draft attorney-client privileged key valuation drivers -- overview note: analysis assumes 11.5%...
TRANSCRIPT
DRAFT
ATTORNEY-CLIENT PRIVILEGED
Key Valuation Drivers -- Overview
Note: Analysis assumes 11.5% discount rate and 3% rate of inflation where applicable.
Key Drivers Description
# / Frequency of Future Films
• Release pattern of future films is assumed to be consistent with history• Release of future films is probability-weighted to account for the fact that only one
franchise (Bond) has exceeded 20 films
Future Film Box Office Range
• Previous Spider-Man films averaged $832MM of WWBO and trailed only The Dark Knight (with $1BN) amongst superhero films
• Median WWBO for large-scale superhero films is $422MM
% Change in Merchandise Sales with Decreases in Box Office in Downside Risk Cases
• Given the broad awareness and attendance of Spider-Man 3, there is limited ability for future films to contribute more to the popularity of merchandise
• If future Spider-Man films underperform, it may negatively impact merchandise sales, but likely not on a one-to-one basis
% Growth in Merchandise Highest Cases
• Eliminating all commissions paid to 3rd party sales agents could increase retained revenues by roughly 9%
• Expanding international merchandise to 60% of sales (from 50% currently) could generate an additional 25% growth
• Achieving all growth opportunities takes time to achieve; assumed to approach 25% growth and phase in over the next 3 films
% Decline in Merchandise Downside Risk Cases
• Spider-Man merchandise faces increased competition• Spider-Man 3 was released in a year with 3 total superhero films, none in the same month• Spider-Man 4 will be released in a year with 6 total superhero films, including a Batman
film and X-Men film in the same month
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DRAFT
ATTORNEY-CLIENT PRIVILEGED
Key Valuation Drivers – Summary of Assumptions
Note: Analysis assumes 11.5% discount rate and 3% rate of inflation where applicable.
Key Drivers Description
# / Frequency of Future Films
• Films released every 2, 3 and 5 years• Probability of future films starts at 100% for Spider-Man 4 and declines
roughly 5% per film thereafter
Future Film Box Office Range
• Performance ranges from low of $400MM to high of $900MM
% Change in Merchandise Sales with Decreases in Box Office in Downside Risk Cases
• 0% correlation when box office remains high or grows• 50% correlation in low box office cases; implies if box office is 50% of
Spider-Man 3 merchandise declines 25%
% Growth in Merchandise Highest Cases
• In the high case growth in merchandise ranges from 0% to 25% phased in with the release of the next three films
% Decline in Merchandise Downside Risk Cases
• Discount for competition ranges from 0% to 10%
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DRAFT
ATTORNEY-CLIENT PRIVILEGED
Key Valuation Drivers – Assumptions by Scenario
Key Drivers Low Case Base Case High Case
# / Frequency of Future Films
• 2 / 3 / 5 • 2 / 3 / 5 • 2 / 3 / 5
Probability of Releasing a Film
• The probability for future film releases in all cases generally decreases by 5% with each film from a high of 100% for Spider-Man 4 (e.g., S-M 7 at 75%, S-M 8 at 70%)
Future Film Box Office Range
• $600MM to start, then declining
• $600 to $900MM to start, then declining
• 900MM to start then declining
% Correlation in Merchandise Sales with Decrease in Box Office in Downside Risk Cases
• 50% • 50% only when WWBO is less than $600MM
• 0%
% Growth in Merchandise Highest Cases
• N/A (declines) • N/A (flat) • 5%, 15%, 25% (phased in)
% Decline in Merchandise Downside Risk Cases
• (10%) • N/A (flat) • N/A (grows)
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