CSC Media Group

acquisition update AUGUST 3, 2012

CSC Deal Update • SPT believes that an acquisition of the True Movies and Entertainment business is very attractive and complements its existing UK networks business and provide positive EBIT and Cash Flow from day 1 • VSS have indicated they wish to dispose of 100% of the CSC Media Group business – – – –

SPT have expressed interest in only the True Movies and Entertainment channels Rubis Media is advising 2 other parties who would acquire the Music and Kids channels Music – Box TV (Bauer Media/Channel 4 JV) who would fund a bid through internal financing Kids – Switchover Media (independent Italian channels business) who would need to secure external financing to fund a bid; concerns exist about Switchover’s ability to secure financing – In order to minimize execution risk SPT has initiated discussions with NBC Universal as a backup to Switchover in the event they are unable to secure funding (NBC have expressed interest in the Kids Channels) – In addition Viacom is rumored to be one of the other bidder(s) and may be willing to sell the Movie and Entertainment channels to Sony [meeting with Viacom scheduled for 14th August]

• SPT proposes a 2nd round bid valuation for True Movies and Entertainment of $35M (~£22.5M) – Assuming $10MM paid at close (FYE13), DWM of $31.4MM, payback by FYE23, NPV of $7.7M and IRR of 22% – Acquisition multiple of 7.8x 2012F EBITDA and 12.0x 2011A EBITDA – Assumed asset value of [$7MM] for EPG slots and programming – SPT’s first round indicative valuation for 100% was $140M–$157M (~$47M implied valuation for True Movies/Ent)

2

Strategic Rationale for True channels business • Market position: ● ●

● ●

● ● ●

● ● ●

●

● ●

Increases Adults reach to 8 million individuals per month (27% increase) Sony becomes the #2 movie provider on the Sky platform

Brand fit: True Movies – clear brand positioning with international appeal and understanding, complements existing Sony portfolio True Movies/Entertainment’s audience skews female, cross promotion opportunities with SMC and SET Complements male-skewing Movies4Men’s audience for advertising sales [Gary to insert brand positioning chart for SMC, SET, M4M, True Movies and True Entertainment]

Financial impact: Low cost programming model delivers high EBIT margins (35%-40%) Delivers shelf space to increase efficiencies and sweat program assets across portfolio bringing down program cost/hour across the group Delivers incremental scale and leverage for future ad sales representation negotiations – no short term upside for Dolphin though Leverages existing UK channel infrastructure FY13 FY14 FY15 FY16 Contributes positive EBIT and cash flow from Day 1 UK CHANNELS: EXISTING BUSINESS Revenues 11,080 17,532 22,365 EBIT (incl PPA) -7,821 -3,661 504 Margin -71% -21% 2% UK CHANNELS: CSC Revenues 3,253 13,210 13,925 EBIT (incl PPA) 262 1,883 2,923 Margin 8% 14% 21% UK CHANNELS: EXISTING BUSINESS AND CSC Revenues 14,333 30,741 36,290 EBIT (incl PPA) -7,558 -1,778 3,427

26,523 3,561 13% 14,492 4,105 28%

41,015 7,665

3

Financial overview – True Movies & Entertainment • Proposed purchase price of $35M (7.8x multiple of FYE12 EBITDA) • Projections per SPE and assume that True Movies channels are integrated with SPE’s existing UK channels • Valuation also assumes that Virgin maintains FYE12/ carriage 31 of these Projected channels FYEMarch 31st, following a change in 2012 FY13 FY14 FY15 FY16 FY17 control(USD '000s) REVENUE Advertising Revenue Other Revenue (Int'l/ Teleshopping) TOTAL REVENUE

9,578

2,514

940 $10,517

399 $2,912

10,180 1,649 $11,829

10,663 1,817 $12,480

11,089

11,533

1,871 $12,960

1,927 $13,460

OPERATING EXPENSES Programming % of Gross Revenue Other Expenses Total Operating Expenses

2,263 21% 3,775

647 23% 1,338

2,672 23% 4,855

2,888 22% 5,057

2,789 22% 5,220

2,900 22% 5,372

6,038

1,985

7,527

7,944

8,009

8,273

$4,535

$4,951

$5,187

$1,634 13%

$2,958 23%

$4,090 30%

$3,195

$3,440

$3,665

$3,195

$3,440

$3,665

EBITDA

$4,480

$927

EBIT (less PPA) % Gross Revenue

$4,218 35%

($79) -3%

Operating Cash Flow

$601

Purchase Price

$4,301 $502 4% $3,028

($10,000) ($25,000)

Net Cash Flow to SPE

($9,399) ($21,972)

Cumulative Cash Flow to SPE

($9,399) ($31,371) ($28,176) ($24,735) ($21,071)

PV (of Cash Flows & TV) @ 12%

$36,517

PV (of Cash Flows) @ 12%

$9,491 Purchase Price ($10,000.0)

$30MM

$35MM

$40MM

IRR to Sony

28%

22%

16%

NPV to Sony

$11.6MM

$7.7MM

$3.7MM

FY22

FY23

FY25

Payback

Note: Assumes 9.2x EBITDA for terminal value in Year 5 or a 1% implied perpetuity growth rate.

4

Current BID status • Execution risk is increased by: total aggregated bid €20M • Low initial bid from Rubis (£58M) • 4 parties (SPE, Switchover, Bauer, Channel 4) • Deferred purchase price by SPE

SCENARIO 2:  Valuation  Existing Operations  Execution Risk

SPE  $35M - $40M  With SPE  MEDIUM

NBCU  NA  NA  LOW

RUBIS (Box)  $30M - $40M  With C4  LOW

4 PARTIES  $100M+  NA  LOW/MEDIUM • 4 parties (SPE, Switchover, Bauer, Channel 4) • Deferred purchase price by SPE

SCENARIO 3: [TBC]  Valuation  Existing Operations  Execution Risk

SPE  $35M - $40M  With SPE  MEDIUM

VIACOM  NA  NA  LOW

VIACOM  NA  NA  LOW

2 PARTIES  $100M+  NA  LOW • Deferred purchase price by SPE

5

TIMELINE ACTION

DATE Now – 14th August

All parties finalize separate valuations of respective business assets and operations

15th August

Box TV request approval from Channel 4 and Bauer Media boards to proceed with bid SPT request approval from senior management to proceed with bid Switchover confirm approval to proceed with bid and confirmation of financing • In the event Switchover is unable to secure financing, SPT formally engage with Viacom and/or NBC [will we have enough time to submit 2nd round bid by Aug 31?]

31 August

All parties submit 2nd round bids

6

appendix

7

Business Assets/operations TRUE MOVIES Programming

• Licenses movies from over 20 distributors

KIDS •

Licenses kids content from over 40 distributors

MUSIC •

Digital library of ~30,000 music videos

Operations – In-House Production

•

TBD

• TBD

• TBD

Operations – Playout

•

TBD

• TBD

• TBD

Operations – Animation

--

Operations – UK Distribution

--

Operations – Int’l Distribution

--

Operations – Ad Sales

• Dolphin • CSC Media Group/3DVision for international

Operations – Facilities STAFF – Dedicated to Channel

• •

•

Team of artists and animators who have developed characters for Tiny Pop

•

2 FTE’s

• Fully equipped, green screen studio for interview and filming • Channel graphic production with a dedicated 2D and 3D animation team •8 Final Cut Server edit suites • Significant in-house digital storage • In-house Grass Valley trained software development •

Advanced , integrated playout system from Grass Valley --

--

--

• Arqiva • Eutelsat 28A to: Sky, Freesat and Virgin Media

--

--

• Stellar POP/Stellar DBS Transport/Intelsat 10 to MYTV • Eutelsat POP/Eutelsat Teleport/W2a-10° East C Band/DTT head ends in Africa/Star Times

•

Sky Media

• TBD •

--

--

Sky Media

TBD

TOTAL

5 FTE’s

--

• TBD •

• TBD

5 FTE’s

--

8

Viewing analysis Adults Reach: True increases reach by 21%

Profile: True readdresses the gender balanceSony Chans 73%

8,249,000

TRUE Combined

61%

27%

6,491,000

53% 47% 39% 27%

SET, SMC, M4M, M&M

Men

Plus True Movies Group

Women

% of Sky Impacts by movie group: True doubles Sony’s share of movie impacts on the Sky platform 35%

100%

24% 16%

12%

12%

9% 6% 0%

SMC, M4M

TRUE

Combined

Sky Movies

Film4

Movies 24

MGM HD

9

Horror Channel