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Early Window Exploitation in the Korean Market

Learn about the potential for early window exploitation of Sony titles in the Korean market, including cooperative local theatrical teams, stabilized consumer usage of digital media, and less resistance from theater chains.

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Early Window Exploitation in the Korean Market

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  1. Korean Market Background ▪ Why early window exploitation is possible 1) Cooperative Local Theatrical Team - A One Sony-minded SPRI head who engages in discussions for early window possibilities of Sony titles. - We share our revenue numbers (per title) to implement the most effective release strategy for each theatrical release title (release timing/number of screens/etc). 2) Stabilized Consumer Usage of Digital Media - Korean box office for our movies is declining, while digital media consumptions are increasing. : Thanks to the early window titles in 2013, we were the #2 studio on digital platforms while theatrical’s BO market share was only 6% (No.5 among Hollywood studios). - Well-established platforms with 15mil subs (as of Mar ’14) on IPTV and Digital Cable : The platforms provide accurate and transparent reporting of sales and we see true uplifts when we move the windows up as most of the platforms are recouping. 3) Less Resistance from Theater Chains - CJ, who owns the largest multiplex cinema chain in Korea, is also the primary producers of local films. As they have engaged in pursuing early windows on digital platforms first, they have less leverage to complain on studios’ involvement in it.

  2. Hollywood’s New Screen Test | WALL STREET JOURNAL By BEN FRITZ and JEYUP S. KWAAK (06/24/2013) Two Hollywood studios have quietly begun testing a controversial business model in South Korea after years of failed efforts in the U.S.: renting movies via video on demand while they are still playing in theaters. The experiments, by Walt Disney Co. and Sony Pictures Entertainment, mark the first time major American studios have offered viewers anywhere the option of buying a ticket to see a movie or to rent it at home from a cable, Internet or satellite-television provider. Sony Pictures is owned by Japan’s Sony Corp. Sony’s “Django Unchained” was available to rent online or via cable just three weeks after premiering in Korean theaters in April. Disney’s animated “Wreck-it Ralph” and “Brave” came five and four weeks, respectively, after launching at cinemas in December and September. In both cases the films were still playing broadly in theaters throughout South Korea, the world’s eighth-largest film market.Executivesat the four other major Hollywood studios said they are watching Disney and Sony’s tests in Korea and may follow suit. In the U.S., top cinema chains including Regal Entertainment Group and AMC Entertainment Holdings Inc. refuse to play films without at least a 90-day “window”—industry jargon for the time between the theatrical and home-entertainment release—out of concern people will choose to wait for the movie at home rather than go to the theater. “A short window or simultaneous release muddies the value proposition being offered to consumers,” said Patrick Corcoran, a spokesman for the National Association of Theatre Owners trade group. Small distributors commonly release low-budget movies in independent theaters at the same time they are on VOD. But major studios, which need to work with AMC, Regal and other chains to blanket the country with their big-budget releases, rarely even come close to doing so. In 2011, Disney conducted a VOD test in Portugal with a six-week window on the animated feature “Tangled.” Until South Korea, it hadn’t repeated the experiment. The same year, Sony, Time Warner Inc.’s Warner Bros., Comcast Corp.’s Universal Pictures and News Corp’s 20th Century Fox each offered a few movies on VOD through satellite broadcaster DirecTV but not until 60 days after their U.S. debut. Even then, the movies cost $30 to watch, six times the normal price for VOD after 90 days. The results of the DirecTV test were widely considered disappointing. Again that year, Universal proposed offering its Eddie Murphy comedy “Tower Heist” on VOD in two cities with a three-week window for $60. It backed down due to fierce opposition from exhibitors. Media Spotlight on WSJ

  3. Korea Window Summary

  4. DEFINITIONS OF NEW WINDOWS ▪ What is it?: - Super Premium VOD (SPVOD): VOD window created during a title’s theatrical run. Retail Price: KRW10,000 ($10). Sony Share: 70% . KRW7,000 ($7) - Early EST (EEST): EEST between SPVOD & PVOD (or start with EEST for non-SPVOD titles) to generate the maximum revenue from the early window. $3 more margin than PVOD per transaction. Sony WSP: KRW5,950 ($5.9) - Premium VOD (PVOD): VOD window created before Home Video street date Retail Price: KRW4,000 ($4). Sony Share: 70% . KRW2,800 ($2.8) ▪ How long is it?: - SPVOD: Ranges from start date through title’s last date in theaters (minimum 2 weeks run) - EEST: Starts right after SPVOD window - PVOD: 3 weeks to 4 weeks prior to local HE street date ▪ What have we been trialing?: - SPVOD: Tested 5 titles (DJANGO, ELYSIUM, CAPTAIN PHILLIPS, 2GUNS, CLOUDY 2) in FY14 - PVOD: Most theatrical releases in FY14 (10 titles, more info on Slide 10) ** 80%-90% of the total title’s revenue results from the early windows when the title is released as SPVOD/PVOD. ▪ How do we see it changing going forward?: - SPVOD: Most local titles. More studios are getting engaged. DISNEY started in 2013, FOX started in 2014. NBCU will be releasing SPVOD for all theatrical titles within 30 days of the local theatrical start date from Summer 2014. - PVOD: A norm for all studios’ and local distributors’ titles

  5. SONY’S WINDOW STRUCTURE AND PRICING

  6. EARLY WINDOW GUIDELINES ▪ Strategic Release Planning - Check the U.S. Theatrical & DVD dates and local territory’s theatrical & DVD dates - Check the competition before setting on a release date (aiming for full exposure for the 1st week) - Take advantage of holidays, long weekends and vacation season ▪ Material Preparations (Agreement from DigiPol in FY14. Under review) 1) Burnt-in Subtitles - 6-8 weeks ahead of US DVD date is fine. (The earliest we have trialed this was with ELYSIUM where we went 8 weeks before US DVD date.) - Burn-in must be in active video (WPF needs a minimum of 2 weeks to prepare) - No need for watermark - DigiPol to be informed - Approval from SPHE, SPT and Theatrical 2) An English Clean version OR a Dubbed version (no burnt-in subs) - Launch no earlier than 6 weeks before US DVD date. - Title to be WM’d with service mark for tracking. - DigiPol to be informed - Approval from SPHE, SPT and Theatrical ** Content is generally pirated 14- 21 days ahead of local release date so we can provide the CLEAN VERSION if the launch is within 2 weeks of the local DVD date or if Early EST is DVD – 3 weeks

  7. Early Window Highlights

  8. FY14 Key Achievements Original FY14 forecast was $4.2M but through the exploitation of SPVOD/PVOD windows for digital platforms, we were able to exceed the forecast by 142% (FY14 Total Revenue: $6M) and generate overages of $1.8M. FY14 DIGITAL REVENUE In USD (Googleplay)

  9. Early Window Titles in FY14

  10. FY15 SPVOD/PVOD Titles Forecast • SPVOD can only be pursued for locally theatrically released titles. (4 titles for FY15:Deliver us from Evil, The Equalizer, Fury,Annie) • Due to internal policy, ASM2 can only be released as PVOD/EEST a month ahead of LVR, starting from July 14.

  11. Opportunities and Challenges in FY15

  12. THANK YOU

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