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fully set forth in the section of the Appraisal styled ‘Limiting
Conditions for the Appraisal.’” The appraisal report in the
record, however, does not contain any section entitled “Limiting
Conditions for the Appraisal.”
Mr. Kutner’s $29 million valuation of the EBD film titles
appears highly inflated. Indeed, that valuation greatly exceeds
(by more than three times) the highest value ($9 million) that
petitioner’s expert (Steven Wagner) arrived at in valuing the EBD
film titles.99 Mr. Kutner’s valuation takes into account
technologies (e.g., DVD) that the other experts in these cases
opined were either not foreseen in 1996, were only latently
observable at that time, or were no longer viable.100 In doing
99 We discuss the valuation conclusions of petitioner’s
expert, Steven Wagner, in more detail infra.
100 For example, Mr. Kutner projected $1,320,000 in DVD
revenue. Although DVD technology was predicted to emerge at some
point after 1996, the success of that technology was not readily
foreseen. For that reason, petitioner’s expert projected no
revenue from DVD sales in his valuation. Mr. Kutner also
projected $1,100,000 in royalty income from laserdisc sales.
According to petitioner’s expert, laserdisc sales in 1996 were
relatively insignificant, even though the technology had been
around for a few years. Neither petitioner’s expert nor
respondent’s expert (Richard Medress) took laserdisc sales into
account. Mr. Kutner also projected $2,410,000 in royalty income
from the revenue-sharing (Rentrak) model for the rental market.
Under this model, video rental stores would pay a small fee up
front to buy a rental film and would then share a portion of the
rental fees with Rentrak. In 1996, however, the rental market
still operated on a front-end sales model; i.e., video rental
stores made a one-time payment up front (e.g., $59 per copy) to
purchase copies of a film, which they could then rent an
unlimited number of times. Neither petitioner’s expert nor
(continued...)
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