I am Hollywood

[Chapter 1087: Terms]

"The initial terms from the other party are," Bill Michanik said, "Sony Pictures can share 15% of all revenue channels, including box office, audiovisual products, and licensing for Big Daddy as distribution costs, but we need to bear the film's marketing budget ourselves."

Eric knew right away that any studio landing Adam Sandler's latest project had to be a veteran of Hollywood, especially compared to when he had naively stared at box office numbers in the past.

In Hollywood, the marketing budget in film production and distribution expenses was notoriously inflated. According to the rules, several major unions in Hollywood required a fixed percentage taken from the net profits of films as benefits for their members. Moreover, some key creatives would sign contracts for a share of the net profits with the film company. To minimize or even avoid this expenditure, production companies often over-reported marketing budgets, seeking to offset profits made during the film's distribution to present a state of loss. This was the infamous Hollywood accounting.

The suggestion from the producer of Big Daddy to allow Columbia to handle the marketing budget directly avoided a major pitfall for the distributors in reporting inflated marketing costs. It's important to note that the marketing budget for Hollywood films typically averaged around half of the production costs, yet many films reported marketing expenses exceeding production costs.

And, of course, the 15% distribution split on all revenue channels was clearly well thought out. This revenue didn't amount to the film's profits or total sales income from channels such as box office and DVDs. Instead, it represented revenue after the film company took a share from various terminal sellers, like the 55% split with domestic theaters in North America, an average of about 35% overseas, plus wholesale income from audiovisual products.

Adam Sandler's overseas box office draw was virtually negligible. The long operational cycle of videotapes and DVDs made it impractical for Columbia. The most substantial revenue remained the North American box office share.

The 15% box office revenue share roughly amounted to around 8% of the total North American box office gross. So, if Big Daddy made $100 million at the North American box office, Columbia would only take home $8 million. While overseas returns might not be significant, it would be possible to gather $2 million.

Thus, Columbia could expect to acquire around $10 million from box office revenues. Given the current income breakdown in Hollywood, where box office, audiovisual, and licensing each represented one-third, after approximately two years of full-channel operations, Columbia's total revenue would hover around $30 million.

New Line had $10 million for the marketing budgets of both The Wedding Singer and The Water Boy, of course, that figure would not reflect accurately in the books. If Big Daddy followed similar standards, after two years of hard work, Columbia would only net $20 million in profits.

It wasn't difficult to guess that since Adam Sandler had turned down New Line's $15 million salary offer, then the independent production company named 'Out of the Blue... Entertainment' must have offered him at least $20 million as a baseline.

Compared to Adam Sandler effortlessly pocketing $20 million, Columbia's team would be toiling away for two years, earning what could only be described as meager earnings.

In Eric's view, a film company that was one of the seven major studios in Hollywood falling to the point of scrapping together small profits from stars was almost worse than bankruptcy.

In reality, Sony Pictures in the original timeline relied heavily on the unyielding Spider-Man franchise to occasionally make its financial reports look decent. Most of the time, the company was stuck making "sweat money" off affordable stars like Adam Sandler and Will Smith. Tom Cruise earning over $70 million from each Mission: Impossible had already strained relations with Paramount, yet Will Smith frequently secured over $80 million per film with Sony, showcasing how pitiful Sony's profit margins were.

With ongoing changes in the industry, Columbia needed projects that could guarantee profitability. However, Eric had no intention of allowing Columbia to tread the same path. Therefore, he said decisively to Bill Michanik, "Reject their offer. We don't want the distribution rights to this film, nor will we accept similar terms in the future."

Bill Michanik hesitated, saying, "Eric, the 15% split is certainly negotiable."

"Bill, you surely have done the profit projections for this film, right?" Eric asked, but before Bill could respond, he continued, "I would rather keep Columbia's distribution channels idle than work for the stars. If Columbia is lacking production funds, I can provide them. You need marketing resources, and the Firefly Media Network can offer that. All you need to do is find good film projects with your team. You have two years. If Columbia hasn't improved by then, I will initiate a large-scale layoff. If that doesn't help, I'll have to let you go and merge Columbia back into Firefly."

After saying that, Eric ignored the two and stood up, heading straight for the exit of the restaurant.

Bill Michanik digested Eric's words, feeling a wave of increased pressure.

...

While Eric's words were harsh, upon reflection, it became clear he was ready to provide the funding and media channels. If their outcome still didn't improve, even without Eric saying anything, he wouldn't have the digntity to stay at Columbia. However, in an industry known for its high risks, who could truly guarantee a film's success?

Seeing Kenneth Horne calmly sipping coffee nearby, seemingly unaffected by Eric's previous statements, Bill Michanik suddenly had an idea and asked tentatively, "Kenneth, I heard that besides The Ring, New Line has a few good Japanese horror scripts?"

Kenneth Horne shook his head immediately and laughed, "Don't even think about it."

Bill Michanik, feeling disheartened, took a sip of coffee and said, "I noticed Eric has helped you choose so many projects, including MGM's spy movie universe, yet Columbia has nothing to show for it."

"Really?" Kenneth Horne smiled. "How about this, you give me Pirates of the Caribbean, and you can choose any script from New Line."

Although Pirates of the Caribbean was being closely held by Eric with no signs of production yet, just thinking of the series of actions Eric took for this script showed how crucial it was to him.

Upon hearing Kenneth Horne's demand, Bill Michanik immediately replied, "Not a chance."

...

Eric's acquisition of Columbia was partly about Pirates of the Caribbean, but even more so to continue expanding the Firefly system's production and distribution platform.

Although many people within and outside of Hollywood were skeptical of Columbia's future and even considered Firefly taking over Columbia a hindrance to its growth, Eric remained confident about Columbia's revival. For him, selecting a handful of promising screenplays from the countless projects brewing in Hollywood at any given moment was merely a walk in the park.

His earlier words were merely a wake-up call for Bill Michanik. Kenneth Horne clearly understood this, which is why he appeared relaxed. After being chastised by Eric, Bill Michanik was naturally more focused now.

As for Adam Sandler's new film, even if it broke box office records reaching $200 million or more, Eric didn't mind. Establishing new profit-sharing rules in Hollywood was far more important in his mind than momentary gains or losses.

Moreover, outside of the Firefly system, the other three -- Warner Bros., Paramount, and Universal Pictures -- were hardly appealing options.

As for the so-called 'Out of the Blue... Entertainment' conducting independent distribution, given that Hollywood had already seen a substantial consolidation of the media industry, their efforts would undoubtedly face the combined obstacles of the major studios. Without substantial advertising resources and solid theater platforms in place, even if a film had the potential for a $100 million box office, landing $50 million would be lucky.

Each release window had a fixed audience and box office scale; a standalone company entering the fray meant cutting into the business of the majors. Who would be willing to do that?

It could be said that after the turn of the millennium, unless there was a fundamental policy shift in North America's media industry, the number of major Hollywood film companies would only decline and never increase.

...

After leaving the restaurant, Eric had intended to go up to the top deck for some fresh air, but he found Harvey Weinstein, Robert Redford, and others already gathered there. Among the crowd stood Julia Roberts, who had been chatting happily. Upon seeing Eric, her demeanor shifted, and she came over affectionate, intertwining her arm with his.

Everyone felt Julia's unusual behavior, but no one displayed any overt reaction. Over the years, Julia had apparently stopped caring what others thought. Among Eric's women, she alone boldly wore that shiny ruby ring in any setting without regard and rarely took it off.

Feeling the smooth silk of Julia's gown against him, Eric wrapped his arm around her waist and smiled, greeting everyone, "What are you all discussing?"

"The Sundance Film Festival," Robert Redford said. "Eric, are you interested in skiing in Park City? It's just the right time."

Robert Redford, besides being a well-known director and actor in Hollywood, was also the illustrious founder of the Sundance Film Festival.

Eric wasn't particularly interested in skiing. Although he understood Robert's intention to invite him to the Sundance Film Festival, he was about to decline.

Yet, just as he was about to speak, Julia gently tugged at his sleeve, her tone a bit hopeful, "Eric, I promised Bob I would attend the opening ceremony of the Sundance Film Festival next week. Will you come with me?"

Julia rarely made requests of Eric, so hearing her say this left him with no thoughts of refusal. He turned to Robert Redford and asked, "Uh, Bob, when is it?"

"The opening ceremony is on Thursday," Robert said, trying to keep his expression neutral, despite having heard of Julia and Eric's relationship. "The ceremony is held in the evening, so you can come by then."

"Well then, I'll take Julia to see it," Eric nodded, then asked, "Are there any outstanding films this year?"

"About that," Robert Redford smiled, "I think all the films are quite good; however, whether they'll suit your taste is something you'll want to check out for yourself."

The Sundance Film Festival aimed to support independent films and new talent, and one of the distinguishing features of these films was their low budget. As the most successful commercial director in Hollywood at that time, Robert Redford found it challenging to gauge whether Eric would still be interested in these smaller productions.

Eric sensed the subtext in Robert's words and said, "In fact, the production budget has never been the most important factor to me. I prefer films that achieve great things on a small scale."

Hearing Eric say this, Harvey Weinstein immediately shook his head in amusement, remarking, "Eric, what you said is something everyone would agree with."

Eric paused for a moment, then laughed, "Yeah, it really is something everyone likes."

...

After chatting for a while, Eric took Julia away from the deck, asking along the way, "What about Liz?"

"She went to New York," Julia replied, moving closer to Eric in the corridor and added, "I think she went to have a fight."

Eric became intrigued, saying, "What fight?"

Julia looked confused, saying, "I don't really know."

Despite Rupert Murdoch's business acumen, he wasn't known as a strict father. Otherwise, his two sons wouldn't have turned out so unruly. For his most accomplished child, Elisabeth, the old man showed even more favoritism. Eric had never witnessed Elisabeth in a confrontation with her father.

Thus, going all the way to New York for a fight could only mean it was with the new step mother.

Thinking about the way Elisabeth ended up devastated during her playful banter, Eric felt a small twinge of worry for her on this quarrel trip.

Upon reaching the lower main deck, Eric walked to the buffet table, grabbing a plate with Julia as they planned to eat something. Eric then asked, "How's the preparation for your new film coming along?"

"I've already talked with Soderbergh," Julia replied, picking her food. "We're starting filming in March, and it will be out by the end of the year."

Eric nodded, smiling, "Nicole's Moulin Rouge! got pushed to next year, so it seems nobody will be competing against you for Best Actress this year."

As a large-scale musical, Nicole's Moulin Rouge! had originally hoped for a summer release. However, due to various delays, it couldn't be ready in time for the summer schedule. The year-end period was already crowded, and it would directly compete with Julia's film, Erin Brockovich. Fox eventually decided to move it to next year.

Having taken their food, they walked to a table on the deck to sit down. Julia said, "I don't care about Best Actress, Eric. You don't care, do you?"

Eric pretended to think about it before chuckling, "I'd still prefer Best Actress."

"Hmm, then I'll go for Best Actress," Julia's expression morphed intriguingly, her eyes shining, "Eric, if you're impatient, there are some Best Actress nominees on this ship right now."

Eric wanted to give Julia a playful tap on her forehead but held back because of the many people around. "Who are they? I haven't seen any."

Julia looked around and pointed, "There, Holly Hunter, the Best Actress for The Piano. Although she plays a mute in that movie, her voice is actually beautiful."

*****

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