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Sony Pictures Entertainment

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<ul><li>For over 60 years, Sony has transformed the world of entertainment . </li></ul>“ in a sprawling market where controlling a broad portfolio of businesses is crucial, nobody is positioned better than sony…” Games Entertainment Music Networking & Financial Services Electronics Sony Pictures Entertainment -Movies( 75% of sales ) -Television( 25% of sales ) -Animation -Home Entertainment -Digital Entertainment Figure 1 Source: SPIT Corporate Overview

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<ul><li>In 1989, Sony acquired the Columbia Pictures Entertainment Inc. (Columbia Pictures, TriStar Pictures, etc.) from The Coca-Cola Company for $3.4 billion. </li></ul><ul><li>The company renamed Sony Pictures Entertainment in 1991. </li></ul><ul><li>Expanding its growth on April 8, 2005, when it acquired the legendary Hollywood studio Metro-Goldwyn-Mayer Studios, Inc. in a deal worth nearly $5 billion. </li></ul>1.1 History of SPE

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Columbia TriStar Motion Picture Group A World-Class Hollywood Library -more than 3500 feature films -over 35000 television episodes -some key franchiese such as Spider-man, Da Vinci Code, Zorro, Men in Black, Charlie’s Angels, Stuart Little. 11 Academy Award for Best Picture winners The Group releases about 22 films per year in US and owns studio facilities in US, Hong Kong, Madrid, Mexico, the United Kingdom, Brazil and Japan . 1.2 Movies:

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-SPE is the current market share leader among the Hollywood studios at the U.S. box office. So far in 2006, SPE has had 12 movies that opened at #1 -has already amassed US$2.1 billion in worldwide ticket sales this year. -has grossed over US$1 billion at the U.S. Box Office for each of the last five years -has grossed over US$1 billion at the international box office for five of the last seven years. -began local film production in Asia in 1998, SPE has produced or co-produced 19 Asian feature films . Two of these productions have made over $100 million worldwide such as Kung Fu Hustle and Crouching Tiger, Hidden Dragon. SPE has set box office records worldwide

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Sony Pictures Television International Distribution program distribution and licensing of Sony Pictures Entertainment feature films and TV products as well as custom mobile products to TV and mobile outlets around the world . International Networks over 40 networks worldwide Local Production original local language productions and both fiction and non-fiction format adaptations. Three Lines of Business 1.3 Television: Figure 2 Source SPIT Corporate Overview

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SPT contains a library that includes more than 35,000 episodes of more than 270 television series and 22,000 game show episodes under the Columbia TriStar Television brand, and the television rights to the Embassy Pictures library and also the owner of the television brand &quot;Embassy Television&quot;--among most recent notable shows in this library are Seinfeld, King of Queens, Days of Our Lives and The Young and the Restless. Television: SPTI 3 highly successful channel brands benefiting from a global infrastructure Asian Anime High Energy Entertainment Light General Entertainment 19 Languages 100 countires 40 channels 200M+ Homes Figure 3 Source SPIT Corporate Overview

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AXN Mobile AXN Mobile portal both inform and drive viewers to channels

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1.4 Animation <ul><li>A division of SPE, founded in 2002, which produces computer-animated films. </li></ul><ul><li>Their first feature film Open Season , was released on September 29, 2006. They have also announced their next film, called Surf's Up. </li></ul><ul><li>For the future of Sony Pictures Animation they have planned Cloudy With a Chance of Meatballs and Hotel Transylvania. Open Season 2 may also be a possibility if the first one does well enough. </li></ul>

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1.5 Home Entertainment It is responsible for the distribution of the Sony Pictures library for home entertainment. They are also responsible for their television shows from the Sony Pictures Television library Sony Pictures Home Entertainment is the home video, DVD, and UMD distribution arm of Sony Pictures Entertainment.

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1.6 Digital Entertainment <ul><li>Known as the digital website interactive creator for SPE </li></ul><ul><li>Designed websites for Sony Pictures, Screen Gems Network, SoapCity, Sony Pictures Imageworks, Game Show Network, among others for SPE. </li></ul><ul><li>In 2005 the group's name was changed to Sony Pictures Digital Sales and Marketing and encompassed all areas of interactive media creation and marketing for SPE, including gaming, mobile, websites, design and sales. </li></ul>

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2.1 Traditional Business The effects of Sony Pictures Entertainment Inc. (SPE)’s new media strategy rely heavily on the performance of its traditional businesses which are known as film and television production and distribution.

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2.1.1 Business Overview Figure 4 Sales (Financial Services Revenue) and Operating Income (Loss) (Pie charts indicate percentage of sales and operating revenue.) In the fiscal year of 2006, SPE’s business sales increased by 1.7% due to the depreciation of the yen. On a U.S. dollar basis, however, it decreased by 4%.

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2.1.2 Film In terms of film, SPE ended calendar year 2005 with over $1 billion in ticket sales in North America for the fourth year in a row, securing its position as the No.1 studio in U.S box office receipts over 2000-2005 period. This achievement lays a solid foundation for Sony’s significant role in the worldwide box office market of which U.S represents around 50%. As illustrated in Figure2, in the year of 2006, from January to November, SPE has released 25 movies with the total gross of $1,425.1 million, accounting for 17.9% of the total market share. Figure 5

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2.1.3 Home Entertainment Home video sales are now 2.5 times the box office income from showing on theatre, so on the home entertainment front, Sony Pictures Home Entertainment (SPHE) has been an indispensable driver of growth for SPE’s motion picture and television business. SPE continues to lead the way in digitizing its film and television library with more titles available for digital distribution than any other studio. SPHE launched its new digital sell-through distribution business in April 2006, making films available for sale via the Internet on sites including Movielink and CinemaNow.

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2.1.4 TV During the fiscal year ended March 31, 2006, Sony Pictures Television (SPT) continues its U.S. daytime drama television leadership with the No.1 and No.2 shows ( The Yong and the Restless and Days of our lives ) and its syndication success with the No.1 and No.2 U.S. syndicated game shows ( Wheel of Fortune and Jeopardy! ), and the enormously popular Seinfeld . SPT also produces The King of Queens , Dragon Tales , Kidnapped and Til Death . On cable, SPT remained the No.1 producer of original scripted series for U.S. basic cable during fiscal year 2005 with more original dramas on the air than any other studio, including four of the top15 (The Shield , Rescue Me , Stargate SG-1 and Stargate Atlantis ).

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In response to its great success in the U.S, Sony Pictures Television International (SPTI), the division of Sony Pictures Entertainment responsible for all television business outside of the U.S., also solidify its position as the leading local language television producer among all Hollywood studios with hit original scripted shows in such countries as Germany, Italy, Chile, Span and Russia. SPIT’s production group generates over 9,000 hours of programming in 25 countries. 2.1.4 TV

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2.2 Digital Business Model in SPE <ul><li>According to the statement of Ken Lo, the vice president of the business department of SPTI, Asia, SPE’s new media operation is simply a strategic try that yields revenue less than 5% of the total. So far it consists of five digital business models: </li></ul><ul><li>Pay Per View </li></ul><ul><li>Download to PCs </li></ul><ul><li>E-Commerce Site </li></ul><ul><li>Mobile-related Service </li></ul><ul><li>At the current stage, SPE don’t expect much of it and plan to continuously invest in each model with equal emphasis for three-to-four years. </li></ul>

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2.2.1 Pay Per View SPHE entered into this field as of April 2006, making films available for sale via the internet on sites including the above-mentioned Movielink and CinemaNow. In fact, Movielink is a joint venture of SPE with other big studios like Metro-Goldwyn-Mayer Studios, Paramount Pictures, Universal Studios and Warner Bros. Studios. It is predicted that in the next coming years, download service will experience a continuously preeminent growth.

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2.2.2 Download to PCs SPHE has launched its digital sell-through business in April 2004. Teaming with Movielink and CinemaNow, the service will enable U.S. broadband internet users to download-to-own a range of entertainment content from the Sony and MGM collective libraries. It began with an initial slate of 75 titles that include the well-known &quot;Memoirs of a Geisha,&quot; &quot;Spider- Man 2,&quot; &quot;Taxi Driver,&quot; &quot;Barbershop,&quot; and &quot;Hitch.&quot; In addition to offering new release titles day-and-date with DVD, the company releases additional titles from Sony's and MGM's library monthly. The combined Sony Pictures and MGM libraries of more than 7,500 titles are believed to be the largest most digitized collection in the business.

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<ul><li>Increasing rate of broadband penetration allows more users to access to it. </li></ul><ul><li>By contrast with pay per view, this service fulfils customers’ demands to ‘own’ content. </li></ul><ul><li>With more flexibility, you may store your favorites downloaded in the computer or burn to a DVD/VCD. </li></ul>It is predicted that in the next coming years, download service will experience a continuously preeminent growth because of the following reasons: 2.2.2 Download to PCs

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2.2.3 E-Commerce Site

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2.2.3 E-Commerce Site SPE also works with portal sites and other third part e-commerce website to sell its products online including Amazon, YesAsia in Hong Kong and CNAVE in China. Compared with Movielink and CinemaNow, in those websites only physical DVD or VCD will be shipped to customers through snail mail.

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2.2.4 Mobile-related Service Deliver Entertainment to Mobile Phone Users Sony Picture Entertainment delivers movie and other entertainment contents to consumers through mobile phones. This business is mainly for Japanese users of third-generation mobile phone services in which moving images and other large-volume data can be transmitted at high speed. The annual sales of it arrive at an estimated 10 billion yen.

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2.2.4 Mobile-related Service Mobile as a marketing tool On the other hand, SPE regards mobile as the most powerful marketing tool for engaging with movie-goers and uses it to help promote its entertainment properties and build deeper customer relationships. The first mobile Internet site to be launched is to accompany the DVD release of Will Smith film Hitch. Mobile Internet sites are launched for every major film release and the biggest of SPE’s DVD releases. These sites are promoted on all marketing material such as press, online and outdoors. Content includes marketing material such as movie trailers and premium content such as video interviews. The personal details collected will be used to build a wider mobile CRM strategy for Sony Pictures.

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3. Operation 3.1.Development & Preparation 3.2.Pre-production 3.3.Production 3.4.Post-production 3.5.Distribution

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Story-Synopsis-Step outline-Treatment-Screenplay-Script Coverage-Assess-Pitch Production Office-Storyboarding-Budging-Scheduling-Crew Principal photography-In camera special effects/Computer generated working <ul><ul><li>Film editing & effects (Visual/Musical/Sound) </li></ul></ul><ul><ul><li>Final release print-Previewed  Feedback  further shooting or editing </li></ul></ul>Marketing (AD materials, PR, Website, Promotion, etc.) Play in selected cinema Digitalization/Conversation  DVD/VHS/Internet players/Others Developing Post-Production Post-Production Production Distribution A E D C B Figure 5 Sony Pictures Movie

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Illustration: OPEN SEASAON

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Marketing Figure 6 Modifying the Script Dubbing Storyboarding CGI Working Editing & Effecting Developing Role Images Script Team Producer Director Artist CG Animator Cast (Voice) Writer editor Idea Story Draft Cinema DVD Online Player Other productions& services SPA Production Company Distributors

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“ Run” of Episode CREW Production Post-production Finished Show <ul><li>Writer </li></ul><ul><li>Executive producer </li></ul><ul><li>Cast </li></ul><ul><li>Director </li></ul><ul><li>Photography director </li></ul><ul><li>Editor </li></ul>Figure 7 Sony Pictures Television TV series idea SPE Pilot a prototype first episode Affiliates SPE Development Distribution Producing

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Distribution Network Local Production SPT Figure 8 Overseas TV products  Local Local TV products  Overseas

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4. Technology 4.1 Video compression <ul><li>Video compression: Reducing video content’s quantity of data with little loss in quality. </li></ul><ul><li>MPEG: The Moving Picture Experts Group has standardized several compression formats and ancillary standards. </li></ul><ul><li>VCD MPEG-1 </li></ul><ul><li>DVD and Pay-TV video MPEG-2 </li></ul><ul><li>Digital TV : Digitized images MPEG-2 transmission </li></ul><ul><li>decompressed displaying </li></ul><ul><li>Internet players can directly play the MPEG2 files . </li></ul>

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<ul><li>Blu-ray Disc: the next-generation optical disc format for high-definition video and high-capacity software applications </li></ul><ul><li>Sony Pictures Home Entertainment released the first 20 titles on the Blu-ray Disc format in June 2006. </li></ul><ul><li>Specification </li></ul><ul><li>High capacity: 9h of HD video can be stored on a 50 GB disc </li></ul><ul><li>User friendliness: menu navigation, new interactive capabilities </li></ul><ul><li>DRM feature : BD+ , Mandatory Managed Copy system </li></ul>4.2 Blu-ray Disc

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Comparison of DVD, HD-DVD, Blu-ray ~ CNET News.com ~ Figure 9 Feature DVD HD-DVD Blu-ray Disc capacity 4.7GB (single layer) 8.5GB (dual layer) 15GB (single layer) 30GB (dual layer) 45GB (prototype triple layer) 25GB (single layer) 50GB (dual layer) 100GB (prototype quad layer) Video capacity (per dual-layer disc) 2 SD: approximately 3 hours HD: n/a SD: approximately 24 hours HD: approximately 8 hours SD: approximately 23 hours HD: approximately 9 hours Manufacturer support (home theater) 4 All Toshiba, LG, Thomson/RCA Hitachi, Mitsubishi, LG, Sharp, Sony, Panasonic, Samsung, Philips, Thomson/RCA Manufacturer support (PC storage) 4 All Microsoft, Intel, HP, NEC, Toshiba Apple, Dell, Benq, HP, LG, Panasonic, Philips, Pioneer, Samsung, Sony, TDK Studio support 4 All Paramount, Studio Canal, Universal, Warner, the Weinstein Company Sony Pictures (including MGM/Columbia TriStar), Disney (including Touchstone, Miramax), Fox, Paramount, Warner, Lions Gate Movie prices $6 and more (retail) $20 to $28 (retail) $20 to $28 (retail) Number of titles available by the end of 2006 50,000-plus Dozens to hundreds Dozens to hundreds

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<ul><li>Digital cinematography : It is the process of capturing motion pictures as digital images, rather than on film. </li></ul><ul><li>Digital distribution : Movies shot digitally may be released to theatres by satallight and leased line, or in forms of VHS or DVD. It saves 85% distribution cost compared with traditional way of distribution. </li></ul><ul><li>Digital projection: In 2000s, some cinema s start to use digital projector s to put on digital films . Digital projectors deliver clearer and sharper images. Video files can show on the screen several times without lost on quality . </li></ul><ul><li>Digital Cinema Initiative was formed in 2002 by the 7 major Hollywood studios, including SPE, to tackle standards for digital cinema. They released the third version of their Digital Cinema System Specification standards in December 2003. </li></ul>4.3 Digitalization

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Director Actor Animator Film Distributor Theatre Visitors Home Video Distributor Home Users (buy DVD) MSO (Provide VOD) Home User (PC/TV) Movie Trailer Wireless Users Content Origination Content Production Distribution Syndication Content Consumption SPE E-Commerce HBO Home User (Cable TV) Online Film Download Sites Theatre/Cinema

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<ul><li>BT is a P2P file distribution protocol. BT websites allows distributing digital files without the permission of the copyright holder. The infringement threathens copyright holders’ profit. </li></ul><ul><li>According to Ken Lo, vice-president of Business Department of Sony Pictures Television International , Asia, beside sending legal threats, SPE is also considering cooperating with P2P websites. He hopes the P2P technology can be combined with DRM (Digital Rights Management) feature to build a platform for people to seek and watch copyrighted movies more conveniently. </li></ul>6. Intellectual Property 6 .1 BT

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<ul><li>From 1997 to October 2003, at least 300 million pirate disks were confiscated by customs and frontier inspection stations all over the country. </li></ul>6. Intellectual Property 6.2 Pirated disks <ul><li>Ken Lo hopes the customs and police exert more efforts against piracy. </li></ul><ul><li>He also forecast that along with the raising of consumption level, Chinese people would prefer better experience provided by legal versions. </li></ul>~Beijing Review~

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<ul><li>Video sharing websites are becoming popular in the past two years. Copyright problem also rises. a large amount of infringing content continues to be uploaded. </li></ul><ul><li>Instead of launching court battles, SPE is actively seeking for cooperation with video sites while protecting its copyrighted contents. </li></ul>6. Intellectual Property 6.3 Video sharing websites

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<ul><li>Case I </li></ul><ul><li>On November 9, Grouper.com, acquired last August by SPE, is offering snippets from 100 Sony films and TV shows for users to integrate into blogs and on social networking sites such as MySpace. </li></ul><ul><li> </li></ul><ul><li>To avoid court battles, some video sites are trying to strike content-sharing deals with studios and music labels. By offering famous scenes from hit films for free, Sony is hoping fans will be prompted to buy the full-length movie. </li></ul>6. Intellectual Property 6.3 Video sharing websites

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<ul><li>Case 2 </li></ul><ul><li>Mainland video sharing site www.bbvod.net ( 九州梦网 ) announced this November that it plans to shell out several million US dollars every year to buy copyrighted video programs mainly from SPE. bbvod.net is mainland’s first website introducing Hollywood movie copyright, aiming to build itself into a broadband entertainment website with most copyrighted videos in China. </li></ul>6. Intellectual Property 6.3 Video sharing websites

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7.1 5 Forces Analysis Figure 11 <ul><li>Competitors: </li></ul><ul><li>Disney </li></ul><ul><li>Warner Bros. </li></ul><ul><li>Universal Studios </li></ul><ul><li>Paramount </li></ul><ul><li>FOX </li></ul>Suppliers Buyers Potential Entrants Substitutes Entry Threat Bargaining Power Bargaining Power Substitution Effect Industry Competitors Rivalry Among Existing Firms

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7.1.1 Rivalry in the industry <ul><li>Industry Overview </li></ul><ul><li>Competitors: Disney </li></ul><ul><li>Warner Bros. </li></ul><ul><li>Universal Studios </li></ul><ul><li>Paramount </li></ul><ul><li>FOX </li></ul><ul><li>Small amount of players </li></ul><ul><li>Similar market share </li></ul><ul><li>High concentration ratio </li></ul>

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Sony’s Position <ul><li>In motion pictures </li></ul><ul><li>Box Office </li></ul><ul><li>-The studio had box office success both in the United States and overseas. </li></ul><ul><li>-SPE ended calendar year 2005 with over $1 billion in ticket sales in North America </li></ul><ul><li>for the fourth year in a row. </li></ul><ul><li>-The studio had five films open at No.1 in the U.S. in the first four months of 2006. </li></ul><ul><li>-After 2001, SPE’s box office share went up quickly. </li></ul><ul><li>2001(6th), 2002(1st), 2003(2nd), 2004(1st), 2005(5th) </li></ul>

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<ul><li>Film Output </li></ul>Mr. Ken Lo, the vice president of Sony Picture Television International(SPIT), said: “Sony picture produced about 40 films a year, the output of which is the NO.1 in the industry every year. ”

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<ul><li>In television </li></ul><ul><li>40 international networks, which are available in more than 100 countries. </li></ul><ul><li>The global leader in local language production, with more than 9,000 episodes produced in over 30 countries. </li></ul><ul><li>SPIT is the No. 1 independent comedy producer in Germany. </li></ul><ul><li>SPIT produces more original programming in Russia than any other major Hollywood studio. </li></ul><ul><li>In 2004, SPIT formed the first fully government-approved television production joint venture in the People’s Republic of China. </li></ul><ul><li>U.S. daytime drama television leadership. </li></ul><ul><li>The No.1 producer of original scripted series for U.S. basic cable during fiscal year 2005. </li></ul>

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7.1 5 Forces Analysis Figure 11 <ul><li>Substitutes: </li></ul><ul><li>Book </li></ul><ul><li>Music </li></ul>Suppliers Buyers Potential Entrants Substitutes Entry Threat Bargaining Power Bargaining Power Substitution Effect Industry Competitors Rivalry Among Existing Firms

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7.1.2 Treat of substitutes Book Music In Porter’s model, substitute products refer to products in other industries. To the economist, a threat of substitutes exists when a product’s demand is affected by the price change of a substitute product.

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7.1 5 Forces Analysis Figure 11 <ul><li>Buyers: </li></ul><ul><li>Video Channels </li></ul><ul><li>Cable/DBS </li></ul><ul><li>Cinemas </li></ul><ul><li>VCD/DVD buyers </li></ul><ul><li>Telecom Service </li></ul><ul><li>Provider </li></ul><ul><li>Internet content </li></ul><ul><li>aggregator </li></ul><ul><li>Mobile Phone user </li></ul><ul><li>IPTV </li></ul>Suppliers Buyers Potential Entrants Substitutes Entry Threat Bargaining Power Bargaining Power Substitution Effect Industry Competitors Rivalry Among Existing Firms

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7.1.3 Bargaining power of buyers The buyers Traditional buyers: New buyers: <ul><li>Video Channels </li></ul><ul><li>Cable/DBS </li></ul><ul><li>Cinemas </li></ul><ul><li>VCD/DVD buyers </li></ul><ul><li>Telecom Service Provider </li></ul><ul><li>Internet content aggregator </li></ul><ul><li>Mobile phone user </li></ul><ul><li>IPTV </li></ul>The bargaining power of buyers is weak.

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7.1 5 Forces Analysis Figure 11 <ul><li>Suppliers: </li></ul><ul><li>Sony Electronic </li></ul><ul><li>Sony Picture Studios </li></ul>Suppliers Buyers Potential Entrants Substitutes Entry Threat Bargaining Power Bargaining Power Substitution Effect Industry Competitors Rivalry Among Existing Firms

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7.1.4 Bargaining power of suppliers The suppliers <ul><li>Sony Electronic </li></ul><ul><li>Sony Picture Studios </li></ul><ul><li>Sony Pictures Studios Post Production Facilities </li></ul><ul><li>DVD Authoring Center </li></ul><ul><li>Worldwide Product Fulfillment </li></ul>

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7.1 5 Forces Analysis Figure 11 Potential Entrants: Not found Suppliers Buyers Potential Entrants Substitutes Entry Threat Bargaining Power Bargaining Power Substitution Effect Industry Competitors Rivalry Among Existing Firms

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7.1.5 Threat of new entrants <ul><li>The characters of film/television production and </li></ul><ul><li>distribution industry: </li></ul><ul><li>high start up cost </li></ul><ul><li>high technology required </li></ul><ul><li>So the entry barrier is high. </li></ul>

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7.2 SWOT Analysis <ul><li>Copyright (BT Pirated DVD) </li></ul><ul><li>Apple Video </li></ul><ul><li>Few Franchise movies </li></ul><ul><li>Few Low-cost movies </li></ul><ul><li>Minor Television syndication </li></ul><ul><li>Poor Television network in China </li></ul>Threats Weaknesses <ul><li>Internet-based video distribution </li></ul><ul><li>Digital Online Entertainment </li></ul><ul><li>Digital Cinema Distribution </li></ul><ul><li>The Attraction of the Chinese Market </li></ul><ul><li>Large film and Television library </li></ul><ul><li>Blu- ray Technologies </li></ul><ul><li>Market leading positions </li></ul><ul><li>Strong Brand name </li></ul><ul><li>Good Customer Relationship in Asia </li></ul><ul><li>Quality Local Language Production </li></ul><ul><li>Advanced Digital Rights Management (DRM) </li></ul>Opportunities Strengths External Internal

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7.2.1 Strengths 1.Large Film and Television Library” With ore than 4,000 films, 270 Television series and 22,000 game shows, SPE can gain competitive advantages in anytime even though the film Industry is not as prosperous as before. 2.Blu-Ray Technologies This successful launch of Blu-Ray provides the potential to benefit Sony’s manufacturing business as well as its games (PS3) and movie businesses. 3.Market Leading Position SPE’s box office share went up quickly.2003(2nd), 2004(1st), 2005(5th) Although SPE’s box office share has experienced considerable volatility because of the release schedule of its key franchises, it has already gained the leading position in the film industry; in return, this will be translated into significant results in the home entertainment market.

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January 1- November 16, 2006 Box Office Figure 12 Source: www.boxoficemojo.com 19 $790.4 10.1% Warner Bros. 5 16 $835.0 10.7% Paramount 4 24 $1,130.4 14.4% 20 th Century Fox 3 23 $1,339.9 17.1% Buena Vista 2 28 $1,377.0 17.6% Sony/Columbia 1 Movies Tracked Total Gross Market Share Distributor Rank

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4. Strong Brand Name: Sony Pictures acquired the legendary Hollywood studio in a deal finalized on April 8 , 2005 , worth nearly $5 billion with 20% ownership. Step by step, SPE has built up its strong brand name under those prestigious film making studios. And the customers will be more reliable on Sony Pictures . Figure 13 Sony Pictures Brand

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5. Good Customer Relationship in Asia “ 20th Century Fox’s Asia headquarter is located in Australia Not very convenient to communicate with its Asia customers.” ------Ken Lo VP SPIT “ Compared with 20th Century Fox which only makes a business trip to Korea or China 2-3 times per year, we can do this more often and easily. We know more about Asian market than any other film companies because we have an Asian blood ” ------Ken Lo VP SPIT Hong Kong (Asia Headquarter) China Hong Kong Taiwan Korea Singapore ……

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6. Qualified Local Language Production Figure 14 Source: SPIT Corporate Overview Today, SPIT is the global leader in local language production, with more than 9,000 episodes produced in over 30 countries

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1. Few Franchises Movies: Sony’s strong “franchise” movies are fewer in number than Warner Bros, for example, which has considerable consistency in its margin history (Harry Potter series, Ring series, and Matrix series). 2. Few Low-cost Movies: One of the factors supporting the strong margin performance of Fox is the development of low cost movies, which have achieved high relative returns. Sony’s slate has not been particularly strong in this regard. 3. Minor Television Syndication: The two top-performing studios in terms of operating margin (Warner and Fox) have both developed strong television syndication pipelines, which tend to support operating margins. Sony’s television activities are now relatively minor, with production focused on cable network production, daytime drama, and game shows, none of which provides significant syndication opportunities. 7.2.2 Weaknesses

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4. Poor Television network in China: “ We just have 3 channels in China’s restaurants and we are lack of television network experience compared with 20th Century Fox which is the member of News Corp. owned by Murdoch a legendary figure in the media industry. ” ---Ken Lo VP of SPIT

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7.2.3 Opportunities: 1. Internet-based video distribution The current media value chain The new video content value chain Figure 15 Source: Forrester Research

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In a summary, after the reconstruction of the video content value chain and the changing viewing habit of the customer, a new video content value chain though still in the fist stage has formed an outline: the content creators, Internet platform operators, technical providers, distribution channels, advertisers and users. And the reinforcement of this value chain needs all participants’ co-operation and as a result, every participant will find their profits in this value chain.

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Figure 16 Source: iResearch.com.cn

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2. Digital Cinema Distribution Digital Cinema Initiatives (DCI) was formed in March 2002 as a joint project of the motion picture studios (Disney, Fox, MGM, Paramount, Sony Pictures Entertainment, Universal and Warner Bros. Studios) to develop a system specification for digital cinema. The adoption of DCI can save money in production and distribution With several hundred movies distributed every year, industry savings could potentially reach $1 Billion or more. 3. The Attraction of the Chinese Market: According to the Chinese Television and Broadcasting Department, China, as the most potential film market, contains a market of 15-20 billion RMB, and in ten years later, this number will go up to 50 billion RMB. And with the more opening of this market and loosening regulations, more foreign films could be brought to China.

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7.2.4 Threats 1. Copyrights: 2. Apple Videos: On 14 October 2005, Apple began to distribute and sell video content with each episode of give popular TV shows over the Internet for $1.99. What made us surprised is that Apple sold 1 million video in less that 20 days strongly suggests that there is a market for legal video downloads. “ What Apple's doing is laying the groundwork for the next frontier in home entertainment” said Gene Munster, of Piper Jaffray.

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7.3 SWOT Matrix <ul><li>Higher Distribution Requirements </li></ul><ul><li>Sony PSP Video </li></ul>W-T Strategies S-T Strategies Threats <ul><li>More Television Networks and Productions n Chinese Market </li></ul><ul><li>More Low-Cost Movies </li></ul><ul><li>Acquisition of Online Video Share Website </li></ul><ul><li>Co-operation with the Leading Internet Provider of On-Demand Movies </li></ul><ul><li>Mobile Internet Site </li></ul><ul><li>Chinese Feature Film Production </li></ul>W-O Strategies S-O Strategies Opportunities Weaknesses Strengths

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7.3.1 S-O Strategies: 1. The Acquisition of Online Video Share Website On 25 Aug, 2006, Sony acquires Groupers.com for $65 millions, the no. 8 UGC sites in the world. This acquisition gives Sony a powerful Web 2.0 marketing and distribution platform for its media properties and offers Grouper’s consumer creators’ direct access to a major media distributor. The acquisition of Grouper is a strategic initiative in the field of digital entertainment and consistent with Sony Pictures vision of making entertainment accessible to consumers whenever, wherever and however they want. Grouper gives SPE a strong platform for growth. And this will bring more sales of the DVD for Sony Pictures as a return.

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2. Co-operation with the Leading Internet Provider of On-Demand Movies On April 3rd, 2006, CinemaNow Inc., the leading Internet provider of premium on-demand movies, announced it has signed pioneering licensing agreements with Sony Pictures Home Entertainment to offer movies for download-to-own purchase through its Web site ( www.cinemanow.com ). With the new download-to-own option, customers can purchase and download a legal, permanent copy of a Sony Pictures Home Entertainment movie for unlimited playback on the download device. All content will be copy protected by Microsoft’s Windows Digital Rights Management (DRM) software. Together with CinemaNow, Sony Pictures are moving beyond traditional media to embrace the digital age as never before.

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3. Mobile Internet Site: Sony Pictures has unveiled a pan-European mobile strategy that will see it creating a mobile Internet site for every major film and DVD release. Content will include marketing material such as movie trailers and premium content such as video interviews. The personal details collected will be used to build a wider mobile CRM strategy for Sony Pictures. 4. Chinese Feature Film Production: SPE has a long history and abundant experience in Asian local film production and has achieved outstanding awards in this area, especially in the time when the Chinese film market is more open and attractive. SPE will put much more efforts on the production on the Chinese feature film.

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7.3.2 W-O Strategies: 1. More Television Networks and Productions n Chinese Market: Although SPIT has three channels in China but all in restaurants, the next step is to try to extend its business to more fields. 2. More Low-Cost Movies:

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7.3.3 S-T Strategies: 1. Higher Distribution Requirements : “ We can do nothing regarding to the pirated videos in Chinese market though we’ve Presented any lawsuits to the government ---Ken Lo What we can do Set higher distribution Requirements for the distributors 2. Sony PSP Video: The launch of Apple’s video content download to iPod is a big threat to the major film studios; however, Sony may not be influenced by this trend because it acquires the inborn and special advantages to compete with Apple video. Sony has already launched the free PSP video download in its UK website. I think the next step is to charge those PSP video contents by providing the high quality videos to the customers.

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王颖 谢菁炜 黄伟 Ken Lo 许晨彦 陈桢 桑田 17 Nov 2006 Sony Pictures