-188-
Mr. Medress assumed that in 1997 (the first full year after
SMP acquired SMHC) 500 units would be shipped for each of the 10
film titles distributed in the rental market, and that this
amount would decline by 2.5 percent per annum as the film titles
continued to age. For scenario 1, Mr. Medress divided the film
titles distributed in the sell-through market into 10 “Group 1”
film titles and 45 “Group 2” film titles. For scenario 2, Mr.
Medress divided the film titles distributed in the sell-through
market into 9 “Group 1” and 38 “Group 2” film titles for 1997,
and 9 “Group 1” and 36 “Group 2” film titles for 1998 through
2006. Mr. Medress assumed, in both scenarios, that 5,000 units
would be shipped for each of the “Group 1” film titles and 100
units would be shipped for each of the “Group 2” film titles, and
that after 1997 the unit shipments would decline by 2.5 percent
per annum.139
Having determined that shipments of rental units that had
been in release for some time would have a low return rate, Mr.
Medress assigned the EBD film titles a 5-percent return rate.
For the EBD film titles distributed in the sell-through market,
138(...continued)
the EBD film library would be distributed in the rental market.
Typically, as the figures reflect, units sell at higher price
points in the rental market (e.g., $44.95) than in the sell-
through market (e.g., $7.99).
139 Mr. Medress does not explain his division of the EBD film
library into “Group 1” and “Group 2” film titles or identify
which film titles were placed into those respective groups.
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