Contents

 

 

Mission & Objectives

NeoClassics distributes and licenses its acquired product on a worldwide basis through initial theatrical release, as well as to the ancillary and tertiary markets, with emphasis on direct distribution in all media for the United States, Canada and The United Kingdom, and licensing in other key markets overseas.

 

Based in Vancouver with a major office in Los Angeles and a satellite office in London, NeoClassics is well-positioned to acquire products from filmmakers in the United Kingdom, Australia, New-Zealand, South Africa, India and other English-speaking areas, in addition to the United States and Canada. The London office is also used as a focal point for acquisition of foreign langauge films from France, Spain and a host of other countries. As a lean and efficient independent film distributor with unique flexibility, NeoClassics develops a branded product stream which is both creative and commercial.

 

Managed by a core of experienced and highly successful industry professionals, its mission is to develop into a viable long-term competitor of quality distribution companies such as Miramax, Sony Classics and Fox Searchlight, while retaining its true creative independence, creating substantial returns and building long-term value for its investor-owners in the process.

 

The NeoClassics label is used for traditional, high-quality independent films including typical festival fare. A separate label, Tigertail Flix, handles youth-oriented films, genre films such as horror and action adventure, and have a high profile internet presence for digital product, short films, student films and other cutting-edge cinema.

 

NeoClassics' films are acquired via licensing from independent third party production entities, either after completion of the films or during the production process.

 

Fundamental to NeoClassics' success is our unique target marketing and regional "platform" rollout of films being distributed domestically. The company utilizes state of the art technology for market analysis, as well as internet-based advertising strategies and direct email contacts with its target market of independent filmgoers.

 

On the acquisition side, NeoClassics has demonstrated that it is a viable competitor for film product through creative strategies, primarily focusing on corporate branding combined with reliance on management's vast array of industry contacts. As a cutting-edge distribution company utilizing the latest technology, NeoClassics creates and nurtures an image as a home for the progressive filmmakers of today and tomorrow, from around the world. As a true independent, it will retain the flexibility, speed and creativity needed to attract and retain relationships with these filmmakers.

 

NeoClassics utilizes the most sophisticated, web-based marketing strategies as an adjunct to traditional marketing programs. In addition, NeoClassics, utilizes the latest state-of-the-art technology under license from Palo Alto-based Itiva Networks to stream its product over the internet.

 

NeoClassics will strive to make a 20% pre-tax return on every dollar invested, focusing on the individual profitability of each film acquired and released to theatres, and optimal licensing of all other rights to ancillary media streams.

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Marketing Strategy

The essence of NeoClassics is its innovative marketing and distribution plan, relying heavily on targeted marketing and corporate branding, combined with regional platform distribution. Unlike traditional film marketing from the major studios, which often consists of a national rollout supported by heavy print and spot television advertisements, NeoClassics' approach is designed to maximize the returns on each dollar of advertising investment by pinpointing the targets for our marketing campaigns and designing regional rollouts in such a manner as to coincide with the targeted advertising.

 

NeoClassics releases its U.S. theatrical product through its NeoClassics and Tigertail Flix labels, in three to ten key urban markets, focusing on New York, Los Angeles and Chicago as well as Atlanta, San Francisco, Boston, Denver, Seattle and Houston. Broader release will follow if warranted by public response.

 

Market trend research is combined with creative advertising campaigns utilizing print ads, spot television and radio ads, cable TV ads, co-sponsorship tie-ins and heavy direct marketing. This includes internet-based strategies utilizing a sophisticated Website, e-mail, video-streaming of trailers and other direct communication with independent filmgoers. Focus group testing, e-mail response surveys, public promotions and commercial tie-ins are utilized to promote NeoClassics as well as its individual releases.

 

NeoClassics brands its NeoClassics label as quality independent fare in much the same way as Miramax, Sony Classics and Fox Searchlight, with a view toward building a long-term following for its product. This will reap benefits not only in creating audience demand for future releases, but also in identifying NeoClassics as a viable and attractive player in film acquisitions, attracting quality product for future releases. Product for its Tigertail Flix label includes youth-oriented films, genre films, as well as horror and action adventure and a wide array of digital product for internet distribution.

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Distribution Product

NeoClassics licenses for distribution independently produced feature-length motion pictures intended for initial theatrical release. Such pictures will be produced by filmmakers from around the world, with a focus on English language film from the United Kingdom, Australia, New Zealand, South Africa, India, the United States and Canada. Foreign language pictures from France, Spain, Germany and other countries will also be licensed and distributed with subtitles. Initially, NeoClassics will focus its efforts on films having a budget of $5 million or less, expanding this horizon over time as its distribution network is established and matures. NeoClassics distributes directly to theatres in the United States and will add direct distribution in the United Kingdom and Canada as soon as practicable. More important than the budget of the potential film for acquisition is NeoClassics' perception of its ability to identify and reach a targeted market for such film successfully and economically. In this connection, management anticipates that its product will originally have appeal to an intelligent, urban audience and will have some key element or hook that will enable it to reach a specific, targeted audience group. This hook might be the particular director or filmmaker, the composition of the cast, a particular aspect of the script, the subject matter of the film, or some other aspect which gives it a unique appeal to a specific group of filmgoers.

 

NeoClassics will to acquire and distribute approximately four or more films during the first year of operations, and approximately eight to twelve films annually thereafter. The number of films distributed annually by NeoClassics is dependent not only on the funds available for acquisition and distribution, but on management's ability to find and secure rights to quality product meeting NeoClassics' rigorous distribution standards that are likely to be marketed profitably.

 

Management draws upon all of its experience, industry contacts and other resources to help locate and secure rights to quality product for NeoClassics' distribution network. NeoClassics reaches out into the film community through all of the following vehicles in order to create a presence designed to attract product:

 

  1. Film festivals around the world, including Sundance, Toronto, Montreal, Berlin, the Cannes Film Festival and other major and minor festivals perceived to be potential sources of product.
  2. International Film Markets, including Cannes (Marché Du Film), Los Angeles (AFM), EFM ( Berlin) and Hong Kong.
  3. Direct contacts with directors, producers, and filmmakers, including participation in symposiums, panels and film school presentations.
  4. Contacts with talent agencies, international sales representatives, law firms, business management and accounting firms, and other entities representing films and filmmakers.
  5. Contacts with foreign distribution companies and other domestic distributors who may be acquiring only limited rights to a film or may be passing on a film if it does not meet their specific distribution needs at the time.
  6. Contacts with banks, insurance companies and other institutions involved with film financing.
  7. General corporate branding and marketing designed to create awareness of NeoClassics and its product, with a view toward attracting filmmakers and film product.

 

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Financial Highlights

Highlights from NeoClassics' financial models are as follows:

 

  • A Release Schedule of 4 films over the first two years following funding.
  • NeoClassics' total commitment per film for acquisition costs and marketing expenses ranges from $450,000 to $2,750,000.
  • NeoClassics targets a 20% pre-tax cash return on each dollar invested in distribution of its films.
  • These results are based on realistic assumptions which allow for substantial upside surprises:
    1. As low as $630 theatrical income per screen per day;
    2. No hit pictures, just moderate results based on industry averages with a maximum U.S. theatrical release of 12 weeks.
    3. No significant revenues from network television sales, pay-per view exhibition or new media distribution, or from sequels, remakes and the like.
    4. A minimum of $10,000 per screen in available advertising funds provided by NeoClassics to support its distribution campaign and help ensure that theatreowners will book NeoClassics' films.
    5. No value attributed to creation of the film library or distribution network. These have the potential to be significant assets long term.
  • NeoClassics' business model has been prepared utilizing relatively average results, omitting extremes which would result from hit pictures or from films which are total boxoffice failures. These results are based upon an analysis of available historical data for performance of lower-budget independent films similar to those anticipated to be distributed by NeoClassics, adjusted where deemed appropriate to reflect current market trends and the specific nature of NeoClassics' business. In this connection, it should be noted that NeoClassics anticipates largely acquiring rights to completed films or films nearing completion which it has had the opportunity to view. While the nature of the motion picture industry is not necessarily one of averages, management believes its business model and projections are based upon assumptions which are reasonable. However, actual results may vary and those variations may be material.
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Development & Bridge Fund

NeoClassics is raising additional funds for a separate Development & Bridge Fund ( the "DBF") earmarked specifically for investment by NeoClassics in certain pictures to be acquired for distribution. This fund may be capitalized at $5 Million or more. The DBF will be utilized at the discretion of management to invest in various pictures to be acquired, with the goal of providing necessary funds to producers for development, preproduction, production and post-production; to enable them to successfully complete production and delivery of such pictures. In addition, the DBF will provide bridge and/or gap financing to the producers to enable them to successfully consummate necessary bank financing for production. It is anticipated that the DBF will invest in a slate of pictures that may number six or more at any given time. DBF investments would be viewed normally as short-term investments with a return of capital anticipated in less than 18 months.

 

The DBF will permit NeoClassics to position itself early in the production cycle in order secure distribution rights to projects deemed highly desirable. Typically, NeoClassics would structure such investments as collateralized loans secured by various distribution rights. An annual rate of return not less than 15% would be anticipated, together with an equity kicker in the form of a percentage of the net profits or other proceeds of distribution of the picture.

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Print & Ad Fund

In order to enhance its ability to successfully market and distribute its film product theatrically in North America and to accelerate growth of its slate of pictures, NeoClassics may elect to establish a separate funding source off-balance-sheet to provide additional funding specifically to cover costs of marketing and distribution. This source will likely be in the form of a Fund ( the "P & A Fund) set up as a Limited Partnership or LLC, of which NeoClassics will be the general partner or managing shareholder. It would be funded in an amount up to $25 Million initially, through capital investments of third parties who would be compensated for their investments in the P & A Fund with a reasonable rate of return on their capital. Typically the P & A Fund would invest in select pictures with a priority recoupment position enabling return of capital plus profit shortly after release of the pictures. By raising additional capital through the P & A Fund, NeoClassics will be able to increase its available funding for growth without diluting its share capitalization. At the same time, it will be able to provide investors in the P & A Fund with a short-term investment vehicle and appropriate rate of return as opposed to a long-term equity investment in NeoClassics.

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Production Fund

In order to accelerate growth of its slate of pictures and position itself to distribute pictures with great potential that might otherwise not be available from producers or other sources after production, NeoClassics may elect to establish a separate funding source off-balance-sheet to provide production funding. This fund will be utilized to finance productions in whole or in part for pictures to be developed by NeoClassics with a view toward distribution.

 

This source will likely be in the form of a Fund ( the "Production Fund") set up as a Limited Partnership or LLC, of which NeoClassics will be the general partner or managing shareholder. It would be funded in an amount up to $100 Million, through capital investments of third parties who would be compensated for their investments in the Production Fund with a reasonable rate of return on their capital. This would typically be in the form of an equity investment in individual pictures or a slate of pictures with a recoupment position enabling return of capital plus a share of the net profits from distribution of the pictures. By raising additional capital through the Production Fund, NeoClassics will be able to accelerate growth in its slate of pictures and develop highly desired films for distribution without diluting its share capitalization or exposing its corporate investors to the risks generally associated with motion picture production. At the same time, it will be able to provide investors in the Production Fund with an investment vehicle that allows them to participate as direct investors in individual pictures or a slate of pictures, with a return by way of their net profit participation as opposed to a long-term equity investment in NeoClassics.

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Internet Distribution and New Media

NeoClassics streams trailers and films over the internet, utilizing the latest state-of-theart technology under license from Palo Alto-based Itiva Networks. Streaming strategies will be devised in order to maximize revenues from the internet and new media for NeoClassics' film product, which may involve one-time viewing opportunities or multiple viewing opportunities with potential purchase. Certain films not deemed to be suited for general theatrical release may be specifically acquired for distribution on the internet and through new media. Our Tigertail Flix label will be utilized for much of our internet content distribution.

 

Itiva Networks has licensed NeoClassics its proprietary breakthrough QStream™ technology, which provides high definition video content distribution over the internet. Itiva's services provide a fast, full screen, high quality viewing experience for large audiences, at a fraction of customary cost. NeoClassics management believes that Itiva's QStream is the newest, most costeffective solution for streaming rich media content such as movies, t.v. shows, trailers, media events and music videos to large audiences. Itiva's technology virtually eliminates core network saturation by making clever use of servers, proxies and peers. It also has the built-in capability to protect copyrighted material and support dynamic advertising. Use of Itiva's technology should ensure that NeoClassics will be on the cutting edge in terms of the quality and efficiency of its internet streaming activities.

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Legal Status and Strategy Overview

NEOCLASSICS FILMS LTD. was incorporated on November 2, 2007, under the laws of the Province of British Columbia. It maintains its main administrative offices in Vancouver and will maintain its principal North American business offices in Los Angeles through a whollyowned U.S. subsidiary incorporated in Nevada. A wholly-owned U.K. subsidiary will later be incorporated and will maintain a business office in London to oversee international activities.

 

North American distribution rights are vested in the Canadian parent and U.S. subsidiary, while international copyrights and distribution rights are generally be vested in the U.K. subsidiary.

 

NeoClassics' administrative offices are presently located at Suite 1925 – 650 W. Georgia Street, Vancouver, B.C. V6B 4N8 Canada. The registered offices of its U.S. subsidiary are presently located at Suite 2114, 1101 E. Tropicana Ave., Las Vegas, NV 89119. The Company has also opened our offices in Culver City (adjacent to Sony Pictures) as our principal business office for our U.S. operations. NeoClassics' London offices will follow and serve as a focal point for international distribution activities and acquisition of international film product. A second satellite office may later be established in Munich, Germany. NeoClassics is a privately held corporation controlled by Irwin A. Olian, with approximately fifteen (15) stockholders and a total of ten million Common Shares issued and outstanding.

 

NeoClassics is currently seeking to raise new investment capital in a Private Placement of Common Shares in the aggregate amount of up to $3 million by selling 10 million additional Common Shares at CAD $0.30 per Share. At such time as $1 million or more has been raised and such funds are available to NeoClassics, it may elect to close the first tranche of the financing and commence business operations. The Private Placement offering shall then continue until the first to occur of (i) the full $3 million shall have been raised; or (ii) the expiration of 90 days following the December 15, 2007 anticipated closing date. This Executive Summary is not to be deemed an offer or sale of securities, which are being offered pursuant to a Private Placement to a small group of select, accredited investors, which may be funds, partnerships, corporations, individuals or other entities.

 

While NeoClassics intends at some future date to become a public company when corporate development warrants such a step, it plans to operate and remain private for the foreseeable future. It intends to develop strategic alliances with select foreign distributors and with domestic distributors for certain ancillary rights such as non-theatrical and home video distribution, where it may not initially distribute directly.

 

NeoClassics is represented by its entertainment counsel, Frankfurt Garbus Kurnit Klein & Selz, P.C., 488 Madison Avenue, 9th Floor, New York, NY 10022 (Attention: Tom Selz, Esq., tselz@fgkks.com). It is also represented by its corporate and securities counsel in Canada, Fasken Martineau DuMoulin LLP, Suite 2100 1075 Georgia Street, Vancouver, B.C. V6E 3G2 (Attention: Ms. Charlotte Bell, CBell@van.fasken.com ); and by its corporate and securities counsel in the U.S., Troy & Gould PC, 1801 Century Park East, Suite 1600, Los Angeles, CA 90067 (Attention: Sanford J. Hillsberg, Esq., sjhillsberg@troygould.com).

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The Rise of Independent Distribution Competition

The United States motion picture industry has been dominated by the major studios including The Walt Disney Company, Paramount Pictures Corporation, Warner Bros. Inc., Universal Pictures, Twentieth Century-Fox, Sony Pictures Entertainment, Dreamworks, and MGM/UA. These major studios, which historically have produced and distributed the vast majority of highgrossing theatrical motion pictures released in the United States are typically components of large, diversified corporations. They have strong relationships with creative talent, television broadcasters and channels, movie theatre owners and others involved in the entertainment industry. The major studios also typically have extensive national or worldwide distribution organizations and own large motion picture libraries. Now, through transactions such as the merger of Time-Warner and AOL, the majors are gaining access to distribution over the internet and other new media.

 

Motion picture libraries consisting of motion picture copyrights and distribution rights owned or controlled by a film company can be valuable assets that are capable of generating revenues for many years through worldwide commercial exploitation in the existing media and markets, as well as in the future media and markets resulting from the proliferation of new technologies and applications. The major studios also may own or be affiliated with companies that own other entertainment related assets such as music and merchandising operations and theme parks. The major studios motion picture libraries and other entertainment assets can provide a stable source of earnings to offset the variations in the financial performance of their new motion picture releases and other aspects of their motion picture operations.

 

During the past 15 years, independent production and distribution companies, many with financial and other ties to the major studios, have played a growing and important role in the production and distribution of motion pictures for the worldwide feature film market. Among the more important independent distributors with whom NeoClassics will be competing and a selection of their releases from 2006 are:

 

Studio Subsidiaries

  • Miramax Films Corporation , a division of The Walt Disney Company, which produced and/or distributed, among others: The Queen, The Night Listener, Tsotsi, Kinky Boots,Heart Of The Game, Once In A Lifetime, Venus, Renaissance;
  • New Line Cinema Corporation , an affiliate of Time-Warner, which produced and/or distributed the Austin Powers films, The Lord of the Rings Trilogy, and in 2006, among others, the following: The Nativity Story, Take The Lead, Snakes On A Plane, JustFriends, How To Eat Fried Worms, The New World, Tenacious D In The Pick Of Destiny, Hoot, Running Scared, Little Children, and A History Of Violence;
  • Sony Pictures Classics (SPC) and Screen Gems (SG), specialty arms of Sony Pictures, which distributed, under the SPC banner: Capote, Friends With Money, The ThreeBurials Of Melquiades Estrada, Volver, Art School Confidential, Why We Fight,Passenger, The, Quinceanera, Who Killed The Electric Car? It distributed The Covenant under the SG banner;
  • Focus Features , the specialty arm of Universal, which, in 2006 distributed such titles as: Jet Li's Fearless, Waist Deep, Dave Chappelle's Block Party, Pride And Prejudice, Catch A Fire, and Brick;
  • Picturehouse (a melding of the forces of HBO Films, Fine Line and Bob Berney). In 2006, they released: A Prairie Home Companion, The Notorious Bettie Page, Tristram Shandy: A Cock And Bull Story, Pan's Labyrinth, and Fur: An Imaginary Portrait Of Diane Arbus.
  • Fox Searchlight and Fox Atomic, specialty arms of Twentieth Century-Fox; Fox

 

Searchlight distributed Little Miss Sunshine, The Hills Have Eyes, The Ringer, Thank You For Smoking, Phat Girlz, The Last King Of Scotland, Water, Night Watch, Fast Food Nation, Bee Season,among others. Fox Atomic had one film in 2006.

 

Independent Distributors

  • The Weinstein Company released in 2006: Scary Movie 4, Hoodwinked!, Pulse, The Matador, The Protector, Wolf Creek, Mrs. Henderson Presents, Transamerica, The Libertine, and Shut Up And Sing;
  • Lions Gate , with Artisan fully incorporated into the company, had an aggressive 2006 slate, including: Saw III, Madea's Family Reunion, Crash, Hostel, Akeelah And The Bee,See No Evil, The U.S. vs. John Lennon, Peaceful Warrior, Leonard Cohen: I'm Your Man, Hard Candy, Saw II, A Good Woman, and Deliver Us From Evil;
  • THINKFilm , focusing first on documentaries, and now on feature films as well, released in 2006, among others: Half Nelson, Strangers With Candy, Shortbus, The, Boys Of Baraka, The Untold Story Of Emmett Louis Till, Awesome: I Fuckin' Shot That (Beastie Boys documentary), Ten Items Or Less, Tideland, The Zodiac, Candy, The Aristocrats, Protocols Of Zion, and Boys Of Baraka;

 

As a result of consolidation and the entrance of new entities in the domestic motion picture industry, a number of previously independent producers and distributors have been acquired by or are otherwise affiliated with major studios. This is evident from an examination of the above list, which shows that many prominent so-called "indies" are actually operating as subsidiaries of major studios. There is currently an opportunity for just the kind of company NeoClassics is building, a lean, cost-effective operation. With a strong and innovative management, a well conceived business model, a watchful eye on expenditures, excellent relationships throughout the industry and being well-capitalized, NeoClassics approaches and embraces this opportunity to evolve into a key particpant in the landscape of the independent film distribution business.

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The Nature of Film Distribution

Motion picture distribution encompasses the exploitation of motion pictures in theatres and in ancillary markets such as home video, pay-per-view, pay television, broadcast television and other markets. Motion pictures may continue to play in theatres for up to six months following their initial release, depending upon the nature of the release campaign and public acceptance of the film. NeoClassics contemplates shorter release schedules, typically up to 90 days, except for extremely successful pictures. Concurrently with their release in the United States, motion pictures generally are released in Canada and may also be released in one or more international markets.

 

The motion picture then generally becomes available for distribution in other media, after typical holdbacks as follows:

 

  • Months After Approximate Theatrical Release Release Period
  • Domestic home video and DVD 4-6 months open
  • Domestic pay-per-view 4-6 months 3 months
  • Domestic pay television 6-10 months 12-21 months
  • Domestic network/basic cable 30-36 months 18-36 months
  • Domestic syndication 30-36 months 3-15 years
  • International home video and DVD 6-12 months open
  • International television (pay or free) 18-24 months 18-30 months

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    A distributor typically acquires rights from the producer to distribute a motion picture in one or more of the markets described above. The distributor typically agrees to advance the producer a non-refundable minimum royalty or guarantee (advance), which is to be recouped by the distributor out of the profits generated from the distribution of the motion picture in whatever markets it has acquired. Generally, the producer also is entitled to receive a participation equal to an agreed-upon percentage of all net revenues received from distribution of the motion picture over and above the advance once the advance is recouped. NeoClassics will generally seek to acquire worldwide distribution rights for all films it licenses from third parties. If that is not feasible, distribution rights in all media will be sought for either the North American or International market places. Rights will be acquired for terms ranging from five years to perpetuity, with a target of 15 years or more for all but very special films.

     

    Theatrical Distribution

    The theatrical distribution of a motion picture generally involves the manufacture of release prints, the promotion of the picture through advertising and publicity campaigns and the licensing of the motion picture to theatrical exhibitors. New initiatives for digital distribution of films to theatres are developing and NeoClassics intends to be at the forefront of this movement. The size and success of the promotional advertising campaign can materially affect the revenues realized from the theatrical release of a motion picture. The costs incurred in connection with the distribution of a motion picture can vary significantly, depending on the number of screens on which the motion picture is to be exhibited, the actual cost and scope of the media advertising expenditures and campaign and the ability to exhibit motion pictures during peak exhibition seasons. Competition among distributors for theatres during such seasons can be great. Similarly, the ability to exhibit motion pictures in the most popular theatres in each area can affect theatrical revenues. Collection of the distributor's share of box office receipts may involve delays and occasionally renegotiation with exhibitors.

     

    Home Video / DVD

    The home video distribution business involves the promotion and sale of DVDs (Digital Versatile Discs) to wholesalers as well as local, regional and national video retailers (e.g., video specialty stores, big box outlets and discounters, electronics stores, convenience stores, record stores, kiosks, online stores like Amazon and online rental services such as NetFlix and other outlets), which then rent or sell such DVDs to consumers, primarily for private viewing. Major feature films are usually scheduled for release in the home video market within four to five months after theatrical release to capitalize on the theatrical advertising and publicity for the film.

     

    The growth curve of the domestic home video market has slowed somewhat from the year over year double digits it has been enjoying since the advent of DVD approximately ten years ago. DVD homes have now surpassed the highest ever number of VHS (videocassette) homes, and DVD sales now represent the largest component of domestic revenues generated by motion pictures. Growth-focused distributors and retail outlets look forward to HD/DVD and Blu-Ray formats reinvigorating that double-digit curve they so enjoyed.

     

    The number of outlets designed to serve the rental market has remained essentially flat for the past several years, explained very easily by the growth of NetFlix (with more than 6 million members) even while grocery stores, kiosks and others have entered the market, and standalone stores have gone into attrition. Pricing in the sell-through and rental markets for mainstream product has stabilized at parity, while certain specialty product tries to pursue more value per disc. Prices for most product are below $30, while big box stores seek to drive that down further. Historically, new technology introduction has spurred growth in motion picture sales, but some of the newer and emerging technologies such as broadband Internet and others could increase the competition for consumer eyeballs impact the home video marketplace.

     

    Pay-Per-View

    ay-per-view television allows cable television subscribers to purchase individual programs, including recently released motion pictures and live sporting, music or other events, on a "per use" basis. The subscriber fees are typically divided among the program distributor, the pay-perview operator and the cable system operator, with half or more going to the distributor.

     

    Pay Television

    Pay television allows cable television subscribers to view HBO, Cinemax, Showtime, The Movie Channel, Encore, Bravo, BET, Lifetime and other pay television network programming offered by cable system operators and satellite operators for a monthly subscription fee. The pay television networks acquire a substantial portion of their programming from motion picture distributors.

     

    Broadcast and Basic Cable Television

    Broadcast television allows viewers to receive, without charge, programming that is broadcast by affiliates of the major networks (ABC, CBS, NBC, Fox, CW (created by a merging of the WB and UPN), independent television stations or through cable and satellite networks. In certain areas, viewers may receive the same programming via cable transmission for which subscribers pay a basic cable television fee. Broadcasters or cable systems operators pay fees to distributors for the right to air programming a specified number of times.

     

    VOD

    Video On Demand has previously been included with (cable and closed-system-based) Pay Per View transactions, however, with the rise of broadband connections, and the advent of services such as NetFlix downloads, Amazon Unbox to Tivo services, Apple iTV, and the like, we are on the leading edge of the changes in content access that were anticipated in the Internet bubble in the 1990's. The technology is actually here, and the connectivity to the home video entertainment center will be complete within no more than a couple of years. Consumers will begin to have the access they have only previously experienced in hotel rooms, but they will be able to store the film locally for repeated viewings, just as they do with a DVD or tape. Just as in the early days of DVD, there may be a Wild West feel to the market, as suppliers and technology companies blur the lines of their businesses, while telcos reach for content plays and content companies move with their technological underpinnings and those in-between, like Comcast, Cox, HBO and others all seek to be in on the expanding pie.

     

    International Markets

    In addition to their domestic distribution activities many motion picture distributors generate revenues from distribution of motion pictures to international markets, including theatrical, home video, television and other platforms. There has been a dramatic increase in recent years in the worldwide demand for filmed entertainment. This growth is largely due to a growth and upgrading of screens, the privatization of television stations, the introduction of direct broadcast satellite services, growth of home video, as well as the increased cable penetration in certain markets.

     

    Non-Theatrical Markets and Other Rights

    Revenues also may be derived from the distribution of motion pictures to airlines, schools, libraries, hospitals and the military, from the licensing of rights to perform musical works and sound recordings embodied in a motion picture, and merchandising rights to manufacture and distribute games, dolls, clothing and similar commercial articles derived from characters or other elements of a motion picture. Development of strong indigenous film industries with higher production values in many countries has also contributed to growing revenues.

     

    New Media and New Technologies

    New means of entertainment product delivery (some outlined in VOD above) are constantly being developed and offered to the consumer. The total impact of emerging technologies such as delivery of motion pictures on the internet cannot be fully defined. However, most analysts are now predicting significant growth while not overly cannibalizing existing markets. Of course there is not an infinite supply of consumer attention span, and a shifting of transactions from brick and mortar stores to digital outlets (for example) should definitely being anticipated. Some product as well may find its most suitable market through emerging technologies. NeoClassics is positioning itself to take advantage of these new markets as they develop. Management believes that control of content will ultimately be the key determinant in driving new media distribution.

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