Chapter 180: Collateral Damage?

Today is June 24th, Friday.

Just yesterday, after a new round of voting, the Writers Guild of America once again rejected the latest contract proposal from the Alliance of Motion Picture and Television Producers (AMPTP), meaning the Hollywood writers' strike, which has lasted for three and a half months, will continue.

The AMPTP represents over 350 film and entertainment companies in the United States, centered around the Hollywood Big Seven studios and the four major broadcast networks, but it ultimately cannot represent all. Due to the prolonged strike leading to business stagnation, many small and medium-sized production companies were forced to sign contracts with the Writers Guild as demanded since last month, including some defectors from the AMPTP.

The strike has now resulted in a lose-lose situation.

Many anticipated the AMPTP would 'settle scores after the autumn harvest' with those production companies that compromised early. Simon was well aware of the actual progression of events. However, standing at the doorway of a casting room at Daenerys Media's headquarters, Simon couldn't help but show a wry smile upon hearing the sudden news from Amy, tentatively asking, "The AMPTP's announcement didn't mention 'Who Wants to Be a Millionaire,' did it?"

Simon had not joined the Writers Guild, and Daenerys Media had not joined the AMPTP either. Throughout the strike, he had intended to remain a bystander. Yet, the emergence of 'Who Wants to Be a Millionaire,' a phenomenon-level reality show that did not require writers, meant Daenerys Media could not stay out of it.

Feeling Simon's hopeful gaze, Amy shook her head regretfully, also showing a bitter smile, "It did."

Jonathan Friedman and the other two, after listening to a bit of Simon and Amy's conversation, understood the situation and tactfully made themselves scarce.

Simon sat back down, frowning in thought.

Before the strike, due to refusing to join the Writers Guild, Simon's scripts from the previous year were ignored by the WGA, resulting in no awards during the awards season at the beginning of the year, which wasn't much of an issue.

But now, with the Writers Guild and AMPTP's conflict intensifying, Daenerys Media's launch of 'Who Wants to Be a Millionaire,' a hit show that could bypass writers, effectively gave the AMPTP a 'nuclear weapon' that could determine the outcome of the war.

Moreover, Daenerys Media's 'nuclear arsenal' wasn't limited to just this one.

With the Writers Guild rejecting the AMPTP's contract again yesterday, and 'Who Wants to Be a Millionaire' achieving an impressive viewership of 17.3 million last night during this off-peak summer season, a confrontational stance had been taken.

The AMPTP's decisive announcement of a blacklist today, specifically mentioning 'Who Wants to Be a Millionaire,' was a sharp counterattack.

It was foreseeable that in the upcoming negotiations, the already weakened Writers Guild would not have any advantage.

Even without any confrontational intentions, under the current circumstances, Daenerys Media had thoroughly offended the Writers Guild.

The relationship between the Writers Guild and production companies is fundamentally that of employees and employers. The AMPTP can blacklist those production companies that signed contracts with the WGA early, but without a solid reason, the Writers Guild could not reciprocate against Daenerys Media.

Reality shows like 'Who Wants to Be a Millionaire' clearly do not constitute such a reason.

However, given the chance, the Writers Guild would definitely find ways to trouble Daenerys Media in the future. Most directly, it would become very difficult for Daenerys Media's films to win awards like the Best Screenplay at the Oscars.

In essence, in the war between the AMPTP and the Writers Guild, Daenerys Media, this collateral fish, could no longer stay out of it.

After Amy closed the door and sat down, Simon had already resolved to deal with whatever comes. From the beginning, he never considered siding with the Writers Guild, as it would not benefit Daenerys Media.

Thinking this, Simon looked up at Amy and asked, "How did the talks with Daniel Burke go?"

Amy shook her head, "ABC refused our offer of $2 million per episode, they are only willing to give $1 million."

Considering a viewership of 20 million, in the 1980s, a 30-second advertisement for such a program during the popular autumn season could reach $200,000. 'Who Wants to Be a Millionaire,' being an hour-long program, actually contains only 45 minutes of content, with the remaining 15 minutes allocated to advertisements.

Thus, the advertising revenue per episode of 'Who Wants to Be a Millionaire' could reach $6 million.

Operating a national television network is very costly.

ABC, among its more than 200 affiliated stations in North America, actually owns a relatively small number of stations directly. Many local affiliate stations broadcast the network's prime-time programs, similar to how movie theaters distribute films from studios, and certainly expect sufficient returns. Including the network's operational expenses and program purchasing costs, the profits that a network can make are actually not substantial.

Taking 'Who Wants to Be a Millionaire' as an example, with an estimated $6 million in advertising fees per episode, the network's operational expenses and affiliate shares would take up 50%, leaving only 50% as the profit to be shared between the network and the producer.

A $3 million profit share, with Daenerys Media taking $2 million, is quite reasonable. After all, theoretically, Daenerys Media should bear the program's production costs. However, reality says otherwise.

'Who Wants to Be a Millionaire' is not like those standard 23-episode autumn season TV dramas. If there were only 23 episodes per season at $2 million each, Daenerys Media would only make a total of $46 million, minus the theoretical production costs, leaving even less net profit for Daenerys Media.

But in reality, based on the original contract, 'Who Wants to Be a Millionaire' would reach 69 episodes per season, three times the number of a standard one-hour TV drama. At $2 million per episode, Daenerys Media's total revenue would skyrocket to $138 million.

Regarding costs, the estimated production cost for 'Who Wants to Be a Millionaire' per season was $20 million. However, Daenerys Media also controlled the rights to in-show advertising, such as brand mentions by the host and products placed on the guest table.

ABC initially had low expectations for 'Who Wants to Be a Millionaire's' viewership, so they relinquished this revenue stream to allow Daenerys Media to offset some production costs.

Now, with 'Who Wants to Be a Millionaire's' current popularity, many brands are willing to pay big money for sponsorship, with this revenue alone enough to fully offset the program's production costs and turn a profit. Daenerys Media selling the program to ABC, regardless of how much per episode, would essentially be pure profit.

If Daenerys Media's asking price were met, ABC could only make less than $70 million in profit per season from this project, possibly not even half of what Daenerys Media would earn.

It's clear that ABC would find it hard to accept a small, newly entered program producer like Daenerys Media making more than double their profit.

Seeing Amy's expression, Simon realized his executive might also struggle to accept this, so he asked with a smile, "Amy, what do you think we can negotiate?"

"Maybe $1.5 million per episode," Amy said, noticing Simon's smile and feeling somewhat sheepish, but she still stated her estimate, adding, "The company has recently received sponsorship applications from AT&T, Mars, HP, and IBM, among many others. Mars alone offered $20 million, wanting to become the main sponsor of 'Who Wants to Be a Millionaire.' From ABC's perspective, $1.5 million per episode and an equal profit share would be the best outcome."

Simon remained non-committal, asking, "What else?"

Amy continued, "ABC also wants to amend the contract to participate in the production of the program. Additionally, they wish to order more episodes, starting official broadcasting from July. However, I don't think this is a good idea. Releasing too many episodes in a short period will cause viewers to quickly experience aesthetic fatigue, shortening the program's lifespan. Therefore, I believe one season a year is enough. A half-year break between each season can keep the audience feeling fresh, and we also have more time to adjust and innovate the program."

In Simon's memory, after 'Who Wants to Be a Millionaire' exploded in popularity, ABC broadcasted it incessantly throughout the year, even increasing to four episodes a week, eventually exhausting all its potential in just a few years.

In comparison, 'Survivor,' which managed its pacing better, continued production for over a decade.

Therefore, Simon fully agreed with Amy's view, "You're right, Amy. Rushing to produce more episodes might bring us a large profit in the short term, but it's hard to sustain in the long run. So, we'll stick to this point, with no room for negotiation."

Amy nodded, then mentioned, "Additionally, ABC wants to acquire 'Survivor.'"

"'Survivor' is not an option for them, nor is 'Big Brother,'" Simon immediately rejected, "If they want something else, it could only be 'The Real Housewives of Beverly Hills.' Speaking of which, have you finalized the selection of housewives?"

Compared to 'Who Wants to Be a Millionaire' and 'Survivor,' Simon invested less time and effort in 'Big Brother' and 'The Real Housewives of Beverly Hills.'

Hearing Simon's question, Amy's lips curved into a slightly different smile, "Initially, not many people signed up, but after 'Who Wants to Be a Millionaire' aired, many have called wanting to participate, and the project team is re-evaluating some candidates based on recent developments. How about we organize a party for you to personally select?"

Simon leaned closer to Amy, asking in a low, hopeful voice, "Will their husbands attend?"

Amy rolled her eyes noticeably, "Boss, if there's nothing else, I need to get back to work."

"Alright, just kidding," Simon sat up straight again, his expression turning serious, "Amy, there's no law that says we can't earn more than the network. So, $2 million per episode, we won't negotiate on this either. ABC making $1 million per episode already exceeds what most of their programs can offer in terms of profit. Most importantly, 'Who Wants to Be a Millionaire' can boost ABC's overall viewership, which is actually more significant for the network. They surely understand this, so we'll stick to $2 million. If ABC disagrees, we'll temporarily shelve the project, and they can look for other programs that can earn more for the network."

Amy's lips moved, but she nodded, asking, "What about 'Survivor' and 'Big Brother,' Simon?"

Amy clearly had no interest in further discussing Simon's bad taste.

Simon didn't mind, "I talked to Barry Diller last time. The basic strategy for these two programs is, we make a profit, and the network gains viewership."

"But we can't prove yet that 'Survivor' and 'Big Brother' will achieve the same success as 'Who Wants to Be a Millionaire,' right?"

"So, it's a gamble," Simon shrugged, "If the network doesn't even have that much courage, then it's better not to talk."

After discussing these matters, as they were about to get busy with their respective tasks, Amy suddenly remembered something, "Simon, it's almost July, we should start preparing for next year's movie projects."

"I'm aware," Simon spread his hands, "But do you have time recently?"

"No."

Amy shook her head, glancing at Simon, who obviously didn't either.

Production studios typically start preparing movie projects for the next year a year in advance. If it's a blockbuster film, production often begins in the latter half of the year.

Daenerys Media's current production schedule, excluding 'Batman,' could at most continue until next Easter. Moreover, the projects that could be postponed to next year were mostly Catherine's 'Blazing Blue Angels' and two low-budget independent films from Sundance, 'Metropolitan People' and 'Sisters,' which obviously lacked appeal.

However, despite Daenerys Media's continuous expansion, the company is swamped with projects, leaving no room to focus on next year.

Team development takes time, and Daenerys Media's current project load has reached Simon's limit of oversight. He couldn't blindly hire people to handle potentially blockbuster projects. Being too eager could lead to failure, and it would be a pity if some films flopped.

In essence, Daenerys Media was still too weak.

Simon found himself even more eager to acquire New World Entertainment.

After all, besides the indispensable Marvel, New World Entertainment also had a complete film production and distribution team. Even if this team couldn't be considered top-tier, it was definitely much more reliable than gathering teams from everywhere.

With this in mind, Simon still said to Amy, "In that case, you can keep an eye out for some good projects in Hollywood recently. If possible, we can participate in investing."

'When Harry Met Sally' and 'Pulp Fiction' were confirmed to bring substantial profits, but the return cycle was very long. Amy Pascal had been carefully monitoring the company's cash flow. Now, with the success of 'Who Wants to Be a Millionaire,' these issues were instantly resolved.

With sponsorships from advertisers and ABC's advance payments, Daenerys Media would soon see a significant influx of cash. If not for this, Amy wouldn't have brought this up to Simon on the spot. Spreading the company this thin, Amy initially only wanted to earnestly complete all ongoing projects.

As for next year, that would have to wait until next year.

Standing up to leave the audition room with Simon, Amy nodded at his suggestion, "I'll keep an eye out."

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