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Confidential Draft SPT Strategic Initiatives February 1, 2008.

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Presentation on theme: "Confidential Draft SPT Strategic Initiatives February 1, 2008."— Presentation transcript:

1 Confidential Draft SPT Strategic Initiatives February 1, 2008

2 1 Value ConsiderationsCurrent SPE RelationshipHistory of Success Embassy Row Overview Creator of numerous successful game and reality shows including: –The Power of 10 on CBS –The 9, online with Yahoo! –Buzz Session with Yahoo! –World Series of Pop Culture on VH1 –Grand Slam on GSN –Chain Reaction GSN –Boy Meets Grill on Food Network SPE’s existing deal with Davies / ER runs through Jan 2, 2009 During this term SPE: –Funds $1.2MM of Embassy Row overhead –Recoups up to $600K in EP Fees –Receives all copyright to shows created by ER ER derives its profits from –Executive Producer fees –Mark-up on overhead charged to shows –Ongoing profit participation By acquiring ER, SPE: –Shifting Davies profit focus to the creation of new formats –Extending the relationship beyond the current term –Acquiring ER’s existing profit streams Embassy Row 2007E profit of $3.4MM implies a value of $20MM - $40MM (1)(2) With successful new shows, value would be significantly higher Note: (1) DCF of $3.4MM in perpetuity at a 16.5% discount rate (2) Based on a marekt multiple of 11.7x EBITDA of $3.4M SPE plans to submit an LOI to acquire ER for $20MM up-front + $28MM in earn-outs A final deal may require more than $50MM total consideration (tied to EBITDA performance)

3 2 Embassy Row Go-forward Operations Distribution with 2waytraffic Management and Reporting Format Development and Acquisition Existing ER slate will be extended into syndication and formats sold abroad New formats will be based on SPE library product, new U.S.-based development, and acquired international formats Limited incremental investment will be required to expand the team, including 3 people acquiring international formats and 3 people developing additional show concepts in-house The business will be managed as an independent unit within SPT with a dedicated P&L ER will leverage 2waytraffic’s existing sales force to sell ER developed formats internationally Requires limited incremental investment in SPE HC (i.e., 3 additional sales people) to sell ER formats worldwide Distribution without 2waytraffic

4 3 Crackle Update The Grouper acquisition significantly increased our presence in online video –Secured a large audience that currently includes over 10MM monthly unique viewers –Provided a platform to market and distribute content online, reach a younger demo, create new distribution, and capture a greater share of growing online ad spend The Crackle re-launch positioned the service for continued growth in a competitive market –Shifted focus from technology to content and programming to differentiate the service –Emphasized higher quality, short-form video to attract top talent and advertisers Going forward, Crackle will expand to encompass all our online, ad-supported content –Leveraging a dedicated organization for original short-form content that debuts on Crackle, differentiates the service, and attracts new users –Elevating the quality of content on Crackle with the addition of movies and television shows –Expanding audience through single distribution team that ensures Crackle content is widely available across partners and platforms

5 4 Note: Next page was drafted by Jim Underwood Steve Brunell will be sending two new pages on Thursday: –One page overview of FUN’s business –One page explaining the rationale for a GSN/FUN merger Jim will integrate those pages as well

6 5 Potential TransactionFit with GSNFUN Overview GSN / FUN Technologies Investment Opportunity FUN offers leading casual games across platforms (online, mobile, interactive TV) FUN provides private label gaming systems and services for AOL, MSN, NASCAR.com 2008E Revenues: $112.7MM 2008E EBITDA: $12.6MM Estimated 20% CAGR for revenues through next 4 years David Goldhill was recently hired to run GSN and is also Chairman of FUN Goldhill believes there is a strong fit between the two companies and is creating formal operating ties FUN Extends GSN into new, faster growing revenue streams and provides casual games that appeal to GSN’s current demo FUN will leverage GSN game show brands to create new casual games Sony and Liberty each own 50% of GSN Liberty owns 100% of FUN, having recently acquired the portion it did not already own at an implied total value of $206MM Liberty will either merge GSN with FUN or create a formal partnership agreement between the two If GSN and FUN merge, SPE may invest $100 - $150MM to maintain our 50% stake


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