The mechanics of the panda – model /         questions of execution

panda does not offer the distributor a cash credit, instead:

• panda buys services on its own behalf on its own account and resells these to the distributor, hereby earning a margin. Fees exceeding these or financing costs are not accrued.

• panda therefore is the distributor’s supplier and grants a commercial credit.

• The services which panda provides are restricted to dubbing, paid advertising and delivery of film prints including the technical services connected therewith.

• According to experience these 3 provisions are about 2/3 to 3/4 of the total initial costs of a theatrical release. The distributor bears the remaining 1/3 to 1/4 of the total P & A Budget itself.

In practice it will be that the operating departments of the distributor - as so far - order the prints at the film laboratory, book advertising at the advertising agency and commission the dubbing studio. However panda has an agreement with these companies which enable the distributor to ask for services in panda´s name up to a certain price.

These companies therefore invoice panda and panda further invoices these services to the distributor. The payment of these invoices is regulated in the agreement between panda and the distributor as follows:

• The incoming lender rents from the cinemas less the costs for booking / billing (max. 12,5%) are forwarded to panda, until the complete compensation of the invoices.

• Should this not suffice for cover the receipts from the subsequent rights are forwarded to panda.

Hereby it should be remarked that regarding the subsequent rights usually only DVD is available, as TV often already is “gone”. With German motion pictures a TV- broadcasting station possibly has co-produced  - with international motion pictures the TV- agreements might have possibly been lent for financing of the minimum guarantee. It also becomes more and more en vogue that a TV – broadcasting station buys all rights and that it only passes on theatrical/DVD rights to a distributor or that theatrical/DVD is sold separately from TV.

panda´s minimum requirement is: An agreement with a DVD-distributor must exist, which includes a MG or an advance payment on future receipts. This amount of this payment must cover 50% of panda´s investment (i.e. about 1/3 of the total initial costs) and also is assigned to panda in case that there still are open demands on the distributor until the start of the DVD exploitation, respectively that the initial costs have not been returned from the cinema.

A further requirement is: panda only enters into packages of at least 3 motion pictures with a distributor and asks for the possibility of crossing. As the motion pictures can stem from different producers complete crossing is not possible, but an overage of a motion picture   remaining with the distributor (after deduction of the producer fee) can very well be allocated  with the underfunding of other motion pictures.

Another word regarding the margin: The goal is that the utilization of panda does not – or at least not considerably – increases the initial costs. Already previously to our operative start I have pre-discussed the according conditions with the suppliers and negotiated prices. The arguments here for are the higher business volume as well as especially the immediate payment at delivery by panda.

Especially film laboratories often play “bank” for distributors and grant long terms of payment. This leads to financing costs, risk surcharges have to be made – all this does not apply when panda pays immediately.