Chapter 826: Issues in Digital Domain

[Chapter 826: Issues in Digital Domain]

"I spoke with Jon Landau and the team this morning. Robert is personally overseeing this. With the ten technical nominations for the Oscars, we should be able to secure all of them. There's no doubt that Titanic is a front-runner in this regard. However, for the six core nominations of Best Picture, Best Director, and the four acting awards, we have little hope for Best Actor and Best Supporting Actor. Leonardo's performance was merely passable, and there are no standout male supporting roles in the film. The other four nominations should be locked in already."

In the spacious loft office of Firefly Studios' Digital Domain, Eric and Jeffrey Katzenberg sat together in the lounge area. After hearing this, Eric instinctively replied, "So, is it still 14 nominations?"

Jeffrey, not catching onto the hidden implications of Eric's statement, assumed Eric had calculated that beforehand and nodded. "Yes, 14 nominations. There are a total of 24 Oscars, but Titanic definitely won't get nominations for Best Foreign Language Film or Best Animated Feature, which are completely irrelevant; that eliminates 7 right off the bat. Among the remaining 17 nominations, Best Original Score divides into categories for Dramatic and Musical Comedies, which eliminates one more. We have no chance at Best Actor or Best Supporting Actor, so we're left with just 14. However, with these 14 nominations, we could match the record for nominations set by 1950's Sunset Boulevard, and we might even surpass Ben-Hur in total wins."

Eric had already noticed the awkwardness of his previous statement but was relieved that Jeffrey didn't seem to mind, not showing any signs of discomfort.

If it hadn't been for the recent media scrutiny directed at the Golden Globes, Eric might have pushed for a Best Actor nomination for Leonardo, potentially surpassing Sunset Boulevard's nomination record. However, due to widespread doubts cast on the Golden Globes, the Academy, while recognizing Titanic's award potential, became more concerned with its own reputation. If Leo received a nomination for a performance that clearly didn't meet the standards, the media would surely turn its criticisms toward the Oscars once the nominations were announced.

While they couldn't break the nomination record set by Sunset Boulevard, as Jeffrey mentioned, surpassing Ben-Hur's record of 11 Oscars was certainly achievable.

The two discussed various PR details in depth, and Eric then asked, "How's the overseas release going?"

Similar to North America, Titanic had been performing well in the countries where it was already released. The UK, in particular, had already crossed $36 million. If the current trend continued, Titanic's ticket sales in the UK would easily surpass the $71 million record set by Jurassic Park a few years earlier, and breaking the $100 million mark wasn't out of reach. Additionally, countries like Spain and Australia were also showing outstanding box office results. Just from these nine overseas markets alone, they had accumulated $92 million in one month.

With such impressive box office numbers, the overseas distributors that had initially been lukewarm about Titanic had completely shifted their attitudes and were now incredibly enthusiastic.

"I'll be flying to Europe next week, and Robert will head to Japan to negotiate directly with local distributors and theaters," Jeffrey paused. "Eric, my thought is that we don't need to pursue a higher revenue share. An average of 35% is already quite good compared to the last few years. If we push for higher shares, it would definitely deter the local distributors. However, we can ask for more resources in terms of marketing, schedules, and theater access."

While Firefly had its branches in major box office countries, the actual distribution work still required cooperation with local companies, making it unavoidable to share some revenue.

Jeffrey was responsible for European distribution, while President Robert Thompson managed Japan, and Eric was quite satisfied with this arrangement. Considering for a moment, Eric nodded. "Let's proceed with your plan. Also, ask Robert to swing by China and see if there's a chance to secure a revenue-sharing qualification for Titanic."

Jeffrey hesitated, considering Eric's past reminders. Firefly had made efforts to secure one or two quota films in the Chinese market each year, yet the local movie market remained disappointingly small despite having over a billion people, and the revenue-sharing percentages were shockingly low.

However, he didn't question Eric's decision since it was just a minor matter. He agreed and then added, "Eric, there's one more thing. Harvey wants to kickstart production on The Sopranos. He mentioned it to me a while back when you were in New York. He's been busy working on Shakespeare in Love and probably hasn't had the chance to discuss it with you yet."

Eric had originally planned to wait until the fall to launch self-produced series like The Sopranos after FFM's financial situation stabilized. Hearing Jeffrey, Eric asked, "What's his take on it?"

"You mentioned before that The Sopranos was a slow-burn type that should mainly rely on award recognition for visibility," Jeffrey said. "Harvey thinks that if that's the case, we should start production now for a spring release in March. This way, it could aim for the Emmy Awards in August. If we push it to the fall, we'd miss this year's Emmys altogether, and there would be a long gap until next year's Emmys. Even if The Sopranos wins, the impact from the first season would diminish significantly, which wouldn't bode well for future video tape/DVD releases."

After spending nearly a month in New York and fretting over Titanic, upon returning to Los Angeles, Eric realized he had accumulated quite a bit of work.

There's no need to mention the post-production work on Casino Royale; on other fronts, Eric had instructed Chris to acquire the UK-based ARM company before the year ended, and while they had signed a purchase agreement, he still needed to make many decisions. Additionally, there were the plans for the Marvel Cinematic Universe, the launch of the MP3 player, equity investments in Clover Holdings, the operations of FFM, and so on. Though each matter had dedicated personnel, there remained a substantial amount of work for Eric to personally decide.

"Harvey is an expert in award campaigning; since he thinks that's the right approach, let's go for the spring release. I'll find time tonight to call him about it."

"Tonight?" Jeffrey raised an eyebrow, chuckling. "Harvey might be busy tonight."

"Oh, I almost forgot. Tonight is the Golden Globe Awards ceremony; we can wait until another time," Eric shrugged, not inclined to discuss further. Firefly would only have the creative team from The Thin Red Line attending the ceremony, while Titanic's team had already decided against attending.

"Lastly, about Clover Holdings," Jeffrey clearly wasn't in the mood to discuss the Golden Globes either. They both had full agendas, so he quickly switched to the next topic. "With recent purchases added in, we've invested $1.98 billion in major IT stocks on Nasdaq. Based on the trends of the past few months, these stocks have already netted us over $210 million in paper profits."

Eric nodded; he was aware of these numbers already. Due to the stock investments in Nasdaq, Firefly's net profits would shrink to around $1 billion this year. Adding the last installments from the previous two years' sales of print media assets and the animation studio, that total wouldn't exceed $2 billion. This was because Eric needed to draw substantial profits out of Firefly Group to reinvest into Internet companies under Firefly Investment. Otherwise, the momentum of Clover Holdings' acquisitions would have been even more aggressive, and they could have temporarily saved even more tax.

Eric thought Jeffrey would likely not bring up this matter independently.

Sure enough, Jeffrey quickly added, "Warren Buffett, Tom Murphy, and David West have been calling me quite a bit recently. I'm sure you've received just as many calls. If it weren't for the profitability of the stocks held by Clover Holdings, their concerns would have been even greater."

"I already spoke with David West last time," Eric poured himself another cup of coffee from the pot beside him. "I told them if they had doubts about Firefly Group's business strategy, I could buy back their shares at any time."

David West had played a significant role during Firefly's acquisition of ABC, which earned him a board seat as one of three external directors of Firefly Group. The group of small shareholders he represented from various investment funds was currently holding nearly 14% of Firefly Group shares, whereas Buffett and Tom Murphy merely controlled 10%.

Although they had maintained a somewhat close relationship at first, the two groups ultimately represented different interests. In the previous two years, through the continuous sale of print media assets, hand-drawn animation studios, and the group's strong profitability, these investment funds had received around $500 million each year in dividends from their 14% stake in Firefly Group. This amount allowed those fund managers to present impressive figures in their annual financial reports.

However, this year, due to Clover Holdings' additional expenses, the dividends received by smaller shareholders like Berkshire Hathaway and State Street Global Advisors would suddenly drop by over half. Furthermore, because they were experts in the investment field, there was evident skepticism regarding Eric's insights in stock investments, leading to dissatisfaction with his aggressive buying in Nasdaq stocks.

Hearing Eric's remarks, Jeffrey chuckled. "Unless they are out of their minds, they wouldn't request for you to buy back their stocks. However, David West discussed another matter with me yesterday over the phone, which you've mentioned before, and I also think the timing is right now."

Eric pondered for a moment and suddenly realized. "He wants to take Digital Domain public?"

Although he figured that Eric was likely to guess it, Jeffrey was nonetheless surprised at his quickness. Laughing, he nodded. "Exactly, Eric. Based on Titanic's current box office trajectory, it's absolutely feasible for it to surpass $1 billion globally. Being a film that showcases cutting-edge CG effects, Titanic's success will further stimulate the growth of Hollywood's effects industry. So I believe the time is ripe for taking Digital Domain public. David also mentioned that if Digital Domain goes public, Wall Street could value it at around $3 billion."

Jeffrey and David West's current thoughts coincided with Eric's previous ideas from years ago.

Eric knew the trajectory of Hollywood's effects industry well. Even though the industry had been regarded as an esteemed 'noble profession' in recent years, the rapid growth of computer technology and related software industries would soon make starting an effects studio effortless with the support of top-tier hardware and professional software. The competition in the effects industry would become ferociously intense.

Therefore, Eric had considered that if Titanic could achieve the success similar to that in the original timeline, then CG effects would become highly respected. At that time, taking Digital Domain public would be the best opportunity to cash in.

However, after the events of recent times, Eric's perspective had shifted.

Ten years from now, or even five years later, the effects industry might no longer possess high entry barriers. But for now, Digital Domain was undoubtedly the top effects company in the industry, without any competition.

Consequently, if they severed Digital Domain's external collaborations, Firefly would at least maintain a three-year lead in the effects field. In three years, that time would be ample for Firefly Group to distance itself from other Hollywood studios in effects films.

Even three years later, with Firefly Group's vast economy and the support of allies like MGM and 20th Century Fox, Digital Domain would still have ample projects. Even further down the line, as long as Digital Domain had outstanding effects technology, even if it couldn't turn a profit, or even if it made slight losses, Firefly Group would still sustain such a dedicated subsidiary.

Moreover, even if Wall Street valued Digital Domain at a whopping $3 billion, if they were to go public and raise funds, with a 20% public offering ratio, Firefly could only extract $600 million at most. To Firefly, $600 million was hardly impactful. It was clear that David West's suggestion was not simply about acquiring this $600 million.

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