Santa Monica Pictures, LLC, Perry Lerner, Tax Matters Partner - Page 112

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          opined that the $68,000-price per title represents:  “an amount             
          that investors were willing to pay for a library that included              
          many titles that were significantly stronger than the titles in             
          the SMHC Film Library.”  In considering the lesser quality of the           
          EBD film titles, Mr. Medress concluded that his estimate of                 
          $24,219 per title for the EBD film rights appeared reasonable.              
               c.  Court’s Analysis                                                   
                    i.  Reconciliation of Expert Opinions                             
               Both experts used an income approach, a discounted cashflow            
          analysis, in valuing the EBD film rights.  In their discounted              
          cashflow analyses, both experts made sales projections based on             
          the number of VHS units shipped in the rental or sell-through               
          market.  In valuing the EBD film rights, both experts relied on             
          information from AMR and the IMDb database.  Both experts assumed           
          that SMHC had no responsibility for residual payments to guilds,            
          participations to talent, or shares to producers.                           
               Neither expert relied on projections for sales in the DVD              
          format.  Neither expert relied on the revenue-sharing pricing               
          model (Rentrak) for the rental market that evolved after 1996.              
          Neither expert considered direct sales of videos via the                    
          Internet.  Neither expert assigned any value to the 26                      
          development projects or the sequel rights to any of the EBD film            
          titles.                                                                     







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