Chapter 679: Playing Hard to Get

[Chapter 679: Playing Hard to Get]

LTD Group fell into the hands of Firefly Investment Company and the Brighton family through a hostile takeover. Although both companies held a 62% stake, giving them absolute controlling power, when Eric proposed a $20 million marketing plan to produce the Victoria's Secret Fashion Show, he faced strong opposition from other shareholder representatives on the LTD board. To avoid any internal turmoil after the recently completed hostile acquisition, Eric took it upon himself to manage the situation. Considering the reaction from Firefly Group's minority shareholders, Eric decided to cover the entire production cost of the fashion show personally.

From the inception of this fashion show to its final broadcast, the buzz it generated proved the immense success of the event. However, before the VHS tape of the fashion show was released, no one believed that it had the potential to turn a profit. Even with the high ratings after airing, which attracted a slew of TV networks eager to purchase the broadcast rights, Eric set the prices extremely low to maximize the Victoria's Secret brand's influence. Some European networks managed to acquire the rights for as little as $100,000, resulting in total income from this segment of just over $10 million, which still fell short of recouping the $20 million production cost.

However, the unexpected happened after the release of the fashion show's VHS tape.

The collection value of the stunning fashion show tape, combined with six chart-topping songs and a hunger marketing effect from being repeatedly sold out, resulted in its popularity far exceeding anyone's expectations. In the U.S. alone, sales of the VHS could reach 20 million copies, and the overseas market prospects were even more enticing.

Thanks to the booming sales of the VHS, just the domestic sales alone could bring Eric $300 million. While Eric's net worth had already reached several billion dollars, this windfall was still a surprising fortune for him.

As everyone marveled at the VHS's sales figures, the shareholders of LTD who had loudly opposed funding the fashion show were left regretting their decisions. Those shareholders likely felt an urge to bang their heads against the wall upon hearing the sales numbers. Had it not been for their vehement opposition, the revenue from the fashion show would have belonged to LTD, almost doubling their annual profits.

Even worse, LTD would certainly miss out on this year's significant profits from the fashion show, as they had carelessly sold its rights to Firefly. Consequently, LTD would also be unable to share in the profits from any future business operations of the Victoria's Secret Fashion Show.

Thus, Emily's recent attempts to reclaim the rights to the fashion show were not surprising.

Though the relationship was very close, Emily was still a Brighton family member, and business was business. If she could recover the rights, the Brighton family stood to gain from it in the future.

From the start, Eric's plan was to produce one Victoria's Secret Fashion Show to demonstrate its advertising effectiveness, then hand the rights back to LTD for them to run it themselves. He never expected the show to yield such a substantial profit. But now, just as Emily was being business-minded, given the unexpected commercial success of the fashion show, Eric could no longer stick to his original plan.

Eric also understood that this year's unexpected success of the fashion show on VHS could only happen this once. It stemmed from him exhaustively leveraging all of Firefly Group's media resources and Yahoo's online platforms, along with six months of hands-on operations to achieve the final outcome.

He knew he couldn't keep dedicating countless media resources to this effort in the future. Even if he were willing, after the fashion show lost its novelty and mystery, viewers wouldn't keep tuning in. Moreover, the format of the fashion show was quite singular; it didn't provide the same yearly suspense as events like the Super Bowl or the Oscars, making duplication of its success unlikely.

Thus, while the first show's success would bring in some profits in the following years, it couldn't sustain itself for long. Therefore, relinquishing the rights to the fashion show was akin to selling a stock at its peak.

After contemplating for a moment, Eric asked Emily, "If I were willing to hand back the rights to the fashion show, what kind of offer could LTD make?"

"Uh?" Emily's eyes widened in disbelief as she gazed at Eric, seemingly trying to confirm if she heard him correctly. Even Chris and Joanna looked surprised at Eric.

Although someone had previously proposed reclaiming the fashion show rights at an LTD board meeting, and Emily was tempted to do so, hearing Eric now express willingness to let them go still shocked her. Like many others, she held no expectation about this.

However, she quickly regained her composure and asked, "Eric, are you serious about what you just said?"

Eric shrugged. "Of course, but if LTD doesn't present an offer with enough sincerity, I certainly won't agree."

"Well, we haven't considered this situation," Emily admitted with an awkward smile, adding, "I need to go back and discuss it with the other shareholders. But, Eric, what would it take to satisfy you?"

Eric replied, "I'm not short on cash right now. If you pay in cash, I'd have to pay personal income tax, and that wouldn't be feasible. So let's consider the fashion show rights as equity investment."

Upon hearing that Eric wanted to convert the rights into LTD equity, Emily immediately looked rather pitiful. "Eric, LTD sold you the rights for a symbolic price! Are you really going to ask for such a high valuation? You've already made so much money from this!"

Eric raised his hands and chuckled, "Without the unexpected revenue from the VHS, I would have been out $20 million of pocket change and burned through a ton of Firefly and Yahoo's media resources. So, I feel completely justified in this amount. Now that I've turned a seed into a gold nugget, you've got to buy it back at the gold price, haha."

Seeing Eric's explanation, Emily stopped the pointless posturing and earnestly brought up the main topic, "So if LTD takes back the rights, would you still be personally involved in producing the fashion show?"

Eric shook his head. "There's no way I could participate like this again. But I am a major shareholder in LTD, and if I have some good ideas, I won't hold back. Besides, the fashion show's initial breakthrough this year should ensure that you can recruit a heavyweight creative team next year, even if I don't participate. With the show's current influence, those top musicians would likely want to use it as a platform for launching their new songs. Although you'll share some revenue with them, the earnings for LTD will still be substantial. And don't forget, the fashion show's primary purpose is to market the Victoria's Secret brand. Though the direct revenue from the show may steadily decline over the years, the brand will maintain a strong stance in its field through continued reinforcement."

Emily nodded repeatedly, and after Eric finished speaking, she jokingly remarked, "Eric, I'm starting to think about bringing you over to LTD as an operations director."

Everyone laughed, and Eric teasingly replied, "Well, I doubt you could afford that."

...

In the following days, LTD nearly rushed to present an offer. Ultimately, the two sides reached a deal worth $225 million in equity. Eric was quite satisfied with the offer. Initially, Firefly Investment and the Brighton family would split the 62% stake evenly. After this transaction, Firefly Investment's share increased to 35%, making it the largest shareholder of LTD, whereas the Brighton family's stake slightly dropped to 30%.

Many industry analysts pointed out that this year's commercial success of the fashion show was not replicable, but market reactions are often blind, or else stock market bubbles wouldn't occur. Consequently, this deal stimulated LTD's stock price once again, pushing its market value past $5 billion. However, all this would unfold in the subsequent days.

...

After the television broadcast of the fashion show concluded, Eric shifted his focus back to Hollywood.

With the Christmas release schedule approaching, Firefly released Face/Off and Columbia launched Jumanji sequentially. Since Jumanji contained a high volume of special effects, Eric was keen to avoid reproducing the original's subpar effects. So, he provided a significantly more generous budget. The new version of Jumanji ended up being vastly superior to the original, but the budget soared, eventually reaching $80 million, with marketing costs consuming an additional $40 million. In comparison, Face/Off's total investment budget was only $60 million, and its marketing costs were significantly lower than Jumanji's.

However, unexpected events occurred after both movies released. Face/Off premiered a week earlier than Jumanji, making $36 million in its opening weekend and garnered critical acclaim for its exciting plot. Ultimately, its box office could reach about $120 million. Although this performance wasn't as spectacular as the previous Mr. & Mrs. Smith, it still managed to recoup its production cost in the North American market alone, and international distribution ensured profitability, with subsequent peripheral promotions essentially becoming net profit.

Then Jumanji was released.

This highly-anticipated blockbuster, backed by Columbia, made just over $36 million in its opening weekend -- almost on par with Face/Off. Columbia's initial box office prediction had estimated around $45 million for its first week, indicating a marked contrast between expectation and reality.

Furthermore, unlike Face/Off's excellent reception, Jumanji garnered rather poor reviews, with many critics citing that this film was excessively 'loud' and the director became too enamored with piling on special effects.

Although the market for CGI films was not yet saturated and many viewers remained unfazed by Jumanji's dropping reputation, the movie's box office saw a minor decline of only 26% in its second week. The cumulative box office reached over $62 million, proving quite successful. However, projections suggested that Jumanji would likely stall at around $140 million in domestic earnings -- $60 million short of Columbia's intended $200 million mark.

Following the recent $2.1 billion write-down event, Sony was already deeply frustrated with Hollywood. Even though Jumanji would ultimately secure a position within the annual top ten box office, viable profits from various distribution channels were still expected. The reality that its earnings didn't meet expectations weighed heavily, regardless.

Moreover, after facing difficulties in selecting the next leader for Columbia -- with Hollywood figures like Barry Diller, Amy Pascal, and Michael Lynne declining offers -- the disgruntled Sony ultimately decided to play hardball.

The first move from a miffed Sony was to take a hard stance in negotiations with Firefly regarding Men in Black and Mr. & Mrs. Smith. They declared publicly that if Firefly continued to intentionally stall the sequel development process, Columbia would not hesitate to use legal means to protect its interests.

Eric had no intention of making things difficult for Sony regarding these movie sequels; he actually hoped they would remain a solid contributor to Hollywood.

However, Sony clearly did not see it this way. Throughout the negotiations, they believed that Firefly was trying to monopolize the rights to Men in Black, which led to tension.

With no progress in the negotiations within a short time frame, Sony instructed Columbia's interim management to take further action -- demanding a renegotiation of distribution contracts related to films like Night at the Museum, Forrest Gump, and even the still-in-theaters Mission: Impossible series.

*****

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