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Gold/Mining/Energy : Mainframe Entertainment (ReBoot/Beasties)
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To: Richard Lam who wrote (73)6/18/1997 12:08:00 PM
From: D.E. Shetland   of 459
 
Margins should expand as they have already bought the equipment and designed the characters for Beast Wars & Reboot. Going into the 2nd & 3rd seasons, margins are enhanced greatly. also, as time goes by, the various ownership residuals start kicking in. For instance, the IMAX ridefilm profits come in starting in late 97 on. I think there is a 50/50 split after IMAX takes a 25% dist fee. Thes movies are extremely profitable as they run for 5 minutes and cost $5-$10 per person with capacity for 10-20 people. Once they get the 2nd & maybe 3rd RideFilm, those profits will be of a reasonable size and they drop right down to the bottom line. Other residuals would be the royalty on merchandise for ReBoot and the small Hasbro/Beast Wars royalty and the Elec Arts game revenues. Obviusly a movie would be huge, providing plenty of immediate operational profit plus a good backend, depending on negotiations.
Analyst reports will come out in 4-5 weeks, I don't have an estimated EBITDA , but the growth rate this year is pretty high, around 30-35%%. They are scheduled to produce 900 minutes of animation versus 500 for last year.

By the way, one of the animation magazines out there reported that Warner Brothers closed their digital division because they could not produce high quality CGI within time & money budgets. This is great news because Mainframe has proven they can. I believe they are also working with WB on one of the movies they're looking at. Given the killer profits they made on Space Jam, I would imagine they'd like another interesting animation hit for 1998.

Otherwise, what a dull opening. It will undoubtedly move on some announcements of developments and analytical coverage.
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