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Valuation Services Group

15~ Gaither Drive

Gordon V. Smith

Moomst~wn, NJ 08057
FAX 609-273-9710


March 14, 1994

Theodore E. Dinsmoor
General Counsel
Titan Sports, Inc.
Stamford, CT 06902
Dear Mr. Dinsmoor:.
At your request, we have analyzed the expert reports prepared for Mr. Janos, d/b/a "Jesse Ventura"
or "Jesse The Body Ventura" (Janos) by Weston Anson and Stephen Dennis and determined that the
videotape and merchandise royalty rates which they adopt and project for purposes of calculating
Venturas damages are not appropriate for application to group licensing arrangements for fictional

During the pedod 1985 through June of 1991, Mr. Janos appeared and performed in the wrestling
persona "Jesse Ventura" in professional wrestling exhibitions promoted by Titan, known as "events.
Mr. Janos was engaged in wrestling activity, or grappling, in the dng through March 1986.
Concurrently, Mr. Janos provided commentary for events that Titan recorded and transmitted via
broadcast and/or cablecast to television viewers. Dudng this pedod of time, Titan licensed Mr. Janos
wrestling persona "Jesse Ventura" for use on merchandise items such as dolls, games, trading cards
and T-shirts and paid Mr. Janos a royalty according to the terms and conditions of Titans 1985
Booking Agreement. Also, Mr. Janos performances in the wrestling persona of "Jesse Ventura" were
recorded on videotape and Titan licensed such performances as contained in its programs for home
video cassette distribution without payment of any additional compensation to Mr. Janos in the form
of a royalty.

Theodore E. Dinsmoor
General Counsel
Titan Sports, Inc.
March 14, 1994
Page 2

Part of Titans business is to videotape the live wrestling events which it promotes in vadous cities
across the country. Subsequently, Titan edits the events to create a television program and licenses
broadcast rights to these programs to syndicated television stations or pay-per-view cable television
operators. In addition, Titan has entered Into a contract with A&H Video Sales Representatives, Inc.,
d/b/a/Coliseum Video (Coliseum) to produce and market video cassettes for retail sale. Titan owns
the copyright for the events. Frequently, Titan uses the programs to create a video cassette for home
distribution. Titan and Coliseum select the programs for the video cassette and Coliseum reproduces
the video cassette, designs packaging and promotional material, packages and distributes the video
cassettes and collects and accounts for sales. After Titans expenses of producing the master tape
for the video cassettes and Coliseums expenses for reproduction, packaging, promotion, and
distribution are paid, Titan and Coliseum divide the resulting net revenue equally between them.

It is Titans current policy to pay 25 percent of the revenues it receives from this sale of video cassettes
into a "pool" which is divided among the participating wrestlers.

In addition, Titan licenses the name and likeness of certain wrestling characters for use on
merchandise items. The amounts received by wrestlers and other performers for merchandise
licensing vary according to the structure of the license agreement between Titan and the merchandiser
and the extent of a performers participation. Royalties received by Mr. Janos during the period in
question are shown below, stated as a percentage of Titans share of licensing income.


Classic Games Card Sedes

WWF T-Shirt
Micro League Match Disk
Micro Superstar Disk
Putnam 1987 Calendar



Theodore E. Dinsmoor
General Counsel
Titan Sports, Inc.
March 14, 1994
Page 3

Quantifvina RovalW Potential

In order to come to an opinion about reasonable compensation in the case of Mr. Janos and Titan,
it is necessary to understand the financial concepts that undedie such a transaction. A business
transaction involving the use of a fictional character, as in the case of the wrestling persona of Jesse
"The Body" Ventura, is basically the same as the rental of other types of property.

If we, as an example, own a building that we do not intend to occupy ourselves, we can realize income
from the ownership of that property in a number of ways. The two most common of these would be
to sell the property in a single transaction or rent the property to others, realizing the income over
future pedods of time rather than in a single lump sum.

If the decision is to rent the property, a number of factors enter into that decision:
The rent charged for similar buildings in the local market.
The market value of the real estate.
The credit-worthiness of the prospective tenants.
The cost of maintaining the building.
The income and property taxes associated with the property.
The cost of administering and collecting the rental contracts.
The cost of the mortgage payments, if any.

It is obvious that thera are both market considerations as well as financial ones in the decision about
an appropriate rent for the subject real estate. The rent charged for the use of the building depends

Theodore E. Dinsmoor
General Counsel
Titan Sports, Inc.
March 14, 1994
Page 4

on both the rental market and the financial circumstances of the owner. We must also remember that
the rental rates in evidence in the marketplace result from the financial decisions of other building
owners who have decided what rent is required to support their investment and expenses. For
example, as mortgage interest rates go up and down, property rents follow. As the market and taxes
change, so will rents. Not all of this happens instantaneously, of course, but over time, it is the
financial and investment realities that will drive rents, and what we observe in the market is the
evidence of that.

This "rental" transaction, when applied to intellectual property such as a patent, trademark, copyright,
the name and likeness of a person or performance rights, is typically called a license, and the rental
payments are called royalties. How does one come to an opinion about how much royalty to charge?

Royalties for the use of intellectual property are also ultimately driven by financial considerations.
When an intellectual property owner and prospective licensee negotiate, they are not simply free to
negotiate whatever comes to their minds. Each party has financial objectives and constraints.

As an example, the manufacturer of a t-shirt which carries the name and likeness of a celebrity or
fictional character must recoup the costs of manufacturing the shirt as well as receive a return on the
investment in assets necessary to do business. If the manufacturer pays a royalty to the celebrity, that
must be added to the other costs to determine the wholesale selling price. The retailer, in turn, must
add a mark-up to recover expenses and return on investment as well. If the resulting retail price will
be higher than the pdces for similar merchandise, then the t-shirts will not be sold or the retailer,

Theodore E. Dinsrnoor
General Counsel
Titan Sports, Inc.
March 14, 1994
Page 5

seeing that this will happen, wont buy the goods from the wholesaler or the wholesaler, seeing where
all this will end up, wont manufacture the goods or agree to the royalty in the first place. There are,
therefore, market constraints on what someone can charge for the use of intellectual property.

Just as with the building rental, it is useful to observe royalty rates from the marketplace, resulting from
arms-length negotiations by others. We must be careful, however, that the transactions we observe
are for fictional characters the same as, or similar to, our subject.

Individval~ and Grouos

One aspect of this case involving Mr. Janos represents an atypical situation with respect to licensing.
Most personal licensing involves individuals who have achieved their recognition by themselves and
are therefore licensing their individual name and likeness on a stand-alone basis.

Mr. Janos, however, performed as a fictional character that was part of a group, not unlike a member
of a professional sports team, or as one member of a radio, TV, movie, or theatrical production. To
be sure, there are those members of such groups who attain such recognition that they become a
valuable intellectual property by themselves, without any association with the group which may have
started the recognition process. Michael Jordan is instantly recognizable in a business suit or with a
golf club in his hand and does not need any visual reminders of professional basketball to achieve that
recognition. In the wrestling field, "Hulk" Hogan is recognizable in an advertisement on a California
beach without any reference to his exploits in the dng.


Theodore E. Dinsmoor
General Counsel
Titan Sports, Inc.
March 14, 1994
Page 6

Most performers or team members who appear on stage, in the ring, in the stadium, and on film, have
not achieved the individual recognition of a Michael Jordan or Hulk Hogan. There is, therefore, a
distinction between an individual identity, a fictional character, and an individual for whom the group
persona is predominant. The team, or group name and likeness, is worth more in the marketplace
than that of an individual, or, to express it differently, the individual playing a fictional character
achieves greater value as a part of the group to which the fictional character belongs.

As an example, there have been a number of famous show business =teams, such as Laurel and
Hardy, Abbott & Costeilo, and the "Three Stooges. Audiences expected to see these teams, as teams,
and the market value of their talents was highest when the whole team was involved. If the Three
Stooges received $5,000 for a personal appearance, it is unlikely that one of these gentlemen by
themselves could have received the same amount of money by appearing alone. Conversely, if there
had been "Five Stooges, it is unlikely that the appearance fee would have been proportionately
greater, since the market pdce would be set based on an appearance of the team. So in one case
the Three Stooges would divide the income three ways, while in the second, the Five Stooges would
have divided the same income trve ways.

Another "group" situation involves a specific performance in which a number of individuals have
participated. Examples would be a motion picture, a Broadway show, a television film, or a sports
event. The intellectual property in this case is the "performance, comprising the activities of all of the
individuals involved.


Theodore E. Dinsmoor
General Counsel
Titan Sports, Inc.
March 14, 1994
Page 7

Financial Considerations
in the previous section, we discussed the difference between royalties paid to individuals for the use
of their name and likeness in contrast to royalties that might be paid to individuals for their fictional
character performance as part of a group, or team. We can readily illustrate the financial impact of
using individually-based royalty rates to compensate those that perform as part of a group.

On Exhibit #1 we have shown a hypothetical division of royalty revenue between the performers
involved in the production of the Titan/Coliseum videotape "Wrestlemania I" in 1985. The performers
are listed and in the first column we have shown the amount paid to each performer for participation
in the original event. In column 2 is shown the proportionate amount of the royalty pool that would
have been paid to each individual. This adds up to 25 percent which is the total of the performers
royalty pool. It has been Titans recent policy to divide the royalty pool among the performers based
upon their individual compensation in the event. This is based on the assumption that the individuals
compensation is indicative of their relative importance and popularity. We have also shown the
percentage that Mr. Janos would have received as part of that pod.

During the period 1986 through June 1991, total revenues received by Titan for "Wrestlemania I" were
$625,749.35. We have assumed that a total of $156,500 (25 percent) would have been divided among
the performers as shown in column 3 of Exhibit #1, in accordance with Titans current policy. Had
Mr. Janos been compensated on the same basis, he would have received a royalty of $2,378. That
is also shown in that column.


Theodore E. Dinsmoor
General Counsel
Titan Sports, Inc.
Mamh 14, 1994
Page 8

If one were to assume, based upon royalty rates appropriate for individual performers, that Mr. Janos
should have received 5 percent of total revenues (Coliseum and Titan shares combined), we can easily
test the financial viability of such an arrangement. If Venturas royalty rate is adjusted to 5 percent,
the shares of the other performers should be adjusted accordingly and we have done that in column
4 of Exhibit #1. We then multiply those adjusted royalty rates by the total amount of combine~
Coliseum/Titan net revenues of $1,251,498.70. We can observe (as shown in column 5) that the total
royalty payable would be $4.2 million, which is more than three times the amount of total net revenue
available and more than six times the income received by Titan. Cleady, such royalty rates are
irrational and no one would ever agree to pay such a royalty, given the business realities involved.

Since most of the royalty ends up being paid to the highly compensated performers, we made a
modifying assumption that the maximum royalty that could be paid to any performer would be 10
percent. The results of that calculation are shown in columns 6 and 7 of Exhibit #1. The total royalty
paid out In this case would have amounted to $1.1 million, which is essentially equal to the total
revenue available to both Coliseum and Titan. This is also clearly beyond the realm of rationality since
it provides no income to either Coliseum or Titan who, in the aggregate, bore all of the risk for both
the initial performances and the investment required to ready the vldeocassettes for the market, and
provides no income to Titan, which owns the copyright for the performance films and is the only
agency which can deliver to the market this unique "package" of entertainment.

This cleady demonstrates the financial results of the completely irrational assumption that individual
performers that are part of a group should receive royalties commensurate with individuals who are
marketing their persona by itself.


Theodore E. Dlnsmoor
General Counsel
Titan Sports, Inc.
March 14, 1994
Page 9

Comparable Royalty Situations/Fair Market Value

As we noted above, there is more subjectivl~ in the licensing process for the name and likeness of
a person or fictitious character than there might be in the case of a patent, trademark, or copyright.
That subjective element includes observing royalty rates obtained by others for similar properties in
arms-length transactions. Royalty rates, expressed as a percentage of net revenue, in such cases can
range up to 15 percent. Much of the information available from the marketplace involves licensing
transactions by individuals, or licensing transactions entered into by the owners of families or groups
of characters.

Information about transactions thought to be comparable must be used with care and with a clear
understanding about who is the licensor, what rights are being licensed and to whom and for what

Licensing transactions by individuals might be comparable to the licensing of Mr. Janos individual
name and likeness on merchandise, such as t-shirts. In our opinion, market licensing information
relative to individuals is not an appropriate yardstick by which to measure Mr. Janos situation with
regard to other merchandise such as dolls, cards, games, and to videocassettes where his fictional
character is presented as part of a group.

We are of the opinion that it is also not appropriate to use royalty rates for families or groups of
characters to gain insight into what might be an appropriate payment to Mr. Janos for the use of his
fictional character or as one of a group of performers. As noted above, Mr. Janos is part of a

Theodore E. DInsmoor
General Counsel
Titan Sports, Inc.
March 14, 1994
Page 10

"package" of entertainment, or a member of a team. It is not reasonable for the member of such a
team to expect to receive anything but a relative portion of the total team compensation. If Paramount
licenses the Star Trek characters as a group, then the individual actors would obviously have to share
the talent royalty pool. There would probably be some pro rata shadng between the principal
characters and the lesser ones.

In our opinion, a much more informative comparison for the Ventura/Titan situation is provided by the
practices of the film and theater industries. In television, motion picture, and theatrical productions,
there is almost always a cast of several actors involved in playing fictional characters, some of whom
are principal players and others of whom are in supporting ro~es. It is not unusual for such
performances to be filmed and have these films offered for rebroadcast or sale in the form of video

There are a number of organizations to which actors and such productions belong and who have
negotiated extensive and detailed contracts with the owners of film or theatrical productions. Included
are the:
Screen Actors Guild
Amedcan Federation of Radio & Television Artists
These contracts spell out in considerable detail the compensation that will be due to the individual
actors in these productions. We feel that this information is more analogous to the situation of


Theodore E. Dinsmoor
General Counsel
Titan Sports, Inc.
March 14, 1994
Page 11

Mr. Janos as a performer in the video cassette productions created and owned by Titan and distributed
by Coliseum and for the situation in which his fictional name and likeness are included in "group"

Another business situation which we considered to be analogous to the relationship between Titan and
its performers would be the world of professional sports. There are hundreds of professional athletes
who are members of teams that are organized into leagues such as the National Football League,
National Basketball Association, National Hockey League, and Major League Baseball. Each of these
leagues has established extensive licensing programs, and individual teams can also have licensing
programs in their relevant geographical areas. It is our understanding that revenues coming from such
exploitation is shared among the league and the participating teams. Individual players do not directly
share in this supplementary income. They benefit in that the team with which they are associated has
income from this source and is able to pay players salades greater than it otherwise would.

On the basis of the above, it is our conclusion that a fair compensation to Mr. Janos from the use of
his fictional characterJesse Ventura" name in merchandise and videocassettes marketed through Titan
is as follows:
For merchandise directly associated with Ventura as an individual (such as
t-shirts). 5 percent.
For merchandise in which Mr. Janos fictional character is part of a set, or
group such as for doll sets, card sets, games and for videotapes where
Venturas wrestling persona is part of a group pedormance, the royalty
pod and performer shadng mechanism employed by Titan is fair and
reasonable for Mr. Janos.

Theodore E. DInsmoor
General Counsel
Titan Sports, Inc.
March 14, 1994
Page 12

For the use of Mr. Janos fictional character on Titans programs, which
Titan produces and then distributes through Coliseum on home video
cassettes, the royalty pool and performer shadng arrangements currently
In use by Titan for wrestling would be fair and reasonable as applied to Mr.

AUS Consultants