Santa Monica Pictures, LLC, Perry Lerner, Tax Matters Partner - Page 102

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          wholesale price per unit for the EBD film titles.132  On the basis          
          of discussions with industry participants, Mr. Wagner opted for a           
          3-year release pattern (on average, just under two film titles              
          per month) for the EBD film titles.133  Mr. Wagner also opted for           
          an even release pattern for each title for each genre; i.e., if             
          there were 9 horror film titles, then 3 horror film titles would            
          be released each year.  On the basis of discussions with industry           
          participants, Mr. Wagner determined that 80 percent of a film               
          title’s revenue would be received in the first year of release              
          and 20 percent would be received in the second year of release.             
               Incorporating these figures, Mr. Wagner computed gross sales           
          data for the EBD film library on title-by-title and year-by-year            
          bases.                                                                      
                    ii.  Cost Projections                                             
               Mr. Wagner projected costs for distributing the EBD film               
          titles including VHS conversion, duplication, distribution                  
          (including shipping and packaging), cover art, and marketing                




               132 Mr. Wagner projected a lower $47 wholesale price per unit          
          for the less well-known actors/horror genre, because distributors           
          had lowered prices in 1996 to induce additional unit sales in               
          this category.                                                              
               133 Mr. Wagner determined that for a typical release pattern,          
          a distributor releases up to three film titles per month                    
          depending on the other film titles that the distributor is                  
          releasing.                                                                  





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