Producing our Prosperity VYP Producing our Prosperity

Contents Overview Prioritization and Identification Discussion and Recommendation Ethical Issue Comprehensive Analysis

Overview Proposal Successful Programmes Strategic Favorable Profit ISSUES AIM OF VYP RECOMMENDATION Proposal Successful Programmes Strategic Expand into Corporate Videos Penetrate Corporate Videos The New Children’s Programme Accept a lower commission price and sell the merchandise Favorable Profit Problem Operational Re-commissioned Drama Series Reinforce cost control by: - Improve the IT system - Incentive programmes Corporate Social Responsibility A New Documentary of VYP Negotiate on contracts Accident at Studio

Contents Overview Prioritization and Identification Discussion and Recommendation Ethical Issue Comprehensive Analysis

Identification and prioritization of issues Identification and Classification Prioritization Reputation (0.4x) Programme quality Brand recognition Corporate social responsibility Financial Performance (0.4x) Profitability Liquidity Urgency (0.2x)

Contents Overview Prioritization and Identification Discussion and Recommendation Expand into Corporate Advertising Videos Fee Negotiation for New Children’s Programme Accident at Studio “Banks – friend or foe?” – A New Documentary of VYP Re-commissioned Drama Series Ethical Issue Comprehensive Analysis

Corporate Advertising Videos Market is strategically suitable… Market situation Competitors situation Promising market Benefits of Corporate Videos Drive higher sales, even a 100% conversion lift Raise Google rankings of official website Keep customers stay longer on the websites Traditional Video production companies are being squeezed from both end, facing tremendous price pressure Huge and expanding market Weakness of competitors Strength of VYP Video types grow from l0- to 50+ Frequency of production has increased tenfold Videos delivered on-line increase 41% in 2007 High Cost Expensive studios & equipments Complex management and admin layers Unacceptable Revenue Sharply Declining rates due to high competition Rich experience & prestige directors Low equipments margin cost Effective management

…financially acceptable and operationally feasible. Assumptions Optimism Pessimism Neutralism Revenue decline for subsequent 0% Cost of actors for the first video 2,800 4,800 4,000 Cost decline for subsequent 15% 5% 10% Neutralism 1st video/ £ subsequent Revenue 17,000 Actors 4,000 3,600 Studio hire 5,000 4,500 Film crew 6,000 5,400 Scripting & Music 2,700 2,430 Total costs 17,700 15,930 Margin (700) 1,070 Margin % -4.12% 6.29% Optimism 1st video/ £ subsequent Revenue 17,000 Actors 2,800 2,380 Studio hire 5,000 4,250 Film crew 6,000 5,100 Scripting & Music 2,700 2,295 Total costs 16,500 14,025 Margin 500 2,975 Margin % 2.94% 17.50% Pessimism 1st video/ £ subsequent Revenue 17,000 Actors 4,800 4,560 Studio hire 5,000 4,750 Film crew 6,000 5,700 Scripting & Music 2,700 2,565 Total costs 18,500 17,575 Margin (1,500) (575) Margin % -8.82% -3.38% Proposal is acceptable as long as subsequent video is commissioned Rich video producing experience Prestige directors Numerous potential clients Necessary equipments Operating Advantages Enhance pre-production communication with clients Hire corporate video producing expert Develop new clients Operating Improvements

Contents Overview Prioritization and Identification Discussion and Recommendation Expand into Corporate Advertising Videos Fee Negotiation for New Children’s Programme Accident at Studio “Banks – friend or foe?” – A New Documentary of VYP Re-commissioned Drama Series Ethical Issue Comprehensive Analysis

Merchandising sales can generate more profits for VYP Merchandise generates large revenue Genre Episodes Publicity Age group Merchandise Model Merchandise sales Puppet TV Series 365 113 countries, 100+ broad-casters 1~5 year old Merchandising sales £125m in 1997 (first year) Cartoon Series; Movie 882 ~50 broad-casters All age group, mainly kids Manufacturing, distributing; leasing £10.33m (RMB 85m) Breakeven sales is attainable Merchandising sales burdens risks Expected £185m The 1st year merchandising sales of Sammy Squirrels is comparable to the 1st year merchandising sales of Teletubbies; The inflation rate of UK is 47.80% from 1997 to march of 2012. Breakeven £22.05m Accepting the original contract, VYP will earn a profit of 6,300,000 - cost; Lower program fee + merchandise right structure will generate a profit of 4,095,000 – cost + 0.1*m-sales. Re-commission Publicity Exposure Sales level VYP could lease Sammy Squirrels

Contents Overview Prioritization and Identification Discussion and Recommendation Expand into Corporate Advertising Videos Fee Negotiation for New Children’s Programme Accident at Studio “Banks – friend or foe?” – A New Documentary of VYP Re-commissioned Drama Series Ethical Issue Comprehensive Analysis

Accident at Studio Accident at Studio Anti-social Hours Poor Planning Production Team Accident at Studio Offer training projects to production team IT system Improve IT system VYP’s Anti-social Hours Behaviors* Balance the profit interest and welfare Anti-social Hours Violate local labour laws and The Working Time Regulations Harm VYP’s social image and reputation Damage employees’ health, safety and working efficiency

Contents Overview Prioritization and Identification Discussion and Recommendation Expand into Corporate Advertising Videos Fee Negotiation for New Children’s Programme Accident at Studio “Banks – friend or foe?” – A New Documentary of VYP Re-commissioned Drama Series Ethical Issue Comprehensive Analysis

“Banks – friend or foe?” – A new documentary of VYP– Short-term Causes of the Cost Over-run Investigations took longer than anticipated Repeated Interviews are required for further clarification of the inconsistency in the evidence gathered Solutions Raised by VPY No more interviews Cut back CGI Usage Breakeven Saving up to £62,000* Quality Concerns Other Cost Saving Methods Reduce the use of outside filming Avoid the use of actors and famous personalities * A forecast margin of £32,000; A loss of £30,000 with full use of CGI and interviews

“Banks – friend or foe?” – A new documentary of VYP– Long-term VYP’s Problems Potential Solutions Inaccurate anticipation Poor cost control Improve IT system Trainings and instructions Performance related bonus Influence VYP’s profitability Harm VYP’s reputation Enhance the producing and financing team Trainings and instructions Performance related bonus Profit Margin Reduction Equipment & Employees 2010 10.1% Equip VYP with its own premises Employ VT crews 2011 9.4%

Contents Overview Prioritization and Identification Discussion and Recommendation Expand into Corporate Advertising Videos Fee Negotiation for New Children’s Programme Accident at Studio “Banks – friend or foe?” – A New Documentary of VYP Re-commissioned Drama Series Ethical Issue Comprehensive Analysis

VYP should negotiate the re-commission fee and the actors’ contract Negotiation on the re-commission fee Reasons for lowered re-commission fee Built studio sets Outdoor scenes, new sites Fee negotiation Not Applicable Mature research and ideas More research and new ideas Cost control Expertise from previous series Applicable Planning and arrangement John Strong’s contract problem Apr May Jun July Aug Sep Oct Nov Dec Jan Feb Mar John Strong's contract Latest plan and shoot

Contents Overview Prioritization and Identification Discussion and Recommendation Ethical Issue Comprehensive Analysis

VYP Should Pay More Attention on Ethical Issues Employees 1 High-quality TV Program 2 Charity and Public-benefits Programmes 3 Development of the Youth 4

Contents Overview Prioritization and Identification Discussion and Recommendation Ethical Issue Comprehensive Analysis

Comprehensive Analysis of the strategy Prioritized No.1 Issues Action Plan VYP’s Aim A new documentary of VYP Expand into Corporate Videos 1 The New Children’s Programme Accident at Studio Re-commissioned Drama Series 2 3 4 5 Penetrate the market of corporate video Initiate production meeting with clients Hire experienced corporate advertising staff Successful Programmes Accept a lower fee Sell the merchandise itself Consider leasing the merchandise rights Favorable Profit Respond to the builder’s injury positively Improve the IT system and the production team Balance VYP’s profit and its corporate social responsibility Cut cost in every possible way while maintaining quality Improve the IT system and enhance the employees’ performance Corporate Social Responsibility Negotiate with BBC on the re-commission fee Execute more strict cost control Negotiate with the actor and smooth the shooting plan Prioritized No. 5

Backups Prioritization and Identification Expand into Corporate Advertising Videos Fee Negotiation for New Children’s Programme

Prioritization and Identification Prioritization Chart Issue Reputation W1 Financial W2 Urgency W3 Credit Priority 1 2 0.4 3 0.2 2.6 5 4 3.8 3.2 3.4

Expand into Corporate Advertising Videos The Changing Face of Corporate Video Industry in UK Traditional approach What works today Budget Large Small – Medium Typical message delivery Actor, presenter or professional voice-over Real people saying real things Frequency of production 1 or 2 videos a year 10’s or even 100’s of videos Scope of video production Broad – a single video covered as much ground as possible Narrow – video focuses on a specific audience with a targeted message

Expand into Corporate Advertising Videos The Changing Face of Corporate Video Industry in UK Uses of Videos Today - Customer Testimonials - Video Case studies - Product ‘explainer’ videos - Product FAQ - Event promotion - Recruiting - Viral Video - Content marketing - Infomercials - Interactive video - Video press releases - Community relations videos - etc. Traditional Uses of Videos - TV Commercials -Sales Presentations - Homepage of your website.

Fee Negotiation for New Children’s Programme The Breakeven Sales of Merchandising Sales £ Revenue 4,095,000+0.4s Program fee 4,095,000 Revenue/h 227,500 Total hours 18 Merchandised sales 0.4s Cost a+0.3s Program cost C Merchandised cost b*0.75*0.4 Profit 4,095,000-c+0.1s £ Revenue 6,300,000 Program fee Revenue/h 350,000 Total hours 18 Cost C Profit 6,300,000-c Breakeven sales 22,050,000