PwC LLP Professional Working Colleagues Slide 1. LMC Media Engagement Bell Games, LLC Analysis

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Professional Working Colleagues

Slide 1

LMC MediaEngagementBell Games, LLC Analysis

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Engagement Team

Blaire Budetti

Junior Consultant

Antoinette Patterson

Sophomore Consultant

Hannah Larkin

Senior Consultant

Cydnie Wright

Sophomore Consultant

Douglas Secrest

Senior Consultant

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Agenda

•Discuss Opportunity and Risk of: • Hands-off

• Selling

• Increase Investment

•Recommendations

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Analysis & Assumptions

Ignore $20M sunk cost• Cost has no effect on future decision

Assumptions• Acquisition price greater than opportunity cost

• LMC bears $30M contract buyout

• Cost Function

- (Future Investment) + (Contract Buyout)

• Projected $80M invested evenly over 3 years

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Research

• Research based on:• Industry metrics published by:

• 3 Gaming Technology Releases:

*All rights reserved for each respective trademark.

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“Hands-Off” Approach

Opportunities = large, fast growing market

Gaming Industry Revenue

$24.75Billion

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“Hands-Off” Approach

Risk• Violent games under scrutiny

• Ultimate Champion – Violent battlefield game

• Reputation risk from potential negative publicity

“Together, we plan to continue to offer our

customers the clean, wholesome fun that they have come to expect from each of our companies.” - Robin Oltman, CEO

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“Hands-Off” Approach

• Time frame for re-evaluating based on projected milestones and cost function

Q3'13 Q1'14 Q3'14 Q1'15 Q3'15* Q1'16 Q3'1650

60

70

80

90

100

110

Cumulative Cost (millions)

PrototypeComplete

Assess Testing

Contract Expires

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Selling

Advantages• Eliminates reputation risk

• Reduce risk of large net loss

Disadvantage• Loss of potential earnings

• Loss of potential marketing opportunity- Product placement & character tie-ins

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If Selling

Package as:• Innovated technology with current 6th best selling

game content

• Appeal to Battlefield 3 type company- They have current customer base

- Matches their current products and strategies

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HotBat Offer

Advantage• Remove reputation risk

• Invest the $ 50M in lower risk options

Required release -18 months- highly unlikely • Will have to crash development schedule

- Increase investment substantially

• To receive 10% of revenues

• Versus not selling and receiving 100% of revenues

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Increase Investment

Increase by 10 million for 1st year

• Produce standard family-friendly computer game

• Revenues off-set investment

• Allows further marketing strategy- Product placement & character tie-ins

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Increase Investment

If successful, continue 10 million per year

Consider changing game• Replace Ultimate Champion with family-friendly

game to align with values

• 7 of top 10 games are targeted to teenagers

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Increase Investment & Restructure

Greater opportunity & lower risk • Enhance cash flows

• Better fit values

• Further promotional strategy

• Less likelihood of net loss

• Diversify risk in gaming market- Produce standard computer game and new technology

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Key Points

• Gaming industry

• Reputation risk• Strong scrutiny of violent games

• Outside of LMC’s values

• Rapid changes in technology• Other company produce same or similar

technology

$24.75Billion

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Recommendation

• Increase investment & restructure

- Produce standard game

◦ Enhance cash flows

◦ Diversify in gaming market

- Change Ultimate Champion

◦ Mitigate reputation risk

◦ Better align with LMC’s values

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