Motion Pictures Marketing

Motion Pictures Marketing

0.Overview

The Marketing function of Sony Pictures Entertainment (SPE) is divided between the Motion Picture and the Home Entertainment divisions. The purpose of these narratives is to document the process for incurring marketing expenditures for the Motion PicturesDivision. The process can be broken up into the following sub processes.

Budgeting
Vendor Master Maintenance
Basics Purchase
Media Buy
Accruals
Film Prints

The process for accounting of Accounts Payable and Payments is covered in the Corporate Accounts Payable Process documentation.

References are made to specific control activities in the Risk and Control Matrix(RCM) template for the Marketing Process. The applicable control activity (e.g., Control) is shown in parentheses following the relevant sentence or paragraph in the procedural documentation.

1. Budgeting

Process owner interviewed:

Joni Isbell, SVP WW Marketing & Distribution Finance

Process owner sign-off by:

Prepared by:

Neil Francis, E&Y / Vanessa Mora, SCA Internal Audit

Reviewed by:

Maria Ortega

Reviewed by:

Kathleen Shane & Joni Isbell

Purpose:

To identify and record the significant documents, systems and procedures used by the Domestic Marketing Finance department for the Budgeting process.

Financial Objectives/Significant Accounts (Assertions):

AccountsAssertion

1.Marketing CostsMeasurement, Occurrence, Completeness

2.Accrual for marketing costsCompleteness, Existence, Valuation

3.Accounts payableCompleteness, Existence, Valuation

Major Classes of Transactions Embedded:

Greenlight Budget

Division Budget

Pre-Release Budget

Spent/Committed Reporting

Overage Memo (Pre-Release Marketing Budget Increase)

Holdover Memo (Post-Release Marketing Budget Increase)

Key Sub-Processes or Transformations:

Greenlight Budget

Division Budget

Pre-Release Budget

Spent/Committed Reporting

Overage Memo

Holdover Memo

Background

The Domestic Marketing Finance (DMF) department budgets, tracks, reports and provides financial oversight for theatrical marketing and distribution costs in the U.S. and Canada. Marketing budgets are the starting point for theatrical marketing and distribution, and are part of each theatrical release’s greenlight memo. DMF uses the Spent and Committed System (SCS) to monitor marketing activity by detailed category of accounts for media (network and cable TV, radio, newspaper, magazines, etc), basics (creative, trailers, publicity, freight, etc), and distribution (print) costs.

The following table lists the key personnel involved with the processes documented:

Department / Position Title / Position / Title Abbreviation / Employee Name
SPE Executive / Chairman & Chief Executive Officer / Chairman & CEO / Michael Lynton
Worldwide Marketing & Distribution / Chairman Worldwide Marketing & Distribution CTMPG / Chair WWM & Distrib / Jeff Blake
Worldwide Marketing Finance & Distribution / Executive Vice President Worldwide Marketing and Distribution Finance / EVP WWM & Distrib Fin / Kathleen Shane
Worldwide Marketing Finance & Distribution / SVP Domestic Marketing & Distribution Finance / SVP WWM & Distrib Fin / Joni Isbell
Business Development / Executive Vice President & CFO CTMPG / EVP & CFO / Stefan Litt
Business Development / SVP Business Development / SVP Bus Dev / Jay Galston

The following systems are used by Domestic Marketing Finance to budget and track marketing expenditures:

System Name

Description

Process

Interface

Spent/Committed System (SCS)

Create purchase orders and to track advertising and promotion costs against budgets.

SAP /

This system is used for maintaining the general ledger and accounts

General Ledger

Process Narrative:

Greenlight Budget

Greenlight budgets are created for all domestic motion pictures. The process of initiating a marketing spend budget begins with the request for a Greenlight Submission. The Domestic Marketing Greenlight Submission contains information such as Domestic Box Office estimates, number of screens, cast names and release date. Additionally, a synopsis analysis is also provided about the cast and crew, which may directly affect the marketing strategy. This submission is sent to VP Business Development and it is included in the official Greenlight memo for the film.

After the Chairman WWM & Distrib CTMPG and EVP WWM & Distrib Finapprove the Greenlight submission the budget can be input into SCS by DMF. Marketing coordinates with advertising agencies and SPE management to determine the best marketing strategy by type. There are two major categories of marketing expenditure: Media and Basics (i.e. Non-Media). Media includes TV, Radio, Outdoor, Interactive and Newspaper. Trailers, Research, Website Production, Publicity & Promotion, Creative Advertising, and Other Costs such as freight and Awards are considered Basics.

Division Budget

The Greenlight Budget is the initial budget for a film. DMF and Marketing use models to help releasing management refine budgets. Around July of each year, the divisional budgets are prepared as part of the fiscal year budget process (and MRP process). The approved greenlight budgets will become the divisional budgets unless changes have occurred that resulted in budget revisions (change in cast, new distribution strategy, etc.). Division Budgets are approved as part of the fiscal year budget approval process. The Divisional budget passes through several layers of approval, before ultimately being approved verbally by Chairman WWM & Distrib CTMPG.

Pre-Release Budget

Approximately 30 days before a film’s release a “Pre-Release Budget” is finalized as Marketing and DMF formalize the approved media and basics plan so that it reflects costs to be incurred to effectively market a given film. A pre-release meeting occurs with Chairman & CEO, Chair WWM & Distrib, EVP WWM & Distrib Fin and EVP Bus Dev to discuss the specifics and the sensitivity analysis. After the pre-release meeting, DMF prepares a “Pre-Release” memo that is sent from Chairman WWM & Distrib CTMPG to Chairman & CEO. This memo contains a summary of the Pre-Release Budget and supporting detail, including a sensitivity analysis. A sensitivity analysis is highly confidential and includes all projected revenue and cost information for each business segment (i.e. Motion Pictures, TV, Home Entertainment). The Chairman WWM & Distrib CTMPG approves the Pre-Release Budget, i.e. total per SCS equity total per Per-Release budget (R845, C502).

A Pre-Release Memo will not be required for acquisition titles where the P&A spend are not funded by Sony Pictures.

Spent/Committed Reporting

DMF enters the budget into the SCS “Division Budget” column, and this becomes the “set in stone” budget from which all spent/committed costs will be measured against to determine overage/underage. The SVP WWMDFand Director review the data entered into SCS to ensure the input has taken place correctly (R814, C373).

A “Weekly Spent/Committed Report” (YTD performance for all titles compared to budget) is reviewed and approved by the EVP WWM & Distrib Fin (or SVP WWMDF), prior to distribution to management including the Chairman WWM & Distrib CTMPG(R845, R814, C286). This report summarizes YTD performance for all titles compared to budget. The SVP WWM & Distrib Fin highlights any changes in the cover memo of the package. DMF also sends a “Spent and Committed Report by Title.” This is the main report used to analyze titles. It contains a break-out analysis of the current status on estimates versus budget. The “Current Estimate, Spent or Committed” column is further broken down into 1) Spent and 2) Committed (not yet spent i.e. Accrual needed). “Over/Under Budget” in SCS is calculated as follows: Divisional Budget – Current Estimate = Over/Under Budget. The current estimate column contains the latest approved budgeted figures.

Domestic Marketing Finance will not allow the budget’s input in SCS to exceed the Division Budget without approval of the CEO in either an “Overage” or “Holdover” memo. (R845, C59)

Overage Memo

Any increase of $1 million or over to the overall "Current Estimate" of a film over the Division Budget before its release is documented in an “Overage” memo. An “Overage” memo isn’t required if the increase is related to a release date change (effective May 3, 2010). This memo is prepared by Domestic Marketing Finance, and sent from the Chairman WWM & Distribto Chairman & CEO for approval. Budget bottom line increases cannot be adjusted without the Chairman & CEO’s written approval. Purchase orders and payment requests cannot be initiated in SCS without an available budget. (R845, C34)

Pre-Release Budget Overage

Any increase of $1 million or over to the “Pre-Release” Budget prior to the release of a film is documented in a Pre-Release Overage Memo (9-20-10). This memo is prepared by DMF and set from the Chairman WWM & Distrib to Chairman & CEO for approval for approval. Budget bottom line increases cannot be adjusted without the Chairman & CEO’s written approval. Purchase orders and payment requests cannot be initiated in SCS without an available budget.

Holdover Memo

Any increase over $1M to the overall “Current Estimate” of a film over the Divisional Budget after its release, or $1M over the Pre-Release budget, should be documented in a “Holdover” memo (Pre-Release Budget supercedes the Division Budget). This memo is also prepared by Worldwide Marketing Finance, and sent from the Chairman WWM & Distribto Chairman & CEO for approval. Budget bottom line increases cannot be adjusted without the Chairman WWM & Distrib’s verbal approval in SCS. Purchase orders and payment requests cannot be initiated in SCS without an available budget.

2. New Vendors

Process owner interviewed:

Joni Isbell, SVPWorldwide Marketing & Distribution Finance

Process owner sign-off by:

Prepared by:

Neil Francis, E&Y / Vanessa Mora, SCA Internal Audit

Reviewed by:

Maria Ortega

Reviewed by:

Kathleen Shane & Joni Isbell

Purpose:

To identify and record the significant documents, systems and procedures used by the Domestic Marketing Finance department for creating new vendors.

Financial Objectives/Significant Accounts (Assertions):

AccountAssertion

1.Accounts payableCompleteness, Existence, Valuation

Major Classes of Transactions Embedded:

New Vendor Request Form

Vendor Review and Approval

Vendor Maintenance Request

SCS New Vendor Update

Key Sub-Processes or Transformations:

New Vendor Request Form

Vendor Review and Approval

Vendor Maintenance Request

SCS New Vendor Update

Background

A new vendor is considered a company or individual who is not already established in the Spent and Committed System (SCS) and is paid for the first time. The SCS is primarily used to create purchase orders and track advertising and promotion costs against budgets. The SCS only allows the creation of purchase orders and payment requests against vendors already set up in SCS. This memo describes the process of adding new vendors to SCS.

The following table lists the key personnel involved with the processes documented:

Department / Position Title / Position / Title Abbreviation / Employee Name
Worldwide Marketing Finance / Executive Vice President Worldwide Marketing and Distribution Finance / EVP WWM & Distrib Fin / Kathleen Shane
WorldwideMarketing Finance / Senior Vice PresidentWorldwide Marketing & Distribution Finance / SVP WWMDF / Joni Isbell
Domestic Marketing Finance / Director Domestic Marketing Finance / Dir / Seda Papaian
Domestic Marketing Finance / Director / Dir / Alma Dahlsrud
Domestic Marketing Finance / Clerk / Clerk / various
MDMA Support / MDMA Super Analyst / Analyst / Amy Benny

Domestic Marketing Finance uses the following systems to add/maintain SPE vendors:

System Name

Description

Process

Interface

Spent Committed System

This system’s primary purpose is to create purchase orders and to track advertising and promotion costs against budgets.

Ariba System

Vendor maintenance requests are initiated in this system.

Accounts Payable

SAP

The system is used for maintaining the general ledger and making payments on behalf of MPG (including Marketing)

General Ledger

Ariba

Process Narrative:

Overview

Vendors must be added to SAP Master File in order for actual payments to be processed. After added to SAP, the data is transferred to SCS.

New Vendor Request Form

The department requesting the service from a new vendor must complete a “New Vendor Request Form,” and submit the form to the Domestic Marketing Finance group (DMF). This form includes information such as the vendor name, address, telephone, fax, e-mail address, federal ID, type of business, owners, management, and Board of Directors (if available). Additionally, the requesting department employee must check a statement regarding related parties, which asks the requester if he/she is associated personally or otherwise to any owner, manager, employee, or member of the Board of Directors.

Vendor Review and Approval

Once the form is completed, the Department Heads and Supervisors of the requesting departments sign the new vendor request form and send the request to SVP WWMDF for review and approval. The process for the transfer from ARIBA to SAP and SCS systems and the controls over the transfer has been documented in Corporate Accounts Payable.Next, the SVP WWMDF or Directors review the form and generates a Dunn & Bradstreet Report on significant prospective new vendors, as considered necessary by management. Additionally, if applicable, a new vendor letter of agreement or a formal contract is submitted to DMF before a new vendor is added to the approved vendor list. All new vendors must complete a W-8 or W-9 form to file with DMF and to be entered into SAP. (R625, R522, C663) Prior to entering a new vendor in ARIBA, the new vendor request form must be submitted to WWMF and approved by SVP. The approved request form(and all pertinent data) is attached in ARIBA for review during electronic approval within the system. (R522, R625, C664)

Refer to Corporate Accounts Payable – Vendor MaintenanceSOX documentation.

Vendor Maintenance Request

After the SVP WWMDF approves the “New Vendor Request Form” a DMF Clerk initiates the process of updating the approved vendor into Ariba - SAP. To do this, the Clerk accesses the Ariba system. After logging into the system, the Clerk creates a vendor maintenance request in Ariba for the addition of the new vendor. Using the information provided in the Vendor Request form, the clerk inputs vendor details. After entering the new vendor information, the Clerk must click on a box agreeing to an electronic statement that he/she has no association with the new vendor. After data entry is completed, the Clerk scans the Vendor Request Form, either W-8 or W-9 and other pertinent data and attaches the documents to the request in Ariba. Then, the Clerk submits the vendor maintenance request for approval. After the request is submitted, the Ariba system routes the request to the Analyst in MDMA for review to insure the information has been submitted properly and the vendor doesn’t already exist. After the Analyst review, the request is forwarded to appropriate person in DMF for approval. The Ariba request requires two DMF management approvals. The EVP, SVP WWMDF and Directors all have authority to approve new vendors in Ariba. Next, the designated approver receives an e-mail notification from Ariba, requesting approval of the new vendor. After receiving this notification, the approver logs into the Ariba system and reviews the vendor request, including the forms scanned and included as attachments. After determining that the request is complete and all required signatures have been obtained, the SVP, SVP WWMDFor Directors approve the new vendor in ARIBA. See A/P New Vendor Set-up process documentation. The vendor maintenance request is transferred by ARIBA to the Administrator and the Analyst in MDMA Support for final admittance to the approved vendor list. The process for the transfer between ARIBA to SAP and SCS systems and the controls over the transfer has been documented in Corporate Accounts Payable – Invoice ProcessingSOX documentation. Before releasing the new vendor into SAP, the Analyst verifies that the new vendor is not already in the system by searching for tax IDs and vendor names. (R625, C106) The process for the transfer between ARIBA to SAP and SCS systems and the controls over the transfer has been documented in Corporate Accounts Payable.

SCS New Vendor Update

After the transfer of the new vendor from ARIBA to SAP, new vendors can be added to SCS. New vendors are activated in SCS by a security assignment window. Before activating the new vendor, either the SVP WWMDF or Directorsreview the information in the new vendor record against the approved New Vendor Request Form to verify that all information has been correctly captured. Only the SVP and Directors have access rights to bring a new vendor into SCS. Finally, to ensure that the DMF has approved all new vendors, a report is generated monthly from Ariba. This report lists all new vendors added to the system for that period. This Ariba report, along with new vendor packages (new vendor request form, W-8 or W-9, formal contract, vendor letter of agreement), is sent to the SVP WWMDF for review. (R522, R625, C282) The SVP WWM Distrib Fin reviews the documents and signs the Ariba report as evidence of review.The process for the transfer and overlapping controls between ARIBA to SAP and SCS systems and the controls over the transfer has been documented in Corporate Accounts Payable SOX documentation.