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DRAFT
page 2
Executive Summary
• Our responsibility for securing Smurfs merchandise licensees and retail space is limited to North American based companies and global “primary category” deals, for which we are compensated at 30% - 51% agency commissions
• Our go forward plan is to maximize the opportunity in these categories with additional headcount
– 5 additional FTEs at SPCP
– Double Smurfs merch revenue
– With a $600K annual investment in incremental headcount, increase SPE’s Smurf merch revenue from $6.3MM (Smurfs 1) to $12.8MM (Smurfs 2) on an ultimate basis
Domestic (which we drive) from $4.0MM to $8.2MM International (which is a passive interest) from $2.3MM to $4.6MM
• We will attempt to restructure deal terms with Lafig that could ultimately drive upside for both parties and we have a reasonable chance of gaining their support
– Release of frozen non-theatrical content rights (e.g., DTV, TV animation)
– Establishment of CMF funded/co-funded by Lafig
– Control of international retail management to SPE
• We will also request full control of international, with related commissions topped up to domestic levels, but Lafig is unlikely to accept unless it takes place between Smurfs 2 and Smurfs 3
DRAFT
page 3
Smurfs Relationship Overview
• SPE is the agent for North America (U.S. and Canada) only
• Lafig controls international
• SPE has no licensor participation and can be legally dismissed as the agent for North America, which would leave SPE with zero overall participation
RolesRoles
• 51% for licenses solicited by SPE covering North America only
• 30% of licenses (“global licenses”) with U.S. companies solicited by SPE
• 15% of licenses solicited by Lafig covering international territories only
General SPE Commission
Rates
General SPE Commission
Rates
DRAFT
$347
$208
$25 $6 $0
$100
$200
$300
$400
Retailer(e.g., Wal-Mart)
Licensee(e.g., Hasbro)
Licensors(Lafig + SPE)
SPE
$208
$125
$15 $2 $0
$50
$100
$150
$200
$250
Retailer(e.g., Wal-Mart)
Licensee(e.g., Hasbro)
Licensors(Lafig + SPE)
SPE
$139
$83
$10 $4 $0
$25
$50
$75
$100
$125
$150
Retailer(e.g., Wal-Mart)
Licensee(e.g., Hasbro)
Licensors(Lafig + SPE)
SPE
page 4
Smurfs 1 – Domestic Value Chain Smurfs 1 – International Value Chain
Smurfs 1 – Global Value Chain
We are projecting Smurfs 1 SPE worldwide share of $6MM, which implies a $347MM global retail spend with 40% domestic vs. 60% international split
60%
12%
40%
60%
12%
15%
60%
12%
25%
($ in millions) ($ in millions)
($ in millions)
DRAFT
64%
131%
50%
81%
58% 76%
48% 36%
65%
30% 26% 33% 18%
0%
25%
50%
75%
100%
125%
150%
Smurfs 1 Smurfs 2 Ice Age 3 Madagascar Ice Age 2 Alvin and the
Chipmunks 2
Madagascar 2
Shrek 4 Ice Age 1 Kung Fu Panda 2
How to Train Your Dragon
Monsters vs. Aliens
Despicable Me
$347
$712
$445 $429 $380
$335 $292 $270 $250
$180 $130 $125 $100
$0
$200
$400
$600
$800
Smurfs 1 Smurfs 2 Ice Age 3 Madagascar Ice Age 2 Alvin and the
Chipmunks 2
Madagascar 2
Shrek 4 Ice Age 1 Kung Fu Panda 2
How to Train Your
Dragon
Monsters vs. Aliens
Despicable Me
page 5
Smurfs 2 Retail Estimate vs. Select Film Properties
Retail Sales: Life-to-Date
Retail as % of WWBO
Average: $267
Average: 47%
Hello Kitty:Toy Story 3:Cars 2:Spider-Man:Peanuts:
$8.2B$5.6B$5.0B$4.0B$4.0B
Toy Story 3:Cars 2:Spider-Man:
527%908%495%
(1) Hello Kitty, Toy Story 3, Cars 2, Spider-Man and Peanuts converted to retail ultimate by multiplying by 2 years.
(1)
DRAFT
page 6
Smurfs 1 vs. 2 Merch Performance (000s)
Smurfs 1 Smurfs 2
Retail
Domestic $138,889 $284,722
International 208,333 427,083
Total Worldwide $347,222 $711,806
Licensor
Domestic $10,000 $20,500
International 15,000 30,750
Total Worldwide $25,000 $51,250
% of Total % of TotalSPE Lic. Share Lic. Share
Domestic $4,000 40% $8,200 40%
International 2,250 15% 4,613 15%
Total Worldwide $6,250 25% $12,813 25%
DRAFT
page 7
Smurfs Licensing Revenue Analysis
Note: Box indicates categories covered by new headcount.
Smurfs 2 domestic business plan assures revenues double and category shares % of total are consistent with industry averages
Smurfs 1 Smurfs 2
% of Licensing % of Licensing % Growth
Product Category Total Revenue Total Revenue vs. S1
Toys/games: dolls, action figures, pre-school 30% 3,000 25% 5,200 73%
Software/videogames: handheld, accessories 12% 1,200 15% 3,000 150%
Sub-Total Primary 42% 4,200 40% 8,200 95%
Accessories: head wear, jewelry, watches 4% $400 6% $1,200 200%
Apparel: adult, kids 20% 2,000 10% 2,000 0%
Food/beverage: candy, cereal, water 3% 300 8% 1,600 433%
Footwear: adult, kids 8% 800 4% 800 0%
Home décor: furniture, furnishings, lamps 3% 300 4% 800 167%
Gifts/novelties: collectibles, gifts 2% 200 7% 1,400 600%
Health/beauty: cosmetics, health 1% 100 1% 200 100%
Housewares: kitchenware 3% 300 2% 400 33%
Music/video - - 3% 600 -
Infant products - - 1% 200 -
Paper products: art, greeting cards 4% 400 3% 700 75%
Publishing 4% 400 4% 800 100%
Sporting goods 5% 500 2% 500 0%
School supplies 1% 100 1% 300 200%
Other: theme park, costume character - - 4% 800 -
Sub-Total Secondary 58% 5,800 60% 12,300 112%
Total NA Gross License Revenue 100% $10,000 100% $20,500 105%
Pri
mar
yS
eco
nd
ary
DRAFT
page 8
SPCP will need 5 additional heads to support Smurfs 2 merch target
Global SVP
Domestic VP Adm Asst
DirectorPaper Products, BTS, Publishing
Exec DirRetail
DirectorToys, Games,
Sporting Goods
CoordinatorRetail
DirectorHardlines,
Food/Bev, HBA
DirectorInteractive, Video,
Mob Apps
Manager
DirectorApparel, Access,
Footwear
DirectorHome Décor, Housewares, Gift/Novelty, Collectibles
CoordinatorNew Position
Current
DRAFT
page 9
Smurfs 2 vs. Smurfs 1 Incremental Contribution (000s)
(1) Incremental headcount cost assumes 4 Director-level hires and 1 Coordinator with 60% of time spent on Smurfs over 3.5 year time period.
Property LaFig SPE
SPE-Controlled Domestic Ultimate Share Share
Smurfs 2 - Domestic Revenue $20,500 $12,300 $8,200
Smurfs 1 - Domestic Revenue 10,000 6,000 4,000
Incremental Smurfs 2 - Domestic Revenue $10,500 $6,300 $4,200
Incremental SPE Headcount Costs(1) $0 $0 ($1,185)
Incremental Smurfs 2 Domestic Contribution $10,500 $6,300 $3,015
Property LaFig SPE
Lafig-Controlled International Ultimate Share Share
Smurfs 2 - International Revenue $30,750 $26,138 $4,613
Smurfs 1 - International Revenue 15,000 12,750 2,250
Incremental Smurfs 2 - International Revenue $15,750 $13,388 $2,363
Incremental Smurfs 2 WW Contribution $26,250 $19,688 $5,377
DRAFT
page 10
Cross-SPE Opportunities for Retail
Contribution
SPCPSPCP
SPASPA
SPHESPHE
SPTSPT
Resulting Campaign
• Secure in-store promotion
• Secure licensee to provide Christmas plush
• Produce additional content, e.g., “Smurfs: A Christmas Carol”
• Promote “Smurfs: A Christmas Carol” on DVDs & Blu-ray with sticker on front of package
• Sell “Smurfs: A Christmas Carol” into TV
• Holiday Campaign
• DVD/Blu-ray with short and plush featured at retail on end caps
• TV special increases awareness and drives purchase
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DRAFT
page 11
Target Deal Terms to Pursue Restructuring
• Release of frozen non-theatrical content rights (e.g., DTV, TV animation) to SPE
TermTerm Resulting Upside(s) for SPEResulting Upside(s) for SPE
• Stand-alone profitable brand extensions
• Support for merch between films and with expanded demo
Modest asks with reasonable chance for Lafig support
• Lafig funding / co-funding of CMF
• Increased retail support for merch
• Int’l retail management to SPE (distinct from ownership of int’l licensee relationships)
• Retail management fee to SPE
• Increased SPE control of int’l film promotion
• Incremental $1.5MM ultimate contribution(1) to SPE
• Full control of int’l to SPE
• SPE int’l commissions increased to domestic levels
• Incremental $7.7MM ultimate contribution(2) to SPE Aggressive ask
Lafig is unlikely to support
(1) Assumes additional 5% fee to SPE (i.e., 15% + 5% = 20% total SPE commission). Would require the conversion of one consultant into FTE plus one full-time coordinator hire.(2) Assumes 25% increase in int’l merch commission (i.e., 15% + 25% = 40% commission in-line with domestic wtd. Avg. commission).