News Analysis

Small studios thinking big with SAP

Linda Tucci, Senior News Writer

When Leo Collins, chief information officer for Lions Gate Entertainment Corp., needed to replace his company's discontinued financial system in 2002 he could have -- maybe should have -- been thinking like a little guy.

At that time, he was CIO of Artisan Entertainment, a privately held motion picture and family entertainment company, firmly planted in the midmarket, at least as measured by revenue: $300 million. He had an IT department of 12, and money was allotted on a project-to-project basis.

We wanted a package that could do what we needed -- and grow with us.


Leo Collins, CIO, Lions Gate Entertainment Corp.

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Instead he took his cue from Hollywood's major studios.

"We proposed SAP," Collins said. "When you looked around, all the people you aspired to be -- Sony, Warner Brothers -- were using SAP. We wanted a package that could do what we needed and grow with us."

A pip-squeak by comparison to the industry giants, Artisan nonetheless had made a name for itself with the groundbreaking film The Blair Witch Project and other critically acclaimed projects, such as the Buena Vista Social Club. It was busy building an impressive library of some 6,000 movie and home entertainment titles. And, as it turned out, the Santa Monica studio was close to becoming part of the Vancouver-based Lions Gate.

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In September 2002, however, when Collins and the company's chief financial officer Greg Arvesen successfully made the case for SAP to CEO Ken Shapiro, the decision to go with the 500-pound gorilla was way outside the norm. "We were absolutely the smallest studio to use SAP," he said.

Artisan's systems were "pretty standard mid-company architecture," Collins said. The company used a reporting tool called OutlookSoft EAP, a product similar to Hyperion, a SQL Server database, and a favorite of Hollywood, TDS 200, a theatrical distribution system. Collins started out by taking a hard look at Microsoft's Great Plains -- a "great product," he said.

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The decision to use SAP was propelled by two factors, he said. SAP was making investments to its system with the entertainment industry in mind. Second, Artisan would be working with former SAP employee and entertainment industry specialist Hemant Agrawal, whose newly formed company, Nexplicit Inc., was equally ambitious.

"SAP is a fully integrated business process. The power is in the product. We wanted to harness that power for the midsized market," Agrawal said.

Headed by Paul Beltz, vice president of performance services, the Nexplicit team worked with Artisan to develop a SAP package suited to the needs of a midsized company. The program was implemented in a record 90 days and became the prototype for Nexplicit's first product, Media Finale, launched last month.

"This provides the same functionality as the big boys have -- and is a lot more user-friendly and a lot cheaper," Agrawal said. "Our worst competition is the manual spreadsheet."

Last month, Media Finale became widely available. It sells for $260,000 and is included in SAP's All-in-One portfolio. It's being billed as a way for entertainment and media companies to increase operational efficiency and improve and master business processes specific to their vertical industry.

The program takes aim at what experts say are the entertainment industry's major requirements: long-term contract management; deferred revenue recognition; cash vs. accruals reporting; and financial reporting by title and media, with attention paid to royalty and participation statements.

Collins said the Nexplicit system parallels how an entertainment company runs its business and how it has to report to people. "If you're an artist, we have to keep track of all the money we have received to pay you your percentage. At the same time, depending upon the agreement, we can withhold all expenses that we've incurred, so when you actually do the calculation you do a combination of accrual and cash-based accounting," Collins said.

That kind of accounting is difficult for people and for many systems." Just describing it to vendors let's you know whether or not they've worked in the entertainment business," he added. "With Hemant's team we created SAP business warehouses that allow us to do that type of calculation very easily and very quickly."

When Artisan was acquired by Lions Gate in October 2003 for $160 million, Artisan's customized SAP managed the merger easily.

Lions Gate -- whose recent fare ranges from Hotel Rwanda to the The Cut, a new CBS TV reality show hosted by Tommy Hilfiger -- opted to drop its Lawson software and use Artisan's SAP solution. "We were essentially able to double in size using our SAP system without having to upgrade it; it had the power to do that," Collins said. In addition, the SAP program was expanded to handle businesses Artisan wasn't in, such as international sales and television production. Nor was it hard to make the case, the first or second time. "Movies are what attract a lot of interest, but the real issue is about what a movie company does now. You finance and distribute. It's the fact that you can ship millions and millions of DVDs that you can manage and track your expenses, something Hollywood has struggled with," Collins said. "IT systems are the lifeblood that supports the creative effort."


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