Media Producer



BUSINESS PLAN

SHALIMAR FILMS, LTD.


805 Sugarbush Ln.
Pittsburgh, PA 30215

March 1995


This plan for a television and entertainment programming company demonstrates how partnerships with others in the field can help ensure success in this rapidly moving industry. Coverage includes financing, products, marketing, facilities, management, and other elements of a well-developed plan.


EXECUTIVE SUMMARY

Overview

In the rapidly expanding market for home entertainment, quality programming is a valuable commodity. Shalimar Films, Ltd. was formed to produce a broad range of proprietary new products for the Television and Home Entertainment industry. The company is now applying their resources to building a successful television production enterprise based in Pennsylvania.

The General Partners of Shalimar Films have earned a solid reputation in the film and video production industry. Major distributors and program buyers, including but not limited to: Capital Cities/ABC, Time-Life Video, Wood Knapp & Company, QVC, Columbia House, Unapix Entertainment, Doubleday, Book of the Month Club, Saturday Matinee, Library Video, Rivertown Trading, Pentrex Publishing, Baker & Taylor, Ingram, Time Warner, Borders Books, The Learning Smith, Trans world, Music, ATA Trading Corp., and PB S Home Video are marketing and distributing programs produced by Shalimar Films.

Shalimar Films has consistently received favorable reviews for their products from national, regional, and local media such as Entertainment Weekly, Video Business, Video Librarian, Billboard Magazine, The Dolans'—Straight Talk on Your Money, Inventor's Digest, Entrepreneur Magazine, Knight Ridder Newspaper Syndicate, and Newsday.

Programs produced by Shalimar Films have also been featured on national television programs such as The Joan Rivers Show and on Fox Television Network's national cable network, FX.

With its highly qualified management team, marketing resources, and progressive business relationships, Shalimar Films is well-positioned to take full advantage of the industry's phenomenal on-going growth. In order to assure the success of their products Shalimar Films has prudently enlisted the resources and capabilities of major corporations, secured by contractual commitments, to market and distribute their programs to the worldwide marketplace.

The proven track record of the industry, combined with its current evolution and strong positive forecast for future growth, offers significant potential for highly rewarding investment opportunities. The demonstrated expertise and entrepreneurial temperament of Shalimar Films provides an attractive opportunity for investors to profit from a truly innovative emerging growth company with tremendous potential.

Concept

Shalimar Films recently signed several pre-sale distribution and marketing contracts that guarantee distribution of their original programs to Home Entertainment and Television markets worldwide. These contracts have been signed with Capital Cities/ABC, Pentrex Publishing, Unapix Entertainment, Time-Life Video, and ATA Trading Corporation. The programs are based on a variety of popular, interesting, and entertaining topics. Each program is designed to capitalize on prevailing trends that have demonstrated commercial success within the industry.

Negotiations are also in progress with Mega Books for a series of illustrated books based on our original children's television programming. These book versions will feature an audio cassette with narration, sound EFX, and original music in order to provide children with a more unique, entertaining, and interactive product that will enhance their learning experience and enjoyment.

A diverse assortment of original television and home video programs will be developed and produced by Shalimar films in four (4) individual phases. Each phase will result in the completion and delivery of several commercially viable, revenue producing products for worldwide distribution. The diversity and quantity of programs produced in each phase will dramatically reduce risk typically associated with dependency on the success of just one program or genre.

Shalimar Films plans to create a high yield "catalog of products" (consisting of a collection of successful "hit" programs proven to generate high revenues) by combining the most commercially successful programs from earlier phases with the development and production of commercially viable new products in each successive phase. Over a period of time, this "catalog" will primarily consist of the most highly profitable and successful products produced by the company. This approach will offer incredible long term profit potential to equity investors and partners.

Production

The entire project, representative of all phases, consists of approximately ninety (90) original programs to be developed and completed over a period of approximately six (6) years.

The first phase of the project requires production of approximately twelve (12) original programs over a period of approximately twelve (12) months at a total cost of $ 800,000. The second phase of the project requires production of approximately twenty (20) programs over a period of eighteen (18) months at a cost of $ 1,700,000. The third phase of the project requires production of approximately twenty-six (26) programs over a period of twenty-four (24) months at a cost of $2,225,000. The final phase of the project requires production of approximately thirty-two (32) programs over a period of thirty (30) months at a cost of $3,500,000.

The company anticipates continued and successful growth well beyond these initial phases. New programs will be funded by "factoring" credit lines, income, and existing capital against distribution contracts for short periods of time. This will allow the company to develop new programming and ancillary products well into the future by continuously cycling cash flow and lines of credit.

Highly successful programs will be produced as an on-going television or video series with advance funding provided by major distributors. Products developed in this manner will serve to provide Shalimar Films with properties (programs) that substantially increase the company's cash value while providing a significant source of additional revenue. The company will also continue to develop new programming in order to provide steady and equity growth in their "catalog."

Objectives

Shalimar Films plans to produce interesting, entertaining, and educational programs on a variety of well-researched topics proven to be commercially viable in the industry. The company only produces those programs guaranteed distribution to a widespread audience through pre-sale contracts with Major Distributors. By spreading the product line across several different worldwide markets, and releasing them through multiple windows of distribution, the Company will effectively minimize risk and increase the potential success for each series of programs they produce. Approximately forty percent (40%) of the programs produced by Shalimar Films are targeted towards the children's television marketplace. Another forty percent (40%) focus on popular subject matter as is targeted for distribution via Broadcast Television and Cable. The remaining twenty percent (20%) of the Company's programming is a mix of special interest and home video programming targeted for distribution via direct to consumer markets as well as the retail and catalog trade.

The management team of Shalimar Films plans to invest a substantial share of the actual cost for creative services as well as a smaller share of the cost for product development and production through reduced fees for creative services, professional services, and production services. The Company has also arranged for their distributors and suppliers to be solely responsible for specific costs as well. In most cases, these costs will include manufacturing, duplication, packaging, warehousing, fulfillment, public relations, advertising, promotion, marketing and distribution of programs developed, produced, and/or sourced by Shalimar Films.

Management

The management team consists of the General Partners, a Board of Directors and a Board of Advisors with over seventy-five (75) years of combined experience in the industry. This experience consists of:

Television Program Development
Television Program Distribution
Television Facility Design
Creative Artist Management
Business Management & Finance
Entertainment Law & Contracts
Direct to Consumer Sales & Marketing
Television Program Production
Television Facility Management
Legal & Business Management
Business Development & Administration
Contract Negotiations & Distribution
Home Entertainment Video Sales & Distribution
Retail, & Catalog Distribution

Marketing

Shalimar Films has a unique relationship with major distributors that provides an in-depth view of the market that informs our management decisions and focuses our creativity. By utilizing the distributors' extensive knowledge and resources, Shalimar Films is able to produce programs that meet consumer demands and have the pre-approved support of a major distribution network.

The fundamental thrust of Shalimar Film's marketing strategy consists of producing only those programs that have already acquired pre-sale agreements, advance payments, and a commitment from distributors to utilize their resources for manufacturing, promotion, marketing and distribution. The reputation and proven ability of Shalimar Films and their management team plays a key role in securing these pre-sale distribution agreements from major distributors.

Shalimar Films focuses on marketing their products through the largest and best suited distributors in the industry. These distributors not only have the advantage of substantial capital resources for funding promotion and advertising campaigns, but also have the ability to obtain better positioning and shelf space in catalogs and retail outlets.

The original programs produced by Shalimar Films will be distributed through, but not limited to, Home Video, Retail Stores, Mass Merchants, Educational Institutions, Libraries, Catalogs, Direct to Consumer Sales, Direct Mail, Broadcast/Cable Television, Interactive Television, New Media Technologies, Laser Disc, and CD-ROM.

Distribution

Shalimar Films will only produce programs that have received a solid pre-sale commitment through a signed licensing or distribution contract with a major label, studio, or distributor.

A licensing contract commits the distributor to the marketing, distribution and sale of a specific series of programs being produced by the Company. A typical licensing contract warranties that the distributor will provide and pay for all packaging, duplication, warehousing, marketing, advertising, sales, shipping, collection, returns and all other costs related to the marketing, distribution, and sale of programs produced by Shalimar Films. Under this licensing contract, a percentage of all gross sales, referred to as a royalty payment, is earned by the Company.

A licensing contract offers several advantages to the smaller independent producer, especially when a program is targeted to a large demographic audience or has widespread audience appeal. A major distributor has the ability to roll out a program on a national basis and feed the pipeline far more effectively and quickly than an independent producer. They also have the ability to promote, on a very large scale, consumer and trade awareness for the program. Additionally, certain classes of trade such as Rack Jobbers, Distribution Outlets, and larger Retailers are better served by a major label, studio or distributor. When a program is projected to have major potential and widespread appeal, a licensing contract is the preferred method of distribution used by the Company.

In some cases, when it makes economic sense, Shalimar Films will sign a distribution agreement rather than a licensing contract. A distribution agreement tends to yield a much higher profit margin for the Company. The downside is that these agreements do not always provide the same level of marketing and sales support as a licensing contract. However this is not always the case and in some situations this approach is more viable than a licensing contract. Instances where this theory holds true is with programming sold through only one or two distributors that represent 75% plus of the entire marketplace for that specific genre of programming.

Another case where distribution agreements are economically viable is when a program or genre is targeted to a specific class of trade. Certain accounts such as Catalogs, Direct to Consumer Marketing companies and certain Retailers are logical clients for direct sales by the Company. This approach requires a small but highly experienced inside sales staff and a promotional budget to market the programming effectively. Shalimar Films will be hiring such a staff to sell certain products on a distribution basis to these accounts. Under a distribution agreement Shalimar Films sells finished goods to the distributor earning an average profit of 100% to 300% per unit.

For example, as part of a licensing deal with Sunshine Videos, Inc., Shalimar Films will produce several children's television programs scheduled for release and distribution in 1995. The first series of children's programs being produced are entitled: "Kids Pick-Up and Go—Video Travel for Children." These programs are pre-sold for distribution through Sunshine Videos, Inc. in the United States and Canada and Atlantis Exporting Corp. for overseas markets. This series of programs will generate royalty income for the company under an existing licensing contract with these distributors.

Sunshine Videos, Inc. is a major player in the marketplace with considerable financial resources for marketing, promotion and advertising of television and video programs. The "Kids Pick-Up and Go—Video Travel for Children" is a timely original concept that is well positioned for significant success. Production is already underway and most of the preparation and pre-production work has already been completed by the Company.

In another example, as part of a distribution deal with Pentrex Publishing, Shalimar Films produce several "Train Trax" video programs also scheduled for release and worldwide distribution in 1995. Pentrex Publishing dominates the "Train Trax" marketplace and is by far the largest distributor of Railroad Videos in the world. These ancillary programs are being produced in an exceptionally cost efficient manner. By exploiting the same footage shot during production of the first two (2) television episodes of "Kids Pick-Up and Go—Exploring Trains," the cost of completion and delivery of these "Train Trax" programs are dramatically reduced thereby substantially increasing profitability of this product line for the Company.

Since we are manufacturing and delivering the completed "Train Trax" video programs to Pentrex Publishing under a direct marketing distribution agreement, the profit margin per video is significantly higher than with a licensing deal. The Company is selling these "Train Trax" video programs to Pentrex Publishing for $8.00 per unit. Since manufacturing costs are less than $2.00 per unit, the Company will realize a profit of over $6.00 for each unit sold.

In addition, with many of the programs produced by the Company, ancillary products will be licensed or distributed through deals with book publishers, music & record companies, toy manufacturers, clothing manufacturers, and major corporations looking for a promotional tie-in with the television/video series. These contracts will provide additional income and increased consumer awareness through cross promotion and advertising.

For example, Shalimar Films is currently in negotiation with Mega Books for an illustrated children's book based on "The Kids Pick-Up and Go Series" concept. This children's book series will include an audio cassette featuring narration, sound effects, and music from the television program to make the product more unique, fun, interactive, and profitable. Obviously, sales of "The Kids Pick-Up and Go Series" programs will benefit from the cross promotion of ancillary products that are being advertised and distributed in the marketplace.

Additionally, with the funding from this offering, the Company plans to produce a variety of programs for major distributors such as Time-Life Video, Inc., Time Warner, A-Vision, Unapix Entertainment, Inc., Guthy Renker Corporation, National Syndication's, Inc. Media Syndication's Inc. and Mega Books.

A substantial commitment of resources and a large financial investment are required by the distributor to manufacture, market, and distribute a new series of programs. Consequently, major distributors are not inclined to sign these types of distribution contracts without good reason. Distributors must have a firm belief that the Producer is reputable, and that the product is one that will meet with a reasonably large degree of success before signing a pre-sale contract.

Shalimar Films, through their reputation, expertise, and creativity, meets the requirements of Major Distributors and have already successfully secured worldwide distribution contracts for several of their original television and home video programs.

Products/Phase 1

Shalimar Films will be producing several finished products that are pre-sold to major distributors. However, in order to protect the confidentiality of the company, the list of programs is not included in this plan.

Finance

To accomplish our goals, we have developed a comprehensive plan to intensify and accelerate the creative development, production, marketing and distribution of these programs. To begin the first phase of development, production, and delivery of our pre-sold programs to distributors, Shalimar Films requires immediate funding in the amount of $800,000.

With realistic projections based on average industry performance, sales income would be generated within the first nine (9) months from capitalization of the company. The estimated average total return on investment for a typical program would range from a low of four-to-one to a high of twelve-to-one. Equity investors and partners will also benefit from the value being compounded in the "mutual fund" and the long term income from a highly successful or "hit" program. Return of the original capital investment should take a maximum of eighteen (18) months to twenty-four (24) months from the date of release for each program on an average case.

Facilities

The management and directors of Shalimar Films have extensive practical experience in the production, marketing and distribution of television programs. Over the past 15 years, the Company's management has maintained the practice of utilizing outside facilities for the technical production of their programs. Technical production, for example, would include Principal Photography, Sound Recording, Computer Graphics, Editing, Audio Mixing and Post Production. In addition, a majority of production management services and creative services are being provided by the Company's management, directors, and in-house staff. Production management and creative services include program development, pre-production, production planning, project supervision, sales, marketing, public relations, legal and business affairs.

By continuing this practice, Shalimar Films will be able to maintain a lower overhead while producing finished programs of the highest quality and commercial value. Shalimar Films will use outside services, freelance staff, and outside equipment rentals to reduce the Company's overheads, staffing, and office space requirements. During the creative development stages, very little production staff is required. By bringing in outside production companies and facilities when needed, a more cost efficient method of operation is realized.

The Company's objective is to focus on a finished program's overall quality of presentation, information content, style, and format with commercial viability and the targeted audience being the principal determining factors. Elements of quality and style include, but are not limited to, nature of content and information, production values, and presentation format.

Most important of all, the Company is committed to delivering commercially viable programming that meets the requirements of their distributors. Utilizing in-house staff for management, creative development, and production supervision, the Company is better able to control the finished quality of the programming they produce.

Shalimar Films currently manages their operation with a full-time and part-time staff of five (5) people. The Company currently operates out of a 1000 square foot office located in Pittsburgh, PA. The Company directors' also maintain smaller offices located in Harrisburg and Philadelphia, PA. An independent sales office is located in New Mexico.

With the realization of financing, the Company plans to move their operations into a larger office space in the PA area. The Company will increase staff to a total of twelve (12) people, including management and directors, and will consolidate their operations into approximately 3,400 to 3,800 square feet of office space. In addition, an off-line editing system will be purchased and utilized in-house to further improve cost control and finished program quality. Off-line editing is considered to be a key factor in reducing on-line editing costs at outside facilities.

Overall, the experience and expertise of the Company's management team and their approach to structuring their organization, provides for a more streamlined, efficient, and effective operation. The practical experience of management provides for tighter controls over the cost of production and also results in a well planned strategy that is ultimately designed to be more lucrative and profitable.

Conclusion

The management team of Shalimar Films enjoys an established track-record in the entertainment industry with past involvement in numerous programs for the Television and Home Entertainment markets, as well as music videos.

In addition, Gerald M. Callens, one of the General Partners in Shalimar Films, was announced as the First Place Winner in Computing Industry Magazine's Best Business Awards Contest. The article on Shalimar Films is part of a feature cover story in the magazine's May 1995 issue.

The experience and commitment of Shalimar Films, combined with the unique working relationships they have established with distributors, and their focus on developing only those programs with strong commercial potential, make this venture a solid opportunity for investors to become part of a winning team. Our distributor's expressions of satisfaction and encouragement are numerous, and we intend to expand our efforts upon funding. This is a major growth industry filled with exciting opportunities. Shalimar Films invites you to join them in their efforts and the rewards that they bring.

THE GENERAL PARTNERS

Gerald M. Callens - President

Gerald M. Callens - (Producer/Director/Writer) - has over 18 years of professional experience in the film and television industry. His expertise includes television program development, producing, writing, and directing. He has also gained valuable experience in advertising, public relations, marketing, and sales. Additionally, Mr. Callens has several engineering and technical achievements to his credit including the design and construction of several television studios, remote television broadcast units, and high end commercial audio/video installations utilizing unique and innovative original designs.

René S. Porter - Vice President - Business & Legal Affairs

René S. Porter - (Business & Legal Affairs) - A former musician and artist, Mr. Porter is an entertainment attorney who established his private practice in 1987 to represent creative people and companies involved in entertainment, sports and the fine arts. His practice is the culmination of a varied career in law, writing, public speaking, academia, the arts, and politics.

Sylvia A. Cole - Vice President - Program Development & Acquisitions

Sylvia A. Cole - (Director/Writer) has 10 years of experience in the film and television industry. Her expertise includes television program development, screen writing, directing marketing and advertising. Additionally, Ms. Cole has had a number of stories and articles published in national and regional magazines.

Overview

Callens, Porter, and Cole bring over 40 years of industry experience to the firm. The company also taps the skills of a large network of experts. These media specialists serve the needs of a varied client base. The General Partners of Shalimar Films have built a solid reputation and are well known for their impressive record and professional results. More recently, the Pittsburgh video company has focused on providing original television programming and software video products for Broadcast/Cable Television, Home Video Cassette, Interactive Television, Laser Disc, and CD-ROM. Its innovative programs help meet consumer demands for high-impact, high quality material. Through their alliances, Shalimar Films brings more than seventy-five years of experience to the management team. This background draws from specialties in television program development, artist management, business affairs, accounting, entertainment law, marketing, and distribution. Shalimar Films specifically targets the home video and broadcast television markets. In this area, the company is producing programs from Depace Productions, JRD Development Corporation, Wood Knapp & Company, Time-Life Video, Pentrex Publishing, ATA Trading Corporation, and Capital Cities/ABC Video Publishing.

DIRECTORS AND ADVISORS

Peter Gomez - Director - Marketing & Sales

A 16-year veteran of the entertainment industry, Peter Gomez has spent the last ten years focused on the sales and marketing of prerecorded video cassettes, specifically concentrating on the Special-Interest programming segment. Peter is currently the Vice President, Consumer Products Division of one of the world's largest distributors of Television and Video programming. Peter holds a B.A. in Sociology from Long Island University. Peter brings us knowledge of the supply chain—from wholesale acquisitions through the distribution pipeline to the retail market. His experience in bringing programs to market is a source of essential information.

Margaret Powell - Advisor - Marketing & Sales

Currently the Manager, Music & Video Marketing for Doubleday Book and Music Clubs, Margaret Powell is an entertainment software Direct Marketing specialist. Her creditials include five previous years in the video industry. Prior to entering the field, Margaret worked in Advertising and Marketing. She is currently completing an M.B.A. at New York University and holds a B.S. in Journalism from West Virginia University. Margaret brings with her a deep-seated knowledge of the complex world of direct marketing and catalog sales, a resource of insight into the rapidly expanding mail order industry, and its relationship to entertainment software.

MARKET ANALYSIS

Market Environment

The entire telecommunications industry is exploding with new, highly advanced methods of television program distribution. CD-ROM, 3DO, CDI, Stragazer Systems, Full Service Networks, Interactive Cable, Multimedia, and On-Demand Television are joining a large and still growing cable and broadcast television base to create a home entertainment behemoth with an insatiable appetite for new, high-quality programming. Now, establishing an entity to produce this much-needed programming on modest budgets is a more attractive and viable proposition than ever before. Realizing the potential of this market, Shalimar Films has positioned itself to produce a variety of new programs in order to capitalize on this growing demand.

Customers

There are more than 92 million U.S. homes (98% of all homes) with television sets, about 65% of which have more than one set. It is estimated that more than 80% of these homes are also equipped with a VCR, and that more than 60% are linked with cable systems. The combined advertising revenues of broadcast and cable television exceeded $40 billion dollars in 1992. Conservative estimates suggest advertising revenues in the broadcast and cable television industry exceeding $50 billion in 1994.

Home video consumer spending (for purchase and rental of video programming) reached over $12 billion in 1993. Industry reports project a nationwide market for home video products to be approximately $13.5 billion by the end of 1994 and projections estimate an increase to almost $18 billion per year by 1997.

The average American home watches TV seven hours a day, according to Neilsen Media Research statistics for the 1991-1992 season. Add to this growing market the promise of new technologies and the demand for quality programming becomes practically unlimited.

Competition

With the rise of new and fiercely competitive windows of distribution, program buyers are hard pressed to find quality products that they require to fill increasing demand. There is plenty of room for growth and expansion in the industry. Since the majority of its products are proprietary, competition is not seen as a major obstacle to the development and success of Shalimar Films and the products it will produce.

The markets for our products are worldwide and include cable television, network television, independent stations, on-demand television, Pay-Per-View, videocassette, direct broadcast satellite, wireless cable, interactive television, CD-ROM, 3DO, CDI, laserdisc, optical media, and Video CD to name a few. Shalimar Films plans to optimize programming wherever possible to take maximum advantage of these windows of distribution.

Strengths

A steady history of growth in the industry, the steady increase in consumer demand for home entertainment programming, and the promise of increasing growth for the future due to new windows of distribution are some of the industry's most promising features. This chart will help to illustrate the steady growth of the Television and Home Video markets.

Market Forecast

Direct Consumer Entertainment Expenditure

Media Producer: Shalimar Films, Ltd.

Market Forecast Revenues in Billions
1992-1997
Consumer Markets *1985 *1992 *1997 % Increase
Theatrical Box Office 3.50 5.00 5.90 18.00%
Home Video - Rentals 0.30 8.30 7.00 −15.70%
Home Video - Sales 0.00 5.00 7.00 40.00%
Pre-Recorded Music 3.30 8.20 10.00 22.00%
Cable Television 4.80 19.90 26.90 35.20%
Pay-Per-View 0.00 0.40 3.60 800.00%
Electronic Shopping 0.00 2.30 8.10 252.20%
Total Consumer 11.90 49.10 68.50 39.50%
Per Capita 53.00 194.00 263.00 35.60%

Advertising Revenue

Media Producer: Shalimar Films, Ltd.

Market Forecast Revenues in Billions
1992-1997
Advertising Markets *1985 *1992 *1997 % Increase
Broadcast Television 14.40 27.10 34.00 25.50%
Cable Television .10 3.40 6.10 79.40%
Total Consumer 14.50 30.50 40.10 39.50%
Per Capita 53.00 194.00 263.00 35.60%

BUDGET DETAIL

Original Television Programming

Production Budget

Overview: Total estimated production budget for each phase of production—Original Television Programs

Assumptions: Based on producing approximately ninety (90) Television Programs. Contributions are being made by Shalimar Films in the area of creative services and production services. Distributors will be making contributions in the areas of celebrity talent, manufacturing, packaging, promotion, advertising, and distribution services.

Media Producer: Shalimar Films, Ltd.

Production Category Phase #1 Phase #2 Phase #3 Phase #4 Prod. Cost
*Distributor
Executive Producer 52,000 95,000 150,000 225,000 522,000
Accounting/Business Affairs 37,500 67,500 125,000 180,000 410,000
Producer/Director 42,000 90,000 180,000 240,000 552,000
Script Writers/AD's 36,000 90,000 180,000 240,000 546,000
Insurance Policies 24,000 36,000 75,000 90,000 225,000
Production Design 18,000 36,000 90,000 140,000 284,000
Site Visits 7,500 18,000 50,000 75,000 150,500
Casting 6,000 25,000 36,000 72,000 139,000
Choreography/Rehearsals 4,500 18,000 32,000 48,000 102,500
Transportation 12,000 36,000 60,000 90,000 198,000
Studio/Location 9,000 30,000 45,000 90,000 174,000
Equipment Rental 40,000 120,000 180,000 240,000 580,000
Production Staff 40,000 120,000 240,000 360,000 760,000
Sets/Props 18,000 36,000 72,000 144,000 270,000
Talent/Buyouts 24,000 90,000 180,000 360,000 654,000
Production Expenses 24,000 60,000 120,000 180,000 384,000
Insurance 8,000 18,000 24,000 32,000 82,000
Contingency 25,000 40,000 60,000 90,000 215,000
Titles/Graphics 24,000 36,000 72,000 144,000 276,000
Music/Licensing 18,000 36,000 72,000 144,000 270,000
ADR/Narr./Layback 9,000 24,000 36,000 48,000 117,000
Audio Sweetening/Mix 7,500 24,000 36,000 48,000 115,000
Screening/Off-Line Edit 36,000 60,000 100,000 120,000 316,000
On-Line Editing 60,000 90,000 200,000 240,000 590,000
Post Production Exp 7,500 145,000 32,000 60,000 114,500
Mastering/Air Masters 5,000 10,000 20,000 30,000 65,000
Trademarks/Copyrights 3,000 5,000 9,000 15,000 32,000
Salaries/Benefits 112,000 225,000 300,000 450,000 1,087,000
Supplies 5,000 7,500 12,000 18,000 42,500
Off./Rent Util 18,000 32,000 48,000 60,000 158,000
Rentals/Lease 12,500 25,000 36,000 48,000 121,500
Shipping/Mssgs 4,000 7,000 12,000 18,000 41,000
Maintenance/Srv 9,000 12,000 18,000 24,000 63,000
Phones/Comms 12,000 24,000 36,000 48,000 120,000
Vehicle Expenses 15,000 22,500 30,000 38,000 105,500
Property Insur 3,000 4,500 8,000 15,000 30,500
Petty Cash 12,000 15,000 24,000 36,000 87,000
Duplication/Manufacturing * * * * 0
Marketing/Promotion * * * * 0
Celebrity/Talent * * * * 0
Press/Advertising * * * * 0
Totals $800,000 $1,700,000 $3,000,000 $4,500,000 $10,000,000

Cash Flow Projections

Overview: Average projected income from each individual phase of production-Original Television Programs

Assumption: Shalimar Films, Ltd. will produce approximately ninety (90) Television Programs over a five year period on a guaranteed pre-sale basis. The projections illustrated represent total income over the average life cycle of a program. The return per program increases in each phase since production of programs that have proven successful are continued in the next phase.

Media Producer: Shalimar Films, Ltd.

Distribution Category Phase #1 Phase #2 Phase #3 Phase #4
Video Cassette
Retail 1,200,000 1,500,000 2,250,000 2,800,000
Catalog 0 750,000 1,200,000 1,500,000
Library 90,000 180,000 360,000 600,000
Jobbers 150,000 240,000 400,000 760,000
DR Markets 750,000 1,200,000 1,500,000 3,200,000
Television Syndication 250,000 1,125,000 1,800,000 3,200,000
Overseas Markets 115,000 450,000 650,000 1,250,000
Ancillary Markets 100,000 400,000 750,000 1,200,000
On-Demand Television 90,000 212,500 472,000 725,000
New Media/Other Markets 75,000 192,500 368,000 600,000
Estimated Sales Projs Projected Projected Projected Projected
Totals 2,820,000 6,250,000 9,750,000 14,400,000
Approximate No. of Programs 12 20 26 32
Approximate Revenue/Prog 235,000 312,500 375,000 450,000

Cash Flow Projections

Overview: Average projected income from all phases of production—Original Television Programs.

Assumption: Shalimar Films will produce approximately ninety (90) Television Programs over a five year period. The projection illustrated here represent total average income over the average life cycle of a program.

Media Producer: Shalimar Films, Ltd.

Distribution Category Projected Total
Video Cassette
Retail 7,750,000
Catalog 3,450,000
Library 1,230,000
Jobbers 1,550,000
DR Markets 5,215,000
Television Syndication 6,375,000
Overseas Markets 2,465,000

Media Producer: Shalimar Films, Ltd.

Ancillary Markets 2,450,000
On-Demand Television 1,499,500
New Media/Other Markets 1,235,500
Projected Total Gross Income 33,220,000
Projected Total Gross Profit 23,220,000
Projected Return On Investment 232.20%
  1. Programs will only be produced based on signed pre-sale agreements with Major Worldwide Distributors.
  2. Production costs are not to exceed the figures quoted. Contributions are being made by Shalimar Films and Distributors.
  3. Projections based on industry averages. Successful programs will exceed quoted projects, especially over the long term.
  4. Projections are calculated using market research and information provided by distributors - Based on average performance.

CONCLUSIONS/SUMMARY

The television and home entertainment industry has a proven track record of phenomenal growth. Market demand is growing each and every day. People are hungry for entertainment and they are more than willing to pay for it. The explosive arrival of the VCR merely set the stage for the quantum leap in programming consumption that we will soon experience as the new technologies make our televisions an ever more important part of our daily lives.

Shalimar Films understands that this is an opportunity of vast potential. We are positioned to take full advantage of the industry's on-going growth. The combined experience of the management team for Shalimar Films equals 75 years of providing quality entertainment and educational programming. This experience has taught us how to produce programming with an extremely high rate of efficiency and success. In addition, Shalimar Films enjoys key working relationships with some of the largest distributors for the home video and television markets. These relationships offer us information about market needs and trends that is factored into all our decisions regarding the development of new programming. Before we produce a program, we have a good indicator of how well it will be received. And we know the programs will be handled by organizations that will provide the most comprehensive distribution, marketing and promotion expertise in the industry.

This offering has been structured in such a way as to provide the limited partners with the most attractive investment opportunity possible with the right of fist recoupment, a generous share of the profits and greatly reduced risks due to the number of projects; the tailoring of these projects to large, identifiable segments of the viewing public; and the assurance that pre-sale agreements are in place with major distributors before production begins.

Enormous potential exists in this offering and the General Partners are fully committed to the task of transforming your investment dollars into a package of high-quality properties that will generate a substantial revenue stream for years to come.



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