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Sony Pictures Digital Productions Budget Overview

An overview of Sony Pictures' digital productions budget for the fiscal year 2014, including highlights and strategic objectives.

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Sony Pictures Digital Productions Budget Overview

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  1. Sony Pictures Digital Productions Fiscal Year 2014 Budget Overview February _, 2013

  2. Agenda Page Number FY13 Q4 Forecast Update 4 - 5 FY14 Budget Overview 7 - 12 Film Ultimates 14 - 17

  3. FY13 Q4 Forecast Update

  4. FY13 Highlights • Full-year EBIT $33.7MM favorable to budget, excluding Aardman titles: • Hotel Transylvania enjoyed enormous worldwide success and is now SPA’s best performing animated feature (#1 domestic September opening of all time, #5 domestic family film this year, #7 family film in worldwide box before its release in France) • Hotel Transylvania’s current projected worldwide performance of $335MM (excluding China) resulted in GP of $79.3MM, $31.6MM higher than greenlight • Imageworks generated $23.0MM in EBIT ($16.0MM favorable to budget), due to stronger than anticipated margins from 3rd party business as well as ongoing cost savings from continued expansion in Vancouver and efficiencies in Culver City • Imageworks maintained its reputation for excellence in the industry, providing high-end VFX and animation work at competitive prices: • Imageworks won this year’s Sci-Tech Academy Award for its work developing Katana (lighting software), which has been monetized subsequently via commercial release with a developer partner • Finishing production on Disney’s March 2013 tentpoleOz: The Great and Powerful, directed by Sam Raimi • In production on Cloudy 2; in pre-production on Amazing Spider-Man 2 and All You Need is Kill (Warner Bros)

  5. FY13 Highlights • The Smurfs: A Christmas Carol, a 22 minute CG/2D animation hybrid short produced originally for the Smurfs 1 home video release, debuted at #1 in its time slot on Cartoon Network and aired internationally in major territories this holiday season, providing an early pre-theatrical marketing boost for Smurfs 2 • Christmas Carol was also sold separately this year • SPA is producing 22 minute The Smurfs: Legend of Smurfy Hollow for October 2013 for TV and separate sale, to help promote home video release of Smurfs 2 worldwide later in the year • Both Smurfs shorts will be bundled for sale with a 3rd title to be produced in conjunction with Smurfs 3, also intended primarily to assist home video • Hotel Transylvania received Golden Globes and Annies nominations for best animated feature • Goodnight Mr. Foot, a 4 minute 2D-animated short produced for home video and attached theatrically to the film Halloween week, was also nominated for an Annie • The Hotel Transylvania Social Game generated over 1MM installs, assisting theatrical and home video marketing while providing a significant user base that can be leveraged for future films

  6. FY13 Q4 Financial Summary ($ in Thousands) TO REPLACE

  7. FY14 Budget Overview

  8. Create additional content to promote films Identify and execute future high-margin franchises FY14 Strategic Objectives • Develop high-margin family-friendly films with franchise potential • Deliver 2 family films per year – either CG-animated or live-action hybrid features • Execute sequels with no more than a 3 year lapse to maximize brand awareness • Have films greenlit and in production 2 years ahead of theatrical release to solicit high quality promotional and licensing partners • Continue to lower average cost of production in response to new economics • Collaborate closely with other SPE divisions to maximize overall revenue opportunity in the theatrical window and beyond • Maintain ongoing relevance of the brand by opportunistically producing additional content at low cost • Smurfy Hollow, a 22 minute CG/2D animation hybrid, will be broadcast separately on TV prior to home video release, successfully expanding on a pre-sale strategy tested with Smurfs: A Christmas Carol • A series of Cloudy 2 shorts, produced inexpensively in predominantly 2D animation, will help online theatrical marketing while still providing important value in the home video window • Opportunistically publish mobile and social apps based on SPA properties that serve as powerful marketing engines while also generating revenue page 8

  9. Sony Pictures Interactive: Execute industry- leading digital campaigns at below market rates Explore potential for TV series based on SPA properties Resize Imageworks and maximize use of Vancouver facility FY14 Strategic Objectives • Sound out opportunities with potential partners – Cartoon Network, Nick and the Hub – to license our properties for a TV series, emulating the model for the DWA’s Penguins of Madagascar series on Nick • Significant EBIT potential from new consumer products licensing opportunities • Potential for incremental profits from rights fees and a share of TV revenue at low investment risk • Maintains high awareness in off-film years, supporting the overall franchise (Madagascar 3 significantly outperformed the prior film with the support of the Penguins show) • Provides theatrical spin-off opportunities (like Penguins) • Proactively resize the business from $150MM/yr to $115-$120MM/yr to adapt to strong price competition and continued volatility in VFX while maintaining quality • Expand Vancouver into all remaining production departments to take even greater advantage of the 58.4% tax rebate on labor. • The number of projected artists in Vancouver are now on par with the number in Culver City • Continue to assist Digital Marketing in developing strategy while executing industry-leading campaigns across all platforms at below market rates • Significantly resize group to meet current cost initiatives requirements without sacrificing major capabilities or quality • Develop 3rd party business to provide incremental EBIT and lower overall costs, mirroring successful Imageworks model page 9

  10. FY14 Budget Financial Summary ($ in Thousands) TO REPLACE

  11. MRP EBIT Reconciliation to FY14 Budget ($ in Thousands) TO REPLACE

  12. MRP Net Cash Reconciliation to FY14 Budget ($ in Thousands) TO REPLACE

  13. FY14 Budget Risks & Opportunities ($ in Thousands) TO REPLACE

  14. Imageworks FY14 Budget Revenue ($ in Thousands) TO REPLACE

  15. Film Ultimates

  16. TO REPLACE page 16

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