Replace with SPE, Sony BMG and/or SCA
Summary of Simon Cowell
Partnership Opportunities
Draft for internal comment only
November 2007
Agenda
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New SyCo Overview – 50/50 JV Sony BMG/Simon Cowell, plus related SPT production JV
–
Overall Deal Structure, New SyCo
–
Syco Today
–
New SyCo Operating Assumptions
–
Value exchange
Sony Pictures Entertainment Contributions
–
SPT
–
GSN
–
Crackle
–
Film
CONFIDENTIAL
2
Overall Deal Structure – New SyCo and SPT/NewSyCo TV JV
In $, mm, except as noted
SCA
- Film funding
(potentially via 3rd
party)
- Facilities
Sony BMG
- Old SyCo, 20082010
- $200 cash
SPE
- Film (production and
distribution)
- TV (production and
distribution)
- Scripted
- Non scripted
- Crackle
- GSN
Recoup production
Facilities rent
Film production
funding
Facilities
Equity (75-90%)
Old SyCo
200 cash
Distribution and
production fees
(Film)
Production and
distribution svcs
50% equity
Distribution fees
Production and
distribution svcs
New SyCo
Development staff
- All projects
- Funded internally
Old SyCo, 2008 – 2010
Music and film copyrights
Estimated value, by line of
business
- Syco (’08-2010): 150
- Music (2010+) : 150
- TV: 20-50
- Film: 50-100
- GSN: 30- 35
- Crackle: 25
- SC other:30 - 80 (from SC)
Total: 455 - 590
50% equity
200mm cash
25% equity (15%
vesting) in NewSyCo
- 10% at signing
- 5% Fox renewal
- 5% 1st TV
- 5% 1st Film
Facilities
All creative
energies on
exclusive basis
2008-2015
All fees and
payments for
services
Production fees (TV)
Ready to air projects
SPT/New SyCo TV JV
All TV copyrights
Estimated value, 40 - 100
CONFIDENTIAL
Simon Cowell
Contributes all:
- Endorsements
- Fees for services
- Payments from Idol
- Est. 10-15/year?
- thru 2015
- Exclusive creative
output through 2015
Receives:
Cash of 200mm
NewSyCo share value
- 10% - 25%
- 45 – 140mm
Overhead and
production funding
Transaction occurs
before 4/08 (for tax
purposes)
3
SyCo Today – [Note – Values to be confirmed/refined]
•
•
•
•
•
•
Initially 50/50 venture between Sony BMG and Simon Cowell
2 years ago 50% purchased for $90mm by Sony BMG
2008-2010 value $150 mm (100%), rights include:
– Music, film and tv
– American Idol artist recording contracts
– X Factor, UK’s Got Talent, ___?
• XFactor US license from Fox is $10mm/year
– Tracking slightly ahead of forecast done at time of acquisition of 50%
– 3 year term remaining to 2010
Excluded rights today include
– Fox payments for Cowell services as judge (est. $10-15mm/year)
– Endorsements
– Other value of Cowell brand as personality
– Production income from current shows (eg – XFactor produced by Freemantle)
Extension for 2010 through 2015, could be $150mm (100%) for music output, before
film, television and other revenue streams considered
Cowell equity vesting based on performance
CONFIDENTIAL
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NewSyCo Operating Assumptions
•
•
•
Staff - TBD
– TV – 10 FTEs, growing to 20 over term,
• Split between NewSyCo and SPT/NewSyCo production JV
– Film – 2 FTEs
– Other
Development budget
– TV - $7mm/year, growing to $12mm/year
– Film - TBD
– Other (eg – Games, merchandising) - TBD
Governance
– Board of SCA, SPT, Sony BMG and Simon Cowell
– Budget approval, etc
CONFIDENTIAL
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Value exchange
•
At inception
– Simon Cowell: contributes Idol fees (3 years valued at 30mm) plus 5 year SyCo deal
extension, gets 200mm plus 10% of newSyCo (valued at 35mm)
• NewSyCo value is SyCo plus extension (300), plus Crackle (25), plus Idol fees
(30) = 355
– Sony BMG: contributes SyCo (valued at 150mm) plus 200mm, gets 90% of NewSyCo
(valued at 320mm)
– SPE: Nothing beyond any Crackle net value, unless some current TV production
shifts to SPT (eg – XFactor)
•
Assuming full value realized over life of deal
– Simon Cowell: contributes Idol fees (8 years valued at 80mm) plus 5 year SyCo deal
extension, gets 200mm plus 25% of NewSyCo (valued at 140mm)
• NewSyCo value is SyCo plus extension (300), plus Crackle (25), plus Idol fees
(80), plus TV, Film and GSN (185) = 590
– Sony BMG: contributes SyCo (valued at 150mm) plus 200mm, gets 75% of NewSyCo
(valued at 450mm)
– SPE: Fees plus 50% of SPT/NewSyCo production JV (valued at 20-50mm)
CONFIDENTIAL
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Potential Value of Partnership Opportunities - SPT
Deal Component
Sony Pictures
Television JV
Entity
Value
$45MM $100MM
% to
NewSyCo
50%
Implied
Value
$20MM $50MM
Entity Value Basis
Simon / SBMG
Equity Basis
• 2 successful shows w/
network, sponsors, and
syndication
• Funding for pilots
required to yield 2
shows
• OH funding
• Based on % of
development and OH
funding provided
Crackle
$62.5MM
22.5% 30%
$15MM $20MM
• Acquisition price
• 5% at close for cash
• 15.5% based on EBIT
funding
• 7.5% based on financial
milestones
GSN
$600MM $700MM
5%
$30MM $35MM
• Negotiated value
between Sony and
Liberty Media
• Warrants
• Based on financial
milestones
Partnership opportunities with SPT would provide $70-100MM in
equity plus additional income to SPT/ NewSyCo
CONFIDENTIAL
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Television Production
Sony Pictures Television Business Overview
SPT is the top independent studio for network and cable television
• Creator and distributor of top comedies, dramas, and game shows:
– #1 comedy of all-time (Seinfeld)
– #1 primetime comedy last season (Rules of Engagement)
– #1 daytime drama (Young and the Restless)
– #1 and #2 game shows of all time (Wheel of Fortune and Jeopardy!)
– #1 producer of TV movies, won 3 Emmys for Broken Trail this year
• Broad range of on-air shows, including 10 network shows, 8 cable shows, 5 syndicated shows,
and 6 made-for-TV movies
• Industry leader in television distribution with records for shows like Seinfeld and King of Queens
• Large ad sales organization with over $200MM in annual revenues
Deal Overview
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Establish a JV with Simon and Sony Pictures Television
•
Provide Simon access to SPT’s drama and comedy writers as well as our creative executives
•
Cover multiple genres as well as scripted and non-scripted formats
•
Provide Simon screen credits including Executive Producer, Logo Credit, and paid ads
Simon will tap into Sony Picture Television’s resources, industry leadership,
and expertise to expand the range of his television offerings
CONFIDENTIAL
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TV Production Company Overview
Content Focus
Business Model
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Reality Shows (e.g., America’s Got Talent, Cupid)
Game Shows (e.g., Power of 10)
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$7 MM annually required for development budget, 6 pilots (50% license fees covered by
networks), and overhead in Year 1; growing to $12 MM by Year 5
Only network shows assumed without need for deficit financing (i.e., no cable shows
modeled)
Reality shows assumed to generate incremental revenue from sponsorship and format
sales
Game shows assumed to generate incremental revenue from First Run Syndication,
Advertising (syndication barter), and international format sales
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Organizational
Structure
Key Success
Factors
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•
JV headed by Simon Cowell with 10 professionals in the first year growing to 20
professionals by Year 5
Wholly owned by SPT and NewSyCo (50/50 JV)
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Pilot pickup rate throughout the plan period in line with industry averages (33%)
Successful first run syndication of best game shows (e.g., Who Wants to be a Millionaire)
Reality formats attract significant sponsorship ($20 MM/Year by Year 3)
NewCo earns all EP fees at 10% of production budget (60-85% of PV)
PV of production company cash flows ranges from $40 MM to $100 MM
driven by Simon’s ability to continue to create exciting television content
CONFIDENTIAL
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Slate Assumptions
General Assumptions
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6 pilots per year with a 33% pick-up rate for both reality and game shows
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Mix of successful (3+ seasons, syndication and format sales) and under performing (average
1-2 seasons, limited sponsorship, no syndication) game show and reality programming
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100% network shows with license fees equal to production budgets
–
Successful shows reach steady state economics in Year 3
Case Specific Assumptions
Success Rates
Aggressive
Case
•
Overall Programming Mix*
Base Case Industry
Average
Show Type
Aggressive
Case
Base Case
Year 1 to 2
60%
30%
27%
Reality Success
2
2
Year 2 to 3
50%
67%
61%
Reality Underperform
3
2
Game Show Success
2
3
Year 3 to 4
67%
50%
67%
Game Show Underperform
3
3
*Numbers represent picked-up shows
CONFIDENTIAL
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Crackle-based Online Partnership
Crackle Overview
Crackle is a premier destination for online video, focused on high-quality short-form video
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Crackle is elevating the quality of online video and attracting the best creators of short-form video
•
Crackle has attracted a large and loyal audience, making it the ideal destination to extend Simon’s
brand online
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Crackle’s model is an ideal fit for identifying talent, with a brand built on offering fame-based incentives
to emerging talent
Deal Specifics
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Sony would grant equity in Crackle as part of the venture
•
Crackle would provide technology, infrastructure, and management team
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Partnership would include marketing support and music video distribution
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Simon would receive cash compensation for his services, including contribution of his expertise in
developing the Network concept
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Simon would contribute his name and likeness, public relations support, and on-going interaction with
audience members
With no cash investment, Simon would participate in creating the leading online destination
for talent and extend his brand to a site that reflects his style of straight talk and celebrity
CONFIDENTIAL
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GSN-based Game Partnership
GSN Overview
Collaborate with Simon to build a game-based business around his brand
•
With the backing of Sony Pictures, Liberty Media, and new management, GSN is redefining its brand
•
GSN is building on its position as a leader in TV game shows (reaching 66MM households) to expand
into online and casual games
•
GSN’s affiliation with Fun Technologies uniquely positions it to be the leader in games across platforms
Deal Specifics
•
GSN would guarantee exclusive carriage for a defined number of Simon’s game shows each year
(number of shows / format would be negotiated)
•
Partnership would provide equity to Simon
•
Simon would have a dedicated programming block one night per week
•
Simon, GSN, and FUN Technologies would collaborate in developing online skill-based games
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Deal would build on Sony’s partnership with IGT and history of introducing the most successful gaming
machines of all time to offer slot machines based on Simon’s game shows
Leverage GSN and FUN Technologies to extend Simon Cowell’s brand into both television game shows and
skill-based casual video games
CONFIDENTIAL
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Preliminary Proposal for an Overall Feature Film Deal
Sony Pictures Overview
Sony Pictures is Hollywood’s leading studio
• #1 in openings (2006 & 2007)
• #1 in market share (2006 & 2007)
• #1 in opening day receipts / weekend receipts (Spider-Man 3)
• 12 Best Picture Oscars
Deal Overview
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•
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An exclusive producing deal with Sony Pictures for all theatrical projects through 2015
Overhead and fringe related to film operations covered out of NewSyCo operations
NewSyCo would produce pictures and retain copyright
SPE would distribute on a “rent-a-system” basis, and potentially provide production services for fee
Simon will leverage Sony Pictures’ resources and feature film production
expertise, providing Simon a vehicle to bring his theatrical projects to the
screen
CONFIDENTIAL
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Key SPE Assumptions – Film
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Development and Greenlight process
– Ultimate greenlight decisions made by NewSyCo, with input from SPE
– Overhead and development funding (amount TBD) covered by NewSyCo
– NewSyCo bears production costs, via recoupable contribution from SCA
– Copyright would remain with NewSyCo
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Production services provided by SPE for fee
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Distribution
– SPE would be worldwide distributor in all markets in perpetuity on a rent-a-system basis
– NewSyCo would provide theatrical marketing funds, via recoupable contribution from SCA
– SPE would charge distribution fees and recoup other releasing costs
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Output Assumptions
– 1 – 2 projects developed per year
– 1 film produced every 2-3 years
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Alternative structure option could be to shift greenlight, copyright, production funding and
marketing costs to SPE
CONFIDENTIAL
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