Industry Surveys Movies & Home Entertainment

September 20, 2007

Tuna N. Amobi, CFA, CPA CURRENT ENVIRONMENT...... 1 Movies & Operating conditions a mixed bag of challenges and opportunities Solid summer box office puts industry in line for blockbuster year Entertainment Analyst Movie studios’ share in 2006 Home video market matures William H. Donald Music sales go from bad to worse Financial Writer Online music retailers try new pricing scheme Entertainment companies continue to jockey for position in media race

INDUSTRY PROFILE...... 7 Consumers and advertisers front the bill The film industry Television The music business INDUSTRY TRENDS ...... 8 Old-line media companies reposition Future growth drivers Contacts: Studios seek synergies TV time Inquiries & Movies: cashing in on sequels Client Support Music: an aging customer base 800.523.4534 HOW THE INDUSTRY OPERATES ...... 17 clientsupport@ Movies: in the theater and at home standardandpoors.com TV industry: big networks still lead Cable system operators Sales Music labels 800.221.5277 KEY INDUSTRY RATIOS AND STATISTICS ...... 23 roger_walsh@ HOW TO ANALYZE AN ENTERTAINMENT COMPANY ...... 24 Lines of business standardandpoors.com Success factors Analyzing financial statements Media Michael Privitera GLOSSARY ...... 30 212.438.6679 michael_privitera@ INDUSTRY REFERENCES...... 32 standardandpoors.com COMPARATIVE COMPANY ANALYSIS ...... 36 Replacement copies 800.852.1641

THIS ISSUE REPLACES THE ONE DATED MARCH 29, 2007. THE NEXT UPDATE OF THIS SURVEY IS SCHEDULED FOR MARCH 2008. Standard & Poor’s Industry Surveys

Executive Editor: Eileen M. Bossong-Martines Associate Editor: Joseph M. Coda Copy Editor: Brandon Wilkerson Statistician: Sally Kathryn Nuttall Production: GraphMedia

Client Support: 1-800-523-4534 Copyright © 2007 by Standard & Poor’s All rights reserved. ISSN 0196-4666 USPS No. 517-780 Visit the Standard & Poor’s Web site: http://www.standardandpoors.com

STANDARD & POOR’S INDUSTRY SURVEYS is published weekly. Annual subscription: $10,500. Please call for special pricing: 1-800-523-4534, option 2. Reproduction in whole or in part (including inputting into a computer) prohibited except by permission of Standard & Poor’s. Executive and Editorial Office: Standard & Poor’s, 55 Water Street, New York, NY 10041. Standard & Poor’s is a division of The McGraw-Hill Companies. Officers of The McGraw-Hill Companies, Inc.: Harold McGraw III, Chairman, President, and Chief Executive Officer; Kenneth M. Vittor, Executive Vice President and General Counsel; Robert J. Bahash, Executive Vice President and Chief Financial Officer; John Weisenseel, Senior Vice President, Treasury Operations. Periodicals postage paid at New York, NY 10004 and additional mailing offices. POSTMASTER: Send address changes to Standard & Poor’s, INDUSTRY SURVEYS, Attn: Mail Prep, 55 Water Street, New York, NY 10041. Information has been obtained by Standard & Poor’s INDUSTRY SURVEYS from sources believed to be reliable. However, because of the possibility of human or mechanical error by our sources, INDUSTRY SURVEYS, or others, INDUSTRY SURVEYS does not guarantee the accuracy, adequacy, or completeness of any information and is not responsible for any errors or omissions or for the results obtained from the use of such information.

VOLUME 175, NO. 38, SECTION 2 THIS ISSUE OF INDUSTRY SURVEYS INCLUDES 3 SECTIONS. CURRENT ENVIRONMENT

Operating conditions a mixed bag of challenges and opportunities

Despite a number of challenges, movie produc- the two highest grossing movies of the year ers are enjoying a strong 2007, thanks to the were sequels: Spider Man 3 was at the top, spring and summer release of at least seven se- with ticket sales of $336 million, followed by quels to previous blockbusters. Meanwhile, the Shrek the Third ($321 million). As of August music industry is battling for its health on sev- 6, four other sequels were among the top 15 eral fronts. Industry challenges include a sharp movies of 2007, year to date: Pirates of the drop (nearly 20% through mid-2007) in com- Caribbean: At World’s End ($307 million); pact disc (CD) sales, which is indicative of a Harry Potter and the Order of the Phoenix strong shift to single-song downloads and ($262 million); Live Free or Die Hard ($130 away from physical sales of entire albums. million), which resurrected the Die Hard The entertainment industry is challenged franchise starring Bruce Willis; and Ocean’s on several fronts: it is facing growing compe- Thirteen ($116 million). tition for consumer discretionary spending; it Box office receipts for 2007 are likely to is being hurt by piracy at home and abroad; top the $9.4 billion all-time record achieved it must compete for consumers’ time in an in 2004, a year when ticket sales gained increasingly crowded arena; some of its 2.5%. (Sales declined 6.1% in 2005, to $8.8 product formats are mature (the standard billion, then rose 4.2% in 2006, to $9.2 bil- DVD format for example); and many of its lion.) The box office gains in 2006 were business practices are outmoded or unwieldy helped by a 3.3% rise in the number of tick- for these times. ets sold to 1.45 billion, which itself was The industry has not been lying down, how- helped by an 11% rise in the number of pic- ever. Rather, movie and music companies are tures exhibited in theaters in 2006. The gain trying in numerous ways to appeal to con- also stemmed from a 2.8% rise in the aver- sumers, to take advantage of newer technolo- age ticket price in 2006, to $6.58 from an gies, to compete more effectively with new average admission price of $6.40 in 2005. competitors, and to develop business practices There are any number of indications why and strategies that will help them keep up with 2007 should end up being a record year. For the changing business environment. one, many of this year’s box office hits are INDUSTRY SURVEY still drawing sizable audiences. Only three Solid summer box office puts industry of the top 15 had finished their theatrical in line for blockbuster year runs as of August 6, 2007, and among those still in theaters, five opened around This year is stacking up to be a stellar Independence Day or later. The Bourne Ul- one for the movie industry. From January timatum, another sequel and sure-fire hit, 1, 2007, through August 6, 2007, movie opened on 5,200 screens in 3,660 theaters ticket sales advanced 6.9% to nearly $6.2 nationwide on August 3, 2007. The action- billion, up from almost $5.8 billion in the thriller starring Matt Damon took in $69.3 comparable 2005 period. The year-to-date million in its first weekend, a record for an Au- MOVIES & HOME ENTERTAINMENT performance at the box office stemmed gust opening as well as for a spy-thriller open- from a number of high-grossing movies: ing, and the movie is sure to move rapidly up each of the top 15 movies of 2007 had the list of box office rankings for 2007. ticket sales greater than $100 million. In addition, the movie industry was antici- Noticeable among this year’s hits were pating dozens of potential box office successes many familiar characters and titles. In fact, scheduled to hit theaters from the second week SEPTEMBER 20, 2007 /

1 2 SEPTEMBER 20, 2007 / MOVIES & HOME ENTERTAINMENT INDUSTRY SURVEY 9974872 ,6 10 .883 37,185 5.08 8.3 37,396 5.39 6.1 1,465 (1.0) 35,280 35,786 7,4487.2 36,764 1,421 3.8 (3.0) 5.66 4.9 2.7 6.03 5.81 7,6612.9 4.7 1,487 1999 38,852 10.2 8,4139.8 1,639 36,595 (4.0) 1,574 3.2 SCREENS 6.41 2000 6.21 3.0 NA 9,52013.2 %CHG. 2001 DOLLARS 9,489(0.3) 2.2 6.55 1,536 (8.7) 1,403 (2.4) 2002 %CHG. 9,5390.2 3.3 1,449 INBIL. 2003 8,991(5.2) 2004 9,487(0.5) %CHG. 2005 BIL.$ 2006 YEAR DOMESTIC THEATRICAL MOVIEINDUSTRY PROFILE 9659276 ,3 . 44 . 29,690 4.42 1.6 31,640 6.0 1,339 4.59 3.8 5,9127.6 Source: MotionPictureAssociationofAmerica. 34,186 3.7 1,388 4.69 2.2 Note: Percentagechangesbasedonunrounded data.NA-Notavailable. 6,3667.7 6.7 1,481 1996 6,9499.2 1997 1998 O FIEAMSIN TICKETPRICE ADMISSIONS BOX OFFICE ter Horse:LegendoftheDeep sequel to Cage; Treasure: Bookof Secrets promising. Itincludesthesequel for openings,andthisyear’s lineuplooks Uma Thurman,andReneeZellweger. Broderick, RobertDuvall,William H.Macy, cast ofvoice-overpersonnelincludingMatthew Bee Movie Denzel Washington andRussellCrowe; Thornton andSusanSarandon. Woodcock Jamie FoxxandJenniferGarner; Crowe; 3:10 toYuma several potentialcrowdpleasers,suchas movie starringJetLi. ney, andPaulGiamatti; name, starringScarlettJohansson,LauraLin- based onthebest-sellingbookbysame has ring Tyler PerryandJanetJackson.November Why DidIgetMarried ley; epic starringAnthonyHopkinsandBenKings- Nicole Kidman; Miller; Claire Danes,MichellePfeiffer, andSienna with abig-namecastincludingRobertDeNiro, Chan andChrisTucker; to thehitaction-comedyseries,starringJackie Some oftheseinclude: in AugustthroughtheendofDecember2007. December ishistoricallyastrongmonth October hastheopeningof September’s menu ofopeningsincludes American Gangster The NannyDiaries Aliens vs.Predator The Invasion The Kingdom AVP: Alienvs.Predator , ananimatedfilmwithall-star , acomedystarringBillyBob , awesternstarringRussell The LastLegion , asci-fithrillerstarring Rush Hour3 , athrillerstarring , acomedysequelstar- , acomedy-drama , acrimedramastarring Stardust , thesci-fihorror , starringNicolas AVERAGE WAR Tyler Perry’s , afantasy/ , afantasy , ahistorical , anaction National ; , asequel The Wa- NO. OF Mr. live actionfilm; and HelenaBonhamCarter. Depp, AlanRickman,SachaBaronCohen, Sweeney Todd cartoon/live actionfamilymovie;and a movies were fourth, withan11.6%share.Warner’s big The HillsHaveEyes included the domesticboxofficein2006.Itssuccesses share. Searchlightalonehada1.8%shareof (ahead ofBuenaVista), witha17.0% market moves uptosecondplaceintherankings specialty filmdivisionofFoxisincluded, Wears Prada Glorious NationofKazakhstan tural LearningsofAmericaforMakeBenefit Museum cluded third placewitha15.2%share.Fox’s hitsin- in boxofficereceipts. two movieoftheyear, with$244million possible III 2006 included market share.Paramount’s biggesthitsin com Inc.,wasinfifthplace,witha10.3% tals ofmorethan$100million. and theanimatedfilm year’s boxofficeleaderat$423million, the Caribbean:DeadMan’s Chest The company’s rosterwasledby ness rankedsecond,witha16.2%share. movies top$100millionattheboxoffice. The DaVinci Code tracker. Sony’s biggestmovieoftheyearwas an onlinemoviepublicationandboxoffice fice spending,accordingtoboxofficemojo.com, with itsfilmsaccountingfor18.6%ofboxof- January 1,2006,throughDecember31, the leadingmarketshareinperiodfrom theaters, SonyPicturesEntertainmentInc.had video market has matured.Theyearsof Movie studios’sharein2006 Home videomarketmatures and Warner Bros.EntertainmentInc.ranked Twentieth CenturyFoxFilmCorp.wasin Paramount PicturesCorp.,ownedbyVia- The Walt DisneyCo.’s BuenaVista busi- Among distributorsofmoviestodomestic There islittle doubt nowthatthehome The Departed X-Men: TheLastStand ; Little MissSunshine Ice Age:TheMeltdown , and . IfFoxSearchlightPictures,the Superman Returns , amusicalstarringJohnny Over theHedge Alvin andtheChipmunks Dreamgirls , eachwithboxofficeto- . Thecompanyhadfive ($42 million). Cars . , thenumber ($60 million)and ; ; and Night atthe , , ; Mission: Im- Happy Feet Borat: Cul- Pirates of , the The Devil , , Nacho Libre Nacho III Saw Below Eight Panther Pink The Web Charlotte's Season Open Clause Escape 3: The Clause Santa The Man Inside Launch to Failure 4 Movie Scary Dreamgirls Break-Up Prada The Wears Devil Kazakhstan of The Nation Benefit Glorious Make of for Learnings America Cultural Borat: III Departed The Impossible Mission: Bobby Click Ricky of Ballad The Nights: Talladega Hedge the Over Happyness WORLDWIDE of Pursuit The US Royale Casino Meltdown The Age: Ice Feet Happy DISTRIBUTOR Returns Superman Code Vinci Da Stand The Last The X-Men: Cars Museum the at Night Chest Man's Dead Caribbean: the of Pirates MOVIE (Ranked by US box office, in millions of dollars) of millions in office, box US by (Ranked DOMESTIC THEATRICAL MOVIEHITS:2006–07 Source: boxofficemojo.com. *Still intheatersasofAugust2007. NOTE: Moviesaregroupedbasedontheyearinwhichtheyfirstappearedtheaters;allreceiptswerenotnecessarilycollecte the 2006firsthalf, whichincludedseveral DVD releasesin 2007couldnotcomparewith reflected difficultcomparisons, giventhatnew 2006. Thatdisappointingperformance largely were 5%lowerthanduringthe sameperiodin rose lessthan2%,to$15.9 billion. down continuedin2006,whenDVDsales crease for2005wasonly4.5%.Theslow- in 2000.However, theyear-over-year in- fourfold inonlyfiveyears,from$4.0billion sales weremorethan$15.7billion,upnearly rentals havecometoanend.By2005,DVD strong double-digitgrowthinDVDsalesand Sales inthesixmonthsthrough June2007 in ae8. 164.9 120.5 80.299.3 80.2 82.2158.9 Paramount 81.6 84.3189.1 Lions Gate 82.6144.4 Buena Vista 110.8 Sony Paramount Sony 84.5 88.5184.4 88.7128.4 Buena Vista Universal 90.7178.3 Paramount Dimension 124.7325.5 260.9 Weinstein/ 118.7205.0 DreamWorks 154.6 Paramount/ 103.4 128.5 Universal Fox 289.8 137.4237.7 132.4 134.0397.9 Fox Warner Bros. 148.2163.0 Paramount Sony 163.6305.1 Sony 167.4594.2 195.3651.6 DreamWorks 335.2 Paramount/ 155.0 384.3 Sony 391.1 Sony 217.5758.2 234.4459.3 198.0 Fox 462.0 200.1 Warner Bros. 250.9573.3 Warner Bros. Sony 1,065.7 244.1 Fox Buena Vista 423.3 Fox Buena Vista 062007 2006 BOX OFFICE(MILS.) *Fantastic Four: Rise of Rise Four: Hard Die *Fantastic or Free Ultimatum *Live Bourne *The Up Movie *Knocked Simpsons *The WORLDWIDE *Ratatouille US Order the and Potter *Harry DISTRIBUTOR Caribbean: the of *Pirates 3 *Spider-Man MOVIE *Rush Hour 3 Hour *Rush *1408 *Hairspray Almighty *Evan You Pronounce Now *I Thirteen *Ocean's *Transformers the Silver Surfer Silver the Hogs Wild 300 Phoenix the of End World's At Third the Shrek Surf's Up Surf's Yard the Stomp Disturbia Terabithia to Bridge Norbit Robinsons the Meet Larry and Chuck Rider Ghost Blades of Glory of Blades sales areadvancing, andhavealreadyovertak- Blu-ray Discand HD(high-definition)DVD to theDVDbusiness.Suchnew technologiesas forces initsfavor, but thesearesmallrelative year salesmaybeflatatbest. half. Butwithoutsure-fireblockbusters, full heavier slateofDVDreleasesinthesecond should bepositive,however, largelyduetoa Goblet ofFire and theWardrobe Chronicles ofNarnia:TheLion,Witch such as blockbuster releasestothehomevideomarket, The homevideomarkethassome positive Wedding Crashers . Second-half2007comparisons o 130.9254.9 118.2144.3 132.2337.7 Paramount/ 141.6145.9 157.0392.2 Fox 147.0163.8 252.8 Fox 313.8 Universal Universal 456.1 168.3 Fox 194.5 Buena Vista 824.3 210.6 Buena Vista Warner Bros. 274.3 954.7 Warner Bros. 304.1633.5 DreamWorks Paramount/ 307.6 336.4890.1 Buena Vista 321.0733.1 DreamWorks Paramount/ Sony oy58.471.6 72.2 61.475.2 71.077.6 Sony 62.6 Screen Gems Sony/ 130.1 115.9 New Line 80.190.8 MGM DreamWorks 82.3 95.3 Paramount/ 152.2 Buena Vista New Line DreamWorks 97.7 98.0121.1 158.7 Paramount/ 95.4 Buena Vista 115.8228.7 106.1108.8 Universal 285.4 Universal 116.4 Sony Warner Bros. DreamWorks ; and d intheyearthatamoviewasreleased. Harry Potterandthe ; King Kong BOX OFFICE(MILS.) ; The

3 SEPTEMBER 20, 2007 / MOVIES & HOME ENTERTAINMENT INDUSTRY SURVEY 4 SEPTEMBER 20, 2007 / MOVIES & HOME ENTERTAINMENT INDUSTRY SURVEY Source: Wikipedia,based onNielsenSoundscanandBMGdata. Backstreet Boys RELEASE Eminem SOLD(MIL.) Nelly Usher Norah Jones Britney Spears Linkin Park The Beatles OutKast Shania Twain ALBUM Creed Eminem N'Sync ARTIST RECENT TOP-SELLINGALBUMS ing fastenoughtooffsetthedropinalbum video, andsubscription,havenotbeenadvanc- comparable year-earlier quarter.) first quarterof2007plunged20%fromthe units, versusthefirsthalfof2006.(Salesin the firsthalfof2007tonearly230million music sales,album(CD)salesdropped15%in cording toNielsenSoundScan,whichtracks sharper plungeinthefirsthalfof2007.Ac- cline hasbeenacceleratinginrecentyears. en yearsthrough2006,butthepaceofde- sales averagednearly5%peryearinthesev- $10.5 billion.ThepaceofdeclineinCD dropped 12.3%in2006,to$9.2billionfrom of musicsalesatroughly80%in2006, (compact disc)sales,thelargestcomponent billion, from$12.3billionin2005.CD Sales in2006alonedropped6.5%to$11.5 about 3%inthesevenyearsthrough2006. then declinedatanaverageannualrateof sic salespeakedat$14.6billionin1999, sharper plungeinthefirsthalfof2007.Mu- for morethansevenyears,tookaneven Music salesgofrombadtoworse sales forseveralyearstocome. Poor’s doesnot expectgiantstridesinthese supplant plasticDVDsales,butStandard& tually thesenewertechnologiesarelikelyto but thiscategoryisstillrelativelysmall.Even- million.) Digitaldownloadsarealsoadvancing, than $500million.(VHSsalesarebelow$300 en VHSsales,butthecategoryissmall—less Black and Blue and Black Show Eminem The Grammar Country Me Confessions with Away Come Again It Did Oops!...I Theory Hybrid Below Love 1 Speakerboxxx/The Up! Clay LP Human Mathers Marshall The Attached Strings No Digital salesintotal,includingmobile, As wealreadynoted,CDsalestookaneven Music sales,whichhavebeendeclining UBRYEAROF NUMBER 10.0 2002 10.0 2000 10.0 2000 10.9 2001 11.0 2003 11.0 2002 11.5 1999 11.5 2000 12.6 2000 8.0 2000 9.0 2002 9.0 2000 9.0 2004 stricted bystore hours.Internetdownloads anytime they wish, ratherthanbeingre- vide consumerstheconvenience ofshopping able toconsumers.Digitaldownloads pro- boosted thenumberoftitles readilyavail- store shelvescan.Thus,the Internethas catalogs canhousemanymore titlesthan loading isgrowingbecauseelectronic tion tolistenerpreference,digitaldown- contribution asrecently2004.Inaddi- revenues for2006,upsharplyfroma1% floor spacededicatedtophysicalmusicsales. Wal-Mart andBestBuy, arealsoreducing down. Thesebig-boxretailchains,including such asWal-Mart StoresInc.topush prices been hurtbythepowerofbigmusicretailers kill physicalmusicsales.Theindustryhas closed inthefallof2006,hasalsohelpedto record stores,suchasTower Records,which sharing. Thedemiseofbrick-and-mortar piracy inallitsforms,includingfreefile packaging intheformofplasticCDs. been freeoftheconstrictionsfullalbum the iTunes Storein2003,listenershave of Apple’s iPodmusicplayerin2001and sharing intheearly2000s,introduction listen to.With theproliferationoffile order togetthetrackstheyreallywant about beingforcedtobuyentirealbumsin buyers, itseems,havealwayscomplained have gottenitsstartbackthen.Record years ago,theshiftintosinglesaleswould nology hadbeenavailableearlier, even20 Poor’s believes,however, thatifthetech- from albumsintosinglesongs.Standard& preferences accountsforthetrendaway instead of15%. sales forthefirsthalfwouldhavedeclined9% lent ofacompletealbum,thentotalalbum If single-songsalesareconvertedintheequiva- 281 millionunitssoldinthefirsthalfof2006. downloads climbedto417millionunitsfrom 49% inthefirsthalfof2007,assingletrack download. Digitalsalesjumpedmorethan The singlesongsareusuallypricedat$0.99per nesses suchasAppleInc.’s online iTunes store. downloaded throughtheInternetfrombusi- problems. Thesedigitalsalesinvolvetunes soar, buttheyhavefailedtosolvetheindustry’s softening demandforplasticCDs,continueto which manythoughtwouldcompensateforthe sales. Electronicdownloadsofsingle-songs, Internet downloadswere16%ofmusic CD saleshavealsobeenhurtbyonline Many believethatashiftinlistener Source: RecordingIndustryAssociationofAmerica. Note: Dataareasreported.Totals maynot addduetonon-responses.*Superaudiocompactdisc(Sonyformat).NA-Notavai GENDER CHANNEL 2006 2005 AGE 2004 2003 2002 2001 FORMAT 2000 1999 1998 1997 GENRE DISTRIBUTOR total) of percent (As MUSIC BUYINGTRENDS Jazz 2.8 1.9 3.0 2.9 3.4 3.2 2.92.7 1.9 3.03.41.8 2.8 2.9 2.0 8.1 7.1 8.910.0 3.1 3.02.0 3.3 3.53.22.4 2.8 9.0 2.7 1.9 10.0 10.312.1 9.4 11.0 6.7 5.86.0 6.3 5.16.75.3 4.5 4.8 5.5 10.7 10.413.0 14.1 10.810.512.5 14.4 10.7 13.0 11.2 10.611.3 10.610.2 9.7 12.8 10.5 24.7 25.223.9 11.0 11.2 25.7 25.224.431.5 32.5 24.8 34.0 Jazz 13.8 13.312.1 9.710.811.413.3 12.9 11.4 10.1 Classical Religious Pop Country R&B/Urban Rap/Hip-hop Rock Male 48.6 48.7 50.3 50.6 48.8 49.4 49.1 49.5 48.7 50.348.8 51.8 48.6 50.6 50.4 50.6 50.9 50.5 51.3 49.751.2 48.2 51.4 49.4 49.6 2.7 1.6 NA 2.0 NA NA NA 3.4 5.05.9 1.1 2.42.98.2 0.3 3.2 9.1 Male Female 6.0 NA NA NA 6.8 NA Concert Digital 50.7 52.853.8 34.4 38.342.432.0 31.9 40.8 Internet 32.7 4.0 4.14.4 9.0 7.96.18.5 11.6 7.6 download 36.8 33.232.5 50.8 44.5 42.539.4 51.8 42.4 10.5 35.4 9.2 9.0 TV, newspaper, magazine 9.910.010.9 10.3 9.6 9.3 Tape/record 8.3 8.8 Other 8.8 9.811.210.7 10.6 12.6 10.410.2 Record 11.6 10.6 25.5 26.626.4 18.1 24.723.7 25.5 16.5 23.8 club 26.1 10.8 10.110.4 10.311.3 9.8 store 11.4 10.1 10.2 11.0 9.410.910.0 12.1 store 11.4 10.510.9 12.7 45 11.7 10.6 9.2 12.7 9.8 11.5 10.0 12.2 12.6 40-44 13.8 12.5 and 13.3 11.411.9 15.8 12.613.011.9 35-39 16.8 12.9 12.8 NA NA NA years 8.9 8.69.4 NA 9.1 8.5 8.6 30-34 NA 8.9 NA 0.50.8 8.9 1.2 7.6 0.0 older years 25-29 0.7 0.50.9 0.7 0.50.6 0.7 0.5 0.6 years 20-24 years 15-19 years 10-14 NA years NA NA 1.3 2.71.7 1.10.8 NA 1.3 NA NA Vinyl NA 0.5 1.30.9 0.25.7 NA years 6.7 8.1 7.68.9 7.9 9.18.5 5.7 SACD* 8.3 7.3 Digital LPs DVD 0.4 0.62.8 0.4 0.52.3 0.9 0.6 2.9 Music 90.5 87.890.3 0.9 1.31.4 74.8 83.289.287.0 70.2 0.7 0.81.1 0.8 89.3 0.9 download 85.6 1.1 Singles 1.9 2.4 6.8 5.4 2.42.7 9.3 18.2 audio 2.5 2.4 2.21.7 3.4 14.8 8.03.41.1 4.9 0.8 Full-length videos/video 0.5 1.0 0.6 0.51.00.4 0.8 0.5 0.7 0.61.0 1.0 0.91.10.7 0.6 0.8 0.3 1.1 Full-length 1.1 1.4 1.7 0.81.40.9 1.2 0.7 (all 0.8 cassettes DVDs CDs Other types) Children's New Oldies Soundtracks Age d r80nme . 29 . 24 . 20 . 17 . 2.4 2.4 1.7 1.5 2.0 3.0 2.4 2.5 2.9 2.7 ad, or800number within theforeseeable future. over asthepredominant revenuesource sales areslowing,digital shouldtake that digitalsalesaregrowing andphysical loads thanforphysicalsales. Atthespeeds costs aresharplylowerfor electronic down- tainment companies,isthat distribution advantage, onethatisfavorabletoenter- also provideinstantgratification.Another third largestmusic company, announcedthatit ing tohaveanswered. InApril2007,EMI, the the questionthatallindustry players arewait- strictions andgreatlyimproved fidelity?Thisis music downloadifitcomeswithout copyre- scheme Online musicretailerstrynewpricing Will musiclistenerspay30%moreforeach lable.

5 SEPTEMBER 20, 2007 / MOVIES & HOME ENTERTAINMENT INDUSTRY SURVEY 6 SEPTEMBER 20, 2007 / MOVIES & HOME ENTERTAINMENT INDUSTRY SURVEY the mostrecent examplesfollowing. join withthecompetition. We noteseveralof on, tocircumscribethecompetition, orto is aggressivelyseekingways tocompetehead tertainment companiesarelying down.Each ed competitiveconditionsin media. growth indigitalformatshassharplyboost- hands ofconsumers.Furthermore,the control awayfrombusinessesandintothe mentation, butalsomovingalargedegreeof media isnotonlyacceleratingcontentfrag- ple, theexpansioninconsumer-generated and challengestoallparticipants.Forexam- content, areprovidingbothopportunities ation ofnewwaystopackageandformat media outletsandtheseeminglydailycre- platforms, combinedwiththeexpansionin tent. However, theconvergenceofmedia to expandingaudiences,pipelines,andcon- ness isexperiencingsustainedgrowththanks jockey forpositioninmediarace Entertainment companiescontinueto ets oftheartists,producers,anddistributors. some ofthatlostrevenuebackintothepock- files. Itishopedthatthisstrategywillput opted forthecheaper$0.99,copy-protected pay extraforDRM-freemusic,while18% more than300,000-musicfansamplewould firm intheUKconcludedthat39%of recent surveyconductedbyamediaresearch Billboard.biz reportedinAugust2007thata peal toalargeproportionofmusicbuyers. files thatcanbefreelycopiedshouldap- illegal file-sharingnetworks.Unprotected one billionsongsaretradedeachmonthon online mediameasurementcompany, about egy. AccordingtoBigChampagne LLC,an heading intherightdirectionwiththisstrat- leader, announcedasimilarstrategy. 2007, UniversalMusicGroup,theindustry phone, computer, ormusicplayer. InAugust for $1.29thatcanbefreelycopiedtoanycell- an announcementthatittoowouldsellsongs In May2007,Amazon.comfollowedsuitwith than the$0.99rateforDRM-protectedsongs. sound quality, andsellfor$1.29 each,rather ring betweendevices.Thesongshaveimproved attached, whichrestrictscopyingandtransfer- out digital-rights-managementsoftware(DRM) would offeritsmusiccatalogtoretailerswith- As wenotedearlier, noneofthemajoren- The movieandhomeentertainmentbusi- Standard &Poor’s believestheindustryis network ofsites).Advertisingwillbeattached. and Fox’s ming content(fullepisodesofNBC’s load, share,andmanipulatepremiumprogram- 2008) thatwillallowInternetuserstodown- ture calledHulu(launchinginthespringof a partnershipwithNewsCorp.tocreateven- courage interaction. working sites,suchasMySpace,inordertoen- with someofthesamefeaturesassocialnet- er brand-relatedcontent.Thesitewillbesetup vintage TVadvertising,movietrailers,andoth- called Didja.com,thatwillarchivenewand new video-sharingsiteinearly2008,tobe announced inAugust2007thatitwilllauncha will usetosetratesadvertisers. will giveNBCvaluableviewingdatawhichit decoding digitalprogram.Thearrangement downloaded throughHiro’s encodingand on NBC’s DotComedy.com tobefreely dia Ltd.,anIsraelifirm,thatallowscontent an agreementinAugust2007withHiroMe- General Electric’s NBCUniversalInc.entered peer-to-peer mediasharingphenomenon, The Employment andCareerChannel. gramming dedicated tohealthyliving),and Channel, HorseTV, TheLimeChannel(pro- to theWeb fromcableincludetheHorror Other independentchannels thathavemoved enough toattractadvertisers. challenge, however, istofindanaudiencelarge started forlessthan$10million.TheWeb ming lineup.AWeb-based operationcanget being includedincableorsatellite’s program- carry theirsignal,thenpayfortheprivilegeof and mustconvincecablesystemoperatorsto cameras andotherbroadcastingequipment), quire upto$200millionlaunch(requiring cheaper torun.Anewcablechannelcanre- gramming flexibility, butitisalsomuch egy forit.Web-TV notonlyoffersmorepro- joining thecompetitionwouldbebeststrat- before it,BlackFamilyChanneldecidedthat an online-onlychannel.Likeseveralnetworks saking cabletelevisionaltogetherandbecoming owned byViacom, announced thatitwasfor- several fronts NBC Universalmeetschallengeson Cable channelsconverttoWeb-only format In March2007,NBCUniversalannounced Separately, NBCUniversal’s USANetwork Rather thanfighttheinevitabilityof The BlackFamilyChannelhas company. In May2007theBlackFamilyChannel, Prison Break , forexample,overa 30 Rock ■ INDUSTRY PROFILE

Consumers and advertisers front the bill

The US movie and home entertainment in- lion movie tickets, worth approximately $9.5 dustries provide products and services for au- billion, at domestic theaters — an average of diences around the world, including new about 4.0 million tickets per day. However, films shown in theaters, video and music ti- the domestic box office represents only a tles, and a wide range of TV shows. Through small portion of total movie spending, which various kinds of distribution arrangements, includes receipts from video and television, companies receive most of their revenues as well as spending in international markets. from the sale or rental of their products to Consumers worldwide spent more than $43 consumers. In the case of broadcast TV and billion in 2006 to view US movies, including radio, the sale of airtime to advertisers is the $25.8 billion for theater tickets. primary source of revenues. Some companies The movie releases of six film distribution (e.g., retailers of videos and recorded music) companies typically account for at least 70% buy the entertainment products and resell of box office revenues in North America. them to consumers. These companies are Fox Entertainment Group Inc. (majority-owned by News Corp. The film industry Ltd.), NBC Universal Inc. (80%-owned by General Electric Co.), Sony Pictures Enter- Movies remain a cornerstone of the US tainment, Time Warner Inc. (formerly AOL entertainment industry, with consumers pay- Time Warner), Viacom Inc., and Walt Disney ing billions of dollars annually to watch Co. Another industry leader emerged in the films in various formats. In 2006, consumers late 1990s — DreamWorks SKG, founded by in the United States bought about 1.45 bil- movie producer Steven Spielberg, former Dis- ney executive Jeffrey Katzenberg, and indus- DOMESTIC BOX-OFFICE MARKET SHARES try veteran David Geffen. In February 2006, (In percent) Viacom’s Paramount Pictures division ac- 2006 BOX OFFICE quired DreamWorks. REVS. DISTRIBUTOR 2001 2002 2003 2004 2005 2006 (MIL. $) Movie theaters keep about 50% of the 20th Century Fox1 10.6 10.1 8.4 9.9 15.3 15.2 1,398 dollars that consumers spend at the domestic Buena Vista2 10.9 13.0 16.5 12.4 10.4 16.2 1,493 box office, with the remainder going to the DreamWorks3 4.9 5.2 3.0 10.0 5.7 … … distributors as film rental fees. The largest INDUSTRY SURVEY Lionsgate … … … 3.2 3.2 3.6 331 North American movie theater company is MGM/UA 5.5 4.0 4.0 2.1 2.1 1.8 167 Regal Entertainment Group, which operated Miramax4 7.5 2.7 4.4 3.9 2.1 … … 539 theaters with 6,386 screens as of Febru- New Line 6.7 9.5 10.1 4.6 4.8 2.7 252 ary 20, 2007. Regal said that its holdings Paramount 11.3 7.4 7.1 6.7 9.4 10.3 947 represented about 18% of all US theatrical Sony/Columbia 9.0 17.2 13.0 14.3 10.4 18.6 1,711 indoor movie screens. Universal5 11.7 9.5 11.6 9.5 11.4 8.9 815 Warner Bros.6 15.1 11.7 12.8 12.9 15.6 11.6 1,066 According to Video Business, a weekly Weinstein Company … … … … … 2.5 227 magazine that covers the creation and deliv- Total, major ery of home video, US consumers spent

distributors 93.2 90.3 90.9 89.5 90.4 91.4 8,406 $15.91 billion in 2006 to purchase DVDs MOVIES & HOME ENTERTAINMENT Others 1.8 5.7 6.1 8.5 8.6 8.6 804 and videotapes, plus another $7.67 billion to TOTAL 95.0 96.0 97.0 98.0 99.0 100.0 9,210 rent these items. Consumer spending de- 1Largely owned by News Corp. 2Owned by Disney. 3Acquired by Paramount in 2006. 4Owned clined 1.1% from the preceding year. DVD by Disney; currently under the control of Buena Vista. 5Owned by NBC Universal, which is 80%-owned by General Electric Co. 6Owned by Time Warner Inc. sales grew 4.6% to $15.65 billion, but the Source: Box Office Mojo. growth was not enough to offset declines in

VHS tape sales and rentals. VHS tape sales SEPTEMBER 20, 2007 /

7 8 SEPTEMBER 20, 2007 / MOVIES & HOME ENTERTAINMENT INDUSTRY SURVEY amk iea 8 215 7.7 11.3 2,195 4,505 13.7 PERLOCATION 285 SCREENS 397 5,635 LOCATIONS 11.8 411 6,386 539 Carmike Cinemas Cinemark USA** AMC Entertainment* Regal EntertainmentCorp. CHAIN 2007) February of as screens, of number by (Ranked LARGEST NORTHAMERICANTHEATER CHAINS ainlAueet 2 146 11.9 1,426 120 *Includes LoewsCineplex.**IncludesCentury Theatres. Cineplex Entertainment National Amusements Sources: oas1802,3 11.4 1,88021,437 Totals Boxoffice Boxoffice which isprivatelyowned. Universal); andWarner MusicGroup (US), (majority ownedbyFrance-basedVivendi AG (Germany);UniversalStudiosGroup in Japan)andprivatelyownedBertelsmann which isjointlyownedbySonyCorp.(based Kingdom); SonyBMGMusicEntertainment, try: theEMIGroupPLC(basedinUnited tors dominatetheUSrecordedmusicindus- for roughly80%ofretailsales,fourdistribu- music in2006.With recordingsthataccount sumers spentabout$11.5billiononrecorded more thana5%marketshare. and satellitechannels;noneofthemaveraged 45%) wasdividedamongthedozensofcable mainder oftheprime-timeaudience(roughly combined marketshareofabout14%.There- with anyofthefourmajornetworkshada over-the-air broadcast stationsnotaffiliated prime-time viewersinthe2006–07season.The four networksattractedroughly40%ofUS ment firmNielsenMediaResearchInc.,these Based onratingsdatafromaudiencemeasure- and NBC(ownedbyGeneralElectricCo.). Corp.), Fox(largelyownedbyNews (owned bytheWalt DisneyCo.),CBS(CBS The musicbusiness Television itself isdisappearing. 2006 wasonly$540million.Thecategory on VHSsalesandrentalscombinedin peaked at$8.4billionin2001.Spending that hasbeenextantsincesuchspending rentals dropped74%,continuingthetrend fell 83%to$260million.SpendingonVHS Online; According toRIAAestimates,UScon- The nation’s fourmajornetworks areABC Variety † ; companyreports;Standard&Poor’s estimates. O FN.O OFSCREENS NO.OF NO. OF 128 1,290 10.1 † Formerly FamousPlayers. AVERAGE NO. puters orwirelesshandhelddevices. recordings athomedirectlyontotheircom- Increasingly, consumersaremakingpersonal and durabilityaresuperiortothoseoftape. age andsoundquality, playbackfeatures, have eclipsedoldertechnologies.Discs’im- downloading anddigitallyrecordeddiscs competitive positionevenfurther. gramming areincreasing,boostingtheir works. Theirpurchasesofhigh-profilepro- advertising dollarsfromthebroadcastnet- been gainingagreatershareofviewersand for video. to-consumer onlinedistributionchannels to exploittheexpandinguniverseofdirect- the televisionnetworksareactivelyseeking channels. Hollywood’s moviestudiosand have alteredandexpandeddistribution term changesastechnologicaldevelopments entertainment industryareundergoinglong- in July2005.Google steppedupitsinvest- Co., acquired MySpace.com for$580million News Corp.,whichownsFox Broadcasting sulted inmajoracquisitions. In anearlymove, evolving landscape,somestrategies havere- and Viacom Inc.’s MTV Overdrive. ABC.com, NBC.com,CBSCorp.’s Innertube, (often withadsthatcannotbeskipped)from ing ofselectTVshowepisodesisavailable are branchingoutontheirown.Freestream- net companies,theold-linemediacompanies es totheInternet. been theleaderinredirectingmusicpurchas- iTunes servicefromAppleInc.,whichhas on apay-for-download basisthroughthe line mediacompaniesalsoprovidecontent and AOLVideo (Time-Warner Inc.).Theold- crosoft Corp.),Yahoo Video (Yahoo! Inc.), (owned byGoogleInc.),MSNvideo(Mi- tent toInternetsitessuchasGoogleVideo studios andTVnetworksnowlicensecon- media world.Forexample,themajorfilm in theracetokeepupwithfast-changing ment farehavenotbeenasleepatthewheel INDUSTRY TRENDS Old-line mediacompaniesreposition In thevideoandmusicindustries,Internet In theTVbusiness,cablenetworkshave The economicsofthemovieandhome As companiesjockeyforposition inthis In additiontonewaffiliationswithInter- The traditionalproducersofentertain- Sources: Standard&Poor'sEquityResearch;companyreports. -- inyACcmiTunes ABC.com ElectricSheep Disney PARTNERSHIPS CBSInnertube OWNEDPROPERTIES CBS COMPANY ENTERTAINMENT COMPANIES' INTERNETMEDIAINTERESTS B nvra rlinBtacle.o AOLVideo BrilliantButCancelled.com NBC Universal deal withGoogle’s AdSensenetwork, which, ture providers, suchasMTV’s advertising form ofpartnershipswithInternet infrastruc- line videosyndication.This could takethe the evolutionofnewbusiness modelsforon- providers tobecomeactiveparticipants in of smallerentrants. these majorplayers,thespacehasseenaspate from allthemajorstudios.Inadditionto launched anonlinevideoservice,withcontent 2006, retailgiantWal-Mart StoresInc. for $1.9billioninGooglestock.InDecember quisition inNovember2006ofYouTube Inc. ment inonlinevideodistributionwiththeac- VlaeMSNVideo Television WithoutPity iTunes OUTzoneTV.com NBCOlympics.com NBC.com >nbbc MSNBC.com iVillage getTRIO.com Wondertime.com Video.com TouchstonePictures.com SOAPnet.com Oscar.com Muppets.com Movies.com Miramax.com LyricStreetRecords.com Jetix.tv HollywoodRecords.com formerly GONetwork Go.com - FamilyFun.com ESPN.com Disney.com Disney Family(Family.com) ClubPenguin.com BVOnlineEntertainment.com ABCFamily.com MSN Last.fm CBSSportsline.com CBSNews.com Video CBS.com B neatv GoogleVideo CBS Interactive Standard &Poor’s expectscontent (YouTube) ieWre detsn.o AOLVideo Advertising.com Time Warner AOLVideo AmericanIdol.com News Corp. icmAo netimn AOLVideo AtomEntertainment Viacom OPN WE RPRISPARTNERSHIPS OWNEDPROPERTIES COMPANY spending depends heavilyonthedevelop- ment” sectionofthis more information,seethe“Current Environ- providers arealsoenteringthefray. (For no surprisethatsomeofthemajorcontent contribute content,distributeit,orboth.Itis tion hub,wherebynetworkparticipantscan has launcheditsownonlinevideosyndica- from MTVprogramming.NBCUniversal ers’ Web sites,interspersedwithvideoclips in August2006,beganairingadsonpublish- Future growthdrivers Long-term growth inUSentertainment N.o BitTorrent CNN.com WhatIfSports.com Strategic DataCorp Scout.com Realestate.com.au Photobucket News.com.au MySpace Jumptheshark.com Indya.com MSN Video IGN.com IdolonFox.com Movielink Grab.com GoogleVideo FoxSports.com FoxNews.com Fox.com Flektor Fl YouTube XFire.com Nickelodeon Online Neopets GoogleVideo MTV.com (Comedy Central) Joost Motherload.com iFilm Gametrailers.com BET.com YouTube Truveo.com Yahoo! TV TIME.com In2TV/In2Movies Gube SI.com PGA.com NASCAR.com Gametap.com Games.com Survey (with Fox,Viacom, Sony, MGM&Disney) .)

9 SEPTEMBER 20, 2007 / MOVIES & HOME ENTERTAINMENT INDUSTRY SURVEY 10 SEPTEMBER 20, 2007 / MOVIES & HOME ENTERTAINMENT INDUSTRY SURVEY 99992 2 7 111 ...... 1,161 ... 969 1,079 ... 860 ...... 798 ...... SHIPMENTS† ...... 958 SUBSCRIPTION ...... DOWNLOADS ...... 1,161 ... 93920 ... 75 SHIPMENTS 127 ... 1,079 ...... 40 1 ... OTHER* ... 1,302 969 9431878 ... 860 21 ... ALBUMS 144 ... 8821848 2 1999 1,583 8 ...... 170 5 SINGLES 798 8031533 2000 383 814 139 3 12 315 14 SHIPMENTS 7462021 7 2001 749 367 625 8 11 28 SINGLES 76733 5 2002 643 586 4 70534 3 ALBUMS 2003 2 VIDEOS 61523 2004 CDS 2005 2006 YEAR RECORDED MUSICINDUSTRY SALESPROFILE 9699526192 2 1,3 ...... 12,534 ... 12,237 ...... 13,711 ...... 14,585 SALES ... 14,324 ...... Source: RecordingIndustryAssociationofAmerica. 13,741 ...... SUBSCRIPTION 12,614 ...... DOWNLOADS ... *Includes musicvideos,andkioskshipmentsofalbumssingles.†Excludessubscriptions...... 11,854 SALES ...... 9,935236 Note: Salesrepresentmanufacturers'shipments,netofreturns.Dollarvaluesarebasedonsuggestedretailprices,whichinma 12,534 ...... 421 ... 1,942 ... 9,915324 12,237 ...... 442 ...... 1,556 12,338 ...... 1996 ... OTHER* ...... 11,416508 13,711 ...... 1997 333 ... 1,454 ALBUMS ...... 12,816377 14,585 149 1998 298 12,270 ... 14,324 1,093 SINGLES ... 174 206 ... 13,215282654 11,510 1999 ... 183 ... 13,741 422 SALES 106 12,909329397 12,614 ... 2000 775 ... 43 504 46 12,044288239 11,854 2001 878 57 5 138 12,155 11,233400164 35 22 SINGLES 136 2002 276 363 66 11,195 581 11,447607 24 9,651 ALBUMS 2003 49 15 VIDEOS 10,520602 ... 2004 22 1,137 9,163451 CDS ... 2005 1,063 ...... 1,124 2006 ...... YEAR ...... 77917 1,137 ... 228 113 ...... 75319 1,063 175 ... 116 1,124 84727 88 1996 162 1997 1998 with thoseof TVs willincreasinglybeused ances thatcombine computercapabilities wireless handhelddevices, and newappli- along withdigitalvideorecorders (DVRs), In thefuture,weexpectthat computers, looms largerintheentertainment picture. ily ondigitaltechnology, thecomputer audio andvideorecordingsrelymoreheav- dio andvideothandooldermedia.As nals, generallyprovideshigherqualityau- images asaseriesofelectronicon–offsig- tal technology, whichtransmitssoundand industry growthinthedecadeahead.Digi- applications willremainamajordriverof Decidedly digital convenience, andhigherquality. spending toacquiremorechoices,greater tems provesthatconsumerswillboosttheir and newmusicdeliveryplaybacksys- spread acceptanceofhomevideo,cableTV, shows, andmusictoconsumers.Thewide- ment ofnewwaystodeliverfilms,TV PHYSICAL SHIPMENTS(MILLIONUNITSSHIPPED) Standard &Poor’s expectsthatdigital UI TE TE HSCLDGTLMBL MUSIC MOBILE DIGITAL MUSIC PHYSICAL OTHER MOBILE OTHER DIGITAL MUSIC PHYSICAL OTHER OTHER MUSIC PHYSICAL SHIPMENTS(MILLION$) OA OA TOTAL TOTAL TOTAL TOTAL TOTAL TOTAL DIGITAL DOWNLOADS(MILLIONUNITSDOWNLOADED) DIGITAL DOWNLOADS(MILLION$) loading accounted for8.8%ofindustryretail grown considerably, however:Internetdown- legally downloadedviatheInternet has from theseexchanges.Theamount ofmusic the artistsreceivednoincremental revenue puter files.Often,recording companiesand the Internetinformofcompressed com- music, assongscanbeexchangedeasilyon righted content.Thisisespeciallytruewith threat ofunauthorizedduplicationcopy- justify therequiredinvestments. can stimulateenoughincrementalrevenueto whether newdeliverysystemsandservices communications companiesmustdecide vices. Second,fromabusinessperspective, money tospendonnewappliancesandser- sumers haveafiniteamountoftimeand up notbeingeconomicallyviable.First,con- some newtechnologiesordevicesmayend ly thananticipatedoverthepastdecade,and tertainment programming. to access,store,timeshift,andcreateen- Digital distributionalsoincreasesthe New TVserviceshaveevolvedmoreslow- ny casesexceededactualprices. they holdintheir substantiallibraries. ries andrerelease oldproductions,which tions basedonfamiliarcharacters orsto- companies periodicallycreate newproduc- ment companies.To tapintothismarket, to remainabusinessdriver forentertain- the musicandmoviesof pastislikely tween 1946and1964).Theirnostalgiafor roughly 77millionAmericansbornbe- members ofthebabyboomgeneration(the on spendingbyolderAmericans,including tertainment industrywillrelyincreasingly tween 2005and2020. aged 65andoldertogrowabout48%be- more, welookfortheUSpopulationthatis projected fortheoverallpopulation.Further- the year2020,comparedwitha13%rise bracket isexpectedtoincr Bureau, theUSpopulationin45-to-64age which downloadscanbepurchased. more than230onlinemusicservicesfrom nearly twobillionsongs,andthereare companies havedigitizedandlicensed izing musicdelivery. Currently, record lion units),on-demandaudioisrevolution- the handsofconsumers(morethan42mil- in thenumberofdigitalaudioplayers tion ofmusic,andtheskyrocketinggrowth than 42millionhouseholds),thedigitiza- in theUnitedStates(nowavailabletomore Evolving demographics delivery Digital technologyrevolutionizesmusic continue toexist. that somevariationoftoday’s networkswill marketing ofnewprogramming,weexpect important channelsforthefinancingand choices. However, becausenetworksserveas scheduling andmaketheirownviewing it allowsaudiencestobypassthenetworks’ — particularlytheTVnetworksbecause a potentialthreattoprogrammingpackagers want, whentheywant.Thisflexibilityposes creasingly permitviewerstowatchwhatthey expects thatemergingtechnologieswillin- trade group. Association ofAmerica(RIAA),anindustry cording toastudybytheRecordingIndustry sales in2005,upfrom2.4%2002,ac- Thus, webelievethatgrowthintheen- Based onprojectionsfromtheUSCensus With rapidgrowthinbroadbandaccess Over thelongterm,Standard&Poor’s ease about 18% by movies aimedattheiragegroup. the optionofreceivingelectronicnotice to ayouth-orientedmagazinecanbeoffered music thatisavailable.Similarly, subscribers quest, receivee-mailnoticesregardingsimilar or whodownloadanalbumcan,attheirre- ample, consumerswhoplaceanonlineorder target specificgroupsofconsumers.Forex- hance entertainmentcompanies’abilityto between 2005and2020. group isprojectedtogrowonlyabout7% technologies. However, theunder-20 age ing outandadoptingnewentertainment they arelikelytobeespeciallyactiveintry- grown upwithcomputersandvideogames, demand. Becauseyoungergenerationshave young adultsshouldremainacornerstoneof spending byolderconsumers,teenagersand the construction ofmultiplextheaters( cess toUSentertainment havebeenboosted by ous foreignmarkets,consumer interestandac- receipts inWestern EuropeandJapan.Invari- cally accountforthemajority ofboxoffice al presenceisextensive.American moviestypi- outside sources. need torely, atleastinpart,oncontentfrom thinks thatthemajordistributionoutletswill niently andeconomically. Standard&Poor’s that theylikeandaredeliveredconve- money onthemovies,programs,andmusic ences. Ultimately, consumerswillspendtheir its offeringswillbewellreceivedbyaudi- content anddistributionisnoguaranteethat game, anovelcaninspirefilm,andsoon. spawn abest-sellingmusicalbumorvideo sector. Forexample,apopularmoviecan duce) arearisingintheevolvingmultimedia producers, actors,andthecontenttheypro- rights, and“creativeassets”( opportunities toleveragetrademarks,copy- (such asabroadcastnetwork).Additional a TVshow)andthedistributionchannel edge fromowningboththeproduct(suchas promotion. Companiescangainaneconomic businesses createsopportunitiesforcross- An extensiveglobalempire Studios seeksynergies Distribution viatheInternetshoulden- Even withtheanticipatedincreasein The USentertainmentindustry’s internation- A singlecompany’s ownershipofboth The ownershipofdiverseentertainment i.e. , writers, e.g. , in 11 SEPTEMBER 20, 2007 / MOVIES & HOME ENTERTAINMENT INDUSTRY SURVEY 12 SEPTEMBER 20, 2007 / MOVIES & HOME ENTERTAINMENT INDUSTRY SURVEY 1990. During thatperiod,theprime-time dish in2006, compared withabout56% in sion programmingviacable orsatellite than 87%ofUShouseholds receivedtelevi- cording toNielsenMediaResearch, more of “over-the-air” broadcaststations. Ac- dramatic shiftintheaudience marketshare ble systemsandsatellitedisheshasledtoa TV time growth opportunitiesoverseas. US programsuppliershavesignificant 800 millionTVhouseholdsintheworld, ing forlessthan15%ofthemore cluding satelliteTV. With theUSaccount- should benefitfromexpandedservices,in- Worldwide demandforprogramming able throughoutEuropeandelsewhere. especially asmorechannelsbecomeavail- find newopportunitiesforglobalgrowth, the lowestoverseaspercentagewas47.2%. from overseasattendance,butevenhere, 50% ofworldwideboxofficerevenues dance. Fourofthetop10scoredlessthan worldwide grossesfromoverseasatten- in 2006derived50%ormoreoftheir tendance. Infact,35ofthetop50movies moviegoers; 60.3%camefromoverseasat- in 2006,ofwhich39.7%camefromUS Chest ers, overseas movieattendancetoUSfilmmak- for nearly39%($9.0billion)ofthat. box office,withUSmoviegoersaccounting sumers worldwidespent$23.4billionatthe broad seas market.US-filmedentertainmenthasa from UScompaniesenjoyasizableover- counterparts. Inaddition,movievideos prospective revenuebasethantheirforeign guage, givesUSmoviemakersamuchbigger ceptance ofEnglishasaninternationallan- countries. ThelargeUSmarket,plustheac- the populationsofmanyotherdeveloped more than300million—fargreater are marketedtoadomesticpopulationof movie industry. IntheUnitedStates,films big-budget filmsthatareastapleoftheUS cast, cable,andsatelliteoutlets. Europe) andgrowthinthenumberofbroad- The availabilityofmorechannelsviaca- US suppliersofTVprogramsshould To illustratefurthertheimportanceof Foreign demandistypicallystrongforthe Pirates oftheCaribbean:DeadMan’s took in$1,066.2millionworldwide worldwide audience.In2005,con- dividual TVstations. networks ( ket sharefrombroadcastoutlets,both take audienceandadvertiserspendingmar- satellite-based TVnetworkswillcontinueto about 35%in2006.We expectthatcable-or dish deliveryincreasedfrom9%in1990to channels thatdependoncableorsatellite The shareofTVadvertisingdollarsgoingto moved theiradspendinginthatdirection. channels havegrown,advertisers average, overtheprecedingseason. season, whichwasalsoupbythreeminutes,on and 35minutesperdayinthe2005–06TV watched byindividualviewerswasfourhours age homein1970.TheaverageamountofTV five hoursand56minutesviewedintheaver- 11 minutesin2004–05andwellaheadofthe year, anall-timehigh,upfromeighthoursand minutes perdayinthe2005–06broadcast hold viewedtelevisionforeighthoursand14 dia Researchreportedthattheaveragehouse- TV viewinglevelscontinuetorise.NielsenMe- audiences andcompetitionfromothermedia, from about80%toapproximately57%. audience shareofallbroadcaststationsfell and theCity programming, includingsuch successesas ducing highlyacclaimedand popular first-run works havemadesignificant inroads inpro- to suchprogramming.Moreover, cablenet- the abilityofcablenetworks to wintherights reach andrisingrevenuelevelshavebolstered football onESPN).Cable’s growingaudience ingly appearingoncablenetworks( movie industry’s AcademyAwards. Football League’s (NFL’s) SuperBowlandthe ming” includesextravaganzasliketheNational broadcast networks.Such“eventprogram- ences continuetoairprimarilyonthemajor most first-runprogramming. broadest audiencereachandpurchasethe the foreseeablefuture.Theyhave pal forceinsmall-screenprogrammingfor NBC, andFox—shouldremaintheprinci- major broadcastnetworks—ABC,CBS, networks anderodingaudienceshare,the Some shiftsinTVprogramming Six FeetUnder As audiencesforcable-orsatellite-based In spiteoftheincreasedsegmentationTV Nevertheless, high-profileshowsareincreas- One-time showsthatdrawenormousaudi- Despite thegrowingpresenceofcable e.g. , The Sopranos , ABC,CBS,etc.)andfromin- . , Entourage e.g. , and , NFL Sex Sources: boxofficemojo.com; the-movie-times.com. over $225millionindomestic revenues,whenmeasuredincurrentdollars. *Still intheatersasofAugust2007.Currentdomestic boxofficetotalsasofAugust2007.Listsallfilms 2 Hour Rush Park Jurassic Signs World: Lost The Exorcist The Away Cast Worlds the of Stand War Last The X-Men: Cop Hills Beverly Wedding Ghostbusters Greek Fat Big My Ark Lost Twister the of Raiders Almighty Bruce Cars 2 Story Toy Azkaban of the Prisoner and Potter Harry Black in Men Museum the at Night Batman Inc. Christmas Stole Monsters, Grinch the How Secrets of Jaws Chamber Incredibles the The and Potter Phoenix the Harry of Order the Shrek and Potter *Harry Fockers the Meet Reloaded Matrix Fire The of Goblet Alone the Home and Potter Back Harry Wardrobe Strikes the and Empire The Witch the Lion, Narnia: of The Chronicles The Sense Sixth The Pearl Black *Transformers the of Curse The Caribbean: the of End Day Pirates World's At Caribbean: Independence the of *Pirates Jedi the of Return Clones the - of II Attack Episode Ring Wars: the of Star Fellowship Stone Rings: The the of Sorcerer's Lord the The and Potter Harry Third the Shrek King Lion The Gump Forrest 3 Towers *Spider-Man Two The Nemo Rings: Finding the of Lord The Park Christ the Jurassic of Passion The WORLDWIDERELEASE 2 King Spider-Man the of US Return Rings: The the of Lord Sith The the of DISTRIBUTOR - III Revenge Episode Wars: Star Spider-Man Chest Man's Dead Caribbean: the of Pirates Menace - I Phantom The Episode Wars: Star Extra-Terrestrial The E.T.: 2 Shrek Wars Star dollars) current of Titanic millions in MOVIE revenues, office box domestic by (Ranked ALL-TIME TOPBOX-OFFICEFILMS anrBo.21 1 1989 251573 2001 2006 411 525 2004 251 Fox 2002 256 260345 1975 631 Warner Bros. 260471 2000 Buena Vista 2007 877 Universal 261 Universal 2003 824 262 Buena Vista 268484 2001 Warner 2005 Bros. 739 279517 286478 2004 1990 274 DreamWorks 2005 Warner Bros. 892 291538 1980 282 Universal 1999 745 Warner Bros. 290 Fox 673 Warner Bros. 292 2003 Fox Buena Vista 294 654 2007 304634 2007 Buena Vista 306817 1996 DreamWorks 305 955 Paramount/ 309475 1983 2001 Buena Vista 311649 2002 308 Fox 871 Buena Vista 2001 Fox 315 Fox 977 1994 New Line 318 784 2003 2002 321733 2007 Warner Bros. DreamWorks 336890 2007 329 865 330677 Paramount/ 926 1994 Buena Vista Paramount 2003 340 342 371612 2004 Sony 357915 1993 Buena Vista 374784 2004 1,119 New Line Universal 377 380850 2005 NM Sony 2006 New Line 404822 2002 1,066 Fox 431924 1999 423 Sony Buena Vista 435793 461775 1982 1977 Fox 441920 2004 Universal 6011,845 DreamWorks 1997 Fox Paramount e ie26 4 2001 2002 347 408 1973 226 441 228 229 619 234430 1997 2000 New Line Buena Vista 234459 2006 233 Universal 234592 Warner Bros. 2005 Fox 1996 241369 2002 235316 Paramount 1984 239292 1984 Fox 495 2006 Paramount 1999 Columbia 242 462 242384 IFC 2004 1981 243485 2003 485 Warner Bros. Paramount 790 244 Universal 246 Buena Vista 251589 1997 250 Buena Vista Warner Bros. Sony O FIE(I.$ YEAROF BOX OFFICE(MIL.$) leased inNovember2006, big moviehits, includingfiveHarryPotter novels alsohave servedasthebasisforsome lines assuressomedegreeof interest.Popular sumers’ familiaritywithcharacters andstory are similartomoviesequels, inthatcon- lic’s imagination. and/or specialeffectshavecapturedthepub- special cases,inwhichconcept,characters, the StarsWars andJamesBondfilms, are as nottobetypecast.Ongoingseries,such sometimes willabandonsuccessfulrolesso talent alsocanpresentaproblem:actors prohibitive. Reunitingorreplacingcreative may beunavailable,orcostsbecome may begintowane,goodscriptsforasequel beyond threeincarnations.Consumerinterest fice in2006. racked up$165.9millionattheUSboxof- the 21stmovieinJamesBondseries, Model ing With theStars and showssuchas a newwaveofrealityprogrammingtookhold, CBS’s Survivorseries.With thatunqualifiedhit, niest HomeVideos which debutedin1989,and Somewhat morerecentexamplesare granddaddy ofthemall,haditsTVdebut. duced in1948,when phenomenon; infact,thegenrewasintro- mas. Therealityshowisnotarecent ming, suchassituationcomediesanddra- produce —thanotherformsofTVprogram- are lessscripted—andoftencostlyto game shows,andtalentcompetitions,which programs suchasphysicalcompetitions, called realityshows.Thiscategorycomprises the latest were sequels(orprequels,asinthecaseof between 2000andearlyAugust2007,22 the top50domesticboxofficehitsreleased film —canleadtoboxofficesuccess.Of quel —afollow-uptopreviouspopular Reality TVmakesasplash Movies: cashinginonsequels have capturedlargeaudiences. prentice Movie adaptationsofpopular TVshows Typically, majormovieseriesseldomgo The mostrecentboomstartedin2000with Prime-time TVhasseenaboominso- In themovieindustry, producingase- (The CWTelevision Network), (NBC), and Star Wars (ABC), American Idol (1990). The AmazingRace and Candid Camera America’s NextTop Batman Casino Royale America’s Fun- (Fox), films). Re- The Ap- Cops , the (CBS) Danc- , , 13 SEPTEMBER 20, 2007 / MOVIES & HOME ENTERTAINMENT INDUSTRY SURVEY 14 SEPTEMBER 20, 2007 / MOVIES & HOME ENTERTAINMENT INDUSTRY SURVEY bard’s series, andafilmadaptationofL.RonHub- 2002 thatwaspartlybasedonthe1960sTV office inrecentyearsinclude weak ordisappointingatthedomesticbox amples ofmoviesthathavebeenrelatively into filmisnoguaranteeofamajorhit.Ex- 1953’s Hairspray cent remakesincludeanewversionof1988’s or newvariationsbasedonearlierfilms.Re- Lord oftheRings blockbusters since1999,includingthethree film, Mr. Bloomhasappearedinseven necessarily playingtheleadingroleineach blockbuster filmssince1999.Althoughnot ton. Eachhasbeenfeaturedinatleastfive Brad Pitt,BenStiller, andDenzelWashing- Depp, Tobey Maguire,EwanMcGregor, Cameron Diaz,LeonardoDiCaprio,Johnny ers, includingOrlandoBloom,MattDamon, the limelightshiftingtowardnewerheadlin- actors havechosenorbeenoffered. ing publictastesandthekindsofrolesthese this toavarietyoffactors,includingchang- less ofafactorattheboxoffice.We attribute and RobinWilliams) hasstartedtobecome rey, JuliaRoberts,ArnoldSchwarzenegger, ( gained prominencebetween1985and2000 lion.) However, thegenerationofactorsthat domestic ticketsalesgreaterthan$100mil- the mid-1980s.(Ablockbusterisafilmwith starred inmorethan10blockbusterssince are Tom HanksandTom Cruise;eachhas strong marqueevalueformorethanadecade Among theactorswhohavemaintained terest inamovieistocastitwithbigstars. Star powerbuyssuccess—sometimes The LordoftheRings three moviesbasedonJ.R.R.Tolkien’s series, films, basedonbooksbyJ.K.Rowling,and Caribbean movies. Mr. Damon hasstarredin billing ineach ofthethreePirates starred insevenblockbusters, includingtop third installmentofthatseries. Mr. Depphas rates oftheCaribbean:AtWorld’s End its sequel Caribbean: TheCurseoftheBlackPearl Man’s Chest e.g. Translating apopularbookorTVshow Movie companiesalsoproduceremakes Star powerisstillimportant,butwesee An establishedwayofbuildingpublicin- , Hanks,Cruise,BruceWillis, JimCar- Battlefield Earth War oftheWorlds Pirates oftheCaribbean:Dead in 2007,andanewversionof , Troy , and,mostrecently, films, . in 2000. Pirates ofthe in 2006. I Spy , afilmin , the Pi- and with same period. has starredinnineblockbustersoverthe blockbusters since1999,andWill Smith Samuel L.Jacksonhasappearedinsix nounce You ChuckandLarry films since1998,including comedic star, withseven$100million–plus 2003. AdamSandlerisanotherestablished role in in the acter inthethree 1999, includingthevoiceoftitlechar- had featuredrolesinsixblockbusterssince Wayne’s World the sceneasatheatricalmoviestarwith Shrek the donkey’s voiceinthethreeanimated busters since1999(includinghisroleas Trading Places 1980s (infilmssuchas lished big-screenstarpowerintheearly ence appeal.EddieMurphy, whoestab- movies; andeachfilmoftheOcean’s trilogy. The BrothersGrimm Talented Mr. Ripley ten blockbusterssince1999,including limit itsupside profitpotential. ative talent,a movie distributoralsomay entering intorevenue-sharing dealswithcre- enues asameanstoreduce risk. However, by pensation onapercentageof boxofficerev- of thefilm.Studioshavebegun basingcom- the headlineactors’payto performance up-front costsofproduction:linkmuch buster was forherstarringroleinthe2006block- She isstillgoingstrong:her14thnomination The Deerhunter nence inthe1970swithsuchhitsas Academy Awards history. Shegainedpromi- Award nominations(14)thananyactorin cally acclaimed sion oftheChrist one ofthebiggesthits2004— domestic boxoffice),Mr. Gibsondirected ring in ture andBestDirector).Inadditiontostar- he wontwoAcademyAwards (forBestPic- starred inanddirected has maintainedastrongcareer. In1995,he After firstachievingblockbusterstatus Plenty ofotheractorshavemajoraudi- Studios havefoundonewaytolimitthe Meryl StreephasgarneredmoreAcademy Lethal Weapon 2 films). MikeMyers,whoburstonto Austin Powers The DevilWears Prada Signs Dr. Seuss’TheCatintheHat in 2002($228millionatthe ), hasstarredinnineblock- Apocalypto , and in 1992($122million),has . Healsodirectedthecriti- Shrek in 1999; ; eachoftheBourne Kramer vs. movies, andthelead in 1989,MelGibson Braveheart 48 Hours films, variousroles in 2006. I NowPro- The Departed . in 2007. , forwhich The Pas- and Julia The in . , ; Nintendo’s Wii, andSony’s XBox,aswell popularity of portable gameplayers,such as growth ingamingisbeingspurred bythe in 2005,upfrom67.5million in2004.The ple intheUnitedStatesplayed videogames and PCgaming.Morethan 76.2 millionpeo- illustrates thegrowingpopularity ofvideo Ziff DavisMediareleasedinAugust2005— and more. tives fordeliveryoffilms,gaming,music, a growingnumberofnewmediaalterna- In addition,theatersarecompetingagainst video recording),andmoviesondemand. TV (HDTV)signals, and advancedsoundsystems,high-definition ment, withsuchfeaturesasflat-panelscreens includes high-qualityhomevideoequip- ogy vyingformoviegoers’timeandmoney young andotheragegroups.Newtechnol- away atmovietheatreattendancebythe and older(10%;20%). (15%; 19%),50to59(10%;15%),and60 population), 30to39(17%;17%),4049 29 agegroup(21%ofadmissions;15% 15% ofthepopulation,followedby20-to- sented 26%ofboxofficeadmissionsbutonly moviegoers. Asofearly2005,thisgrouprepre- year-olds continuedtobe themostfrequent the mostavidmoviegoers.In2005,12-to20- search, amongallagebrackets,theyoungare vice BoxOfficeMojoLLC. cording torevisednumbersfromreportingser- and increased4.2%in2006($9.21billion),ac- billion), declined6.1%in2005($8.84 (to $9.19billion),rose2.5%in2004($9.42 Boxofficereceiptsrose0.2%in2003 billion). lion), thengained1.4%in2006(to1.40 billion), declined 0.4%in2004(tolessthan1.52 sions fell3.8%in2003(to1.52billion), ing at1.58billionadmissionsin2002,admis- has generallyfalleninrecentyears.Afterpeak- average of$6.58),thenumberticketsales (including anincreaseof2.8%in2006,to ticket priceshaveriseneveryyearfordecades billion to$9.5since2001.Although off —holdingwithinarangeofroughly$9.0 Gaming proliferates moviegoers’ time New entertainmentoptionsviefor Digital GaminginAmerica—asurveyby New entertainmentoptionsarechipping According toMPA Worldwide MarketRe- US boxofficerevenuesappeartobeleveling and dropped9.2%in2005(1.38bil- time-shifting (digital dance aswell. infer thatgamingishurtingtheateratten- address theissue,itwouldnotbeastretchto per weekin2004.Whilethesurveydidnot week ofTVin2005,downfrom18hours 2007, accordingtoIDC. $656.3 millionin2004to$2.2billion expected toincreasedramatically, from in 2008.USrevenuesfromonlinegamesare from $116.5millionin2004to$1.0billion able Internetgameswillclimbsubstantially, gy data,forecaststhatUSsalesofdownload- cell phones. the growingpopularityofgame-playingon ing fortheDVD towatchamoviethatthey be theatergoers finditeasiertojustifywait- bly willshrinkthewindow further. movie downloads,competitive forcesproba- dows. With thegrowingpopularityofdigital gap betweentheatricaland DVD releasewin- and saveonmarketingcostsbyclosingthe moviemakers hopetolessenmoviepiracy ticket salesattheboxoffice.Inaddition, tern similartothepostreleasedrop-offin off sharplyaftertheirinitialrelease,inapat- Since 2004,DVDsaleshavetendedtodrop 2001, to57%in2003,just4.5%2005. sales growthdeceleratedfrom269%in whose boomhasapparentlyended:DVD them isthedecreasingshelflifeforDVDs, shrinking moviereleasewindow. Oneof making aprofitonboxofficeclinkers. inthehopeofrecoupingcostsand timing moviemakers seektotakeadvantageof release datehascontinuedtoshorten,as movie’s theatricalreleasedateanditsDVD earlier. Thewindowbetweenthetypical an averageofsixmonths,onlyafewyears the movie’s theatricalrelease—downfrom retail saleanaverageoffourmonthsafter billion units. 368% overthesameperiod,tonearly1.3 2001. DVDunitsalesandrentalsclimbed ing videosandDVDs,a62%increasefrom that Americansspent76hoursayearwatch- Association ofAmerica(MPAA) revealed receipts DVD salesandrentalsdivertboxoffice On average,gamerswatched16hoursper IDC, aproviderofinformationtechnolo- With theshortenedwindow, manywould- There areanumberofforcesbehindthe In 2004,movieDVDswerereleasedfor A studyin2005bytheMotionPicture 15 SEPTEMBER 20, 2007 / MOVIES & HOME ENTERTAINMENT INDUSTRY SURVEY 16 SEPTEMBER 20, 2007 / MOVIES & HOME ENTERTAINMENT INDUSTRY SURVEY music devices, such astheiPodfromApple, lent; andthegrowing popularityofportable the high-pricedformatthathas becomepreva- older consumers’greaterability toaffordCDs, factors: thegeneralagingof population; about 19%in1990.Thislikely reflectsseveral music salesin2005,upsignificantly from aged 40andolderaccountedforabout35%of down from70%in1990. made about57%ofpurchasesin2005, indicated thatconsumersaged10to34 changed. AsurveyconductedfortheRIAA However, itsaudiencedemographicshave of itsbusinessfromyoungerconsumers. Music: anagingcustomerbase until theDVDreleaseformultipleviewings. movie inthetheaterfindsiteasiertoholdoff might havegonebackseveraltimestoseea see” immediately. Inaddition,someonewho are interestedinseeing,butnot“dyingto Sources: RecordingIndustryAssociationofAmerica;* Fever Night Saturday (MIL.) Destruction for Appetite U.S.A. the in Born RELEASE* Supernatural Beatles/1962–1966 Moon The the of Side Dark View Rear Cracked Beatles/1967–1970 LABEL The Pill Little Jagged Hits Greatest California Hotel Fences No Graffiti Physical Bodyguard The ARTIST Boston Beatles The Rumours Over on II Come Volume & I Live Volume Double — Hits Greatest Black in Back IV Zeppelin Led Wall The (1971–1975) Thriller Hits Greatest Their 2007) ALBUM February of as millions, in shipped, units by (Ranked ALL-TIME TOP-SELLINGALBUMS According tothesamesurvey, consumers The musicindustrycontinuestogetmost All Media Guide Media All h ete aio 9316 16 16 1973 16 1976 1974 17 1995 16 16 17 Capitol 1976 19 Elektra Rocket 1975 1990 1992 Maverick 1964 21 CapitolNashville 21 19 The Beatles SwanSong Epic Alanis Morissette 20 20 1980 Elton John 1985 1977 Arista 23 Eagles 29 Capitol 23 Garth Brooks 1997 27 1998 Led Zeppelin Warner Bros. MercuryNashville 1979 1976 Whitney Houston 1971 Columbia CapitolNashville Elektra Boston 1982 The Beatles Fleetwood Mac Swan Song Columbia Shania Twain Elektra Garth Brooks Billy Joel Epic AC/DC Led Zeppelin Pink Floyd Michael Jackson Eagles e esPldrAls17 15 15 15 15 1977 15 1999 1987 15 Polydor/Atlas 1973 1973 1985 16 Geffen Arista Columbia Capitol Capitol 1994 Bee Gees Guns 'NRoses Bruce Springsteen Santana The Beatles Atlantic Pink Floyd Hootie &theBlowfish . cheaper thanpurchasingaCD. tend todownloadindividualsongs—whichis among theyoungergenerations.Theseusers tail operations inlateDecember2006. inventory and closedthedoorsonitsUSre- music retailerTower Records liquidated its from onlinedownloadingservices. Thegiant with allretailoutletsunder growing pressure according totheRIAAsurvey citedearlier, industry sales,downfrom69.8% in1990, 2005, recordstoresaccountedfor39.4%of the expenseofspecialtymusicstores.In industry sales.Thesegainscamelargelyat also haveaccountedforagrowingportionof stores. OnlineoutletssuchasAmazon.com way toattractyoungerconsumerstheir have usedpricereductionsonhitalbumsasa lets’ recordedmusicsales.Theseretailers counted foragrowingportionofretailout- Inc., andCircuitCityStoresInc.)haveac- (such asWal-Mart StoresInc.,BestBuyCo. Sales channelsshift During thepastdecade,discountchains ERO SHIPPED YEAR OF NUMBER tainment industry areinvolvedinthecre- ferent kindsofdevices. which downloadedmusiccanbeplayedondif- able, pricingtoconsumers,andtheextent are likelytoincludethevarietyofmusicavail- ward, factorsinfluencingcompetitivesuccess Mart’s musicdownloadservice.Goingfor- Inc.), MSNMusic(MicrosoftCorp.),andWal- Napster (NapsterInc.),Musicmatch(Yahoo! nect storesometimeafterMarch2008), gust 2007thatitwouldshutdowntheCon- (Sony Corp.;however, SonyannouncedinAu- (from RealNetworksInc.),SonyConnectInc. competitors includedRealPlayerMusicStore music downloads.AsofJanuary2007,iTunes’ creasingly competitiveenvironmentforsalesof music purchases.Inaddition,weseeanin- means isstillbutasmallpercentageofoverall for portablemusicdevices. accounts formorethan75%ofthemarket online musicservice,andthatApple’s iPod We believethatiTunes istheworld’s leading cally sellsindividualsongsfor99centseach. Store, whichdebutedinApril2003andtypi- loaded fromitsInternet-basediTunes Music length films)hadbeenpurchasedanddown- episodes andmorethan1.3millionfeature- two billionsongs(plus50millionTV January 2007,Applesaidthatmorethan on theirPCsorportablemusicdevices.In songs intheformofdigitalfilesforplayback Internet, wherebyconsumersdownload grow rapidlyintheyearsahead. expects Internetsalesavenuestocontinue 2002 and0.3%in1997.Standard&Poor’s ing totheRIAAstudy, upfrom 2.4% in counted for8.8%ofindustrysales,accord- 2005, musicdownloadedviatheInternetac- er digitaldevicesformusicpurchases.In creasingly turnedtotheircomputersandoth- fell to1.1%,from32.1%. od, themarketshareforfull-lengthcassettes up from58.4%in1994.Overthissameperi- represented 87.0%ofmusicpurchasesin2005, According totheRIAAsurvey, full-length CDs purchasing musiconCDsratherthancassettes. HOW THEINDUSTRYOPERATES Companies in the movieandhomeenter- The amountofmusicsoldthroughsuch Increasingly, musicisbeingsold viathe In morerecentyears,consumershavein- There hasbeenalong-termtrendtoward bringing contenttothepublic. and oftenowndistributionchannelsfor ucts, haveextensivelibrariesofproducts, nies financethedevelopmentofnewprod- Inc., andtheWalt DisneyCo.Thesecompa- Ltd., SonyCorp.,Time Warner Inc.,Viacom NBC UniversalInc.business),NewsCorp. General Electric(throughits80%-owned industry. Amongthebiggestare CBSCorp., sumers ontapeordisc. at futuretimesand/ormadeavailabletocon- likely toberecorded,andthenrebroadcast tainment eventsthatarebroadcastlive transmit andcopy. Inaddition,many enter- images andsounds,makethemeasierto tally, whichcanpreserveahigher qualityof recorded entertainmentisbeingstoreddigi- can beseenorheardrepeatedly. Increasingly, is recordedonfilm,tape,ordiscsothatit gramming forconsumers.Thisprogramming ation anddeliveryofvariouskindspro- TV markets.For movietheaters,thewide contributions from varioushomevideoand day, profitabilityoftendependsheavilyon longer theprincipalsourceof revenues.To- rental feesforavideotitle. distributor andretailershare consumers’ revenue-sharing agreement,underwhichthe ers. Italsomaydistributethemthrougha distributor usuallysellsthemtovideoretail- ranging tohavevideosmanufactured,the rights inthehomevideomarket.Afterar- theatrical releasealsoownsitsdistribution major films),thecompanyhandlingfilm’s to another. Inmostcases(andparticularlyfor rights toonepartyandsellshomevideo cases, aproducergrantstheatricaldistribution for feesandashareoftheproceeds.Insome or providesaportionofthefinancinginreturn tor typicallyfundsamoviefromstarttofinish talent. With amajortheatricalfilm,distribu- duction company, andacollectionoffreelance contract signedbyamajordistributor, apro- least 70%ofdomesticboxofficerevenues. NBC Universal—typicallyaccountforat tainment Group,Time Warner Inc.,and Inc., SonyCorp.,NewsCorp.’s FoxEnter- companies —theWalt DisneyCo.,Viacom Movies: inthetheaterandathome Large, diversifiedcompaniesdominatethe For manyfilms,movietheater salesareno Movies todayusuallyaremadeundera The moviereleasesofsixfilmdistribution 17 SEPTEMBER 20, 2007 / MOVIES & HOME ENTERTAINMENT INDUSTRY SURVEY 18 SEPTEMBER 20, 2007 / MOVIES & HOME ENTERTAINMENT INDUSTRY SURVEY ER(NMLIN)(NMLIN)DD CSCSETSDVDS Source: MotionPictureAssociationofAmerica. CASSETTES 54.096.5 50.6 †Sales toUSdealers.*Atyearend. 90.4 391 69.795.5 619 64.3 VCRS 88.1 244 2002 84.393.4 879 76.9 85.2 126 2003 91.394.0 82.8 1,212 49 85.3 DVDS 2004 1,293 95.793.1 85.9 7 83.6 1,325 2005 (INMILLIONS) 2006 (INMILLIONS) YEAR PROFILE OFUSHOMEVIDEOMARKET UBRO OSHLS IH PRERECORDED VIDEOSALES NUMBER OFHOUSEHOLDS*WITH: DVDS VCRS%OFTVHOMESWITH:(INMILLIONSUNITS) film’s revenuesorprofits. contractually entitledtoaportionofthe creative talentinvolvedinamoviemaybe the film’s homevideorelease.Inaddition, markets, andmanufacturingmarketing dubbing orsubtitlingthemovieforforeign cation (makingmultiplecopiesfortheaters), worldwide, asofAugust2007. ranks it106thamongall-timemoviegrosses worldwide boxofficetotalof$368.7million fice salesof$127.3million.Themovie’s of $241.4millionandinternationalboxof- the filmgenerateddomesticboxofficesales Reportedly producedforabout$5million, big was ample ofalow-budgetmoviethatmadeit the USboxofficein2006alone.Anotherex- million tomake,buttookin$60at Little Miss less. Forexample,the2006boxofficehit some filmsaremadefor$15millionor more than $225 milliontoproduce,while rates oftheCaribbean special-effectsmovie,suchasa profile Extensive costs,elusiveprofits ate revenuesforyearstocome. value inancillarymarkets,helpingtogener- translates intogoodreceptionandgreater from ticketsales,theatricalsuccessoften addition tocontributingrevenuesdirectly jor impactonfilms’ultimateprofitability. In formance willlikelycontinuetohaveama- entertainment. Nevertheless,boxofficeper- are increasinglybeingusedtoviewfilmed ternet access,computersandwirelessdevices tion, withthegrowinguseofhigh-speedIn- may limitlonger-term attendance.Inaddi- video, handheldgames,andothernewmedia availability ofcableandsatelliteTV, home Other costsincludeadvertisinganddupli- Production costsvarywidely. A high- My BigFatGreekWedding † Sunshine cost anestimated$8 sequel, cancostfar in 2002. Pi- coup theirinvestmentandmakeaprofit. release tohomevideoandothermediare- panies intheindustryrelyonsequential ment intheirdomestictheatricalrun.Com- movies losemoneyontheiroriginalinvest- ures. AccordingtotheMPAA, sixof10 sectors, thesuccessesmustpayforfail- this business,asinthemusicandtelevision cost structureisseldomdisclosed. are talliedpublicly, aspecificmovie’s full though amovie’s boxofficerevenuesoften stream —isoftenmanyyearsinlength.Al- concept totheexhaustionofitsrevenue in USboxofficesalesthatyear. theatrical rentalsfromthenearly$9.5billion distributors tookinmorethan$4.7billion tion isknownastheatricalrentals.In2006, where itisexhibited.Thedistributor’s por- a filmandtheoperatorsoftheaters equally betweenthecompanythatdistributes peaked in2003atasumof$102.9million. release). Bothmarketingandnegativecosts the movieproducedandreadyforcommercial all othercostsassociatedwithactuallygetting costs, and$65.8millioninnegativecosts( which included$34.5millioninmarketing (MPAA) moviein2006was$100.3million, Motion PictureAssociationofAmerica management skill. access tocapital, regulatorybarriers,and according tosector. Salientfactorsinclude join theranksofindustry leadersvaries easily. Theabilityofsmallercompaniesto However, long-lived successdoesnotcome years forindependentfilms (“indies”). industry hasseenagrowthmarketinrecent distribution businessarenothigh,andthe tablished companies. pabilities tendtofavorthelarger, morees- creative talent,andproductdistributionca- management experience,relationshipswith tion, factorssuchasbrand-namerecognition, theater ownersandTVnetworks.Inaddi- of itsproductsgivesitmoreinfluencewith a varietyofprojects,whilethesheervolume large firmcandiversifyitsriskbydeveloping able companieshaveobviousadvantages.A Size andentrybarriers Most moviesarenotbigmoneymakers.In The lifespanofafilm—frominitial Box officereceiptsaresharedabout The averagecosttomakeandmarketa Barriers toentryinthefilmmakingand In thefilmedentertainmentbusiness,siz- i.e. , digital versatile discs(DVDs;oftencalled had morethanonescreen. Most ofthe6,356USmovie theatersin2006 39,668, comparedwith38,852 in2005. movie screensin2006increased2.1%to According totheMPAA, thenumberofUS ruptcy proceedingsbetween1999and2001. 12 largestUSfilmexhibitorsenteredbank- of thisandotherfactors,abouthalfthe insufficient numberofolderscreens.Because 15,000 newmoviescreenswhileclosingan industry over-expanded, openingmorethan based uponhowwellthemoviehasperformed. after afilm’s theatricalrunhasconcluded, ject toasettlementprocessthatisnegotiated edged up.Inaddition,rentalfeesmaybesub- percentage oftotalboxofficereceiptshas weeks intheaters,weexpectthatdistributors’ creasingly comingfromthefirstcoupleof the bulkofticketsalesmajormoviesin- screens longer. However, inrecentyears,with tive fortheexhibitortokeepfilmonits ceipts increasesovertime,itprovidesanincen- exhibitor’s weeklypercentageofboxofficere- enues exceededanegotiatedfigure. percentage oftheamountthatadmissionrev- cline asafilm’s theatricalrunlengthens)ora centage ofboxofficereceipts(whichmayde- advance, adistributorwillreceiveeitherper- formula. Typically, ifthefeeisdetermined in sales, arebasedlargelyonarevenue-sharing fees, whichaverageroughly50%ofticket distributors orsubmittingbidstothem.Rental license filmsbyeithernegotiatingdirectlywith rental ofmoviesfromdistributors.Exhibitors boost averagecapacityutilization. single-screen theaters,sothisformatcanalso ically havefewerseatsperscreenthando movie. Multiplex(ormegaplex)facilitiestyp- stance —canservepatronsofmorethanone concession standsandboxoffice,forin- scale, inthatemployeesandfacilities—the ater complexesalsopermiteconomiesof the valueoftheirrealestate.Multiscreenthe- ing avarietyoffilms—andthusmaximizes operators attractmoremoviegoersbyoffer- theater complexes.Thisformatlets Videos forsaleorrent Theatrical revenuesharing A varietyofmaterial isnowavailableon During the1990s,USmovietheater During afilm’s theatricalrun,ifthemovie A theateroperator’s largestexpenseisthe Many oftoday’s cinemasaremultiscreen advancing 42.0%in2003and76.4%2002. In 2004,unitsaleshadclimbed37.9%,after which wasup6.6%from1.21billionin2004. only 2.5%fromthe1.29billionin2005, sold totaled1.32billionin2006,anincreaseof tially since2005.ThenumberofDVDunits through 2004,butgrowthhasslowedsubstan- customer’s rentalfeeorpurchaseprice. for avideobutisentitledtoretainallofthe ties. Inothercases,aretailermaypaymore rental spendingissplitbetweenthetwopar- ment withthedistributor, wherebyconsumer and thenhavearevenue-sharingarrange- may acquireavideoatrelativelylowcost, are aimedatrentalsbyconsumers,aretailer though theyalsogeneratesignificantrentals. more likelytobepurchasedbyconsumers, larly thoseavailableforlessthan$20,are activity, whilelower-priced DVDs,particu- than $35)aregenerallytargetedforrental relatively highretailpurchaseprice(more at differentpricepoints.Videos thathavea els ofdemandfromretailersandconsumers mize revenuesandprofitsbyforecastinglev- rectly toconsumersasvideos. are notshownintheatersbutreleaseddi- theatrical debut.Inaddition,somemovies DVD aboutthreetofourmonthsaftertheir theatrical moviestypicallyarereleasedon of thedollarsspentonvideopurchases.New than 70%ofvideorentalsandatleast60% cassettes. Moviesprobablyaccountformore movies), whichhavelargelyreplacedvideo- “digital videodiscs”whenreferringto programming services. that isbecoming availablethroughdigital as viewersshifttoalternative programming that theirmarketshareswill declinefurther 10 yearsearlier. Inthelongterm, weexpect viewers, comparedwithmore than60%just tracted roughly40%oftotal prime-time levels notavailableelsewhere. vide householdpenetrationandviewership advertisers, thesenetworkscontinuetopro- in UStelevisionprogramming.Fornational CBS, NBC,andFox)remainthelargestforce the fourmajorbroadcastnetworks(ABC, TV industry:bignetworksstilllead Sales andrentalsofDVDsgrewrapidly In somecases,especiallywithvideosthat Suppliers ofhomevideosseektomaxi- For the2006–07season,BigFourat- Although theirmarketshareiseroding, 19 SEPTEMBER 20, 2007 / MOVIES & HOME ENTERTAINMENT INDUSTRY SURVEY 20 SEPTEMBER 20, 2007 / MOVIES & HOME ENTERTAINMENT INDUSTRY SURVEY tional network commitments. duction business canhelpgenerateaddi- creation ofasuccessfulshow byanypro- market programsproduced byothers.The smaller firms,andoftendistribute and contract fororjointlyproduce showswith finance newshows.Larger companiesoften cash flowfromprogramlibrarieshelpsto to themoviebusinessinmanyways.Good of therevenuesassociatedwithdoingso. time. Theyincurallofthecostsandkeep programming andforsellingadvertising sponsibility forfillingtheirscheduleswith ated withabroadcastnetwork,bearfullre- heading laterinthissection.) program suppliers.(Seethe“Syndication” tion hasacquiredindependentlyfromother tional networktimewithshowsthatthesta- grams thanduringnetworkofferings. more advertisingtimeduringsuchpro- produce themselves,affiliatesgettosell are typicallyhigherforshowsthatthey house (suchaslocalnews).Althoughcosts as asyndicatedshow)orproducedin- have eitherpurchasedindependently(such show, theyofferprogrammingthat from theirnetworks. ates alsoreceiveafee,calledcompensation, ods whentheirshowsareairing.Manyaffili- bulk oftheadvertisingtimeduringperi- change, networksobtaintherighttosell 20 hoursofprogrammingperweek.Inex- owned stationsandaffiliateswithmorethan others. Thenetworkstypicallyprovidetheir ate relationshipswithTVstationsownedby panies ownTVstations;theyalsohaveaffili- independent broadcaststations. nent ofthebroadcastfareoncableoutletsand the BigFournetworksarestillalargecompo- years, showsthatoriginallyappearedononeof programming hasrisensignificantlyinrecent though cablecompanyinvestmentinoriginal buyers ofhigh-profile,first-runshows.Al- Program suppliers Independent stations Networks provideprogramming The productionofTVshowsissimilar Independent stations,whicharenotaffili- At times,anaffiliatechoosestofilltradi- When affiliatesarenotairinganetwork All ofthemajorbroadcastnetworkcom- The broadcastnetworksremainthelargest broadcast networkand/orcablenetworks. nies) alsoarefullorpartownersofa of thesebusinesses(ortheirparentcompa- Touchstone Television ProductionsLLC.All Television, andtheWalt DisneyCo.’s Universal Television Group,SonyPictures Corp.’s CBSParamountTelevision, NBC Twentieth CenturyFoxTelevision, CBS er Bros.Television Group,NewsCorp.’s works includeTime Warner Inc.’s theWarn- program becomesahit. but itcanalsogenerategreaterreturnsifa usually involvesahigherinitialinvestment, interests inshowsthattheyair. Doingso creasingly producingoracquiringownership ever, broadcastnetworkcompaniesarein- supplier retainsownershipofashow. How- and itslongevityonbroadcastnetworkTV. termined largelybythesizeofitsaudience desirability ofaprogram’s rerunrightsisde- dividual TVstationsorcablechannels).The off-network syndication(sellingrerunstoin- in thehopeofultimatelyprofitingthrough are included,asuppliermayacceptdeficit markets. However, evenafterforeignsales deficit bysellingtheprogramtoforeign duction, itmayoffsetsomeorallofthe to anetworkforlessthanthecostofpro- years ofproduction. $200,000 perepisode,especiallyintheearly exceed thenetworklicensefeebymorethan programs themselves,thecostofwhichcan fordable forthenetworksthanproducing times. Thisarrangementisgenerallymoreaf- them aireachepisodeofaseriesseveral ers throughlicenseagreements,whichlet run prime-timeshowsfromprogramsuppli- as tocablenetworks. prises salesto both kindsofstations,aswell of timetofill.Thesyndication marketcom- shows, althougheachhasa different amount dependent TVstationsalike buysyndicated to cablenetworks.Network affiliatesandin- market basis.TVprograms are alsolicensed around theUnitedStatesonamarket-by- ing aprogramtoindividualTVstations Network licensing Syndication Major programsuppliersforthenet- In alicensingarrangement,theprogram When aprogramsupplierlicensesshow The broadcastnetworksoftenobtainfirst- Syndicating aTVprogrammeanslicens- budget productions. Forprogramsuppliers, as talkandgame shows,arerelativelylow- a bighit. that havedebutedinrecent years hasbecome low. Noneof thefirst-runsyndicationshows evening, whenoverallviewership isrelatively cated showsairduringthedaytimeorlate prime-time networkofferings.Manysyndi- attracting audiencescomparabletothe and thenasreruns. lucrative thanlicensingitfirsttoanetwork but infirst-runsyndicationmaybemore some programsuppliers,havingashowde- too narrowforanetworktimeslot.For gram, orconsideritspotentialaudience lar shows,donotliketheproposedpro- reasons —becausetheyalreadyhavesimi- are notinterestedinairingitforvarious distribute aprogramthiswayifnetworks market. Aprogramsuppliermaydecideto cally forlicensinginthesyndication cation involvesnewshowscreatedspecifi- single newnetwork,theCWNetwork.) the UPNandWBnetworksmergedintoa er inthissection.(Inmid-September2006, off-network syndication—aredescribedlat- of syndication—first-runand need forsyndicatedprogramming.Two kinds stations tobecomeaffiliates,reducingthe WB networksconvincedmanyindependent ment Tonight inthesevaluabletimeslots. cesses asWheelofFortuneandEntertain- not impossible,todisplacesuchprovensuc- pliers ofnewshowsoftenfinditdifficult,if works starttheirprime-timeschedules.Sup- zones —thehourbeforebroadcastnet- 6 p.m.to7inthecentralandmountain the easternandPacifictimezones,from shows istypicallyfrom7p.m.to8in cense syndicatedshows. them —haveanevengreaterneedtoli- they donothaveanetworktosofor their ownschedulesentirely—because time. Independentstations,whichmustfill any advertisingrevenuesgainedduringthat programming costsitself,itgetstokeep ming. Whiletheaffiliatemustpaysuch time thatisnotusedfornetworkprogram- Many first-runsyndicatedprograms, such Few first-runsyndicatedshowssucceedin ◆ The developmentoftheFox,UPN,and The peakviewingperiodforsyndicated Affiliates buysuchprogramstofillair- First-run syndication. First-run syndi- pected tobewatched, thegreatersuccess a tional advertisers. Themoreashowisex- enough audiencetoattractthe interestofna- households intheUnitedStates —alarge shows thatcanreachatleast 70%oftheTV shows, nationaladvertisers typically lookfor in turn,sellstheadtimetootherparties. pensation fromtheTVstation.Thesupplier, receives adtimeratherthanmonetarycom- for providingashow, theprogramsupplier cast networkshavewithaffiliates.Inreturn ing, issimilartothearrangementthatbroad- their shows.Thisprocess,knownasbarter- from sellingadtimeonthestationsthatair ers receiveatleastaportionoftheirrevenue cable channels. duce thancomedies)haveairedprimarilyon hour-long dramas (whichcostmoretopro- of hour-long dramas. Recentlyproduced for thestationsellingadtime)thanthose tract largeraudiences(andthustoearnmore of half-hourcomediesgenerallytendtoat- losses fromfailedshows.Inaddition,reruns for aprogramsupplier, helpingtooffsetthe vary widely. being offeredatagiventime.Pricesmay tive buyers,andthesupplyofsimilarshows health andprogrammingneedsofprospec- degree ofnetworksuccess,thefinancial show rerunsonvariousfactors:theshow’s new first-runprogramming. same timethatthenetworkspresenttheir becomes availableeachfall,ataboutthe A newcropofoff-networkorrerunshows Love Lucy example. Othersyndicatedshows,suchas tion for anetwork— while newepisodesarestillbeingproduced iarity withandloyaltytothem. strong marketappeal,duetoviewers’famil- ing shownonnetworkTV. Suchshowshave are licensedforairingasrerunsafterfirstbe- syndication involvesprogramepisodesthat making themarkethighlycompetitive. can createaglutofprogrammingalternatives, However, first-runsyndicatedprogramsalso this easesthecostofgettingintobusiness. When purchasingtimeonsyndicated With manysyndicatedprograms,suppli- Syndicated rerunscanbehighlylucrative Suppliers basethepricestheychargeto Some programsenterrerunsyndication ◆ , withnewepisodesairingonCBS,isone Off-network syndication. , havelongagoleftthenetworks. CSI: CrimeSceneInvestiga- Off-network I 21 SEPTEMBER 20, 2007 / MOVIES & HOME ENTERTAINMENT INDUSTRY SURVEY 22 SEPTEMBER 20, 2007 / MOVIES & HOME ENTERTAINMENT INDUSTRY SURVEY not offerallcable channels.Fortheserea- 98%). Inaddition, cablesystemoperators do cess tobroadcastsignals(approximately or satelliteTV(roughly84%) thanhaveac- rates forcableorsatelliteservice. are chargedafeeinaddition totheirbasic Time Warner). Subscriberstothesechannels Home BoxOffice(HBO;largelyownedby networks arepay-TVchannels,suchas ESPN andCNNaretwoexamples.Other part ofa“basic”cablesubscriptionpackage; ator (alongwithlocalbroadcaststations)as often areprovidedbythecablesystemoper- Most networksareadvertiser-supported and gories: advertiser-supported andpayTV. satellite serviceshasgrownrapidly. recent years,thenumberofsubscribersto dish antennastoreceivebroadcastsignals.In services, whichrequiresubscriberstohave cable systems,aswellbywirelesssatellite delivered toviewers’homeslargelybywired able bysubscription.Theirtransmissionsare & Cable the cableTVindustry, seethe broadcasts. (Foranin-depthdescriptionof cal advertisingonthecablenetworksthatit system generallycansellapercentageoflo- revenues comesfromadvertising.Eachcable expand thecountry’s cabledeliverysystem. equipment necessarytocreate,maintain,and well astosupportthemassiveinvestmentin ESPN orCNNfortheirprogramming,as ly feeslargelytopaycablenetworkssuchas from viewersubscriptions. than $20billion,thebulkofwhichcomes sumers’ homes.Annualrevenuestotalmore companies thatdelivercablesignalstocon- sumers. Theindustrycomprisesthepipeline value ofcontentthatitdeliverstocon- has asignificantbearingontheusageand for entertainmentandinformation,thus economical andconvenientdeliverymedium Cable networks Cable systemoperators of TVstations. syndicator willhaveinsellingittoagroup Fewer UShouseholdssubscribe tocable Cable networksfalllargelyintotwocate- Dozens ofcablenetworksarenowavail- A portionofthecablesystemindustry’s Individual cablesystemsusethesemonth- The cablesystemindustryprovidesan issue of Industry Surveys Broadcasting .) charge cablesystemstoshowitinthefuture. popular enough,itsownermaybeableto er, ifanewnetworkorchannelbecomes dience andthusadvertisingdemand.Howev- source —intensifyingitsneedtobuildanau- may becomethenewchannel’s solerevenue carry theirsignal.Insuchcases,adrevenues even agreetopaycablesystemoperators times waivetheirfeesforseveralyearsor gain audienceexposure,newchannelssome- win thecompetitionforshelfspaceandto ingly hardtobecarriedbycablesystems.To so newcablenetworkshavetofightincreas- system operatorshavelimitedchannelspace, monthly per-subscriber basis.However, cable tem operatorsaretypicallyleviedona systems. Thefeesthattheychargecablesys- time andbychargingfeestoaffiliatedcable in twoprincipalways:bysellingadvertising ten splitcommercialtimewiththeiraffiliates. operators. Anothersimilarityisthattheyof- also delivershowstoaffiliatedcablesystem tions) withprogramming,thecablenetworks provide theiraffiliates(individualTVsta- works? JustasABC,CBS,NBC,andFox and sports. pling ofbroadcastnetworkreruns,movies, and TBSSuperstation,featureabroadsam- programming. Others,suchasUSANetwork niches withtheirrelativelynarrowrangeof CNN andESPNhavecarvedoutprofitable 60 millionUShomes.Channelssuchas that theyreach)areavailableinmorethan measured bythenumberofTVhouseholds reach ofthenationalbroadcastnetworks. sons, cablechannelsfallshyofthehousehold HBO, particular channel,suchas ming —showsthatviewersidentifywitha there isarisingneedforsignatureprogram- made-for-TV movies.Ascompetitiongrows, ming, suchasmajor-league sportseventsand creased theirinvestmentinoriginalprogram- Cable programming and Showtime, moviesremaintheprincipal nently scheduledoncablechannels. on broadcastnetworksarestill beingpromi- However, rerunsof showsthatoriginallyaired ly ShowWith JonStewart The largercablenetworksreceiverevenue Why arecable-onlyoutletscallednet- Still, thebiggestbasiccablenetworks(as In recentyears,cablenetworkshavein- For thepay-TV networks,suchasHBO Larry KingLive on CNN,and on ComedyCentral. The Sopranos The Dai- on the industryinclude technologicalchange, ing periodsofeconomicdifficulty. consumers cantypicallyafford themevendur- ment productsarerelativelymodest inprice,so son isthatmostmovieandhome entertain- impact ontheentertainment business. Therea- come generallydonothaveasignificant ment, consumerconfidence,andpersonalin- provided bymajormusiccompanies. which alsomayinvolvesubscriptionservices from AppleInc.(formerlyComputer), er wirelesshandhelddevices,suchasiPods music viapersonalcomputers(PCs)andoth- sumers areincreasinglyacquiringrecorded tailer islikelytopayroughly$12.Con- suggested pricetoconsumersof$18.98,are- compact disc(CD)format.ForaCDwith stores andboughtbyconsumersareinthe pectations forthenewrecording. sales successoftheartist’s musicandtheex- centage fortheartistusuallyreflectpast of theadvancepaymentandroyaltyper- record’s suggestedretailprice.Theamount to somewherebetween5%and13%ofthe to receivesales-basedpaymentsthatamount vance) arededucted,theartististhenlikely ments. Aftersuchcosts(includingthead- before theartistreceivesanyadditionalpay- new album,butitlookstorecoveritscosts up-front feetoanartistwhoisproducea acquainting consumerswithnewmusic. television ( exclusively overanumberofyears.Radioand tend torecordforasinglecompanyandlabel contractual obligationsmeanthatmusicians Their relationshipswithartistsareimportant: products underanumberofdifferentlabels. AND STATISTICS KEY INDUSTRYRATIOS Music labels has dwindled. in theaters,afterthevideorentaldemand pay networksaboutayearaftertheydebut ly becomeavailableononeormoreofthe programming fare.Theatricalfilmstypical- Factors thathave moreofabearingon Macroeconomic factorssuchasemploy- Today, mostofthealbumsshippedto A recordingcompanytypicallypaysan Each ofthemusicindustryleadersoffers e.g. , MTV)aresignificantfactorsin ceives fromadvertisingdollars. the amountofsupportthatprogrammingre- and, especiallyforTVnetworksandstations, tainment ormusicthatappealstoconsumers; which contentcreatorsproducefilmedenter- distribution, andcompetition;theextentto which canleadtonewproducts,meansof free oratadiscount. “make-good” time—scatterprovided network maycompensateadvertisers with sured byNielsenMediaResearch, the jected audience,whichistypically mea- upfront market. prices mayfallbelowthosechargedduringthe vantage isthat,ifadvertisingdemandweak, than duringtheupfrontseason.Apotentialad- rower choiceofslotsandpricesmaybehigher from thescattermarketarethatitoffersanar- date ofbroadcast.Thedisadvantagesbuying which advertiserspurchasetimeclosertothe made availableinthe“scattermarket,”from time unsoldduringtheupfrontperiodisthen the beginningofanewTVseason.Advertising front season—typicallyMayandJune,before networks tonationaladvertisersduringtheup- category comprisesadvertisingsalesmadeby cals andonInternetsites. Research andcanbefoundinvariousperiodi- ratings andshareisprovidedbyNielsenMedia consumer products.Informationpublishedon year-olds, whoare believedtobebigbuyersof cific demographicgroups,suchas18-to49- are likelytoplaceaparticularemphasisonspe- watching TV, isknownas“share.” Advertisers which excludespotentialviewerswhoarenot are tunedintoaparticularshow. Thisnumber, people watchingtelevisionatagiventimewho sion homes,orabout1.1millionhouseholds. point (1.0)isequalto1/100ofallthetelevi- (Latest figureavailable.)Onenationalrating television householdsasofAugust2006. there wereapproximately111.4millionUS search firmthatmeasuresaudiencesize, cording toNielsenMediaResearchInc.,are- the TVhouseholdswatchesthatshow. Ac- tion typicallyindicateswhatpercentageof points foragivenshowinnationaldistribu- its advertisingrevenue.Thenumberofrating TV audienceisanimportantdeterminantof

If aTVshowdoesnotdeliver itspro- Data alsoarecollectedonthepercentageof Upfront televisionadvertisingsales. Television ratings. The sizeofashow’s This 23 SEPTEMBER 20, 2007 / MOVIES & HOME ENTERTAINMENT INDUSTRY SURVEY 24 SEPTEMBER 20, 2007 / MOVIES & HOME ENTERTAINMENT INDUSTRY SURVEY http://www.boxofficemojo.com. source ofboxofficeinformationistheWeb site http://www.nielsenedi.com/charts. Another motion pictureindustry, canbefoundat fice measurementandresearchfirmforthe formation providedbyNielsenEDI,aboxof- United States.V wide domestictotalsmaybelimitedtothe ed StatesandCanada.However, industry- in thepresstypicallyincludebothUnit- office totalsforindividualmoviesreported Poor’s ticket salesthatafilmgenerates.Standard& attention giventotheamountofweekend reported invariousmedia,withparticular help buildfuturebusiness. film, however, favorableword-of-mouthcan retaining themovie.Ifearlyaudienceslikea advertising, andtheatersmayloseinterestin opens poorly, adistributormaycutbackon film’s longer-term audienceinterest.Ifafilm tant becausetheyarealeadingindicatorof lease, atleastinitially. screens), whileothersmaygetalimitedre- leased (typicallytobetween3,000and5,000 film isplaying.Somemoviesarewidelyre- screen, andthenumberofscreenswherea the averageamountofticketspendingper ating, analystsconsideroverallticketsales, audience interestatheatricalmovieisgener- from discussionswithindustryparticipants. tions duringthespringorsummer, aswell going canbeobtainedfromvariouspublica- mestic industry salesvolumebasedonmanu- Association of America(RIAA)measures do- watch filmedentertainment. DVDs andHDDVDs)onwhich consumers material relatedtothedifferent formats( sumer spendingonvideos.Thisincludes ures onrecentvideohitsandoverallcon- (http://www.videobusiness.com) providesfig- Video Business firms, andvariouspublications.Forexample, obtained fromtradeorganizations,research titles, aswellindustrywidefigures,canbe estimates aboutdemandforindividualvideo The performanceoftheatricalmoviesis Opening weekendsareparticularlyimpor-


Indications ofhowwellupfrontsalesare Video salesandrentals. Box officeresults. Music sales. believes thatreporteddomesticbox magazine’s Web site arious domesticboxofficein- The RecordingIndustry To gaugehowmuch Information or e.g. , and cross-promote itsassets? company have opportunitiestobuildbrands sets underthesamecorporate roof.Doesa if valueisbeingaddedbyhaving variousas- stand-alone basis,butitisimportant toask their operationsmaybeattractive ona long tomorethanonecategory. Eachof generally operatemultiplebusinessesandbe- distributors, packagers,andpipelines. four basiccategoriesarecontentcreators, mines thecategorytowhichitbelongs.The entertainment companyemphasizesdeter- future results. its pastperformanceandfoundationfor nancial statementscanrevealalotabout nally, adetailedstudyofthecompany’s fi- new productsandwithstandfailures?Fi- Does ithaveenoughfinancingtocreate competitive advantagesordisadvantages? to consumers?Inaddition,whatareits chain ofcreatinganddeliveringproducts business. Whatplacedoesitholdinthe ment companyistodetermineitslinesof the backpagesin SoundScan numbersarereportedregularlyin the UnitedStatesandCanada.Certain sales ofmusicandvideoproductsin lated byNielsenSoundScan,whichtracks RIAA’s Web site(http://www.riaa.com). dustry shipmentscanbefoundatthe than consumersales.Reportsofmusicin- lated inventorystocking—growsfaster cur, forexample,ifretailspace—andre- consumers arereallybuying.Thiscouldoc- close approximationofthevolumesthat At times,unitshipmentlevelsarenota may besoldtoconsumersatlowerprices. ed retailprice,whilemanyalbumsactually (value ofshipments)arebasedonsuggest- mind thattheRIAA’s citeddollaramounts sis. These dataarereleasedonasemiannualba- facturers’ shipmentlevels,minusreturns. Lines ofbusiness ENTERTAINMENT COMPANY HOW TOANALYZE AN The mostprominententertainmentfirms The kindofassetsandbusinessesthatan The firststepinanalyzinganentertain- Industry volumeattheretaillevelistabu- When consultingthesedata,keepin Billboard magazine. did whenpartofalargercorporateparent. ing, requiringfewerlevelsofapprovalthanit quicker ormoreagilewithitsdecisionmak- separated, asmallerbusinessmaybecome asset saleoraspin-off.Forexample,when parent companythroughsuchmeansasan vestors iftheywereseparatedfromalarger do betterandbemoreappreciatedbyin- ble ofachievingalone. that separatebusinesseswouldbelesscapa- said tocreatesynergy—acombinedeffect pany. Suchinterrelationshipsare sometimes a broadcastTVnetworkownedbythecom- help topromoteshowsthataredebutingon ters, whilesomeofitscableTVnetworks tractions mightusesomeofitsmoviecharac- a significantshareoftherevenue. and marketingofaproductinexchangefor panies, whichoftenhelpwiththefinancing volve thesupportoflargedistributioncom- their producttothepublic.Deliverymayin- equate financingandameansofdelivering succeed, thesecompaniesmusthavebothad- TV shows,musicalbums,orallthree.To marily contentcreators,producingmovies, able toconsumersthroughsuchoutletsas shows, videos,andmusictobecomeavail- function istoarrangeformovies,TV marketing effortsofdistributors,whose tainment reachconsumersthroughthe RACSCR.DSE NVRA OP OP ANR VIACOM WARNER CORP. CORP. UNIVERSAL DISNEY CBSCORP. AREA DIVERSE ENTERTAINMENT OPERATIONS &ASSETSOFMAJORUSMOVIEANDTVCOMPANIES rabn ie • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • Source: Companyreports. • • Note: Somerelativelyminoroperationsmaybe excluded. Includessignificantequityinterestsinjointventuresorothercompan • • Broadband sites • Book publishing • • • Magazines/newspapers Merchandise licensing • • • Theme parks • Recorded music • • Radio stations/networks Cable orsatellitesystems Premium cablenetwork(s) Basic cablenetwork(s) Broadcast TVnetwork(s) Broadcast TVstation(s) TV production/library Film production/library ◆ On theotherhand,somebusinessesmight For example,acompany’s themeparkat- ◆ Content creators. Distributors. Various formsofenter- Some firmsarepri- project’s futurerevenuestream. typically booststhedistributor’s shareofthe a project( tion, distributorssometimeshelptofinance revenue generatedfromconsumers.Inaddi- portion ofthesalespriceorapiece distributor oftenreceivesitsfeeeitherasa theaters, TVstations,andretailstores.A viewers inthe18-to-49agegroup. their products,andmanyespeciallyvalue buying patternsandinterestsmatchupwith tuning in.Advertisersseekviewerswhose how manyofthosewhocouldwatchare of viewingitsprogramsand,course,by mined byhowmanyhouseholdsarecapable TV andtheGolfChannel. cable TVnetworkssuchasHome&Garden consumers, particularlythroughspecialized tailored tothespecificinterestsofindividual and deliveringentertainmentcontentthatis producers/distributors. ming thatitlicensesorbuysfromthird-party the packagerorbyaffiliates,plusprogram- hear. Thiscanincludecontentproducedby nizes orscheduleswhatconsumerssee (often, aTVnetworkorstation)thatorga- net serviceproviders.Importantfactorsaf- video storestocableTVsystemsandInter- sumers, rangefrommovietheatersand physically deliverentertainmenttocon- B ESSN TIME SONY NEWS NBC ◆ ◆ For aTVnetwork,successislargelydeter- There isagrowingemphasisonpackaging Packagers. Pipelines. e.g. , amovieproduction),which Pipeline companies,which A packagerisacompany ies. 25 SEPTEMBER 20, 2007 / MOVIES & HOME ENTERTAINMENT INDUSTRY SURVEY 26 SEPTEMBER 20, 2007 / MOVIES & HOME ENTERTAINMENT INDUSTRY SURVEY lined following. ters affectingtheentireindustry, asout- range fromcompany-specificissuestomat- tunes ofanentertainmentcompany. These Success factors via theInternet). available oncellphonesandotherdevices tion isemerging( fered) andtheextenttowhichnewcompeti- a cablesystemsonewservicescanbeof- spending plans(suchasthecosttoupgrade fecting theiroperationsincludecapital content towhichtheyhaveownershiprights. how successfultheyareinbeingpaidforthe digital deliverysystemsdepends,inpart,on tent towhichcompaniesbenefitfromnew serious threattocopyrightowners.Theex- recorded musicandvideos—hasbecomea bution ofcopyrightedproducts,suchas purchase, acquisition/downloading,ordistri- gy, piracy—theillegalreproduction,sale, brands helpacompanytostandout. became accustomed togettinginformation early yearsof public Internetuse,consumers related company. Forexample,duringthe the traditionalbusinessofan entertainment- ers tobypassadvertisements —maythreaten Internet, oraservicethatallows TVwatch- such asmusicorvideodownloading onthe money. Insomecases,newtechnology— fecting howconsumersspendtheirtimeand various kindsofentertainment,whilealsoaf- livery systemshelptoincreasedemandfor ( com Inc.’s MTV)andsignatureprogramming ment companiestodevelopbrands( is becomingmoreimportantforentertain- ment choicesbeingofferedtoconsumers,it sumer franchises? does thebusinesshaveincreatingnewcon- ent formats?Whatsortoftrackrecord assets beenexploitedsuccessfullyindiffer- brand names.To whatextenthavethese ny’s copyrightstoanypopular ment, itisimportanttoconsiderthecompa- evaluating aprovideroffilmedentertain- e.g. ◆ A numberoffactorsinfluencethefor- ◆ With theintroductionofdigitaltechnolo- Given thegrowingnumberofentertain- , CNN’s New technology. Copyrights tobig-namecharacters. Larry KingLive e.g. , deliverysystems New orimprovedde- ). Successful characters or e.g. , Via- In of unauthorizedfreedownloading. chases morethanoffsetthenegativeimpact find awaytoensurethatdownloadedpur- into profits.Inthiscase,companiesmust companies totranslatetheirmarketpower net hascreatedachallengeforentertainment of file-sharingclientprogramsovertheInter- source. Nonetheless,webelievethattheuse fit, especiallyifitprovidesanewrevenue able touseanewtechnologyfortheirbene- paying afeetothetunes’copyrightowners. load songsontheircomputerswithout try saleswerehurtbyfans’abilitytodown- service provider).Inparticular, musicindus- charge (apartfromthecostofanInternet and entertainmentontheInternetfreeof tionship were formed.Evenanewcontract tract werenot renewedorifanewrela- consequences mightbeifa significantcon- nies. Itisadvisabletothink aboutwhatthe of programming,and/orpipeline compa- product suppliers, distributors,packagers commitments acompanyhas withimportant at theongoingrelationshipsandcontractual pany. Furthermore,itisagoodideatolook goals thatarecurrentlypertinenttothecom- in addressingthesamekindsofneedsand with thatcompanyandotherfirms— look attopmanagers’trackrecords—both evaluating acompany, itisagoodideato products ormanagingexpansionactivity. In ment, whileothersarebetteratcreatingnew business andinthevalueofstock. expression ofconfidenceintheunderlying rate buybacksoftencanbeviewedasan ning issues),executivepurchasesandcorpo- buying ordivestingstock( own. Whiletherecanbepersonalreasonsfor holdings orarelighteninguponwhatthey whether topexecutivesareaddingtotheir line withthoseofothershareholders. should bringmanagers’interestsmorein own stockinthecompany, becausethat prefer situationsinwhichtopexecutives times andbad.Inaddition,wegenerally well relativetotheirpeersinbothgood management teamsthathaveperformed dard &Poor’s looksfavorablyonseasoned factor forentertainmentcompanies.Stan- ness, managementqualityisakeysuccess ◆ Over time,companiesmayincreasinglybe Some executivesexcelatcostcontain- We adviseinvestorstokeepaneyeoutfor Management. As inanyotherbusi- e.g. , estateplan- stock appearsunderpriced. are goodandtorepurchaseshareswhenthe shares whenmarketconditionsforitsstock look forawell-managedcompanytosell a companytoraisecapital.Ingeneral,we meet ifthebusinessenvironmentchanges. rowing commitmentsthatmaybedifficultto whether acompanyhasmadecapitalorbor- Poor’s. Inaddition,itisadvisabletoassess major creditratingagency, suchasStandard& cial strengthistocheckratingsofitsdebtbya borrow morefundsinthefuture? in agoodpositiontorefinanceitsdebtor available toservicethedebt?Iscompany How muchoperatingcashflowwilllikelybe debt andcash,itscostofborrowing. ments, itisimportanttolookatitscurrent company thathassizablecapitalrequire- related businesses. be ofgrowingimportancefor and favorableallianceswithothersislikelyto a company’s abilitytoformcomplementary telecommunications, andcomputerservices), increasingly overlapping( factors ascompetitiveconditions. negotiations canchangedependingonsuch At varioustimes,thebalanceofpowerin through itswires)couldalterprofitability. tem payingtocarryacablenetwork between thesameparties( ment orcontent. take riskswith newerkindsofentertain- companies tobemorewilling andlikelyto panies. Ingeneral,wewould expectsmaller making processthathampers biggercom- bogged downinthemultilevel decision- spirit, asmallfirmislesslikely tobecome management ismoreentrepreneurialin market conditions.To theextentthatits nimble thanbigfirmsinrespondingto fluence withcustomers. stronger purchasingpowerandgreaterin- large companyisalsomorelikelytohave set basethanthoseofasmallerfirm.A revenue streamandspreadoveralargeras- overhead expensessupportedbyabigger ny tendstoenjoyeconomiesofscale,with ◆ Selling equity(stock)isanothermeansfor One waytoinvestigateacompany’s finan- ◆ At atimewhenindividualindustriesare Small companies,however, maybemore Access tocapital. Size. Is biggerbetter?Alargecompa- When evaluatinga e.g. e.g. entertainment- , entertainment, , acablesys- and musicalbums. riety trade magazinessuchas to gaugeacompany’s effortsistoread boosted thesuccessofitsmovies? Oneway of popularactorsorcompelling storylines products havepizzazz?Has theinclusion and musiccompanies.Doafirm’s new ucts arethelifebloodofmostmovie,TV, from itscorestrengths. of topmanagementordistractthecompany tion alsocarriesrisks:itmaydilutethefocus slowdown elsewhere.However, diversifica- proving conditionsinonesectormayoffseta sifying intomultipleindustries,becauseim- tend toberelativelyhigh. film, evenifthecostsofsuchproductions stars orproducingasequeltoanearlierhit risk bybankingonhighlypopularmovie forts. Companiesalsocantrytolimittheir spread risksacrossaslateofcreativeef- difficult topredict,soitispreferable tainment products.Consumerresponseis unproven films,TVshows,orotherenter- ny thatwasbettingthefarmononeortwo ures. Thus,wewouldbewaryofacompa- ventures mustcoverthecostofmanyfail- produce moviesandTVshows,successful help tofinancenewproduction. such formatsastelevisionandhomevideo,can movies producedyearsago),forviewingin merger activity. such asEuropemayaffectplans verse companies,regulatorybodiesinareas dustry consolidation.Forgeographicallydi- may ease,contributingtosuchactivityasin- times, however, theregulatoryenvironment national basisandwithinlocalmarkets.At Media ownershipmaybelimitedbothona ownership ofcertainkindsbusinesses? pany likelytobeaffectedbyrestrictionson should beconsidered.Forexample,isacom- Federal CommunicationsCommission— typically promulgatedbyCongressorthe from licensingorsellingsuchproducts( their largelibrariesofolderproducts.Revenues tertainment companiesisthecashflowfrom ◆ A similarargumentcanbemadefordiver- ◆ ◆ A principaladvantageofbig,establisheden- , whichcover currentpopularmovies Regulation. Diversification. New products. Regulatory constraints— Successful newprod- For companiesthat Billboard and e.g. Va- , 27 SEPTEMBER 20, 2007 / MOVIES & HOME ENTERTAINMENT INDUSTRY SURVEY 28 SEPTEMBER 20, 2007 / MOVIES & HOME ENTERTAINMENT INDUSTRY SURVEY sider arelistedfollowing. statements. Someimportantfactorstocon- involves scrutinizingthefirm’s financial Analyzing financialstatements tent fromthatofotherproviders. ability tofavorablydifferentiateafirm’s con- time slotonapopularTVnetwork)andthe have favorabledistributionoutlets( considerations. tribution andmarketingarerelevant rectly tothepublic.Forcontentowners,dis- while others,suchasvideoretailers,selldi- broadcasters, relyprincipallyonadvertisers, customer base?Somecompanies,suchas the revenuesources,andhowdiverseis movies fromtheircompetitors. crease alongwitheffortstodifferentiate tain. Marketingexpendituresmayalsoin- theater screenspacemaybecomehardtoob- panies, costsforcreativetalentmayriseand growing, particularlyamongthemajorcom- nies. Forexample,ifmovieproductionis from bothconsumersandpipelinecompa- produced andthelevelofinterestordemand between theamountofprogrammingbeing shows islikelytobeaffectedbythebalance tertainment productssuchasmoviesandTV through sales to internationalmarkets?Of- to grow?Are there opportunitiestoexpand take marketsharefromcompetitors inorder enues expanding,orwillacompany haveto same tocompetitors. production company, itislikelytodothe strike shutsdownproductionatonemajor ate andreleasenewproduct?However, ifa could thishaveonacompany’s abilitytocre- Actors Guildgoesonstrike,whatimpact pany’s laborcosts?Forexample,iftheScreen a strike,orsignificantchangeinthecom- contract beingsignedwithoutlaborunrestor to expire.Whataretheprospectsforanew to knowwhenmajorcontractsarescheduled unions orlabororganizations,itisadvisable ment industryemployeesarerepresentedby ◆ An analysisofanentertainmentcompany ◆ ◆ To reachtheaudience,itisimportantto ◆ Revenues andcustomerbase. Supply anddemand. Growth prospects. Labor contracts. Since manyentertain- Are industryrev- The successofen- What are e.g. , a items withforeignconsumers. ten, USmoviesandrecordedmusicarehot one-time chargeforgoodwillimpairment. flated, wewouldexpectcompaniestotakea their balancesheet.Ifthevalueappearsin- periodically reviewthevalueofgoodwillon underlying growthorbusinesshealth. ed totheabsenceofgoodwillexpensereflect expense.) Nordidtheimprovedresultsrelat- zation waspreviouslyconsideredanoncash book valueoftheassetacquired;itsamorti- purchase priceforanacquisitionexceedsthe will isessentiallytheextenttowhich tle ornoimpactonactualcashflow. (Good- share improved,butthisshouldhavehadlit- sult, reportednetincomeandearningsper pense ontheirincomestatements.Asare- cease amortizinggoodwillasanongoingex- change in2002causedmanycompaniesto ing growthrates.Forexample,anaccounting fect year-to-year comparisonswhencalculat- company’s profits. veal theunderlyinggrowthandqualityof normalized levels,whichshouldhelptore- bers towhatwouldbeconsidered ings report,itisadvisabletoadjustthenum- one-time ornonrecurringitemsinanearn- counting rulechanges.Iftherearesignificant comparisons areunusualtaxratesandac- reported profitsorinyear-to-year earnings one-time writedownofanasset’s value. ally lowbecauseofarestructuringchargeor gain fromanassetsale,ortheymaybeunusu- earnings maybeunsustainablyhighduetoa inflated ordepressedresults.Forexample, to assessanyone-timefactorsthatmayhave When lookingateitherrevenuesorprofits,try Are thereanyone-timefactorstoconsider? and conservativemanner? the companyaccountingforthem inarealistic nificant pensionoremployee benefit plans,is earnings. Furthermore,ifthe company hassig- and theimpactthattheyhaveonacompany’s which acompanyissuesoptionstoemployees Poor’s alsoadvisesexaminingtheextentto Reported earnings maynotbeanaccurate ◆ ◆ Going forward,weexpectcompanieswill A changeinaccountingstandardscanaf- Other itemsthatcancausepeculiaritiesin ◆ Quality ofearningsandone-timefactors. Employee stockoptions. Cash flow. How healthyis cashflow? Standard & to anotherparty. guaranteed paymentofaloanthatwasmade ance sheet.Thesecouldinclude,forexample, tions thatarenotclearlyreflectedonthebal- company haspotentialliabilitiesorobliga- dication ofbothsourcesandusescash. the cashflowstatementshouldgiveanin- on thecompany’s incomestatement,while TV showshasyettoberecognizedascosts cate whatlevelofinvestmentinmoviesor The balancesheet,forexample,mayindi- ny’s balancesheetandcashflowstatement. costs, lookfortheentertainmentcompa- project generatesapositivecashflow. of productionandthetime,ifever, thatthe be aperiodofseveralyearsbetweenthestart ment. With moviesandTVshows,theremay that arenotincludedontheincomestate- payment, anddividendstoshareholders— movies thathaveyettobereleased,debtre- penditures —suchasproductioncostsfor they donotrepresentanactualcashoutlay). and writedowns—arenoncashitems( ment —suchasdepreciation,amortization, some expensesonacompany’s incomestate- tion orfinancialstrength.Keepinmindthat reflection ofacompany’s cashflowgenera- stock, orinvestinotherbusinesses. could beusedtoreducedebt,repurchase sibly bedivested,generatingproceedsthat Also, lookfornoncoreassetsthatcouldpos- ly bereappraiseddownwardinthefuture. turn outtobeafailure.Suchassetswilllike- investment inacostlyfilmthatwillactually those obtainedthroughanacquisition,or assets mayneedtoberevised—suchas flected. Atthesametime,valueofsome names ormanagementability, maynotbere- ample, intangibleassets,suchasbrand measures oftheassets’totalworth.Forex- whether thevaluesreportedareaccurate balance sheet,itisalsoimportanttojudge ◆ We recommendconsideringwhetherthe To getatleastapartialpictureofthese Companies alsogenerallyhavecashex- Asset valuations. When lookingata ■ i.e. , 29 SEPTEMBER 20, 2007 / MOVIES & HOME ENTERTAINMENT INDUSTRY SURVEY GLOSSARY

Analog — The conventional system of storing and trans- Broadband satellite service (BSS) — A radio communi- mitting sound, pictures, or other material as an electri- cations service that transmits or retransmits broad- cal wave (or wave form) that is a facsimile, or analog, cast signals via space stations. of the original signal. This analog signal, or waveform, may be amplified, attenuated, or otherwise altered but Broadcast — A signal transmitted to all user terminals retains the characteristics of its original signal. Of vary- in a service area. ing frequency and amplitude, these signals can be sus- ceptible to noise interference. Cable modem — A broadband access device which en- ables a computer to transmit data over a cable line, Average revenue per unit/user (ARPU) — Term used by with speeds ranging from 512 Kbps to more than 10 telephone carriers and cable system operators for Mbps. measure of average monthly revenue generated by each customer unit. Also referred to as revenue gen- Cable television (CATV) — A delivery system over a erating units (RGUs). network of coaxial or fiber-optic cable that gives subscribers hundreds of video channels. A cable Bandwidth — The overall capacity of a transmission system includes the headend, trunk lines, feeder system to carry information, measured in bits per lines, and drop lines. second (bps) for digital lines and hertz (Hz) for ana- log lines. In electronic communication, bandwidth is Catalog — Older releases of recorded product that are the width of the range (or band) of frequencies that not readily available in current retail display or rota- an electronic signal uses on a given transmission tion unless otherwise noted or advertised. medium. Since the frequency of a signal is measured in hertz (the number of cycles of change per sec- Compilation — A collection of previously-released songs ond), a given bandwidth is the difference in hertz be- sold as a one album unit, or a collection of new materi- tween the highest and lowest frequencies the signal al, either by single or multiple performers, sold as a col- uses. An analog TV broadcast video signal has a laborative effort on one musical recording. bandwidth of six megahertz (MHz), which is about 2,000 times as wide as the typical voice signal’s Digital — A method of recording, transmitting, or repro- bandwidth of four kilohertz (kHz). In computer net- ducing sound, video, or other material by sampling works, bandwidth is often used as a synonym for an analog signal and translating those samples into data transfer rate (the amount of data that can be digital information, or data. carried from one point to another in a given time pe- riod). This kind of bandwidth is usually expressed in Digital subscriber line (DSL) — A technology for bring- bits (of data) per second, or Bps. ing high-bandwidth information to homes and small businesses over ordinary copper telephone lines. It Bits per second (Bps) — A measure of the speed by consists of a twisted-pair copper wire connection which information is transmitted over certain elec- with a special modem at either end that filters out tronic media. A “bit” (also known as a “byte”) is a background noise and interference and allows high- single binary pulse of information; megabits per sec- speed data transfer. ond (Mbps) is million bps; kilobits per second (Kbps) is 1,000 bps. Digital television (DTV) — The new system that will

INDUSTRY SURVEY eventually replace the current analog system. Digital Broadband — High-speed Internet access, whether TV refers to televisions that can receive and display wired or wireless, with data transmission systems the digital TV signals that are broadcast over the air carrying multiple signals simultaneously. The term or transmitted by cable or satellite systems. The fed- describes any transmission medium that supports a eral government has required adoption of this new wide frequency range, including audio and video fre- digital format by all broadcast television stations. quencies. It can be multiplexed to carry several in- Changing to the digital format enables the broadcast dependent channels, each in its own bandwidth. industry to deliver programs comparable in quality to Broadband transmission is often in the range of one other digitally delivered services, such as direct MHz or more. broadcast satellite and cable. MOVIES & HOME ENTERTAINMENT MOVIES & HOME ENTERTAINMENT SEPTEMBER 20, 2007 /

30 D H I I n n i V t t g e e ganizations, andlibrariesuseISRCcodes. recording, copyrightorganizations, broadcasting or- or recompiledwithoutanyediting.The ownerofthe same ISRCcodemaybeusedifarecording issold changes, anewISRCcodemustbeassigned.The ample, ifarecordingisremixedortheplayingtime by dashes.AnISRCcodemaynotbereused.Forex- year ofreference,anddesignationcodeseparated consists ofcharactersforthecountry, registrant, numbers andis12charactersinlength.Thecode recording. TheISRCcodeismadeupoflettersand code iscontainedinthesubcodeofeachtrackor sential fordistributionofroyaltypayments.TheISRC video recordings.Thisassociatedmetadataises- owners andotherparticipantsinsoundmusic tomated dataprocessingsystemstoidentifythe product. TheencodedISRCcanalsobeusedinau- recording andcanbepermanentlyencodedintoa unique andpermanentidentifierforaspecific video recordingsoncompactdiscs.EachISRCisa international identificationsystemforaudioand sumers’ existingCDcollections. ers, butmost,ifnotall,newDVDplayersalsoplaycon- DVD audiodiscsareonlyplayableonthenewestplay- tures suchastext,graphics,videoandinteractivity. than currentCDs,andmayalsobeusedtoincludefea- tichannel surroundsoundthatissignificantlybetter pacity inthediscisusedtoachieveahigh-quality, mul- about seventimesthecapacityofaCD.Theextraca- a CD-replacementformat.Itishigh-densitydiscwith discs. DVD-RAMisthewriteableversion.DVD-Audio usually playsregularCD-ROMdiscsandDVD-Video pressed datadiscsonly).TheDVDdriveoncomputers many peopleusetheterm“DVD-ROM”torefer regardless oftype,areDVD-ROMdiscs,though disc foruseoncomputers(allread-onlyDVDdiscs, television sets.DVD-ROMisthetypeofdriveand mat designedforfull-lengthmoviescompatiblewith DVDs comeinseveralformats.DVD-Video isthefor- cluding movieswithhighvideoandsoundquality. technology permitshigh-densitydatastorage,in- digital videodiscand,later, digitalversatiledisc.The making apurchase. getting moreinformation,submittinganemail,or to dosomethingotherthanwatchtheprogram,from 525 linesforanalog. is theother).HDTVhas1125linesofresolution,versus available withdigitaltelevision(standarddefinitionTV common TVsystem.HDTVisoneofthetwoformats different fromanalogTV, whichcurrentlyisthemost relationship ofthewidthtoheightpicture)is rectangular (widescreen)becausetheaspectratio(the capability. TheshapeofthepicturewithHDTV ismore of today’s analogtelevision,plusdigitalsurround-sound available, offeringmorethanfivetimesthesharpness D h r r

a n d — Anopticaldiscstoragemedium,formerlycalled c a e t t f i i i v o n e i n t

i a o T l n V

S

T — ATVbroadcastthatallowsaviewer t a V n

( d H a D r T d V

R ) e — ThehighestqualitydigitalTV c o r d i n g

C o d e

( I S R C ) — The V I V M M T S N P P r i o o t e d P T T o i a p d I footprints since2004. been launchingVoIP telephonyserviceacrosstheir ordinary telephoneservice.Cableoperatorshave vantage ofVoIP isthatitavoidsthetollschargedby the publicswitchedtelephonenetwork.Amajorad- by usingthetraditional formation indigitalformdiscretepacketsratherthan other IP-basednetwork.VoIP involvessending voicein- for routingvoiceconversationsovertheInternetorany subscription video-on-demand(SVOD). extra monthlynominalfee.Avariantofthisserviceis subscribers —someatnoextracharge,othersforan Most majorcableoperatorsofferVODtotheirdigital er totheirownTVsetsatthetimethattheychoose. watch videoprogramstransmittedfromacentralserv- IPTV andIPtelephony(VoIP). play onabroadbandconnectionrequirestheuseof net, telephony, andtelevisionservices.Offeringtriple mit dataovertelephoneorcablelines. to anotherovertheInternet.) the methodbywhichdataissentfromonecomputer nection overInternetProtocol.(Internetprotocolis to subscribersorviewersusingabroadbandcon- computers. ternet forplaybackonmobiledevicesandpersonal such asaudioprogramsormusicvideos,overtheIn- upon bytheMovingPictureExpertsGroup. group ofaudioandvideocodingstandardsagreed loading ontheInternet.MPEGisdesignationfora is oneofmanyformatsusedforuploadinganddown- relatively smallwhilemaintaininghighaudioquality. It gy commonlyusedtomakedigitalaudiocomputerfiles ABC radionetwork. television network,theESPNcableand and/or licensedlocalstations.ExamplesaretheNBC and sellscommercialtimenationallyviaaffiliated (See 704 linesofresolution,versus525foranalog. ward evenhigherresolutionwithHDTV. SDTVoffers livers clearerpictures,buttheindustryismovingto- TV istheother).ComparedwithanalogTV, SDTVde- mats availablewithdigitaltelevision(highdefinition t e V d P n 3 w l c o e

e d

( a — Television and/orvideosignalsaredistributed ( o

M

m a o V p s r r n o k t l P d High definition TV definition High a i — Adevicethatenablesacomputertotrans-

i n d E

— Abroadcastentitythatairsprogramming c y d g e G e e — AconsumerpackagethatincludesInter- m

— Amethodofdistributingmultimediafiles, a f o i a u n v n d e i t d i r i o o

— Asystembywhichviewerscan I

n n l a

t T y e e V r r n

- ( e 3 S t ) D circuit-committed protocolsof

.) P — Thecompressiontechnolo- T r V o ) t o — Oneofthetwofor- c o l ) — A newtechnology — 31 SEPTEMBER 20, 2007 / MOVIES & HOME ENTERTAINMENT INDUSTRY SURVEY INDUSTRY REFERENCES

PERIODICALS BOOKS

Billboard Entertainment Industry Economics: A Guide for The Nielsen Company Financial Analysis 770 Broadway, New York, NY 10003 By Harold L. Vogel (646) 654-8360 Cambridge University Press, 2001 Web site: http://www.billboard.com Fact-filled discussions of leisure-time industries, includ- Weekly; covers the recorded music industry. ing movies, TV, and music.

Boxoffice Magazine TRADE ASSOCIATIONS Boxoffice Media LP 230 Park Ave., Ste. 864, New York, NY 10169 Consumer Electronics Association (CEA) (800) 877-5207 1919 S. Eads St., Arlington, VA 22202 Web site: http://www.boxoffice.com (703) 907-7600 Monthly; covers the movie industry. Web site: http://www.ce.org Produces numerous publications; monitors shipments Broadcasting & Cable of consumer electronics products. Multichannel News Reed Business Information DEG: the Digital Entertainment Group 360 Park Ave. South, New York, NY 10010 9229 Sunset Boulevard, Ste. 425, Los Angeles, CA 90069 (646) 746-7764 (310) 888-2201 Web site: http://www.reedtelevision.com Web site: http://www.dvdinformation.com Weekly publications; cover the television industry, and An industry-funded corporation that advocates and cable TV and telecommunications, respectively. promotes benefits associated with digital versatile discs (DVDs; often called “digital video discs” when The Hollywood Reporter referring to movies) and provides information related VNU Business Media to the DVD format. 5055 Wilshire Blvd., Los Angeles, CA 90036 (323) 525-2000 Entertainment Merchants Association (EMA) Web site: http://www.hollywoodreporter.com 16530 Ventura Blvd., Ste. 400, Encino, CA 91436 Daily and weekly; covers filmed entertainment. (818) 385-1500 Web site: http://www.vsda.org TelevisionWeek Group representing those engaged in the sale and/or Crain Communications rental of entertainment software. 6500 Wilshire Blvd., Ste. 2300, Los Angeles, CA 90048 (323) 370-2400 Independent Film & Television Alliance Web site: http://www.tvweek.com 10850 Wilshire Blvd., 9th Fl., Los Angeles, CA 90024 Weekly; covers the broadcast, cable, and interactive (310) 446-1000 media industries. Web site: http://www.ifta-online.org Comprises small companies that develop, finance, pro- Variety duce, and/or distribute English-language movies and TV

INDUSTRY SURVEY Reed Business Information programs worldwide. Formerly the American Film Mar- 5700 Wilshire Blvd., Ste. 120, Los Angeles, CA 90036 keting Association (AFMA). (323) 857-6600 Web site: http://www.variety.com The International Federation of the Phonographic Daily and weekly; emphasis on filmed entertainment. Industry (IFPI) 10 Piccadilly, London W1J 0DD, UK Video Business 44 20 7878 7900 Reed Business Information Web site: http://www.ifpi.org 5700 Wilshire Blvd., Ste. 120, Los Angeles, CA 90036 Seeks to represent the music industry, and has more than (323) 965-2402 1,450 members in 75 countries. IFPI opposes music piracy, Web site: http://www.videobusiness.com and seeks to help develop legal conditions and technolo- Weekly; covers the creation and delivery of home video. gies for the recording industry in the digital era. MOVIES & HOME ENTERTAINMENT MOVIES & HOME ENTERTAINMENT SEPTEMBER 20, 2007 /

32 movie screens. Represents ownersandoperatorsofUSoverseas Web site:http://www.natoonline.org (202) 962-0054 750 FirstSt.NE,Ste.1130,Washington, DC20002 ing thatrelatedtotheentertainmentindustry. Reports onandanalyzestechnologicalchange,includ- Web site:http://www.forrester.com (617) 613-6000 400 Technology Sq.,Cambridge,MA02139 annual statisticaloverviewofthemovieindustry. Represents mostlylargermoviecompanies.Publishes Web site:http://www.mpaa.org (818) 995-6600 15503 Ventura Blvd.,Encino,CA91436 entertainment. Produces newslettersandreportson mediaand Web site:http://www.kagan.com (831) 624-1536 Monterey, CA93940 1 LowerRagsdaleDr., Bldg.1,Ste.130 Primedia Inc. RESEARCH FIRMS filmed entertainmentandinteractivemediamarkets. Provides marketdataandfinancialanalysisofthe Web site:http://www.adamsmediaresearch.com (831) 624-0303 27865 BerwickDr., Carmel,CA93923 the UScableTVindustry, includingsubscriber counts. ers, andcableTVservicefirms;providesinformationon Represents cablesystems,networks,hardwaresuppli- Web site:http://www.ncta.com (202) 222-2300 Washington, DC20001 25 MassachusettsAve. NW, Ste.100 active entertainment. Reports onhomevideo,computeruse,andinter- Web site:http://www.alexassoc.com (212) 684-2333 31 E.32ndSt.,12thFl.,NewYork, NY10016 certifies best-sellingrecordings. Produces semiannualdataonindustryshipments;also Web site:http://www.riaa.com (202) 775-0101 1330 ConnecticutAve. NW, Ste.300,Washington, DC20036 N K N M A A R F o a e d l a a e o r g c a t t r x t i i a o e m i o o a o n r s n n n s n d t

a a d

W e

i M P n l l e r

g A C i

o r e c R

r a s & d t I e l u n s b d i s

a o r d l l

A e e e M

c u R s a

i s & A e s a e r t c o d s

t r s T i y h c s i e o a e

o

i a n A I a l c n e r

t s o c i c e c a s f h . s o

o t T i m c o h i n m a e

t a o u i o t f n e

n A i r c

m o a O f t e w

i A o r n i n m c e s a e r

s A r ( i M c s s a P o

A ( c R A i I a A ) t i A o ) n lite, andcable. tional communicationsbyradio,television,wire,satel- rectly toCongress.Regulatesinterstateandinterna- Independent USgovernmentagency, responsible di- Web site:http://www.fcc.gov (888) 225-5322 445 12thSt.SW, Washington, DC20554 ed music,andotherindustries. which containdatarelatedtotelevision,movie,record- try ReportandCommunicationsIndustryForecast, Publications includetheannualCommunicationsIndus- Web site:http://www.veronissuhler.com (212) 935-4990 350 ParkAve., NewYork, NY10022 Measures televisionaudiencesizes. Web site:http://www.nielsenmedia.com (646) 654-8300 770 Broadway, NewYork, NY10003 for theBillboardmusiccharts. data frompoint-of-salecashregisters;thesalessource dian salesofmusicandvideoproductsthrough An informationsystemthattracksweeklyUSandCana- Web site:http://home.soundscan.com/about.html (914) 684-5525 1 N.LexingtonAve., 14thFl.,WhitePlains,NY10601 box officeresults. Provides informationonthemovieindustry, including Web site:http://www.entdata.com (323) 860-4600 6255 SunsetBlvd.,19thFl.,Hollywood,CA90028 Viacom Inc.: http://www.viacom.com The Walt DisneyCo.: http://disney.go.com tion, seecompanyWeb sites,suchas: from variouscompanies.Forproductandotherinforma- Quarterly andannualreportscanbeobtaineddirectly documents, suchas10Ksand10Qs. change Commissionthatprovidesaccesstocorporate A Web sitemaintainedbytheUSSecuritiesandEx- http://www.sec.gov/edgar/searchedgar/webusers.htm CORPORATE INFORMATION GOVERNMENT AGENCIES Provides newsanddatarelatedtothemovieindustry. Web site:http://www.showbizdata.com (323) 933-1344 752 N.OrangeDr., LosAngeles,CA90038 N S N N E F V e D h e i i i e e e d o r G l l l o e w s s s A n r e e e e B a R i n n n s l

i

z D C E S M S

a D D o o u e t m u a h I a d n t l b m e a i d a a r

u S

I

s R n S n c e c e t i a c e . s n a v e e t a i n o r c s n o h s n

C o m m i s s i o n

( F C C ) 33 SEPTEMBER 20, 2007 / MOVIES & HOME ENTERTAINMENT INDUSTRY SURVEY 34 SEPTEMBER 20, 2007 / MOVIES & HOME ENTERTAINMENT INDUSTRY SURVEY http://www.zap2it.com http://www.the-movie-times.com http://www.showbizdata.com http://www.nielsenedi.com http://www.medialifemagazine.com http://www.boxofficemojo.com http://news.yahoo.com/fc/Tech/ Digital_Media_ tainment industryand/orindustry-relatedlinks: The followingsitesprovidenewsordataontheenter- News.com. news providedthroughZDNetNewsandCNET Sources oftechnologyindustryinformation,including http://www.zdnet.com/zdnn http://www.cnet.com WEB SITES C N and_File_Sharing E T

N e t w o r k s DEFINITIONS FOR COMPARATIVE COMPANY ANALYSIS TABLES

Operating revenues Price/earnings ratio Net sales and other operating revenues. Excludes The ratio of market price to earnings, obtained by interest income if such income is “nonoperating.” dividing the stock’s high and low market price for the Includes franchised/leased department income for year by earnings per share (before extraordinary items). retailers and royalties for publishers and oil and mining It essentially indicates the value investors place on a companies. Excludes excise taxes for tobacco, liquor, company’s earnings. and oil companies.

Dividend payout ratio Net income This is the percentage of earnings paid out in dividends. Profits derived from all sources, after deductions of It is calculated by dividing the annual dividend by the expenses, taxes, and fixed charges, but before any earnings. Dividends are generally total cash payments discontinued operations, extraordinary items, and per share over a 12-month period. Although payments are dividend payments (preferred and common). usually calculated from the ex-dividend dates, they may also be reported on a declared basis where this has been established to be a company’s payout policy. Return on revenues Net income divided by operating revenues. Dividend yield The total cash dividend payments divided by the year’s Return on assets high and low market prices for the stock. Net income divided by average total assets. Used in industry analysis and as a measure of asset-use efficiency. Earnings per share The amount a company reports as having been earned for the year (based on generally accepted accounting Return on equity standards), divided by the number of shares outstanding. Net income, less preferred dividend requirements, Amounts reported in Industry Surveys exclude divided by average common shareholder‘s equity. extraordinary items. Generally used to measure performance and to make industry comparisons. Tangible book value per share This measure indicates the theoretical dollar amount Current ratio per common share one might expect to receive should Current assets divided by current liabilities. It is a liquidation take place. Generally, book value is measure of liquidity. Current assets are those assets determined by adding the stated (or par) value of the expected to be realized in cash or used up in the common stock, paid-in capital, and retained earnings, production of revenue within one year. Current liabilities then subtracting intangible assets, preferred stock at generally include all debts/obligations falling due within liquidating value, and unamortized debt discount. This one year. amount is divided by the number of outstanding shares to get book value per common share. Debt/capital ratio INDUSTRY SURVEY Long-term debt (excluding current portion) divided by Share price total invested capital. It indicates how highly “leveraged” This shows the calendar-year high and low of a stock’s a company might be. Long-term debt includes those market price. debts/obligations due after one year, including bonds, notes payable, mortgages, lease obligations, and In addition to the footnotes that appear at the bottom of industrial revenue bonds. Other long-term debt, when each page, you will notice some or all of the following: reported as a separate account, is excluded; this account generally includes pension and retirement benefits. Total NA—Not available. invested capital is the sum of stockholders’ equity, long- NM—Not meaningful. term debt, capital lease obligations, deferred income NR—Not reported. taxes, investment credits, and minority interest. AF—Annual figure. Data are presented on an annual MOVIES & HOME ENTERTAINMENT MOVIES & HOME ENTERTAINMENT basis. Debt as a percent of net working capital CF—Combined figure. In this case, data are not available Long-term debt (excluding current portion) divided by the because one or more components are combined with difference between current assets and current liabilities. other items. It is an indicator of a company’s liquidity. SEPTEMBER 20, 2007 /

35 36 SEPTEMBER 20, 2007 / MOVIES & HOME ENTERTAINMENT INDUSTRY SURVEY

COMPARATIVECOMPANYANALYSIS— MOVIES& HOME ENTERTAINMENT

Operating Revenues

Million $ Compound Growth Rate (%) Index Basis (1996 = 100) Ticker Company Yr. End 2006 2005 2004 2003 2002 2001 1996 10-Yr. 5-Yr. 1-Yr. 2006 2005 2004 2003 2002 MOVIES & ENTERTAINMENT‡ KDE § 4KIDS ENTERTAINMENT INC DEC 71.8 D 86.7 103.3 102.1 53.1 41.5 7.0 26.3 11.6 (17.2) 1,029 1,242 1,481 1,463 762 DIS * DISNEY (WALT) CO SEP 34,285.0 A 31,944.0 C 30,752.0 27,061.0 25,329.0 A 25,269.0 C 18,739.0 A,C 6.2 6.3 7.3 183 170 164 144 135 LYV § LIVE NATION INC DEC 3,691.6 A 2,936.8 A 2,806.1 A 2,707.9 A NA NA NA NA NA 25.7 ** ** ** ** NA NWS.A * NEWS CORP JUN 25,327.0 A,C 23,859.0 A 20,458.3 20,080.6 16,329.1 13,044.8 C 9,882.0 9.9 14.2 6.2 256 241 207 203 165 TWX * TIME WARNER INC DEC 44,224.0 A,C 43,652.0 42,089.0 39,565.0 D 40,961.0 D 37,224.0 A,C 1,093.9 A 44.8 3.5 1.3 4,043 3,991 3,848 3,617 3,745 VIA.B * VIACOM INC DEC 11,466.5 A,C 9,609.6 8,132.2 A,C NA NA NA NA NA NA 19.3 ** ** ** ** NA OTHER COS WITH SIGNIFICANT ENTERTAINMENT OPERATIONS BBI BLOCKBUSTER INC DEC 5,523.5 D 5,864.4 6,053.2 5,911.7 5,565.9 C 5,156.7 NA NA 1.4 (5.8) ** ** ** ** NA CVC CABLEVISION SYS CORP -CL A DEC 5,927.5 C,D 5,175.9 D 4,932.9 4,177.1 D 4,003.4 D 4,404.5 1,315.1 A 16.2 6.1 14.5 451 394 375 318 304 CKEC CARMIKE CINEMAS INC DEC 495.5 468.9 A,C 494.5 493.1 507.2 F 457.0 F 426.7 F 1.5 1.6 5.7 116 110 116 116 119 CBS * CBS CORP DEC 14,320.2 D 14,536.4 A,C 22,525.9 A,C 26,585.3 A,C 24,605.7 C 23,222.8 A 12,084.2 D 1.7 (9.2) (1.5) 119 120 186 220 204 CNK CINEMARK HOLDINGS INC DEC 1,220.6 A 1,020.6 NA NA NA NA NA NA NA 19.6 ** ** ** ** NA DWA DREAMWORKS ANIMATION INC DEC 394.8 462.3 1,078.2 301.0 434.3 NA NA NA NA (14.6) ** ** ** ** NA GE * GENERAL ELECTRIC CO DEC 160,854.0 D,F 148,559.0 D,F 151,802.0 A,F 133,585.0 F 130,685.0 F 125,679.0 F 78,541.0 A,F 7.4 5.1 8.3 205 189 193 170 166 HDL HANDLEMAN CO # APR 1,324.5 1,312.4 1,260.6 1,216.3 D1,357.9 1,337.5 1,181.0 1.2 (0.2) 0.9 112 111 107 103 115 LGF LIONS GATE ENTERTAINMENT CP # MAR 976.7 A 951.2 A 842.6 384.9 A 301.8 D 267.3 NA NA 29.6 2.7 ** ** ** ** NA MGM MGM MIRAGE DEC 7,176.0 D 6,482.0 A 4,238.1 D 3,908.8 D 4,019.9 3,972.8 804.8 24.5 12.6 10.7 892 805 527 486 499 RGC REGAL ENTERTAINMENT GROUP DEC 2,598.1 A 2,516.7 A 2,468.0 A 2,489.9 A 2,140.2 556.9 NA NA 36.1 3.2 ** ** ** ** NA TRB * TRIBUNE CO DEC 5,517.7 D 5,595.6 5,726.2 5,594.8 5,384.4 5,253.4 2,405.7 A,C 8.7 1.0 (1.4) 229 233 238 233 224 V VIVENDI -ADR DEC NA 23,073.0 D 29,009.2 32,099.7 60,970.3 A 51,056.1 A NA NA NA NA ** ** ** ** NA

Note: Data as originally reported. ‡ S&P 1500 Index group. * Company included in the S&P 500. † Company included in the S&P MidCap. § Company included in the S&P SmallCap. # Of the following calendar year. ** Not calculated; data for base year or end year not available. A - This year's data reflect an acquisition or merger. B - This year's data reflect a major merger resulting in the formation of a new company. C - This year's data reflect an accounting change. D - Data exclude discontinued operations. E - Includes excise taxes. F - Includes other (nonoperating) income. G - Includes sale of leased depts. H - Some or all data are not available, due to a fiscal year change.

Net Income

Million $ Compound Growth Rate (%) Index Basis (1996 = 100) Ticker Company Yr. End 2006 2005 2004 2003 2002 2001 1996 10-Yr. 5-Yr. 1-Yr. 2006 2005 2004 2003 2002 MOVIES & ENTERTAINMENT‡ KDE § 4KIDS ENTERTAINMENT INC DEC (1.7) 5.1 12.7 14.8 7.0 12.2 (0.2) NM NM NM NM NM NM NM NM DIS * DISNEY (WALT) CO SEP 3,374.0 2,569.0 2,345.0 1,338.0 1,236.0 120.0 1,214.0 10.8 94.9 31.3 278 212 193 110 102 LYV § LIVE NATION INC DEC (31.4) (130.6) 16.3 57.0 NA NA NA NA NA NM ** ** ** ** NA NWS.A * NEWS CORP JUN 2,812.0 2,128.0 1,607.3 1,213.7 (6,732.2) 184.1 953.0 11.4 72.5 32.1 295 223 169 127 (706) TWX * TIME WARNER INC DEC 5,114.0 2,921.0 3,209.0 3,146.0 (44,574.0) (4,895.0) 29.8 NM NM 75.1 NM NM NM NM NM VIA.B * VIACOM INC DEC 1,570.3 1,303.9 1,392.9 NA NA NA NA NA NA 20.4 ** ** ** ** NA Net Income (continued)

Million $ Compound Growth Rate (%) Index Basis (1996 = 100) Ticker Company Yr. End 2006 2005 2004 2003 2002 2001 1996 10-Yr. 5-Yr. 1-Yr. 2006 2005 2004 2003 2002 OTHER COS WITH SIGNIFICANT ENTERTAINMENT OPERATIONS BBI BLOCKBUSTER INC DEC 67.9 (588.1) (1,248.8) (979.5) 189.4 (240.3) NA NA NM NM ** ** ** ** NA CVC CABLEVISION SYS CORP -CL A DEC (133.0) (125.9) (667.0) (283.1) (560.8) 1,007.7 (332.1) NM NM NM NM NM NM NM NM CKEC CARMIKE CINEMAS INC DEC (19.4) 0.3 28.4 106.4 (39.8) (125.4) (7.3) NM NM NM NM NM NM NM NM CBS * CBS CORP DEC 1,382.9 (8,321.8) (15,059.5) 1,435.4 2,206.6 (219.6) 170.7 23.3 NM NM 810 (4,875) NM 841 1,293 CNK CINEMARK HOLDINGS INC DEC 0.8 (25.4) NA NA NA NA NA NA NA NM ** ** ** ** NA DWA DREAMWORKS ANIMATION INC DEC 15.1 104.6 333.0 (184.6) (25.1) NA NA NA NA (85.5) ** ** ** ** NA GE * GENERAL ELECTRIC CO DEC 20,666.0 18,633.0 16,819.0 15,589.0 15,133.0 14,128.0 7,280.0 11.0 7.9 10.9 284 256 231 214 208 HDL HANDLEMAN CO # APR (53.4) 14.8 34.9 34.0 27.7 37.1 5.4 NM NM NM (998) 277 652 635 517 LGF LIONS GATE ENTERTAINMENT CP # MAR 27.5 6.1 20.3 (94.2) 1.1 (15.4) NA NA NM 350.8 ** ** ** ** NA MGM MGM MIRAGE DEC 636.0 443.3 349.9 237.1 292.8 170.6 74.5 23.9 30.1 43.5 853 595 469 318 393 RGC REGAL ENTERTAINMENT GROUP DEC 86.3 91.8 82.5 185.4 118.7 4.9 NA NA 77.5 (6.0) ** ** ** ** NA TRB * TRIBUNE CO DEC 660.9 534.7 573.3 891.4 608.6 111.1 282.8 8.9 42.8 23.6 234 189 203 315 215 V VIVENDI -ADR DEC NA 3,626.0 1,020.8 (1,439.8) (24,431.1) (12,102.7) NA NA NA NA ** ** ** ** NA

Note: Data as originally reported. ‡ S&P 1500 Index group. * Company included in the S&P 500. † Company included in the S&P MidCap. § Company included in the S&P SmallCap. # Of the following calendar year. ** Not calculated; data for base year or end year not available.

Return on Revenues Return (%) on Assets Return (%) on Equity (%)

Ticker Company Yr. End 2006 2005 2004 2003 2002 2006 2005 2004 2003 2002 2006 2005 2004 2003 2002 MOVIES & ENTERTAINMENT‡ KDE § 4KIDS ENTERTAINMENT INC DEC NM 5.8 12.3 14.5 13.2 NM 2.6 6.4 8.3 4.6 NM 3.2 7.8 10.1 5.6 DIS * DISNEY (WALT) CO SEP 9.8 8.0 7.6 4.9 4.9 6.0 4.8 4.5 2.7 2.6 11.6 9.8 9.4 5.7 5.4 LYV § LIVE NATION INC DEC NM NM 0.6 2.1 NA NM NM 1.1 NA NA NM NM 9.4 NA NA NWS.A * NEWS CORP JUN 11.1 8.9 7.9 6.0 NM 5.1 4.0 3.3 2.8 NM 9.5 7.5 6.6 6.0 NM TWX * TIME WARNER INC DEC 11.6 6.7 7.6 8.0 NM 4.0 2.4 2.6 2.7 NM 8.3 4.7 5.5 5.8 NM

VIA.B * VIACOM INC DEC 13.7 13.6 17.1 NA NA 7.7 6.9 NA NA NA 21.0 12.3 NA NA NA OTHER COS WITH SIGNIFICANT ENTERTAINMENT OPERATIONS BBI BLOCKBUSTER INC DEC 1.2 NM NM NM 3.4 1.8 NM NM NM 2.7 10.5 NM NM NM 3.8 CVC CABLEVISION SYS CORP -CL A DEC NM NM NM NM NM NM NM NM NM NM NA NA NA NA NA CKEC CARMIKE CINEMAS INC DEC NM 0.1 5.7 21.6 NM NM 0.0 4.5 17.9 NM NM 0.1 14.4 142.0 NM CBS * CBS CORP DEC 9.7 NM NM 5.4 9.0 3.2 NM NM 1.6 2.4 6.1 NM NM 2.3 3.5 CNK CINEMARK HOLDINGS INC DEC 0.1 NM NA NA NA 0.0 NA NA NA NA 0.1 NA NA NA NA

DWA DREAMWORKS ANIMATION INC DEC 3.8 22.6 30.9 NM NM 1.2 8.3 35.5 NM NA 1.5 11.8 81.8 NM NA GE * GENERAL ELECTRIC CO DEC 12.8 12.5 11.1 11.7 11.6 3.0 2.6 2.4 2.5 2.8 18.6 16.9 17.7 21.8 25.5 HDL HANDLEMAN CO # APR NM 1.1 2.8 2.8 2.0 NM 2.8 7.2 6.7 4.9 NM 5.0 11.5 11.0 9.2 LGF LIONS GATE ENTERTAINMENT CP # MAR 2.8 0.6 2.4 NM 0.4 2.5 0.6 2.5 NM NM 13.8 4.6 19.9 NM NM MGM MGM MIRAGE DEC 8.9 6.8 8.3 6.1 7.3 3.0 2.8 3.2 2.2 2.8 18.0 14.8 13.2 9.1 11.3

RGC REGAL ENTERTAINMENT GROUP DEC 3.3 3.6 3.3 7.4 5.5 3.5 3.6 3.3 7.8 5.3 2,241.6 185.6 19.1 18.0 10.9 TRB * TRIBUNE CO DEC 12.0 9.6 10.0 15.9 11.3 4.7 3.7 4.0 6.1 4.1 12.0 7.9 8.3 13.6 10.4 V VIVENDI -ADR DEC NA 15.7 3.5 NM NM NA 6.5 1.6 NM NM NA 17.8 6.1 NM NM

Note: Data as originally reported. ‡ S&P 1500 Index group. * Company included in the S&P 500. † Company included in the S&P MidCap. § Company included in the S&P SmallCap. # Of the following calendar year. 37 SEPTEMBER 20, 2007 / MOVIES & HOME ENTERTAINMENT INDUSTRY SURVEY 38 SEPTEMBER 20, 2007 / MOVIES & HOME ENTERTAINMENT INDUSTRY SURVEY

Current DebtRatio / Capital Ratio (%) Debt as a % of Net Working Capital

Ticker Company Yr. End 2006 2005 2004 2003 2002 2006 2005 2004 2003 2002 2006 2005 2004 2003 2002 MOVIES & ENTERTAINMENT‡ KDE § 4KIDS ENTERTAINMENT INC DEC 5.9 5.4 4.5 5.3 4.9 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 DIS * DISNEY (WALT) CO SEP 0.9 1.0 0.8 1.0 1.0 23.7 26.1 24.6 29.0 32.6 NM NM NM NM NM LYV § LIVE NATION INC DEC 1.0 1.1 0.8 0.8 NA 44.6 32.7 80.1 76.3 NA NM 630.9 NM NM NA NWS.A * NEWS CORP JUN 2.1 1.9 1.4 1.6 1.3 24.4 22.7 21.8 26.9 27.7 168.7 164.6 283.5 260.5 419.4 TWX * TIME WARNER INC DEC 0.8 1.1 1.0 0.8 0.8 31.2 19.5 21.5 25.0 28.5 NM NM NM NM NM VIA.B * VIACOM INC DEC 0.9 1.1 0.9 NA NA 50.8 42.1 2.1 NA NA NM NM NM NA NA OTHER COS WITH SIGNIFICANT ENTERTAINMENT OPERATIONS BBI BLOCKBUSTER INC DEC 1.1 1.1 0.8 0.7 0.6 54.8 64.0 51.3 2.2 8.7 528.2 NM NM NM NM CVC CABLEVISION SYS CORP -CL A DEC 0.7 0.8 1.1 0.7 0.6 179.6 137.4 122.2 111.2 92.5 NM NM NM NM NM CKEC CARMIKE CINEMAS INC DEC 0.7 0.6 1.0 0.7 0.7 67.4 64.9 55.7 73.6 97.1 NM NM NM NM NM CBS * CBS CORP DEC 1.9 1.3 1.1 1.0 1.0 21.4 23.1 18.2 13.1 13.7 187.7 504.8 NM NM NM CNK CINEMARK HOLDINGS INC DEC 0.9 1.3 NA NA NA 69.0 62.2 NA NA NA NM NM NA NA NA DWA DREAMWORKS ANIMATION INC DEC NA NA NA NA NA 6.3 17.0 20.7 101.9 64.3 NA NA NA NA NA GE * GENERAL ELECTRIC CO DEC NA NA NA NA NA 66.0 61.4 60.0 63.5 63.3 NA NA NA NA NA HDL HANDLEMAN CO # APR 1.3 2.3 2.4 2.3 2.0 0.0 21.5 0.0 0.0 1.1 0.0 36.6 0.0 0.0 1.8 LGF LIONS GATE ENTERTAINMENT CP # MAR NA NA NA NA NA 72.8 81.8 81.8 81.5 68.6 NA NA NA NA NA MGM MGM MIRAGE DEC 0.9 0.7 0.9 1.0 0.8 64.1 65.1 54.4 56.2 54.0 NM NM NM NM NM RGC REGAL ENTERTAINMENT GROUP DEC 0.4 0.4 0.5 0.9 1.3 101.1 98.1 96.1 60.0 33.8 NM NM NM NM 770.9 TRB * TRIBUNE CO DEC 0.5 1.0 1.1 1.3 1.3 36.2 24.6 20.3 20.2 28.2 NM NM NM 688.6 870.5 V VIVENDI -ADR DEC NA 0.8 0.8 0.6 0.7 NA 15.3 25.1 35.0 33.8 NA NM NM NM NM

Note: Data as originally reported. ‡ S&P 1500 Index group. * Company included in the S&P 500. † Company included in the S&P MidCap. § Company included in the S&P SmallCap. # Of the following calendar year.

Price / Earnings Ratio (High-Low) Dividend Payout Ratio (%) Dividend Yield (High-Low, %)

Ticker Company Yr. End 2006 2005 2004 2003 2002 2006 2005 2004 2003 2002 2006 2005 2004 2003 2002

MOVIES & ENTERTAINMENT‡ KDE § 4KIDS ENTERTAINMENT INC DEC NM-NM 59-40 32-17 27-10 54-27 NM 0 0 0 0 0.0-0.0 0.0-0.0 0.0-0.0 0.0-0.0 0.0-0.0 DIS * DISNEY (WALT) CO SEP 21-14 24-18 25-18 37-23 41-22 16 19 18 32 34 1.1-0.8 1.0-0.8 1.0-0.7 1.4-0.9 1.6-0.8 LYV § LIVE NATION INC DEC NM-NM NM-NM NA-NA NA-NA NA-NA NM NM NA NA NA 0.0-0.0 0.0-0.0 NA-NA NA-NA NA-NA NWS.A * NEWS CORP JUN 25-17 27-20 35-27 40-24 NM-NM 15 9 5 7 NM 0.9-0.6 0.4-0.3 0.2-0.1 0.3-0.2 0.4-0.2 TWX * TIME WARNER INC DEC 18-13 31-26 28-22 26-14 NM-NM 17 16 0 0 NM 1.3-0.9 0.6-0.5 0.0-0.0 0.0-0.0 0.0-0.0

VIA.B * VIACOM INC DEC 20-15 NA-NA NA-NA NA-NA NA-NA 0 NA NA NA NA 0.0-0.0 NA-NA NA-NA NA-NA NA-NA OTHER COS WITH SIGNIFICANT ENTERTAINMENT OPERATIONS BBI BLOCKBUSTER INC DEC 19-11 NM-NM NM-NM NM-NM 29-11 0 NM NM NM 8 0.0-0.0 1.3-0.4 78.2-26.2 0.7-0.3 0.7-0.3 CVC CABLEVISION SYS CORP -CL A DEC NM-NM NM-NM NM-NM NM-NM NM-NM NM NM NM NM NM 55.6-34.7 0.0-0.0 0.0-0.0 0.0-0.0 0.0-0.0 CKEC CARMIKE CINEMAS INC DEC NM-NM NM-NM 17-13 3-2 NM-NM NM NM 22 0 NM 5.2-3.4 2.5-1.4 1.7-1.2 0.0-0.0 0.0-0.0 CBS * CBS CORP DEC 18-13 NM-NM NM-NM 61-40 41-24 41 NM NM 15 0 3.1-2.3 0.9-0.7 0.8-0.6 0.4-0.2 0.0-0.0 CNK CINEMARK HOLDINGS INC DEC NA-NA NA-NA NA-NA NA-NA NA-NA NA NA NA NA NA NA-NA NA-NA NA-NA NA-NA NA-NA Price / Earnings Ratio (High-Low) (cont’d) Dividend Payout Ratio (%) (cont’d) Dividend Yield (High-Low, %) (cont’d)

Ticker Company Yr. End 2006 2005 2004 2003 2002 2006 2005 2004 2003 2002 2006 2005 2004 2003 2002

DWA DREAMWORKS ANIMATION INC DEC NM-NM 41-22 10-9 NA-NA NA-NA 0 0 0 NA NA 0.0-0.0 0.0-0.0 0.0-0.0 NA-NA NA-NA GE * GENERAL ELECTRIC CO DEC 19-16 21-19 23-18 21-14 28-14 52 52 51 49 48 3.2-2.7 2.8-2.4 2.8-2.2 3.6-2.4 3.4-1.7 HDL HANDLEMAN CO # APR NM-NM 31-15 17-13 15-8 14-7 NM 45 19 15 0 3.7-1.8 3.0-1.5 1.5-1.1 1.9-1.0 0.0-0.0 LGF LIONS GATE ENTERTAINMENT CP # MAR 47-31 NM-NM 56-21 NM-NM NM-NM 0 0 0 NM NM 0.0-0.0 0.0-0.0 0.0-0.0 0.0-0.0 0.0-0.0 MGM MGM MIRAGE DEC 26-15 30-21 29-15 24-15 23-15 0 0 0 0 0 0.0-0.0 0.0-0.0 0.0-0.0 0.0-0.0 0.0-0.0 RGC REGAL ENTERTAINMENT GROUP DEC 38-31 34-28 41-30 18-13 30-19 207 190 NM 422 18 6.7-5.5 6.7-5.6 33.8-25.1 33.5-23.4 0.9-0.6 TRB * TRIBUNE CO DEC 14-11 25-18 30-22 19-15 26-18 30 43 27 16 23 2.7-2.1 2.4-1.7 1.2-0.9 1.1-0.8 1.2-0.9 V VIVENDI -ADR DEC NA-NA 10-9 34-24 NM-NM NM-NM NA 26 0 NM NM NA-NA 2.8-2.4 0.0-0.0 0.0-0.0 10.2-1.6

Note: Data as originally reported. ‡ S&P 1500 Index group. * Company included in the S&P 500. † Company included in the S&P MidCap. § Company included in the S&P SmallCap. # Of the following calendar year.

Earnings per Share Tangible($) Book Value per Share Share ($) Price (High-Low, $)

Ticker Company Yr. End 2006 2005 2004 2003 2002 2006 2005 2004 2003 2002 2006 2005 2004 2003 2002 MOVIES & ENTERTAINMENT‡ KDE § 4KIDS ENTERTAINMENT INC DEC (0.13) 0.39 0.93 1.11 0.55 11.74 11.73 12.00 11.49 10.10 19.65-14.09 23.00-15.46 30.20-15.47 29.55-10.92 29.86-15.06 DIS * DISNEY (WALT) CO SEP 1.68 1.27 1.14 0.65 0.61 3.10 3.24 3.15 2.01 1.78 34.89-23.77 29.99-22.89 28.41-20.88 23.80-14.84 25.17-13.48 LYV § LIVE NATION INC DEC (0.48) (1.96) 0.24 0.84 NA 2.17 7.42 NA NA NA 24.90-12.77 14.00-10.55 NA-NA NA-NA NA-NA NWS.A * NEWS CORP JUN 0.88 0.70 0.57 0.47 (2.72) 1.86 1.81 1.84 (0.32) 7.14 21.94-15.17 18.88-13.94 19.87-15.31 18.90-11.20 16.25-8.80 TWX * TIME WARNER INC DEC 1.22 0.63 0.70 0.70 (10.01) (8.35) (4.60) (4.89) (6.02) (6.34) 22.25-15.70 19.64-16.10 19.90-15.41 18.32-9.90 32.92-8.70 VIA.B * VIACOM INC DEC 2.20 1.65 1.62 NA NA (7.02) (3.92) NA NA NA 43.90-32.42 NA-NA NA-NA NA-NA NA-NA OTHER COS WITH SIGNIFICANT ENTERTAINMENT OPERATIONS BBI BLOCKBUSTER INC DEC 0.30 (3.20) (6.89) (5.44) 1.06 (1.28) (1.90) (0.60) 3.25 1.43 5.59-3.20 10.65-3.19 19.37-6.50 23.07-12.21 30.25-11.80 CVC CABLEVISION SYS CORP -CL A DEC (0.47) (0.45) (2.32) (0.99) (1.91) (26.96) (17.71) (19.28) (17.39) (15.34) 28.80-18.00 33.90-22.50 27.70-16.13 24.01-15.42 48.25-4.67 CKEC CARMIKE CINEMAS INC DEC (1.57) 0.02 2.43 11.83 (4.33) 13.14 15.61 19.02 12.78 (1.53) 25.75-16.74 37.75-21.11 42.37-31.06 37.12-18.58 30.19-14.25 CBS * CBS CORP DEC 1.81 (10.54) (17.56) 1.64 2.52 (7.45) (10.22) (8.65) (7.22) (8.14) 32.04-23.85 77.98-59.86 90.10-60.18 99.50-66.22 103.78-59.50 CNK CINEMARK HOLDINGS INC DEC 0.01 (0.24) NA NA NA (9.08) (2.87) NA NA NA NA-NA NA-NA NA-NA NA-NA NA-NA

DWA DREAMWORKS ANIMATION INC DEC 0.15 1.01 4.09 (2.41) (0.33) 9.65 8.84 7.70 NA NA 29.92-20.05 41.32-22.45 42.60-34.77 NA-NA NA-NA GE * GENERAL ELECTRIC CO DEC 1.99 1.76 1.62 1.56 1.52 2.76 2.81 2.86 2.65 2.00 38.49-32.06 37.34-32.67 37.75-28.88 32.42-21.30 41.84-21.40 HDL HANDLEMAN CO # APR (2.65) 0.71 1.55 1.39 1.06 8.59 11.14 13.78 13.02 10.16 13.48-6.50 21.90-10.76 26.47-19.60 20.99-11.14 15.00-7.50 LGF LIONS GATE ENTERTAINMENT CP # MAR 0.25 0.06 0.21 (1.35) (0.06) 0.52 (0.36) (0.45) (0.85) 0.40 11.65-7.66 11.63-7.47 11.82-4.36 4.71-1.70 2.65-1.61 MGM MGM MIRAGE DEC 2.25 1.56 1.25 0.80 0.93 7.68 5.41 9.04 7.92 7.79 59.52-34.20 46.77-32.57 36.75-18.35 19.30-12.05 21.01-13.90

RGC REGAL ENTERTAINMENT GROUP DEC 0.58 0.63 0.57 1.34 0.84 (1.58) (1.32) (1.00) 4.21 7.92 21.85-17.90 21.50-17.95 23.31-17.35 24.15-16.85 25.10-16.00 TRB * TRIBUNE CO DEC 2.40 1.68 1.75 2.78 1.93 (18.24) (7.88) (5.88) (5.15) (8.43) 34.28-27.09 42.17-30.05 53.00-39.20 51.77-41.60 49.49-35.66 V VIVENDI -ADR DEC NA 3.15 0.95 (1.35) (22.47) NA 5.12 (3.88) (19.35) (19.21) NA-NA 33.06-28.76 32.39-23.04 24.50-12.15 57.90-8.90

Note: Data as originally reported. ‡ S&P 1500 Index group. * Company included in the S&P 500. † Company included in the S&P MidCap. § Company included in the S&P SmallCap. # Of the following calendar year. J-This amount includes intangibles that cannot be identified.

The analysis and opinion set forth in this publication are provided by Standard & Poor’s Equity Research Services and are prepared separately from any other analytic activity of Standard & Poor’s. In this regard, Standard & Poor’s Equity Research Services has no access to nonpublic information received by other units of Standard & Poor’s. The accuracy and completeness of information obtained from third-party sources, and the opinions based on such information, are not guaranteed. 39 SEPTEMBER 20, 2007 / MOVIES & HOME ENTERTAINMENT INDUSTRY SURVEY

Topics Covered by INDUSTRY SURVEYS

Advertising Electric Utilities Movies & Home Entertainment Aerospace & Defense Environmental & Waste Management Natural Gas Distribution Agribusiness Financial Services: Diversified Oil & Gas: Equipment & Services Airlines Foods & Nonalcoholic Beverages Oil & Gas: Production & Marketing Alcoholic Beverages & Tobacco Healthcare: Facilities Paper & Forest Products Apparel & Footwear Healthcare: Managed Care Publishing Autos & Auto Parts Healthcare: Pharmaceuticals REITs Banking Healthcare: Products & Supplies Restaurants Biotechnology Heavy Equipment & Trucks Retailing: General Broadcasting & Cable Homebuilding Retailing: Specialty Chemicals Household Durables Savings & Loans Communications Equipment Household Nondurables Semiconductor Equipment Computers: Commercial Services Industrial Machinery Semiconductors Computers: Consumer Services & Insurance: Life & Health Supermarkets & Drugstores the Internet Insurance: Property-Casualty Telecommunications: Wireless Computers: Hardware Investment Services Telecommunications: Wireline Computers: Software Lodging & Gaming Transportation: Commercial Computers: Storage & Peripherals Metals: Industrial

GLOBAL INDUSTRY SURVEYS

Industry/Region Industry/Region Advertising/Asia, Europe Healthcare: Pharmaceuticals/Asia, Europe Aerospace & Defense/Europe Healthcare: Products & Supplies/Asia, Europe Airlines/Asia, Europe Industrial Machinery/Asia, Europe Autos & Auto Parts/Asia, Europe Insurance: Life & Health/Asia, Europe Banking/Asia, Europe, Latin America Insurance: Property-Casualty/Asia, Europe Biotechnology/Asia, Europe Investment Services/Asia, Europe Broadcasting & Cable/Asia, Europe Oil & Gas: Production & Marketing/Asia, EMEA, Latin America Chemicals/Asia, Europe Publishing/Asia, Europe Communications Equipment/Asia, Europe Real Estate/Asia, Europe Computers: Hardware/Asia Retailing: Specialty/Asia, Europe Construction & Engineering/Asia, Europe Supermarkets & Drugstores/Asia, Europe Consumer Electronics/Asia Telecommunications: Wireless/Asia, Europe, Latin America Electric Utilities/Asia, Europe Transportation: Commercial/Asia, Europe Foods & Nonalcoholic Beverages/Asia, Europe

Each of the topics listed above is the exclusive subject of an issue of Industry Surveys or Global Industry Surveys. To order an issue or receive subscription information, please call (800) 221-5277. For information about Industry Surveys and Global Industry Surveys, please call (800) 523-4534. Standard & Poor’s INDUSTRY SURVEYS 55 Water Street New York, NY 10041