Chapter 184: Trio

The power structure of Hollywood is intricate and cannot be simply determined by one's position.

Usually, to understand the explicit and implicit power of an individual, one needs to look at which layer of Hollywood they report to. The president of a major movie company, if directly responsible to the parent company's executives, may have power comparable to a CEO. Directors of Steven Spielberg's caliber, capable of direct communication with moguls like Steve Ross, hold even greater influence than the CEOs of major movie companies.

Robert Lem's proposal did not surprise Simon.

In present-day Hollywood, Disney's CEO Michael Eisner and President Frank Wells have a parallel relationship. Both report directly to Disney's board, with Eisner being a rank higher than Wells, but without any authority over Wells, allowing them to manage their respective domains.

The clear division of labor and checks and balances within Disney significantly contributed to the company's rapid rise from the late '80s to the early '90s.

By the mid-'90s, Frank Wells' untimely death in a helicopter accident led to Michael Eisner consolidating power. To maintain control over Disney, he didn't hesitate to purge dissent, leading to Disney's decline into mediocrity under Eisner's later years until Robert Iger rejuvenated the company.

Considering these factors, Simon readily agreed to Robert Lem's request.

For publicly traded companies, such horizontal executive arrangements could easily incite internal strife. However, Simon was not worried about this for Daenerys Films. He held absolute control over the company and could swiftly remove any destabilizing elements among the executives if necessary.

Having settled this matter, the two discussed Robert Lem's compensation.

With Daenerys Films' rapid development and astounding profit potential, Simon could not offer Lem a profit-sharing plan like he had initially promised Amy. However, Simon was not stingy. He agreed to a three-year contract with a base annual salary of $250,000, similar to Amy's, and a bonus of up to $3 million per year, depending on Lem's performance.

In Hollywood, even among the seven major studios, executives earning over $3 million a year are rare. After integrating New World Entertainment, Daenerys Films, still considered a second-tier movie company, made Robert Lem happily accept the contract.

Similar compensation schemes in Hollywood are precedented, with the specifics of assessing Robert Lem's performance to be negotiated by lawyers from both sides based on past experience.

After finalizing these matters, Robert Lem openly discussed the operational issues and challenges facing New World Entertainment with Simon.

The main problem for New World Entertainment was a lack of funds, compounded by the Hollywood screenwriters' strike preventing the launch of planned TV series projects. Additionally, Lem disclosed about $20 million in various hidden debts at New World Entertainment.

The $20 million did not surprise Simon and was within his capacity to manage.

Having already decided to acquire Marvel, Simon didn't let the debt become an obstacle. This issue, common among Hollywood entertainment companies seeking to improve their financial appearance, wasn't due to shareholders or management embezzling funds. As long as New World Entertainment could resume operations, the debt could be absorbed by the company's robust cash flow.

After an extensive discussion lasting over an hour, Robert Lem left.

Just as Simon settled back at his desk, Amy knocked on his office door.

"Simon, here are the preliminary sponsorship contract drafts with Mars, AT&T, and other companies. Five companies in total, and we can secure $56 million in advertising fees for the first season of 'Who Wants to Be a Millionaire.' Also, here are the loan proposals from Wells Fargo, Citibank, and other financing institutions. I think Citibank's offer is the best, a 7-year loan of $250 million at an annual interest rate of 4.6%. Wells Fargo's rate is 5%, but the loan term is 5 years. Although Citibank's plan will cost us an additional $20 million in interest, it minimizes our annual debt repayment burden."

Simon glanced at Amy, who appeared nonchalant, and smiled as he reviewed the loan proposals from the banks for the acquisition of New World Entertainment.

Despite his aversion to borrowing, the acquisition of New World Entertainment forced Simon to consider taking out loans.

Quickly reviewing the proposals from Wells Fargo and Citibank, Simon noted that the 5-year contract with Wells Fargo would cost Daenerys Films $60 million in interest, while Citibank's 7-year contract would amount to $80 million in total interest.

Both proposals implied that the interest would exceed 20% of the principal, highlighting why highly indebted companies like New World Entertainment are so prone to crises. Without strong operational performance, such companies might not even be able to cover the annual interest on their loans.

In the transaction for Daenerys Films to acquire New World Entertainment, General Electric had already offered significant debt relief.

Although borrowing was costly, rapid expansion often necessitates it. Thanks to its profitable operations, Daenerys Films enjoyed low financing costs, a luxury many companies sought at higher interest rates.

Simon understood Amy's concerns and, after reviewing the documents, reassured her, "I've talked with Robert Lem. He's staying."

Amy's eyes flickered with relief, waiting for Simon to continue.

"Your position will change to CEO, mainly responsible for daily administrative management and film production. Robert Lem and Robert Iger will both serve as presidents, with Lem overseeing film distribution and Iger managing TV operations," Simon explained, outlining the new executive structure.

This plan eased Amy's concerns.

Over the past year, Amy found her rapid ascent from managing a startup to leading a top second-tier film production company almost unbelievable.

Setting aside other factors, her initial compensation contract with Simon, now in its second year, seemed astonishing in value.

Last year, during Daenerys Films' founding phase, only "Final Destination" contributed to her profit share, making her earnings modest.

This year, however, a 5% share of the company's net profits, given Daenerys Films' current performance, would bring her no less than $10 million, even if the rest of the year's projects performed moderately.

Including her equity rewards, Amy's annual salary could exceed $20 million, a sum unmatched by any pure manager in Hollywood without company shares.

Sometimes, Amy doubted her worth for such compensation, which recently transformed into worry.

She knew if the company maintained its growth, her income would only increase, making it hard for Simon to justify such high compensation.

However, Simon reassured her, valuing her contribution and dedication, and expressed willingness to discuss future contracts, provided she chose to stay with the company.

Convinced, they moved on to discuss the documents before Simon, while Daenerys Films continued auditing New World Entertainment and another week of the North American summer box office quietly passed.

From July 8 to 14, Hollywood buzzed with the news of "Pulp Fiction" crossing the $100 million mark at the box office, marking Daenerys Films' second blockbuster of the year. With "Basic Instinct" releasing on July 15, all eyes were on whether it could continue the box office rally.

In the final week before its release, a gossip paper in Los Angeles stirred interest by reporting that Michael Douglas refused to attend "Basic Instinct" promotional events over a poster issue, reigniting media attention.

Fox Studios capitalized on "Basic Instinct"'s hype by unveiling a giant billboard in major cities, including Times Square in New York, featuring only the film's female lead, Linda Fiorentino, in a provocative pose reminiscent of a famous scene from the original "Basic Instinct." This marketing move, aimed at sparking controversy, set the stage for the film's release and subsequent media debate over its explicit content, contrasting sharply with Simon Westlake's previous, more critically acclaimed works.

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