Chapter 280: Mid-Year Financial Report

As a plan for 10 movies sets Hollywood abuzz, the mid-year financial audit of Daenerys Entertainment quietly concludes.

Simon, juggling other responsibilities, spent three days poring over the dozens of pages of financial reports compiled by the company's finance department.

Overall, Daenerys Entertainment's revenue in the first half of the year still heavily relied on four films released at the end of last year: "Scream," "Mulan," "Dead Poets Society," and "Rain Man."

From January 1 to June 30, over six months, these four films continued to bring in $263 million in domestic box office receipts, with Daenerys Entertainment's share amounting to $121 million. The reason for the share being below the average 55% box office revenue split was mainly due to the staggered revenue sharing agreement with theaters, where the share of box office revenue decreases over time after a film's release.

Internationally, the total revenue from these four films was $356 million, with "Scream" bringing in $95.15 million, "Mulan" $12.37 million, "Dead Poets Society" $86.32 million, and "Rain Man" $163.65 million.

This box office revenue is expected to increase in the second half of the year, though the potential for significant growth is limited.

Compared to the original timeline, the international box office of these four films has significantly contracted, except for "Mulan," which suffered due to its niche overseas audience. The shrinkage in box office for the other films was mainly due to Daenerys Entertainment's lack of distribution capability overseas and the fact that many overseas markets have not yet opened up to foreign films.

Moreover, even in countries that have opened up their movie markets, there are still various restrictions in place to protect their own film industries, such as low revenue shares and high taxes on Hollywood films, leading to an average revenue share of only 33% for Daenerys Entertainment from overseas box office.

In addition, in some smaller or more policy-restricted overseas markets, Daenerys Entertainment could only sell the rights outright, meaning these revenues were included in the total international box office figures but did not contribute to revenue sharing.

Simon remembers that this situation would improve rapidly after the 1990s.

In total, these four films contributed $116 million in overseas box office revenue to Daenerys Entertainment.

As for the new releases up to June 30, six films including "Blue Angels" and "Metropolitan" cumulatively brought in $123 million, with "The Sixth Sense," which premiered on June 30, excluded from this tally, resulting in $73 million in shared revenue.

In the home entertainment sector, the VHS release of "When Harry Met Sally" at the end of last year sold 2.93 million copies by the end of June, with each tape priced at $29.9, generating sales of $87.6 million.

Although film studios typically attribute 80% of VHS revenue to costs, leaving only 20% for revenue sharing, in reality, studios generally achieve a gross profit margin of 40% to 50% per tape sold. For hot new releases like "When Harry Met Sally," the profit margin is even higher.

Thus, just the VHS release of "When Harry Met Sally" alone brought in more than $46 million in gross profit for Daenerys Entertainment.

Including some other minor income sources, Daenerys Entertainment's film business generated a total industry output of nearly $900 million in the first half of the year, with $395 million attributable to Daenerys Entertainment's own operating revenue.

Behind the substantial revenue, however, also lies a massive expenditure.

In the first half of the year, Daenerys Entertainment had over ten films in various stages of official production, with just the budget for "Batman" reaching $50 million. Other projects like "The Bodyguard," "The Sixth Sense," "Uncle Buck," and "Scream 2" also required significant expenditures.

Additionally, Daenerys Entertainment invested heavily in both domestic and international film distribution.

Finally, considering the need to cover the construction of the Daenerys Studios in Malibu, the establishment of many overseas subsidiaries, the repayment of some due loans, and other significant expenditures, as well as crucial tax considerations, Daenerys Entertainment's net profit from its film business in the first half of the year was only $51.19 million, with a net margin of less than 13%.

In terms of television business.

Compared to films, the first half of the year's television business was somewhat lackluster, with Daenerys Television's revenue still heavily reliant on four reality shows. Since the beginning of the year, the television department has signed production contracts for three new series, but two series from last year were cancelled after the spring season due to low ratings.

Thus, Daenerys Television is currently operating exactly 10 television projects, six of which are drama series and four are reality shows.

With the major income from reality shows almost certain, Daenerys Entertainment's television business total revenue for the first half of the year was $232 million. After sharing significant expenditures, the television department's net profit was $36.82 million, with a similarly modest net margin of 16%.

In the comics business.

Although the launch of the "Batman" project brought industry attention to Marvel Entertainment, this comic book company remained low-key in its operations during the first half of the year, with $39.71 million in revenue and $2.26 million in profit, having a minimal overall impact on Daenerys Entertainment.

However, the mid-year financial report had its bright spots, notably led by Nancy Brill's consumer products division.

After several adjustments, Daenerys Entertainment's consumer products division is now mainly responsible for developing merchandise for a series of film and television projects, distributing original soundtracks, and handling a portion of the advertising business.

Of course, the sponsorship advertising operations for several reality shows like "Who Wants to Be a Millionaire" are still managed by Daenerys Television's advertising department separately. The consumer products division only handles the merchandise development for a few reality shows, with the so-called advertising business mainly involving product placement partnerships for Daenerys Entertainment's films and television series.

The energetic petite woman, Nancy Brill, has led investments in Blockbuster, established Daenerys Analytics, and launched Blizzard Studios this half year. While seeming somewhat off-track, the operations of the consumer products division haven't missed a beat.

Through the successful merchandising of "Scream" and "Beverly Hills Wives," two key projects targeting different consumer groups, the consumer products division has established two targeted retail channels—one aimed at teenagers and the other at housewives. These two groups represent the largest potential consumers.

Following the successful merchandising of "Scream" and "Beverly Hills Wives," the development of merchandise for other films proceeded more smoothly.

In the original soundtrack sector, although the soundtracks for "Dead Poets Society" and "Rain Man" did not reach the heights of "The Bodyguard," they achieved respectable sales. "Rain Man's" soundtrack sales exceeded 5 million copies by June 30, a remarkable achievement for a pure music album.

Lastly, in the advertising business, Simon has been very cautious to avoid viewer backlash from indiscriminate product placement in films and television shows.

Nancy Brill has also refrained from pursuing inappropriate product placements. However, due to the overwhelming success of Daenerys Entertainment's films over the last year, many brands have been eager to collaborate, offering generous terms. Nancy, while adhering to Simon's directive to avoid an overload of advertisements, has still managed to secure lucrative brand partnerships through projects like "Batman," "Charlie's Angels," "Pretty Woman," and "Ghost," contributing significantly to the company's revenue.

As a result, the consumer products division, which had little income last year, saw its revenue surge to $207 million in just the first six months of this year.

However, because Nancy Brill focuses more on the long-term development of the business rather than short-term profits, a large amount of capital has been invested in product production, channel building, and marketing. The company has even unknowingly acquired a toy factory on Rhode Island's East Coast. Additionally, the consumer products division also shares in the company's other expenditures, resulting in a lower profit margin of only 9.5%, with a net profit of $19.71 million.

In total, Daenerys Entertainment's revenue for the first two quarters of the year amounted to $873 million, with a net income of $110.78 million.

Compared to the massive earnings Cersei Capital recently garnered from the Japanese financial market, Daenerys Entertainment's $110 million net profit might seem modest. However, Simon has always been clear that this company is his foundation. Opportunities in the financial markets are not available every year, and as he becomes more notable, it will become increasingly difficult to profit from financial markets. Investments in the technology sector often do not yield results until ten to twenty years later.

The relatively low profit margin of Daenerys Entertainment is primarily due to the company's rapid expansion needs.

Yet, a net profit of $110 million in half a year is certainly not low. In this era, such a profit level would easily place Daenerys Entertainment within the top 100 of Forbes' North American companies.

Fifty kilometers off the Los Angeles coastline, a luxury yacht more than 60 meters in length is quietly moored on the sea surface.

The date is August 6th, Sunday.

This weekend, Simon did not work continuously but chose to rest once again.

However, this rest was not merely for relaxation.

James Rebhorn had come from New York in recent days to discuss company matters and to introduce Simon to some people, specifically, some politicians, aboard this yacht.

Simon intends to expand his political connections without resorting to illicit methods, adhering strictly to public regulations like the Federal Election Campaign Act. Nonetheless, he wishes to keep these interactions as low-key as possible, certainly not intending to publicly appear alongside any politician in the media.

Over two days, including David Dinkins, who is in the final stages of preparation for the New York City mayoral race at year's end, Simon met with six politicians, all of whom are individuals that Westeros Corporation has confirmed it will financially support. Besides Dinkins, the others include a California State Senator, two members of the California State Assembly, a U.S. Senator from New York, and a U.S. Representative from California.

These individuals are all Democrats. Having decided to take sides, Simon is not planning to hedge his bets in the short term.

Moreover, Simon did not choose high-profile star politicians but instead selected several well-researched candidates with good potential and no confirmed backers. U.S. congressional elections occur every two years, which seems frequent, but in reality, the rate of incumbency is very high, with some politicians securing more than ten consecutive terms.

Simon does not expect immediate returns from these individuals.

The initial "investment" is primarily to establish connections, ensuring that Daenerys Entertainment is not left in the dark should any federal-level issues arise.

In the long term, if these individuals can support Westeros Corporation's expansion in three to five years, that would be satisfactory. If, in ten to eight years, any of them reach the core of federal power while still supporting Westeros Corporation, it would be considered a significant gain.

As the evening approaches, Simon concludes the weekend's last meeting.

After personally seeing off the U.S. Senator from New York by helicopter, Simon and James sit down at a table on the yacht's top deck terrace.

As the sun sets, the sky is painted with a spectacular display of colors, offering a breathtaking view of the sea and sky.

Jennifer serves the two men a pot of coffee before sitting down nearby, quietly reading a magazine.

James glances at his daughter with a sigh, continuing to speak to Simon, "I'll send you the details of some other candidates when I have a moment. Also, there's a new consulting firm, Schlap Consulting, based in Greenwich, Connecticut, near New York. Although it's new, its founder, Joseph Schlap, and his family have deep political roots and connections. I think it's a good opportunity for us to establish a dedicated fund to support this firm long-term."

Political investments do not seek direct monetary returns. Establishing a non-profit fund can also maximize the transformation of capital contributions into tax-deductible capital.

"I'll take a look at the materials first," Simon responds, not immediately agreeing. He adds, "Also, we can transfer another $50 million from Daenerys Entertainment to your side. We definitely won't need the overseas funds within a year."

" $50 million is already very good. I've also recently reviewed the company's finances. The tech companies we invested in the first half of the year contributed about $37 million in dividends, which is somewhat lower than last year, mainly because our heavily invested companies like Microsoft did not distribute dividends. However, with our existing funds, this amount is sufficient to maintain company operations," James says, then remembers something else, "Also, among the three companies we can sell at any time, AMD's stock price has been falling recently. Its market value is now 50% lower than when we bought in two years ago. I think there's no need to hold on to it any longer."

AMD, naturally, is Intel's "little enemy."

It seems it can't be propped up after all.

Recalling the purchase of AMD shares two years ago when the company was valued at about $9 billion, with an investment of around $45 million. Simon has not paid close attention to this recently, but hearing James mention it, AMD's market value might have fallen to $6 billion, compared to Intel's relentless march towards $60 billion...

Well, it's hardly a comparison.

However, considering AMD managed to survive for over twenty years, there's no need to sell off now; a future rebound might recover the losses.

Simon shakes his head with a smile, "Let's continue to hold onto it."

James nods in agreement.

After discussing serious matters, they casually talk about Daenerys Entertainment's recent big moves.

The two sit on the terrace for half an hour before the helicopter returns, and Simon, James, and Jennifer board to head back to Malibu.

Upon reaching the shore, the Rebhorns decline Simon's invitation to join a Warner Brothers party that evening, opting instead to dine with Jennifer's uncle, George Norman, and his family.

Simon rests briefly at his home on the west side of Point Dume before heading to downtown Los Angeles.

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