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Legal Disclaimer By accepting a copy of this Business Plan, the recipient hereby agrees, among other things, to keep the information contained herein and the existence of this Business Plan confidential and to restrict the use of any information contained herein to those people within the recipient’s organization or its designated representatives who have been informed of the confidential nature of such information and who need to have such information in connection with the organization’s evaluation of Melpomene Pictures. This Business Plan has been prepared by Melpomene Pictures on the basis of internally prepared information, as well as information from public and private sources, including trade and statistical sources commonly used in the industry. The Business Plan does not purport to contain all of the information that may be required to evaluate all of the factors that would be relevant to a recipient in considering a transaction with Melpomene Pictures. The Company makes no warranty or representation, express or implied, as to the accuracy or completeness of either the material contained herein or any other written or oral information provided by the Company to recipient, and no liability shall attach thereto. Nothing contained in this Business Plan is, or should be relied on as, a promise or representation as to the future performance of the company, its business sector, the state of public or private capital markets or the economy in general. The projected financial information contained herein was prepared expressly for use herein and is based upon the stated assumptions and the company’s analysis of information available at the time that this Business Plan was prepared. There is no representation, warranty or other assurance that any of the projections set forth herein will be realized. This Business Plan does not purport to contain all of the information that may be required to evaluate Melpomene Pictures or its assign(s) and any recipient hereof should conduct its own independent investigation and analysis of the business described herein; moreover its recommended that any recipient should conduct its investigation with the assistance of their professional advisors. TABLE OF CONTENTS 1 An Overview……………………………………………………………......3 Strategic Plan Outline……………......…………………………………….4 Distribution The Buyer…………………………………………………………………....8 Income Projections Direct to Consumer Sales: Internet Sales of DVD’s Direct to Consumer Sales: Pay-Per-View Internet Direct to Consumer Sales: Pay-Per- View On-Demand TV……………8 Video Store Chains: A Small Snapshot of a Larger Picture…………....9 The Larger Picture: Worldwide Ancillary Markets Direct to Consumer Sales: Selling from Magazine Advertisements Added Profit Potential Longevity of Product………………………………………………………11 Achieving Cult Film Status Overnight Stars Current Stars The Power of the Internet………………………………………………….12 The Production Phase Scripts Quality of the Movies We Will Produce Marketing & Publicity Sales Advantages Marketing Artwork Cross Promotions Film Festivals ………………………………………………………..13 Theatrical Exhibition………………………………………………………14 Schedule of Events Strategy and Long Term Goal……………………………………………..15 5 Year Outline…………………………………………………………….....16 Quick Recap Distribution of Revenues & Equity………………………………………..18 Overview of Start Up Expenses…………………………………………… 19 Who is Melpomene Pictures……………………………………………….20 Project Synopses…………………………………………………………….21 Crew Resumes................................................................................................2 2 7 MELPOMENE PICTURES An Overview MELPOMENE PICTURES seeks to create films that are not only financially viable with a high potential for profit, but also push the boundaries of storytelling technique and filmmaking technology. We aren't content to churn out cookie cutter formula films like our competitors. We truly love filmmaking and have the burning desire to make content that will both enlighten and entertain, content that will be able to reach a mass audience without catering to the lowest common denominator. Bringing the innovation of low-budget independent filmmaking into a larger and more well funded structure can push the envelope of what's capable in film while keeping costs low and driving profits higher. In addition, we want to create a breeding ground for the next generation of filmmakers. The film industry is notoriously difficult to break into and there are incredibly talented people in all aspects of the process, from writing to directing, from acting to props and makeup, that are fighting to find their way in. We will scout that talent and develop it. We want to find the next Speilburg, Scorcese, and Tarantino. We want to cast the next Brad Pitt, Scarlett Johannsen, and Johnny Depp. We want to give these artists and craftsmen the environment they need to flourish in. We can create a virtual Villa Diodati where an entire generation of filmmakers can learn and grow, making their dreams come true while giving something back to an industry we love and creating wildly entertaining films and profitable films in the process. We have been involved in a slew of low-budget films. All have been crowd pleasers, cult favorites, and multiple award winners. GEORGE'S INTERVENTION, for instance, has won first prize at film festivals domestically as well as in the UK and Germany and has garnered a massive fan base. THE CELLAR DOOR was so popular that on the day of it's release it became the most downloaded film on the internet, surpassing big-budget studio films like THE BUCKET LIST released the same day. 3 However, with all of our success, talent, and hard work, we are still playing in the minor leagues. It is very difficult for a film shot for under 250k to become a massive hit for one reason: star power. Name actors drive the budget of a film up in several ways: their personal fee, which can be exorbitant, as well as forcing the film to become a signatory of the Screen Actor's Guild and providing the "perks" the Guild requires (trailers, hot meals, etc). However, having name actors in your film guarantees sales, especially to foreign markets. Actors as diverse in scope from Cuba Gooding, Jr to Jean Claude Van Damme routinely earn their films as much as 500% profit from name recognition alone. This is the ceiling that we have currently hit. As we grow and excel as filmmakers and storytellers, we still do not have the funding to make a film with name actors. Were we able to break through that and into a budget range that allowed us to cast internationally recognizable stars, then we could build on our growing fan base and break into markets that have so far been closed off to us. In doing so, we would create products with the potential of massive success both critically and financially. BUSINESS PLAN FOR PRODUCTION & DISTRIBUTION Company Goals We are in business to produce and sell feature films based on specific budgets ranging from $500,000.00 to $10,000,000.00 (U.S) in order to minimize downside risk and maximize cost-to-profit ratios. Our strategy is to capitalize on profitable ancillary markets such as DVD, TV, Cable, satellite, internet, VOD (video on demand) and Video Streaming (internet, cell phones, etc) where distribution avenues are virtually unlimited in addition to traditional theatrical release. We intend to utilize this “well oiled machine” as a platform to develop and create “festival” quality films with “break out” potential. 4 STRATEGIC PLAN OUTLINE •Demonstrate with real examples how budgets below $10,000,000 generate cost-to-revenue multipliers often hundreds of times beyond big budgeted studio pictures. •Detail how typically the majority of revenues are seen within 16 to 24 months. •Choose genres with broad appeal to virtually every country and culture. •Avoid competing with major studio strongholds while selling directly to worldwide DVD, Cable, etc. •Utilize this scenario as a platform to create “festival” quality and “break-out” films within the same budget range. THE INDUSTRY AT A GLANCE The film industry investment is not necessarily one that requires huge sums of capital to be profitable. This is why we have specifically chosen to concentrate on lower budget genre films. There are of course many genres, including romantic comedies, thrillers, dramas, sci-fi and action-adventures. While a mystery to some, the film business is essentially a manufacturing business that relies on supply and demand. Small budgeted genre movies, even with unknown actors and very little marketing promotions, generate some of the healthiest revenues of any films in the U.S. and abroad. Quality movies produced on budgets below the $10,000,000 mark have a very good potential of generating large revenues within 16 to 24 months regardless of whether they break out or not. Yet, genre feature films still share the potential of a big budgeted picture to indeed break-out, making millions in profit. At this level of budget it is not as hard to recoup the investment since there are numerous opportunities today to sell directly to consumers. There are very few legal investments that can experience such 5 phenomenal, immediate, and record setting revenues as the low budget film. Consider PARANORMAL ACTIVITY, a movie shot entirely on a home video camera with a reported shooting budget of $15,000 and a return of over 6,000 times its investment just in the U.S alone. This is an extreme example of a “break-out” film and should not be considered the norm; however it makes a clear statement of the power of its genre and, in this case, the power of the internet and word of mouth. There is an undeniable worldwide psychological appeal to the “hard” genres, like horror and action. They appeal to the most primal emotions no matter what the country or culture. Audiences seek them out for the same reason they like to strap themselves into a roller coaster and plunge 10 stories in a matter of seconds. It is actually the territories outside the U.S. that make up the majority of a film’s revenue.