Participations PARIS Implementation & Residuals Outsourcing to Entertainment Partners Greenlight...

Participations PARIS Implementation & Residuals Outsourcing to Entertainment Partners

Greenlight deck

May 21, 2013

Agenda

►Executive Summary

►Business Problem Statement

►Assessment Phase Status Update

►PARIS for Participations - Assessment

►PARIS for Participations - Project Plan

►PARIS for Participations - Financials

►EP for Residuals Outsourcing - Assessment

►EP for Residuals Outsourcing - Project Plan

►EP for Residuals Outsourcing - Financials

►Appendix

►Participations & Residuals work volume metrics

►PARIS Impact Assessment Approach

►State of other studios

Participations PARIS Implementation & Residuals BPO – Greenlight deck 2

Executive Summary

• The Participations and Residuals systems are outdated, lack integrations with key enterprise systems and promote many manual, in-efficient and error prone processes increasing the risk of inaccurately paying the Participants and the Talents (Guilds)

• The total project cost to convert Participations to NBCU PARIS and outsource Residuals to Entertainment Partners is estimated at approximately $17,710,366 (Net new funds requested is $16,761,041)

o The PARIS project cost is $10,742,748 (includes the cost of the Inception phase) Net new funds requested is $10,358,106

o The Residuals BPO project cost is $6,967,618 (includes the cost of the Inception phase)Net new funds requested is $6,402,935

3

Participations PARIS Implementation & Residuals BPO – Greenlight deck

Problem Statement – Participations

● Very manual, time-consuming and inefficient processes are employed for Data Sourcing, Payout Calculations, Paper copying and filing.

● The OPUS system is not enabled to model participant contracts, calculate payouts and to directly generate participant statements. A mix of manual procedures and excel manipulations are employed to prepare Talent Statements.

● The volume and type of products and the complexity of talent deals are ever increasing which results in keeping up with the statement generation schedule very difficult. Additional headcounts are required to keep up with the ever growing volume of work. To deal with the work load, for the deals which are forecasted to not pay do not have statements created (i.e. statements are “bugged”)

● Upstream data sources lacking governance and consistency in usage providing data in a form that lacks the appropriate level of granularity and attributes. Lack of complete understanding of the information flowing into and filtered out of the data feeds into the department.

● Unable to focus on value-add activities (e.g. breakout projections, proactive buyout assessments, ‘What-if’ analysis, impact assessment & feedback to Business Affairs across title, market & media types).

4


Problem Statement – Residuals

● Very manual, inefficient, and error-prone processes employed for data sourcing, payout calculations, guild reporting, paper copying/filing.

● Majority of the data sourcing and systems feeding is done manually by the clerks which is error-prone. Data reconciliation processes are not rigorous and error prone due to human involvement.

● The volume and type of Products, the complexity of guild rules along with expansion of the reuse markets and the manual departmental procedures results in keeping up with the workload very difficult. This in turn results in un-recoupable overpayments, late fees and penalties on the department.

● The increasing workload and the lack of a system results in the work being handled by the staff through overtime and by outsourcing to third party providers. This has also resulted in temporary staff being used permanently.

● Unable to focus on value-add activities (e.g. projections, analysis for negotiations and ultimates).

● Recurring errors in payouts and the accompanying claims might strain relations with the Talents.

5


Part

icip

ati

ons • Difficult to manage the volume with time-consuming manual calculations

• Statement generation is manual and very cumbersome; OPUS does not produce “headsheets” or statements, only the data to support them

• 18-month limit on detailed monthly data in OPUS; difficult to calculate historical point-in-time data• Spends a significant amount of time responding to queries from other groups; lack any type of

estimation/modeling tools for calculating “what-if” scenarios• No system support for payout calculations for the digital markets, and complex talent deals

Audit

• Spends a significant amount of time researching data discrepancies, statement adjustments, etc.

• System “tricks”, dummy numbers, and manual adjustments (“one-sided entries”) pose risks during audits

• Lack of formal checks and balances

IT

• Residuals system is inflexible and has several system limitations (e.g. field sizes are limited to $99,999) as it was implemented in the 1960’s

• IT support for the Residuals mainframe system is very limited due to aging technology. The team has recently lost one-half of the IT support team –resources who had been supporting the department for several years. Additional turnover events (like retirement) will pose serious risks to IT operations and the obsolete technology makes it harder to find suitable replacements.

Resi

duals

• Difficult to manage the volume with time-consuming manual calculations• Changes to the guild agreements cannot be accommodated; system is not equipped to support

current guild agreements• Unable to capture pension or pension ceilings so often overpaying or underpaying• Cannot adjust tax rates as the change will be applied retroactively and recalculate all previous

statements/payments• Payments are manually tracked on a spreadsheet• Retrieve data from 12 different feeds/sources; input data manually from hard copy reports• Electronic reporting to the guilds and talents requires improvement• Data reconciliation of financial and trigger information is not being done due to lack of system

capabilities

Current Challenges and Issues by Area

6


7

Since we last convened …

Workstream Description Deliverables

PARIS Impact Assessment

Fit gap analysis of NBCU-PARIS with respect to the process consolidation and systems implementation needs of the Participations and the Residuals departments.

- High-level Functional Requirements- Functional Demonstration Scripts for PARIS Evaluation- Technical Questionnaire for PARIS Evaluation- Executive Report with Impact Assessment

Residual Outsourcing Assessment

Assessment of the various options available to outsource the Residuals business processes to a third party organization.

- Request for Information (RFI)- Requirements for Assessment- Request For Quote (RFQ)- Scoring Model- Executive Report with Preliminary Business Case and next steps

Residuals Outsourcing Due Diligence with Entertainment Partners

Detailed assessment of Entertainment Partners' organization, future state of SPE's organization, the proposal approach, timeline, effort and the pricing.

- Future State Process Flows - EP-Outsourcing Due Diligence Report

Business Cases Comparative Analysis

Business case comparison of the Systems implementation option (i.e. PARIS for Participations and Residuals) versus Outsourcing (i.e. Entertainment Partner's for BPO).

- Comparative analysis of Business Cases

Interfaces and MDM assessment

Detailed analysis of the data sourcing interfaces, including tracing back to the upstream master and reference data systems to document the functional needs for PARIS integration

- Interface Strategy Assessment Report- Functional Requirements for MDM / GPMS enhancements- Data Overlap Analysis Assessment between P&R

Data Structure & Quality Assessment

Detailed analysis of the current state of the data sourcing interfaces, issues with the integrity and the quality of data, and recommendations on

- Data Flow analysis document - Data Quality Assessment report - Data GAP Analysis report

An Assessment phase was funded with the primary objective of assessing the functional fit-gap of NBCU PARIS against SPE requirements and assessing the feasibility of Residuals BPO.


Assessment Phase Summary

• Timeline: August 2011 to August 2012 Phase Cost: $949,325

• Activities summary: Delivered selection of Software Platform and Operations Model using PARIS for Participations Delivered Business Case Assessment and subsequent Due Diligence for BPO with Entertainment

Partners Gathered High Level Requirements through Focus interviews and Workshops with key

stakeholders Finalized Overall Project Scope Developed High-level Project Budget, Schedule and Timeline, Resource Plan (including backfill

requirements) Developed Data Conversion & Migration Strategy and Plan Developed Data Sourcing & Interface Strategy and Plan Developed Greenlighting Material for full project funding

2011 2012

Jul – Sep Oct – Dec Jan – Mar Apr - Jun Jul - Sep

Data & Interface Assessment

Residuals Outsourcing Assessment

NBCU PARIS Impact Assessment

BPO Due Diligence BPO Business Case

PARIS Impact Assessment Report

8

Comparative Review

ExecutiveDebrief


The project has already seen paybacks in terms of recoupments for Participations and Residuals

in the Inception phase.

PARIS for Participations - Impact Assessment

Participations module of NBCU-PARIS has a good level of functional fit relative to SPE’s requirements.

● The Business Process automations delivered by PARIS far exceeds the current automation levels at SPE. ● PARIS capabilities and feature-set for Participations & Audit scored at over 86% and 81% respectively by SPE stakeholders.● PARIS provides a strong coverage for most of the requirements. ● The Participations, Data Staging and Audit modules are quite robust, flexible and more mature than the Residuals module.● PARIS architected on the latest Microsoft technologies including the .NET framework.

NBCU facilitated 4 sessions with SPE:• PARIS overview and orientation • Admin features (Data staging and Administration) demo • Residuals demo • Participations demo

The NBCU demonstrations of PARIS were based on scripted demo scenarios :• These scenarios were based on SPE’s high-level functional requirements.• The scenarios represented a selection of high- and medium priority processing

requirements.• Demos were attended by SPE stakeholders across Participations, Residuals, Input

Consolidation, Audit, Finance and IT groups.

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PARIS for Participations - Project Phases

• Impact assessment Requirements Functional fit Estimates

• Hands-on evaluation► Early design► Support model decision► Refined estimates

• Conversion planning► Approach and priorities► Resources and backfill► Controls and

Acceptance► Planning for Parallel

Ops.

• Impact Assessment• Hands-on Evaluation• Conversion planning

• Installation and Configuration• Development and Integration • System & Parallel Testing• Training and Change

management

• Participations Conversion• Parallel Operations• IT Support

• Installation and Configuration► Data loads (migration)► Lookups/mappings► Templates and

hierarchies• Development and Integration

► Interfaces► Reports

• Testing► Functional tests► Parallel tests

• Training and Change management

► Org and process design

• Participations conversion• Parallel operations

► Data refreshes► Porting converted titles

• IT support► Hypercare► Systems maintenance► User support

Planning Implementation Conversion

10

2 Months 12 Months Ongoing


PARIS for Participations - Project Timeline

Key Estimation Drivers and Project Considerations

● The PARIS Configuration within the Implementation phase is the key design activity to prepare the system for Participations usage.

● The detail- and research-oriented nature of Conversion makes it the most intensive phase in time and effort. Issues unearthed demand strong decision making skills and Standard Exception Handling procedures need to be instituted.

● Resource planning and Department alignment is critical to the success of the project. Determining backfill, ratio of SPE-to-contractor resources and regular training will help mitigate the risk of PARIS knowledge being confined to contractors.

● There exists a steep learning curve to PARIS, and the departmental functions will become more analytical and less data entry / processing type.

Program management/planning

Hands-on evaluation

Implementation

Hypercare

Participations Conversion

Parallel operations

IT Support

Years

Quarters

1 2 3 4 5

1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4

Go Live

Implementation model decision

Decommission legacy

systems

Planning Conversion

Conversion Complete

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PARIS for Participations - Project Costs & Benefits Summary

12

Project Costs (includes Inception phase)

Software $3,500,000Hardware/Peripherals $411,000Internal Labor $199,981External Labor $6,627,322Miscellaneous (i.e. Travel) $4,445Total $10,742,748

Ongoing Costs (Twelve-year Summary)

Incremental support labor $851,877Incremental maintenance $739,800Total $1,591,677

Project Benefits (Twelve-year Summary)

Cost Avoidance $12,759,929Risk Mitigation $40,000,000Total $52,759,929

Twelve-year Summary Total Costs (One-time + Incremental Ongoing) $12,334,425Total Benefits $52,759,929Internal Rate of Return 42.02%Net Present Value $15,034,230Payback Periods (in months) 30.47

Future Funding Needed FY14 $6,117,030FY15 $1,770,339FY16 $1,100,740FY17 $1,095,998

FY18 $273,999 $10,358,106

Note:1. Twelve year summary includes the costs of Inception phase2. CBA has been calculated over a timeline starting FY12


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PARIS for Participations - Project Benefits

Category $ Description

Cost Reduction / Avoidance

$230,535 Avoiding SCA mainframes hosting and support cost $1,393,273 (average)

Avoiding the need to increase the Participations staff to support the departmental functions

Risk Mitigation $5,000,000 Mitigating the risk of overpayments


Entertainment Partners selected as the leading vendor from a Business Process Outsourcing RFQ concluded in 2012.

A detailed due diligence assessment of the EP proposal was conducted. The assessment included review of - Organization & Transition approach,

Conversion approach, IT Systems, Timeline and Level of Effort. The goal of the due diligence was to craft the future state organization for SPE and EP,

create the BPO Business Case and confirm the Pricing.

● EP proposes to completely take over certain functions, including product and cast setup, residuals calculations and payment processing.● SPE would retain ownership over interpreting agreements, determining triggers, supporting audits, forecasting and reporting,● Improved Data Staging is the key to realizing the benefits. The option being considered is the use of EP’s proposed new feeder system (go-live expected in July 2013).● There is a potential to offshore 2 FTEs in the retained organization.

Draft for discussion14

EP for Residuals Outsourcing - Assessment

• Finalize Contracts, SLAs, and KPIs

• Define Processes & Controls• Perform Data Reconciliation• Build Data Enrichment

Platform• Build Interfaces for triggers &

payments• Design Organization and

Change Management• Conduct recruitment for

Backfill and retained Organization

• Build the SPE system sunset roadmap

• Implement Organization, Processes & Infrastructure

• Import historic data and recreate balances between SPE & EP

• Business-as-usual interaction between SPE and EP

• Title/cast setups for 1,442 features and 52,714(1) episodes

• Revenue and air date history import

• Reconciliation of historic SPE payments with EP system results

• Document collection for new setups

• Review/approval of setups, triggers and payments

• Audit & forecast support • New acquisitions processing• Residual payment processing• Infrastructure maintenance

Draft for discussion

Implementation Conversion Operations

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EP for Residuals Outsourcing - Project Phases

Project (24 Months)

Note:1. Size of the library as of August 2012

Months

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24

Signed Contract with

EP

Process Transition

Data Staging / Enrichment

Contract Negotiations

Planning and Administration

EP Client

On-Boardin

g

IT Design & Development Complete

Data Enrichment / Staging Complete

Integration Testing

Complete

Data Conversion

Training

Project Closure

Initial Cutover

Transition Complete

Data Conversion Complete

• Finalize KPI/SLA• Review and finalize

MSA• Finalize new Air

Date vendor

• Finalize transition plan

• Confirm transition team

• Obtain resources

• Confirm Data Enrichment requirements• Configure Data Enrichment requirements• Develop Data Enrichment rules• Test enrichment rules• Deploy enrichment rules to production

IT Design & Development

• Build interface for revenue /run data

• GL interface from EP• Reports development • Reconciliation reports

• Vendor introductions• Account setups• Finalize EP client

profile• User access rights

(hosted environment, VPO)

Integration Testing

• Revenue triggers

• Run triggers• GL feed to SAP

Cutover Plan

• Hosted environment• VPO• Conduct future state process training• EP work shadow and knowledge transfer

• Develop and approve cutover approach (business and IT)

• Decommission transition backfill

• Project completion planning

• Implement retained organization

• Archive historic data• Decommission

conversion backfill• Decommission RP00

• Confirm final process design

• Future process documentation & desktop procedures

Communication

Basic Cable

Game Shows

Pay Cable / Video

Network / Soaps

Fox

Syndications

Other Non Networks

Foreign

Employee

Masters

Features

• Review and finalize communication requirements• Draft communication to internal organization• Draft communication to external organizations (talent, guilds, etc.)

Organizational Transition

• Roles & responsibilities• Identify skillsets for

retained organization• Identify key process

owners• Coordination with HR

(compensation, termination, recruitment)

• Interview potential hires• Identify resource

transition plan and timeline

Data Reconciliation

EP for Residuals Outsourcing - Project Timeline

17

EP for Residuals Outsourcing - Project Costs & Benefits Summary

Project Costs (includes Inception phase)

Hardware/Peripherals $68,000Internal Labor $308,813External Labor $6,048,995Miscellaneous (i.e. Travel) $4,445Duplicate Payroll Tax $306,436Severance and Retention Payouts $230,929Total $6,967,618

Ongoing Costs (Twelve-year Summary)

Outside Services (i.e. EP Fees) $6,281,811Incremental support labor $222,433Incremental maintenance $122,400Total $6,626,644

Project Benefits (Twelve-year Summary)

Costs Reduced $27,581,168Costs Avoided $403,438FTE Savings $7,582,733Total $35,567,339

Twelve-year Summary Total Costs (One-time + Incremental Ongoing) $13,594,262Total Benefits $35,567,339Internal Rate of Return 44.98%Net Present Value $8,581,677

Payback Periods (in months) 30.83

Future Funding Needed FY14 $2,263,021 FY15 $3,239,638FY16 $861,276FY17 $39,000 $6,402,935

Note:1. Twelve year summary includes the costs of Inception phase2. CBA has been calculated over a timeline starting FY12


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EP for Residuals Outsourcing – Project Benefits

Category $ Description

Cost Reduction / Avoidance

$573,427 Reduction in late fees / handling fees$909,000 Reduction in over reported foreign remittance taxes

$1,138,838 Reduction in overpayments$415,240 Recoupable overpayments

$42,296 Savings in print material and labor$23,695 Avoiding DGA employee contributions$57,634 Avoiding SCA mainframes hosting and support cost$92,000 Eliminating check processing and reporting Costs

Annual FTE Savings

$571,880Incremental reduction in the Residuals department overhead due to reduction in the need for labor

$280,686Incremental reduction in the IT department overhead due to reduction in the need for labor



Headcount request

• One Director role to Television IT team to replace Mark Quinto

• One Director/Manager role to Corporate IT team to backfill Rajeev Nair

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Questions ?


21

State of other Studios

Studio Participations Environment Residuals EnvironmentWarner Brothers

•Currently, a mainframes based system is used for Revenue and Cash register with a front end to edit the revenue section and to generate video statements. The actual statements are currently generated manually using Excel

•They purchased the Participations module of the PARIS solution

•The PARIS implementation is currently underway The projected go live date for the implementation phase is mid-June 2013, which will be followed by the Data conversion phase

•Custom in-house solution known as AIRS is being used and they plan to stay on this platform

NBC Universal

•Comprehensive in-house solution called PARIS (Participations And Residuals Information System) to generate participant statement and to calculate Residuals payout

•The Residuals module within PARIS is leveraged to calculate payouts

Paramount •Participations and Residuals payments were being processed by mainframes based system.

•They evaluated alternatives and decided to purchase the PARIS system from NBCU. They are about two months away from completing the conversion to PARIS

•They are currently in the planning phase for the implementation of the Residuals module

Disney •Disney internally developed BRUCE, a custom client-server application for generating Participations statements The application relies heavily on SAP as single source of data

•Disney tried to rally “Residuals as a service” effort couple of years ago, but it did not take root.

•They are currently in discussion with Entertainment Partners and conducting a feasibility study

Fox •Fox has a homegrown solution coupled with manual processes

•Fox has homegrown solution coupled with manual processes


PARIS Impact Assessment Approach

• The PARIS Impact Assessment was identified as an initial planning tool as part of the SPE Participations and Residuals Program Alignment Session in July 2011

• As part of the assessment, high-level requirements were gathered for Participations and Residuals processing and these requirements were prioritized to create:

► Scripted scenarios for a PARIS demo► A technical questionnaire covering system configuration and maintenance

inputs

• Three PARIS demo sessions spanning 8 hours were held to: ► Assess key capabilities and functional fit► Gather high-level implementation inputs

• Additional inputs on implementation and conversion were collected from other studios’ experiences with PARIS and other solutions

• These inputs were distilled to: – Create a work plan and estimates with the implementation approach and timeline– Document risks and considerations around deploying and transitioning operations to

PARIS


PARIS manages the range and complexity of scenarios and calculations employed by Participations & Residuals

Area Observations

►Head-sheet, statement and backup schedule generation

►Powerful expression builder for Participations calculations

►Extensive Residuals rules library

►Can handle receipts/expenses from multiple sources

►Configurable GL account definitions for both departments

►Adjustments applicable to Participations

►By-season and multi-title reporting for Participations

►Wizard based non-financials setup to ease data entry and edits

►Upload capability on financial setup to eliminate entry (including adjustments)

►Upload capability on cast setups to minimize data entry

►Wide range of features entails steep learning curve

►Interface reconciliation, threshold and variance management tools

►Strong audit trails against record changes

►No statement versioning

►Payout calculations not linked to payment records

Flexibility

Usability

Controls

Fit

Total Requirements 412

# of Requirements covered

311

Administration Participations

Score % 81% 86%

Average 83%

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24

Residuals departmental work metrics


10 Years Ago

5 Years Ago

Last Year

0200400600800

1,0001,2001,4001,6001,800

10 Years Ago

5 Years Ago

Last Year

0

500

1,000

1,500

2,000

2,500

10 Years Ago

5 Years Ago

Last Year

0

1,000

2,000

3,000

4,000

5,000

6,000

Features with Quarterly Reporting

Net New TV Episodes requiring

setup

Titles with New Media Payments

(Quarterly Payments)

10 Years Ago 5 Years Ago Last Year YOY

increaseAnnual Residual Payments $150.4 $197.9 $237.7

5.80%Average increase over 5 years 31.58% 20.11% Number of Features Requiring Quarterly Reporting

945 1,206 1,5386.28%

Average increase over 5 years 27.62% 27.53% Number of New Episodes of TV Series Requiring Set-up

1,165 1,602 2,1408.37%

Average increase over 5 years 37.51% 33.58% Number of Titles with Quarterly New Media Payments

0 0 4,867

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Participations departmental work metrics


Number of statements issued for 12 months endingLine of Business Oct, 2009 Oct, 2010 Oct, 2011 Oct, 2012Television 9,016 9,388 10,458 10,001Theatrical 2,929 4,712 3,385 2,985Video 12,458 13,305 25,064 33,278Merchandising 5 12 10 26Revolution 586 557 551 552Soundtrack 92 85 92 81SPC 513 508 504 536Total statements => 25,599 28,567 40,064 47,459

YOY increase 11.59% 40.25% 18.46%

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