Chapter 436: The Road

[Chapter 436: The Road]

Starting from 1984, the A Nightmare on Elm Street series, which was produced at a rate of one film per year, accumulated a significant number of dedicated fans. When Firefly Films announced that Wes Craven, the creator of the series, would return to direct the final installment, it drew considerable attention from moviegoers.

On November 1, Halloween day, Freddy's Dead: The Final Nightmare premiered in over 1,200 theaters across North America, raking in $13 million at the box office during its opening weekend. It also received quite a few positive reviews. Although the film's total earnings would likely rest around $50 million, compared to its production cost of under $15 million, Firefly was set to make a tidy profit domestically.

Aside from Firefly's modest success at the year-end box office, Disney announced that its high-budget film, Billy Bathgate, would be postponed until the following summer, just as Eric had imagined. Disney claimed to believe in the film's box office potential, hoping to fully realize its commercial value. However, those with even a bit of industry knowledge scoffed at this reasoning.

After the announcement of the delay, the filmmakers faced questions from reporters, either clamming up or spinning tales. But soon, an interview with Nicole Kidman, a former lead candidate for Billy Bathgate, provided a hint to the public. Nicole didn't provide any commentary on the film but ambiguously mentioned that a good friend advised her against taking the role.

As one of Eric's "rumored girlfriends," it was easy for many to guess who that "good friend" was. Once the news broke, media outlets turned up the heat, relegating Billy Bathgate to the category of flops, making Disney's defense seem futile.

...

However, this turmoil hardly affected Disney's stock price. Ever since Firefly launched its public acquisition of Disney, the company's shares had slowly been climbing. By early November, Disney held a market value of $4.7 billion, marking a 34% increase in just three months.

With Wall Street and Hollywood closely watching, on November 4, Viacom officially placed a $4.9 billion bid for Disney, competing directly with Firefly.

That day was a Monday. Firefly had already gathered some intel, and Eric arrived early at the Firefly headquarters to strategize with the acquisition team.

During the three months Summer Redstone spent securing investment, in addition to engaging in back-and-forth discussions with Disney's management and shareholders, Firefly managed to purchase an additional 4% of Disney's stock at a premium, raising its holdings to 15%, making it Disney's second-largest shareholder.

If the acquisition reached a stalemate, Firefly could demand a re-election of Disney's board at the next shareholders' meeting, thus taking a hand in Disney's management and potentially seizing control.

Moreover, even in the worst-case scenario, should Firefly lose this acquisition battle, with Disney's current stock price, they could cash out their shares for a profit of at least $300 million.

...

Upon entering the meeting room, Bernie Sanders, the head of the Morgan Stanley team, spoke first: "Based on the information we've gathered, Summer Redstone has divested his interest in theater operations. Viacom has managed to raise around $5 billion. Additionally, Viacom controls a small share of Blockbuster's stocks, and Redstone is lobbying Blockbuster for funding support. If successful, Viacom's leverage will exceed $7 billion."

As Eric listened, he flipped through the materials in front of him regarding Blockbuster.

Blockbuster was the largest video rental chain in North America, boasting over 2,000 locations. Most importantly, its business model provided it with a significant cash flow, a factor that worried Eric the most.

He recalled Redstone's hostile takeover of Paramount in 1994, which occurred after acquiring Blockbuster, using that asset to secure $10 billion in funding and ultimately swallowing Paramount.

Thinking along those lines, Eric asked, "Bernie, is there a chance that Viacom might use its funds to acquire Blockbuster first and then use Blockbuster as collateral to raise more money for the acquisition?"

After some contemplation, Bernie shook his head. "While that strategy is very effective, the likelihood is extremely low. Since Blockbuster changed hands in 1987, it has been expanding rapidly, adding 500 stores a year, with annual growth rates exceeding 30%. Shareholders only need to hold onto their shares, and in less than three years, they could easily double their investments. Under those circumstances, a sale is highly unlikely."

Eric felt a bit relieved. Though he couldn't predict why Viacom would later succeed in acquiring Blockbuster, Bernie's analysis seemed sound.

"What about within Viacom? Even though Redstone currently holds control, wouldn't the shareholders prevent him from going unchecked?"

Bernie nodded, "Redstone may have raised over $7 billion, but if his bid exceeds $6 billion for Disney, he'll encounter increasing resistance from Viacom's shareholders. Once the bid exceeds their psychological limits, it could lead to internal conflicts, allowing us to win the acquisition easily. However, we don't know what that limit is."

The room buzzed with quiet discussions. Eric pondered if there was a way to entice Redstone to withdraw from this contest. However, he soon felt disheartened as it seemed unlikely. Redstone was a classic autocrat: headstrong, utterly dismissive of others' opinions, particularly in direct competition.

Years ago, during his hostile takeover of Viacom, Redstone had relentlessly pushed his offer from $2.25 billion up to $3.4 billion, and upon completing the acquisition, faced with resistance from Viacom's management, he didn't hesitate to pay hefty severance packages to remove the upper management entirely. His aggressive nature was evident.

Once a decision was made, unless circumstances forced him into a corner, the chance of Redstone stepping back was virtually zero.

...

On the day Viacom made its bid, Firefly immediately countered with a $5 billion offer. With just a $100 million difference, onlookers speculated that this was merely a test of the waters between Firefly and Viacom.

In the week that followed, neither side seemed to make any headway. Yet those involved knew that the frequency of contact between Viacom and Firefly's acquisition teams with Disney intensified during that time.

Many also recognized that the Thanksgiving and Christmas seasons would prove crucial for this acquisition, mainly because Disney's management was still determined to lobby shareholders against the deal. If Disney's performance improved in the two months ahead, or if Firefly faced significant setbacks, it was likely that Disney's management would once again secure substantial shareholder support.

...

Despite the year-end box office being significantly lower than the summer period, the competition was still fierce.

On November 22, the first week of the year-end holiday season kicked off with a bang, featuring five films that launched simultaneously, including Fox's Home Alone 3, Disney's Beauty and the Beast, Firefly's Dumb and Dumber, Paramount's The Addams Family, and Universal's An American Tail: Fievel Goes West.

Although it had been a year since a sequel was developed, Home Alone 3 showed no signs of slowing down, pulling in over $27 million from more than 2,500 theaters over its opening weekend, securing the top spot without question. Eric was somewhat surprised by this performance but didn't regret handing the sequel rights over to Fox, considering the film's budget was over $50 million, leaving little room for profit for the studio.

Trailing right behind Home Alone 3 was Paramount's The Addams Family, which netted $24 million across over 2,400 screens.

Firefly's road comedy, Dumb and Dumber, came in third, with Eric arranging for it to screen in 1,900 theaters, earning just $20 million over the weekend.

While this figure paled in comparison to the former two films, it was worth noting that Home Alone and The Addams Family had built substantial recognition through previous films and television series. Dumb and Dumber was entirely new, lacking any audience buildup, yet it had a very low production cost, making its results all the more noteworthy.

On the same day the weekend box office numbers were released, Hollywood producers began analyzing the film, aiming to uncover the success factors of this comedy so they could replicate it. They quickly pinpointed the key element: Jim Carrey. However, upon learning of Jim Carrey's contract terms with Firefly, most abandoned any ideas they might have had.

Aside from these three films, while Disney's Beauty and the Beast received favorable reviews, its distribution was limited to fewer than 1,000 screens, placing it fifth in the box office, even behind Universal's Cape Fear, which had already been out for a week, directed by Martin Scorsese and starring Robert De Niro.

As for Universal's other collaboration with Spielberg's Amblin Entertainment, An American Tail: Fievel Goes West, it grossed a dismal $340,000 across 1,700 theaters, marking the first box office disappointment of the holiday season.

...

Amid the rivalry with Viacom and the occasional mischief from Disney's management, Eric didn't take any breaks during the Thanksgiving holiday, even sharing Thanksgiving dinner with Jeffrey and others.

Eric originally estimated that Dumb and Dumber would earn about $80 million; as long as it hit that milestone, he would be satisfied, considering that lowbrow comedy had yet to cultivate a sufficient audience in Hollywood. However, the film exhibited the potential to exceed $100 million, alleviating Eric's concerns about the upcoming Sarah & Shannon (The Heat).

Nonetheless, although Dumb and Dumber achieved visible success, it was met with criticism from Disney. Just a day after its release, Disney condemned the film's raunchy style as incompatible with its own business philosophy, arguing that such lowbrow humor would damage Disney's wholesome brand image if the two companies merged.

In response to Disney's somewhat unreasonable criticisms, Eric dispatched a firm rebuttal. He clarified that, upon acquisition completion, Disney would be just one brand under the Firefly umbrella, not the other way around. Thus, the current management's assertions were utterly baseless; the projects developed by different subsidiaries would not affect one another. After all, Disney's Touchstone Pictures had produced a considerable number of R-rated films over the past few years.

...

After a month in the Thanksgiving marketplace, Home Alone 3's box office total reached $80 million. Given the upcoming Christmas season, Fox anticipated the film would continue to perform well, as its competition included films like Beauty and the Beast, which had only grossed about $30 million over four weeks. While Beauty and the Beast received good reviews, its box office potential was clearly limited; post-holiday expectations were low. Conversely, Dumb and Dumber managed to pull in $65 million, making it a sure bet to surpass the $100 million mark in revenue.

Steven Spielberg was bound to be a pivotal figure no one in Hollywood could overlook. While most focused on the rivalry between Firefly and Disney's films, Sony Pictures boldly set the release date for its highly anticipated Hook on December 6.

Although the film's script underwent extensive modifications with Eric's involvement -- particularly increasing Nicole's role as the fairy -- the movie still received backlash. In the two weeks leading up to its release, it faced negative media attention. Sony had initially expected the film to earn over $40 million in its first week, but it only managed to pull in $17 million. Though box office numbers increased as Christmas approached, it never surpassed $30 million in any week. With a budget of $70 million, this film would inevitably rely on Spielberg's personal reputation to recoup its costs.

Opening alongside Hook, Dances with Wolves proved even less remarkable. While the smaller film garnered great reviews, its four-hour runtime kept the bulk of viewers away from cinemas.

On December 20, during the first week of the Christmas release season, Firefly's Sarah & Shannon (The Heat) and Disney's Father of the Bride premiered in 1,900 theaters. Father of the Bride, a remake, relied on the star power of the original with Elisabeth Taylor but lagged significantly in relevance; while the original was a classic, it had been out of circulation for 40 years, leaving its impact largely diminished. As a result, the film earned only about $14.4 million in its opening weekend.

In contrast to Father of the Bride's old-school comedy approach, Firefly's Sarah & Shannon (The Heat) wowed many audiences with its raunchy humor, bringing in $21 million over its opening weekend despite mixed reviews from critics. Nicole's portrayal of a serious yet somewhat goofy female cop, teamed with Rosie O'Donnell's brash police officer, delivered 100 minutes of nonstop laughter to cinema-goers. Nicole's transformative role in Sarah & Shannon (The Heat) even sparked interest among viewers regarding her character in Hook, inadvertently boosting the latter's box office numbers. Nonetheless, most fans interviewed expressed a stronger preference for Nicole's performance in Sarah & Shannon (The Heat).

...

As the last day of 1991 passed, with the New Year on the horizon, box office totals for the year began to emerge, hinting at a significant final showdown.

Although some films were still in theaters, the box office and audience reception for most had already crystallized. Due to the war, North America's total annual box office revenue for 1991 was just $4.8 billion, a drop from 1990.

Time Warner continued to dominate Hollywood, releasing 21 films altogether with a cumulative gross of $750 million, capturing a market share of 15.6%.

Reluctantly acknowledged by everyone, Firefly's name shone brightly in the second position. With hits like Terminator 2, Toy Story, Freddy's Dead, Dumb and Dumber, and Sarah & Shannon (The Heat), Firefly secured a total box office of $660 million, accounting for 13.7% of the North American market share.

Due to Cutthroat Island being their main focus, Disney only released 12 films throughout the year. Its most highly touted movie flopped, leading to a dismal total box office of $380 million and a market share that sank to its lowest in five years at 7%.

Furthermore, with debts amounting to $2 billion requiring interest and principal repayment, Disney reported a loss of $120 million. This data triggered the first drop in Disney's share price in over five months.

...

The Disney shareholders, initially holding onto a glimmer of hope regarding its management team, finally lost all confidence, leading them to seriously consider the potential merger between Firefly and Viacom.

"I'm sorry, Mr. Bass. It's unfortunate we couldn't reach an agreement. I hope we get an opportunity to collaborate next time," Eric said as he stood in the parking lot at the corner of Liberty City Manor, saying goodbye to the two middle-aged men in front of him.

The two men, who were about to head off, were named Sid Bass and Roy Disney. Sid Bass was the current head of the Bass family, who held the most Disney shares, while Roy Disney, as everyone knew, was a member of the Disney family--nephew of Walt Disney.

"Here's hoping," Sid Bass looked deeply at Eric one last time before entering his silver sedan. Roy Disney's lips moved as though he wanted to speak, yet ultimately joined him in the car.

...

As their vehicle left the manor, Chris, who had quietly stood by Eric's side, couldn't help but say, "Eric, I think their proposal sounded quite reasonable. If you agree, Viacom won't pose a threat to us anymore."

Sid Bass and Roy Disney's visit represented a significant portion of Disney's shareholders, hoping to exchange their shares for equity in the merged company with Firefly rather than cash.

Should Eric agree, these Disney shareholders would band together to support Firefly in the acquisition, but Eric chose to decline.

Hearing Chris's comment, Eric glanced over at Bernie Sanders. "What do you think, Bernie?"

Bernie shrugged and said, "I'm merely a mediator. When Sid Bass reached out to me, I didn't hold out much hope. I figured you had long since made up your mind."

Eric chuckled, leading the two men back. "You guys should've heard the news: Barry Diller is leaving Fox in February."

Both men nodded in unison; they had been closely following Hollywood news during this time.

The news of Barry Diller's impending departure sent ripples through Hollywood. As an outsider, Murdoch had primarily focused on his newspaper operations in Australia and the UK. Without Barry Diller's assistance, Murdoch would never have entered the mainstream Hollywood scene, let alone developed Fox Broadcasting. Consequently, the details surrounding Barry Diller's sudden exit became the subject of much speculation. When Eric encountered Elisabeth during the Christmas break and inquired about it, she didn't hold back her insights.

Eric continued, "Barry Diller is an immensely gifted individual. His contributions have played a crucial role in Fox's rise over the years. Mr. Murdoch offered him incentives to stay, but as of last September, Barry told him he didn't want to continue as an employee. He wanted to be the owner. You know what Murdoch's response was?"

Chris and Bernie looked on with curiosity.

"No buildup or suspense needed," Eric stated. "Murdoch replied that there could only be one owner of Fox."

Chris fell silent, deep in thought.

Eric went on, "Firefly is no different; only one person can be in charge. Murdoch surely recognized that Barry Diller's departure would significantly impact Fox's progress. Yet he didn't even entertain the idea of a second option, even one that would affect his hold on Fox.

Many investors often try to impress upon business owners that they shouldn't hoard all the profits and should share benefits for mutual growth. In truth, such arguments serve as a pretext for those vying for control of the company -- an excuse to justify exchanging their shares for development capital, often made by those with limited choices.

If ample funds were available, I imagine that the founders of such companies as Microsoft, Oracle, and Cisco would never have opted for public financing. After achieving success, most do all they can to increase their stake, aiming to regain control. Firefly is quite fortunate. I currently have enough capital to take a path unlike other entrepreneurs. It may be tougher and require more sacrifice, but I firmly believe it's worth it. I will never choose the relatively easier option that would bury Firefly's future under heavy risks."

*****

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