CONFIDENTIAL Refining SPE’s Business Detailed Analysis January 2006

CONFIDENTIAL

Refining SPE’s Business

Detailed Analysis

January 2006

page 2

Overview: Opportunities to Refine SPE’s Business

• SPE is seeking to drive increased growth and profitability

– SPE aspires to achieve a 10% EBIT margin by FY09; however, FY06 EBIT is projected to be below 5% and FY07-09 EBIT margins are projected to be 5% to 7%

– The majority of SPE’s revenues are derived from its core Columbia Pictures business, which has considerable volatility and limited margins and growth potential

• To achieve this goal, SPE should evaluate 3 high-level strategic options

1. Optimize current assets: Maintain current portfolio of businesses, continuing to pursue incremental investments and periodically adjust capital allocation

2. Narrow focus: Define core competencies and divest non-core businesses

3. Diversify: Invest in strategic businesses where SPE has no or limited presence

page 3

Economic Overview—SPE Film Businesses

Line of business

Columbia1

Screen Gems

Revolution(production deal)

Classics

Local language

Acquisition/DTV (SPHE)4

FY03

1 Includes Oliver Twist (Tristar)2 Based on Slate Ultimates (which exclude marketing and distribution overhead); Acquisition/DTV based on P&L3 Includes Production, Development and Acquisition Spending, Capital Expenditures and Strategic Investments4 Based on P&L; Volume rebates, G&A expenses, and Other income removed to more accurately reflect Acquisition/DTV business

$3,053

12.3%

FY04

$2,690

6.9%

FY05

$2,225

19.1%

FY06E

$1,662

-22.0%

Average margin

6.4%

$30

-8.7%

$319

21.4%

$421

23.8%

$546

23.6%22.4%

$550

26.1%

$560

28.0%

$564

29.5%

$703

24.8%27.0%

$1,025

3.3%

$975

-10.0%

$1,036

0.4%

$413

-16.6%-3.7%

$80

10.6%

$80

22.3%

$155

14.7%

$87

11.5%14.7%

$37

-21.3%

$19

-2.4%

$138

16.2%

$23

5.0%7.0%

FY06 Budget capital investment3

$88

$150

$81

$27

$25

$816

Total Film $4,775

11.5%

$4,643

7.1%

$4,540

16.3%

$3,434

-3.5%8.6% $1,187

Ultimate Revenue ($M) / Margin (%)

FY06 gross profit2

$129

$174

-$68

$10

$1

-$365

-$120

P&L Revenue ($M) / Margin (%)

page 4

Economic Overview—SPE Television/Network Businesses

Businesses

TV production (Broadcast Network, Cable Network, Library)

3rd party distribution2 (Seinfeld, Just Shoot Me, etc.)

Made-for-syndication TV content (Wheel, Jeopardy!, Judge Hatchett)

Local language TV production

FY03

$451

7.6%

FY04 FY05 FY06EAverage margin

14.9%4$635

18.8%

$561

19.3%

$582

12.0%

$63

23.6%

$67

21.4%

$105

15.9%

$131

14.0%

17.5%6

1 Includes Production, Development and Acquisition Spending, Capital Expenditures and Strategic Investments2 From FY04-06E Seinfeld booked under net accounting (100% margin); all other shows booked using gross accounting (~15% distribution fee)3 Excludes SPTI networks in investing stage 4 Includes production-related overhead only (~50% of total SPT overhead)5 Total international networks capital investment 6 Excludes $8.8 million of Corporate OH per year

$306

$101

FY06E capital investment1

$108

93.3%

$250

70.6%

$125

66.2%

$99

70.2%

$334

30.8%

$380

55.6%

$236

38.7%

$227

46.9%

73.8%4

43.5%4

Total TV/Network $698$1,407

23.5%

$1,740

34.6%

$1,537

26.0%

$1,621

22.5%

26.9%

Revenue ($M) / Margin (%)

Daytime TV production

$224

27.1%

$221

25.7%

$238

21.8%

$246

19.8%

23.5%4

FY06E operating income

$107

$5

$100

$70

$18

$49

$69

$107

$365

Int’l networks - Growth stage3

$11

8.8%

$13

-15.9%

$39

0.9%

$64

10.3%

4.6%$795

$7

Int’l networks – Established3

$216

7.6%

$175

14.7%

$233

20.6%

$272

16.8%

15.2% $46

page 5

Economic Overview—SPE Digital Businesses

Line of business

Mobile entertainment1

Video games (SOE)3

Imageworks

1 “SPD contribution margin” before pass-through to film, TV businesses; capital investment is Digital Sales/Marketing development expenses2 Includes Production, Development, and Acquisition Spending, Capital Expenditures and Strategic Investments3 Margin excludes SCEA royalty

Revenue ($M) / Margin (%)

FY03

$1

-177.4%

FY04

$5

47.0%

FY05

$9

21.0%

FY06E

$7

2.0%

Averagemargin

13.8%

$86

-6.0%

$136

10.4%

$150

11.7%

$154

9.3%

7.8%

$82

-11.6%

$143

9.1%

$119

-6.2%

$214

7.0%

2.0%

Animation n/a n/a n/a n/a n/a

$6

$48

$19

$94

FY06E capital investment2

Total Digital $169

-9.6%

$284

10.4%

$278

4.3%

$375

7.9%

5.0% $167

FY06E operating income

$0

$14

$15

n/a

$29

page 6

SPE 2003-2006E P&L

1 Based on October 2005 forecast

SPE P&L ($000s) FY2003 FY2004 FY2005 FY2006E1FY05-06

Growth %

SPE Total

Revenue 6,616,440 6,781,641 6,851,682 6,859,471 0.1%

Costs (5,774,875) (6,119,008) (5,949,270) (6,300,194) 5.9%

Operating Income b/f Corp OH 841,565 662,633 902,412 559,277 -38.0%

Operating Margin % 12.7% 9.8% 13.2% 8.2%

Corporate Shared Services (150,713) (158,244) (164,491) (185,500) 12.8%

Compensation Plans and other (200,745) (161,619) (135,769) (73,500) -45.9%

Subtotal Corporate OH (351,458) (319,863) (300,260) (259,000) -13.7%

Operating Income after Corp OH 490,107 342,770 602,152 300,277 -50.1%


page 7

Strategic Options for SPE

Options Description

Narrow focus

Optimize current assets

Diversify

• Maintain current portfolio of businesses

• Continue to pursue incremental growth opportunities

• Periodically optimize capital allocation among businesses

1

2

3

Advantages

• Lowest risk strategy• No acquisitions/divestures

required• Limited change required

Disadvantages

• Assumes that SPE’s current mix of businesses is optimal

• Define SPE’s core businesses/competencies

• Divest non-core businesses and invest proceeds in core

• Enables SPE to realize value from peripheral businesses for investment in core businesses

• Increased focus of management attention, resources and capital

• Increased financial volatility• Potential to adversely

impact growth and/or margins

• Execute substantial acquisitions in strategic area(s) that strengthen SPE and Sony

• Potential to improve margins and growth

• Potential to help to smooth revenue/earnings

• Significant capital required

page 8

Optimize Current Assets – Potential Actions

• Continue to incrementally increase investment in areas with attractive growth prospects and relatively high margins

– International networks– Screen Gems– TV production– Animation– Acquisition/DTV films– Mobile gaming

• Evaluate potential to improve SPE growth and margins through reallocation of capital between businesses

page 9

Narrow Focus – Potential Actions

• Define areas of SPE competitive advantage– Motion picture production/distribution– Television production/distribution– International networks

• Divest areas outside of SPE core focus– GSN stake– Digital businesses (SOE, Imageworks, SPA)– Game show and daytime soap annuities

• Use capital realized from divestures to strengthen core business

page 10

Diversify – Potential Actions

• Invest $2 to $4 billion to build a substantial presence in aggregation, distribution and services businesses that complement the core business

– Potential targets may include• Starz/Encore ($900M - $1.2B)• Netflix ($1.2B1)• Tivo ($350M1)• BitTorrent (~$100M based on rumored funding round valuation)

• Consider divesting non-core assets to help fund new investments– SPE stake in GSN ($300-$400M)– Digital businesses

• SOE ($500M)• SPA/Imageworks ($500M)

– Game show and daytime soap annuities ($1.1 - $1.3B)

• Evaluate potential to leverage partial acquisitions/joint ventures to increase diversification while managing capital outlay

1 Enterprise Value

page 11

Potential Acquisitions Would Create a Bridge Between Sony Content and Devices

SPE Content Distribution/aggregation Sony Devices

Potential: IP and traditional

page 12

Overview of Entertainment LandscapeCompetitive Landscape Sony/SPE NBC/Universal News Corp/Fox

Time Warner / Warner Brothers Disney/ABC Viacom / Paramount

Film Production

Mainstream/big budget Columbia Universal Pictures Twentieth Century Fox Warner Bros. Touchstone PicturesParamount Pictures, Dreamworks SKG

Genre specialty Screen Gems/Tristar Focus Features Fox Searchlight Pictures New Line Cinema formerly MiramaxClassics Sony Classics

Animation SPA Blue Sky Studios Warner Bros. AnimationWalt Disney Feature Animation,

PixarLocal language Local language Warner Independent PicturesAcquisition/DTVSpecial effects Imageworks

TV Production

Domestic network TV productionLove Monkey (CBS), The

Book of Daniel (NBC)Law & Order (NBC), The Office

(NBC), Will & Grace (NBC)24, Family Guy, Prison Break,

The Simpsons (FOX) ER (NBC), West Wing (NBC)Alias, Desperate Housewives,

Grey's Anatomy, Lost CSI franchise (CBS)

Cable network TV productionRescue Me (FX), the

Boondocks (Cartoon Net)Monk (USA), Battlestar

Galactica (SciFi) Over There (FX)Nip/Tuck (FX), The Closer

(TNT)Power Ranger: SPD (ABC

Family)MTV Productions, Nick

Productions, etc.

Reality seriesQueer Eye (Bravo), Fear Factor

(NBC) American Idol Bachelor Survivor, The Amazing RaceThird-party distribution Seinfeld

Made-for-syndication TV contentJeopardy, Wheel of Fortune,

Judge HatchettAccess Hollywood, Blind Date,

Maury, Jerry SpringerLive! With Regis and Kelly,

Who Wants to be a MillionaireEntertainment Tonight, Judge

Judy, Judge Joe Brown

Daytime TV productionDays of Our Lives, The Young

and the RestlessGeneral Hospital, All My

Children Bold and the Beautiful

Sports programming NBC Sports, NBC OlympicsFox Sports Net, Fox College Sports, Fox Soccer Channel ESPN, ABC Sports CBS Sports

Game ProductionMMO games SOE (EverQuest) Warner Bros. Interactive Ent. Midway GamesPortable gamesConsole games Warner Bros. Interactive Ent. Midway Games

Online PublishingContent Sony Connect NBC.com, MSNBC.com IGN, Foxsports.com, Scout ABC.com, ESPN.com, Community MySpace

Film AggregationPremium channels STARZ/ENCORE HBO, Cinemax ShowtimeInternet NETFLIX iFilm

TV AggregationBroadcast networks - domestic NBC FOX the WB ABC CBS, UPN

Cable networks - domestic GSNMSNBC, CNBC, Bravo, Sci Fi,

USA, Telemundo

Fx, National Geographic Channel, Fox News Channel,

Fox Reality

TBS, CNN, TNT, Cartoon Network, Adult Swim, Turner

Classic Movies

ESPN, ESPN2, Disney Channel, ABC Family, Toon Disney,

SOAPNet, Lifetime, A&E, The History Channel

MTV, Nickelodeon, VH1, Comedy Central, Spike TV, CMT, Nick@Nite, TV Land,

BET, Logo, MTV2, Noggin, The N, MTVU, Sundance

Local TV stations NBC TV stations FOX TV stations ABC TV stations 40 CBS TV stations

International networksAXN, Animax, Sony

Entertainment Television

13th Street (Fr, Ge, Sp), Universal Channel (Latin

America), CNBC (Asia, Europe), Studio Universal (Ge, It)

STAR (in China, Taiwan, India, and the rest of Asia)

JETIX (Latin America, Europe), Disney International Channels,

A&E International, History International

Online AggregationPortal AOL

Film/TV DistributionCable companies Time Warner CableSatellite companies DirecTV

ServicesDVR TIVOAudience measurement

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Potential Acquisition

Potential Divestiture

page 13

APPENDIX

page 14

Appendix

• Company profiles

• Industry value chain

• Industry economics

• SPE financials

page 15

Starz Entertainment Group (SEG) OverviewCompany Overview:

Financial/Operating Statistics CY ’04:

• Largest provider of premium movie services offering 13 digital movie channels

– Starz (7 thematic movie channels): 14.1 million homes

– Encore (6 thematic movie channels): 24.9 million homes

• Also provides advanced services

• Vongo: subscription movie download service beta launched in January 2006

– Over 1,000 movies and a live streaming Starz TV channel for $9.99 per month

– VOD rental available for $3.99

• Starz On Demand: provides impulse viewing of SEG films as part of monthly subscription

• Starz HDTV: high definition version of Starz service

• Valuation: $928M - $1,237M (as estimated by analysts)

• Revenue: $963M

• EBITDA: $211M

• EBIT: $148M

• Multichannel distribution as a % of Starz’ revenue:

– Comcast (24.2%), DirecTV (23.6%), Echostar (11.3%), Time Warner (9.7%), Other (31.2%)

Recent News: • January ’06: Launched ‘Vongo’, a $9.99/month subscription movie download service that will include more than 1,000 movies, short films and programs

• June ’05: Starz and Comcast agree to offer 1,500 movies a year to Comcast’s ON DEMAND service at no extra charge to Starz subscribers

• April ‘05: Signed affiliation agreement with Verizon FiOS TV providing carriage for all 13 Starz movie channels

page 16

Netflix OverviewCompany Overview:

Financial/Operating Statistics CY ’05:

• Largest online DVD subscription service

– Standard subscription plan allows subscribers to have 3 titles at a time for $17.99/month

– Provides access to library of 35,000 movie, TV and other filmed entertainment titles

• Distributes 1 million DVDs per day from 37 shipping centers in the U.S.

• Personalization and recommendations based on database of 1 billion movie ratings from customers

• Market Cap: $1,382M (as of January 19, 2006)

• Revenue: $688M (EV/Revenue multiple: 1.8x)

• EBITDA: $115M (EV/EBITDA multiple: 10.5x)

• EBIT: $8M (EV/EBIT multiple: 158.0x)

• Cash and Equivalents: $212M

• LT & ST Debt: $0M

• Subscribers (End of Period): 4.2M

• ARPU per month: $16.89

• Average Monthly Churn: 4.3%

Recent News: • January ’06: Former Postmaster General named COO

• May ’05: Agreement to promote Wal-Mart online movie sales business in return for Wal-Mart promoting Netflix online DVD rental business

• September ’04: Agreement between TiVo and Netflix to work together to develop a joint entertainment offering (Details and current status are unknown)

page 17

TiVo OverviewCompany Overview:

Financial/Operating Statistics CY ‘04:

• Provider of technology and services for digital video recorders (DVRs)

– Subscription-based service provides consumers with easy way to record, watch, and control TV

– Technology supported by portfolio of intellectual property rights that enables TiVo to offer DVR software, hardware, and service solutions to customers like DirecTV, Pioneer, Toshiba, etc.

• Began offering advanced home media features with TiVo Series2 DVR connected to a home network

– Features include digital music and photos, multi-room viewing

– TiVoToGo offers ability to transfer recorded programs from TiVo DVR to a PC or portable device

• Market Cap: $465M (as of January 19, 2006)

• Revenue: $172M (EV/Revenue multiple: 2.1x)

• EBITDA: -$71M

• EBIT: -$76M

• Cash and Equivalents: $106M

• LT & ST Debt: $5M

• Subscribers (End of 3Q ‘05): 3.0M

– Standalone subs: 1.3M ($8.80 Monthly ARPU)

– DirecTV subs: 2.7M ($1.15 Monthly ARPU)

Recent News: • December 2005: TiVo rolled out online services to broadband connected TiVoSeries2 DVR

– View/share photos with Yahoo! Photo, browse movie information and purchase tickets via Fandango, listen to internet radio via Live365

• November 2005: Enhanced TiVoToGo feature that allows subscribers to easily transfer recorded TV programming to Apple iPod or Sony PSP devices

• November 2005: Announced plans to offer television-based advertising search solution by Spring 2006 allowing subscribers to access targeted advertising on an opt-in basis

• May 2005: TiVo and Comcast announced strategic partnership

page 18

BitTorrent OverviewCompany Overview:

Financial/Operating Statistics:

• Cooperative distribution technology that makes downloading more efficient

– Assembles digital movies and other computer files from separate bits of data downloaded from other computer users across the internet

– Decentralized nature makes downloading more efficient by reducing bandwidth and server costs

– Red Hat, Sun Microsystems, NASA, PBS, and Blizzard Entertainment currently use BitTorrent for digital distribution

• Rumored $100M pre-money valuation

• Used by an estimated 50 million users (worldwide)

Recent News: • Q1 2006: Plans to open online marketplace for digital content

– Video (film, documentary, television, music video)

– Subscription ($20/month): unlimited access to television, catalog films, and some new release movies

– Pay-per-download 30 day video rental: $3 new release, $2 catalog

– Ad-supported video

– Audio (music, podcasts, live recordings, ancillary video)

– Games (hardcore videogames, MMOGs)

– Software (applications, operating systems, updates/patches)

• November 2005: Agreement with MPAA that the founder of BitTorrent will remove Web links to pirated versions of movies from bittorrent.com upon notification from a movie studio

• September 2005: Raised $8.75 million in venture funding from DCM (Doll Capital Management) to be used for product development

page 19

Appendix




• SPE financials

page 20

Overview of Value Chain – Film and Television

Film

Television

Studios Exhibition (AMC, GCC, Loews)

Retailer (Wal-Mart, Best Buy, Costco)

Rentailer (Blockbuster, Movie Gallery)

Data Services (Rentrak, Nielsen, Supercomm)

Cable/Satellite Distribution(Comcast, DirecTV, DISH)

Content

Broadcast Networks (ABC, NBC, CBS, FOX, UPN)

Cable/Satellite Distribution(Comcast, DirecTV, DISH)

Cable/DSL IP Access(Verizon, SBC, Comcast)

Mobile IP Access (Verizon, Sprint, Cingular)

Cable Networks (FX, Food, Nickelodeon, MTV, AXN)

Premium pay channels (HBO,Showtime, Starz)

PPV/VOD Aggregator(inDemand, TVN)

Mainstream (Universal, Disney, Fox, Warner, Columbia)

Genre (Lions Gate, Screen Gems, Sony Classics)

Animation (Pixar, Dreamworks, SPA)

Network (Warner, Buena Vista, Touchstone, Fox, CBS)

Independent (Carsey-Werner,SPT, Brillstein-Grey, Avenue)

Kids (Nicktoons, Disney, HIT Entertainment, DIC)

Reality (Mark Burnett)

Sports (ESPN, Fox, CBS,ABC, NBC)

TV Production Time-shifting services (TIVO)

Audience Measurement (Nielsen)

Mobile/IP Distribution (Verizon, Cingular, Sprint)

Premium pay channels(HBO, Starz/Encore, Cinemax)

Internet (Netflix, MovielinkGoogle, AOL, iFILM)

SPE Presence (operating control)

Mobile Entertainment (MobiTV, Jamdat)

Internet Video(AOL, Google, Yahoo, iTunes)

Aggregation Distribution ServicesProduction

page 21

Overview of Value Chain – Games and Internet

Games

Internet

Game Development Retailer (Wal-Mart, Best Buy, EB Games, Game Stop)

Rentailer (Blockbuster)

Online (EAGames, WorldofWarcraft, Station.Sony)

Content

Dial-up IP Access(AOL, Net Zero)

DSL IP Access (Verizon, SBC)

Cable IP Access(Comcast, Time Warner)

Portals (Yahoo, Google, MSN, AOL)

Console/PC/Online (EA, THQ, VU Games, Activision, SOE)

Community(MySpace, Linked In)

Content(iFILM, ESPN.com, CNN.com, IGN, Atom Films)

Audience Measurement (Nielsen/Net Ratings)

SPE Presence (operating control)

E-Commerce(eBay, Movielink, Bit Torrent)

Aggregation Distribution ServicesProduction

page 22

Appendix




• SPE financials

page 23

Summary of SPE and Industry Economics for Relevant Businesses

Motion Pictures

Television Production & Distribution

15%

28%

13%

Avg. 2003-05EMargin (EBITDA)

1 Excludes Corporate Overhead, totaled $272 M (4% of Rev.) in FY052 New Release films (excludes 2nd cycle revenues)3 Based on Ultimates; excludes marketing and distribution overhead

Mainstream

Genre

CG Animation

6%2

50%

DomesticNetworks

Broadcast

Cable

Pay Channels

47%

2003-05ERevenue CAGR%

(2%)2

7%

5%

14%

Cable/Satellite Distribution

30% 12%

International Networks

18% 17%

Market Estimates

6%3

15%4

n/a

n/a


22%3

n/a


n/a

n/a

n/a

n/a n/a

18%5 11%

SPE (ex. Overhead)1

(6%)

34%

n/a

7%

n/a12%

(3%)Domestic

International n/a 8% 19%n/a

4 Excludes made-for-syndication, 3rd party distribution, and daytime TV production5 SPTI established networks margin

Thematic

page 24

Summary of SPE and Industry Economics for Relevant Businesses


Games 23%


17%

Mobile Distribution 35% 15%

Special Effects n/a n/a

Market Estimates


8%2


22%

14% 98%

2% 38%

SPE (ex. Overhead)1

1 Excludes Corporate Overhead, which totaled $272 M in FY052 Margin excludes SCEA royalty

page 25

Overview of Industry Film Margins: Major Studios

Studio

Time Warner 10.6% 14.1%

FY03-05E Average EBITDA Margin

OverallLibrary*

20.9%

Fox 7.0% 14.2%34.7%

1.7% 12.5%

25.1%**

Disney 1.6% 6.4%23.5%

Average

New Release*

* Industry analyst estimates define library as syndication TV window and catalog DVD** Weighted averageSource: Morgan Stanley

5.5%**

28.8%

11.3%**

Viacom

page 26

Overview of Industry Film Margins: Variations by Feature Type

Feature type

Specialty16.9%**

CY05 EBITDA margin

Average Domestic

B.O.

~$8M*

CG Animation50.1%***~$200 M

11.0%****~$27M*

* CY04 averages** Based on Lion’s Gate*** Weighted average of FY04-05E EBITDA margins for DreamWorks, Pixar**** Average of CY05 for Paramount, Warner, Disney and CY04 FoxSource: JPMorgan, Morgan Stanley

Overall market

page 27

Overview of Industry Television Production Margins: Major Studios

Studio

Time Warner-27.7% 12.4%

FY03-05E Avg. EBITDA Margin

OverallSyndication

31.1%

Fox-16.7% 18.8%47.1%

Viacom-25.3% 20.7%

Disney-19.5% -5.2%29.7%

Total

Primetime

36.1%

15.3%**

Viacom

* Un-weighted average** Weighted averageSource: Morgan Stanley

36.0%*-22.3%*

page 28

Overview of Industry Broadcast Network Margins: Major Players

Broadcast Networkand Stations

CBS 16.6%

FY03-05E Avg EBITDA Margin

FOX 18.8%

Viacom -0.8%

ABC 5.0%

UPN

* Weighted averageSource: CSFB

12.2%

WB

Average 12.7%*

5.6%

FY03-05E Revenue CAGR

9.3%

13.6%

-1.3%

7.7%

4.6%*

page 29

Overview of Industry Cable Network Margins: Major Players

Domestic CableNetworks

Turner Networks(Cartoon Network, CNN, TBS, TNT, TCM)

48.2%

FY03-FY05E Avg EBITDA Margin

MTV Networks(MTV, Nickelodeon, VH1, Comedy Central, Spike TV)

49.1%

36.9%

Scripps Network(HGTV, Food Network, DIY Network, Fine Living)

54.5%

Average

* Weighted average** Owned by Rainbow Media, a subsidiary of CablevisionSource: CSFB

47.0%*

Discovery Communications(Domestic Networks)

6.8%

FY03-FY05E Revenue CAGR

19.0%

14.0%

32.1%

14.2%*

AMC**

IFC**

44.0% 4.9%

36.6% 19.0%

page 30

Overview of Industry Premium Pay Channel Margins: Major Players

Premium Pay Channel

Starz26.5%


HBO30.7%

Showtime20.0%

Average

* Weighted averageSource: CSFB

27.5%*

6.4%


6.6%

6.1%

6.5%*

page 31

Overview of Industry International Networks: Major Players

International ‘Cable’ Network

Discovery Communications (International Networks)

17.4%

FY03-FY05E Avg. EBITDA Margin

20.2%

M6 Thematic Channels (France)

7.6%*

Average

* Operating margin** Weighted average*** FY03-06E Average EBIT margin used to account for minority interest**** FY03-FY06E Revenue CAGRSource: Morgan Stanley, CSFB, SPE Corporate Finance

18.3%**

Viacom International Networks

SPTI Int’l Networks 10.5%***

20.8%


11.6%

38.3%

16.9%**

10.5%****

page 32

Overview of Industry Interactive Gaming Margins: Major Players

Game Developer/Publisher

Electronic Arts 26.7%


Take Two 13.6%

Viacom 22.5%

Activision 23.2%

Average

* Weighted average** FY03-FY06ESource: Morgan Stanley, Citigroup, SPE Corporate Finance

22.9%*

THQ

SOE 2.5%**

12.3%


11.5%

27.2%

27.6%

16.5%*

21.6%**

page 33

Overview of Industry Mobile Distribution Margins: Major Players

Mobile Carrier

Cingular 29.0%


Verizon 38.2%

Sprint-Nextel 36.3%

Average

* Weighted averageSource: JP Morgan, CSFB

35.3%*

13.2%


16.6%

15.6%

15.4%*

page 34

Overview of Industry Cable/Satellite Margins: Major Players

MSO/DTH Player

Charter 38.8%


Cablevision 37.5%

38.7%

Comcast 38.5%

DISH

* Weighted averageSource: Morgan Stanley, Citigroup, Bloomberg

9.6%

Time Warner

DirecTV

29.6%*

4.9%


8.9%

10.9%

10.1%

14.4%

11.5%*Average

18.0% 17.7%

page 35

Appendix




• SPE financials

page 36

SPE 2003-2006E P&LSPE P&L FY2003 FY2004 FY2005 FY2006E1

MPGRevenue 4,974,169 4,635,278 4,978,380 4,719,294 Costs (4,362,296) (4,462,176) (4,316,797) (4,385,579) Operating Income 611,873 173,102 661,583 333,715 Operating Margin % 12.3% 3.7% 13.3% 7.1%

SPTRevenue 1,158,025 1,516,505 1,178,026 1,199,200Costs (873,308) (1,027,098) (917,426) (929,400) Operating Income 284,717 489,407 260,600 269,800 Operating Margin % 24.6% 32.3% 22.1% 22.5%

SPTIRevenue 358,246 351,632 428,892 515,093 Costs (364,700) (344,336) (438,876) (532,813) Operating Income (6,454) 7,296 (9,984) (17,720) Operating Margin % -1.8% 2.1% -2.3% -3.4%

SPDRevenue 178,926 298,711 298,550 382,529 Costs (248,998) (332,156) (337,153) (375,847) Operating Income (70,072) (33,445) (38,603) 6,682 Operating Margin % -39.2% -11.2% -12.9% 1.7%

SPE Divisions before Corp OHRevenue 6,669,366 6,802,126 6,883,848 6,816,116 Costs (5,849,302) (6,165,766) (6,010,252) (6,223,639) Operating Income b/f Corp OH 820,064 636,360 873,596 592,477


Net Corporate OH (329,957) (293,590) (271,444) (292,200)

SPE TotalRevenue 6,616,440 6,781,641 6,851,682 6,859,471 Costs (6,126,333) (6,438,871) (6,249,530) (6,559,194) Operating Income after OH 490,107 342,770 602,152 300,277


Operating Margin ComparisonBefore Corporate OH 12.3% 9.4% 12.7% 8.7%After Corporate OH 7.4% 5.1% 8.8% 4.4%Difference 4.9% 4.3% 3.9% 4.3%

1 Based on October 2005 forecast

Documents

CONFIDENTIAL Refining SPE’s Business Detailed Analysis January 2006