Confidential Draft

Game Show/Reality Format Business

November 2007

DRAFT AS OF: 11.08.07

2

Executive Summary

• The game / reality format business represents a critical growth area for SPE

– Reality shows represent nearly half of the top 20 shows in the demo

– The overall demand for reality formats continues to grow

– Game / reality shows lend themselves to syndication and international formatting, creating a highly profitable business

• Michael Davies will be the anchor of our format business

– Davies has a proven track record in the space

– Davies current deal expires in early 2009

– We need to extend or expand the relationship to provide continuity and a platform for growth

• An acquisition of Embassy Row is the best method for building our business and securing Davies for the long-term

– Evaluated both deal extension and acquisition

– An acquisition of ER provides a better long-term platform for growth

– Over time, ER will be further expanded through strategic acquisitions of additional production companies in international territories

3

Overall Assumptions for Operations

• Embassy Row is a viable acquisition with limited incremental investment– Existing ER slate will be extended into syndication and formats sold abroad– New formats will be based on SPE library product, new U.S.-based development, and

acquired international formats– 9 additional headcount will be hired

3 people to sell formats internationally 3 people to acquire successful international formats for domestic development 3 people to develop additional show concepts in-house

• SPT will also seek to acquire international production companies to grow Embassy Row into a truly global business

– Acquire multiple international production companies to increase local development, sales, and acquisitions

– High priority countries for acquisitions include UK, Mexico, and Australia

• The business will be managed as an independent unit within SPT– Dedicated P&L including all of SPT’s game/reality shows worldwide– Acquired international production Cos. would report directly into this business unit

4

Acquisition

• Longer relationship; acts as foundation

for a global format business

• Better aligns Davies’ incentives with

our own; increases emphasis on long-

term profitability

• More expensive

• Riskier: Davies must adapt to larger

studio structure; SPT takes on Davies

existing E&O and other liability

exposure

• Must create long-term enterprise value

to justify up-front payment

Alternative Deal Structures

Pros

Cons

2 Year Extension

• Less expensive; lower risk than outright

acquisition

• Davies continues to operate under the

independent structure that made him

successful

• Shorter relationship limits ability to build

a full business (more a collection of

shows)

• Davies’ incentives not tightly aligned

with ours; can generate EP fees without

creating long-term show value

• Builds Davies’ brand for him to later

shop himself to others

5

Deal Structuring Considerations

Extension

Joint Venture

Acquisition • If a non-compete is in place, up-front payments are largely attributed to the non-compete and amortized, decreasing near-term profitability

• If payments are earn-outs in later years and tied to Davies’ remaining with the company, payments are expensed as compensation and decrease earnings in later years

• Deal extension would require an increase above current OH deal

• All overhead will be expensed

• Extension does not help build long-term enterprise value

• EBIT impact is split in half (for better or worse)

• If SPT builds a successful business, then SPT sacrifices half of any upside enterprise value

Recommendation • Acquire through a mix of up-front and year 5 earn-outs

• Spread impact of deal expense to limit loss to initial year

6

Alternative Deal Structures

2 Year Extension

• Increase overhead to $2.5MM

per year from $1.2MM today

(other economics in-line with

current deal)

• SPE owns all copyrights

Acquisition

• Up-front consideration of $25MM

• Earn-out set at 50% of year 5

EBITDA from all ER related shows

(estimated at a $5-8MM earn-out)

• 5 year contract with Davies,

including a non-compete clause

7

Acquisition

• PV of cash flows (and eventual sale) less purchase price

• Excludes value of current Davies deal

• Ranges vary for number of shows and percentage of EP/chargeback fees

$2.1

$17.1

$32.1

$0

$5

$10

$15

$20

$25

$30

$35

Base Case Mid Case High Case

($ in MM)

Incremental Value of Acquisition vs. Deal Extension

$4.4

$5.5

$6.5

$0

$1

$2

$3

$4

$5

$6

$7

Base Case Mid Case High Case

2 Year Extension

• Lifetime value of shows created during a 2 year deal extension

• Inclusive of recoupment of EP fees

• Net of OH expenses

($ in MM)

8

Key Assumptions

Base Case Mid Case High CaseModel Assumptions

• EP Fee: 10%• Chargeback: 0%

Deal Assumptions

• $25MM cash at close• $5.5MM of earn-outs achieved• $4MM of amortization for 5 years

Profit from Format Business (includes current shows / P10)

Incremental Value: Acquisition

• EP Fee: 10%• Chargeback: 5%

Deal Assumptions

• $25MM cash at close• $7.0MM of earn-outs achieved• $4MM of amortization for 5 years

• EP Fee: 10%• Chargeback: 10%

Deal Assumptions

• $25MM cash at close• $8.4MM of earn-outs achieved• $4MM of amortization for 5 years

Model Assumptions Model Assumptions

Value of Cash Flows (1): $7.5

Value of Exit (2): $22.2

PV of Purchase Price: ($27.6)

Incremental value: $2.1

Incremental Value: Extension

Value of New Shows (3): $4.4MM

Notes: (1) Includes value of new shows and excludes value of shows created under current contract (i.e., excludes P10 from incremental value calculation) (2) Includes exit at 7x multiple in 2013 based on shows created in 2009 or later (3) Includes value to Sony of shows created in 2009 and 2010

Incremental Value: Acquisition

Incremental Value: Extension

Value of New Shows (3): $5.5MM

Incremental Value: Acquisition

Incremental Value: Extension

Value of New Shows (3): $6.5MM

Profit from Format Business (includes current shows / P10)

Profit from Format Business (includes current shows / P10)

Value of Cash Flows (1): $12.6

Value of Exit (2): $32.8

PV of Purchase Price: ($28.2)

Incremental value: $17.1

Value of Cash Flows (1): $17.7

Value of Exit (2): $43.3

PV of Purchase Price: ($28.9)

Incremental value: $32.1

Calendar Year

07 08 09 10 11 12 13

EBITDA (all shows) 0.6 12.9 9.6 13.5 16.8 30.6

Amortization - (4.0) (4.0) (4.0) (4.0) (4.0) -

Earn Out Expense - - - - - (8.4) -

EBIT - (3.4) 8.9 5.6 9.5 4.4 30.6

Purchase Price (25.0) - - - - -

Cash Flow (25.0) 0.6 12.9 9.6 13.5 8.4 30.6

Calendar Year

07 08 09 10 11 12 13

EBITDA (all shows) 0.6 10.3 7.7 11.0 13.9 25.8

Amortization - (4.0) (4.0) (4.0) (4.0) (4.0) -

Earn Out Expense - - - - - (7.0) -

EBIT - (3.4) 6.3 3.7 7.0 3.0 25.8

Purchase Price (25.0) - - - - -

Cash Flow (25.0) 0.6 10.3 7.7 11.0 7.0 25.8

Calendar Year

07 08 09 10 11 12 13

EBITDA (all shows) 0.6 7.7 5.8 8.6 11.0 20.9

Amortization - (4.0) (4.0) (4.0) (4.0) (4.0) -

Earn Out Expense - - - - - (5.5) -

EBIT - (3.4) 3.7 1.8 4.6 1.5 20.9

Purchase Price (25.0) - - - - -

Cash Flow (25.0) 0.6 7.7 5.8 8.6 5.5 20.9

9

Slate Assumptions

General Assumptions

• Begins with Embassy Row Base Slate

• Eliminates short order cable series, films, TV documentaries, and interactive

• Increases cable pilots for more conservative pilot/pick-up ratio

• Adds one acquired product per year

• Brings one Embassy Row created show into syndication by end of model

Pilot / Pick-up Ratio

Network Pick-ups / Pilots 6/12 50%

Cable Pick-ups / Pilots 6/17 35%

Acquired Product that Airs 5/5 100%

Success Rates

Year 1 to 2 5/16 31%

Year 2 to 3 3/5 60%

Year 3 to 4 2/3 67%

Model

Year 1 to 2 27%

Year 2 to 3 61%

Year 3 to 4 67%

Industry

10

Performance of New Slate (Starting with New Product Developed / Acquired in 2008 or Later)

2008 2009 2010 2011 2012 2013

CableAcquired (Bought) 0 1 0 1 0 1Acquired (On-Air) 0 0 1 0 1 0

Pilots (Produced) 2 3 3 3 3 3Pilots (On-Air/Picked-Up) 0 1 1 1 1 1

Returning from Last Year 0 0 0 2 3 2

Total On-Air 0 1 2 3 5 3Format Sold Internationally 0 0 0 0 1 1

NetworkAcquired (Bought) 1 0 1 0 1 0Acquired (On-Air) 0 1 0 1 0 1

Pilots (Produced) 2 2 2 2 2 2Pilots (On-Air/Picked-Up) 0 1 2 1 0 1

Returning from Last Year 0 0 0 0 1 1

Total On-Air 0 2 2 2 1 3Format Sold Internationally 0 0 0 0 0 1Shows Syndicated 0 0 0 0 0 1

11

Next Steps

• Resolve high level price and structural issues with Michael Davies

– Review Davies deals that remain outside the acquisition, ensure incentives are aligned

– Ensure Davies production capacity will be entirely in-house with SPE

– Agree timing for international acquisitions and/or network of international producers

– Discuss likelihood network deals will require line item approval

– Agree on approach to interactive, documentary, and other ancillary items

• Submit / negotiate LOI

• Enter exclusive diligence period

• Close acquisition

• Expand Embassy Row team

• Begin screening complementary acquisition targets

12

Appendix

13

• The total number of reality shows on air continues to grow

– During 2006-07 season 51 reality shows aired in network primetime a 31% increase over the 39 reality shows aired five years ago

• Reality shows are also growing as a percentage of network primetime

– Reality now represents 27% of the primetime schedule, having grown from 8% of network programming 5 years ago

– Reality represents over 40% of summer programming

• Reality shows consistently generate high ratings

– During 2006-07 season, almost half (45%) of the top 20-rated programs among A18-49 were reality programs

Industry Performance of Reality Shows

14

Detailed Slate

2008 EPS 2009 EPS 2010 EPS 2011 EPS 2012 EPS 2013 EPS

WSOPC (CS1) 10 WSOPC (CS1) 12 WSOPC (CS1) 12

Grand Slam (CS2) 8 Grand Slam (CS2) 10 Grand Slam (CS2) 10 Grand Slam (CS2) 12

Chain Reaction (CSS1) 65 Chain Reaction (CSS1) 65P10 (NS1) 16 P10 (NS1) 16 P10 (NS1) 22 P10 (NS1) 26

P10 (FMT1) 40 P10 (FMT1) 40 P10 (FMT1) 40 P10 (FMT1) 40 P10 (FMT1) 40P10 (SYN1) 195 P10 (SYN1) 195 P10 (SYN1) 195 P10 (SYN1) 195 P10 (SYN1) 195

Cable Series 4 (CS4) 8 Cable Series 4 (CS4) 10 Cable Series 4 (CS4) 12

Net Series 2 (NS2) 8Cable Strip Series 1 (CSS1) 65Syn Series 1 130Acquired Net Pdt 1 (ANP1) 8

Net Series 3 (NS3) 8

Net Series 4 (NS4) 8

Cable Series 6 (CS6) 8 Cable Series 6 (CS6) 10

Cable Strip Series 2 (CSS2) 65 Cable Strip Series 2 (CSS2) 130 Cable Strip Series 2 (CSS2) 130 Cable Strip Series 2 (CSS2) 130

Cable Strip Series 2 (FMT2) 40 Cable Strip Series 2 (FMT2) 40

Acquired Cable Pdt 1 (ACP1) 13 Acquired Cable Pdt 1 (ACP1) 65 Acquired Cable Pdt 1 (ACP1) 65

Cable Series 7 (CS7) 8

Net Series 6 (NS6) 8 Net Series 6 (NS6) 26 Net Series 6 (NS6) 26

Cable Strip Series 3 (CSS3) 40 Cable Strip Series 3 (CSS3) 40

Acquired Net Pdt 2 (ANP2) 13

Net Series 6 (FMT2) 40Net Series 6 (SYN2) 195

Cable Strip Series 4 (CSS4) 65

Acquired Cable Pdt 2 (ACP2) 10 Acquired Cable Pdt 2 (ACP2) 65Net Series 10 (NS10) 8

Cable Strip Series 5 (CSP5) 65

Acquired Net Pdt 3 (ANP3) 10

Net Pilot 1 (NP1) 1 Net Pilot 3 (NP3) 1 Net Pilot 5 (NP5) 1 Net Pilot 7 (NP7) 1 Net Pilot 9 (NP9) 1 Net Pilot 11 (NP11) 1

Net Pilot 2 (NP2) 1 Net Pilot 4 (NP4) 1 Net Pilot 6 (NP6) 1 Net Pilot 8 (NP8) 1 Net Pilot 10 (NP10) 1 Net Pilot 12 (NP12) 1

Cable Pilot 3 (CP3) 1 Cable Pilot 5 (CP5) 1 Cable Pilot 7 (CP7) 1 Cable Pilot 10 (CP10) 1

Cable Pilot 4 (CP4) 1 Cable Pilot 6 (CP6) 1 Cable Pilot 8 (CP8) 1 Cable Pilot 11 (CP11) 1

Cable Strip Pilot 1 (CSP 1) 1 Cable Strip Pilot (CSP2) 1 Cable Pilot 9 (CP9) 1 Cable Pilot 12 (CP12) 1

Failed Cable Strip Pilot (FP 1) 1 Failed Cable Strip Pilot (FP 2) 1 Failed Cable Strip Pilot (FP 4) 1

Failed Cable Strip Pilot (FP 3) 1 Failed Cable Strip Pilot (FP 6) 1 Failed Cable Strip Pilot (FP 8) 1 Failed Cable Strip Pilot (FP 10) 1

SynPilot 1 1 SynPilot2 1 Cable Strip Pilot 3 (CSP3) 1 Failed Cable Strip Pilot (FP 7) 1 Failed Cable Strip Pilot (FP 9) 1 Failed Cable Strip Pilot (FP 11) 1

Acquired Net Pdt 1 (ANP1) 1 Acquired Cable Pdt 1 (ACP1) 1 Failed Cable Strip Pilot (FP 5) 1 Cable Strip Pilot (CSP4) 1 Cable Strip Pilot 5 (CSP5) 1 Cable Strip Pilot 6 (CSP6) 1

SynPilot 3 1 SynPilot 4 1 SynPilot 5 1 SynPilot 6 1Acquired Net Pdt 2 (ANP2) 1 Acquired Cable Pdt 2 (ACP2) 1 Acquired Net Pdt 3 (ANP3) 1 Acquired Cable Pdt 3 (ACP3) 1

15

Base Case P&L

2007 2008 2009 2010 2011 2012 2013 2014 2015Total Revenue 20,024.3 24,706.0 89,278.8 75,547.3 89,539.9 80,046.3 129,933.6

Total Costs 16,594.9 24,056.8 81,603.3 69,757.6 80,959.6 69,001.6 108,986.8

Operating Income/Loss 3,429.4 649.2 7,675.5 5,789.7 8,580.4 11,044.7 20,946.8

Less SPE Share (600.0) (600.0) 3,967.5 5,390.3 7,486.0 11,734.1 13,013.6

Operating Income after SPE Share 4,029.4 1,249.2 3,708.0 399.4 1,094.4 (689.4) 7,933.2

Initial Consideration (25,000.0) - - - - - -

Terminal Value - - - - - - 55,532.6

Earn Out - - - - - (5,522.3) -

FCF + Terminal (25,000.0) 1,249.2 3,708.0 399.4 1,094.4 (6,211.7) 63,465.9

NPV for 6 years at 16.5% $2,142

SPE Renewal - - (1,900.0) (1,900.0) - 1,500.0 5,467.5 5,467.5 5,467.5

NPV for 7 years at 16.5% $4,395

16

Mid Case P&L

2007 2008 2009 2010 2011 2012 2013 2014 2015Total Revenue 20,024.3 24,706.0 91,909.1 77,476.5 91,975.3 82,914.9 134,773.5

Total Costs 16,594.9 24,056.8 81,603.3 69,757.6 80,959.6 69,001.6 108,986.8

Operating Income/Loss 3,429.4 649.2 10,305.8 7,719.0 11,015.8 13,913.3 25,786.7

Less SPE Share (600.0) (600.0) 4,845.0 6,311.6 8,453.5 12,749.9 14,080.2

Operating Income after SPE Share 4,029.4 1,249.2 5,460.8 1,407.3 2,562.3 1,163.4 11,706.5

Initial Consideration (25,000.0) - - - - - -

Terminal Value - - - - - - 81,945.3

Earn Out - - - - - (6,956.6) -

FCF + Terminal (25,000.0) 1,249.2 5,460.8 1,407.3 2,562.3 (5,793.2) 93,651.7

NPV for 6 years at 16.5% $17,137

SPE Renewal - - (1,900.0) (1,900.0) - 1,500.0 6,345.0 6,345.0 6,345.0

NPV for 7 years at 16.5% $5,457

17

High Case P&L

2007 2008 2009 2010 2011 2012 2013 2014 2015Total Revenue 20,024.3 24,706.0 94,539.3 79,405.8 94,410.7 85,783.6 139,613.3

Total Costs 16,594.9 24,056.8 81,603.3 69,757.6 80,959.6 69,001.6 108,986.8

Operating Income/Loss 3,429.4 649.2 12,936.0 9,648.3 13,451.1 16,781.9 30,626.5

Less SPE Share (600.0) (600.0) 5,722.5 7,233.0 9,420.9 13,765.7 15,146.8

Operating Income after SPE Share 4,029.4 1,249.2 7,213.5 2,415.3 4,030.2 3,016.2 15,479.7

Initial Consideration (25,000.0) - - - - - -

Terminal Value - - - - - - 108,357.9

Earn Out - - - - - (8,391.0) -

FCF + Terminal (25,000.0) 1,249.2 7,213.5 2,415.3 4,030.2 (5,374.7) 123,837.6

NPV for 6 years at 16.5% $32,131

SPE Renewal - - (1,900.0) (1,900.0) - 1,500.0 7,222.5 7,222.5 7,222.5

NPV for 7 years at 16.5% $6,518

18

Economics by Show Type

SPE AssumptionsSource Embassy Row Pof10 Embassy Row SPE Embassy Row

($ in 000) Network First-Run CableAcquired Network Acquired Cable

Cost per Pilot/Sales Material $750 $1,000 $250Episodes (est.) 26 195 65 26 65Fee per ep, for acquisitions / Yr 1 $36 $1.6Fee per ep, for acquisitions / Yr 2 $38 $1.7Fee per ep, for acquisitions / Yr 3 $40 $1.8Fee per ep, for acquisitions / Yr 4 $42 $1.8Fee per ep, for acquisitions / Yr 5 $44 $1.9

Lic / ep Yr 1 $722 $65 $32 $722 $32Lic / ep Yr 2 $760 $75 $33 $760 $33Lic / ep Yr 3 $800 $95 $35 $800 $35Lic / ep Yr 4 $840 $130 $37 $840 $37Lic / ep Yr 5 $882 $145 $39 $882 $39

Ads / ep Yr 1 $0 $65 $0 $0 $0Ads / ep Yr 2 $0 $65 $0 $0 $0Ads / ep Yr 3 $0 $65 $0 $0 $0Ads / ep Yr 4 $0 $65 $0 $0 $0Ads / ep Yr 5 $0 $65 $0 $0 $0

EP / ep Yr 1 $72 $12 $3 $72 $3EP / ep Yr 2 $76 $13 $3 $76 $3EP / ep Yr 3 $80 $13 $4 $80 $4EP / ep Yr 4 $84 $14 $4 $84 $4EP / ep Yr 5 $88 $15 $4 $88 $4

Chargeback Fee / ep Yr 1 $0 $0 $0 $0 $0Chargeback Fee / ep Yr 2 $0 $0 $0 $0 $0Chargeback Fee / ep Yr 3 $0 $0 $0 $0 $0Chargeback Fee / ep Yr 4 $0 $0 $0 $0 $0Chargeback Fee / ep Yr 5 $0 $0 $0 $0 $0

All Prod/Mkting/Distr Costs / ep Yr 1 $722 $120 $32 $722 $32All Prod/Mkting/Distr Costs / ep Yr 2 $760 $126 $33 $760 $33All Prod/Mkting/Distr Costs / ep Yr 3 $800 $132 $35 $800 $35All Prod/Mkting/Distr Costs / ep Yr 4 $840 $139 $37 $840 $37All Prod/Mkting/Distr Costs / ep Yr 5 $882 $146 $39 $882 $39

OtherFormat Episodes Sold 40Formats Sold 15Fee Per Ep/Territory $5

G&A Expenses as a % of Headcount 25%Acquisition Budget $2,000Acq. Fee per ep / as a % of Prod. Cost 5%Growth in ER Overhead Expense 5%EP Fee 10%Chargeback Fee 0%