0€¦ · Web view0. Overview The Marketing function of Sony Pictures Entertainment (SPE) is divided between the Motion Picture and the Home Entertainment divisions. The purpose of

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 Pictures Division. The process can be broken up into the following sub processes.

1. Budgeting2. Vendor Master Maintenance3. Basics Purchase 4. Media Buy5. Accruals 6. 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.

Sony Pictures Entertainment Private & Confidential

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1. Budgeting

Process owner interviewed: Joni Isbell, SVP WW Marketing & Distribution FinanceProcess owner sign-off by:Prepared by: Neil Francis, E&Y / Vanessa Mora, SCA Internal AuditReviewed by: Maria OrtegaReviewed 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):Accounts Assertion

1. Marketing Costs Measurement, Occurrence, Completeness2. Accrual for marketing costs Completeness, Existence, Valuation3. Accounts payable Completeness, Existence, Valuation

Major Classes of Transactions Embedded: Greenlight BudgetDivision BudgetPre-Release BudgetSpent/Committed ReportingOverage Memo (Pre-Release Marketing Budget Increase)Holdover Memo (Post-Release Marketing Budget Increase)

Key Sub-Processes or Transformations: Greenlight BudgetDivision BudgetPre-Release BudgetSpent/Committed ReportingOverage MemoHoldover 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.


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The following table lists the key personnel involved with the processes documented:Department Position Title Position / Title

AbbreviationEmployee 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 InterfaceSpent/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 Fin approve 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.


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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 WWMDF and 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


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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 & Distrib to 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 & Distrib to 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.


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2. New Vendors

Process owner interviewed: Joni Isbell, SVP Worldwide Marketing & Distribution Finance

Process owner sign-off by:Prepared by: Neil Francis, E&Y / Vanessa Mora, SCA Internal AuditReviewed by: Maria OrtegaReviewed 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):Account Assertion

1. Accounts payable Completeness, Existence, Valuation

Major Classes of Transactions Embedded: New Vendor Request FormVendor Review and ApprovalVendor Maintenance Request SCS New Vendor Update

Key Sub-Processes or Transformations: New Vendor Request FormVendor Review and ApprovalVendor Maintenance Request SCS New Vendor Update

BackgroundA 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.



Worldwide Marketing Finance

Executive Vice President Worldwide Marketing and Distribution Finance


Kathleen Shane


Senior Vice President Worldwide Marketing & Distribution Finance

SVP WWMDF Joni Isbell

Domestic Marketing Finance

Director Domestic Marketing Finance

Dir Seda Papaian


Director Dir Alma Dahlsrud


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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 InterfaceSpent 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

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)


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Refer to Corporate Accounts Payable – Vendor Maintenance SOX 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 WWMDF or 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 Processing SOX 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 Directors review 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.

A non-A/P vendor can be added to SCS without being added to SAP; however a payment will never be paid. These non-A/P vendors are used for describing various studio, travel, and other internal sources that aren’t paid directly to vendors.


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3. Basics Purchase

Process owner(s) interviewed:

Joni Isbell (SVP Worldwide Marketing & Distribution Finance)

Process owner sign-off by:Prepared by: Neil Francis/ Vanessa MoraReviewed by: Maria OrtegaReviewed by: Kathleen Shane & Joni Isbell

Purpose: To gain an understanding of the process for incurring expenditures on basics.

Financial Objectives/Significant Accounts (Assertions):

Account Assertion1. Marketing costs Measurement, Occurrence, Completeness2. Accrual for marketing costs Completeness, Existence, Valuation3. Accounts payable Completeness, Existence, Valuation

Major Classes of Transactions Embedded: Contract NegotiationsPurchase OrdersInvoices and Payment RequestsPayment Accrual

Key Sub-Processes or Transformations: Contract NegotiationsPurchase OrdersInvoices and Payment RequestsPayment Accrual

Background

“Basics” consists of the purchase of creative services, print and AV production, research, publicity, promotions, exhibitor relations, website production, freight and miscellaneous expenses. Expenditures are tracked and authorized through the issuance of purchase orders. The Domestic Marketing Finance Department (DMF) has a system called the Spent and Committed System (SCS) which is used to raise the purchase orders and track payments. The system has been in use for about 20 years.


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Executive Vice President Worldwide Marketing & Distribution Finance


Kathleen Shane


Senior Vice President Marketing & Distribution Finance



Director Marketing Finance Dir Seda Papaian


Director Marketing Finance Dir Alma Dahlsrud


Clerk Marketing Finance Clerk various

Creative Production Senior Vice President Print Advertising

SVP Print Ad Mark Walker

Procurement Vice President Procurement VP Procurement Arun Casuba

The following systems are used:System Name Description Process InterfaceSpent and Committed System (SCS)

The system used to track commitments and marketing spend against those commitments

SAP The system is used for maintaining the general ledger and accounts

General Ledger Ariba

Ariba The system is used for creating new vendors

Accounts Payable SAP

Contract Negotiations

The Procurement Department enters into contracts for creative production purchases i.e. actual production of marketing materials. The contract negotiations are handled by the SVP Creative Prod and the VP Procurement. Once the terms of the agreement and the rates are finalized, a copy of the agreement is sent to the Legal Department for review. Two copies of the agreement are then sent to the vendor for signing. The copies are then signed off as determined (Procurement and Corporate Policy).

For creative purchases (mostly for art and design), signed contracts may not exist; instead, an approved vendor letter is retained on file.

Purchase Orders

All transactions over $1,000 other than freight, EPK distribution and other audio/visual transfers are initiated by the creation of a Purchase Order (‘PO’) in SCS. There are two types of POs: Vendor POs and Book POs. The Vendor POs are for one specific purchase while the Book POs are for multiple purchases or an event/activity that takes place over a period of time. Book POs are used for items such as photo shoots, junkets, premieres, etc. The Book POs are created for the activity budget amount and all expenses


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incurred for that activity are booked against the PO.

A purchase order can be created only against a budget and for a vendor already present in SCS. If a budget is not present or the vendor has not yet been approved in SCS, the purchase order cannot be raised (R351, C34). The SCS has approval limits defined within the system. The purchase order is routed to the required authority for approval electronically through the system. The Marketing Department Vice Presidents and above are required to approve all POs according to defined Marketing chart of authority. (R351, C604). Based on authorization limits, the POs are routed for final approval to either the EVP WWM & Distrib Fin, SVP WWMDF, or Directors for approval. The authorized approver reviews the PO for reasonableness as well as accuracy (R351, C927). The name of the person approving the purchase order is recorded by the system. The PO remains in draft form until all required approvals have been entered into and captured by the system. No invoices can be booked against an unapproved PO (R351, C840). The POs are serially numbered by SCS (R351, R172, C1370, C178). Once the PO is approved, a copy is sent by email to the vendor, if applicable, depending on the vendor’s request.

SPE has a long-term contract with Deluxe for the production of trailer prints valid through April 30, 2015. The prices are subject to revision based on certain clauses in the contract. The price revisions generally take place on an annual basis. Deluxe sends a letter to the Print Operations Department with the pricing changes whenever a revision takes place. The prices are maintained in a price master file in SCS. The prices are picked up from the master file when POs are raised. The SVP Print Operations enters the revised prices into the price master file. Only the SVP Print Operations has access to change prices in the master file (R372, C281). The VP Print Operations reviews the changes made in the price master to verify accuracy.

Invoices and Payment Requests

The PO initiator receives invoices. After receiving an invoice, the initiator verifies that the material or service was provided and the invoice is within the PO amount before approving it. Book POs are verified manually by ensuring invoice line items are within Budget line item limits in SCS. Next, the Department Vice President (generally) or above reviews and approves the invoice by signing it (R82, R351, C665). Then, the invoice is sent to WWMDF along with any supporting documents. A DMF Clerk checks that the invoice is approved by the Department within the SC management levels (R82, C471). The Clerk enters the PO number into SCS to pull up the charge codes of the PO on the screen. Then, he inputs the date, invoice number and amount of the invoice against the PO. One PO may be made for several items. In that case, the amount for each item is mentioned in the PO. SCS will not allow an invoice to be processed for an amount in excess of the amount specified for that item in the PO. If the amount of the invoice is less than $1,000, the Clerk can input the invoice directly in SCS without pulling up a PO, depending on the type of charge. The entries in SCS are transferred over to the accounts in SAP through an electronic data transfer. If the data transfer does not take place correctly, an Accounts Payable document number is not assigned. There is no manual intervention in the data transfer. The SCS checks for duplicate invoices (R449, C255). SCS verifies the proper account codes on the PO.

After that, the DMF Clerk generates a payment request from SCS for the invoice that has been booked in the system. The status of the payment request in the system at this stage is ‘Blocked’. Once a payment request has been marked as ‘Blocked’ in the system, the same request cannot be processed again. If the request needs to be re-processed, it must first be reversed to clear the ‘Blocked’ status. After the payment request is entered in SCS, the invoice and supporting documents are attached to the payment request and given to the SVP WWM & Distrib Fin, SVP WWMDF or Directors to check that the invoice and PO have been correctly authorized and the payment request has been accurately generated before approving it (R82, R172, R372, R449, C1496). The payment requests must be approved by at least two WWMF


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approvers. See Corporate Accounts Payable testing.

Once Accounts Payable processes the payment request in SAP, a data feed is sent back to SCS which changes the status of the payment request from ‘Blocked’ to ‘Released’. After payment, the status of the payment request is changed to ‘Paid’; it cannot be paid again (R449, R572, C1361).

PaymentRefer to Narrative_Accounts_Payable for the payment process.

AccrualRefer to Narrative_MP_Marketing_Accrual for the accrual process.


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4. Media Buy

Process owner interviewed: Joni Isbell (SVP Worldwide Marketing & Distribution Finance)Process owner sign-off by:Prepared by: Neil Francis, E&Y / Vanessa Mora, SCA Internal AuditReviewed by: Maria OrtegaReviewed by: Kathleen Shane & Joni Isbell

Purpose:To identify and record the significant documents, systems and procedures used by the Marketing Department in the Media Buy process.


1. Marketing costs Measurement, Occurrence, Completeness2. Accrual for marketing costs Completeness, Existence, Valuation3. Accounts payable Completeness, Existence, Valuation

Major Classes of Transactions Embedded: Media RatesBudgetingMedia PlanSCS ReportingInvoices and Payments

Key Sub-Processes or Transformations: A. Media RatesB. BudgetingC. Media PlanD. SCS ReportingE. Invoices and Payments

Background

Approximately 75% of domestic theatrical marketing spending is in media buys, consisting primarily of network television, spot television, cable television, digital media, newspaper and radio. Approximately 99% of media buys are conducted through Universal McCann (UM), SPE’s Media buyer.


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Worldwide Marketing & Distribution

Chairman Worldwide Marketing & Distribution CTMPG

Chair WWM & Distrib

Jeff Blake

Marketing President Worldwide Marketing Pres Mktg Marc WeinstockMarketing Executive Vice President,

MediaEVP Media Stefanie Napoli

Marketing Senior Vice President, Media SVP Media Jennifer GrahamMarketing Senior Vice President,

Worldwide Digital MediaSVP Digital Media Elias Plishner

Marketing Senior Vice President, Media & Promotions

SVP Media & Promo Anne Yoo

Marketing Vice President, Media VP Media Marisa RevelesMarketing Director, Media Dir Media Jennifer GoyetteWorldwide Marketing Finance

Executive Vice Worldwide Marketing and Distribution Finance


Kathleen Shane


Senior Vice President Domestic Marketing & Distribution Finance


The following systems are used:System Name Description Process InterfaceSpent/Committed System (SCS)

The systems primary purpose is to create purchase orders and to track advertising and promotion costs against budgets.

Process Narrative:

A. Media Rates

The Marketing Department uses three types of pricing strategies: Upfront pricing (primarily networks and cable and digital marketing) – Schedules of specific

units by vendor are used to achieve an overall, guaranteed cost-per-thousand impressions (CPM). If the guarantee is not achieved, make goods or credits are received in the form of Audience Deficiency Units (ADUs) throughout the year. For Digital Marketing, the pricing is effective, as long as the minimum annual spend is achieved. All contracts have extension clauses for an extra 90 days (should movie titles change dates).

Pre-Book (local market) – A base of units are booked 1-2 quarters in advance of upcoming releases

Scatter Market – Additional units are purchased on an as needed basis. Rates and negotiations are subject to current market conditions.

Upfront pricing:

In April of each year, the Marketing Department and McCann work to allocate Divisional budgets for


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Media by vendor for the next broadcast year (October-September). Preliminary allocations are approved in an April meeting, attended by Chair WWM & Distrib, President Marketing, EVP WWM & Distrib Fin, and EVP Media. Once these allocations are approved, UM has authorization to enter the market and begin negotiations with vendors. There is no written approval issued for these preliminary allocations. The preliminary allocations are subject to change based on market conditions and negotiations. Final approval of specific deals and dollar commitments rests with SVP Media. Once the rates and volume of spots are finalized, they are documented via email confirmation to the EVP Media. UM sends documentation to Sony which details quarterly impression guarantees and volume of spots agreed upon, by vendor. Letters and contracts are then exchanged between UM and vendors. Specific units change throughout the year, but overall guarantees are maintained. Changes to these packages are approved by Media Department through individual schedules for each product and quarterly guideline tracking documents. All schedules and guideline documentation is prepared and sent by UM.

For Digital marketing, once the annual budgets are determined (including the approximate digital marketing spend), UM will start with media publishers, and eventually will develop contracts to determine specifics of the annual deal.

Scatter Market:

The volume of spots and the prices are negotiated by UM and communicated to the Company as a part of the media plan for each individual campaign. The EVP Media, SVPs Media and President Marketing approve the media plans.

B. Budgeting

At the beginning of the financial year (April), the Divisional budget is released which would include the marketing budget for each film to be released during the year. The Chair WWM & Distrib and Pres Mktg approves the media budget (Pre-Open and Support Media) for each title in the Divisional Budget. For more details on the budgeting and greenlight process refer to the “Budgeting” narrative.

If a budget increase is deemed necessary, prior to the film’s opening, Worldwide Marketing Finance (WWMF) prepares an “Overage” memo that is sent from Chair WWM CTMPG to the CEO & Chairman for written approval. If a budget increase comes after a film has opened, the same procedure follows. In this case, a “Holdover” memo is prepared and sent from the Chair WWM & Distrib to the Chairman & CEO. Budget bottom lines cannot be adjusted without the Chairman & CEO’s approval. Generally, these post-opening increases occur when domestic box office exceeds expectations/target numbers.

C. Media Plan

The Media Department in conjunction with Universal McCann, the primary media buying agency for SPE, develops the media plan. The Marketing Department has weekly meetings with Sony Media and Universal McCann at which unapproved media plans are reviewed. The Pres Mktg, Chair WWM & Distrib, EVP Media, SVPs Media and EVP WWM & Distrib Fin attend these meetings. Complete planning packages, which include the volume of spots and the prices, are delivered weekly to Sony Executives. The Media Plan is used as a point of reference during weekly discussion either in a marketing meeting or executive meeting and will be used as a basis for updating marketing budgets. Budget changes are communicated through the Weekly Spent and Committed Report. (R93, R95, C949). Additionally, the Dir Media emails approved budgets weekly to Universal McCann, the Marketing Department, and Worldwide Marketing Finance. On a weekly basis, McCann issues individual budgets


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and plans, which detail any changes from the previous week. Additionally, a final plan is issued once the flight has ended for each product. McCann also issues Post Report summaries which detail ratings delivery vs. planned estimates by film.

The Marketing Department employs Merlyn Monitoring Service, for select monitoring in which a daily report is issued to UM Buying groups. The reports summarize planned activity of TV spots vs. what aired the previous day. The McCann buying groups then negotiate “make-goods” or refunds based on any discrepancies. Additionally, the SCA Internal Audit Department does a review of Universal McCann annually which would include reviewing supporting documentation for invoices (R93, R95, C545).

For digital marketing, once planning begins for each movie campaign, the upfront rates are used in plans (when possible), and scatter rates are used when no deal is in place with the publisher. All rates are confirmed by Sony when plans are approved and executed. Finally, a Budget Authorization document (BA) is sent to Sony to confirm the final spending per publisher, on a media plan.

Upon completion of a Digital marketing Campaign, a post report is sent to Sony showing a report of the delivery of the contracted media impressions. The report is generated through a 3rd party audit service to confirm the actual numbers. Once the report shows all of the media delivered in full, Sony and UM begin the payment process for publishers.

D. SCS Reporting

Domestic Marketing Finance enters the budget into SCS in the “Divisional 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 WWMDF and Director reviews the data entered into SCS to ensure the input has taken place correctly.

Purchase orders are raised in SCS for each item in the Media Plan for each week. A purchase order can be created only against a budget and for a vendor already present in SCS. If a budget is not present or the vendor has not yet been approved in SCS, the purchase order cannot be raised. The SCS has approval limits defined within the system. The purchase order is routed to the required authority for approval electronically through the system. The approval structure is in accordance with the Chart of Financial Authority (COFA). The Marketing Department Vice President and above is required to approve all POs according to COFA.

E. Invoices and Payments

The Company has an arrangement with Universal McCann under which Universal McCann makes payments to media vendors directly from the Company’s bank accounts. Under the arrangement, Universal McCann sends Domestic Marketing Finance a Funding Request to Marketing and a Cash Disbursement Report to Treasury. Then, Domestic Marketing Finance has 7 (seven) days to fund the account so that McCann can make payments. The Funding Request file is a summary of the payments to be made by media for each title. The Cash Disbursement Report contains the details of the payments to be made by media. The Clerks enter the details of the Funding Request against the purchase orders in the SCS to generate payment requests. The SCS will not allow payment requests to be generated in excess of the purchase order amount. Next, the SVP WWMDF and Director review the payment request, matches it against the Funding Request, which was approved by EVP Media. The payment request is then approved within the Finance COFA levels and forwarded to Accounts Payable for processing. (R95, R93, R351, C1496). After the payment request has been sent to Accounts Payable, the DMF Director e-mails a memo to Corporate, Treasury and Accounts Payable confirming the release of the payment request to Accounts Payable.


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5. Accruals


Kathryn Nielsen (VP), William Starkey (Director Motion Picture Group)

Process owner sign-off by:Prepared by: Neil FrancisReviewed by: Maria OrtegaReviewed by: Kathleen Shane & Joni Isbell

Purpose: To gain an understanding of the process for the accounting of accruals for marketing expenditure for the Motion Pictures division.


1. Marketing costs Measurement, Occurrence, Completeness2. Accrual for marketing costs Completeness, Existence, Valuation

Major Classes of Transactions Embedded: Calculation of Accrual Amount

Key Sub-Processes or Transformations: Calculation of Accrual Amount

Background

The Motion Pictures Finance team handles the accruals for marketing expenditures. The Motion Pictures Marketing Finance team provides estimates of the expenditures and the Motion Pictures Finance team handles the calculation and booking of the accrual.



Motion Pictures Marketing Finance

Director, Worldwide Marketing Finance

Dir WWM Fin John McAleer

Motion Pictures Finance

Executive Director, Motion Picture

Ex Dir MPFG Rosa Ortiz

The following systems are used:System Name Description Process InterfaceSpent and Committed System (SCS)

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

SAP The system is used for maintaining the general ledger and accounts


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Calculation of Accrual Amount

The Worldwide Marketing Finance Director prepares a monthly statement in Excel of the amount incurred to date on marketing by film title. Then he prints a report from the SCS from inception to date of committed spends for each film release. The accrual estimate is documented in an Excel spreadsheet, called the “Monthly Incurred Marketing Report.” For films close to release date or released in the month of the accrual, the Dir WWM Fin reviews the latest Media Plan for anticipated commitments. The Media Plan anticipated commitments, committed Basics, and any other known commitments are used to develop the estimated accrual for the month.

Next, the “Monthly Incurred Marketing Report” is forwarded to the Motion Pictures Finance Group. The MPFG downloads total expense paid to date for each of the films from the general ledger in SAP. The expense incurred to date for each title is plotted against the expense paid to date on an Excel sheet and the difference is booked as an accrual. Then, the Ex Director MPFG reviews the calculations and signs off on the calculation before it is booked in SAP. The calculation for the accrual is also forwarded to the analysts and managers in the Finance Department who review the accrual for their respective titles for reasonableness. These controls are tested in Motion Pictures Financial Statement Close Process.

The MPFG manually reverses the accrual at the beginning of the following month and rebooks it at the end of the month. These controls are tested in Motion Pictures Financial Statement Close Process.


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6. Film Prints


Rosemarie Ortiz (Vice President Print Operations), Joni Isbell (VP Worldwide Marketing & Distribution Finance)

Process owner sign-off by:Prepared by: Drew Whalen / Maria OrtegaReviewed by:Reviewed by: Kathleen Shane & Joni Isbell

Purpose: To gain an understanding of the process for incurring and recording expenses for film prints.

Financial Objectives/Significant Accounts (Assertions):

Sr No Account Assertion1. Marketing costs Measurement, Occurrence, Completeness2. Accrual for marketing costs Completeness, Existence, Valuation3. Accounts payable Completeness, Existence, Valuation

Major Classes of Transactions Embedded: Purchase OrdersInvoices and Payment RequestsCapitalization of Revenues

Background

Sony Pictures Entertainment (SPE) primarily has one vendor, Deluxe Laboratories Inc. (Deluxe) for the manufacture of prints (all types: i.e. digital, 35mm, satellite). Currently the U.S. and Canada prints are made at Deluxe, Hollywood. The purchase of prints is tracked and authorized through the issuance of purchase orders. Domestic Marketing Finance has a system called the Spent and Committed System (SCS), which is used to raise purchase orders and track payments. All prints are purchased by Columbia Pictures Inc. or Screen Gems, and resold to SPR Domestic Releasing for the distribution to exhibitors (as described in SPR Domestic releasing process documentation). The budget for prints are developed and approved as part of each title’s Greenlight process. The pre-release memo (as described in 1. Budgeting section) provides the budgeted amount for purchase of prints for the title (the number rarely changes after the release; however the pre-release memo is subject to change until the day before the release). MP Finance calculates the print Ultimate based on this information. The cost is amortized over same period as the domestic theatrical revenue stream. Although inventory records are kept to account for the physical location of the print, there is no inventory value recorded after the theatrical release window. See MP – Ultimates & Amortization documentation for further details.

The physical print locations are tracked using an inventory management system called WPTS. SPE has an agreement with Deluxe Film Services (DFS) for the collection and distribution of prints within the USA and Canada. For satellite distribution, tests are being conducted with Microspace Communications and Technicolor for future delivery.


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Print Operations Vice President Print Operations VP Print Ops Rosemarie OrtizPrint Operations Senior Vice President SVP Print Ops Mike JonesDomestic Marketing Finance

Vice President Domestic Marketing & Distribution Finance


Motion Pictures Finance

Executive Director Exec Dir Rosa Ortiz

Production Company

Various e.g. Colombia Pictures Inc (CPI), Screen Gems, Revolution, etc.

The following systems are used:

System Name Description Process InterfaceSpent and Committed System (‘SCS’)

This system tracks commitments and purchases against those commitments

Marketing SAP

SAP This system is used for maintaining the general ledger and accounts

Various SCS, SPIRIT

QuatroPro Inventory management system used to track location of prints

Print location tracking

SPIRIT Transmits print requirements (bookings) to ETS

Domestic Releasing DFS, SAP

Purchase Orders

As described in 3. Purchase Orders section, a PO can only be created if an approved budget has been entered in SCS, or if the invoice is less than $1,000. An initial purchase order is created on behalf of the production company and is faxed to Deluxe for the number of prints needed for production.

A reverse PO is created at the same time as the original PO to charge the costs for the film prints from CPI to SPR Domestic Releasing. The original PO is referenced on reverse PO for tracking purposes.

Deluxe creates an invoice when the prints are completed. This purchase is then charged to the American Express ProCard. The invoices are approved by the VP Print Operations and sent to the DMF clerk. Each month an Amex statement is received to which the clerk matches the appropriate approved invoices. The matched statement is sent to the SVP Print Operations and the President WW Distrib for approval. The Director and SSVP WWMDF will then finally approve the statement. The statements are filed in DMF.

Shipment Reconciliation

SPIRITWORLD is used by the Print Department to further determine print requirements and electronically transmit (via real-time interface) these requirements (bookings) to DFS. Inventory is tracked and reconciled using WPTS. Shipping lists of bookings in a confirmed or booked status are


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electronically transmitted daily from SPIRITWORLD to DFS, SPR's third party warehouse, to allow the warehouse to schedule circuit pick-ups. Prints or digital keys will not be provided by DFS to an owner circuit if their account is on hold in SPIITWORLD until it has been released either in the system or, in the event of last minute releases, called into DFS by Financial Administration Account Coordinators.

Specific print numbers are assigned by DFS and included on print labels. Spirit does not track prints by assigned numbers nor does it track print locations—it only tracks the number of prints booked in SPIRITWORLD. Prints are scanned out of the DFS depots when they are released to the exhibitors and again when they are returned. The VP, Print Operations reviews DFS Reconciliation Worksheet that reconciles between what is shipped from DFS and SPIRITWORLD. Since the value of the prints is captured in the film ultimate and amortized over the same period as the domestic theatrical revenue stream, the reconciliation serves only to account for the physical location rather than the amount recorded in the ultimate model. .

Expense Capitalization

Expenses are capitalized as incurred and amortized as part of the MP Ultimate amortization process. For further detail, see the Ultimates/Amortization narrative.


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0€¦ · Web view0. Overview The Marketing function of Sony Pictures Entertainment (SPE) is divided between the Motion Picture and the Home Entertainment divisions. The purpose of

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