Title Caps/Qualifications for 2014 – 2016 Theatrical Releases
A Total Cap of 50 Films Released Per Year
Acquired from up to 2
sources per Year
(unless MGM)
SPC Films
“A/B” Films
(e.g., Columbia,
Screen Gems or
Acquisitions)
15
35
≤6 Sony Rent-ASystem Films
≤4 Third Party RentA-System Films
(SPC films can fill “A/B”
slots if there are open “A/B”
slots in that Year)
Privileged and Confidential
Acquired from a single
source per Year
8
Qualifications Chart for 2014 – 2016 Theatrical Releases
CAP
(on # of films Starz must
license)
Theatrically
Released by
Meet at least 1
Additional
Element
Meet at least 1
Minimum
Requirement
License Fee
Provision
“A/B” Films
35 releases per Year
Any SPE label
Yes
Yes
Same fee
SPC Films
15 releases per Year
(excess films may be
licensed as overflow
“A/B” category films if
there are open “A” film or
“B” film slots in that Year)
SPC or
successor
label
Yes
Yes
<1 counts as
wide release film
Sony Rent-ASystem
(categorized
as an “A/B
Film”)
No more than 6 “A/B”
films can be Sony RAS
acquired from up to 2
sources per Year (if any
MGM franchise film is
designated a Sony RAS,
no. of sources can be 3)
Any SPE
Group
Member
Does not satisfy
any of the
Additional
Elements”
Yes
Third Party
Rent-ASystem
(categorized
as an “A/B
Film”)
No more than 4 “A/B”
films can be acquired
from a single source per
Year.
Not
Theatrically
Released by
an SPE Group
Member
Does not satisfy
any of the
Additional
Elements
Yes
Privileged and Confidential
Fee caps:
2/yr $6M each
2/yr $5M each
9
Caps on Films
– Overall cap above anticipated output levels
– Excess SPC films can spillover into A/B titles
Historical (CY)
“A” Titles
MRP Period (FY)
CY05
CY06
CY07
FY08
FY09
FY10
FY11
Avg.
(09 -13)
Cap
15
19
19
22
17
17
20
18
25
(14 -16)
Cap
35
“B” Titles (1)
4
3
3
6
6
6
6
5
10
SPC
19
16
18
13
19
20
20
18
15
15
Total
38
38
40
41
42
43
46
41
50
50
(1) FY08-FY12 based on FY09 Q1 forecast estimates.
Privileged and Confidential
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Making Ofs
• STE remains obligated to accept and exhibit Making Ofs
• At least 10 Making Ofs per year from theatrical distribution (other than SPC)
• At least 6 Making Ofs per year from SPC
• Making Ofs to be 15 or 24 minutes in length, closed captioned if available
• STE continues to have the exclusive right to exhibit Making Ofs from 1st day of
month prior to initial theatrical release (ITR) through the last day of the 2nd month
following ITR
• STE continues to have exhibition commitments for Making Ofs
• Not less than 6 exhibitions with at least 2 in primetime with 1 on Encore or Starz
• At least 4 exhibitions 2 weeks prior to and following ITR
Privileged and Confidential
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Non-theatrical Window
• Removed requirement that Non-theatrical exhibition be via “traditional projection
means” and “closed circuit, on-site originated tv”
• Now permits exhibition via “any technology”, both “on-site” and off-site
originating
• Swank’s college dorm/ apartment product (included in room rate) is permitted as
long as two other major studios are licensing
• At least one studio must be Disney, Universal, Warner or Fox
• The other can be any of these studios, or Paramount, DreamWorks, MGM or any
other MPAA member with $250MM in DBO
Privileged and Confidential
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Rate card and Bonus
Privileged and Confidential
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Rate card and Bonus
• Current term (2009 – 2013)
• Rate card unchanged from 2009 – 2011
• Rate card reduced 12.5% for “A” titles including SPC titles during 2012 – 2013
• Annual Bonus of $47.5MM unchanged
• Extension term (2014 – 2016)
• Rate card reduced 35% from 2009 levels
• Addition of low volume rate card discounts
• Annual bonus of $38.7MM - $40MM (based on payment option selected by Sony)
• Supercaps
• No change through 2011
• Starting with 2012 releases:
–The deal eliminates the current higher rate card for two pictures per year
–No more than 4 total pictures (no more than 1 in any year) at the highest tier
Privileged and Confidential
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Rate card – 2009, 2010 and 2011 – Unchanged
• For Pictures with General Theatrical Release (or, if no General Theatrical Release has occurred,
Initial Theatrical Release) in Years 2009, 2010 and 2011:
Film Rentals:
Incremental
Percentage:
Cumulative Fee at
Highest Point in Range:
<$1 million
100%
$1.0 million
$1 ≤$2 million
85%
$1.85 million
$2 ≤$15 million
52%
$8.61 million
$15 ≤$30 million
30%
$13.11 million
$30 ≤$50 million
22.7%
$17.65 million
$50 ≤$175 million
0%
$17.65 million
$175 ≤$207.34 million
15%
$22.5 million
> $207.34 million
0%
$22.5 million
• Starz will pay a license fee equal to 65% of the applicable License Fee in the above table for each
“B” film, however, that in no event shall such license fee be greater than $7.0MM for any 3rd Party
Rent-A-System Film
Privileged and Confidential
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Rate card for Supercap Titles – 2009, 2010 and 2011 – Unchanged
• Two Pictures with a General Theatrical Release (or, if no General Theatrical Release has occurred,
Initial Theatrical Release) in each of Years 2009, 2010 and 2011 with the highest Film Rentals shall
be calculated in accordance with the following table:
Film Rentals:
Incremental
Percentage
Cumulative Fee at
Highest Point in Range:
<$1 million
100%
$1.0 million
$1 ≤$2 million
85%
$1.85 million
$2 ≤$15 million
52%
$8.61 million
$15 ≤$30 million
30%
$13.11 million
$30 ≤$50 million
22.7%
$17.65 million
$50 ≤ $73.5 million
10%
$20.0 million
$73.5 ≤ $175 million
0%
$20.0 million
$175 ≤$191.67 million
15%
$22.5 million
> $191.67 million
0%
$22.5 million
Privileged and Confidential
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Rate card – 2012 and 2013
• For Pictures with General Theatrical Release (or, if no General Theatrical Release has occurred,
Initial Theatrical Release) in Years 2012 and 2013:
Film Rentals:
Incremental
Percentage:
Cumulative Fee at
Highest Point in Range:
<$1 million
87.5%
$875,000
$1 ≤$2 million
74.38%
$1.62 million
$2 ≤$15 million
45.5%
$7.53 million
$15 ≤$30 million
26.25%
$11.47 million
$30 ≤$50 million
19.86%
$15.44 million
$50 ≤$175 million
0%
$15.44 million
$175 ≤$207.34 million
13.13%
$19.69 million
> $207.34 million
0%
$19.69 million
• 1 Picture in each of 2012 and 2013 may have a License Fee in either of the highest two tiers
• Starz will pay a license fee equal to 65% of the applicable License Fee in the above table for each
“B” film, however, that in no event shall such license fee be greater than $7.0MM for any 3rd Party
Rent-A-System Film
Privileged and Confidential
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Rate card – 2014, 2015 and 2016
• For Pictures with General Theatrical Release (or, if no General Theatrical Release has occurred,
Initial Theatrical Release) in Years 2014, 2015 and 2016:
Film Rentals:
Incremental
Percentage:
Cumulative Fee at
Highest Point in Range:
<$1 million
65.00%
$650,000
$1 ≤$2 million
55.25%
$1.20 million
$2 ≤$15 million
33.80%
$5.6 million
$15 ≤$30 million
19.50%
$8.52 million
$30 ≤$50 million
14.76%
$11.47 million
$50 ≤$175 million
0%
$11.47 million
$175 ≤$207.34 million
9.76%
$14.63 million
> $207.34 million
0%
$14.63 million
• 1 Picture in each of 2014, 2015 and 2016 may have a License Fee in either of the highest two tiers
• 3rd Party Rent-A-System Film fees capped at: 2/yr $6M each and 2/yr $5M each
• Low volume rate card:
# of Wide Release A/B Films (incl. up to 1 SPC Film):
Percentage Reduction:
12 to 14
6.5%
9 to 11
13%
Less than 9
33%
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Bonus
2009 – 2013 – Unchanged
• In addition to the license fees, Starz will pay the amounts set forth below on the dates set forth below
for Years 2009, 2010, 2011, 2012 and 2013:
Payment Amount:
Payment Due Date:
$47.5 million
January 15, 2010
$47.5 million
January 15, 2011
$47.5 million
January 15, 2012
$47.5 million
January 15, 2013
$47.5 million
January 15, 2014
2014 – 2016
• Starz shall pay to Sony, at Sony’s election (such election to be made on or before December 31,
2009), either: (a) $40 million on June 30 of each of 2015, 2016, and 2017; or (b) $38.73 million on
March 15 of each of 2015, 2016, and 2017; or (c) $20 million on Feb 28/29 of each of 2015, 2016,
and 2017 and $20 million on Oct 31 of each of 2015, 2016, and 2017.
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Bonus Schedule for 2014 – 2016
CY14
CY15
CY16
Option #1
($38.73M every March 15)
Sum: $116.2M
NPV: $109.9M
Monthly Revenue: $3.05M
Mar 15 – $38.73M
Mar 15 – $38.73M
Mar 15 – $38.73M
Option #2
($40.0M every June 30)
Sum: $120.0M
NPV: $112.1M
Monthly Revenue: $3.11M
June 30 – $40.0M
June 30 – $40.0M
June 30 – $40.0M
Scenario #3
($20.0M every Feb28/29 and
Oct 31)
Sum: $120.0M
NPV: $112.1M
Monthly Revenue: $3.11M
Feb 28/29 – $20.0M
Oct 31 – $20.0M
Feb 28/29 – $20.0M
Oct 31 – $20.0M
Feb 28/29 – $20.0M
Oct 31 – $20.0M
• The revenue recognition will be based on the NPV and not the sum of the cash
• The difference is booked to interest income below the line
NOTE: Assumes 5% discount rate.
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Internet Terms for Starz Play Service
Privileged and Confidential
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Overview of Internet Approach
• Overall philosophy is to ensure that online Starz is offered on a premium basis,
primarily by video-based services
• A cap on total internet subscribers ensures service is offered to no more than
roughly half of broadband households
• Suggested list prices help ensure service is positioned as premium
– Online services may offer actual prices below suggested list prices; however those
subscribing at a discount will be counted as multiple subscribers against the cap
• Marketing and messaging further ensure premium positioning
• Most SOD restrictions that applied under the previous deal (e.g., maximum of 72%
of titles available at one time) continue to apply on the internet
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Internet SOD: Overview
TV + Broadband
Examples
DSL Only
Open Internet*
(cable TV + broadband)
(DSL)
Premium
Starz Play only marketed as
part of packages that include
TV (e.g., double play / triple
play).
Available as an ALC “addon” or part of a premium DSL
tier each with suggested list
pricing
Available as an ALC “addon” or part of a premium
video content tier each with
suggested list pricing
Must include an ALC offer
with suggested list pricing
No offers marketed as “free”
No offers marketed as “free”


No offers marketed as “free”
Subscriber Caps
to Encourage
Premium
Incremental
Compensation


* Customers that subscribe through an MSO’s web site (e.g. Fancast) will be considered “Open Internet” subscribers if they do not receive broadband from the MSO
(e.g. Comcast) and subscribers through a telco’s web site will be considered “Open Internet” subscribers if that web site is not specifically dedicated to the telco’s DSL customers
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Suggested List Prices
Cable
DSL
Open Internet
Greater of $33 or
Basic+$5.99+$.01
Bundles
A La Carte in
addition to a
video service
Not applicable; but may
only bundle with
packages that include
basic cable
A La Carte
without an
underlying video
service
$33 threshold moves up
and down with market
changes
N/A
$13.99 through
2012
$16.99 thereafter
$5.99 through
2012
$7.99 thereafter
$5.99 through 2012
$7.99 thereafter
$13.99 through
2012
$16.99 thereafter
Litigation settlement terms: (1) through June 2009, Netflix SLP will be $7.99
ALC, $8.99 bundled. Thereafter, Netflix SLP will be the same as other Open
Internet services (2) Verizon SLP for bundles is $29.99 through 12/31/13.
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Internet SOD: Household Cap and Rate card
Subscriber Cap
Adjustment
HH Cap
•
Cap applies to all instances of
Starz Play (TV+BB, DSL Only,
and Open Internet)
•
Household cap for Starz Play
is 35MM in 2009; growing to
50MM in 2012
•
Starting 2013, cap grows as a
% of growth in high-speed
internet households (but never
less than 50MM)
•
•
Subscribers purchasing below
suggested list prices are
included as multiple
subscribers against the cap
HH Cap
2009
35MM
2010
40MM
2011
45MM
2012
2013+
50MM
50MM+ grows
Privileged and Confidential
•
Rate card applies to Open
Internet subscribers only
(excluding Netflix)
•
Total annual fees to SPE capped
at $20MM (expected value is less
than $20MM as much of cap
likely to be filled by TV+BB and
DSL Only subs)
•
Litigation settlement terms
(Netflix): $2MM per year for next
3 yrs (if Netflix terminates, SPE
receives single $2MM payment)
Example:
10M subs at
SLP
10M subs at
15% below SLP
10.0M
25.0M
(10.0 x 2.5 = 25.0)
Total Subs
Year
Rate card
35.0M
% Decrease
from List Price
Subscriber
Multiplier
0 – 10%
1.75x
10 – 20%
2.5x
20 – 50%
3.25x
50 – 80%
4x
80 – 100%
10x
Subs
(MM)
Rate
card
Incremental/
Max Total
(MM)
0-10
$0.33/yr
$3 / $3
10-15
$0.50/yr
$3 / $6
15-20
$0.75/yr
$4 / $10
20-25
$1.00/yr
$5 / $15
25-30
$1.25/yr
$5 / $20
25
SOD Scenario 1: TV (Cable/Sat/IPTV) + Broadband
Basic Terms
•
May only be marketed as a bundle with offering that includes cable TV service
•
Can not be marketed as a bundle with data only by cable companies
•
A la carte pricing made available
•
No pricing restrictions for Starz Play as a result of it being bundled with TV
•
Must maintain Starz branding
•
Household cap applies
•
Rate card does not apply
•
Bundling with TV likely within Starz’ rights; nearly all cable broadband households have cable
TV service
Rationale
-
May offer Starz Play to these households without incremental license fees to SPE
-
Marketing must still focus on access included with TV or premium packages
-
Cap on total households reinforces premium access
Acceptable Marketing Messages
Examples
•
“Sign up for Comcast ‘Double Play’ and get TV, Starz Play, and Broadband”
Unacceptable Marketing Messages
•
“Get Starz Play when you sign up for HSIP”
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SOD Scenario 2: DSL Only
•
-
Basic Terms
Rationale
Can be bundled with any tier above basic. SLP is $33/month ($29.99 for Verizon through 2013)
Today, only allows Starz Play to be bundled with highest of 3 tiers on Verizon and highest
of 4 tiers on AT&T
•
Can be offered a la carte. SLP is $5.99 initially ($7.99 beginning in 2013) on top of any tier
•
Can not be positioned as “free” to consumer; value must be clearly identified
•
Must maintain Starz branding
•
Household cap applies
•
Rate card does not apply
•
DSL providers shifting to cable-like offerings of IPTV + broadband (e.g., FIOS)
•
Starz views cable-like treatment as critical; rate card does not apply
•
$33 SLP helps ensure premium position even if DSL prices fall
Current Verizon DSL Plans
Examples
•
“Starter” plan: $19.99  Starz Play available a la carte at $5.99 (initially)
•
“Power” plan: $29.99  Starz Play can be bundled at no extra charge
•
“Turbo” plan: $42.99  Starz Play can be bundled at no extra charge
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SOD Scenario 3: Open Internet (excluding Netflix)
Basic Terms
Rationale
•
Limited to content provider websites
•
Can be offered a la carte. SLP is $5.99 initially ($7.99 starting in 2013) in addition to any basic
video subscription of at least $4.99
•
SLP bundled price of $13.99 initially ($16.99 starting in 2013)
•
If website has no subscription, Starz Play can be offered a la carte. SLP is $13.99 initially ($16.99
starting in 2013)
•
Must maintain Starz branding
•
Household cap applies
•
Rate card applies
•
Applying rate card acknowledges that rights are incremental to output deal
•
Subscription requirement is analogous to cable
-
Ensures Starz continues to bundle with content (not software)
-
Today, $4.99 qualifying basic video package, $5.99 SLP a la carte fee, plus $20 for BB
requires customers pay ~ $31 before Starz Play is bundled
-
As BB prices decline, SLP of $13.99 (then $16.99) helps ensure Starz Play remains
premium
Hulu (no base subscription)
Examples
(Current)
•
Starz Play is available a la carte. SLP is $13.99
Blockbuster
•
“1 at a time” minimum plan for $9.99  Starz Play available a la carte for $5.99
•
“2 at a time” premium plan for $13.99
•
 Starz Play can be bundled
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Other SOD Restrictions (Applies on Cable, Satellite, IPTV and Internet)
• Titles may be available for no more than 72% of the days of the linear license
period
• Titles may only be available on SOD during a month of linear exhibition (with
limited exceptions for SOD premieres): 120 days across up to 10 Starz channels
for each of pay 1 (16-18 months) and pay 2 (13 months)
• SOD for cable (or mobile) is only as an "add-on" to a linear service, no standalone SOD except on the Internet
• Titles cannot be more than 50% of the SOD titles on the service in any calendar
quarter
• Imposed up-to-date content protection requirements and usage rules on Starz
Privileged and Confidential
29
Sony Platform Considerations
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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 certain 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 through 2016, we have significantly improved our ability to offer on-demand services
including some new rights specific to Sony-owned platforms
– PPV / VOD / EST
Cable / broadband / IPTV -- Broadened our rights to offer PPV / VOD / EST for final 3 months of Pay 1 and
Pay 2, subject to minimum pricing
New media – Retained ability to offer PPV / VOD / EST over the internet at any time (including during Starz
window) and clarified that we can offer PPV / VOD / EST on mobile and future media 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 products >$100 at any time
for up to 2 months
– Starz Internet Service -- Secured MFN, ensuring Sony can offer the Starz linear Pay TV or subscription on-demand
channel on Sony internet platforms with favorable terms
– Pay TV over Mobile -- obtained right to exhibit 6 titles (<$50m DBO) per year on our mobile linear Pay TV 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
Privileged and Confidential
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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 services any time,
including during Starz window
Implications
• If BIVL or PSN is delivered over the
open internet (i.e., not a closed
system) or operated as a web site
service they could offer PPV / VOD /
EST titles at any time, including
during Starz window
• If BIVL or PSN morphed into an
IPTV provider (effectively a cable
competitor) they were prohibited
from offering PPV / VOD / EST titles
during Starz window
Privileged and 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 right to offer PPV / VOD /
EST when delivered over the open
internet (including BIVL and PSN
when not as a closed system) and
adds rights for mobile and any
future media at any time, including
during Starz window
• If BIVL and PSN become closed
systems, adds rights for PPV /
VOD / EST to overlap with Starz
windows during last 3 months of
Pay 1 and last 3 months of Pay 2
• Adds mobile rights to PPV / VOD /
EST to the same extent as rights
over open internet
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PPV / VOD Viewing Period
Previous Starz Deal
Deal Terms
Implications
New Starz Deal
• 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 value
and appeal of PPV / VOD offerings
on Sony platforms and 3rd party
providers
• Limited our ability to drive PPV /
VOD revenue through 3rd parties
Privileged and Confidential
33
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 end of Pay 1
• Sony is allowed to exhibit 2 pictures
per year on FOD basis at any time
including prior to the end of Pay 1, if
bundled with a Sony consumer
electronics product priced > $100 in
a single transaction and promotion
can be up to 2 months per picture
• No box office restriction (can offer
our best titles)
• No timing restrictions (can offer at
any time after theatrical release)
Implications
• “Hancock” was not able to be
bundled “free” with the purchase of
a BIVL
Privileged and Confidential
• 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 or service so
long as it is priced > $100 in a
single transaction
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Subscription on-demand during Starz Window
Previous Starz Deal
Deal Terms
• 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
New Starz Deal
• Starz must make Starz Play
available for Sony internet platforms
(e.g., PSN and BIVL) directly or
through partners on no less
favorable terms than those offered
to third parties, provided however
Sony must match all terms and
conditions including technical
implementation
• MFN on service terms is in place
through February 2012
Implications
• Created risk of Starz Play channel
being available in multiple places
online, yet not on PSN and BIVL
Privileged and Confidential
• Provides BIVL and PlayStation
leverage for favorable deal terms
through February 2012
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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 pay
television channels during the
network window
Implications
• Crackle and Pix mobile could only
have library titles on pay television
(non-ad supported) channels
• Enables Crackle and Pix to
introduce quality titles into
subscription mobile channels
earlier
Privileged and Confidential
36
EST Wholesale Price During Pay 2
Previous Starz Deal
Deal Terms
• EST was allowed in Starz window
but with pricing restrictions
New Starz Deal
• Wholesale pricing during Pay 2
reduced to $3.48
• Wholesale pricing during Pay 2
was $6.95
Implications
• Pricing was unrealistically high for
older (Pay 2) titles, limiting the EST
business
Privileged and Confidential
• More realistic pricing will help grow
EST during the Pay 2 window
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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 during
the Starz windows
• Allows an Open Market “digital
locker” redelivery during the Starz
windows
• 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) during the Starz
windows
• 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
Privileged and Confidential
38
Windows
Privileged and Confidential
39
Timeline of Current and Proposed Windows*
Pay 1 Triggers
Theatrical
Release
Home Video
PPV / VOD
(Standard or
Day & Date)
Pay 1
Window:
No Black; 16
mos. current, 18
mos. in
extension (was
15 plus black)
Home Theater / Early Window
No Pay 1 trigger
10 months from theatrical (was 12 months)
4.5 months from Home Video
(was 6 months)
3.5 months from VOD (was 8 months; not
necessary with home theater carve-out)
* Special rules apply to Thanksgiving, Chanukah and Christmas themed pictures.
Privileged and Confidential
3.5 months from
PPV (was 6 months)
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