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SPT Business Overview
November 14, 2012
DRAFT – FOR DISCUSSION ONLY
1
Sony Pictures Television
Sony Pictures TelevisionSony Pictures Television
ProductionProduction NetworksNetworksDistributionDistribution
• Development, acquisition, and production of television programs for broadcast, basic cable, and premium cable networks
• Program genres include scripted comedies and dramas and non-scripted reality, talk, and game shows
• Sale of SPE’s film and television content to television and digital customers
• Customers include U.S. and international broadcast and cable networks, U.S. local television stations, and digital services, e.g., Netflix
• Management and distribution of branded networks and channels worldwide
• International brands include AXN, SET, and Animax
Business Overview
2
Television Business is Growing
Se-ries1
0
100
200
300
400
500
600
700
800
900
11
Monetization$MM
FY13Frcst
FY14Current
FY15 Current
FY16 Current
3
SPT Consolidated EBIT
15% CAGR
• Networks – Networks has an EBIT CAGR of 23% across the plan, breaking earnings records in each and every year. The growth comes from all regions across the world as newer channels mature to profitability and more mature channels grow or maintain their margins
• U.S. Production & Ad Sales – EBIT grows 21% over the plan from $290MM to $351MM driven by a steady pipeline of programming sold to SVOD and Off-net syndication: Last Resort, Happy Endings, Justified
• International Production – International Production has an EBIT CAGR of 78% across the plan. Moderate organic growth from existing operating companies is supplemented by EBIT contributions from recent acquisitions Left Bank and Silver River as well as the inclusion of a hit format starting in FY15
$564
$625
$765
$859
553
SPT EBIT continues to grow at a rate of 15% year-over-year
FYE13Gross
FYE13Net
FYE16Gross
FYE16Net
$-
$1,000
$2,000
$3,000
$4,000
$5,000
$6,000
$7,000
$8,000
$5,217
$3,648
$6,972
$5,389
Sony Pictures Television
Revenue and EBIT – Today and Tomorrow
Revenue EBIT($MM) ($MM)
4FYE13 FYE16 $-
$100
$200
$300
$400
$500
$600
$700
$800
$900
$1,000
$553
$859
Gross Revenue Net revenue EBIT($MM) FYE13 FYE16 FYE13 FYE16 FYE13 FYE16
U.S. Distribution 778 632 48 40 34 25 Int'l Distribution 1,630 1,895 9 5 (45) (54) Int'l Production 233 513 294 573 6 34 U.S. Production & Ad Sales 1,058 1,450 1,761 2,191 290 351 Networks 1,518 2,482 1,536 2,580 268 503 Total 5,217$ 6,972$ 3,648$ 5,389$ 553$ 859$
SPT Organization Overview
5
Steve MoskoPresident, Sony
Pictures Television
David MumfordEVP, Planning & Research
Andy KaplanPresident, Worldwide
Networks
John WeiserPresident, Distribution
Michael DaviesPresident, Production
Corii BergSr. EVP, Production
Business Affairs
Harry FriedmanExecutive Producer
Zach Van AmburgPresident, Programming
Jamie ErlichtPresident, Programming
Jeff FrostEVP, Business
Affairs
Cheryl LynchSVP, Business
Affairs
Keith LeGoyPresident, Distribution
Amy CarneyPresident, Ad Sales
Chris ElwellEVP, Distribution Business
Operations
Andrea WongPresident, Int’l Production
Paula AskanasEVP, SPT Communications
Sheraton KalouriaEVP and Chief Marketing
Officer
Chris Van AmburgSVP, U.S. Marketing
Susan LawU.S. Ad Sales
Marketing
OpenSVP, Media & Talent
Relations
OpenSVP. International
Marketing
U.S. Production
6
U.S. Production: Forecast
Strong and Consistent Earnings Growth
• Growth is driven by a steady pipeline of programming sold to SVOD and Off-net syndication: Last Resort, Happy Endings, Justified
• Continue to grow international revenue through exploring co-production opportunities and maximizing tax credits
MRP AssumptionsU.S. Production Current Series, Pilots & Development Cost ($MM)
FY13 FY14 FY15 FY16 -
500
1,000
1,500
2,000
150
170
190
210
230
250
270
290
$1,579 $1,739 $1,839
$2,012 $224 $228
$275 $276
Revenue EBIT($MM) ($MM)
7
U.S. Production: Challenges and Opportunities
8
• Continued investment in A-list writers, directors and producers for future drama/comedy/unscripted development
• Develop series with broad international appeal with globally marketable talent to sell in the US and abroad
• International co-production partnerships
• Continue to be on the forefront of the burgeoning subscription VOD market (Netflix, DirecTV) to sell and develop series
• Production cost control and reduction efforts continue on all programs
• Expand our prime time broadcast and cable reality slate
Opportunities
• Continued network reliance on self produced shows
• Declines in Broadcast and Cable ratings
• Broadcast station groups produce own content to save costs and control ad inventory
Challenges
U.S. Production: Organization Overview
9
Steve MoskoPresident, Sony
Pictures Television
Jamie ErlichtPresident, U.S. Programming
Zack Van AmburgPresident, U.S. Programming
Holly JacobsEVP, U.S. Reality &
Syndication Programming
Suzanne Patmore GibbsEVP, U.S. Drama
Development
Glenn AdilmanEVP, U.S. Comedy &
Animation
Dawn SteinbergEVP, U.S. Talent & Casting
Helen VernoEVP, U.S. MOWs / Minis
Steve KentSr. EVP, U.S. Format
Production
Kim RozenfeldEVP, U.S. Current
Programming
Ed LammiEVP, U.S. Production
U.S. Production: Opportunities for Improvement
• TBD
10
Ad Sales
11
Ad Sales: Forecast
• Drive additional revenue for first run through pricing increases and advertiser integrations
• Increase share in TV market upfront
• Digital ad sales growth (Crackle, PlayStation)
• Expanded list of advertisers for 30s/10s
• Sell out levels of 70% or higher in upfront and sell remaining inventory at premium CPMs
MRP AssumptionsU.S. Production & Ad Sales Revenue and Profit Contribution ($MM)
FY13 FY14 FY15 FY16 -
50
100
150
200
250
300
350
400
450
-
20
40
60
80
100
120
140
$184 $260
$330 $392
$34
$61
$103
$128
Revenue EBIT($MM) ($MM)
12
U.S. Ad Sales: Challenges and Opportunities
13
• Diffuse volatility in TV ad revenue market by growing a strong digital base
• Continue to drive additional revenue for first run through advertiser integrations
• Expand current base of advertisers for :30s and :10 to off-nets
• Develop emerging Cable Networks business
• Find new 3rd party representation opportunities
• Continue to support cable/network properties through Branded Entertainment
Opportunities
• Year-over-year growth in TV ad revenue is limited by available shows
• Opportunities for 3rd party ad sales representation in TV are declining
Challenges
U.S. Ad Sales: Organization Overview
14
Steve MoskoPresident, Sony
Pictures Television
Stuart ZimmermanEVP, Ad Sales
Richard BurrisEVP, Strategic Planning &
Analysis
Chris KiriakatisSVP, Digital Ad Sales
David MumfordEVP, Planning & Research
Amy CarneyPresident, U.S. Ad
Sales
Travis HoweSVP, Digital Ad Sales
U.S. Ad Sales: Opportunities for Improvement
• TBD
15
International Production
16
International Production: Forecast
• Moderate organic growth from existing operating companies is supplemented by EBIT contributions from recent acquisitions Left Bank and Silver River
• Inclusion of a hit format starting in FY15
• Included $50MM annual investment fund for FY14-FY16
MRP Assumptions
Int’l Production Revenue and EBIT ($MM)
FY13 FY14 FY15 FY16 -
100
200
300
400
500
600
700
-
5
10
15
20
25
30
35
40
$294
$433 $530 $573
$6
$13
$28
$34
Revenue EBIT($MM) ($MM)
• EBIT excludes FY13 monetization of $11MM
17
International Production: Challenges and Opportunities
18
• Continue to exploit Millionaire and develop a stable base of other successful formats
• Make more focused and sustained investment in development executives, producers, production companies, and new content especially in the UK
• Foster a more creative culture to develop intellectual property by: − Realigning the organization, including a
new President and a creative head
− Combining the print sales and format sales teams to better serve our buyers
− Creating a strategically centralized development fund
− Implementing a competitive incentive plan
• Simplify admin and operational processes
• Opportunities for local production in emerging markets
Opportunities
• Competitive marketplace
• Challenging economic climate in key markets
Challenges
International Production: Organization Overview
19
Steve MoskoPresident, Sony
Pictures Television
Wayne GarvieChief Creative Officer
Donna CunninghamEVP Operations
Mary ChanVP Production – Asia
Nathalie CivraisSVP Production – France
Andrea WongPresident, Int’l
Production
Astrid QuentillSVP & MD – Germany
OpenSVP & GM – Latin America
/ U.S. Hispanic
Maria SmirnovaMD Production – Russia
and Lean M
Ziad KebbiPresident, SPT Arabia
Jeff LernerSVP, Scripted Dev &
Production
International Production : Opportunities for Improvement
• TBD
20
U.S. Distribution
21
U.S. Distribution: Forecast
• Increase feature library sales driven by
I. Strategic use of driver inventory to leverage broad package sales
II. Hyper-targeted offerings with premium pricing
III. Multiple nonexclusive buyers and bulk buys to drive low-rated product
• Leverage SVOD licensing and strategic product planning for U.S. channel carriage
• Revenue and corresponding profit contribution volatility is largely driven by release timing, size of theatrical slate and timing of off-net syndication avails (e.g., Rules of Engagement, Community, Happy Endings)
MRP AssumptionsU.S. Distribution Revenue and EBIT
($MM)
FY13 FY14 FY15 FY16 -
100
200
300
400
500
600
700
800
900
-
5
10
15
20
25
30
35
40
$778 $778 $671 $632
$34 $36
$28
$25
Revenue EBIT($MM) ($MM)
22
U.S. Distribution: Challenges and Opportunities
23
• Opportunity to renegotiate Starz output deal
• Sell library film and TV series into non-exclusive subscription deals
• Split library windows, license multiple rights, structure non-exclusive deals
• Aggressively sell slate carve-out windows utilizing more aggressive inventory tracking and planning
• Develop consistent flow of first-run product with top talent
Opportunities
• Starz spin-off and uncertainty regarding original programming strategy
• Less reliance on library product
Challenges
U.S. Distribution: Organization Overview
24
Steve MoskoPresident, Sony
Pictures Television
John WeiserPresident, U.S.
Distribution
Thanda BelkerEVP, U.S. Pay & TV Sales
Flory BramnickEVP, U.S. Cable
Alan DanielsSVP, Distribution Planning
Phil MartzolfEVP, U.S. Syndication
Sales
U.S. Distribution: Opportunities for Improvement
• TBD
25
International Distribution
26
International Distribution: Forecast
Strong and consistent growth
• Sustained delivery of network dramas drives TV product revenue growth
• Broaden scope of broadcaster relationships to explore English language, European content, co-production opportunities
• Investments in International Distribution
• New market entrants help drive revenue pipeline
• Stronger relationships in key markets
MRP AssumptionsInt’l Distribution Revenue and Profit
Contribution ($MM)
FY13 FY14 FY15 FY16 1,400
1,500
1,600
1,700
1,800
1,900
2,000
600
620
640
660
680
700
$1,630 $1,712
$1,772
$1,895 $634
$653
$662
$685
Revenue EBIT($MM) ($MM)
27
International Distribution: Challenges and Opportunities
28
• Broaden scope of broadcaster relationships to explore English language, European content, co-production opportunities
• Take full advantage of opportunities with emerging SVOD players
• Close long-term deals in key markets over the plan
• Focus on select emerging markets to expand SPT’s presence and better capitalize on opportunities (Netherlands, Scandinavia, Poland, Hungary, South Africa)
Opportunities
• Shift in MPG film slate• Lack of a breakout/hit Drama• Ensure we keep rights to key revenue-
driving feature film franchises
Challenges
International Distribution: Organization Overview
29
Steve MoskoPresident, Sony
Pictures Television
Keith LeGoyPresident, Int’l
Distribution
Ed LouwerseSVP, Product Management
Paul LittmanSVP, Global Sales
Mike WaldEVP, Distribution EMEA
Alex MarinSVP, Distribution, Latin
America
Angel OrengoEVP, Distribution,
Asia/Pacific
Kevin BylesSVP, Distribution, Canada
International Distribution: Opportunities for Improvement
• TBD
30
Networks
31
Networks: Forecast
Strong and Consistent Earnings Growth
FYE13 FYE14 FYE15 FYE160
500
1,000
1,500
2,000
2,500
3,000
0
100
200
300
400
500
600
$1,536 $1,961
$2,258
$2,580
$268
$328
$410
$503
Revenue EBIT
• Growth comes from all regions across the world as newer channels mature to profitability and more mature channels grow or maintain their margins
• Focus next 18 months on maximizing efficiencies in existing operations
• Continue to selectively launch channels in new and existing territories
• Increase investment in Crackle U.S. advertising and technical infrastructure
EBIT reaches over $500 million in FYE16, growing
at a 23% CAGR over the MRP periodMRP Assumptions
EBIT Margin:
17.4% 16.7% 18.2% 19.5%
Networks Revenue and EBIT ($ in Millions)
32
North
America23%
Europe13%Latin America
16%India36%
Rest of Asia / Australia12%
EBIT FYE16
North America
17% Europe7%
Latin America21%
India39%
Rest of Asia / Australia
17%
EBIT FYE13
As a result of recent investments, North America and Europe grow as a percentage of Networks’ EBIT from 24% in FYE13 to 36% in FYE16
NetworksEBIT by Region
33
Networks: Brands
SET GENERAL ENTERTAINMENT
AXN GENERAL ENTERTAINMENT
ANIME/YOUTH LIFESTYLE/MUSI
CDIGITAL MOVIES
PARTNER NETWORKS
Highly successful network brands benefiting from global infrastructure
34
Networks: Challenges and Opportunities
35
• Buy out Indian partners and realize an Indian regional opportunity
• Focus next 18 months on maximizing efficiencies in existing operations
• Continue to selectively launch channels in new and existing territories
• Increase investment in Crackle U.S. advertising and technical infrastructure
• Continue to secure programming supply through studio output deals and investment in original programming (The Firm). Increase 3rd party acquisitions for US businesses
• Maximize value in Crackle US and expand internationally (Latam, Brazil, Canada)
• Expand SPTL Asia facility to service EMEA channels
Opportunities
• Global pressure on ad sales and subscriber fees
• Volatility of foreign currencies has had a particularly harsh impact on Networks earnings
• Rising content costs, increased broadcasting costs from HD roll outs and the investment in ad sales and affiliate infrastructure keeps margins in check
• Lack of a sports channel in India
Challenges
Networks: Organization Overview
36
Andy KaplanPresident,
Worldwide Networks
Eric BergerEVP, Digital Networks
Marie JacobsonEVP, Programming &
Production
James SmithSVP, Global & Digital Ad
Sales
George ChienSVP, Networks, Asia
Superna KalleSVP, GM, Sony Movie Channel & Cine Sony
Bob BilleciEVP, Technical Operations
T.C. SchultzEVP & MD, Latin America
Ricky OwEVP, Singapore
Steve MoskoPresident, Sony
Pictures Television
Masao TakiyamaSVP, Japan
Kate MarchSVP, Western Europe
Lyle StewartSVP, Central EMEA
Networks: Opportunities for Improvement
• TBD
37
Closing
38
Television: Big Ideas for Change
• TBD
39