Executive Summary in association with

Executive Summary
in association with
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*Khepri (keh-PREE)- "He Who is Coming into Being" - Egyptian god of creation, the movement of the sun, and rebirth.
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KHEPRI/MEE STUDIOS
Executive Summary
Khepri/MEE Studios (“Khepri/MEE” or the “Company”), a feature film distribution
company, is seeking an equity investment of $35 million to fund the launch and the
first five operating years of an integrated entertainment company focusing on the
multibillion-dollar urban film market. Khepri/MEE brings together a top-flight management team to execute a new, highly-profitable distribution model that provides
a greater ROI on urban-themed feature films than the traditional studio movie system. The required funds will be used to fund as-needed procurement of services
from a top-notch theatrical distribution company; acquire an urban research and
marketing firm; and acquire, co-finance, produce and distribute a slate of 16 films.
It is common industry knowledge that feature film distribution is where the real
money in the filmed entertainment industry is made. Distribution companies make
the lion’s share of the money when a movie is produced and released. Its payoff
is highest in the “food chain.” This sector is where Khepri/MEE intends to make its
name—and money for its investors.
Khepri/MEE Studios
brings the next generation
model for film distribution—an innovation
whose time has come.
Based on projections,
the company can return
profits within five short
years. Investors can expect
returns of over 30% on
their initial investment.
The urban film market provides a great investment opportunity. Since the early
1990’s, there has been a steady wave of low to moderately budgeted urban films
which have turned a solid profit, due to very strong support from the African American market and the “cross-over” of these films to Hispanic and mainstream audiences.
The success of Tyler Perry is the most obvious example. His 2009 film, Madea Goes to
Jail, earned $41 million and 34% of the weekend movie-going audience (according
to Exhibitor Relations) at the box office during its opening weekend1, and held off
America’s mainstream teen idols (The Jonas Brothers: The 3D Concert Experience) in its
second week.2
Perry (and the money he has made) has proven to the film industry that there is a
hungry, neglected audience for Black-themed films. Clearly, this audience’s needs
and desires had not been met in the same way by urban films that came through the
traditional Hollywood system. The reason for his success is that Tyler Perry knows his
audience inside and out—and he delivers what they want—a mixture of comedy,
faith and consciousness. His independent films have multigenerational and acrossclass appeal, particularly to Black women.
The hundreds of millions of box office dollars generated by Perry films demonstrate
that there are opportunities that Khepri/MEE can leverage. As Perry knows his
audience, Khepri/MEE will know ours just as well, through our research-based
content development process. At the same time, we will be able to expand the
offerings to the urban film audience, offering more upscale writing, direction
and production values. The Khepri/MEE model will have stories that resonate
just as strongly with urban audiences. In addition, we will completely control the
Executive Summary
Page 1
KHEPRI/MEE STUDIOS
distribution for our films, allowing Khepri/MEE to maximize the profits from its
audience-driven stories.
Khepri/MEE represents
a strategic advancement on the traditional
studio distribution
model. By spending less
to produce and market
its films, then releasing
them in the top urban
markets that represent
the lion’s share of urban
box office dollars, the
break-even point for
each film is lower. This
is where Khepri/MEE
has a clear advantage.
Khepri/MEE represents a strategic advancement on the distribution model for such
urban filmed entertainment (theatrical, DVD, Pay-TV/cable). Investors will have a
lower downside risk with a higher upside potential than with the traditional Hollywood studio model. That model (with its higher overhead costs) pressures studios to
produce and distribute large-budget movies, while making them less profitable on
smaller or niche films, particularly on those with urban themes. Khepri/MEE will be
able to reduce its costs (compared to major studio films) at several key points in the
film development process. By spending less to produce and market its films, then
releasing them in the top urban markets that represent the lion’s share of urban box
office dollars, the break-even point where each film becomes profitable is lower. This
is where Khepri/MEE has a clear advantage.
The film industry overall is recession-resistant. Even in the current economic downturn, Americans are still going to movie theaters, even if only to escape the harsh realities of hard times.3 Box-office revenues remained strong at the start of 2009. African Americans, Khepri/MEE’s core audience, are loyal and ardent movie-goers. They
represent a disproportionately larger share of the film industry, making up 25%-30%
of the movie-going public.4 The urban segment is an expanding market totaling
over $3 billion5 of the total $9.6 billion annually in America.6 In addition, urban culture is followed and copied enthusiastically around the world, meaning that Khepri/
MEE can develop a global marketing strategy as revenue builds.
The market for urban-themed films, while lucrative, is not being serviced well. Khepri/MEE’s new model seeks to take advantage of this market reality. Khepri/MEE will
be a streamlined, tightly-focused and audience-driven company, with the flexibility and nimbleness to constantly be responsive to the urban consumer market. The
Khepri/MEE stories (like those of Tyler Perry) will resonate with their audiences, because as any film industry executive knows, “content is king.”
A major component of the launch plan includes the acquisition of MEE Productions
Inc., an urban communications and marketing firm that has been involved in the
development (concept testing) and marketing (ad testing) of more than 70 urbanthemed films and TV shows. MEE has conducted comprehensive audience research
with the urban youth market for nearly two decades, and its film entertainment expertise spans the entire process, from pre-production audience research to creating
“street buzz” for successfully launching new movies and television programs. MEE
will leverage its Community Network, a 20,000-member database of urban community-based organizations (CBOs) across the key markets to develop strong direct-toconsumer relationships and build pre-release awareness of Khepri/MEE films. (See
pages 8-9 for a detailed description of MEE.)
Khepri/MEE will cost-effectively bring films to market by hiring a distribution company with strong exhibitor relationships in top urban markets to launch each feature
Page 2
Executive Summary
KHEPRI/MEE STUDIOS
film. The theatrical distribution strategy will be focused, to maximize profitability, in
the highest-return urban/African American markets. This company will be able to
leverage its insider knowledge of these markets with focused marketing, efficiently
and effectively generating word-of-mouth that translates to strong box office numbers. Leading this effort will be the winning management team of urban marketing,
theatrical entertainment and film distribution industry professionals with more than
100 years of combined experience and an extensive and proven track record. The
unique combination of capabilities and relationships our team brings to this venture
will allow Khepri/MEE to “own” the urban audience.
Within a short period, Khepri/MEE will build the reputation of providing urban
themed-film products that are commercial, critical and audience successes.
Producer of three Academy Award-nominated films (Do the Right Thing, Tupac:
Resurection and Malcolm X), Preston Holmes (see page 18), President of Acquisition
and Production, will utilize his Hollywood-insider knowledge and experience to lead
MEE’s films-for-distribution acquisition and production strategies. Film distribution
and marketing expert Russell Schwartz, respected throughout the film industry, will
bring innovative distribution and advertising strategies to every Khepri/MEE project.
And Dwight Williams, Executive Producer of Hustle & Flow, will leverage the contacts
and processes that keep film production on track and profitable. Exhibitors and DVD
retailers will know a Khepri/MEE product is always of high quality, in demand within
the urban marketplace and reflective of the trendsetting urban lifestyle.
Initially Khepri/MEE will
cost-effectively bring
films to market by hiring a distribution company with relationships
in top urban markets
to launch each feature
film. The theatrical
distribution strategy
will be focused, to
maximize profitability,
in the highest-return
urban/African
American markets.
Once established, Khepri/MEE Studios will be the leading brand in the lucrative urban film market. The equity investment will fund this strong, unique concept. Based
on projections, the company can return profits within five short years. Investors can
expect returns of over 30% on their initial investment. Our research has shown that
the entertainment industry is ready for an innovative development—an audiencefocused distribution and research-informed production model that is tightly integrated in every step to the urban market place. Khepri/MEE Studios brings the next
generation model for film distribution—an innovation whose time has come.
Scenario 1
1 Investor
Scenario 2
2 Investors
Scenario 3
3 Investors
Executive Summary
Give
Get
Total
$35 Million
50% = 45% (+ 5% bonus)
$35 Million
$25 million
$10 Million
35% = 32.15% (+ 2.85% bonus)
14% = 12.85% (+ 1.15% bonus)
49%
$35 Million
$25 Million
$5 Million
$5 Million
35% = 32.15% (+ 2.85% bonus)
6.5% = 6.45% (+ 0.05% bonus)
6.5% = 6.45% (+ 0.05% bonus)
48%
$35 Million
Page 3
KHEPRI/MEE STUDIOS
Khepri/MEE Studios:
Profitable, High-Quality Films for the Urban Consumer
BUSINESS
MODEL
BUDGET
DEVELOPMENT
The Hollywood Way
The Khepri/MEE Studios Way
Vertical integration with high overhead, high
production and high P&A costs
A focused, research-informed production
and distribution model. Vertical integration
to the urban marketplace with lower
overhead, production and P&A costs
In Hollywood, even a “low-budget” film can
cost up to $25 million to shoot
A typical Khepri/MEE film will be budgeted
at $3 - $5 million
A Hollywood film can easily take years of
preparation and development (scripts,
rewrites, planning, casting, etc.)
Development will take less time and be
more effective, because research with the
target audience will inform script content
and casting choices, before film production
begins
Typical Hollywood films are shot in about
100 days
Khepri/MEE’s experienced Production
Heads (Holmes & Williams) will enable a
typical Khepri/MEE film to be shot in 25-35
days. Lower production cost means lower
break-even point for films
Primarily utilizes expensive and traditional
outlets (television, print and outdoor media)
Targeted traditional media, plus nontraditional and new-media strategies that
reflect oral communications culture and
create word-of-mouth
Hollywood is forced to “open wide” in order
to recoup the larger production costs.
Typical films open on 2,000 or more screens.
This results in significantly higher P&A costs
Targeted openings in the Top 10 to 25
highest-return urban markets. Lower P&A
costs mean a lower break-even threshold
for Khepri/MEE films
A typical Hollywood film returns only
pennies for every dollar invested, through
domestic box-office, international, DVD and
ancillary markets
Khepri/MEE promises an initial rate of
return (IRR) of greater than 30%
SHOOT TIME
MARKETING
STRATEGIES
DISTRIBUTION
STRATEGIES
RETURN ON
INVESTMENT
Page 6
The Hollywood vs. Khepri/MEE “Way”