-189-
Mr. Medress assumed a 20-percent return rate, which he regarded
as “typical of sell-through product.”140
Because of the age of the EBD film titles, Mr. Medress
selected a $44.95 wholesale price for rental units, which was at
the lower end of the range for direct-to-video titles released by
independent studios. On the basis of his industry knowledge, Mr.
Medress used a $7.99 wholesale price for sell-through units.
Mr. Medress did not incorporate a release pattern into his
projections; he assumed that income would be received evenly over
his 10-year projection period (with the exception of the annual
2.5-percent decay rate discussed above).
Incorporating these figures, Mr. Medress computed gross
sales data for the EBD film library on a year-by-year basis.
ii. Cost Projections
On the basis of his industry knowledge, Mr. Medress
projected $2.75 in manufacturing, packaging, and shipping costs
per unit and marketing costs equal to 10 percent of gross sales.
Mr. Medress also projected administrative overhead at what he
140 Mr. Medress assumed that 98 percent of returned units
would be recycled into sales; he made an adjustment in the
following year for the manufacturing costs of the returned units.
Page: Previous 179 180 181 182 183 184 185 186 187 188 189 190 191 192 193 194 195 196 197 198 NextLast modified: May 25, 2011