Embassy Row Acquisition Update

July 2008

Confidential Draft
Executive Summary

• Reality remains a critical growth area for SPE and requires further investment
– Sector offers attractive program economics and continues to grow
– Through 2waytraffic, SPE has secured strong international distribution
– Additional U.S. product is needed to fill 2way’s distribution capacity
– U.S. formats of 2way’s product will also create new value

• Michael Davies will serve as a cornerstone of our domestic strategy

– Davies has a strong track record, is credible internationally, and works well with 2way
– ER earnings are expected to be below CY08 budget. We continue to believe in Davies’
potential and do not anticipate a significant negative impact on overall economics
– Substantive terms have been agreed (in-line with previous discussions: $25MM at close,
up to an additional $50MM of earn-outs)

• We recommend formalizing the term sheet to acquire Embassy Row

– Sign term sheet
– Finalize long-form and complete confirmatory diligence
– Target closing October 1

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Strategic Rationale

• History of success with shows like “Who Wants to be a Millionaire?” and “Wife Swap”
• Now focusing on reinvigorating Sony brands (e.g., “Million Dollar Pyramid” and “Newlywed Game”) and launching new shows with global potential (e.g., “Take the

Track Record Money and Run”)

• Well regarded both domestically and internationally

International Credibility
• Strong relationships with networks in multiple territories

• Creates new formats that leverages 2way's distribution capacity

• Valuable sales asset for selling new ER formats, SPT library formats, and 2way formats in the U.S.

Fit with 2waytraffic

– Driving force behind 2waytraffic’s format “All-Star Mr. and Mrs.” being developed for the U.S. (likely with CBS)

• Reality producers / production companies are quickly being locked-up (Lisa Levenson, Tom Forman, Ryan Seacrest)
• Davies has one of the best track records amongst reality producers; may be acquired by another studio if not by SPT
Market Factors / Timing

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Financial Performance

• Operating income was in-line with previous projections

CY 07 – $3.3MM actual vs. $3.4MM budget

• YTD is below budget, full year is expected to be below budget

– Earnings through May are ($378K) vs. prior year through May of $892K
CY 08 – Full year profits estimated to be roughly $1MM vs. budget of $3.5MM

• FY09 EBIT impact on SPE will be better than SPE budget, due largely to timing
– $118K including P10, ($1.0M) before P10 vs. budget of ($3MM)
– Later close of acquisition results in less deal amortization during the fiscal year
– Earlier quarters (pre-acquisition) included losses; December and March quarters expected to be more profitable

FY 09 – Decreased estimates for incremental investment

• We believe Davies will still generate successful new shows and that the deal will remain NPV
Deal NPV positive under the current structure

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Deal Structure

• $25MM cash at close

• Up to $50MM of additional earn-outs

–Value of earn-outs would be calculated in Year 6 as: 7x (Average of Years 5-
6 EBITDA) minus $25MM advance

• Earn-out payments would be made between Year 6 and Year 10

–10% of earn-out paid to employees in Year 6
–10% of earn-out paid to employees in Year 7
–80% of earn-out paid to Davies over Years 6-10 if Davies meets minimum
EBITDA targets
–Earn-out payments can be accelerated if Davies exceeds EBITDA goals

Max Total Consideration: $75MM

PV(1) of Max Total Consideration: $41MM(1) - $45MM(2)
Note: (1) PV of up-front payment and maximum earn-outs fully vested in Years 6-10 at 16.5% discount rate
(2) PV of up-front payment and maximum earn-outs fully vested in Year 6 at 16.5% discount rate
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 Financial Impact – Base Case

Base Case (Prior) Base Case (New)

P&L FY09 FY10 FY11 FY12 FY13 P&L FY09 FY10 FY11 FY12 FY13
EBITDA $1.9 $4.3 $9.6 $15.5 $21.6 EBITDA $2.1 $3.2 $4.5 $5.4 $5.8
Amortization ($4.4) ($4.4) ($4.4) ($4.4) ($4.4) Amortization ($2.0) ($4.4) ($4.4) ($4.4) ($3.2)
EBIT ($2.5) ($0.1) $5.2 $11.1 $17.3 EBIT (1) $0.1 ($1.2) $0.1 $1.0 $2.6

Incremental EBITDA $1.4 $1.4 $3.7 $5.8 $6.7 Incremental EBITDA $2.1 $1.7 $3.8 $4.9 $5.4
Amortization ($4.4) ($4.4) ($4.4) ($4.4) ($4.4) Amortization ($2.0) ($4.4) ($4.4) ($4.4) ($3.2)
Incremental EBIT ($3.0) ($3.0) ($0.7) $1.5 $2.4 Incremental EBIT $0.1 ($2.7) ($0.6) $0.6 $2.2

NPV (10-year) Nominal (10-Year) NPV (10-year) Nominal (10-Year)

Incremental EBITDA: $21.0
Value of Exit : $16.1
(2)
Total Consideration: ($25.0)
Net Present Value (3): $12.2
Incremental EBITDA: $52.8
Terminal Value: $74.2
Total Consideration: ($25.0)
Consideration / EBITDA: 47%
Incremental EBITDA: $18.8 Incremental EBITDA: $45.0
Value of Exit : $12.9
(2)
Terminal Value: $59.4
Total Consideration: ($25.0) Total Consideration: ($25.0)
Net Present Value (3): $6.7 Consideration / EBITDA: 56%

Notes: Difference between total EBITDA and Incremental EBITDA is the portion of shows we own under Davies’ current deal
Old Cases assume ER is owned for all of FY09 while New Cases assume ER is owned as of October 1, 2008
Assumes a risk adjusted discount rate of 16.5% for all NPV calculations
(1) If ER secures 5% chargebacks, EBIT in FY10 - FY13 would be ($0.1), $1.9, $3.6 and $6.1, NPV would be $19.1MM
(2) Includes exit at 11x multiple
(3) Includes $25MM up-front, incremental EBITDA less earn-outs, plus exit at 11x 6
Cumulative Incremental EBITDA and NPV: New and Prior Base Case

• Value associated with properties currently on-air has decreased

– Largely offset by decrease in required investment in overhead and development as a
result of the ability to leverage 2waytraffic and ER’s currently increased staff
• Value of properties in development is largely unchanged
• Values of new properties could be higher if ER network contracts include chargebacks (1)

Base Case (Prior) Base Case (New)

NPV NPV
Estimates for Properties 10-yr EBITDA 10-yr EBITDA
On-air Impact Cash Flow Terminal Total Impact Cash Flow Terminal Total
(2)
Power of 10 $36.5 $15.0 $10.4 $25.4 $5.3 $3.1 $0.8 $3.9
Other TV $13.0 $9.1 $0.0 $9.1 $0.0 $0.0 $0.0 $0.0
Interactive $13.9 $6.4 $3.5 $9.9 $12.9 $5.8 $3.3 $9.1
Sub-Total $63.4 $30.5 $13.9 $44.4 $18.2 $8.9 $4.1 $13.0

Estimates for Properties In-

Development
TV $81.4 $31.6 $26.2 $57.8 $79.8 $33.7 $22.4 $56.1
Interactive $3.5 $1.6 $0.9 $2.5 $7.9 $3.7 $1.9 $5.7
Sub-Total $84.9 $33.2 $27.1 $60.3 $87.7 $37.5 $24.3 $61.8

Expenses
ER Overhead ($40.8) ($18.4) ($10.5) ($28.9) ($40.6) ($18.5) ($10.3) ($28.7)
Incremental Investment ($54.7) ($24.2) ($14.4) ($38.6) ($20.2) ($9.1) ($5.2) ($14.3)
Sub-Total ($95.5) ($42.6) ($24.9) ($67.5) ($60.9) ($27.6) ($15.5) ($43.1)

Deal Consideration N/A ($25.0) N/A ($25.0) N/A ($25.0) N/A ($25.0)

Total Acquired EBITDA $52.8 ($4.0) $16.1 $12.2 $45.0 ($6.2) $12.9 $6.7

Note: (1) If ER secures chargebacks of 5% of budget on new shows, NPV is $19.1M

(2) Includes only portion of P10 acquired from Davies. 7
Key changes in Model: “Base Case”

Current Approach Changes from Prior

Slate • Davies’ “New” slate, but eliminate chargebacks
on new shows
• New shows including 2 modest format successes
in the next 3-5 years
• P10 on GSN, declining format profits, no
syndication and no local language production
• Begins w/ Davies’ updated slate
– Smaller shows (WSOPC, Chain Reaction, Grand
Slam) no longer on-air
– New shows added (Newlywed, Pyramid)
– Format profits on new/library shows more modest
compared with format profits on network shows in
prior model
– P10 moved to GSN from CBS, formats/ syndication
fees and local language production reduced

Incremental • Reduced to $1.2MM - $2.2MM of investment in • Reduced investment from prior estimate of
Investment HC and development $3MM - $6MM due to:
– Ability to leverage 2way for acquisition and
distribution
– Davies now has more HC in place

Interactive • $1.9MM (CY07 actuals) growing at 5% • Increased from $1.5MM growing @ 5% based on
actual performance

Ancillary • Excluded • No Change

Sports and Film • Excluded • No Change

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Incremental SPT Investment New Case vs. Prior

Incremental Investment (Prior) Incremental Investment (New)

• Incremental investment was modeled prior to • New incremental investment assumes ability to
2waytraffic acquisition leverage 2waytraffic
• $300K-$2.4M of headcount costs • Current ER and 2way working relationship is
– 2-3 Acquisition headcount already bearing fruit with the development of
– 1-3 Development headcount “Celebrity Mr. and Mrs. “
– 1-3 Administration headcount • Reduced headcount costs to $700K-$1.7M
– An additional 5 Embassy Row headcount – 2 Acquisition headcount
converted to full-time employees – 1 Development headcount
• $2.0-$2.5M of self-funded pilot costs – 1-2 Administration headcount
• $0.0-$2.0M for development and acquisitions – 1 Finance headcount
– 2 additional Embassy Row headcount
converted to a full-time employees
• $0 in self-funded pilot costs
• $500K for development and acquisitions
Incremental Investment (Old) Incremental Investment (New)
FY09 FY10 FY11 FY12 FY13 FY09 FY10 FY11 FY12 FY13
($2.8) ($4.7) ($5.2) ($5.9) ($6.0) ($1.2) ($1.9) ($2.0) ($2.1) ($2.2)
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Timing and Next Steps
July 2008
S M T W T F S

Date 1 2 3 4 5
6 7 8 9 10 11 12
13 14 15 16 17 18 19
20 21 22 23 24 25 26
Late July • Lynton / Hendler review
27 28 29 30 31

August 2008
S M T W T F S
1 2
3 4 5 6 7 8 9
Early August • Formalize / sign term sheet 10 11 12 13 14 15 16
17 18 19 20 21 22 23
24 25 26 27 28 29 30
31

September 2008
S M T W T F S
• Finalize long-form confirmatory diligence (legal, tax, 1 2 3 4 5 6
End Sept financial) 7 8 9 10 11 12 13
14 15 16 17 18 19 20
• Final approval from SCA 21 22 23 24 25 26 27
28 29 30

October 2008
S M T W T F S

Early Oct • Close 1 2 3 4

5 6 7 8 9 10 11
12 13 14 15 16 17 18
19 20 21 22 23 24 25
26 27 28 29 30 31

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APPENDIX

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Comparable Transaction Analysis
Transaction Value /
Date Target Acquiror Transaction Value Last FY Sales Last FY EBITDA Last FY EBIT
European Deals
07-Dec 12 Yard Productions ITV £35 3.0x 14.8x na
07-Sep Metronome Film & Television Schibsted £31.4 0.4x na 18.8x
07-Sep Twenty Twenty Productions Shed Media £18.0 1.9x 8.6x na
07-Aug Sparrowhawk Media NBC Universal £175.0 1.8x na na
07-Aug Objective Productions All3Media £50.0 2.2x na na
07-Jul Marathon Group De Agostini 250 3.6x na na
07-Jul Prospect Pictures DCD Media £7.1 0.9x na 3.9x
07-Jul September Holdings DCD Media £9.1 1.2x na 12.9x
07-Jul West Park Pictures DCD Media £3.0 2.7x na nm
07-May Endemol Investor group incl. John de Mol 3396.8 3.0x 19.2x 21.2x
07-Jan Princess Productions Shine £20.0 na 8.5x 8.6x
07-Jan Endemol France Endemol NV 450 2.6x na na
06-Dec WWTBAM & Cellador 2waytraffic £111.5 3.8x 7.3x na
06-Dec Kudos Shine £35.0 na 11.0x 11.3x
06-Aug All3Media Secondary buy-out (Permira) £320.0 1.4x 11.5x 12.3x
06-May Tiger Aspect Holdings IMG Media £27.0 0.4x 12.1x 15.1x
06-Apr Darlow Smithson Productions IMG Media £20.0 1.0x na na
06-Apr Odeon Film GFP Vermögensverwaltungs £15.6 0.4x 4.3x 4.5x
06-Mar Hurricane Spütz Na na na na
05-Dec IWC RDF £14.0 0.8x 17.5x 19.5x
05-Nov Ricochet Shed £30.0 2.0x na 14.1x
05-Oct TV Corp Tinopolis £27.7 0.6x 21.2x na
05-Aug Touchpaper Television RDF £4.2 0.9x 11.9x na
Median 1.6x 11.7x 12.9x
Average 1.7x 12.3x 12.9x
2waytraffic Deal
TBD 2waytraffic (1) Sony Pictures Entertainment $353.0 3.4x 11.4x nm
Recent US Deals
7-Dec Reveille Shine $155.0 2.0x 12.0x 12.0x

Davies CY07 EBITDA: $3.3M

Implied Market Value at 11-12x: $36M - $40M
Total Initial Consideration: $25M

Note: (1) Based on expected Sony Base Case consideration of $353 and CY07E projections. 12