WED/WDP Royalty Payments

Transcription

1 University of Central Florida Harrison "Buzz" Price Papers Report WED/WDP Royalty Payments Harrison Price Company Find similar works at: University of Central Florida Libraries Part of the Tourism and Travel Commons Recommended Citation Harrison Price Company, "WED/WDP Royalty Payments" (1963). Harrison "Buzz" Price Papers This Report is brought to you for free and open access by the Digital Collections at STARS. It has been accepted for inclusion in Harrison "Buzz" Price Papers by an authorized administrator of STARS. For more information, please contact

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3 Dear Bill: After a careful analysis we have come up with an approach to th$ WE~WDP royalty problem that appears to have merit The essence of it i a that lj\.led would receive a profit on its design work through royalties on attractions designed, and that the royalties would be collected on that portion of attendance that is over break-even levels. By this means you get no profit if the attraction does no more than break even, a modest profit "1,~~ii.~S~aa~esr;9- when the attraction dravvs a satisfactory level maximum p~~ctical capacity of the attraction. The royaltn "Z&""klwWNtt ainount 0asis level of would be set to return the/profit over the first three years of operation of the attraction, but payments would continue thereafter at the same amounts so tha.t royalty income would be built up to quite substantial levels after several years of ~ this system of operation. The following eight points are the basis for the system we have devised: le V::ED should receive a profit on their design work in addition to being reimbursed for design costs. 2. This profit should be related to the cj'.'11.jwd-pulling success of the attraction designed. Until attendance is at a pre-established break-even level, no profits are deserved.. When attendance is at a satisfactory level a modest profit is warranted, with the level of profit increasing as attendance incre.~ sea to the maximum practical capacity of the attraction. ) " f'lt.~ -f.p-r,,, 0 f- 3. Profits should be re-coived royalties on attendance over break~ even levels. Royalties will continue to be paid on this basis ao long as should. the attraction is in operation. The royalty amount per admission 1lci:ii: be established at a level which will permit WED to recapture the basic profit allowance after three years. Three years has been used rather than the

4 more standard five because the five year term usually relates to payout of investment whereas in this instance the funds received c0nsttutute the source of already only/profit on services/performed. costs 4. The profit allowance should ge computed on the basis of all/incurred in producin;.?; a design for 1 YDP. Included costs wouldm be labor, employee benefits, ou:beof posket expenses, material, and overhead at cost. S. A basic profit allowance of 15 percent seems reasonable on an attraction which draws a satisfactory attendance, with a 30 percrmt maximmn at maximum practical attendance capacity. These basic allowances are the ray..] itj:os amounts to be recovered in the fil:jst three years.. 'ftld "*t9f' al nwfi± 'reodvqcj 6. There is every reason to continue royalty payments at the same afdu..~ts per admission after the IBasic profit allowance has been recovered features The design ~ built into the attraction will have an important bearing on its economic life, and if by good design VIBD is able to add life to an attraction it should share in the income from the at ' raction. 7. If there is no practical way to :measure the design results, as in directly the case of attractions which can be enjoyed without payment of a/related admission fee, a 20 percent return is w-a.rrantedo In these cases there is no opportunity for VED to participate directly in the results of their efforts,, and an average level return is deserved. ~ For the reasons given earlier, three years should be the period over which the basic 20 percent is collected, but payments would be made for the entire economic life of the attraction. 8. If WED has carried the design forward into the construction stage at cost and sold the completed attraction/to ~ IJIJDP, as in the case of the tiki-room, the regular basic profit allowances should a c.ply to the entire costa However,

5 probably somewhat as the construction function is/less unique and is not patentable, it seems more appropriate that the basic profit allowance be spread over five years rather than three. Attached are several sheets illustratillg how this system w~uld work and giving the details on how to use it. Ve feel that this is a means by which both WED a.nd VllDP can receive equitable treatment, and hope that you will find it useful. Respectfully submitted, Harrison A. Price Prmsredent

6 SYSTE1'1i FOR CALCULATING ROYALTY PAYMENTS r (For revenue producing attractions) 1. Establish the following: r a. Total design costs, or total design and construction costs if WED mb.nufactures the attractiono b. ~ Basic profit allowances are 15 percent and 30 percb.nt of the above cost. c. Theorfitical ride capacity, and break-even, satisfactory, and maximwn practical ride capacity. 2. Divide the basic profit allowances by three, or by five ijfi WED manufactures, to yield the amount to be recovered a ~nually. 3. Calcu1ate the annual number of rmdas below break-even, from break-even to satisfactory, and from satisfactory to maximum. 4. Divide the amount to be recovered annually in the bre~k-even to satisfactdvy attendance range by the number of annual rides in that range. Do the same for the higher attendance range. The answer is the royalty amount to be collected per ride. 5. Convert the am1ual fligures to months, maki.~g appropriate adjustments for differences in numbers of days and houbs per day, so t hat the royalties due ~.r=::d can be calculated and pamd monthly. (For non-revenue producing attractions) 1. Establish the design (and construction if applicaple) costs as above. 2. Calculate the basic profit allowance at 20 percent of costs 3. Divide by three to derive the annual royalty. 4 Collect monthly as a flat fee, with adjustments for open hours per month if desirable,,,7 IN ALL CASES PAYMENTS CONTINUE ~ LONG AS THE ATTRACTION IS OPERATED.

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