PRIVILEGED AND CONFIDENTIAL ATTORNEY CLIENT WORK PRODUCT Operating Model September 2010 WORK IN...
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PRIVILEGED AND CONFIDENTIAL ATTORNEY CLIENT WORK PRODUCT Operating Model September 2010 WORK IN PROGRESS
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Transcript of PRIVILEGED AND CONFIDENTIAL ATTORNEY CLIENT WORK PRODUCT Operating Model September 2010 WORK IN...
PRIVILEGED AND CONFIDENTIALATTORNEY CLIENT WORK PRODUCT
Operating Model
September 2010
WORK IN PROGRESS
page 2
Executive Summary
• Options for handling complexities of Physical New Release– #1 Greater studio control over terms and customer relationships; less
cost savings– #2 Less studio control; greater cost savings
Confirm assumptions that:
Key Areas to Discuss
• Digital is not handled by Newco
• To minimize start-up/system investment for Newco, each studio independently selects a 3rd party distributor to handle and secure cost savings in distribution, invoicing, and cash collections
• Newco is a 50 / 50 J.V. (not a profitable entity) that includes headcount and systems for sales, marketing, ops, finance/accounting for the functions it performs (primarily Sales and Marketing, rather than distribution or vendor of record)
– Overhead costs split 50/50– All product costs passed as actuals
• Performance Metrics will be developed for Newco– Financial: Performance vs Budget– Operational: Returns, Freight, Inventory Turns, Merchandising– Incentive plan based on performance vs Budget’s (Financial and
Operational)
Goal
• The over-arching goal is to merge as much of our Home Entertainment businesses as possible to extract as much cost as possible and create greater efficiencies
Source: 1 Screen Digest, August 2010. Digital includes “VOD/PPV” (total on-demand movie consumer revenues) and “On-line” (transactional movie retail and rental download/subscription consumer revenues)2 Nielsen Home Scan, title-level analysis; box office adjusted for inflation and 3D admissions
page 3
PRIVILEGED AND CONFIDENTIALATTORNEY CLIENT WORK PRODUCT
WORK IN PROGRESS
New Release Physical Considerations
Class of Trade Possible Models Complexity of Deal
Brick-and-mortar Retail Wholesale Low
Brick-and-mortar Rentail Rev share vs. Wholesale MediumOutput vs. Non-output
Subscription Rev share HighWindow vs. non-WindowOutput vs. Non-output
Kiosk Copy Depth vs. Wholesale HighWindow vs. non-WindowOutput vs. Non-output
page 4
PRIVILEGED AND CONFIDENTIALATTORNEY CLIENT WORK PRODUCT
WORK IN PROGRESSNew Release Physical Considerations:Option #1: Less Control / Greater Cost Savings
Pro’s1) Maximizes Savings Potential2) Maintains control of strategic elements of a products
life cycle (windows, pricing, rev share/subsript)3) Maintain creative control over a Title (Pkg, Value-Add)4) Allows SPHE to set marketing direction/strategy
without having to execute5) Eliminates all Operational aspects of distribution
Class of Trade Each Studio Independently Newco
Retail
Brick-and-mortar Rentail
Subscription
Kiosk
Each studio partner separately negotiates agreement with customer for their respective new release titles.
Street dates follow Retail
sets street date; establishes deemed wholesale, marketing budgets, sku strategy - by title. Additionally establishes annual incentive programs, by customer if applic.
Executes: Sales, Marketing (e.g., national and customer marketing (co-op), secure shelf space, etc.), mfg and distribution
Executes: Sales (negotiates matrix buys within a tolerance per contract), Marketing (national and customer marketing (co-op),Trade Spend etc.), Mfg and Distribution
Execute contract within parameters.
Con’s1) Removes the Launch responsibilities of the Title
in the market. This is viewed as the most critical element in the products life cycle.
Proposed Operating Model: Option #1
• Operating Parameters by Function:
page 5
PRIVILEGED AND CONFIDENTIALATTORNEY CLIENT WORK PRODUCT
WORK IN PROGRESS
New Release* CatalogPhysical Digital Physical Digital
Sales Newco Studio Newco Studio
Marketing Newco Studio Newco Studio
Operations Newco N/A Newco N/A
Finance Newco/Stuido
Studio Newco Studio
Accounting Studio Newco Studio
H.R./Legal/I.T. All Studio Newco Studio
Vendor of Record Distrib Part. Distrib Part. Distrib Part. Distrib Part. ERP D.P. D.P. D.P. D.P. OTC D.P. D.P. D.P. D.P. Credit/Collections D.P. D.P. D.P. D.P.
Supply Chain Distrib Part. Studio Distrib Part. Studio Distrib. D.P. n/a D.P. n/a Transportation D.P. n/a D.P. n/a Warehousing D.P. n/a D.P. n/a Returns D.P. n/a D.P. n/a
*Individual studio’s negotiate specific contract terms (s/t or rental, windows, discount programs, etc.) and communicate sensitive information to the DADC directly
Newco executes all sales, marketing and operations functions relative to the launch of the title
Option #1: New Release
page 6
PRIVILEGED AND CONFIDENTIALATTORNEY CLIENT WORK PRODUCT
WORK IN PROGRESS
*Studio Partner #1 *Studio Partner #2
Newco
Customers
Customers
Customers
Customers
Customers
Third Party Distributor(s)(outside Newco, services and distributor
independently determined/negotiated by studio but potential for synergies)
Invoicing, Cash Collections, Potential Consolidated Distribution, VMI
New Release: Individual studio’s negotiate specific contract terms (s/t or rental, windows, discount programs, etc.)
Individual Studio’s communicate sensitive information to the DADC directly
Newco executes all sales, marketing and operations functions relative to the launch of the title
New
co
ma
nag
es
10
0%
of
the
tra
ns
itio
na
l re
sp
on
sib
ilit
ies
of
Ne
w R
ele
as
e
*Studio Partner’s continue to own the product development process (Key Art, Programming, Packaging, Value-Add, etc.). Components are delivered for manufacturing.
Option #1: Catalog
page 7
PRIVILEGED AND CONFIDENTIALATTORNEY CLIENT WORK PRODUCT
WORK IN PROGRESS
Studio Partner #1
Studio Partner #2
Newco
Customers
Customers
Customers
Customers
Customers
Third Party Distributor(s)(outside Newco, services and distributor
independently determined/negotiated by studio but potential for synergies)
Invoicing, Cash Collections, Potential Consolidated Distribution, VMI
Catalog: Individual studio’s establish guidelines for Newco regarding catalog management: reprices, annual incentive plans, resets, auctions, integrated promotional campaigns, etc.
Newco manages 100% of the transitional responsibilities of Catalog
page 8
PRIVILEGED AND CONFIDENTIALATTORNEY CLIENT WORK PRODUCT
WORK IN PROGRESSNew Release Physical Considerations:Option 2: Greater Independent Control / Less Cost Savings
Class of Trade Each Studio Independently Newco
Retail
Brick-and-mortar Rentail
Subscription
Kiosk
Each studio partner separately handles Sales, Marketing, Operations, Finance, Accounting, H.R., Legal, I.T., for their respective new release titles.
No responsibilities for new release titles.
Cost savings exist in relation to reduction of catalog sales force and associated support plus potential for supply chain savings.
Pro’s1) Maintains control of strategic elements of a products
life cycle (windows, pricing, rev share/subsript)2) Maintain creative control over a Title (Pkg, Value-Add)3) Allows SPHE to set marketing direction/strategy
without having to execute4) Eliminates all Operational aspects of distribution
Con’s1) Reduces savings realized
Proposed Operating Model: Option #2
• Operating Parameters by Function:
page 9
PRIVILEGED AND CONFIDENTIALATTORNEY CLIENT WORK PRODUCT
WORK IN PROGRESS
New Release CatalogPhysical Digital Physical Digital
Sales Studio Studio Newco Studio
Marketing Studio Studio Newco Studio
Operations Studio Studio Newco Studio
Finance Studio Studio Newco Studio
Accounting Studio Studio Newco Studio
H.R./Legal/I.T. Studio Studio Newco StudioXVendor of Record Distrib Part. Distrib Part. Distrib Part. Distrib Part. ERP D.P. D.P. D.P. D.P. OTC D.P. D.P. D.P. D.P. Credit/Collections D.P. D.P. D.P. D.P.
Supply Chain Distrib Part. Studio Distrib Part. Studio Distrib. D.P. n/a D.P. n/a Transportation D.P. n/a D.P. n/a Warehousing D.P. n/a D.P. n/a Returns D.P. n/a D.P. n/a
Option #2: New Release
page 10
PRIVILEGED AND CONFIDENTIALATTORNEY CLIENT WORK PRODUCT
WORK IN PROGRESS
Studio Partner #1
Studio Partner #2
Newco
Customers
Customers
Customers
Customers
Customers
Third Party Distributor(s)(outside Newco, services and distributor
independently determined/negotiated by studio but potential for synergies)
Returns Processing
Returns
New
Re
lea
se
(Ph
ys
ica
l an
d D
igit
al)
Cat
alo
g -
dig
ita
lC
ata
log
(P
hys
ica
l On
ly)
Pri
cin
g, T
erm
s &
Co
nd
itio
ns
Sales and Marketing
Invoicing, Cash Collections, Potential Consolidated Distribution, VMI
Potential Other Studio’s
*Studio Partner’s continue to own the product development process (Key Art, Programming, Packaging, Value-Add, etc.). Components are delivered for manufacturing.
Option #2: Catalog
page 11
PRIVILEGED AND CONFIDENTIALATTORNEY CLIENT WORK PRODUCT
WORK IN PROGRESS
Studio Partner #1
Studio Partner #2
Newco
Customers
Customers
Customers
Customers
Customers
Third Party Distributor(s)(outside Newco, services and distributor
independently determined/negotiated by studio but potential for synergies)
Invoicing, Cash Collections, Potential Consolidated Distribution, VMI
Catalog: Individual studio’s establish guidelines for Newco regarding catalog management: reprices, annual incentive plans, resets, auctions, integrated promotional campaigns, etc.
Newco manages 100% of the transitional responsibilities of Catalog
