The global television production industry is comprised of vertically integrated media companies with studio television divisions, broadcast and cable networks, and independent producers and licensers of television content. Television production companies develop and produce television programs that they license or syndicate to broadcast and cable networks and other content distributors.

The demand for original programming is strong and growing. According to Kagan, global television programming revenue from U.S.-produced programming is expected to reach more than $48.2 billion by 2011, representing a 4.4% CAGR from $40.6 billion in 2007. Kagan also anticipates that U.S. basic cable programming spending will grow at a CAGR of 8.1% from 2007 to 2011 and that international demand for U.S.-produced programming is projected to grow at a 5.5% CAGR from 2007 to 2011. Kagan expects similar growth rates to persist through 2016.

Demand for new content stems primarily from the proliferation of networks and new distribution platforms. For example, according to Kagan, the average number of basic cable channels received by U.S. multi-channel subscribers increased 7.3% annually from 49 in 2001 to nearly 75 in 2007 and is projected to increase at a 4.1% CAGR to approximately 88 channels in 2011. Key global growth drivers include:

As the number of other outlets for television product multiplies, demand for television content is expected to expand, and content companies such as RHI are expected to benefit. According to Veronis Suhler Stevenson, DVD revenues in the home video market are expected to climb to $31.2 billion annually by 2011, representing a CAGR of 4.0% from 2007 to 2011. In addition, according to Veronis Suhler Stevenson, the residential wired cable VOD market is projected to grow from less than $1.4 billion in 2007 to $2.5 billion in 2011, representing a CAGR of 16.1%. During the same period, the internet video download market is projected to increase from $353.0 million to $1.8 billion, a 50.9% CAGR.

The first step in the pre-sale process is negotiating an initial license with broadcast or cable networks. This period generally ends after a specific number of telecasts, but not later than three to seven years (depending on the type of content) after delivery. During the defined period, the specific licensee has the exclusive right to air the programming in a certain geographic area. The Company’s practice is to not begin production of a MFT movie or mini-series without securing an initial license agreement.

When the initial license agreement is secured, the production process begins. Although the Company has key employees who evaluate certain aspects of a project, it relies on third party production companies to produce many of its MFT movies, mini-series and other television programming. These third parties are responsible for hiring key talent, including actors, directors, writers and film production crews. In consultation with the Company’s senior management team, these third party production companies also determine the location of filming, finalize the production budget and schedule.

The Company’s sales force continuously makes presentations to broadcast and cable networks worldwide in order to generate orders for both new productions and existing content from the Company’s film library. The Company’s content is licensed on either an individual or multi-picture basis, depending on the needs of the distribution platform. Recent sales have included several multi-film agreements for licensing of new content. The majority of the Company’s new productions automatically qualify for inclusion in several of its existing international distribution agreements with European broadcast and cable networks, providing secured foreign market distribution.

Cost of sales increased $12.6 million to $17.6 million for the three months ended March 31, 2008 from $5.0 million during the same period in 2007.

Interest expense, net decreased $1.4 million to $11.8 million for the three months ended March 31, 2008 from $13.2 million during the comparable period in 2007.

The net loss for the three months ended March 31, 2008 was ($20.2) million, compared to $(17.3) million for the three months ended March 31, 2007.