GSN Investment Committee Presentation March 4, 2011 DRAFT - - PowerPoint PPT Presentation

GSN Investment Committee Presentation

March 4, 2011

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Executive Summary

• GSN operates a multiplatform U.S. cable network focusing on game show content and a digital

business that includes skill-based games, casual games and an online ad network

• SPE owns 35% of GSN and shares management control 50/50 with DIRECTV (65% owner)
• SPE seeks approval for the following transaction; long-form documentation still under

negotiation with DIRECTV

– Acquire an additional 5% of GSN for $60MM (net cash impact of $(9)MM) – Acquire management control of GSN – Grant DIRECTV a put on an additional 20% of GSN

• Acquiring management control of GSN would create strategic and financial value for SPE

– Strengthens SPE’s presence in U.S. cable networks, a key profit driver for media companies – Enables SPE and GSN to further exploit and mutually benefit from SPE’s light entertainment assets – Updated programming strategy and build-up of social gaming assets positions GSN for strong future growth – Acquiring management control of GSN allows SPE to consolidate, and is expected to increase EBIT (by up to $38MM per year by FYE14) and cash in future years – SPE would recognize a step-up gain at close of approximately $265-300MM

• SPE believes now is the right time to capitalize on DIRECTV’s willingness to cede management

control and expand on SPE’s growing base of U.S. cable assets

– SPE’s strategy to build scale in U.S. cable networks is gaining momentum (3net, Sony Movie Channel, FEARnet) – SPE could eventually manage these channels under a common infrastructure – DIRECTV has demonstrated it is open to ceding management control of GSN to SPE; this would resolve the challenges of the 50/50 governance structure which SPE was unable to resolve with its prior partner, Liberty Media

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GSN Overview

• U.S. cable network with a primary

programming focus on game show content

• Distributed to approximately 66 million

homes(1)

• Demographics: target audience aged 25-54,

female-skewing

• Revenues driven by a mix of affiliate fees and

television/online advertising

• Programming strategy focused on

−Producing flagship originals (The Newlywed Game, Baggage, 1 vs. 100) −Acquiring highly rated off-network series −Licensing content from SPT library, 2waytraffic, and Embassy Row Skill-based games

• Online casual skill-based cash competitions
• 30MM players worldwide(3)
• Over 35 games including popular titles such

as JEOPARDY! and Wheel of Fortune Casual games

• Ad-supported games on GSN.com
• 50+ casual games on Facebook

– Utilizes virtual goods currency model – 2MM+ active members(3) Advertising network

• Ad sales network for online games offering

premium ad solutions and a performance based inventory system

Television Digital

(1) Per GSN estimate of CY10 subscribers (2) Unaudited (3) Per GSN management estimates

CY2010(2), Values in $MM TV Digital Total Revenue $166 $66 $233 % of Total 71% 29%

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Target Demographic Online Presence Programming Management Partner Revenues / Profits(1)

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GSN Past vs. Present

• CY10 Revenue $233MM
• CY10 EBIT $71MM

PAST PRESENT

• CY07 Revenue $126MM
• CY07 EBIT $15MM
• DIRECTV 65% owner

– Willing seller – Believes 50/50 governance is not ideal

• Liberty Media 50% owner

– Not a willing seller – Comfortable with 50/50 governance

• New management team with strong track

record

• Financial growth and implementation of

strategic initiatives

• Concerns with management team
• Difficulty reaching consensus with Liberty on

installing new management team

• Producing compelling originals/reformats

(Baggage, 1 vs. 100)

• Acquiring highly rated off-network series
• Licensing content from SPT library,

2waytraffic, and Embassy Row

• Heavy reliance on licensing older game

show library product

• Original programming less compelling or

appealed to a demographic not core to GSN

• Robust strategy featuring:

– Skill-based cash competitions – Casual games on Facebook and ad- supported games on GSN.com – Advertising network

• Limited online game options on GSN.com
• Embracing older female demographic

– Attracts advertisers – Aligns with heavy online gaming users

• Management attempting to shift core

demographic to young men, rather than focusing on older females

(1) Based on unaudited actuals

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GSN Financial History and Forecast

Since 2007 the business has grown significantly and is now highly profitable

Values in $MM Values in $MM 44% CAGR 18% CAGR

NOTES:

• 2005 – 2007 and 2010 figures are unaudited actuals; 2008 – 2009 figures are audited actuals; 2011 figures are GSN budget; 2012 – 2013 figures are

management forecasts

• The figures include the contribution from FUN Technologies acquired by GSN in April 2009, as well as Shizmoo and Mesmo acquired in April 2010

Calendar Year Calendar Year Figures represent 100% of GSN’s Revenue and EBIT 2005A 2006A 2007A 2008A 2009A 2010A 2011B 2012F 2013F EBIT Margin % 6% 13% 12% 34% 27% 30% 30% 35% 38%

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Key GSN Growth Drivers

Advertising Affiliate Revenues Focus Demographic Diversification into Online Games and Ad Sales

• Strong performance in television advertising, partly due to increase in

viewership − Ad revenues held fairly stable through economic recession − Management forecasting significant further growth through CY13

• Modest growth in affiliate revenue with CPI increases year-to-year and

stable carriage commitments − Potential to increase penetration with existing affiliates, which could result in up to 10MM additional homes

• Refocused programming strategy on core female 25-54 demographic with

increased investment in original programming and top tier licensed content

• Acquisition of casual games business positions GSN to capture significant

growth in virtual goods social gaming

• Purchase of CPM Star enables GSN to offer the full suite of digital

monetization opportunities from cash games to performance-based ad sales

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Strategic Benefits to SPE

• Management control of GSN would give SPE

– The majority of Board seats – Controls over the budget – The ability to hire/fire key management

• Gaining management control of GSN increases SPE’s presence in U.S. cable networks

– Adds increased scale to SPE’s portfolio of U.S. cable networks, which now includes minority stakes in GSN, FEARnet and 3net, and 100% of the Sony Movie Channel – GSN would become the cornerstone in a bouquet of channels that could eventually be managed under a common infrastructure

• In addition to traditional network assets, GSN brings strength in skill-based online games that

utilize GSN’s game show brands and SPE’s brands such as Wheel of Fortune and Jeopardy! – Attracts new demos to SPE’s television game shows

• Builds on GSN’s and SPE’s current operating relationship to further benefit from SPE’s light

entertainment assets – GSN could be a launching pad for new SPE game show formats – GSN would continue to license completed game show episodes from SPE’s library (Wheel of Fortune, Jeopardy!) and commission new versions of library formats (The Newlywed Game)

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Historical Context and Rationale for Buying-up

• Historically, SPE and Liberty each owned 50% of GSN and maintained 50/50 governance
• While GSN has remained an attractive asset, the 50/50 governance structure has inherent

challenges that SPE has been attempting to resolve for several years – Prohibits either party from consolidating – Contributed to stalemates that delayed the agreement to hire new management in 2008

• Liberty needed GSN as a strategic asset and showed no willingness to sell its stake
• In April 2009 SPE sold 15% of GSN to Liberty and instituted a buy/sell mechanism while leaving

50/50 governance in place

• Liberty eventually spun out DIRECTV including Liberty’s interest in GSN (which is now held by

DIRECTV)

• Recently, SPE has expanded its U.S. network presence to include interests in three channels,

in addition to GSN

• GSN has continued to increase its profitability
• Today, DIRECTV has indicated that it is willing to sell all or a portion of its stake in GSN to SPE,

as well as cede management control

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Summary of Proposed Deal Structure

• For $60MM ($(9)MM net cash impact), SPE would acquire an additional 5% of GSN at a valuation of $1.2BN

(bringing SPE’s ownership to 40%) and acquire management control of GSN

• DIRECTV can trigger the put of an additional 20% of GSN to SPE at an equity valuation of 13x prior calendar year

OIBDA (EBITDA before executive compensation and earn-outs), capped at $1.6BN – Trigger window is being negotiated; trigger window will begin no earlier than April 2012 (FYE13); DIRECTV seeks two additional trigger windows in CY13 and CY14, which may be required to close the deal – Once the put is triggered, certain competition filings and clearances may be required in the U.S. and other jurisdictions, as well as other consents prior to closing – SPE would have the flexibility to pay half of the put price in the year it is triggered and half a year later, with a 10% return to DIRECTV on the second half of the payment only – Selection of payment option would need to be made on or after July 1st in the year the put is triggered

• A buy / sell provision will apply to DIRECTV’s 40% and SPE’s 60% interest in GSN but cannot be triggered until

April 2015 (FYE16); triggering party would propose a price at which it is willing to either buy or sell

Deal Step Resulting SPE Stake (1) Payment (1) SPE acquires 5% at a $1.2BN Valuation 40% $60MM (2) SPE acquires 20% at 13X OIBDA (Assumes DirecTV exercises put option) Payment Option A: Pay all at once 60% $268MM (2) Payment Option B: Pay in two halves 60% $281MM (2) (w/ 10% return on the 2nd half) ($134MM + $147MM) (3) Potential Buy/Sell 100% / 0% FMV (1) Percentage ownership equals percentage of any dividends and any distribution on dissolution / sale of GSN (2) Assumes put is triggered in April 2012, with the valuation based on CY11 OIBDA of $103MM; GSN’s value for purposes of put would be $1.342BN

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GSN Valuation Summary

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NOTES:

• CY2010 Adj. EBITDA = $84.304MM
• CY2011 Adj. EBITDA = $98.204MM
• Houlihan Lokey Enterprise Value equals Equity Value less cash of $51MM, plus $0 debt, plus a $40MM valuation adjustment to account for LTIC in excess of

normalized levels (which excess was excluded from HL’s comparables and DCF analysis)

• 5% transaction Equity Value adjusted to Enterprise Value by subtracting $51MM of cash and adding $0 debt
• 20% put Equity Value adjusted to Enterprise Value by subtracting $57MM of cash and adding $0 debt

(1) Calculated from DCF analysis, adjusted EBITDA multiples and transaction multiples (2) Assumes DIRECTV triggers the put in April 2012

• Initial 5% purchase based on an Equity Value of $1.2BN with an implied Enterprise Value / CY10
• Adj. EBITDA multiple of 13.6X
• 20% put would imply an Equity Valuation of $1.342BN and implied Enterprise Value / CY2011
• Adj. EBITDA multiple is 13.1X(2)

Deal Comparison

(1)

Preliminary Houlihan Lokey Valuation Values in $MM Enterprise Value / Value for: GSN Equity Value CY2010 Adj. EBITDA Comments Low High Low High Controlling Equity Value with Full Marketability $1,007 $1,222 11.8X 14.4X Assumes full control premium of 30% GSN Valuation for Calculating SPE Interest after 5% Acquisition and Management Control $906 $1,100 10.6X 12.9X Includes 30% premium for full control and 10% discount for restricted marketability

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• The valuation for purposes of the gain would be based on either:

– The value implied by the price paid or – A third-party’s estimate of fair value, in this case $1.0BN - $1.1BN (including a restricted marketability discount of 10%)

• At closing, SPE would realize an estimated step-up gain of $265MM - $300MM on the 35% of

GSN currently owned

• Gain subject to PwC’s further review of long-form documentation and Houlihan Lokey valuation

Financial Impact: Estimate of Step-Up Gain

(1) HL’s preliminary valuation analysis includes a restricted marketability discount of 10% Values in $MM

Gain Calculation (Illustration based on 3rd Party Valuation) Mid High HL Estimated Value (1) $1,003 $1,100 Value of SPE Share (35%) $351 $385 Book Value SPE Share - Projected Mar '11 ($87) ($87) Gain $264 $298

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Financial Impact: Estimate of Increased EBIT

• Acquiring management control would allow SPE to consolidate GSN and is expected to

increase SPE’s EBIT by $10MM-$40MM per year once initial purchase price amortization (PPA) levels taper off in FYE13

(1) The valuation of intangible assets and related amortization will be undertaken by a valuation expert. The amounts presented are management's estimates and final amounts may vary by more than 10%.

Values in $MM

FYE12 FYE13 FYE14 Annual Figures Net Income $88 $113 $133 Current Ownership - 35% of Net Income $31 $40 $47 Deal as of March 31, 2011 100% of EBIT $88 $113 $133 PPA Estimate (1) ($78) ($59) ($48) SPE Consolidated EBIT Post PPA $10 $54 $85 Variance to Current State ($21) $14 $38 Cumulative Figures SPE EBIT Variance to Current State ($21) ($7) $31

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Financial Impact: Estimate of Cash Impact

Values in $MM Buy 5% in March 2011 (FYE11 Impact) Gross Cash for Consideration ($60) Consolidate Balance Sheet $51 Net FYE11 Impact ($9) Option A -- Pay Put All at Once Buy 20% in April 2012 (FYE13 Impact) Gross Cash for Consideration ($268) Incremental Cash from GSN in FYE13 $27 Net FYE13 Impact ($241) Option B -- Pay Put in Two Tranches Total Gross Cash for Consideration $281 Pay Half in April 2012 (FYE13 Impact) Gross Cash for Consideration ($134) Incremental Cash from GSN in FYE13 $27 Net FYE13 Impact ($107) Pay Half (with 10% Return) in April 2013 (FYE14 Impact) Gross Cash for Consideration ($147) Incremental Cash from GSN in FYE14 $49 Net FYE14 Impact ($98)

IRR(1)

• Pay put in one payment:

– Pre-tax IRR of 18% – Post-tax IRR of 13%

• Pay put in two tranches:

– Pre-tax IRR of 20% – Post-tax IRR of 15% Payback Period(1)

• If 20% put is not triggered, deal has an

expected payback of less than 2 years

• If 20% put is triggered, deal has an expected

payback of 10 years

Impact on cash if DIRECTV triggers put in April 2012

(1) Exit valuation based on Houlihan Lokey report; assumes 20% put is triggered by DIRECTV in April 2012

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Financial Impact: Potential Put Dates and Payment Plans

Cash for Consideration IRR (1) 5% Acquisition 20% Acquisition Put Date & Payment Plan Pre-Tax After-Tax FYE11 FYE12 FYE13 FYE14 FYE15 FYE16 Total April 2012 -- 1 Payment 18% 13% Gross ($60)

• ($268)
• ($268)

Net ($9)

• ($241)
• ($241)

April 2012 -- 2 Payments 20% 15% Gross ($60)

• ($134)

($147)

• ($281)

Net ($9)

• ($107)

($98)

• ($205)

April 2013 -- 1 Payment 12% 10% Gross ($60)

• ($316)
• ($316)

Net ($9)

• ($268)
• ($268)

April 2013 -- 2 Payments 9% 7% Gross ($60)

• ($158)

($174)

• ($332)

Net ($9)

• ($110)

($125)

• ($235)

April 2014 -- 1 Payment 12% 9% Gross ($60)

• ($320)
• ($320)

Net ($9)

• ($271)
• ($271)

April 2014 -- 2 Payments 9% 7% Gross ($60)

• ($160)

($176) ($336) Net ($9)

• ($111)

($127) ($239)

Notes: (1) IRR calculation assumes exit value occurs at later of 12/31/2013 (the Houlihan Lokey terminal value date) or date of the final put payment

• Payback on put specifically in all scenarios is approximately 8 - 10 years, which is in addition to just under 2 year payback on the initial 5%

purchase

• April 2012 put based on 13x CY2011 OIBDA of $103MM = $1.342BN valuation (SPE 20% put payment = $268MM)
• April 2013 put based on 13x CY2012 OIBDA of $122MM = $1.581BN valuation (SPE 20% put payment = $316MM)
• April 2014 put based on 13x CY2013 OIBDA of $146MM = $1.891BN but capped at $1.6BN (SPE 20% put payment = $320MM)

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Risks and Mitigation

Carriage Deals

• GSN will need to retain its carriage deals with distributors to

achieve its forecast; this includes its carriage deal with DIRECTV which lapsed in February 2011 and is being renegotiated

• This may be more difficult for GSN vs. channels owned by

media conglomerates with larger network portfolios

• GSN expects to extend its DIRECTV carriage agreement prior to

closing under current terms for multiple years

• GSN will benefit from SPE’s and DIRECTV’s relationships with
• ther distributors

Skill-based Games

• A portion of GSN’s growth is driven by online casual skill-

based game tournaments for a fee, which are subject to gaming regulations

• “Skill-based” determination is done on a game-by-game

basis, is factually intensive and can vary by jurisdiction

• If gaming regulations become more restrictive, GSN’s

revenues in this area could decrease

• To comply with gaming regulations, among other things, FUN

(GSN’s skill-based online gaming division):

• Does not offer fee-based tournament games in certain prohibited

U.S. states and foreign jurisdictions

• Employs filtering technology to exclude players from prohibited

jurisdictions

• Designs its games with outside counsel review

Risks Mitigation Impairment

• Transaction will create Amortizable Intangibles of $450-

550MM that would require a write-down if GSN: (1) had a material downward trend in its financials or (2) diverged from its core business or (3) changed its name

• Transaction will create Goodwill of $450-550MM that would

require a write-down if GSN is sold for a loss or there is underperformance

• GSN has a history of steady performance, is on a solid growth

path and SPE is unlikely to change GSN’s name

• Per current estimates, by 3 years post acquisition about 40% of

the Amortizable Intangibles would be amortized which significantly reduces the potential long-term impact

• SPE does not expect to sell the asset in a loss position
• Under U.S. GAAP, the goodwill test addresses the value of the

broader portfolio of television network assets which could decline significantly without a goodwill impairment

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Next Steps

• Accounting

– Finalize step-up gain with PwC – Preview value of intangible assets with PwC

• Deal documentation

– Complete negotiation of Operating Agreement to revise governance – Complete negotiation of Liquidity Agreement to address the put and buy/sell – Complete negotiation of Membership Interest Purchase Agreement for purchase/sale of 5% of GSN – Extend DIRECTV carriage agreement

• Review with Group Executive Committee on March 9, 2011 and seek approvals to:

– Acquire an additional 5% of GSN for $60MM – Acquire management control of GSN – Grant DIRECTV a put on an additional 20% of GSN – Delegate selection of put payment method to Sony CFO

• Deal close

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Appendix

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GSN Income Statement CY2005A – CY2013F

Values in $000s NOTE: 2005 – 2007 and 2010 figures are unaudited actuals; 2008 – 2009 figures are audited actuals; 2011 figures are GSN budget; 2012 – 2013 figures are management forecasts (1) Represents the long-term normalized LTIC of $5MM per year (2) Accounts for additional LTIC/earnout incurred in excess of the steady state LTIC of $5MM per year; projected to decline to $0 in the long-term (3) OIBDA = EBITDA plus total LTIC (steady state + additional) 2005 (A) 2006 (A) 2007 (A) 2008 (A) 2009 (A) 2010 (A) 2011 (B) 2012 (F) 2013 (F) REVENUE NET ADVERTISING REVENUE 58,076 65,527 68,079 67,327 71,263 96,980 118,557 132,903 149,165 NET AFFILIATE REVENUE 58,762 62,728 62,575 73,072 95,028 86,749 91,115 93,848 96,664 GAMES/OTHER 650 2,441 1,472 1,037 34,026 48,903 68,667 81,421 97,593 TOTAL GROSS REVENUE 117,488 130,696 132,126 141,436 200,317 232,632 278,339 308,173 343,422 LAUNCH SUPPORT AMORTIZATION (14,449) (11,633) (6,515)

• TOTAL REVENUE

$103,039 $119,063 $125,611 $141,436 $200,317 $232,632 $278,339 $308,173 $343,422 COST OF SALES PROGRAMMING AMORT (39,393) (41,725) (46,344) (33,335) (43,227) (30,648) (37,444) (38,291) (39,248) PARTNER SHARE/OTHER

• (17,073)

(33,114) (46,829) (53,755) (62,095) TOTAL COST OF SALES (39,393) (41,725) (46,344) (33,335) (60,300) (63,762) (84,273) (92,046) (101,344) GROSS PROFIT 63,646 77,338 79,267 108,101 140,017 168,870 194,066 216,127 242,078 SG&A G&A (31,957) (35,663) (37,627) (45,639) (57,642) (65,325) (71,453) (73,239) (75,070) MARKETING (24,421) (25,369) (25,175) (11,210) (12,188) (14,241) (19,409) (21,289) (21,539) TOTAL SG&A (56,378) (61,032) (62,802) (56,849) (69,830) (79,566) (90,862) (94,529) (96,610) STEADY STATE LONG-TERM INCENTIVE COMP (LTIC) (1)

• (5,000)

(5,000) (5,000) (5,000) (5,000) ADJUSTED EBITDA $7,268 $16,306 $16,465 $51,252 $65,187 $84,304 $98,204 $116,598 $140,468 ADDITIONAL LONG-TERM INCENTIVE COMP (LTIC) (2)

• (1,900)

(6,095) (7,598) (8,272) (3,216) (5,152) EBITDA $7,268 $16,306 $16,465 $49,352 $59,092 $76,706 $89,932 $113,382 $135,316 DEPRECIATION AND AMORTIZATION (1,446) (1,710) (1,608) (1,495) (5,335) (6,524) (7,100) (5,900) (3,800) OTHER INCOME AND EXPENSE

• 720
• EBIT

$5,822 $14,596 $14,857 $47,857 $53,757 $70,902 $82,832 $107,482 $131,516 OIBDA (3) $7,268 $16,306 $16,465 $51,252 $70,187 $89,304 $103,204 $121,598 $145,468

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GSN Balance Sheet at December 31, 2010

CURRENT ASSETS CURRENT LIABILITIES CASH AND CASH EQUIVALENTS 29,403 $ ACCOUNTS PAYABLE/ACCRUED EXPENSES 58,187 $ RESTRICTED CASH 21,720 PROGRAMMING RIGHTS PAYABLE 13,693 ACCOUNTS RECEIVABLE 39,684 TOTAL CURRENT LIABILITIES 71,880 PROGRAMMING RIGHTS 20,815 PREPAID & OTHER 3,327 NON-CURRENT LIABILITIES TOTAL CURRENT ASSETS 114,949 PROGRAMMING RIGHTS PAYABLE 13,120 OTHER NON-CURRENT LIABILITIES 21,678 NET PROPERTY AND EQUIPMENT 2,757 TOTAL NON-CURRENT LIABILITIES 34,798 OTHER ASSETS EQUITY PROGRAMMING RIGHTS 31,152 MEMBERSHIP INTEREST - DTV 129,000 NET INTANGIBLES & GOODWILL 156,281 MEMBERSHIP INTEREST - SPCV 69,462 TOTAL OTHER ASSETS 187,433 TOTAL EQUITY 198,463 TOTAL ASSETS 305,140 $ TOTAL LIABILITIES AND EQUITY 305,140 $

ASSETS LIABILITIES AND EQUITY

Values in $000s

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Summary of GSN Carriage Agreements

Source: 2011 GSN Budget presentation

Subs in MM

Affiliate Contract Expiration CY2010 Forecast Subscribers CY11 Budget Subscribers Rate * DirecTV TBD (1) 15.9 16.2 $0.086 Comcast 09/15/13 13.8 14.2 $0.086 * Time Warner 04/30/12 8.4 8.6 $0.105 * EchoStar 03/31/11 8.4 8.4 $0.086 * Verizon 12/31/12 3.1 3.4 $0.250 * Charter 09/30/11 3.2 3.2 $0.165 * AT&T 12/31/11 2.5 3.1 $0.220 * NCTC 12/31/13 2.5 3.0 $0.195 Cablevision TBD ** 2.7 2.9 $0.110 * Cox 12/31/10 2.0 2.0 $0.195 * Non-domestic misc 2.1 2.2 $0.170 Other misc 1.2 0.5 $0.240 Total 65.8 67.7 (1) As a condition of the transaction, contract to be extended 3 - 5 years based on the current deal terms * Cannot migrate GSN to a tier/package with lower subscriber count ** Currently under negotiation

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Overview of SPE U.S. Cable Channels

Description Launch Date Carriage Content

• One of the first networks offering

24/7 programming dedicated exclusively to 3D content

• February 2011
• Targeted for carriage on all major

satellite / cable providers

• Currently carried on DIRECTV
• General entertainment content such

as natural history, documentary, action/adventure, travel, concerts, movies, etc.

• Includes original programming shot

in native 3D

• Multiplatform cable network

showcasing Hollywood movies commercial free in HD

• October 2010
• Placed on HD tiers
• Currently carried on Dish,

DIRECTV, and AT&T

• Anticipated carriage on Time

Warner, Verizon, and Cox in next 12 months

• HD content licensed predominantly

from SPE library

• Features popular blockbusters and

library movie product

• Multiplatform cable network, the

premier destination for horror, thriller, and suspense movies in HD and SD

• Linear cable channel launched

December 2010

• Video-on-Demand / online business

founded in 2006

• Currently carried on Verizon
• Expanded rollout across all major

carriers anticipated in next 12 months

• Licensed content predominantly

from SPE and Lionsgate

• Original short and long form series

Ownership

• Joint venture among:
• Sony (44.93% stake)
• Discovery (44.93% stake)
• IMAX (10.14% stake)
• 100% SPE owned
• Joint venture among:
• SPE (34.5% stake)
• Lionsgate (34.5% stake)
• Comcast (31.0% stake)

3net Sony Movie Channel FEARnet

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GSN Comparable Companies and Transaction Analysis

RELEVANT PUBLIC COMPS BENCHMARK MULTIPLES HL'S SELECTED RANGE EV / EBITDA Multiples LTM CY10 CY11 CY12 CY10 Discovery Communications 12.6x 12.5x 10.9x 9.9x Scripps Network Interactive 9.8x 9.2x 8.2x 7.5x Low High Average 11.2x 10.9x 9.6x 8.7x 9.0x 10.0x Premium with 100% Control 30% 30% 30% Implied Multiple based on Public Comps 14.2x 11.7x 13.0x RECENT M&A EV / EBITDA Multiples Trailing Forward Scripps Buys 65% of Travel Channel Nov. 09 12.5x 9.0x OLDER M&A EV / EBITDA Multiples 12.0x 13.0x Trailing Median of Seven Deals from 2001 - 2008 15.6x All with over 60MM subscribers 07/06/08 Weather Channel 11.9x 10/01/07 Oxygen 15.1x 05/01/07 Travel Channel 9.6x 05/01/06 CourtTV 16.7x 07/03/03 QVC 16.3x 06/30/03 AMC, IFC, WE 15.6x 07/23/01 Fox Family Worldwide 18.8x

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Financial Impact: Cash Flow Based on Single Put Payment (Option A)(1)

• If SPE pays the entire 20% put at
• ne time would require a $268MM

cash outflow in FYE 2013

• Buy-up would increase SPE’s share
• f distributable cash by $26MM in

FYE12, increasing to $83MM in FYE14 under GSN’s estimated dividend policy

• Note, SPE’s share of GSN’s

distributable cash will be lower if GSN pays out a greater portion of cash in dividends as SPE consolidates 100% of any cash that remains on GSN’s balance sheet

Values in $MM

GSN Cash Flow & Balance Sheet Forecast (2) FYE11 FYE12 FYE13 FYE14 Beginning Cash $51 $57 $63 Cash for Incentive Plans in FYE11 Operating Cash $56 $87 $121 Less Dividends ($50) ($81) ($96) Ending Cash $51 $57 $63 $88 CURRENT STATE - ANNUAL (2) Current SPE Ownership - 35% of Dividend $18 $28 $34 POST DEAL SPE CASH FLOW - ANNUAL (2) Distributable Cash (3) $51 Operating Cash $56 $87 $121 Dividend to Direct TV (60% FYE12 and 40% thereafter) N/A ($30) ($32) ($38) SPE Share of Cash - Operating less Dividend $51 $26 $55 $83 Variance to Current State $51 $8 $27 $49 Purchase Price ($60) $0 ($268) $0 Variance to Current State ($9) $8 ($241) $49 POST DEAL SPE CASH FLOW - CUMULATIVE (2) Purchase Price ($60) ($60) ($328) ($328) Incremental Cash (Consolidated and Dividends) $51 $59 $86 $135 Cumulative Net Impact ($9) ($1) ($242) ($193) (1) Assumes DIRECTV triggers the put in April 2012 (2) Estimates based on GSN projections (3) FYE11 represents an estimated $51MM of cash

• n GSN's balance sheet that SPE would

consolidate

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Financial Impact: Cash Flow Based on Split Put Payment (Option B)(1)

• If SPE pays the 20% put in two

tranches would require a cash

• utflow of $134MM in FYE 2013

and a $147MM in FYE 2014

• Buy-up would increase SPE’s share
• f distributable cash by $26MM in

FYE12, increasing to $83MM in FYE14 under GSN’s estimated dividend policy

• Note, SPE’s share of GSN’s

distributable cash will be lower if GSN pays out a greater portion of cash in dividends as SPE consolidates 100% of any cash that remains on GSN’s balance sheet

(1) Assumes DIRECTV triggers the put in April 2012 (2) Estimates based on GSN projections (3) FYE11 represents an estimated $51MM of cash

• n GSN's balance sheet that SPE would

consolidate (4) Assumes $134m paid on April 30, 2012 and $134m plus 10% paid one year later ($147m)

Values in $MM

GSN Cash Flow & Balance Sheet Forecast (2) FYE11 FYE12 FYE13 FYE14 Beginning Cash $51 $57 $63 Cash for Incentive plans in FYE11 Operating Cash $56 $87 $121 Less Dividends ($50) ($81) ($96) Ending Cash $51 $57 $63 $88 CURRENT STATE - ANNUAL (2) Current SPE Ownership - 35% of Dividend $18 $28 $34 POST DEAL SPE CASH FLOW - ANNUAL (2) Distributable Cash (3) $51 Operating Cash $56 $87 $121 Dividend to Direct TV (60% FYE12 and 40% thereafter) N/A ($30) ($32) ($38) SPE Share of Cash - Operating less Dividend $51 $26 $55 $83 Variance to current state $51 $8 $27 $49 Purchase Price (4) ($60) $0 ($134) ($147) Variance to current state ($9) $8 ($107) ($98) POST DEAL SPE CASH FLOW - CUMULATIVE (2) Purchase Price ($60) ($60) ($194) ($341) Incremental Cash (Consolidated and Dividends) $51 $59 $86 $135 Cumulative Net Impact ($9) ($1) ($108) ($206)

DRAFT

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GSN Valuation Summary

Values in $MM Values in $000s

(1) Assumes DIRECTV triggers the put in April 2012 (2) Adds back LTIC in excess of $5MM per year (long-term normalized LTIC estimated to be $5MM per year) (3) Enterprise Value equals Equity Value less cash of $51MM, plus $0 debt, plus a $40MM valuation adjustment to account for LTIC in excess of normalized levels (which excess was excluded from HL’s comparables and DCF analysis) (4) Enterprise Value equals Equity Value less cash of $51MM, plus $0 debt (5) Enterprise Value equals Equity Value less cash of $57MM, plus $0 debt

GSN KEY OPERATING METRICS CY2010 CY2011 Budget OIBDA $89,304 $103,204 LTIC ($12,598) (13,272) EBITDA $76,706 $89,932

• ADJ. EBITDA (2)

$84,304 $98,204

PRELIMINARY HL VALUATION RANGE Equity Value Enterprise Value (EV) (3) CY10 EV / Adj. EBITDA CY10 EV / OIBDA Low High Low High Low High Low High Value with Full Control and Marketability $1,007 $1,222 $996 $1,211 11.8x 14.4x 11.2x 13.6x Discount for Lack of Marketability 10% 10% 10% 10% HL View of Fair Value for Proposed Transaction $906 $1,100 $896 $1,090 10.6x 12.9x 10.0x 12.2x PROPOSED DEAL STRUCTURE Equity Value Enterprise Value (EV) CY10 EV / Adj. EBITDA CY10 EV / OIBDA Buy 5% on a $1.2BN Valuation $1,200 $1,149

(4)

13.6x 12.9x CY11 EV / Adj. EBITDA CY11 EV / OIBDA Buy 20% at 13X 2011 OIBDA $1,342 $1,285

(5)

13.1x 12.5x

(1)