I'm in Hollywood Chapter 169: A roundabout talk

Aniston, who had been sitting quietly beside Eric, was a little confused. Before she came, Eric did not hide the purpose of this invitation to Robert Shea. But now that dinner was past over half, neither of them had mentioned the acquisition of the film company at all. Instead, they were talking irrelevantly about kinds of industry insiders, such as the huge loss of MGM's Heaven's Door, the box office miracle of Gone with the Wind in 1939 when Robert Shea was born, why Disney rose so fast, or the truth of RKO’s bankruptcy. Anyway, there was nothing about the acquisition, at least the not-so-intelligent young lady didn’t find anything related.

At first, Aniston listened with relish, then gradually losing interest, but she didn’t want to be rude so that her boyfriend would lose face, the lady can only sit up and listen carefully, although her mind had flown to the horizon.

Until the waiter removed the dishes and served coffee for them, Eric's chat with Robert Shea was not over.

"... The latest issue of Variety published a data article. Statistics show that, from next year, the revenue from video tape and television rights of movies will surpass the box office. Moreover, the development of various copyrights of merchandising products  from movies is more and more diversified. So the role of distribution channels will become increasingly important in the film industry chain. Pure content providers will find it difficult to survive.”

"That's one-sided. If there are no excellent films, then the expansion of distribution channels will be impossible to talk about. Hollywood is developing its territory in the overseas market just by virtue of high-quality films one after another. If our films are as unproductive as European movies and few good ones were made, they will surely be like European movies, can only be competitive in a small circle. Building highway is important, but without automobiles, highway has no value for existence. Moreover, the salary of Hollywood movie stars has increased more than ten times compared with ten years ago, and they have even begun to take cuts from the profits of movies, which is the most intuitive manifestation of the importance of content in the film market.” Eric finished, took a slow sip of coffee and glanced at Robert Shea. Shortly after the dinner began, they exchanged a few words of greetings and flattery, and insensibly started a secret confrontation. Although no one mentioned any issues about company acquisition, they had been arguing about which part was of greater consequence, the content of the film or the distributor.

The topic was initiated by Robert Shea, who had lost the upper hand since that moment. Now that Robert started the topic, Eric knew that he was very excited about the Firefly's proposal to buy Newline. If he was unwilling to sell, he would not mention the topic at all.

Robert Shea, was also slightly distressed. He found himself far underestimating the vision and insights of the young lad sitting opposite.

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As an experienced man who has been making a living in Hollywood for more than twenty years, how could he not understand that once the topic was started, he was likely to uncover his intention?   

But Robert Shea thought Eric was only nineteen years old. Even though he had some talent in film making, he certainly knew very little about other aspects. And He was thirty years older than him, accumulating much more experience. Moreover, Robert thought his eloquence was not bad, so at first he was confident that he could hold Eric down. Once a seed was planted in Erick’s heart that the distribution channel is the key, Robert would be able to take the initiative in future negotiations.

Eric’s successive films had worked wonders at the box office. So when Eric had someone invite him and leaked some info, Robert Shea felt tempted. Fireflies’ buying Newline was for sure, Robert Shea didn't consider the possibility of the reverse at all. Robert Shea was already fifty years old, but still very ambitious. He didn’t value the huge amount of money from fireflies’ purchasing. Instead, he hoped to achieve the merger of the two companies and get as much equity as possible.

Newline had now hit a bottleneck. Among the second-tier studios, Newline was already one of the best. It had a well-earned film series, and had built a good distribution channel in the United States while also cooperated with fixed distribution partners overseas. What's more, Newline had not been attached to any film giant and completely maintained its independent operation. But compared with the six major film companies, Newline still got a very long way to go. The main reason was it had few box-office hits, or none at all. Up to now, Newline’s most profitable series, a Nightmare on Elm Street, its highest box office was only over 40 million. However, the film’s box office in North America couldn’t be considered qualified until reaching about 100 million U.S. dollars. Without box office hits, Newline was doomed to be difficult to rank among the giants

The pareto principle of the Hollywood market are particularly evident, namely, twenty percent of movies each year gained more than eighty percent of box office revenue. The top ten movies in the box office list are always monopolized by the six major companies, which meant that more than 80% of the box office revenue was pocketed into the six giants. In fact, the revenue proportion of the six companies had been reduced in recent years, because the vigorous development of various channels, providing independent film companies much space to grow. Therefore, the six giants occupied only about 85%, leaving a 15% share to other Hollywood studios. This seemed to be a small percentage, but compared with that more than a decade ago, this proportion was very large. At that time, the six companies basically shared all the box office every year, leaving only a poor 1% to small studios.

If Newline was aimed to make its way to rank among the giants to share the profits of that 80 percent, before meeting Eric, Robert had only two ways to choose, one was concentrating all its strength and risk making big investment, which might achieve big sales, but the risk was enormous. Once it failed, the Newline only had to go bankrupt. The other way for Newline was taking conservative approach, wishing maybe one day, a small-budget film invested by the company surprisingly got box office sales, quickly helping Newline accumulate huge financial strength. If coupled with the good vision of company leaders, its following investment movies could also sell, that would achieve a virtuous circle. In this way, Newline would build up its strength and might join the large companies one day. Lionsgate Film had risen by luck like this. Lionsgate, founded in 1997, was far less qualified and powerful than the old second-tier companies like Newline and Miramax. However, its low-cost documentary Fahrenheit 911, which was released under great pressure of the government in 2004, luckily won 2.4 billion U.S. dollars in worldwide box office, and quickly accumulated sufficient capital, and then with this capital, it developed a series of super-selling "Twilight" and "Hunger Games" series, once dominating giants like Universal and MGM. Following Warner, Disney, Colombia and Fox, Lionsgate ranked fifth in the box office.

After Eric's offer, Robert Shea saw another way to go for prosperity, which allowed Newline to move smoothly into the ranks of film giants without taking risks or waiting for good luck passively. Eric's previous big sales had proved that he had the strength to do so. Since there was a combined giant like MGM-United Artists in the Six companies, there would surely be another case like Newline-Firefly, well, Firefly-Newline.

With a cup or two of coffee, Robert Shea had no patience to carry on with Eric. The young man's patience was amazing. Although he was unwilling to admit it, Robert Shea had to face up to the fact that he had failed in the battle. If he didn’t get to the point directly, maybe Eric would really take the meeting as a chat and got up to say goodbye. Maybe they could only meet again at the negotiating table next time.

"Eric, I heard that Fireflies are ready to expand its distribution channels?" Stirring the refilled coffee with a spoon, Robert Shea asked casually.

The corner of Eric’s mouth curled up. Finally he couldn't cover the intention. The meal had been eaten for nearly two hours. Eric almost had no patience to spend time with Robert Shea. The lady had thrown several charming winks suggesting that he should leave. Eric planned to finish his coffee. If Robert didn't ask for it, he would go back home and get busy with Aniston. Now what’s left was that fireflies officially and publicly issued the invitation to buy Newline.

Eric wanted to probe Robert Shea's intention and see if he was interested in selling Newline. Since in Eric’s memory, Robert Shea's control desire was very strong. In his previous life, although Warner purchased Newline, it was Robert Shea that firmly controlled Newline, it seemed that almost 20 years later, until Golden Compass underwent a great deficit, Robert Sheikh was forced to step down with great pressure.

Robert Shea's initial topic and long argument with Eric had shown his attitude, so it's not necessary to talk about it at the dinner table. Anyway, even if a preliminary intention was reached, the specific terms still needed to be negotiated for a long time. Sony's acquisition of Colombia had now taken more than half a year, with the time for previous planning, at least one year had passed. Firefly's acquisition of the Newline would not be so troublesome, but it certainly couldn’t be completed in a month or two.

Chapter end