| BUSINESS DESCRIPTION
The Business Opportunity
The Motion Pictures Association of America has reported
that the last decade has seen a steady worldwide growth
in the number of theater complexes (even with the recent
consolidations), an increase in television stations,
expansion in the new technologies of cable and satellite
broadcasting and the emergence of the internet as a
future distribution channel. Together, all have created
a huge demand for new entertainment content.
There are presently a limited number of independent
companies capable of exploiting those entertainment
opportunities, most of which are either too small or
too specialized to be of interest to the majors. Consequently,
the timing is excellent for establishing an independent
organization such as SMG. The Company will capitalize
on these opportunities by providing worldwide commercial
appeal in a low-risk, cost-efficient manner.
Strategy For Creating Enterprise Value
SMG's long-term business strategy is to build, over
time, a large library of motion picture and television
products in order to secure a major share of the lucrative
global distribution business, without the inherent financial
risks associated with the traditional production, marketing,
and distribution of originally produced motion picture
and television programming. Although future events make
it difficult to predict what opportunities may be available
at any given time, the new long-term goals that SMG
will pursue will be:
- Film and Television Distribution:
We have developed several key business relationships
that allow each entity the opportunity to gain a presence
in the global motion picture and television distribution
market. Such market includes non-theatrical venues,
pay television, home video and free television. The
focus has been to develop relationships that target
both the domestic (North America and Canada) and international
distribution of proprietary film and television productions
as well as film and television properties that may
otherwise be acquired or licensed. We have established
several key worldwide distribution relationships that
are somewhat unique.
- Film and Television Finance: We
have developed programs and identified sources of
capital designed to provide various forms of financing
for a broad range of film and television projects.
Such sources will include tax-based and government-subsidized
financing. To that end, SMG has recently established
an investment banking relationship in order to provide
additional expertise in management and oversight of
the various financing vehicles available to us to
assist it in the execution of our overall business
strategies.
- Acquisition of Existing Film and Television
Libraries: SMG is focused on a program of
aggressively and systematically identifying and acquiring
the ownership and/or distribution rights to libraries
comprised of previously released theatrical motion
pictures and/or previously aired television films
and series.
- Original Film and Television Production:
We have been historically focused on the production
of various original motion picture and television
projects, entering into such projects at various stages
of their respective development. SMG will focus on
the creation of production and financial joint ventures
that result in the use of little, if any, of SMG's
capital to produce.
- New Media: The exponential growth
of the Internet and the convergence of film programming
content have been well documented in recent years.
Internet advertising alone has grown from its 1997
level of $500 million to over $5 billion in 2000.
Many financial analysts view this medium as the most
important information and entertainment delivery platform
for the next century. SMG will leverage the experience
of several creative members of its management team
to help the company combine the best talent in the
entertainment industry with the technological and
content opportunities this new arena can offer including
our management of Inter-View project.
- Merchandising: Attractive opportunities
exist for the cross-promotion, product placement,
novelization of screenplays, toys, video games and
other merchandising of product in filmed entertainment
content and direct licensing activities.
- Financial: A division of SMG provides
specialized accounting, forensic and business services
to entertainment and media companies. Such services
are supervised by Jay J. Shapiro, CPA.
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