sony music mrp phase ii review (2014)

8/9/2019 Sony Music MRP Phase II Review (2014)

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MRP Phase II Review

October 8, 2014


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Agenda

2

Executive SummaryFull Year FYE15 Forecast

Brief Overview/Phase I Recap

Market OverviewCompetitor Analysis

Key Strategic Initiatives and Goals

Financials (Main Focus)

Financial Anatomy of the Business

MRP Assumptions

Financial Projections

Risk/Opportunities & Sensitivity Impact of Key Drivers

Potential Strategic Investments

Mid-Range Plan


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Agenda

3

Mid-Range Plan







MRP Assumptions





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4

Corporate Strategy

44

VisionA Global Market Share Leader PoweredBy The Industry's Best Creative TeamsAnd Delivering Maximum Profits


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Key Strategic Priorities

Grow MarketShare

Expand andGrow DigitalRevenueModels

MaximizeResultsAcross AllOur

InternationalOperations

Reduce andControlCosts/Maximize

Efficiencies

MaximizeOpportunitiesWith BroaderRights and

New Business

2 3 4 5 6

AggressivelyPursueOne SonyInitiatives

Roadmap to Winning During Mid-Range Planning Period


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6

FYE15 Financial Results ($ In Millions)

New and Developing Artist Success

September YTD Full Year

FYE14ACT FYE15ACT Vs. PY FYE15FC

Revenues $1,286 $1,261 $2,780

OperatingIncome $95 $107 $240

Net Cash FlowBefore Financing $42 $66 $138

+$12M

-$25M

+$24M

Full YearForecastedOperating

Income andCash Flow

Expected tobe On orAbove

Business Plan

Strong Start to Fiscal Year, WellPositioned Going In to Second Half


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Recent New and Developing Artist Success

MAGIC! Meghan Trainor Ella Henderson Pharrell Williams Calvin Harris A Great Big World

Kid Ink Sia Rita Ora Hozier MKTO Pentatonix

Fifth Harmony Kongos Bobby Shmurda Future Tyler Farr George Ezra

Collabro Juicy J Becky G Tinashe Bleachers G-Eazy


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Strong Slate of Key Releases In Balance of Year

Barbra Streisand (Sep 14) Kenny Chesney (Sep 14) Jason Aldean (Oct 14) Pentatonix (Nov 14)

Pink Floyd (Nov 14) Pitbull (Nov 14) One Direction (Nov 14) Foo Fighters (Nov 14)

Calvin Harris (Nov 14) Olly Murs (Nov 14) Garth Brooks (Nov 14) Usher (Dec 14)

Meghan Trainor (Dec 14) AC/DC (Dec 14) Miguel (Dec 14) Carrie Underwood (Dec 14)

J. Cole (Feb 15) Adele (Mar 15) Kelly Clarkson (Mar 15) Alicia Keys (Mar 15)


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SME Revenues

SME Operating Income

MRP Financial Highlights ($ In Millions)

$2,820 $2,780 $2,735 $2,763 $2,896

FYE12 FYE15 FYE16 FYE17 FYE18

CAGR+0.4%

Mid-Range Planning PeriodForecast

MRP Period WillContinue to DeliverImproved Profitsand Profit Margins

Operating Incomeand Cash FlowTargets Favorableto Prior MRP

Actual

$133

$240$250 $260

$275


CAGR+12.9%

Mid-Range Planning PeriodForecastActual

% OperatingIncome Margin 4.7% 8.6% 9.1% 9.4% 9.5%


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Agenda

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Mid-Range Plan







MRP Assumptions





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$1,286$1,183 $1,261

$95

$30

$107

FYE14ACT FYE15BP FYE15ACT FYE14ACT FYE15BP FYE15ACTRevenues Operating Income

September YTD ($ In Millions)

FYE14ACT FYE15BP FYE15ACT Vs PY Vs BP Highlights

Revenues $1,286 $1,183 $1,261Favorable Sales Due to:

Success of Michael Jackson and Pharrell Williams

Unbudgeted John Legend Carryover, Jack White and Future

Favorable Sales and Success of MAGIC!

Earlier Than budgeted Release of Sia and Kenny Chesney

Favorable Digital Track Sales of Meghan Trainor, DJ Snake and Calvin Harris

Favorable SoundExchange Recognition of Digital Unearned Advances/Guarantees (SNEI and XBOX)

Partially Offset by: Slippage of Usher, Rita Ora, Maxwell and Miguel

Favorable Operating Income Due to:

Favorable Flow Through From Sales

Recognition of Beats Gain On Sale and Sale of Nashville Building

Favorable Syco International TV Format Revenues

Favorable Timing of Talent

Favorable Cash Flow Due to:

Higher Operating Results

Proceeds From Sale of Nashville Building and Proceeds From Sale of BeatsInvestment

Partly Offset by Syco Dividend Payment to Simon Cowell and Timing ofPayments

Operating Income $95 $30 $107

Net Income $101 $18 $57

Net Cash Flow

Before Financing $42 $38 $66

+$77M

+$39M

+$78M

11

+$12M

+$28M+$24M

-$25M

-$44M

+$77M

Vs BP

+$12M

Vs PY

*Net Income Significantly Unfavorable to Prior Year As Prior Year Included Favorable Tax Audit Settlement In Holland

*

-$25MVs PY

+$78MVs BP


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September YTDMajor Sellers (Revenues)

*Michael Jackson Includes 10M In Additional Revenues Due to Sony Mobile Deal; Pharrell Williams Includes Sales of Both Album G I R L and Single Happy

Michael Jackson* $29M Pharrell Williams* $13M($31M RTD) John Legend$10M($22M RTD)

Now 88 $9M

Chris Brown $7M($11M RTD)

Miranda Lambert $7M Barbra Streisand $6M MAGIC! $6M

Sia $6M Beyonc $5M($47M RTD) Calvin Harris (singles) $5M($7M RTD) Now 87 $5M($10M RTD)


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Full Year FYE15 ($ In Millions)

FYE13ACT FYE14ACT FYE15FC

Revenues $2,790 $2,869 $2,780

Operating

Income $218 $238 $240

Net Income $192 $194 $138

Net Cash

Flow BeforeFinancing $162 $150 $138

FYE15 Forecast

Expected to BeOn or Ahead ofBusiness Plan

1) FYE13 Net Income Includes Reversal of Brazils Valuation Allowance

2) FYE14 Net Income Includes Reversal of Tax Provisions As A Result of Favorable Tax Audit Settlements In Holland

3) Includes $30M Benefit From Deferring NOW! Investment Into FYE14

(2)(1)

(3)


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Agenda

15

Mid-Range PlanExecutive Summary

Full Year FYE15 Forecast





Financial Anatomy of the BusinessMRP Assumptions





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U.S. Industry RevenuesRIAA Figures ($ In Millions)

1H 2013 1H 2014 B/(W)

Total Physical $571 $482

Downloads $1,076 $956

Subscriptions (Paid) 151 204

Streaming (Ad-Supported) 105 165

Digital Radio 267 323

Other 26 17

Total Digital $1,625 $1,665

Sync 99 88

Total U.S. Industry $2,295 $2,235

+35.1%

+57.1%

-15.6%

-11.2%

+21.0%

-34.6%

-11.1%

-2.6%

+2.5%

Strong Growth In RevenuesFrom Streaming Services

(Growth of 33% Y-O-Y) Helpedto Offset Continued DeclinesIn Physical and Downloads

Streaming Services Combined Contributed to 31% ofthe Industry Revenues, Up From 23% In Prior Year


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Worldwide iTunes Year-on-Year Growth (Industry Level)

1%

7%

4%3%

1%

-5%-7%

-6%

-13%-11%

-14%

-17%

-14%-16%

-17%-15%

-14%-15%

-4%

Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Fiscal 15Budget

Assumption2013 2014


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Spotify & Pandora Active Monthly Users (In Millions)

10.021.0

36.1

54.5

71.176.4

QE Jun 2009 QE Jun 2010 QE Jun 2011 QE Jun 2012 QE Jun 2013 QE Jun 2014

6.0 9.0 11.015.0 16.8

22.1 23.8

36.7

1.0

3.04.0

5.08.2

8.9 9.1

11.5

7.012.0

15.020.0

25.031.0 32.9

48.2

May 2011 Jan 2012 Jun 2012 Dec 2012 Nov 2013 Dec 2013 Jan 2014 Aug 2014

Paid SubscriptionsActive Users

+47%Aug From Jan(48.2M TotalActive Users)

+26%Aug From Jan(11.5M Paid

Subscriptions)

Launch of Mobile Free Brings InMore Than 5M Users In the Month

of December, With 700K Paying

5.04 Billion Quarterly Listener Hours

M k t T d R d d M i O l


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Market TrendsRecorded Music Only(Trade Value, Excluding Japan, $ In Billions)

$5.3 $4.6 $3.9 $3.0 $2.4

$5.7$5.9

$6.4 $7.1 $8.2

$11.0 $10.5 $10.3 $10.1 $10.6

FYE14 FYE15 FYE16 FYE17 FYE18Digital +8% +4% +8% +12% +15%

Physical -10% -13% -16% -21% -23%

Total -1% -4% -3% -1% +4%

-2.7%-4.4%


-1.3%

Actual

Excludes New Business Revenues; Digital Figures Include Digital Radio

+3.6%

FYE15BP+9%

FYE15BP-16%

Prior MRP+12%

Prior MRP-18%

Prior MRP+12%

Prior MRP-20%

-0.8%

W ld id Di it l M k t G th P j ti ( J )


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Worldwide Digital Market Growth Projections (ex-Japan)U.S. Vs. International ($ In Billions)

$2.9 $3.0 $3.2$3.5

$3.0 $3.4 $3.9

$4.7$5.9

$6.4$7.1

$8.2

FYE15 FYE16 FYE17 FYE18

Total

CAGR+11%

IntlCAGR

+16%

U.S.CAGR

+6%


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Worldwide Digital Market Growth Projections ($ In Millions)

52% 41%30%

21%

27%37%

48%59%

11% 13% 15% 14%

7% 7% 7% 7%2% 1%

0%

20%

40%

60%

80%

100%

FYE15FC FYE16MRP FYE17MRP FYE18MRP

Other

Digital Radio

Video

Audio Subs/Streaming

Downloads

CAGR

Downloads $3,091 $2,606 $2,132 $1,705 -18%

Audio Subs/Streaming 1,614 2,372 3,416 4,782 +44%

Video 661 860 1,033 1,140 +20%

Digital Radio 412 468 513 538 +9%

Other 137 68 17 4 -69%

Total $5,915 $6,374 $7,111 $8,169 +11%

FYE15FC FYE16MRP FYE17MRP FYE18MRP


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Agenda

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35.0%25.1%

14.6%

Based On Internal Best Estimates

RankGrowth

From 2012

U.S. 39.2% 28.5% 2 +0.5% 17.6%

UK 32.2% 23.9% 2 +2.7% 15.1%

Germany 33.1% 22.2% 2 +0.9% 9.9%

France 32.5% 22.0% 2 +4.3% 14.5%

Australia/NZ 44.0% 25.9% 2 +0.2% 14.5%

Canada 42.0% 21.6% 2 +0.3% 14.5%

ROW (incl. SA) 32.8% 22.8% 2 +2.1% 14.5%

Asia(excl. Japan) 16.2% 12.2% 2 +0.6% 7.6%

Latin America 33.2% 32.5% 2 +0.5% 12.2%

WW(excl. Japan) 35.0% 25.1% 2 +1.2% 14.6%

Universals Acquisition of EMI Has Increased Their Leadership Position In Most Key Markets

UNI +9.9% pts WMG -10.5% pts

Calendar 2013 Market Share Breakdown by Territory

Competitor Comparison Recorded Music


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Competitor ComparisonRecorded MusicMost Recent 12 Months Available (Including Japan, $ In Millions)

Revenues & EBITDA Amounts Shown for Comparative Purposes; Adjusted for One-Time and Other ItemsUNI, SME & WMG 12 Months Ended June 30, 2014UNI Includes EMI Acquisition From September 28, 2012; WMG Includes Parlophone Acquisition From July 1, 2013

Includes SMEJ

ROS 12%11% incl. SMEJ12% excl. SMEJ 11%

$5,467

$644$3,625

$414

$2,526

$275

Revenues EBITDA EBITDARevenues Revenues EBITDA

Digital

$2,251

Digital

$1,090

Digital$1,273

(SME Only)

SMEJ $774

SMEJ $80


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Agenda

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Grow MarketShare


MaximizeResultsAcross AllOur

InternationalOperations

Reduce andControlCosts/Maximize

Efficiencies

MaximizeOpportunitiesWith BroaderRights and

New Business

2 3 4 5 6


Roadmap to Winning During Mid-Range Planning Period


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25.10%

25.35%

25.60%

25.85%



Maximize New Talent Development Success Across

All Our Creative Repertoire Sources Aggressively Invest In New Talent

Expand Our Relationships With Independent LabelSector

Look For Opportunities to Sign Established Talentand Acquire Catalog


+0.25%pts

+0.25%pts

+0.25%pts

Flat Growth

Grow MarketShare

Maximize New Talent Development Success Across All Our


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Maximize New Talent Development Success Across All OurCreative Repertoire Centers

Core Labels

Exclusive Producer

Creative Partnerships

Indie Services

Catalog Artists

Classical

CMG

SalaamRemi

DrLukeAsia

Latin Am.Europe

GermanyFrance

Japan

Local Talent Development

U.K.

Labels

ASTRONAUTSWANTED

Nashville

WolfgangBoss

A i l I I N T l


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Alex &

Sierra Hozier

Rita

Ora

London

Grammar MKTO sgeir Zhu

KidInk MAGIC! Bleachers Sia Tinashe Pentatonix G-Eazy

A GreatBig World

FifthHarmony

KatDahlia

MeghanTrainor Kongos

BobbyShmurda Future

TylerFarr

CaseyJames

Steven LeeOlsen

TheHenningsens

JerrodNeimann

SwonBrothers

JoshDorr

UKGeorge

EzraLaura

DoggettNothing

But ThievesLonely

The BraveRag N

Bone Man MadeonJamie

Joseph

EllaHenderson Collabro

JackPack

EttaBond

MarlonRoudette

AdySuleiman

KidArkade

Targetingto Achieve

35% orGreaterShare of

New ArtistBreakouts

During

MRP Period

Aggressively Invest In New Talent

Strengthen Our Focus On Country and EDM Genre. Recent Achievements Include Signing of

Garth Brooks, New JV Deal With Disruptor Records and Continued Alignment With Ultra.

Look For Opportunities to Sign Established Talent and
http://www.sonymusicnashville.com/artist/josh-dorrhttp://www.sonymusicnashville.com/artist/steven-lee-olsenhttp://www.google.com/url?sa=i&rct=j&q=&esrc=s&source=images&cd=&cad=rja&docid=7_R21YIjZG9-bM&tbnid=iuLJHdiVD46V5M:&ved=0CAUQjRw&url=http://prettymuchamazing.com/music/check-out-tinashe-vulnerable&ei=MsgAU63YH8jKsAT44oDoDQ&psig=AFQjCNHAJ6YxcV1Jc1p_g-cS8N79YB8FvQ&ust=1392646531140902http://www.google.com/url?sa=i&rct=j&q=&esrc=s&source=images&cd=&cad=rja&docid=oemmxyzrQHFqtM&tbnid=0VbZyVblVc0KtM:&ved=0CAUQjRw&url=http://www.peoples.ru/art/music/pop/rita_ora/&ei=Ur8AU9znB7SssQTVjYGoCw&bvm=bv.61535280,d.aWc&psig=AFQjCNH_A5DJwsztGDkm-qLJFqboF_5kqg&ust=1392644279920417


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Look For Opportunities to Sign Established Talent andAcquire Catalog

Catalog37%

New

Music63%

Catalog41%New

Music59%

FYE08 FYE14

Maximize Digital Revenue Opportunities Through Targeted Partner Driven

Initiatives Aggressively Pursue Strategic Catalog Investments

Importance of Catalog Assets Continues As We Migrate More Towards Digital

K St t i P i iti


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$686 $701 $706 $752$830

$577 $636$728

$868

$1,060$1.3 B$1.3 B

$1.4 B

$1.6 B

$1.9 B


TotalCAGR+13%

SME Digital Revenues

IntlCAGR+19%

U.S.CAGR+7%

Considers Market &Market Share Growth

Estimated $0.6B Growth In Digital Revenues Over the MRP Period Driven bySignificant Growth In Paid Streaming

An Overall 44%Growth From FYE15

2


FYE14A FYE15FC FYE16MRP FYE17MRP FYE18MRP CAGR

Downloads $817 $704 $600 $496 $401 -17%

Streaming (Paid & Ad-Supported) 250 375 558 812 1,148 45%Video 85 120 158 194 217 22%

Digital Radio 69 90 104 116 123 11%

Other 42 26 13 3 1 -68%

Total $1,263 $1,315 $1,433 $1,621 $1,890 13%

Global Revenues Continue Decline While Consumption


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588m

581m1,070m844m

428m382m 326m 331m

316m 289m501m

1,172m 1,271m 1,271m 1,336m1,259m

98b

62b

31b

20b24b

PAID STREAMING

WITHIN SUBSCRIBTION SERVICES

AD-SUPPORTED

26M Paid Monthly Subscribers

520M music hours / month

45M monthly listeners 450M music hours / month

1BN monthly users

2.4BN music hours / month

76M monthly listeners


DIGITAL VIDEO

DIGITAL RADIO




OTHER CONSUMPTION

$11.0 $10.5 $10.3 $10.1 $10.6

2013A 2014FC 2015MRP 2016MRP 2017MRP

GLOBAL REVENUES EXPECTED TOCONTRACT FURTHER

MUSIC CONSUMPTION HOWEVERCONTINUES TO GROW

2006 2007 2008 2009 2010 2011 2012 2013

GLOBAL CONSUMPTION NUMBERSACROSS CHANNELS AT ALL TIME HIGH

OWNERSHIP + SUBSCIPTION (US)

Global Revenues Continue Decline While ConsumptionReaches Record Highs

C i i t P id S b i ti I Ulti t G l


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Strategies to support growth and healthytransition from ownership to access are critical

Continue to adjust ad-supported streamingtiers to drive conversion to paid

Remove on-demand listening capability

in ad-supported tiers Further limit ad-supported experience

through changes in functionality andcontent availability

Developing policies to restrict/limit promotion

on free and ad-supported channels Limit digital radio where possible to ensure

partners have incentive to drive paid tier

Develop higher-price premium tier to includea higher price point for high-definition audio,

lyrics, audiovisual and family plans

Conversion into Paid Subscription Is Ultimate Goal

PAID SUBSCRIPTION

PHYSICAL

AD-SUPPORTED

$70

$48

$19

$4

DOWNLOADS

AVERAGE REVENUE PER USER

Subscription Will Be Leading Revenue Channel by 2016

C i i t P id S b i ti I Ulti t G l ( td)


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Service to device ubiquity willaccelerate consumer adoption of paidsubscription

Need paid subscription to win thebattle for the car, against current

low/zero monetization options suchas terrestrial/ digital/ satellite radio

Consistency of experience onmobile, car and home is key yet

currently missing for consumer andwill incentivize conversion

SME to provide necessary incentivesto high-revenue partners so thatthey are able to compete against

current alternatives

Conversion into Paid Subscription Is Ultimate Goal (contd)

Promote Device Ubiquity and Focus on Car Access

Continue Developing Other Revenue Streams
http://www.google.com/url?sa=i&rct=j&q=&esrc=s&frm=1&source=images&cd=&cad=rja&docid=M_J1lnAA3iDpRM&tbnid=uT7X6giFFSRydM:&ved=0CAUQjRw&url=http://marketplayground.com/2011/10/15/sirius-xm-nasdaqsiri-releases-first-satellite-radio-2-0-product-for-sale/&ei=4SeVUZzqL8e70AGPvYG4Bw&bvm=bv.46471029,d.dmg&psig=AFQjCNEILz0_bZSP6gOjaYzID6hxi4phTA&ust=1368815916971281


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YouTube subscription has potential to be significantcontributor to growth

SME to re-evaluate/limit licensing terms for ad-supportedduring MRP periodcurrently only ad-supported platform

offering on-demand features on both mobile and desktop

Continue to invest and create significant value in VEVO

- Develop VEVO.commigrate traffic from YouTube

- Expand original programming and contentdevelopment

- Expand internationally in priority territories

- Develop subscription offering for service without adsand for premium content

Continue Developing Other Revenue Streams

Maximize monetization of video content

Continue Developing Other Revenue Streams (contd)


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Download business still significantly material andsome customers will not make the switch

Casual buyer will not transition to higher ARPU ofsubscription

Ownership still preferred within somedemographics

Enhance products including more visual element andhigh definition audio

Download product continues to simply be an audiofile

Sound quality and audiovisual have been outlinedas key developments of interest by listeners

Continue Developing Other Revenue Streams (cont d)

Dont abandon download customer



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Artist Secure Global ArtistBreakthrough

MarketContinue to AggressivelyPursue Opportunities toIncrease Repertoire Base(Organically and by Acquisition)

ExpansionAggressively PursueOpportunities to Exploit Newand Emerging Markets toSecure No. 1 Position

Common International Initiatives

Across All Territories

3

MaximizeResults AcrossAll OurInternationalOperations

Expanding Repertoire Base Grow Market Share


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Expanding Repertoire Base Grow Market Share

Negotiation withLUIS MIGUEL

Negotiation withCOLDPLAY

Negotiation withmajor artist

KHALIL

A&R Joint Venture withBLACK BUTTER

Possible Acquisition

with SME Classics:HARMONIA MUNDI Exploring

Acquisitionwith GDB:

BELIEVE

Exploring Acquisitionof TRADEMARK:

BRAVONegotiation with

STROMAE

Negotiation with

ENRIQUE IGLESIAS

Possible LabelAcquisition:

NAIVE

Acquisition targets:YMC /

CHROME/YEDANG

Acquisition target:RED FOO

Label Acquisition:PHONAG/TBA

MRP InitiativeAggressively Pursue Opportunities to increase

Repertoire base (Organically and by Acquisition)

Expanding Regionally Secure No 1 Position


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Expanding Regionally Secure No. 1 Position

CHINA:ExpandDigital Businessthrough

China Mobile Video deal and directonline license deal with eitherTencent, Alibaba or CMC.IncreaseRepertoirethroughsigning of major artists KHALIL fromGold Typhoon (recent WarnerAcquisition) and MO MO WU fromIndie Dream China.

INDIA:Grow Digital Business with new DSPlaunches, e.g. Spotify, GoogleHungama, Eros, Rdio, Boinc (SriLanka), Rockville (Pakistan).Targeting Catalogueacquisitions:Crescendo & Magnasound.

VIETNAM:Explore market opportunities,possibly open office

KENYA/NIGERIA:Grow and exploit West- and East

African digital markets throughnewly opened office in Lagos andNairobi.

REPERTOIRE:Target acquisition of local musiccatalogue, e.g. Premier Music, IvoryMusic (African) or Melody, Rotana

(Arabic).Target JV opportunities withestablished players (Chocalate City,DB Records)

DIGITAL EXPANSION:Currently in Discussions with mostAfrican Mobile Network Operatorse.g. MTN Nigeria, Etisalat, Airtel,Huawei, Safaricom, Tigo, Vodafone,IMI mobile.Partnership with Digital ServiceProvider NMusic in expansion toAfrica

PERU:Grow and exploit growing Peruvian

market through newly opened officein Lima

CUBA:Explore market entry.Potential Acquisition of Catalogs, e.g.EGREM for worldwide exploitation.

BRAZIL:Further Explore Digital OpportunitiesExplore opportunities aroundOlympic Games 2016

TICKETINGExplore and build Ticketing Businessin Latin America

Overall Goal for RegionTo Grow Profits by 40% to $50m

LATIN AMERICA AFRICA ASIA

MRP InitiativeAggressively pursue opportunities to exploit new

and emerging markets to secure No.1 position



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Capture and Exploit Broader Rights From New Artist Signings

Continue to Maximize Exploitation of X Factor and Got Talent TV Formats

Develop New Formats and Visual Content From Syco and Astronauts Wanted

(Judy McGrath) JV Seek to Extend Long Term Successful Relationship With Simon Cowell

SME Global FYE15FC

New Business Revenues($ In Millions)

MRP Assumes $261M Revenues

$84

$74

$37

$6

$11

$26

$23

TV/Film

Live

ArtistManagement

Merchandising

Total$261

Brands/Sponsorship

Other

PassiveArtist Rights

Participation

Artist Services

$70M Op. EBIT($33M Profit

From Syco TV JV)4

MaximizeOpportunitiesWith BroaderRights and NewBusiness



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8.3%8.6%

9.1% 9.4%9.5%



% Operating Income Margins

Mid-Range Planning Period

Targeting to Continue to Improve Operating IncomeMargins Over MRP Period Through Initiatives In

Overhead, Marketing and Supply Chain

ForecastActual

5

Reduce andControl Costs/MaximizeEfficiencies

Overhead Marketing Costs and Supply Chain


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Overhead, Marketing Costs and Supply Chain

Overhead/Headcount

MarketingCosts

Supply Chain(Physical + Digital)

$1,556M

$954M

2005 FYE15FC FYE16 FYE17 FYE18

HC 8,000

HC 4,182

Mid-Range Planning Period

Overhead and Headcount Excludes Increases From Investment In Growth Areas and Emerging Markets

15.3%15.3%

$560M

19.7%

12.4%% OFNET SALES

$660M

2005 FYE15FC FYE16 FYE17 FYE18Mid-Range Planning Period

2005 FYE15FC FYE16 FYE17 FYE18Mid-Range Planning Period

Targeting to Maintain Efficient Spending RateWhile Focusing On New Artist Development

Targeting $45M Gross Savings During MRP

Period to Partially Offset Inflation

Targeting to Partly Offset Effects of DecliningPhysical Pricing With Supply Chain Savings

(% of Net Sales Going From 12.4% to 8.4% Over MRP Period)

$350M

$280M



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6


Japan

ELE TRONI S

50%

25%

Michael Jackson Xscape FYE15 SuccessfulOne Sony Global Collaboration

Sony Music Partnered With Sony Mobile, Sony Electronics

and Sony Network Entertainment On A Global Co-Marketingand Promotion Campaign

To Continue to Seek One Sony Opportunities
http://www.emimusicpub.com/index.php


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To Continue to Seek One Sony Opportunities

Pursue Joint Signing Opportunities When Feasible

Maximize Sync Opportunities With Sony Music Owned Masters and SATV Controlled Copyrights

Maximize Collaboration Around Industry Related Issues

Continued Shift of Warehousing and Distribution Service Requirements to DADC:

- Comprehensive Reintegration of Manufacturing and Distribution, In Australia, Hong Kong, UK, Iberia,Mexico

- New Long Term Exclusive Manufacturing Deal In Europe

- Under Negotiation - to Appoint DADC In Brazil As Our New Partner For Manufacturing and Distribution

- Licensing Out to DADC In Hong Kong Under Review

Explore Potential Synergies Between The Orchard JV and DADC Digital Ops Group

James Bond 2015 One Sony Collaboration Collaboration With Sony Music, Sony Pictures and Sony Mobile On Running With Music: Ghostbusters

Edition, A Ghostbusters Branded Mobile Game

Exploring Sales & Distribution Cooperation Opportunities With Sony Pictures (Mexico, Benelux, Nordics,Turkey, India, Africa, Brazil and France)

Continue to Explore Cost Efficiencies Across All Support Areas

Collaboration With Syco JV On Film/TV Opportunities, Including Potential Investment

SME Is Currently Exploring Numerous Hi-Res Audio, 4K, and SOMC collaborations:- Creating A Global Hi-Res Album Bundle For Xperia, and Potential Hi-Res Offering On Xperia Through

Sprint In the U.S. In Q1 2015

- Working With the U.S. Hi-Res Audio Team On An October Hi-Res Walkman Listening Event

- Shooting Yahoo Live! Music Events In 4K to Build Up SELs 4K Library

- A 12-18 Month Partnership Between Sony and the Foo Fighters Which Would Integrate Hi-Res Audio,4K and Potentially Other Divisions Around the Artists 2015 U.S. and Global Tour Schedule

- Working With SOMC to Provide On An Emerging Artist Platform and A Recurring Offer/StreamingSolution For Xperia Users, Allowing the Customer to Stream A Selection of Music Every Month

- Successful Sony Jive Music App to Be Launched In Indonesia and Other Territories

ELE TRONI S

did l


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46



Brief Overview/Phase I RecapMarket Overview

Competitor Analysis







Repertoire Center Profit Summary


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47

Columbia

RCAEpic

Nashville

UKUK Syco

(ex. Syco)

25%

75%

LocalInternational

Repertoire

MajorRepertoire

Centers

Talent From Major Repertoire Centers (Primarily English Language) Account For 75% of GlobalProfitsTherefore Critical to Success

Talent From Local Repertoire Centers Account for 25% of Global ProfitsTherefore Also An

Important Part of Our Business and Potential Growth Area, Particularly In Emerging Markets

Repertoire Center Profit Summary

Impact of Talent Investment


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New CatalogNew CatalogNew Catalog

New CatalogNew Catalog

New Catalog

Impact of Talent Investment

Catalog Highly Profitable Due to Upfront Investment In New Music (Talent and Marketing)

Reduction In Talent Spending Will Have A Positive Short-Term Impact On Profit, But A Negative Mediumand Long-Term Impact On Profit and Valuation

Reduced Talent Spend Would Negatively Impact SME Market Share

TalentInvestment

$173M

TalentInvestment

TalentInvestment

TalentInvestment

NewMusic

NewMusic

NewMusic

NewMusic

NewMusic

60%of

Revenues

40%of

Revenues Existing

Catalog

Existing

Catalog

Existing

Catalog

Existing

Catalog

Existing

Catalog

New Releases Become Part of Catalog 18 Months After Release

Market Share Importance


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SME Global

Owned &DistributedMarket Share

Market Share Enables Leveraging of Fixed Cost Structure GainsHas Been Oneof the Contributing Factors to Profit Increases and Margin Improvements

22.0%

24.0%

25.1%

CY11 CY12 CY13Source: IFPI

Market Share Importance

+3.1% ptsOver 2Years

Market Share Influences Negotiations of

Rates/Terms/Advances/MinimumGuarantees/Equity In DSPs

Market Share Is An Important Factor In Determining

Income From Digital Services and PublicPerformance and Broadcast (Radio Play)

Industry International Public Performance and Broadcasting Income

$630M

$751M

2010 2013

5.2 PPB%of Industry

6.2 PPB%of Industry

SME PP&BRevenues ForFYE14 $166M

PP&B Industry Revenues Have Grown 19% Overthe Last 3 Years

Is A Significant Revenue Source

Global Industry BreakdownRecorded Music Only


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Streams Per $1 SME Revenue(Global CY14 Jun YTD)

109

408633

727 769

y y(FYE15FC, Trade Value, Excluding Japan, $ In Billions)

Excludes New Business Revenues; Digital Figures Include Digital Radio

Downloads$3.152%

Subscriptions$1.627%

Video$0.7

11%Digital Radio

$0.47%

Ringtones/Other$0.13%

Total Global Industry Digital Breakdown

DigitalBreakdown

Physical$4.644%

Digital$5.956%

$10.5B $5.9B

PaidSubscription

Stream

Ad-Supported

Stream

Ad-Supported

Stream

Ad-Supported

Stream

DigitalRadio

Top Physical and Digital Partners


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PhysicalPhysical Projection of-20% CAGR of 3 Yr MRP

DigitalDigital Projection of+11% CAGR of 3 Yr MRP

Top Physical and Digital Partners

Anconnect/Anderson

30%

Target13%

Alliance14%

Amazon14%

TransWorld4%

Other25%

U.S.

Top 5 = 75%

On Average, >70% of Physical Revenues Come

From Only Top 5 Customers In Key Markets Concentration of Top Accounts Means Exit of

One Retailer Can Have Significant Impact OnRevenues

Downloads,Streaming (Beats),

Radio53% Downloads,Streaming 4%

Streaming 11% Downloads 3%

Radio 5% Streaming 2%

Video 4% Streaming 2%

Video 4% Streaming 1%

Top 10 = 89%

Top 10 Global Digital Partners Top 10 Global Digital Partners

Account For 89% of Total

Mix of Top Partners Will ChangeAs We Move Towards More ofA Streaming Model

Risk of Cricket Exit Concentration of Major

Accounts to Be Spread Across AGreater Number of Partners IsDependent On Partners Abilityto Achieve Financially ProfitableBusiness Models (See Spotifyand Pandora Example On NextPage)

Spotify and PandoraFinancial Data and FutureP fit bilit $
http://www.google.com/url?sa=i&rct=j&q=&esrc=s&source=images&cd=&cad=rja&uact=8&docid=-10CkyW5Zm-7GM&tbnid=gngrx8Zs-FqWiM:&ved=0CAUQjRw&url=http://logos.wikia.com/wiki/Cricket_Wireless&ei=xie_U4vnJYSkyASFRA&bvm=bv.70810081,d.aWw&psig=AFQjCNFKWOYmnL2dLo4KxKTksEbAZU2leg&ust=1405122875958703


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p yProfitability ($ In Millions)

52

Spotify First LaunchedIn Oct 2008 In Swedenand EBITDA For 2013Was A Loss of $109M

Pandora FirstLaunched In Jan 2000

Forecast Years Per Morgan Stanley

Album to Track Market


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Album to Track Market

51%46%

39%

30% 23%

49%54%

61%70%

77%

FYE14A FYE15FC FYE16MRP FYE17MRP FYE18MRP

Albums Tracks The Migration of the Music Market From

Physical and Downloads to StreamingReduces the Relevance of the Album

SME to Continue to Migrate ArtistContracts and Operating Practices toSupport the Business Evolution Away FromAlbums and Towards Track Consumption

Changes Could Include:

- Artist Contract Migration Towards TrackFocus

- Track Based Marketing As Opposed toTraditional Album Based Marketing

- More EP Releases and Less Full LPs

- Ensuring Cost Efficiencies Around LowerVolume of Recordings As Focus Is NotOn Releasing Albums With 10+ Number

of Songs- Reverse Order of Release Planning -

Tracks to EPs to LPs

- Maximize Our Physical Business WherePossible (Such As Consignment BasedSales For Physical, Exclusive ProductOfferings, Digital/Physical Offerings)

A dMid R Pl


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54




Competitor Analysis







Key Assumptions


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y p

Forecast Mid-Range Planning PeriodFYE15 FYE16 FYE17 FYE18 Comments

Physical Market -13% Accelerated decline in Physical Market

Digital Market +4% More aggressive growth expected duringlater MRP years

Market Share 25.10% Increase of 0.75% pt during MRP period

Talent Costs $173MInvestments to drive A&R/market sharegrowth & investments in emergingmarkets

Overhead Vs. PY:(Net After Inflation)

Inflation -$20MOffset inflation through targetedsavings initiatives

Savings$20M

Real Estate FlatReflects increased rent related torelocation into new corp. headquarters

Investment In EmergingMarkets & Other GrowthAreas

$0MTargeting emerging markets and growthareas

Restructuring -$23M 23

-16% -21% -23%

+8% +12% +15%

To25.35%

To25.60%

To25.85%

$15M $15M $15M

$180M $210M

$20M $20M $20M

$6M $20M$0M

Flat $12M

$20M $20M

Flat

Flat

$20M

A dMid R Pl


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Competitor Analysis







Comparison Vs. Prior MRP ($ In Millions)


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p ($ )

MRP Op. Income Favorable From Prior Year MRP Despite Declining Revenues

Forecast Mid-Range Planning Period


Prior MRP $2,766 $2,831 $2,904

Forecast/MRP $2,780 $2,735 $2,763 $2,896

Inc/(Dec) $14 ($96) ($141)

Prior MRP $230 $240 $250

Forecast/MRP $240 $250 $260 $275

Improvement $10 $10 $10

Prior MRP $130 $130 $135

Forecast/MRP $138 $140 $150 $160Improvement $8 $10 $15

Revenues

Operating Income

Net Cash Flow

Before Financing*

*Assumes No Capital Payment Associated With NY Headquarters Relocation

Projected Improvement In All Profit Measures ($ In Millions)


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FYE15 Mid-Range Planning PeriodBus. Plan Forecast FYE16 FYE17 FYE18

Revenues $2,768 $2,780 $2,735 $2,763 $2,896

Operating Income $240 $240 $250 $260 $275

Margin % 8.7% 8.6% 9.1% 9.4% 9.5%

Net Income $138 $138 $150 $158 $168

Operating Cash Flow $285 $292 $320 $330 $344

Net Cash Flow Before Financing $138 $138 $140 $150 $160

Return On Equity 11.5% 11.3% 11.3% 11.2% 11.5%

EBITDA $348 $341 $350 $367 $389

EBITDA Margins 12.6% 12.3% 12.8% 13.3% 13.4%

j p ( )

MRP ReflectsContinued

Improvement InOperating Income

Margins

ReconciliationFYE14 Actual to FYE15 Forecast ($ In Millions)


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Revenues

Operating Income

$238 $240+$24

-$35

-$74

+$76

+$20 +$18

-$9 -$20-$20

+$10 +$12

FYE15 FYE16FYE14

Actual

One Time ItemsPhysical MktDecline -13%

Downloads-14%


+50%

Digital Video+40%

Digital Radio+32%

Other-39%

Syco VEVOEquity

Income

Costs/Other/New

Business

FYE15

Forecast

FYE14 Actual to FYE15 Forecast ($ In Millions)

$2,869

$2,780

+$21

-$143

-$112

+$125 +$34 +$22-$16 -$33

+$12

FYE14Actual

4Q ActualFYE14

Actual

One Time ItemsPhysical MktDecline -13%

Downloads-14%


+50%

Digital Video+40%

Digital Radio+32%

Other-39% Syco

Other(New Business)

FYE15

Forecast

Breakage +21

OH Inflation -20OH Savings +20Talent FlatNew Business +12

Breakage +14Beats Gain +7Other Gains +3

Orchard +6NOW! +4

Total Digital $53+3.8%

Total Digital $31

ReconciliationFYE15 Forecast to FYE16 Target ($ In Millions)


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FYE15 Forecast to FYE16 Target ($ In Millions)

Revenues

Operating Income

$2,780 $2,759

$2,735-$21

-$151

-$111

+$176 +$37 +$13-$13

+$25

FYE14Actual

4Q Actual

Breakage -21


$240

$216

$250

-$24

-$44

-$64

+$105+$20 +$11

-$8

+$12 +$2

FYE14Actual

4QActual

Total Digital $64

Breakage -14Beats Gain -7Other Gains -3

OH Inflation -20OH Savings +15Other Cost Savings +6

FYE15

Forecast

One Time ItemsAdj. FYE15

Forecast

Physical MktDecline -16%

Downloads-16%


+47%

Digital Video+31%

Digital Radio+14%

Other-50%

Market ShareGain +0.25% pt

FYE16

Target

FYE15

Forecast

One Time ItemsAdj. FYE15

Forecast


Downloads-16%


+47%

Digital Video+31%

Digital Radio+14%

Other-50%

Market ShareGain +0.25% pt

CostsFYE16

Target

Biggest Risk Is Streaming Growth47% Assumed IncrementalGrowth Contributes $105M to

ProfitIf Only 30% Growth, ProfitImpacted Negatively by ~$39M

ReconciliationFYE16 Target to FYE17 Target ($ In Millions)


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$250$260

-$54

-$70

+$136 +$14+$9

-$7

+$12

-$12 -$6 -$7 -$5

FYE15 FYE16

Revenues

Operating Income

FYE16

Target


Downloads-18%


+44%

Digital Video+21%

Digital Radio+10%

Other-75%

MarketShare Gain

+0.25% pt

Real EstateEmergingMarket

Investment

TalentInvestment Costs

FYE17

Target

FYE16 Target to FYE17 Target ($ In Millions)

$2,735 $2,763

-$167

-$110

+$245+$33 +$10

-$10

+$27

FYE14 Actual 4Q Actual


Total Digital $82

FYE16

Target


Downloads-18%


+44%

Digital Video+21%

Digital Radio+10%

Other-75%

Market Share Gain+0.25% pt

FYE17

Target

Inflation -20Savings +15



ReconciliationFYE17 Target to FYE18 Target ($ In Millions)


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Revenues

Operating Income

$260$275

-$48

-$63

+$162 +$7 +$4

-$1

+$13

-$20 -$30 -$9

FYE15 FYE16FYE17

Target


Downloads-20%


+40%

Digital Video+11%

Digital Radio+5%

Other-75%

MarketShare Gain

+0.25% pt

EmergingMarket

Investment

TalentInvestment Costs/Other

FYE18

Target

FYE17 Target to FYE18 Target ($ In Millions)

$2,763

$2,896

-$142-$99

+$325 +$21 +$6

-$2

+$24

FYE14 Actual 4Q Actual


Total Digital $109

FYE17

Target


Downloads-20%


+40%

Digital Video+11%

Digital Radio+5%

Other-75%

Market Share Gain+0.25% pt

FYE18

Target

Inflation -20Savings +15Other -4



Cash Flow ($ In Millions)


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Actual Forecast Mid-Range Planning Period


Earnings Before Interest & Taxes $215 $215 $225 $235 $250

Depreciation/Amortization 83 78 80 87 94

Working Capital (2) (1) 15 8 -

Cash Flow From Operations $296 $292 $320 $330 $344

Capital Expenditures (22) (25) (29) (26) (25)

Strategic Investments (67) (60) (60) (60) (60)

Proceeds From Disposal of Assets 1 29 - - -

EBIT Cash Flow $208 $236 $231 $244 $259

Interest & Taxes (34) (70) (75) (77) (81)Minority Interest Payments (24) (28) (16) (17) (18)

Net Cash Flow Before Financing $150 $138 $140 $150 $160

1) Includes Proceeds From Sale of Beats ($17M) and Sale of Nashville Building ($12M)

2) Includes Receipt From SCA On Prior Year Taxes3) FYE14 and FYE15 Reflects Dividends Paid to Simon Cowell and Benefit of X Factor U.S.

(1)

(2)

(3)

AgendaMid Range Plan


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Competitor Analysis







Risks During the MRP Period


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Aggressive Market Assumptions MRP Assumes 44% CAGR for Streaming and 20% CAGR for Video Physical Decline Could Accelerate and Cause Accounts to Exiting MusicCliff Event

Unsustainable Profit From Syco TVand Syco Music

MRP Assumes Extension of SC deal At Existing Terms

MRP Assumes Success With New Formats ($46M Profit From New Formats Over 3 Year MRP)Higher Artist Royalty Cost Pressure On Artist Royalty Rate For DigitalParticularly Streaming

MRP Assumes Some Slow Rate Creep Could Be Faster and Higher

Talent Exposure On Superstar ArtistDeals and JVs

Key Superstar Talent Assumed to Perform Consistent With Historical Sales and No AdditionalAdvance Exposure

JVs Expected to PerformDevelop New Talent and Turn Profitable

Unable to Generate OverheadSavings to Offset Inflation

MRP Assumes $15M Savings Initiatives Per Year ($45M Total)All Currently Unidentified Mitigated by Restructuring Provisions

Higher VEVO Funding Needed toDrive Strategy

MRP Assumes $20M Per Year For Funding of VEVO Operations Which Is Only the Current Run Rate

Universals Aggressive PracticesFurther Negatively Impacts BusinessEconomics

Drives Up Costs For Key Artist Renegotiations and New Artist Signings Pricing Decisions Will Force Us to Follow Suit to Maintain Sales and Positioning

Potential Unfavorable Result FromOnline Rate Hearing

Negative Impacts For Recorded Music From By-Product of DOJ Review of Publisher Issues

Negative Impact of the Orchard ExitProvision

If Forced to SellLower Operating Income and Market Share/Influence Mitigated by One Time Gain On Sale

Further Overhead Reductions Reduction In New Talent Investment Reduction In New Releases and Rosters Potential Wholesale Changes In the Way We Do Business

- Exclusives/Windowing

- 3rdParty Artist Financing

Contingency Plansto Mitigate RisksWould Include:

Opportunities During the MRP Period


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Purchase of Controlling Interest Inthe Orchard

Consolidation of Earnings (51% to 100%)

Recognition of Gain From Revaluing Existing 51%Interest

Sale of Spotify Equity Potential Sale of Warrants and EquityTotaling ~7%Interest

Approximately $4B Valuation

Liquidation of Other EquityInvestments

Deezer (5%)

VEVO (37.7%)

Higher Growth In Emerging Markets Digital Business Provides Opportunity to GrowLegitimate Music In Emerging Markets

Potential For Favorable Result From

Online Rate Hearing

U.S. Copyright Review Hearing On Online Radio

Rates to Take Place Calendar Year 2015

Recognition of Breakage Unearned Advances

Minimum Guarantees

Flats From Digital Service Providers

Physical Market SensitivityOperating Income ($ In Millions)


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Base Case

Lower Case

Higher Case

CAGR-20%

CAGR

-16%

CAGR-24%

$240

$250

$260

$275

$241

$248

$263

$240

$259

$273

$289



1% pt Growth/Decline In Physical ImpactsProfitability by Approximately $3M

High Case and Low Case Exclude thePotential Offsetting Effect of Digital MarketMovements

Digital Market SensitivityOperating Income ($ In Millions)


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$240 $250$260

$275

$216

$190

$164

$240

$284

$333

$395

Base Case

Higher Case

Lower Case

CAGR

+7%

CAGR+11%

CAGR+15%



1% pt Growth/Decline In Digital ImpactsProfitability by Approximately $8M (FYE16)

High Case and Low Case Exclude thePotential Offsetting Effect of PhysicalMarket Movements

AgendaMid Range Plan


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Competitor Analysis








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Bravo StrategicPriority MEDIUM


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Germany acquisition of BRAVO Hits compilation series

Overview/Long TermStrategic Value

The BRAVO Hits compilation series is by far the biggest selling compilations product seriesin GSA

Until 2013, SME GSA was part of a JV with UMG licensing the brand from Bauer Verlag

Given their market power after EMI acquisition, UMG pushed SME out of the JV contract

and licensed directly from Bauer, resulting in profit loss of $4.6M for SME

Acquiring the trademark gives SME chance to get back into this important compilation brand

Bravo represents in total 2% of market share

In acquiring brand and then forming a JV with UMG would increase SMEs Market share by

roughly 1% (and reduce UMGs respectively)

Estimated cost ~$30M

Timing F2015

Expected IRR ~11-12%

IncrementalProfit

EBIT of $37M over 10 years

Big Machine/Taylor Swift StrategicPriority HIGH


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Acquisition of indie label Big Machine


Addition of Big Machine label to our Country division and Taylor Swift, the top femalecountry artist, to our roster

Big Machine founder/owner, Scott Borchettapotential Sony executive

Synergy opportunities in integrating Big Machine with Sony Music Nashville

Position Sony Music as leader in Country music genre

Estimated cost $100M+

Timing F2015 - F2016

Expected IRR TBD

Syco StrategicPriority HIGH


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Syco JV (Primarily TV Format Income) Syco Artists

$95.8M

$48.7M

$102.3M

$62.2M

$99.0M

$61.7M$67.8M

$42.8M

Revenues Profit Revenues Profit Revenues Profit Revenues Profit

FYE12ACT FYE13ACT FYE14ACT FYE15FC

Simon Cowell Is:- One of the Most Prominent and Successful TV Personalities

- The Most Successful A&R Executive In the Industry Over the Last 15 Years- Proven Developer of Highly Successful TV Formats Simon Cowell and Sony Music: A 24 Year Relationship Potential New Deal Framework

- Purchase of All or Part of SCs Interest In the Syco JV, Excluding Music(Est. $60M - $100M)

- Enhance Music RelationshipPossible Converting Override Arrangement to JVArrangement (Estimated Profit Advance TBD)

- Extend SCs Services On TV and Music For An Additional 5 Years (Annual Salary TBD)- Discussions Underway With SPE TV- Timing Expected During FYE15 or FYE16

- IRR Range 10%-20%

Total Syco JV Post-Tax Dividends FYE11-FYE14 $146M- Sonys Share $105M; SCs Share $41M- Sony Allocated $64M Higher Than SC Due to Contract Terms Which

Protect/Recovered Sonys Initial Investment MRP Assumes Flat From FYE15FC

Key Initiative Extension of Simon Cowell ServicesCurrent Deal Expires 12/31/15

The Orchard StrategicPriority HIGH
http://www.google.com/url?sa=i&rct=j&q=&esrc=s&source=images&cd=&cad=rja&uact=8&docid=N5qnV7C9Cqwr3M&tbnid=lAqSih9E44n7TM:&ved=0CAUQjRw&url=http://www.mobo.com/news-blogs/x-factor-simon-cowell-return-2014&ei=6cPPU-nBNJe0yAT024GwBA&bvm=bv.71667212,d.aWw&psig=AFQjCNHpmi6Qx9snzAs-ZwDbuL_RxyYYxA&ust=1406211402847743


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Current equity investment with 51% non-controlling ownership stake. Negotiating withDimensional about potential purchase of remaining 49% interest.

Overview/

Long TermStrategic Value

SMEs investment in the Orchard has created significant value since Mar12. Our $25M cash

investment has generated $14M of equity income to date for a net investment value of$38M. Orchards CY14EBITDA is forecasted to be $25M.

Purchase of remaining 49% of the Orchard gives SME full control and allows us to consolidateOrchard financials. Based upon Orchards 3 year MRP, EBITDA is projected to growfrom$25M to $47M by CY17.

Given current net investment value on our books, purchase of the remainder of company at avaluation of $350M-$660M could result in significant one time P&L gain due ($144M+)

Preserve Market Share: Based on our agreement we have the last right to match any bindingthird party offer to buy Orchard. If we elect not to buy the remaining 49% at the third partyvaluation we would be forced to sell our 51% interest. This would result in a loss of over 3.5%pts in global digital market share.

Estimated cost $175M - $330M (based on overall valuation of $350M - $660M) Based on offer received from3rdparty

Any deal could include significant earn out component

Timing 3 - 12 months

Current Status Given current gap between Dimensional and SMEs valuation, Dimensional will explorepotential third party interest to acquire its 49% share.

SME will make a decision on exercising its right to match at the appropriate time

Expected IRR 10%-20%

Coldplay StrategicPriority MEDIUM


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Signing iconic band Coldplay (currently have one album remaining with WMG) in adistribution deal & license agreement


Coldplays recent albums sold over 6M units each worldwide

Will increase our artist roster with an iconic band, long-term deal with 3 firm albums,creation of catalog product

Estimated cost Maximum commitment $40M

Timing Signing in F2015, effective F2016

Payments spread over contract term (per album)

Expected IRR ~20%

Profit Impact Profit contribution of $18M over 3 albums


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Believe Digital StrategicPriority MEDIUM


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Potential acquisition of Believe Digital, a competitor to the Orchard with a significantpresence in Continental Europe


While The Orchards organic growth prospects continue to be strong, opportunity exists to

achieve synergistic value through this acquisition (as evidenced by the integration of TheOrchard & IODA)

International strength presents a much more attractive acquisition target as it completes theOrchards global market share profile

Believes distribution fees are in line with the Orchard which should enable a high label

retention rate

Estimated cost $75M - $150M (based on 100% acquisition)

Timing 1-3 years

Expected IRR 10%-20%

Razor & Tie StrategicPriority MEDIUM


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Potential acquisition/investment in Razor & Tie record label


Longstanding distribution relationship with proven track record. Creator of popular Kidz Bopfranchise, as well as a diverse artist roster specializing in metal, rock. R&T had 0.5% U.S.market share CY13

Depending on deal structure, potentially allows us to consolidate Razor & Tie financials (FY14recorded music revenue through SME of $20M + additional ancillary revenue streams)

R&Ts specialty compliments SMEs catalogue and distribution business

Estimated cost TBD

Timing 1-3 years

Expected IRR TBD


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Ultra Records/Patrick Moxey StrategicPriority MEDIUM


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$28.8M

$7.0M

$23.0M

$4.5M

Revenues Profit Revenues Profit

2012 (Pre-JV) JV Year 1

Ultras Yr 1 Profits Declined From Historical Level Due to Fewer Big Hits Than Prior Years- Deals Expired and Not Renewed On A Few Established Acts- Universal Aggressively Overpaid For Several EM Acts After Losing Bid to Acquire Ultra

15 Months Ending March 31, 2014

Sony Acquired 50% Interest In An Established Label, Ultra, In December 2012Increasing SonysFootprint In EM (Dance)

- An Established and Profitable LabelTherefore No Startup PeriodImmediate Profit Patrick Moxey Also Serves As Head of EM For Sony Music International

- Providing Support to All International Affiliates In EM A&R and Marketing Activities

- Several International EM Acts Have Been Signed, Including Mr. Probz, With Patricks Oversight and Format Credibility Potential Buyout

- Contractual Option to Buy Patrick Moxeys Interest In JV At End of Term (December 2017)- Potential TimingF17 or F18- Potential Purchase Price and IRRTBD

Annual Profit Allocation Protects Sonys InvestmentFrom Declining Profits

- 1st- Sony receives $3.5M profit each year,- 2nd - PM receives next $3.5M profit,- 3rd - Sony receives shortfall on $3.5M/year, if any- 4th - 50%/50

Mr. Probz Steve Aoki Benny Benassi Kaskade Carnage Project 46

Sonys Share $3.5M

P. Moxey Share $1.0M

VEVO StrategicPriority HIGH
http://www.google.com/url?sa=i&rct=j&q=&esrc=s&source=images&cd=&cad=rja&uact=8&docid=0weWGglvNX94DM&tbnid=cp_UEb8EtoWuDM:&ved=0CAUQjRw&url=http://knackfortracks.com/2014/06/20/project-46-sky-bar-buffalo/&ei=VmC8U9q-JMyZyAS-toDoBA&bvm=bv.70138588,d.aWw&psig=AFQjCNEUlLtwUEMnp7OaoIbAGw01NAkrmw&ust=1404940749804280http://www.google.com/url?sa=i&rct=j&q=&esrc=s&source=images&cd=&cad=rja&uact=8&docid=w9gZXu8TU9NnRM&tbnid=jzdl8oKuOYRQ7M:&ved=0CAUQjRw&url=http://whiteraverrafting.com/watch-this-dj-carnage-edc-aftermovie/2013/07/30/&ei=9YetU5ewDc-_sQTy8YCIAw&bvm=bv.69837884,d.cWc&psig=AFQjCNH4DfM3aOZ4grVELFAACKSHE8qoEQ&ust=1403967817382546http://www.google.com/url?sa=i&rct=j&q=&esrc=s&source=images&cd=&cad=rja&uact=8&docid=kWqwq3gb5da9DM&tbnid=IeW_rMpgNFdhfM:&ved=0CAUQjRw&url=http://www.rollingstone.com/music/news/kaskade-brings-edm-to-grammy-museum-20130116&ei=gzu8U_6FBo6pyATn0YDIAQ&bvm=bv.70138588,d.aWw&psig=AFQjCNFP5whKxD4OzKbw24fSRUKfvXCJ2g&ust=1404931313921677http://www.google.com/url?sa=i&rct=j&q=&esrc=s&source=images&cd=&cad=rja&uact=8&docid=607PPPXlAjHSpM&tbnid=rzCUveX8ok19PM:&ved=0CAUQjRw&url=http://en.wikipedia.org/wiki/Mr_Probz&ei=QZDOU-XIJcyfyASq8oKQDw&bvm=bv.71198958,d.aWw&psig=AFQjCNGEoE7FiENxm9LC9toHJz8eF8-dLA&ust=1406132493517662http://www.google.com/url?sa=i&rct=j&q=&esrc=s&source=images&cd=&cad=rja&uact=8&docid=829qXMzgpLTwZM&tbnid=voPiPY6eHWnOSM:&ved=0CAUQjRw&url=http://www.billboard.com/biz/articles/news/legal-and-management/6143195/edm-power-players-the-executives&ei=_Y7OU-P5N86nyASDhoLYBg&bvm=bv.71198958,d.aWw&psig=AFQjCNFun4dLZGGzpMUs4coL8_hejo1GqA&ust=1406132340551458http://www.google.com/url?sa=i&rct=j&q=&esrc=s&source=images&cd=&cad=rja&uact=8&docid=vLK0hjbPtFOLqM&tbnid=Kum7G0rzm8xBzM:&ved=0CAUQjRw&url=http://de.wikipedia.org/wiki/Datei:Ultra_Music_Logo.png&ei=M4rOU5-_O8KQyATSmIHYDA&bvm=bv.71198958,d.aWw&psig=AFQjCNEpj-FsGH8BwmjVEwZ-xEKrWxXPlA&ust=1406131118470640


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Continued funding of VEVO JV


VEVOsbusiness performing better than forecasted with revenue growing 57% yoy in 1sthalfof year. SMEs license revenue from VEVO is forecasted at $85M for FYE15. Overall, netincome to SME from VEVO is positive as net profits from content fees after artist royalties isforecasted to exceed SMEs equity losses by $31M for FYE15.

While VEVO is expected to continue to experience positive revenue growth, VEVO willrequire additional capital funding to continue to expand their business, cover working capitaland other operational cash expenses over the MRP period. Growth in VEVO can be achievedthrough investment in original content, launch of a subscription service and International

expansion.

Majority Shareholders (Universal / SME) believe significant value growth can be achieved andwill therefore continue to invest in building of the business. As a result, no outsideinvestment from 3rdparties is likely during Mid Range Plan.

Exception could be made for investment by Warner Music if antitrust requirements can bemet

Estimated cost $60M of funding

Timing Throughout MRP Period

Expected IRR N/A


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sony music mrp phase ii review (2014)

Documents