EFTA00596077

FrMO 
New Business Formation: 
Animation Feature Film Development 
& Production Company 
December 11, 2014 
EFTA00596077

Table of Contents 
I. Executive Summary 
II. Business Description 
III. Barry Josephson's Bio 
IV. Investment Analysis 
V. Industry Overview 
EFTA00596078

Executive Summary 
Barry Josephson is forming a company to develop & produce animated films 
New Venture 
Overview 
• 
Form and fund Animation Feature Film Development & Production company 
("Josephson Animated Company") 
• 
Attractive market — global box office for animated feature films growing at a 
12.5% CAGR since 2008 and grossed -$5B in 2013 
• 
Proposed deal structure: By contributing equity to the venture, equity investors 
will share in the profits of all the films funded under this venture pari passu and 
share in the copyright ownership of all underlying rights 
Capital 
Request 
• 
With Josephson Animated Company self-funding the entire production cost, 
there is a request for $175mm in Equity to launch development and production 
for the first three to four films, and associated overhead for the entity 
• 
After a film is released, it will enter into a secured $150mm Debt Facility which 
will finance the production and release of the future films, of which you will retain 
equity ownership and profit share 
Barry 
Josephson's 
Leadership 
• 
Former President of Columbia / Sony Pictures 
• 
36-year career in film, TV, and music with extensive industry relationships 
• 
Makes profitable feature films on-budget & on-time — superior business acumen 
combined with talent for assembling & managing high-performing teams 
• 
Barry's impact: 15 films grossed over $2.6B at WWBO / returned 3.1x budget 
• 
Josephson Entertainment's box office production successes include: 
• 
Enchanted: $340MM in WWBO / returned 4.0x budget with 93% RT 
• 
Other involved titles: Wild Wild West, Men In Black, Air Force One 
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Executive Summary 
Barry Josephson is forming a company to develop & produce animated films 
Investment 
Highlights 
Investor 
Returns 
Partnering with Josephson Entertainment offers investors an extraordinary 
opportunity to: 
• Win big by participating in tremendous growth potential that exists for compelling 
family content and Animated feature films, with significant potential equity returns 
• Invest in a successful and proven Entertainment executive / entrepreneur 
Utilizing Base Case estimates for the films, equity investors can expect to see: 
• 
IRR of 15.4°/0 
• 
Invested capital Payback within 7 years, or 3 years after the first film release 
• 
Subsequent equity returns after Payback point, as fund start-up and initial 
production/development costs have been recouped 
Under an Upside Scenario, equity investors can expect to see: 
• 
IRR of 25.0°/0 
• 
Invested capital Payback within 6 years, or 2 years after the first film release 
3 
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Table of Contents 
I. 
Executive Summary 
II. Business Description 
III. Profile - Barry Josephson 
IV. Investment Analysis 
V. Industry Overview 
4 
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Seeking $175 Million to Develop, Produce & 
Market Initial Slate of Six Animated Feature Films 
• 
Create self-sustaining, film production company to develop, produce and oversee 
marketing for its family-oriented animated features 
• 
Equity will fund initial development and production costs of films. and fund 
overhead/administration costs of $1.5M-$2M a year, with future cash flows financing the 
operations/production of future slate films 
Sources 
Equity — Investor 
Capital 
Debt — Secured Credit 
Facility 
Amount 
($MM)
$175.0 
54% 
$150.0 
46% 
Total Sources 
$325.0 
10_0%1
Uses 
Acquisition, Production 
and Release Expenses 
Overhead/Administration 
Total Uses 
Amount 
($MM)
$315.0 
O/O
Total 
97% 
$10.0 
3% 
$325.0 
10_0Y0 
Representative Investment Per Film: 
IP Acquisition 
Film Production 
Prints & Advertising 
$ 2.5MM 
50.0MM 
40.0MM 
Total Investment Per Film 
$92.5MM 
5 
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Josephson Entertainment's Animation Business 
High-Level Approach 
Josephson Entertainment Value Proposition 
• Company is built off of Barry Josephson's keen eye and a focus towards properties with 
strong performance across multiple quadrants, franchise potential and ability to be 
exploited across multiple revenue streams (Enchanted, Men in Black, Bones) 
• Strong track record of profitability and accountability with budgets and timing, which will 
minimize fund cash needs and expenditures, and generate and return cash flow quickly 
Development Philosophy 
• Only select/acquire material it intends to produce and initiate development on one film per 
year with the intention of releasing one film per year 
• Have three to four films in various stages of development, production and release at a 
time, utilizing all sources of capital to self-sustain and create cash flow generating assets 
Film Production 
• Outsource to best-of-breed animation studios, reducing costly entity overhead needs 
Marketin • Costs 
• Fund own 
expenditures, greatly reducing shared economics with distributor to only a 
distribution fee, and exercising increased control over film marketing campaign and 
positioning 
6 
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Fundamentals of Family Content Make it Very 
Valuable & Ultra Competitive Industry Segment 
Family content continues to have value as other genres decline 
• Willingness to pay 
- Parents as key customer will continue to 
purchase non-discretionary items related to 
animated films to make their kids happy 
• Repeat consumption 
- Children watch their favorite stories over and 
over, thus strengthening the value of 
purchase 
International Growth 
• Foreign box office 
- FBO for family films has grown at 7.4% 
CAGR since 2005 (vs. 1.0% for DBO) 
- Qualitatively, animated films are visually 
appealing and overcome language barriers 
• International TV markets 
- "Disney Channel has become biggest 
franchise grower for the company 
worldwide" — Disney CFO Jay Rasulo 
Superior Monetization of Content 
Licensing & merchandising potential 
- Disney Pixar's Cars generated estimated 
$8B in merchandising revenue before 
release of Cars 2 
Home video sales 
- For given level of box office, animated films 
generate 15 — 20% more HV revenue than 
other genres 
Expanding Buyer Universe 
• Growing consumer demand 
- Family WWBO has tripled in last 15 years 
• Powerful film & TV content buyers 
- Increase in size & importance of major cable 
and pay TV networks benefits content 
owners 
- Netflix, Amazon, Hulu and Microsoft making 
presence felt(original & licensed content) 
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Despite Higher Up-Front Capital & Longer Time 
Horizon, Animation Provides Unique Opportunity 
Animation thesis 
Favorable Supply / Demand Dynamics 
• Heavy skew to live-action movies — only 19 
animated films were released in 2013 
• Higher barriers to entry — unique skill set & capital 
requirements 
Reduced Execution Risk 
• Combination of (i) limited supply of movies and (ii) 
children having less discriminating tastes 
• A+ quality not always necessary — Cars 2 received 
RT score of 39%, but still earned $560MM at box 
office 
• From 2005 to 2012, 50 movies with RT scores of 
25% or less earned / returned: 
- (12) Animated: 
$156.3 WWBO / 3.0x budget 
- (38) Live-Action: $105.9 WWBO / 1.8x budget 
Superior Operating Leverage 
• Gross participations generally limited to producers; 
voice talent unlikely to command significant 
ownership share 
• Voice talent does not drive WWBO - films that 
market stars perform no better than films that don't 
Superior Home Video & IP Monetization 
• For a given box office result, HV for animated fare 
runs 15-20% higher than live-action 
• Original characters can be exploited through 
licensing and merchandising 
- Disney Pixar's Cars generated estimated $8B in 
merchandising revenue before release of Cars 2 
8 
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Josephson's Animated Family Films Would be in 
High Demand with Major Film Distributors (1 of 3) 
Josephson will cover cost of Production as well as 
, greatly reducing 
anticipated fees it would pay a distributor in any output deal 
Film Distributor 
Distribution Activities 
• Terminated its distribution deal with DreamWorks Animation at the end of 2013 
• Development and production initiative in full swing on handful of new animated 
properties, such as SpongeBob SquarePants and Monster Trucks, to be released 
in 2015 
• Key relationship with Nickelodeon to mine children's IP 
A VA...OM comPArry 
UNIVERSAL. mom 
• While Fox owns Blue Sky (Ice Age franchise, Rio franchise, Epic) and replaced 
Paramount as DreamWorks Animation's distributor, they are still in the market 
for other animated fare 
• Recently released The Book of Life and scheduled Peanuts for 2015 
• Created Warner Animation Group in 2013 with first release, The LEGO Movie, 
grossing $468M worldwide 
• Seeking to distribute non-Warner Bros. developed films 
• Primary source of animation is through ownership interest in Illumination 
Entertainment (Despicable Me franchise, The Lorax, Hop) 
• Ability to monetize successful animated fare across TV network portfolio and 
theme park capabilities 
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Josephson's Animated Family Films Would be in 
High Demand with Major Film Distributors (2 of 3) 
Josephson will cover cost of Production as well as 
, greatly reducing 
anticipated fees it would pay a distributor in any output deal 
Film Distributor 
Distribution Activities 
• Sony has in-house studio, Sony Pictures Animation, which has averaged one film 
per year (Cloudy with a Chance of Meatballs franchise, The Smurfs franchise) 
• Interested in working with other animation partners 
SONY 
PLC 1010 8 
• Signed distribution deal with Reel FX, the company behind 2013's Free Birds 
to take worldwide rights, but are looking for other options 
LIONSGATE• 
• While producing animated films sporadically, such as Hoodwinked! and 
Escape from Planet Earth, the Weinsteins have also signed distribution deals 
for independently produced films 
• Acquired Argentinian hit Underdogs for release in 2015 
THE WEINSTEI'1 COMPANY 
Seeking powerhouse animated films to distribute and are rebooting Power 
Rangers franchise with Saban 
10 
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Josephson's Animated Family Films Would be in 
High Demand with Major Film Distributors (3 of 3) 
Josephson will cover cost of Production as well as 
, greatly reducing 
anticipated fees it would pay a distributor in any output deal 
Film Distributor 
Distribution Activities 
FOCUS 
F
E
AT
URE
S 
• Focus has extended a deal with LAIKA to distribute their films, such as The 
Boxtrolls, Parallorman and Coraline, but have also distributed other 
specialized animated projects, such as 9 
OPENRCA'Z'.
Released The Nut Job in 2014, as the highest grossing independently 
roduced animated film and have experience in releasing/servicing films with 
financing attached 
STX 
• New studio headed by Bob Simonds and funded by TPG, Hony Capital and 
ENTERTAINMENT 
Gigi Pritzker. 
• Seeking animation partner for anticipated 12 film slate with direct distribution to 
major exhibition chains. 
11 
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ILLUMINATION 
ENTERTAINMENT 
Case Study Success: Illumination Entertainment 
Illumination Entertainment demonstrates that strict cost control and hit 
animated movies are not mutually exclusive 
too
Critical Success Factors 
• Very few management 
layers 
• Clear decision-making 
• Shorten development / 
production cycle 
• Hire less star power — vocal 
talent, young animators, and 
first-time directors 
• Keep investment in 
animation technology to a 
minimum 
• Use licensing partners to 
help build awareness 
Illumination Entertainment 
Animated Movie Releases 
Film Title 
Year 
WWBO Budget 
WWBO/ 
Budget 
Rotten 
Tomatoes 
Despicable Me 2 2013 
$971 
$76 
12.8x 
74% 
Dr. Seuss' The 
Lorax 
2012 
349 
70 
5.0x 
54% 
Hop 
2011 
184 
63 
2.9x 
25% 
Despicable Me 
2010 
543 
69 
7.9x 
81% 
$2,047 
$278 
7.4x 
54% 
"...I like being involved in all the facets of a movie, from the inception 
of the idea to the marketing of the movie and everything in between. 
It can start with what ideas we're going to explore as possible stories, 
to the hiring of the writers, to guiding the writing process, to choosing 
the directors. It's a very comprehensive approach to producing." 
-- Illumination's CEO Chris Meledandri in Dartmouth Now 
Source: 
NY Times, "For Illumination Entertainment, Animation Meets Economic Reality', 04/04/2011. 
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Studios Must Decide Which Activities Will be Done 
In-House vs. Outsourced to Specialty Firms 
Josephson Entertainment seeks to replicate Illumination's success & early 
operating model by doing development & pre-production phases in-house 
1 
High-Level Phases of Animated Film-Making 
Animation Studios 
Pre- 
Post-
Development 
Production 
Production 
Production 
Distribution 
Disney / Pixar 
2 Fox / Blue Sky Studios 
Oy-integrated Studios 
3 Sony Pictures Animation 
Jill. 
4 DreamWorks Animation 
1 
20th Century 
Fox 
5 Illumination Entertainment 
Iiiiion 
Entertainment's 
ar y Operating Model i i 
Mac Guff 
(2011) 
Mac Guff 
(2011) 
Universal 
6 Josephson Entertainment 
7 Warner Bros. 
8 Paramount Pictures 
' (Despicable Me 2) is going to end up being the single most profitable film in the 100 year history of Universal 
Studios...We love Illumination", he added about the animation producer behind the hit franchise. 
- NBCUniversal CEO Steve Burke in Hollywood Reporter (07/31/2013) 
:Company Wchsites. 
13 
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Table of Contents 
I. Executive Summary 
II. Business Description 
III. Profile - Barry Josephson 
IV. Investment Analysis 
V. Industry Overview 
14 
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Executive Barry Josephson is a 36-Year Film, TV & 
Music Veteran with Impressive Credentials (1 of 2) 
Mainstream success through many motion pictures, TV series and specials 
across genres, in roles ranging from film & TV producer to talent manager 
Barry Josephson's Entertainment Career Highlights 
• Former President of Sony's Columbia Pictures, responsible for such hits as Men In Black, Air 
Force One, In The Line Of Fire, The Fifth Element, Anaconda, Bad Boys, The Professional, and 
The Craft 
• Producer on Walt Disney Pictures' Enchanted (2007), an animated / live-action romantic 
comedy that grossed over $340 million at the global box office and received three Academy 
Award Nomination for songs 
• Josephson Entertainment's other box office production successes include: 
- Life as We Know It from Warner Bros. 
- Hide and Seek starring Robert De Niro from 20th Century Fox 
- Like Mike from 20th Century Fox 
- 
The Ladykillers written/directed by Coen Brothers / starring Tom Hanks from Disney 
- 
Wild Wild West starring Will Smith from Warner Bros. 
• Currently in pre-production on feature film projects, including Lionsgate's Driving Dick Kelly, 20th Century Fox & 
Lightstorm Entertainment's The Dive, Voltage's Apex and Focus's Circle of Treason 
• Executive Producer on FOX Network hit TV series Bones, now in its 10th season 
• Executive Producer on American Revolutionary War TV drama Turn: Washington Spies, for AMC in production 
for 2"c' season 
• Served as talent manager and has helped advance the careers of such stars as Whoopi Goldberg, Patti Labelle, 
the Pointer Sisters, and Paula Abdul 
15 
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Executive Barry Josephson is a 36-Year Film, TV & 
Music Veteran with Impressive Credentials (2 of 2) 
Mainstream success through many motion pictures, TV series and specials 
across genres, in roles ranging from film & TV producer to talent manager 
Barry Josephson's Other Professional & Personal Interests 
Founding member of Comic Relief, the comedy concert series that raised millions of dollars to 
aid the plight of the homeless 
• Active advocate of animal rights and sponsors The Milian Foundation for Rescued Pets 
Played pivotal role in HBO Aspen Comedy Festival and currently does so in: 
- 
The Commitment to Life Benefit (supporting AIDS Project Los Angeles) 
- NHL Entertainment Board 
- Los Angeles Kings Advisory Board 
- Founding member and current board member of 20-year running Heart of Austin 
Film Festival for screenwriters 
• Graduated from American University and remains active member of its American University School of 
Communication Alumni program 
• Honored by American University with a Lifetime Achievement Award and received the Daughters the 
Revolution Award and the Saturn Award 
• Josephson lives in Pacific Palisades, CA with his wife Brooke and daughter Shira 
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Barry Josephson is a Proven Filmmaker & Knows 
Animation, Producing 2007 Disney Hit Enchanted 
Proved his mettle by purchasing original story, overcoming extended 
development process, and putting together pieces for highly successful film 
Barry Josephson's Role: Producer 
Genre & Plot: Animated / live-action romantic comedy — Giselle is a classic Disney Princess, 
who is forced from her traditional animated world of Andalasia into live-action world of NYC 
Cast: Amy Adams, Patrick Dempsey, James Marsden, Timothy Spall, Idina Menzel, Rachel 
Covey, and Susan Sarandon 
Development, Production & Release: 
• Bill Kelly's script sold in 1997 to Disney & Sonnenfeld / Josephson Productions 
• No support for R-rated movie — project languished after several rewrites & 3 directors 
• In 2005, hired 41" Director Kevin Lima and Bill Kelly returned to write new version 
• Renowned songwriting team of Alan Menken and Stephen Schwartz involved early in film 
• November 2007 wide-release with 93% Rotten Tomatoes score 
• Two Golden Globe nominations, four Critics' Choice Awards three Academy Award 
nominations, and won Critics' Choice Award for Best Family Film and Phoenix Film Critics 
Society Award for Best Live Action Family Film 
Financial: 
• $340MM at global box office / returned 4.0x its $85MM budget 
• $100MM in domestic DVD sales 
• Licensing deals with Mattel and Nintendo 
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Barry Josephson's Films also have Global Reach 
and Franchise Potential, like Men in Black 
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Genre & Plot: Comic science fiction action spy film. Two agents of a secret organization called 
Men in Black supervise extraterrestrial life forms who live on Earth and hide their existence from 
ordinary humans 
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Cast: Tommy Lee Jones, Will Smith, Linda Fiorentino, Vincent 
and Rip Torn 
— 
Development, Production & Release: 
• Optioned in 1992, based on a small circulation graphic novel, The Men in Black 
• Hired Ed Solomon for the original 1st draft 
• Script problems — Tommy Lee Jones joined cast only after Steven Spielberg promised that the 
script would improve 
• Delayed due to Barry Sonnenfeld's commitments around Get Shorty (1995) 
• Original shoot locations ranged from Kansas, Washington 
., and Nevada, but Sonnenfeld 
opted for NYC where the city's structures resembled flying saucers and rockets 
• July 1997 wide-release with 91% Rotten Tomatoes score 
Financial: 
• $589MM at global box office / returned 6.6x its $90MM budget (In the Top-100 all time grossing 
films) 
• $58MM in domestic DVD sales 
• Sequels: Men in Black II (2002) and Men in Black Ill (2012) grossed $442MM and $624MM in 
WWBO, respectively 
• WB Animated series based on film, titled Men in Black: The Series, ran from 1997 to 2001 
18 
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There is a Strong Talent Pool of Animation Studios 
with whom Josephson Entertainment can partner 
International firms typically can offer local tax breaks & lower salaries 
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*Mac Guff split into 2 separate companies, with Illumination Entertainment buying the animation department to form Illumination Mac Guff in 2011. 
Mac Guff Effects would like to establish itself in feature animation. 
19 
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