confidential draft embassy row discussion document december 17, 2007
DESCRIPTION
2 Earn-out Target Estimates Notes: (1)Davies’ own calendar year forecast through Calendar 2011; grown 15% per year after; converted to fiscal years ending March 31 (2)Assumes syndication starting in FY09 with 195 episodes sold in all domestic markets and growing annual fees; formatting starting in FY09 with 40 episodes sold in 15 markets at $5K per market FY09FY10FY11FY12FY13 Davies Targets (Fiscalized) (1) $5.5$6.8$8.1$9.2$10.5 Power of 10: Format and First Run (2) Total$6.4$11.1$15.4$20.1$26.7 Earn-out TargetN/A$10.0$12.0$15.0$20.0TRANSCRIPT
Confidential Draft
Embassy Row Discussion Document
December 17, 2007
2
Embassy Row’s Role and Organization within SPT
• The business will be managed as an independent unit within SPT– Dedicated P&L for all Embassy Row activities, including existing ER shows
(like Power of 10) and newly developed shows– Managed by Michael Davies– Embassy Row staff would move to SPT as full-time employees
• New formats will be based on SPE library product, new U.S.-based development, and acquired international formats
• ER programs will be syndicated domestically and formatted globally
• To facilitate increased development, acquisitions, and international format sales, 9 additional people will be hired (plus assistants)
– 3 to sell international formats – 3 to acquire international formats for domestic development– 3 to develop internally
3
Earn-out Target Estimates
Notes:(1) Davies’ own calendar year forecast through Calendar 2011; grown 15% per year
after; converted to fiscal years ending March 31(2) Assumes syndication starting in FY09 with 195 episodes sold in all domestic
markets and growing annual fees; formatting starting in FY09 with 40 episodes sold in 15 markets at $5K per market
FY09 FY10 FY11 FY12 FY13Davies Targets (Fiscalized) (1) $5.5 $6.8 $8.1 $9.2 $10.5Power of 10: Format and First Run(2) 0.9 4.3 7.3 10.9 16.2
Total $6.4 $11.1 $15.4 $20.1 $26.7
Earn-out Target N/A $10.0 $12.0 $15.0 $20.0
4
ER Fiscal Year Projections
75% 25%
In order to fiscalize the calendar year figures for a year ending March 31st, SPT takes 9 months of the previous calendar year (75%) and 3 months of the current calendar year (25%)
Figures Provided Grown at 15%CY08 CY09 CY10 CY11 CY12 CY13
Davies Targets (Calendar Year) $5.2 $6.5 $7.9 $8.8 $10.2 $11.7
FY09 FY10 FY11 FY12 FY13Davies Targets (Fiscalized Year Ending Mar 31) $5.5 $6.8 $8.1 $9.2 $10.5
5
Power of 10 -- Format and First Run Profits
75% 25%
($in 000)CY09 CY10 CY11 CY12 CY13
First RunAssumptionsEpisodes 195 195 195 195 195
License Fee/ep $67 $73 $93 $133 $147 annual growth 10% 27% 43% 10% implied weekly fee (ep fee x 195 eps / 52 wks) $250 $275 $350 $500 $550
Ad Revenue/ep $65 $65 $65 $65 $65
Production Cost/ep $120 $120 $126 $132 $139 annual growth (1) 0.0% 5.0% 5.0% 5.0% implied weekly cost (ep cost x 195 eps / 39 strip wks) $600 $600 $630 $662 $695
Revenue License Fee $13,007 $14,300 $18,200 $26,000 $28,600 Ad Revenue $12,675 $12,675 $12,675 $12,675 $12,675Total Revenue $25,682 $26,975 $30,875 $38,675 $41,275
Costs Pilot and start-up costs $1,800 Production Cost $23,400 $23,400 $24,570 $25,799 $27,088Total Costs $25,200 $23,400 $24,570 $25,799 $27,088
Total First Run Profit/Loss $482 $3,575 $6,305 $12,877 $14,187
FormatEpisodes 40 40 40 40 40Markets Sold 15 15 15 15 15License Fee per Market/ep $5 $5 $5 $5 $5Total Format Profit/Loss $3,000 $3,000 $3,000 $3,000 $3,000
Format and First Run of Pof10 (Calendar) $3,482 $6,575 $9,305 $15,877 $17,187
FY09 FY10 FY11 FY12 FY13Format and First Run of Pof10 (Fiscal) $870 $4,255 $7,258 $10,948 $16,204
Note: (1) CY09 to CY10 flat; increased physical production costs offset by decreased marketing
6
Ad Revenue Assumptions
Assumptions:1040 :30 spots calculated as 4 spots per episode, 5 episodes a week and 52 weeks a year1300 :10 spots calculated as 5 spots per episode, 5 episodes a week and 52 weeks a yearHALF HOUR STRIP M-F (195 episodes)BARTER SPLIT 5.0 MIN LOCAL/ 2.0 MIN NAT90% US CLEARANCE50% Early Fringe / 50% Daytime
$12,825,287Net Revenue
$65KValue Per Episode
:30 Ads :10 Ads
National Rating 2.5 Revenue per Ad (20% of :30) $2,321
% of HH 2.5% Ad Units 1300
Households (MM) 115.5 Total Revenue $3,017,715
Viewers per HH (W25-54) 0.26 Agency Commision (15%) $452,657
W25-54 Viewing ('000) 751 Total Net Revenue $2,565,057
TOTAL W25-54 CPM $15.46
Revenue per Ad $11,607
Ad Units 1040
Total Revenue $12,070,859
Agency Commision (15%) $1,810,629
Total Net Revenue $10,260,230
7
APPENDIX
8
ER Calendar Year Projections (Per Michael Davies)
Embassy Row 2007 2008 2009 2010 2011Production RevenueEntertainment $20,756,574 $33,855,940 $39,897,074 $47,841,235 $48,691,161Interactive $2,445,000 $3,697,843 $5,300,157 $6,456,163 $7,536,010Sports $455,858 $3,700,000 $5,860,000 $7,506,400 $11,957,536Factual $4,348,000 $6,870,000 $11,948,000 $12,638,000 $14,748,000Film $600,000 $1,200,000 $1,200,000 $1,200,000 $600,000
Gross Revenue $28,605,432 $49,323,783 $64,205,231 $75,641,798 $83,532,707
Production ExpensesEntertainment $16,670,767 $27,959,861 $33,627,544 $40,532,624 $41,224,931Interactive $953,913 $2,035,649 $3,278,935 $4,412,112 $5,209,777Sports $322,418 $3,190,000 $5,027,800 $6,380,440 $10,163,906Factual $4,348,000 $6,705,000 $11,448,590 $11,715,650 $13,696,650Film $600,000 $1,200,000 $1,200,000 $1,200,000 $600,000
Net Revenue $5,710,334 $8,233,273 $9,622,362 $11,400,972 $12,637,443
Overhead Expenses $2,307,531 $3,030,981 $3,155,137 $3,550,819 $3,798,688
Annual Net Profit $3,402,803 $5,202,292 $6,467,225 $7,850,153 $8,838,756