Chapter 156: At a Loss?

Easter in 1988 falls on April 3rd, with middle and high schools and colleges in the United States typically giving students a one to two-week spring break around this time. Young people being the main movie-going demographic, Easter naturally becomes an important release window in North America.

On March 25th, the Easter release window kicks off, and "When Harry Met Sally," after two weeks of sneak previews, officially opens wide on 1,077 screens.

Additionally, Universal Pictures' "War Genius," Orion Pictures' "Good Guy Johnny," and Paramount Pictures' "Bachelor's Affairs" — three films targeting the Easter holiday audience — also premiere on the same day.

Among the new releases, "War Genius" stars Matthew Broderick, who previously had a conflict with Simon, making his casting no coincidence. Matthew Broderick and Michael J. Fox, who rose to fame with "Back to the Future," are the two most popular male stars among the youth demographic of this era. This is why Michael J. Fox's "The Secret of My Success" was also slated for the Easter window last year.

Compared to his previous two mediocre works, Matthew Broderick's new film "War Genius" has received widespread acclaim from the media. Had it not been for the emergence of "When Harry Met Sally," "War Genius" was destined to be the most popular film this Easter.

Now, thanks to Disney's relentless promotion and the buzz generated from two weeks of sneak previews, coupled with the controversy over a particular diner scene involving Meg Ryan, "When Harry Met Sally" surpasses other Easter releases in both media ratings and topical heat.

Moreover, a classic film like "When Harry Met Sally," which remains a topic of conversation among cinephiles decades later, naturally can't be compared to teen popcorn movies like "War Genius" and "Good Guy Johnny" that were tailor-made for the Easter window.

As a result, in its first week of wide release, "When Harry Met Sally" easily secures $17.81 million at the box office, leaving its competitors in the dust.

In comparison, "War Genius" slides to below $10 million in its opening week, with 1,239 screens yielding only $9.13 million. "Good Guy Johnny" and "Bachelor's Affairs," along with other new and old films, fall even further behind.

From March 25th to March 31st, the total box office for the 17 films released in North American theaters amounts to $60.33 million, with "When Harry Met Sally" alone aggressively claiming 29.5% of the share, leaving the remaining 70.5% to the other 16 films.

On April 1st, when the new week's data is released, despite some having braced themselves during the sneak preview phase, many still wonder if this is an April Fool's joke.

Notably, among the top five films in the weekly box office, "When Harry Met Sally" had the fewest screens. Warner Bros' highly anticipated "Police Academy 5" even had 1,700 screens but only earned $5.09 million in its second week, ranking fifth with a cumulative total of $12.52 million.

Meanwhile, "When Harry Met Sally," with 1,077 screens and including sneak previews, easily surpasses $20 million in three weeks, reaching $21.56 million.

During Danerys Studios' initial pitching of "When Harry Met Sally" last year, almost all studios were skeptical of the project. Even as the attitude towards "When Harry Met Sally" began to soften following Simon's string of successful films, Danerys Studios still ended up signing a highly unfavorable distribution contract with Disney.

Though the details of the partnership were not publicized, in Hollywood, where secrets are scarce, this became a topic of much discussion.

Following Simon's sudden fortune in the stock index futures market, his subsequent "spending spree" in Hollywood also garnered him labels like novice, easy mark, and nouveau riche.

Since the formation of the major studio system over half a century ago, many attempts to establish a foothold in Hollywood by outside capital have ended in failure, with recent examples like Cannon Films, De Laurentiis Entertainment Group, and New World Entertainment expanding rapidly only to decline just as quickly.

To many, Simon Westerloo's recent actions seem to follow the same pattern as companies like Cannon Films.

Now, with the release of "When Harry Met Sally," many begin to reevaluate the young man who entered Hollywood less than two years ago.

After its first week of wide release breaking $20 million, along with overwhelming critical acclaim and topical heat, it's evident that "When Harry Met Sally" has a strong chance of breaking $100 million at the North American box office.

Or, to put it conservatively, "When Harry Met Sally" is destined to be the first domestic film of 1988 to break $100 million.

Breaking $100 million domestically might seem straightforward, but it's a goal many Hollywood filmmakers chase their entire careers without achieving. On average, only about five films each year achieve this milestone, and most involve Hollywood's finest talent and substantial marketing efforts. Films that hit $100 million purely as dark horses, like "When Harry Met Sally," are even rarer.

Yet, for Simon, crossing this threshold seems effortless.

Last year, one of his films became the annual box office champion, another broke $100 million, and even the least successful, "Final Destination," ranked ninth annually with over $70 million domestically.

This year, as many watched Simon's post-fortune "misadventures" with a sense of schadenfreude, an atypical romance film previously dismissed by all of Hollywood suddenly demonstrates potential to break $100 million domestically.

Four films, four successes.

Now, anyone with a semblance of intelligence can no longer dismiss Simon Westerloo's series of triumphs as mere flukes.

"..."

"Meg Ryan is so beautiful, and that scene, haha, truly classic. I must buy the videotape as a collectible."

"..."

"Do you know of any other films starring Meg Ryan?"

"The wife of the pilot who died in 'Top Gun,' have you forgotten? However, Meg Ryan looked so bad in that film, and her performance seemed exaggerated, so it's understandable you don't remember. Seems like she's more suited for roles like Sally."

"..."

"Autumn in New York is so beautiful. Toby, let's go to New York this fall. We can stay at my aunt's place."

"..."

Inside a movie theater in Burbank.

As the film ends and the departing audience buzzes with conversation, CAA President Michael Ovitz, still seated, turns to Disney CEO Michael Eisner and says, "If you include 'Good Morning, Vietnam,' this is the fifth time. Late last year, Simon Westerloo was eager to sign Robin, probably because he saw the box office potential of 'Good Morning, Vietnam.' I blocked that move, causing a minor rift with Westerloo. Now, I'm beginning to doubt whether my decision was right or wrong. Robin might have missed out on an even better film."

"When Harry Met Sally," distributed by Disney, could easily be viewed by Michael Eisner with a simple command. However, both he and Michael Ovitz wanted to directly experience the film's audience reaction, prompting their visit to the theater.

Eisner was aware of Ovitz's sudden interest in "Good Morning, Vietnam" last year, leading to a family screening, and the reasons behind it. Listening to the lively audience discussions, Michael Eisner asks, "That script, Michael, can you tell me more about it?"

"A drama called 'Dead Poets Society,'" Michael Ovitz replies. "If you're interested, I'll have someone send you a copy later."

Michael Eisner nods, then suddenly asks, "Michael, do you think Disney has a chance of acquiring Danerys Studios?"

"After 'When Harry Met Sally,' other studios will likely have the same idea," Michael Ovitz responds with a laugh. "But think about it, with his current wealth, why would he sell his film company?"

Eisner replies, "Perhaps he might want to affiliate with a major film company. Simon Westerloo's talent in filmmaking is undeniable, but his company management is a mess. Take 'When Harry Met Sally,' for instance. If I were in his shoes, I would never have signed the original contract with Disney."

The contract signed last year between Danerys Studios and Disney stipulated that for "When Harry Met Sally's" North American box office earnings up to $40 million, Danerys Studios would pay Disney a fixed distribution commission of $6 million. Beyond $40 million, Disney would receive an 18% share of the box office as a distribution commission.

This means the higher "When Harry Met Sally's" box office, the more Disney earns from distribution commissions, which is contrary to normal practice.

Now,

Even if "When Harry Met Sally's" North American box office hits $100 million, Disney's commission income alone from this film would be $18 million. Additionally, Disney retains the right to prioritize distribution in other channels.

Knowing the situation as friends, Michael Ovitz is roughly aware of it.

Recalling Simon Westerloo's various actions in Hollywood since his sudden wealth, they seem chaotic on the surface.

However,

Pointing to the screen, Michael Ovitz says, "Michael, if Simon Westerloo hadn't signed what seems like a disadvantageous contract, would Disney have gone all out in promoting this film?"

Michael Eisner pauses, realizing the truth, and shakes his head with a bitter smile, "No, and if it were a typical distribution deal, I definitely wouldn't have given this film an Easter release and over 1,000 screens."

Michael Ovitz shrugs, "So, do you still think that young man doesn't know how to run a company? To me, his understanding of Hollywood is on par with ours. Moreover, he's a young man who knows how to compromise. He understands that to get what he wants, he has to give enough. Now, look at 'When Harry Met Sally.' Even if we calculate a domestic box office of $100 million, with a theater share ratio of 50%, Disney gets $18 million, which seems generous. However, Danerys Studios, holding rights outside the domestic theaters and other distribution channels, will earn far more in the future."

As the theater empties, they stand and head out.

Hearing Michael Ovitz's words, Michael Eisner calculates and nods again, albeit with another bitter smile.

Indeed,

Without Simon Westerloo's offered conditions, Disney wouldn't have invested much effort in this film.

Now, it's precisely because Disney invested substantial marketing resources, including two months of TV trailers, over 1,000 screens, and the popular Easter window, that "When Harry Met Sally" achieved its impressive box office success.

Without these conditions, even with its quality, "When Harry Met Sally" might still have been a hit, but its box office success wouldn't be as remarkable. And breaking $100 million domestically boosts the film's subsequent distribution across all channels, the impact of which is immeasurable.

Based on the revenue ratios across Hollywood film platforms, "When Harry Met Sally's" income from overseas, TV, and videotapes will be three to four times its domestic box office. Since subsequent distributions require minimal marketing investment, the profits are even more substantial.

Moreover, even after deducting commissions and marketing expenses, Danerys Studios will have fully recouped its production costs from the North American box office alone, making any further channel revenue pure profit.

Thus, Disney only earning $18 million in commissions seems like a loss.

As they get into a car parked outside the theater and head back to Disney headquarters, Michael Eisner says, "So, Michael, what do you think of the projects Simon Westerloo has initiated recently?"

"I've basically read all the scripts, like 'Rain Man,' which I personally pushed forward for over a year, and 'Dead Poets Society,' 'Steel Magnolia,' among others. Frankly, I think these scripts will make good films, but their commercial box office potential is hard to guarantee," Michael Ovitz says thoughtfully. "In Hollywood for so many years, everyone understands that no one can predict a film's success before its release. But now, I'm not so sure anymore."

Eisner asks, "So, do you think Danerys Studios' films could be like 'When Harry Met Sally'?"

Michael Ovitz shakes his head, "I don't know. But if I were you, I would start vying for the distribution rights of films under Danerys Studios that haven't secured distributors yet. At the very least, I would maintain a good working relationship with Danerys Studios."

Michael Eisner nods but then says, "However, you haven't done so in your current position."

"That's a very ambitious young man," Michael Ovitz reflects. "You know, the first time we met, he hinted at a desire for Hollywood to return to the studio era, when stars were merely employees of film companies, leaving no room for agencies to exist. How could that be possible? So, we're destined to be adversaries."

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