V I D E O • A G E Se p t e m b e r/ Oc t o b e r 2 0 0 9 58 studios, theatrical ultimates are good for approximately four years, then they switch to a cash basis in U.S. syndication. Classic Media’s Doug Schwalbe noted that calculations at his company are based on the life of the copyright, or three full cycles –– something around 20 years. For a TV series, the most important (and complex) income forecast comes from the international sales. There are times, however, when shows such as M*A*S*Hand The Cosby Show, comedies that generally do not do well in the international marketplace, have each generated $1 billion in U.S. sales. In these cases, domestic sales were the driving force of their ultimates. At the U.S. level, income estimates come from secondary TV licensing (syndication), online limited rights, DVD-box set, and ancillary rights. Naturally, the initial sale is to the commissioning TV outlet, which is a known entity both in terms of revenue and deficit carried. At the international level, each territory has its own set of rules for the pay window (such as Sky), online rights, FTA sales, DVD-box, and ancillary rights. For example, while most territories use BO grosses to set pay-TV fees, France uses admissions. According to Irv Holender of Los Angeles-based The Fremantle Corp., for the past three years, international TV sales have been the most predictable forecasts. Eight countries provide up to 80 percent of International TV revenues (Canada, U.K., Germany, Italy, France, Australia, Japan and Spain). In the past, each hour of a commercial drama series was valued at $1 million worldwide (non commercial, PBS-style TV series could go as low as to $300,000 per episode). Nowadays, however, some commercial series (such as Disney’s FlashForward) could fetch as much as $3 million per hour worldwide (see story on pg.46). In addition to conducting interviews with six executives, the story was supervised by Tony Friscia, an entertainment industry executive and consultant, who has created and maintained ultimates at Twentieth Century Fox (both theatrical and television), Columbia Pictures Television and Lorimar Home Video. Friscia has overseen the ultimates of such classic shows as Star Wars , M*A*S*H, Barney Miller , and the Jane Fonda workout videos. After reviewing the story Friscia summarized: “The individual film forecast computation method or ultimates, amortizes film costs (production costs, participations, residuals, prints and other exploitation costs) in the same ratio that current gross revenues bear on anticipated or ultimate total gross revenues. That method requires the determination of a fraction. The numerator being gross revenues from the film for the current period and the denominator being the ultimate total gross revenues from exploitation in all media and all markets. Due to the uncertainties in the estimating process, ultimates are reviewed periodically and are revised when necessary to reflect more current information. Unamortized film costs are compared with Net Realizable Value (NRV) each reporting period on a film-by-film basis. NRV is ultimate revenue less ultimate costs. If estimated ultimate revenues are not sufficient to recover the unamortized film costs, the unamortized film costs are written down to NRV. In other words, you are required to take a write-off and recognize the loss. A write-down may be required even before the film is released.” Now, one can appreciate the importance of forecasting, but it is not an art limited to Hollywood’s film and television production. Other industries, such as fashion and textiles, use forecasting extensively since they have to predict, often five years in advance, which color will eventually be popular so that fabric manufactures can gear up for the new colors that designers will be utilizing. (Continued from Page 56) “Ultimates” Game by territory basis. Worldwide grosses are to be considered when residuals and bank interests are factored in. The final entries are the generics for ancillary rights, such as hotels, colleges, airlines, ships, merchandising and music publishing (e.g., Hannah Montana). However, the utimates don’t end with the first life cycle of a movie (which could last from three to five years), but continue forecasting subsequent sales cycles and finally a film life as library material. For Classic Media’s Doug Schwalbe VideoAge’s December Miracle on 75th Street Issue. VideoAge, 216 E. 75 St., NY, NY, 10021 - Tel. +1-212-288-3933 www.videoage.org & Covering the German and Singapore markets with a single issue is nothing short of a miracle, but VideoAge pulls it off by being at both the: German Screenings in Munich Asia TV Forum in Singapore Plus: We check-in with the key buyers in Latin America. VideoAge’s December Issue will make all your dreams come true and prepares you for a prosperous 2010!
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