“Sony Corporate Strategy 2002” Financial Analysts Meeting

New York, NY - May 9, 2002

Thank you Howard.  Close to a year ago we began a structural reform initiative called Project USA. Its mission is to enhance the operating efficiency and financial performance of our U.S.-based Electronics, Music, and Pictures divisions. I would like to take a few moments to review the entertainment related aspects of Project USA.

Under the USA umbrella, we undertook a number of vertical initiatives for each operating division. These have already produced significant operational streamlining and financial performance improvements.

At SPE (Sony Pictures Entertainment), the initiative was known as the “21st Century Project.” It resulted in a restructuring of our television operations in which we refocused on our core programming competencies such as made-for-cable, syndicated fare, and international production. We also expanded our film and television digitization efforts and engineered a meaningful reduction in our corporate overhead. Overall, the 21st Century project, the first vertical initiative of Project USA, will result in annualized savings up to $100 million per year at Sony Pictures.

As mentioned earlier, Sony Music is undergoing dramatic changes in order to reorganize its operations to better meet industry challenges.  The company has made significant strides in manufacturing consolidation, overhead reduction and clustering of international offices. The build-out of a state-of-the-art digital asset management system infrastructure has already begun. This is critical to the successful deployment of digital music services. Tommy (Mottola, Chariman and CEO, Sony Music Entertainment) and Bob (Bowlin, Chairman, Sony Music International) will talk more about this later. The combined financial effect of these initiatives at SME (Sony Music Entertainment) will result in annualized savings up to $150 million.

Along with these vertical initiatives, under the Project USA umbrella, we also have begun a set of horizontal initiatives across the operating companies that will result in the creation of several shared platforms. Each of our divisions will share in the scale economics for all common services. These platforms include:

 - Logistics: Our logistics platform will enable integrated supply chain management. As Howard (Stringer, Chairman and CEO, Sony Corporation of America) mentioned earlier, all our operating divisions are working towards greater consolidation of manufacturing, distribution, and transportation operations.

 - Purchasing: Our purchasing platform will increase our buying power through joint purchasing contracts. This initiative has already resulted in significant savings in expenses related to travel, part-time personnel, usage of external consultants and legal fees.

 - Media-Buying: With respect to media buying, this past year we consolidated our media planning and spending dollars of our U.S. and Canadian operations for our Electronics, Music, and Pictures divisions with Universal-McCann. We anticipate savings of over $20 million in this current fiscal year alone.

 - IT Infrastructure: And finally, we are in the midst of consolidating our IT infrastructure (including Data centers, voice and data networks, and Web infrastructure) to increase the operating efficiency and utilization of our systems.

Project USA will be largely completed by the end of this fiscal year, both the vertical initiatives and the creation of these shared service platforms. The project is on course to lead us to meaningful margin enhancement and increased operating efficiencies across our divisions. Overall, we anticipate over $400 million of annualized savings from the overall project including the initiatives at Electronics. We began generating savings this past fiscal year and it will take three years for the full impact to kick in.

As Howard mentioned earlier, our entertainment operations were quite profitable over the past year. We closed the fiscal year ending March 2002 with over $10 billion of revenues and nearly $1 billion of adjusted EBITDA for Sony's worldwide entertainment operations. Sony Pictures was up 174% in terms of adjusted EBITDA as compared to the prior year spurred by increased global penetration of DVD players and the harvesting of successful films such as “Vertical Limit” and “Crouching Tiger, Hidden Dragon.” At Sony Music there was a decrease of 14% in adjusted EBITDA from the prior year due to the contraction of the global music industry and an increase in digital piracy. Adjusted EBITDA simply excludes restructuring charges and inter-company allocations.

We expect continued growth in adjusted EBITDA during this fiscal year. I am happy to note that our forecast this expectation do not include our book gain of over $500 Million which we will enjoy from the sale of our stake in Telemundo to GE for approximately $700 million. Additionally, this does not include any revised financial expectations reflecting the superb opening of Spider-Man.

That does it for our overview of Sony Broadband Entertainment.