Discussion Materials
October 4, 2007
Summary
• Very undesirable audience from a TV perspective
• Limited reach to launch hit or demo-changing shows
• Incremental improvements more difficult due to: declining
ratings, fragmentation, return of game shows to broadcast,
affiliate pressures
• Ambitious re-orientation of business proposed to capitalize on
growth of casual games off TV
• Seek genuine multi-platform games biz model: packaging, online
ad sales, online fees, formats, mobile
• Key issue: can Game Show Network broaden to attract similar,
but not identical, audience with similar but not identical
consumer experience?
Current Situation
2007 Forecast
(000)
Subscribers
Revenues
Ad Revenue (Net)
Affiliate Revenue
Participation Revenue
Online Revenue
Other Revenue*
Total Gross Revenue
Launch Support
Total Net Revenue
Operating Costs
Programming
Online/Interactive
Participation TV
Marketing
SG&A & Other*
Total Operating Costs
EBITDA
3Q Fcst
2007
Budget
2007
56,664
57,376
66,528
68,021
697
905
1,080
137,231
(6,341)
130,891
3Q Fcst vs
2007 Bdgt
2007 Fcst vs
2006 Actual
%
%
(712)
-1%
1,769
68,207
66,830
8,236
2,297
1,811
147,381
(6,431)
140,949
(1,678)
1,191
(7,539)
(1,392)
(731)
(10,149)
91
(10,058)
-2%
2%
-92%
-61%
-40%
-7%
-1%
-7%
1,001
5,292
105
483
(348)
6,534
5,293
11,828
2%
8%
18%
114%
-24%
5%
-45%
10%
40,196
4,281
2,908
25,358
31,038
103,782
41,433
8,741
5,474
26,095
32,315
114,058
(1,237)
(4,460)
(2,566)
(737)
(1,277)
(10,276)
-3%
-51%
-47%
-3%
-4%
-9%
(1,529)
(1,829)
1,998
(11)
2,397
1,025
-4%
-30%
220%
0%
8%
1%
27,109
26,891
10,803
66%
218
1%
* Other Revenue includes casino site fees, international series licensing, lottery ticket and merchandise licensing.
SG&A & Other costs exclude benefit from appreciation plan settlement.
3%
Historical financial performance
(000)
2002
2003
Revenue
Ad Revenue (Net)
Affiliate Revenue
Other Revenue*
Total Gross Revenue
Launch Support Amort
Total Net Revenue
33,518
39,800
27
73,345
(20,031)
53,314
43,851
44,576
31
88,458
(12,813)
75,645
49,742
53,066
34
102,842
(15,287)
87,555
58,076
58,763
649
117,489
(14,449)
103,039
65,527
62,728
2,441
130,696
(11,633)
119,063
66,528
68,021
2,683
137,231
(6,341)
130,891
18%
12%
208%
16%
-13%
22%
2%
8%
10%
5%
-45%
10%
Operating Costs
Programming
Online/Interactive
Marketing
SG&A & Other*
Total Operating Costs
16,979
2,795
15,670
28,785
64,229
26,713
4,050
14,157
30,097
75,017
33,749
4,370
26,421
24,685
89,225
39,393
5,295
24,421
26,663
95,772
41,725
6,111
25,369
29,552
102,757
40,196
4,281
25,358
33,947
103,782
25%
22%
13%
1%
12%
-4%
-30%
0%
15%
1%
7,267
7%
16,306
14%
27,109
21%
n/a
66%
EBITDA
Margin
(10,915)
-20%
628
1%
2004
(1,670)
-2%
2005
2006
2007E
4-YR
06-07
CAGR GROWTH
* Other Revenue includes online ad, online games, participation TV fees, casino site fees, international series licensing, lottery ticket and merchandise licensing.
2007 SG&A & Other costs include Participation TV and exclude benefit from appreciation plan settlement.
Ratings trend
2007
0.40
0.35
0.30
0.25
0.20
0.15
0.10
0.05
P25-54 ratings
Source: Nielsen Media Research, full-day average basis.
07 Budget targets
07
3Q
07
2Q
07
1Q
06
4Q
06
3Q
06
2Q
06
1Q
05
4Q
05
3Q
05
2Q
05
1Q
04
4Q
04
04
3Q
2Q
04
1Q
03
4Q
03
3Q
03
2Q
03
02
HH ratings
1Q
4Q
02
3Q
02
2Q
1Q
02
0.00
Efforts to broaden the audience:
original programming
Cash spend by genre (000):
2002
2003
2004
2005
2006
Game show
Casino
Reality
Light sports
Documentary
Non-traditional / other
16,994
16,994
15,848
980
817
1,375
19,021
8,241
3,229
3,942
1,436
16,849
5,601
9,493
1,917
6,336
2,835
702
26,885
13,488
8,669
108
823
322
23,410
Game show
Casino
Reality
Light sports
Documentary
Non-traditional / other
100%
-
83%
5%
4%
7%
49%
19%
23%
9%
21%
35%
7%
24%
11%
3%
58%
37%
4%
1%
* Does not include World Poker Tour, $2.8M spent in 2007, $4.1M due in 2008, plus
$3.0M marketing commitment ($1.5M hard-dollars) in 2008.
2007E
14,931
8,726 *
3,287
26,944
55%
32%
12%
2007 programming & marketing spend
Program
Poker*
Blackjack
Casino
Without Prejudice
Lingo
Other game shows
Development
Acquired
Marketing
Total spend
%
5,772,853
2,953,353
8,726,206
847,500
847,500
6,620,353
2,953,353
9,573,706
15%
6%
21%
2,231,500
4,485,148
11,514,465
1,754,910
9,188,146
37,900,375
5,921,400
949,600
7,718,500
8,152,900
4,485,148
12,464,065
1,754,910
9,188,146
45,618,875
18%
10%
27%
4%
20%
* Does not include World Poker Tour, $2.8M spent in 2007, $4.1M due in 2008, plus
$3.0M marketing commitment ($1.5M hard-dollars) in 2008.
Female skewing audience
Audience composition:
Male
Female
Total TV
GSN total day
GSN prime
48%
52%
34%
66%
38%
62%
Source: Nielsen Media Research via Marketbreaks. 1/1/07-8/26/07.
Older skewing audience
Audience composition:
P2-24
P25-54
P55+
Total TV
GSN total day
GSN prime
33%
43%
24%
11%
27%
62%*
12%
30%
58%
* GSN median age = 61.
Source: Nielsen Media Research via Marketbreaks. 1/1/07-8/26/07.
Competitive ranker P25-54 VPVH prime
DIY
SC IFI
DISC
TV1
DSC I
TOC
TLC
BRVO
SPD
FX
SPIKE
NGC
DTMS
SOAP
766
762
748
739
734
729
726
716
710
706
690
688
683
679
G4
TBSC
ENT
VS
FOOD
C MDY
WE
STYL
C MT
AEN
HIST
TNT
TRAV
BBC A
677 OXYG
676
DHLT
675 AMC
663
USA
652
ENN
647 TVGN
643
GAC
642 HGTV
639
LMN
626
HI
626 C OURT
626
ESPN
620
VH1
616 WGNC
616
MIL
553
MTV
412
610 GOLF 551 MTV2 379
609
BIO
550
C NN
374
606 ESPN2 545
GSN
372
597
FAM
544
HALL 326
597
BET
527
NAN
323
585
LIF
524 ADSM 311
571
TVL
523 FOXNC 303
571
TWC
518 NKTNS 300
570 ESPC L 511 NIC K 244
567 C NBC 502 TDSNY 241
567
APL
498 DSNY 224
565 MSNBC 463 TOON 211
554
HLN
441
Source: Nielsen Media Research via Marketbreaks. 1/1/07-7/29/07. M-Su 8p-11p.
Moderate to low income audience
Ra nk
21T
21T
45T
56T
56T
56T
56T
64T
64T
FAM
WE
OX YG
C OURT
LIFE
TVGN
WGNC
GSN
HALL
HH
53K
53K
48K
43K
43K
43K
43K
38K
38K
P25-54
58K
58K
53K
48K
48K
48K
53K
53K
43K
F25-54
58K
58K
53K
48K
48K
48K
53K
48K
38K
Source: Nielsen Media Research via NPower. 1/1/07-7/29/07. M-Su 8p-11p.
F18+
48K
53K
48K
43K
38K
43K
43K
33K
33K
Dayparts are not clearly differentiated
DAY
FRINGE
PRIME
LATE
WEEKEND
TIME
M-F
9A-3P
M-F
3P-7P
M-SUN
7P-12M
M-SUN
12M-4A
SAT-SUN
9A-7P
HH RATING
0.23
0.35
0.24
0.10
0.31
25-54 VPVH
335
291
429
362
402
CLASSIC LIBRARY GAME SHOW
100%
13%
-
21%
44%
MODERN LIBRARY GAME SHOW
-
38%
50%
11%
22%
GSN ORIGINAL GAME SHOW
-
50%
36%
-
33%
CASINO
-
-
14%
11%
-
PARTICIPATION
-
-
-
29%
-
OTHER
-
-
-
29%
-
% OF SCHEDULE
Current GSN schedule; ratings / VPVH for 3Q07.
Majority of GRPs still from re-run game shows
Formats as % of total GRPs:
100%
0%
1%
12%
17%
80%
2%
40%
60%
12%
40%
6%
• Casino, reality,
all other
21%
• GSN original game
shows
15%
• Library game
shows, modern
54%
58%
• Library game
shows, classic
2006
2007YTD
9%
4%
12%
20%
31%
22%
20%
22%
80%
20%
47%
46%
48%
2003
2004
2005
0%
2002
* 2007YTD is through end of 8/31/07.
DR unit rates higher than general rate
All-DR pro-forma
2007E
2007E
General rate units sold
Effective avg. unit rate
Revenue
91,883
$260.35
23,921,739
DR units sold
Effective avg. unit rate
Revenue
136,728
$344.93
47,161,589
228,611
$330.02
75,446,202
Informercial revenue
7,296,088
7,296,088
Total gross revenue
78,379,416
82,742,290
(11,851,226)
(12,494,086)
66,528,190
70,248,204
Agency commissions
Total net revenue
% General rate spots
% DR spots
40%
60%
Net
-
0%
100%
3,720,014
Declining delivery creates make-good challenge
2007
ADU beginning balance
$1,593,751
ADU created
$6,940,199
ADU paid out
($5,237,722)
ADU ending balance
$3,269,228
Participatory elements are minor
Revenue (000):
2005
2006
2007E
58,076
58,763
65,527
62,728
66,528
68,021
Online
Participation TV
156
-
422
591
905
697
Other *
494
1,428
1,080
117,489
130,696
137,231
Advertising
Affiliate
Total
Online / Participation as %
0.1%
0.8%
* Other includes casino site fees, international series licensing, lottery ticket and merchandise licensing.
1.2%
Online business still small
Rank
1
2
3
5
7
12
16
17
30
Monthly unique visitors (000)
Yahoo! Games
MSN Games
POGO.com
AOL Games
MINICLIP.com
Big Fish Sites
IWIN.com
WorldWinner
GSN.com
19,559
11,465
9,917
8,826
6,883
3,621
2,111
2,093
692
Source: Rank out of 125 listed games sites; ComScore, My Metrix, July 2007
Reach is low, new show launches a challenge
Reach
Rank
12
14
24
31
35
40
41
44
64
LIFE
FAM
WGNC
COURT
OXYG
WE
HALL
TVGN
GSN
52.0%
51.5%
44.1%
41.0%
39.1%
32.6%
32.1%
27.8%
19.1%
Source: Nielsen Media Research , August 2007. Rank out of 72 major nets, total monthly cume, HH basis.
Poker is an island
% female comp:
7:00PM
TUESDAY - SUNDAY
MONDAY
59%
57%
60%
High Stakes Poker
36%
8:00PM
9:00PM
10:00PM
World Series of Blackjack
48%
11:00PM
12:00AM
62%
Source: Nielsen Media Research, 1/1/07 – 9/21/07.
50%
We are vulnerable to migrations
• Migrations 2006-2007 YTD
– Comcast: 6.0M EB subs lost (net loss = 2.1M)
– Time Warner: 850K EB subs lost (net loss = 425K)
• Threatened migrations through 2008 YE
– Comcast: 4.8M EB subs (proj. net loss = 1.5M-2.2M) in
Boston, Albuquerque, Sacramento, Pittsburgh, Florida
– Charter: 2.5M EB subs (proj. net loss = 850K) in Los
Angeles, Madison, Greenville
– Time Warner: 350K EB subs (proj. net loss = 125K) in
NE Ohio
GSN’s strategic advantages
• The only network in this space
– 66.4 million Nielsen UE
• Solid household core
• Audience is highly engaged
• Audience over-indexes on computer / internet
usage
• Casual games space has exploded
• GSN demographic a plausible fit with casual games
Opportunity
Casual games opportunity
• 55 million online casual gamers in the U.S.
• The #2 activity on AOL, behind only email / IM
• The “stickiest” form of online entertainment
• Heavily female
• Older than typical internet audience
• Multiple but modest-sized revenue streams
(ad, subscription, download, cash games, etc.)
Casual games usage is heavily female
Total time spent on game sites (US):
(in millions of minutes)
Women
• F25-54 player averages:
55+
1,300
Men
– 9.0 days per month
923
– 22.1 min per usage day
– 199 min of play per month
25-54
3,903
2,788
• F55+ averages:
– 296 min per month
18-24
616
59%
Source: ComScore Media Metrix, July 2007
326
41%
“Stickiness” of best-in-breed sites
Frequency
Usage days Avg. visits per
per visitor
usage day
per month
Duration
Minutes per
visitor per
month
Avg.
minutes per
visit
Pogo
7.2
2.3
378.5
22.5
MySpace
10.5
2.5
207.4
7.8
YouTube
4.3
1.5
103.7
15.6
Sources: ComScore Media Metrix, July 2007
GSN and casual games audience intersection
All US TV HH
GSN TV
audience
Casual games
top sites
WorldWinner
Female comp:
51%
66%
60%
57%
Age: 25-54
43%
29%
55%
62%
Income: $30K - $75K
39%
35%
50%
55%
HH size : 3-4
48%
35%
45%
53%
Sources: ComScore Media Metrix; Nielsen Media Research
High audience engagement
Length of tune-in; rank out of 72 major nets:
RANK
RANK
NET
LOT
RANK
NET
LOT
1
HALL
31.5
14
AEN
22.1
2
NICK
29.3
15
DTMS
21.6
3
NAN
28.7
16
TV1
21.3
4
ADSM
27.7
17
FOXNC
20.4
5
USA
26.4
18
HGTV
20.0
6
TVL
24.9
19
TBSC
19.0
7
LIF
24.7
20
DSCI
18.7
8
BIO
23.5
21
BET
18.4
9
TNT
23.5
22
HI
18.1
10
GSN
23.4
23
FAM
18.0
11
SCIFI
23.2
24
SPIKE
17.9
12
SOAP
23.1
25
HIST
17.9
13
COURT
22.9
Source: Nielsen Media Research, full-day HH basis.
HALL
LIFE
GSN
COURT
FAM
WE
OXYG
G4
1
7
10
13
23
35
36
50
Audience over-indexes on computer / internet usage
Of 72 major networks, GSN ranks #1 in F25-54 and #4 in
P25-54 for indexing of heavy computer / internet usage:
GSN
OXYG
TVGN
HALL
WE
WGN
FAM
LIFE
COURT
F25-54
P25-54
168
123
115
115
110
105
106
96
103
146
121
116
113
113
111
107
97
97
Source: MRI Doublebase 2006. P25-54 and F25-54. Heavy computer / internet = 10+ hours per week.
What to do
6 key objectives in building business plan
• Accept fundamentally older female demo,
gradually seek to get marginally younger
• Make play, accessible participation central to all
programming
• Focus on brand
• Market untraditionally
• Build multi-platform business models
• Own, exploit our own IP
Revitalize air while staying true to core
• Game shows remain the workhorse of the schedule
• Create sense of “lights on” at network
–
–
–
Interstitials
Games
Same-day promotion
• IDEA: Utilize a substantial live-hosted block to establish unique
tone, new business models, refresh library programming
–
–
–
–
–
Current thinking: fringe 4-7pm, 6-8 minutes per hour
GSN, online promotion
Live games with prizes
Tied to programming
Major sponsorship vehicle
continued…
–
Substantial programming / marketing investment
• Production costs estimated at $2 million per 13 weeks
• Prizes estimated at $0.5 million per 13 weeks
• Lost ad inventory to stay on clock, foregoing $1 million
in revenue per 13 weeks
• Single feed (some cost recapture)
• Build greater differentiation between dayparts
–
Idea: use varying degrees of participation to define blocks,
counter-program broadcast game shows
• Poker as an island
–
Drop or create “male swim”
Play games, utilize accessible interactivity all day
• Trade technological innovation for accessibility
• Vary levels of interactivity
–
–
–
–
Interstitials
Audience participation shows (e.g. “Bingo”)
Playmania-type
Long-term games, continuity
• Real stakes
–
–
–
•
•
•
•
Invest in prizing
Seek sponsorships, partnerships
Create currency
Cross-platform driver
Encourage team, league play to build community
Drive subscriber growth
Partner with affiliates for walled garden games
Build strong well-defined brand, targeting actual
core audience
• Look and feel of network, programming / marketing choices reflect:
–
–
–
–
–
–
–
Female
Casual
Accessible, not edgy
Family friendly
Competitive but fun
Ever-present diversion
Participatory but not technology driven
• Focus on brand in everything we do
• Focus on our community – GSN is “their” network
–
4.9 million registered users
• Embrace identity
–
–
Celebrate, don’t run away from classics
Tie classics to online games
Market unconventionally
• Shift off-air media resources to prizing
• Focus marketing on community
–
–
Focus on GSNtv.com community
Games as continuity – build our own currency
• Be TV partner of all major games sites
–
Barker channel for games community
• Syndicate games widely
–
–
–
Affiliate sites
Partner portals
Advertisers
• Arbitrage opportunities to showcase brand
–
–
–
GSN HD (see appendix 1)
GSN radio (costs < $1 million / year)
GSN location
Build cross-platform business model
• Packaging value: use online to monetize low-value TV audiences, TV
to monetize free casual gamers
–
Targeting, engagement the key to ad pricing, not audience size
• Merge WorldWinner into GSN.com (see appendix 2)
–
–
Jump-start monetization online
Greater sophistication regarding traffic, metrics
• Acquire female-oriented casual games sites to achieve necessary
scale (approx. 10 million uniques)
–
–
–
–
Immediate need to expand model
GSN slow starter – 700K monthly uniques
Several sites at 1 to 3 million uniques can be bought for 5-7X revenues
Advertising services agreements an alternative, complement
continued…
• Focus programming spend on sub-brands, formats that can
thrive cross-platform
• Create GSN mobile brand
–
–
–
Packaged with ad sales effort
Acquire or partner
Use prizes to build audience
• IDEA: launch an all-participation network on revenue share
model with affiliates
Own IP as core of originals strategy
• Focus on cross-platform franchises and rights
• Experimental (shorter runs, varied formats)
• Lower cost, higher frequency
• Development lab (team of 7-10 people, cost < $1 million / year)
• Build flexible production facility (see appendix 3)
• Partner with Imagination Entertainment (see appendix 4)
• IDEA: buy library, preferably Goodson (at least North America)
–
–
–
–
Essential to secure base, defensive position
Unlimited multi-platform rights
Format, remake rights
Clip flexibility
• BUT, remain open to external development
• Full freedom to monetize
Team
Senior management
Build an equity culture
• Current bonus programs have essentially no
performance variability
– Annual cost: $2.5 million
• “Profit-sharing” scheme anything but
– Annual cost: $425K
• Need team focus on building long-term equity value,
rather than annual EBITDA
• Recent payout demonstrates problems with
“valuation” approach to group compensation
• IDEA: rolling deferred bonus plan (see appendix 5)
Governance
Proposed changes to governance
• Remove normal operating decisions from required board approvals
–
–
Greenlighting original shows
Licensing IP
• Replace approvals with approval thresholds
–
–
–
–
Affiliate agreements impacting > 10% of subscriber base
Budgeted line item increases or unbudgeted expenses > 0.5% of annual
revenue
Hiring approvals limited to CEO, CFO, and executives with guaranteed
comp > $1.5 million over length of contract
Approvals for commencing or settling litigation limited to cases with
settlement or amount in controversy > 0.5% of annual revenue
• IDEA: bring in outside board members to add perspective,
establish relationships
–
Differentiation between owners’ required approvals (capital structure,
M&A, CEO hiring, annual budget) and normal board operations
Appendices
Appendix 1: GSN HD
• Upgrade current Bowtruss master control, operations center, and
uplink infrastructure to full HD capabilities
–
Increased exposure for GSN within narrower HD channel lineups
–
Meet affiliate needs for HD programming volume
–
Modern acquired programming increasingly available in HD
–
GSN would begin building an original HD library
• Financial impact
–
Facilities cap ex: $1.9 million
–
IRD receivers for MSO head-ends: $7.4 to $12.4 million over
several years, pending MSO demand and receiver pricing declines
–
Incremental operating expenses: $822K per year
–
15% premium to produce originals in HD
Appendix 1: GSN HD
Capital expenditure
Master control upgrade
Media operations
Media management
Terminal equipment & sub systems
Integration
IRD receivers (immediate to launch with top MSOs)
Total capital expenditures
Cost
464,655
390,285
78,750
579,285
220,000
4,200
Units
1
1
1
1
1
50
Extended
464,655
390,285
78,750
579,285
220,000
210,000
1,942,975
Incremental annual operating costs
HD compression/uplinks/satellite
Interconnection to HD uplink
Total operating costs
Cost
65,000
3,500
Months
12
12
Extended
780,000
42,000
822,000
Future IRD receivers remaining to purchase
Current price
IRD receivers (high)
Future price
IRD receivers (low)
Cost
Units
Extended
4,200
2,950
12,390,000
2,500
2,950
7,375,000
Appendix 2: WorldWinner
• The #1 ranked casual skill games site
–
–
2.1 million uniques
Skill games provider to AOL, MSN, Pogo, GSN
• Business model based on fees for administering online cash
entry tournaments and competitions
–
–
–
Entry fees range from $1 to $10 per tournament
Average entry fee: $1.90
WorldWinner retains 20%
• High growth mode
–
–
Revenue: 2007 = $43M; 2008E = $65M; 51% growth
EBITDA: 2007 = $8M; 2008E = $12M; 50% growth
Appendix 2: WorldWinner is an “upsell” for the
most passionate online players
PLAYING DAYS / MONTH:
12 DAYS+
(74% of users)
AVG. = 4 DAYS
Sources: ComScore Media Metrix, July 2007; WorldWinner study
Appendix 3: GSN Studios production facility
• Flexible production facility allows GSN to bring content from
conception to air quickly, while saving costs
–
–
–
–
Environment in which to rapidly pilot and test new concepts
Produce more programming in-house; greater control and savings
Increased live programming capabilities, interstitials
Improved flexibility in advertising / sponsorship integration
–
Increased production of online broadband content, GSN radio, etc
• GSN will realize financial and operational efficiencies
–
–
$12.4 million capital outlay
14 FTEs decrease reliance on outside companies
–
$2.1 million annual operational savings (Bowtruss rent, studio
rentals, outside production teams)
5.8 year payback period, assuming $0 rental revenues
–
Appendix 3: GSN Studios production facility
Cost
Life
Accounting
Basis
Cash
Basis
-
Capital expenditure
Equipment & integration
Facility buildout
Supplemental HVAC
Supplemental tech electrical
Total capital expenditures
7,100,364
4,100,000
500,000
700,000
12,400,364
7
10
10
10
1,014,338
410,000
50,000
70,000
1,544,338
Annual operating costs
Stage permanent staffing
Stage freelance staffing
Building operations
Annual rent
Total building operations
1,049,200
1,722,640
740,000
1,800,000
5,311,840
1
1
1
1
1,049,200
1,722,640
740,000
1,800,000
5,311,840
1,049,200
1,722,640
740,000
1,800,000
5,311,840
6,856,178
5,311,840
751,180
750,000
5,950,000
7,451,180
751,180
750,000
5,950,000
7,451,180
595,002
2,139,340
Total annual expense
Savings
Bowtruss rent (monthly)
Development (pilots)
Original programming (shows)
Total annual savings
Annual net savings
Capital outlay
Years to payback
Cost
62,598
75,000
850,000
Qty
12
10
7
12,400,364
5.80
Appendix 4: Imagination Entertainment
• A leading multi-platform games company
–
–
–
DVD-based games (considered inventor of category)
Board games, puzzle books, desktop calendars, toys
Produce TV, iTV, radio, mobile, online, console games
• Broad international footprint
–
–
–
Distribution to 16,000 US retail outlets; 69,000 more in 42
countries
170 employees in US, Europe, Australia
2007E financials: $70M revenue, $15M EBITDA
• Current GSN collaborations:
–
Lingo DVD game, “The Wrong Game” in original programming
development, targeted ad buys for game show DVD/board
games
Appendix 4: Imagination Entertainment
Summary P&L:
in 000 US$
Revenue
2004
2005
$13,210
% of sales
EBITDA
% of sales
2007E
$19,136
$42,998
$69,862
45%
125%
62%
$6,878
$8,379
$23,626
$37,649
52%
44%
55%
54%
$344
$1,315
$11,261
$15,351
3%
7%
26%
22%
Growth rate %
Gross profit
2006
Appendix 4: Imagination Entertainment
Top titles:
2006
Rank
Game Title
Developer / Licensor
2006
Revenue
1
Deal or No Deal
Endemol USA
$16,794,458
2
Family Feud
Fremantle
$6,287,776
3
Pirates of the Caribbean
Disney
$3,363,981
4
Fact or Crap
Imagination
$3,015,479
5
Battle of the Sexes
Imagination
$2,704,737
6
Name That Tune
Sandy Frank among others
$1,387,483
7
Dance Dance Revolution
Konami Digital Entertainment
$1,222,329
8
Beat The Parents
Imagination
$230,657
Appendix 4: Imagination Entertainment
Licensed games:
•
•
•
•
•
•
•
•
•
•
Deal or No Deal
• What’s My Line
Family Feud
• Beat the Clock
Who Wants to be a Millionaire
• Tetris
Planet Earth (pending)
• Whac-A-Mole
Pirates of the Caribbean
• Disney Trivial Pursuit
Dance Revolution
• Let’s Make a Deal
Shout
• Jumble
Would You Rather
• Big Brother
Name that Tune
• Cricket Trivia
To Tell the Truth
• Pass Out
• Family Fortunes
Strategy:
Proprietary games:
•
•
•
•
•
•
•
•
•
•
•
•
Press Your Luck
The Price is Right
Blankety blanks
Backwords
Temptation
Derby Day
In Order to Win
Party Bingo
Sudoku
The Brain Game
Charades
Bunco
• Use scale and retailer relationships to
secure most attractive IP licenses
• Pick-up games already successful on TV
and radio (no guessing)
• Speed to market; Imagination owns its
studio and produces the games, it is
faster than competitors
•
•
•
•
•
•
•
•
•
Battle of the Sexes
Fact or Crap
Brain Game
Beat the Parents
The Wrong Game
Left Center Right
Snipe It
Mind Twist
Wethead
• Leverage distribution relationships
to commercialize owned games,
which offer higher margins
• Aggressively buy or trademark
public domain game concepts
• Imagination has build a “library” of
game concepts waiting to be
exploited
Appendix 5: Rolling deferred bonus plan
Base Year EBITDA (Act. Prior Year)
Grant 1
26,000,000
Grant 4
50,781,250
Grant 5
63,476,563
Target EBITDA Growth %
YR 1 EBITDA Target
YR 2 EBITDA Target
YR 3 EBITDA Target
Cum EBITDA Target
12%
12%
12%
12%
29,120,000 36,400,000 45,500,000 56,875,000
32,614,400 40,768,000 50,960,000 63,700,000
36,528,128 45,660,160 57,075,200 71,344,000
98,262,528 122,828,160 153,535,200 191,919,000
12%
71,093,750
79,625,000
89,180,000
239,898,750
Actual EBITDA Growth %
YR 1 EBITDA Actual
YR 2 EBITDA Actual
YR 3 EBITDA Actual
Cum EBITDA Actual
25%
25%
25%
32,500,000 40,625,000 50,781,250 63,476,563
40,625,000 50,781,250 63,476,563 79,345,703
50,781,250 63,476,563 79,345,703
0
123,906,250 154,882,813 193,603,516 142,822,266
79,345,703
0
0
79,345,703
% Target
Over Goal
Overage % Credited as Bonus Pool
Bonus Pool Funding
Plan Salaries
Base Pool %
Base Pool Funding
126%
Grant 2
32,500,000
126%
Grant 3
40,625,000
126%
25,643,722
15%
3,846,558
32,054,653
15%
4,808,198
40,068,316
15%
6,010,247
7,732,500
20%
1,546,500
8,119,125
20%
1,623,825
8,525,081
20%
1,705,016
Partial Grant Funding %
Total Base Pool & Bonus Pool
74%
(49,096,734) (160,553,047)
15%
15%
0
0
8,951,335
20%
1,790,267
67%
5,393,058
6,432,023
7,715,264
33%
1,193,511
9,398,902
20%
1,879,780
33%
626,593
Appendix 5: Rolling deferred bonus plan
Grant 1
Number of Participants Plan Start
Forfeiture %
Number of Participants After Forfeiture
Average Payout Per Participant
% Payout Per Participant Base Salary
Grant 2
33
Grant 3
33
Grant 4
33
10%
10%
10%
30
181,584
77%
30
216,566
88%
30
259,773
101%
Grant 5
33
10%
33
10%
30
40,186
15%
30
21,097
7%
Example:
Employee
Employee A
Employee B
Employee C
Employee D
Grant 1
Salary
150,000
200,000
300,000
400,000
Target
12%
18,000
24,000
36,000
48,000
Grant 1
Payout
116,242
154,990
232,484
309,979
Grant 2
Payout
132,034
176,046
264,069
352,092
Grant 3
Payout
150,835
201,113
301,669
402,226
Grant 4
Payout
22,222
29,630
44,444
59,259
Grant 5
Total
Payout
Payout
11,111
432,445
14,815
576,593
22,222
864,889
29,630 1,153,186
%
Salary
288%
288%
288%
288%