PROFILE/1stjc/mark2nd BEN SULLIVAN Staff Reporter At heart, Steven Muellner is a salesman. He’s hawked potato chips in the midwest, vertical blinds in Santa Monica and now as president of Woodland Hills toy maker Applause Inc. peddles Grovers, Elmos, Darths and Tweeties by the shipload. With more than $150 million in net revenue in 1996, Applause is the nation’s top privately-held licensor of toys and accessories stemming from feature film characters. The company counts Disney, Universal and Fox among its partners, and has held rights to produce plush toys and plastic knickknacks for such merchandising wonders as “The Lion King,” “Space Jam,” “101 Dalmatians” and “Star Trek.” Q: Licensing of film merchandise is growing, to the point where secondary products often bring in more revenue than ticket sales. What’s driving this trend? A: Licensing in its current form began to take on a more serious tone within retailing in the U.S. about 10 years ago. Today it accounts for something in the neighborhood of half of all toys sold. The box office is now just one element, and probably not even the driving element, of the profitability of a film product. So going into a film that has high licensing probabilities, the studios are considering the profit from licensing as probably more important than the box office. Q: Walk me through the process. If a studio’s making a film with licensing potential, at what point are you called in? A: Each of the studios is really quite different, but all of them will bring in their licensing partners 12 to 18 months prior to the release of a film. Depending on the closeness of the partnership, it could be four years prior to the release of the film. We have a relatively strong relationship with the Disney folks, for example, and we have at least their preliminary schedule of movie releases going three to four years out. We don’t actually start working on those movies this far out, but we start the creative juices going, discuss with them characters and things like that. Q: Does the licensing potential ever affect the film itself? For example, making one character more cuddly because it’ll sell more dolls down the road? A: It does. I’ve heard of a very specific instance where (a studio) determined the hair would be longer on a female lead character because of the “playability” it would lend to the dolls that would then be sold. The initial concept was to have the hair shorter. Q: People complain about what a cut-throat group movie folk are. Do you have to be as shark-like? A: Much less so. I’ve yet to experience my first shark fest. My observation is that for all the talk of the industry being very tough, I notice that actors, writers, directors and musicians all flow fairly freely back and forth between one studio and another. The same is definitely true on the license side. I run into the same companies that might be holding a license for Warner Bros. and also for a Disney, Fox or Universal. Q: Does Applause hold licenses or just manufacture for companies that do? A: It’s done in both ways. We actually buy the licenses for almost all of our domestic business, but it changes dramatically when we go international. In international it is probably more likely that the specific distributor might buy the license for his particular country and then we serve as the manufacturing source for them. This is important because the purchaser of the license will have to meet a minimum number of sales. If Applause holds the risk, we have to meet a guaranteed number of sales. And if we don’t meet the number, we just have to pay the studio the difference. Q: When you buy the license to a product, what are you getting? A: One answer is we get the incredible consumer awareness that is tied to a Tasmanian Devil, or a Bugs Bunny or a Mickey Mouse or a Darth Vader. There is incredible consumer awareness around these characters because hundreds of millions of dollars of advertising effort has gone into building a built-in customer base. We basically are paying for the privilege of knowing that when we introduce a product there is immediate consumer demand. Do we have the right to carte blanche produce anything? The answer is a quite definitive no. When we get a license with any one of our licensors, it is very specific for products. It would be specifically written into the contract what it is we can manufacture and sell, as well as specifically in what channels. Many of our licenses go so far as to specifically name retailers across the United States that we can and can’t sell to. Q: What keeps the studios which already have their own retail stores in some cases from taking it one step further and manufacturing this stuff themselves and putting you out of business? A: They probably have discussions on that very subject once a week, or once a day. (laughs) What prevents the studios from doing the same thing? We have established relationships, methodologies and 165 sales people in the U.S. with established contacts and methodology for distributing our product. We have, in fact, a company, which for the studios to eliminate they would have to replicate. Any good business is designed around the principle of win-win. It is my assumption that as long as we make it more profitable for the studios to deal with us than to do it on their own, then this relationship will continue. If at some point they determine they can do what we do just as well and make more money without us, then I would expect them to make that decision and do it. Q: Why don’t you manufacture domestically? A: The costs are prohibitive. Most of what we do is hand produced. There’s really nothing that just gets cranked out in a machine. And because of the costs of labor in the United States you would be prohibited. (He holds up a plastic Grover figure). This piece was molded and then mass-produced in the color blue. Somewhere in China there’s a line of people that have five or six paintbrushes in their hand and five or six different paints on the table. They’ll paint the white stripe on the body, then use the other brush for the red stripe, then a slightly different color red for the bow-tie, and then another brush to paint the eyes. You can see the steps involved here. And even as good and efficient as people can get doing this, it’s time-consuming and would be very difficult to do in the United States. In fact you couldn’t do it. Q: Are there toy manufacturing opportunities in Los Angeles? A: There is no major toy manufacturer doing anything of any quantity in the United States today. That would suggest to me that the time has passed for any realistic opportunity for producing toys in America, and definitely for L.A. as well. If we were to start our business fresh today and had to decide where would we do our manufacturing, there’s probably a zero probability that we’d even consider California. Having said that, I consider this to be the perfect spot for a company such as ours to be located because of the access to the Hollywood film industry. SNAPSHOT: Steven Muellner Position: President, Applause Inc. Born: Minneapolis, 1950 Education: B.S. business & journalism, University of Minnesota; MBA Cornell University Career turning point: Earning MBA in mid-career Most admired person: Ronald Reagan Personal: Married, one daughter

valleyedit///lacter/mike1st Hed — Time to wise up Charter reform is a tough sell for a town not accustomed to deciding important public policy matters especially ones that won’t have any real impact for years to come. Are enough Angelenos even aware of the issue, much less able to take a position on it? That question, and others like it, take on greater urgency over the next two months. After much legal wrangling much of it instigated by the Los Angeles City Council voters in the April 8 city election will be asked to create and elect 15 members of a citizens’ panel to rewrite the charter. Substantive and reasoned reform is long overdue. The 71-year-old charter, which runs more than 700 pages and has been subjected to 400 amendments, is a hopelessly outdated document. Its mechanisms for dividing power among the mayor, the City Council and the assorted part-time citizen commissions leave more incentive for filibustering than for getting things done. Want to know why it’s such a hassle to get licenses in the city of Los Angeles? Wonder why business taxes are so capriciously drawn or why the mayor has so little power in getting things done? Much of it comes down to the charter. To his credit, Mayor Richard Riordan has taken the lead in reforming the system by supporting and partially funding the charter reform measure. It hasn’t been easy; it took a federal judge’s order to finally put the reform initiative on April’s ballot in essence, overruling council opposition. The council has created its own advisory body to recommend charter reform measures complete with veto power on any of the proposals. That arrangement strikes us as a cynical effort to keep the council in control, hardly the way to provide an open forum on the city’s future. In fact, the recent tug-of-war perfectly illustrates the need for charter reform. But if past is prologue, the debate will involve far too few voices. Voter turnouts for municipal elections even those that involve mayoral races are notoriously low, and we fear that the confusion in selecting members of a citizens’ panel could keep even more voters away. This serves no one’s purpose. Getting a mechanism for charter reform up and running is a landmark event and it requires mass participation not just the 15 percent of the electorate that, all too often, tend to make decisions for the rest of us. Now that the measure is on the ballot, Los Angeles has a real opportunity. Government officials, interest groups, the media, and the public at large have more than two months to examine the ways in which charter reform can help shape L.A. in the 21st century. This is not bite-sized stuff. It’s challenging, it’s complex and yes, it’s vitally important. The big question is whether L.A. is up to the task.

valley forum/d.taub/1stjc/mark2nd Los Angeles city officials are seeking proposals for a new building complex to replace the earthquake-damaged Van Nuys “City Hall.” The complex would house offices for city employees as well as feature shops, outdoor dining/entertainment areas and a 450-space parking complex. The project, however, falls short of a proposal by Los Angeles City Councilman Marvin Braude to do a complete makeover on Van Nuys Civic Center which would have included the addition of a civic auditorium, movie theaters, offices and retail development . Those more elaborate plans were shelved by the City Council. The San Fernando Valley Business Journal asks: Does the San Fernando Valley need a new civic center in Van Nuys? Stan Thomas Business development specialist Mid-Valley Chamber of Commerce “Yes, because the way the city is set up, the area needs a lot of revitalization. You already have that as a central hub because the police and the city offices are centered there. It would revitalize the civic center that’s already there. Wal-Mart is coming in a lot of different things are happening up and down Van Nuys Boulevard. There’s a lot happening on the boulevard, and that would just propel the area bringing it back to the status it once had.” Sandor Winger President Sandor L. Winger and Associates land use consulting “The answer to the question is yes, but it has to coincide with the Valley being totally independent with its own civic center. Van Nuys would be a good start. The Valley does need a government center, but more importantly the government center would be for the use of an independent city.” Jerry Katell Katell Properties “I think a revitalization and the addition of the kind of new projects contemplated by Marvin Braude would be a welcome addition to Van Nuys. The area could use a revitalization. Retail in particular could use a revitalization, and I think it’s a very central location.” Rick Voorhis President Van Nuys Flight Center “If they just fixed up the government buildings and put in a new auditorium, it probably wouldn’t attract more people to it. If there were attractions to go there and you brought in classy office buildings, restaurants, shops, theaters, then it would be nice. It’s pretty obvious that Van Nuys Boulevard is in disfavor right now in terms of people shopping.” Dan Selleck Principal Selleck Properties “I think it’s a good idea, It’s probably long overdue. However, the private sector is also in the process of revitalizing the Valley. And I think our project (at the old General Motors Plant) in particular will go a long way to revitalizing the Van Nuys Boulevard corridor. The private sector is going to maybe start the ball rolling, and the success of these projects will encourage other property owners to do the same, and it will be kind of a snowball effect at least we hope it will be.” Marvin Braude Los Angeles City Councilman 11th District “I consider it the most important and badly needed project in the San Fernando Valley. It is the essence the heart of the Valley. It is the distribution place for serving the Valley. It is the symbolic center of the Valley. This is the place where, if the Valley were a separate city, it would be the most obvious place for the City Hall.”

Don’t jump ship What subway? The SFVBJ opines that we in the Valley should forget the subway (“Forget Valley subway” January). Some of the Valley’s business leaders appear to be against the subway, but upon further reading, they advocate building exactly that. This problem with semantics is fostered by an incompetent press that refuses to educate itself on what the MTA proposes for the Valley’s east-west line. Webster’s defines the term “subway” as “an underground metropolitan electric railway or the tunnel through which this runs.” Thus, anything underground, whether it be “deep-bore” or “cut-and-cover,” is a subway. Approximately one-third of the first phase of the proposed east-west line from North Hollywood to the Sepulveda Basin is not in a subway, but is in an aerial configuration. The line is proposed to be at-grade through the Sepulveda Basin, and is therefore, not a subway. The current studies being done by MTA consultants include efforts to find alternatives to deep-bore tunneling, such as constructing the line in a deep trench which will both save costs and make the view for the transit rider far more pleasant than looking at the dark walls of a subway. So, if you want to kill the Valley “subway,” understand it is not a subway you are seeking to kill, but a heavy rail that uses subway construction on certain portions of the line. Proponents of Valley rail have consistently advocated cost-effective construction using a subway only where it is required. That includes Valley Industry and Commerce Association. It is this proposal that continues to warrant the support of Valley citizens who recognize that transportation improvements are needed here. The Valley deserves its fair share of the tax dollars going to build Metro Rail. Now is no time to jump ship. The elected officials who serve on the MTA Board have created far more difficulties than any of the MTA’s contractors. But as troublesome as this conduct has been, we are still making great progress in constructing a rail system for which we will all be proud. ROGER L. STANARD Stanard, Blender & Schwartz Woodland Hills

newsmakers.people/SFV/d.taub/mike1st/mark2nd February Banking & Finance R. Hank Miller has been hired as an assistant vice president and business development officer at the Bank of Granada Hills. Miller was previously a commercial loan officer and assistant vice president at the Bank of Hollywood. Benjamin S. Wong has been named chairman of the board of SGV Bancorp Inc. and its subsidiary, First Federal Savings and Loan Association of San Gabriel Valley. Wong, a West Covina city councilman, replaces Royce A. Stutzman, who will remain with SGV Bancorp as director. Entertainment/Media Noreen Halpern has been promoted to vice president of creative affairs at Alliance Communications Corp. Halpern will be involved with new material, material follow-through, pitches and network meetings. Digital Theater Systems has named Rory Kaplan executive in charge of artist relations for the recently formed DTS Entertainment Division. Kaplan, who has worked with Jeff Beck, Stevie Wonder, Michael Jackson, Natalie Cole and Joe Cocker, will act as a liaison to the music industry, as well as solicit musicians to re-release or record new material using DTS Entertainment technology. The Motion Picture & Television Fund has named Johanna K. Lieblein vice president and chief information officer. Lieblein, who has 18 years experience in information systems in the health care industry, will be responsible for information systems planning, development and implementation. Al Kasha has been appointed to the newly created position of president of MTM Entertainment Inc.’s music division. Kasha, who joined MTM as a consultant a year ago, has created soundtracks for NBC’s “The Pretender,” UPN’s “Sparks” and the syndicated drama “The Cape” during his time with the company. Universal Music & Video Distribution has appointed Joyce Castagnola to the position of senior vice president of sales and distribution. Castagnola, who was previously at Virgin Records for 10 years, most recently as senior vice president of sales, will be responsible for overseeing sales operations at Universal Music & Video. Jon Gumpert has been appointed executive vice president of Universal Pictures. Gumpert, who has served as executive vice president of legal and business affairs for Universal since 1994, will be responsible for planning and coordinating business operations, including talent negotiations and third-party financing. High-Tech Charles C. Maynard has been appointed chief executive officer of Cybernetic Services Inc. Maynard was most recently chief executive officer of Progressive World Messaging. Prior to that, he was president of Cincinnati Bell Messaging Services Inc. Insurance Curt L. Biersch has been named executive vice president and branch manager of the Woodland Hills office of Sherwood Insurance Services. Biersch began his career with Sherwood 10 years ago as a property producer. Public Relations William J.P. Smith Jr. has been appointed senior vice president and director of public relations at Ahlman & Associates. Smith, who most recently spent three years as a professor at Emerson College in Boston and Los Angeles, will be responsible for strategic planning and program execution for the firm’s public relations clients. Real Estate Countrywide Home Loans Inc. has promoted Keith McLaughlin to the position of managing director of finance. McLaughlin, who has been with Countrywide for 10 years, will be responsible for Countrywide’s work in the areas of corporate accounting, corporate tax and financial reporting. Martha M. Belcher has been named vice president and regional counsel for the Fannie Mae Western Regional Office. Belcher, who was previously a partner at the Los Angeles office of Arnold & Porter, will have overall responsibility for legal activities within Fannie Mae’s western region, as well as serving as general counsel for the office. Retail Peter Boutros has been promoted to vice president of international marketing for Disney Consumer Products. Boutros, who has been with Disney since 1993, was previously director of international marketing. Security Pinkerton’s Inc. has appointed Jim R. Mellor to its board of directors. Mellor is currently chairman and chief executive officer of General Dynamics and previously served as president and chief operating officer of AM International Inc. Tourism Lana Dubovik was named “Young Hotelier of the Year” for 1996 by the International Hotel Association and Hotels magazine. Dubovik, a recent & #233;migr & #233; to the United States from the Ukraine, is director of sales at the Radisson Valley Center Hotel in Sherman Oaks.