Update on Titles / "Major Venture" and "Core Activities"

Dear HHSE Friends & Shareholders - As we prepare our release slate for 2014 and 2015 - as well as our materials in support of the upcoming Shareholder's Meeting - we wanted to update the status of some of those key items that have already been announced.  Listed below are those items comprising the "already announced" properties in the categories of both "MAJOR EVENT" titles and "Direct-to-Video" (or "core business model") releases.

The "core business model" titles can be realistically looked at for generating $4-mm to $8-mm in gross wholesale revenues for HHSE... with the "possibility" that items could break-out and individually exceed $1-mm or more in revenues (on the list below, the most likely prospects for a financial breakout are the book "THE VERDICT" and the "LENNON BERMUDA" audio CD; although both "LION PRINCE" and "BONOBOS" could also click with video consumers, as did similar films "March of the Penguins" and "Chimpanzee").

The "Major Event" titles are positioned to be transformative to HHSE.  These are titles that each are expected to generate many millions of dollars in sales from both the International marketplaces, as well as from the domestic revenue streams.  For instance, it is not at all unrealistic to look at "MOTHER GOOSE: JOURNEY TO UTOPIA" as generating $12-mm from international, and another $10-mm from domestic distribution sources (e.g., $22-mm in gross sales for HHSE);  this is why we consider these titles "transformative" to the Company's stature, revenues and bottom line.

The core business is solid and predictable - and as you can see - HHSE already has a nice line-up of new titles for 2014.  So this is a terrific foundational business - atop which we can (and ARE) building a major indie-studio profile!  Go HHSE!

"2014 - 2015 Major Event" Level Titles In Process:

MOTHER GOOSE: JOURNEY TO UTOPIA

LEGEND OF BELLE STARR

SHADOWVISION

"2014 - 2015 Major Event" Titles in Development:

TERMINATOR 3000 (T3K)

WILD OATS

MOTHMAN CHRONICLES

2014 Titles for "Direct to Video" or Limited Theatrical:

 

		Primary
Title	Licensor	Formats
20,000 Leagues Under the Sea	Plaza Ent.	DVD
Around the World in 80 Days	Plaza Ent.	DVD
Journey to the Center of Earth	Plaza Ent.	DVD
Next Up	Trace Ent	DVD
Verdict - Print Edition	McClellan	Print / Ebook
Lennon Bermuda - Print	Brannon	Print / Ebook
Lennon Bermuda - Audio CD	Brannon	Audio CD
GeneraGraphics	Goodman	Print / Ebook
Bobby Dogs	Brooklawn Ent.	DVD
Ingloda: Possession Within	On-Ride Ent.	DVD
Spring Break Murders	Film Sales Co.	DVD
Wide Blue Yonder	OPIX	DVD / BD
Weather Station	Shoreline	DVD / BD
Reach	Vongtama	DVD
Treasure Island	Plaza Ent.	DVD
Frankenstein 2014	Alphilms	DVD
Borrar de la Memoria	Eduardo	DVD
Asalto Al Cine	Shoreline	DVD
Gabrielle	Royal Blue Pic	DVD
Bonobos	SND / MC4	DVD / BD
Sunshine	East Exit Films	DVD
Buried Alive	Fubot Pictures	DVD
Midnight Horror Show	Northbank	DVD
The Lion Prince	Le Petit Bureau	DVD / BD
The Devil of Lincoln County	Royal Blue Pic	DVD
Valley of the Witch	Northbank	DVD

Today's business model vs. the 2014-2015 Strategy?

As we enter into a new year for Hannover House - and a new era - some shareholders have asked for clarification on the company's "release slate direction" for the coming years.  Rather than go into voluminous detail and analysis of industry trends, sales histories and title specifics, someone suggested that we go with the visual-aide-route of visible presentation.  Accordingly, to help demonstrate the merits of our release-strategy thinking for 2014 and 2015, we submit below a snapshot of a portion of the New Release video shelves this week at Walmart Supercenters in the United States.

Specific DVD titles in this image are small and hard to read.  But if you look real closely, you'll see that on the second-row-up from the bottom, on the left hand side of the endcap, is a placement for the Hannover House new release horror-title "AMITYVILLE ASYLUM."  This item is holding one shelf keeping unit (SKU) with a single, product facing.  This item happens to have been stocked with ten (10) units per "A" store, whereas many of the other items in this endcap were stocked with only four-to-eight units, based on sales forecasting models.

Now, look to the right-hand side of the end cap.  Probably the most prominent item (besides the "Butler" signage), is that they have given a five-SKU placement for "Despicable Me 2."  Each of these skus holds ten (10) units; additionally (and far more significantly), there is a 1/2-pallet "displayer" at most Walmarts for this item, holding an additional 600 units of assorted "Despicable Me 2" format videos.

			Avg. WM	WM Retail
	Location	Units	Price	Value
Amityville Asylum	NR Mod	10	9.96	$                   99.60
Despicable Me 2	NR Mod	50	19.96	$                 998.00
Despicable Me 2	Spl. Display	600	19.96	$           11,976.00
Sales performance of 100% depletions of "AMITYVILLE ASYLUM" generates
less than 1% of the revenues that WM would see from a similar turn rate
of "Despicable Me 2."

While Hannover House can (and HAS) built a nice business with programming comparable to "Amityville Asylum," there is very clearly an upside limitation.  These lower-profile titles rarely merit a "second sku" placement; as such, the likely upside (unless sales are replenished), is the 8-to-10 units initially placed per Walmart location, multiplied by 2,500 to 3,200 stores (depending upon title genre and competitive releases).  If Hannover can carefully program our release DATES and "GENRE" assortments, it's possible to get two or three "New Releases" each month into Walmart.  So the "upside" of this core business is fundamentally limited by shelf space and consumer demand.  Granted, there are many other accounts in addition to Walmart.  But with a 52% market share in the USA, how Walmart goes generally sets the tone for a title's response across all accounts.

So what's the solution?  Bigger titles like Hannover's massively expensive experiment in 2010 with  "Twelve?"  No, actually, movies like "Twelve" fall into what some retail buyers call a "no man's land."  They can be far higher profile (and expensive) than most of the items that make it onto the Walmart New Release shelves... but they tend to not be "big enough" to merit a second sku, or any sort of premium video placement or displays.  In fact, statistically, mid-level films like "Twelve" sell no better than genre-specific, direct-to-DVD items like "Amityville Asylum."  They just cost the distributors a lot more, and therefore can be a lot less profitable to their bottom line.

The answer is to follow-the-leaders with respect to the sort of "higher-end" films that are genuinely connecting with consumers.  A movie like "Despicable Me 2" can satisfy a very broad range of market tastes... from young kids who like the animation, colors and quirkiness... to adults who appreciate the double-entendre humor and sophisticated plot lines.  This is why a movie like "Tim Burton's Alice In Wonderland" connected with multiple age-demos and went on to over $1-billion in worldwide box office.  It's also why a movie like Hannover's "Mother Goose: Journey to Utopia" is as ideally positioned for huge upside, as a film like "Chronicles of Narnia" or even "The Hobbit."  Broad appeal, accessibility, name-awareness, star power and quality. 

Best of all, and unlike the "Twelve" structure, the bigger films that Hannover is pursuing for 2014 and 2015 are being financed with outside capital, to remove downside risk for the company without unreasonably diluting the company's upside revenue potential.

The goal over the next few years will be to have major new Hannover House titles transform the company's profile, stature and revenues - much in the way that "Twilight" transformed tiny distributor SUMMIT, or the way that "Tyler Perry" transformed fledgling LIONSGATE.  Hannover House is positioned in a comparable mode to Summit and Lionsgate "just before" their transformative hits.  With the right product, it can (and should) happen for HHSE.

Meanwhile, the core business - the monthly placement of titles like "Amityville Asylum" and "Blues for Willadean" into Walmart and other USA retailers, will continue to fund the HHSE operations.  In fact, there's always the chance that some of these specialty-level releases will "take off" and outperform a single-sku revenue depletion.  But as we enter into a new year, take a look at HHSE, where we have been, where we are now, and where we are going.  The direction is positive, the aim is specific and the strategy is sound.  We thank you for joining us on this exciting journey.

What a great time for HHSE!

Happy New Year to all our HHSE Friends & Shareholders.  We hope the holidays were pleasant for each of you. 

Looks like the bounty is just beginning for Hannover House, as today's nationwide street date for "AMITYVILLE ASYLUM" is taking off like a ROCKET at Walmart locations!  And in queue for Walmart - just weeks from now - is "BLUES FOR WILLADEAN," so the HHSE new release assault for 2014 has begun.

The AMITYVILLE legend has grown into one of the most successful horror-film franchises in history.  Consumers can not get enough of this legendary haunted home in New York... and the new "AMITYVILLE ASYLUM" turns it up to "11" for maximum thrills.  Priced at only $14.95 suggested retail - with an "everyday low price of $9.96 for Walmart shoppers - "AMITYVILLE ASYLUM" is positioned to be one of the top selling DVD horror titles of all time for Hannover House.  Just as a point of reference - check out the chart below of top selling horror histories at Walmart:

Hannover House
Top Selling HHSE - Horror DVDs at Walmart
		Walmart	HHSE
Title	Stars	Net Units	Gross
Oxygen	Adrien Brody, Maura Tierney	678,126	$      2,068,284
Devil in the Flesh	Rose McGowan	336,150	$      1,025,258
Devil in the Flesh 2	Jodi Lynn O'Keefe	128,900	$         393,145
Future Shock	Bill Paxton, Vivian Schilling	88,626	$         270,309
Boggy Creek	Texas Battle	30,384	$         147,362

Typically, most of the HHSE "direct-to-DVD" horror releases sell in the range of "Boggy Creek", "Humans Vs. Zombies", "Dawn of the Living Dead", "Fun Park", etc... as represented by the detail for BOGGY CREEK in the above table.  But every once in awhile - with the addition of a star or a particularly compelling concept or franchise - Horror DVDs at Walmart can truly ROCKET and become the home video equivalent of a corporate ATM machine.  It's way too early to say if "AMITYVILLE ASYLUM" will "have the legs" of movies like "Oxygen" or "Devil in the Flesh."  But it's certainly off to a GREAT start!

Last, but not least, another reason why we're excited to be doing what Hannover House is doing right now is the INDUSTRY GROWTH.  Today's edition of Home Media Magazine (timed for today's opening of the Consumer Electronics Show), shows not only the strength and resilience of the domestic home entertainment market... but actually chronicles GROWTH during 2013 (when many of the "outside-the-industry 'experts'" predicted the rapid decline and demise of consumer spending).  It's rather amusing to read the posts and prognostications from these legions of self-appointed "experts" that try to influence others with flawed logic!  But for any one of you who has read some of the nonsense on the IHub (and other stock-chat boards), you're already aware of the prevalence of such idiots. But in the long-term, reality prevails, and that's part of why we feel so blessed with the longevity of Hannover House and our exciting new opportunities.

Hannover House has operated continuously for over 20-years now - our sales and revenues are consistently growing - and our new productions for 2014 and 2015 are ideally positioned to transform the company.  This is all happening under the broad umbrella of a ENORMOUS and SOLID "Consumer Entertainment" marketplace in the United States (and worldwide, for that matter).  2014 is going to be epic for us, and we are grateful for those who will enjoy the journey alongside.

INDUSTRY NEWS:

http://www.homemediamagazine.com/research/consumer-spending-home-entertainment-slightly-2013-32234?utm_source=homemedia&utm_medium=email&utm_campaign=breakingnews_01_07_2014&utm_content=consumer-spending-home-entertainment-slightly-2013-32234&spMailingID=18686880&spUserID=NDQ1MzAzMzQzOTkS1&spJobID=249361475&spReportId=MjQ5MzYxNDc1S0