I am Hollywood

[Chapter 1143: Detailed Plan]

During its opening weekend, Iron Man grossed a remarkable $232 million worldwide, nearly recouping half of its production and distribution costs. Everyone involved in the film was in high spirits. After the box office numbers were released, Firefly Group quickly announced a celebratory party for the weekend.

Additionally, while the promotional activities for the film continued to intensify, the company swiftly began implementing its already well-planned Marvel Cinematic Universe expansion strategy. Iron Man's success not only opened the door for the Marvel Cinematic Universe but also boosted the popularity of all cast members, big and small. Even Natasha Henstridge, who only had a few scenes as a Victoria's Secret Angel, rapidly gained a dedicated fanbase. The movie featuring the actress, Underworld, quickly became one many looked forward to.

Consequently, with Firefly kicking off series such as Captain America, Thor, and The Incredible Hulk, even though whispers of stringent long-term contracts being signed with superhero actors circulated internally, Hollywood talent agencies engaged more closely. Everyone understood that once the Marvel Cinematic Universe unfolded, it was bound to catapult a slew of new Hollywood stars into the limelight. For many, Firefly's inclination towards using fresh talent meant an incredible opportunity.

After a couple of days filled with high-level meetings discussing the Marvel Cinematic Universe's future development, work was orderly and efficiently set in motion. Once the workweek began, Iron Man's daily box office fell to between $6 million and $7 million, with expectations to accumulate another $25 million to $30 million over the next four workdays, aligning closely with Firefly Group's projections.

...

Wednesday arrived quickly.

At the Burbank headquarters, key executives gathered at nine in the morning in the grand conference room to discuss the implementation progress of the '4200' Plan. It was now May, and only six months remained until the premiere of the first blockbuster, Gravity, which would be released in 3D and IMAX formats in November.

Since last year, following the refinement of the technical details for 3D and IMAX formats, Firefly Group had begun negotiating with North American and international theater chains, planning to establish 200 high-end IMAX theaters exclusive to Firefly Group.

On the large screen in the conference room, a world map dotted with dense numbers was being displayed. Jeffrey Katzenberg stood at the front, personally addressing the group: "We have successfully concluded negotiations with various theater chains across North America regarding 2,000 3D screens. Internationally, we can assure that Gravity will premiere with around 1,550 3D screens in 26 key markets. Although this doesn't meet our initial expectations, if Gravity succeeds at the box office, we can rapidly expand the number of overseas 3D screens to 2,000 or more. Moreover, the construction of 200 IMAX theaters, both local and abroad, is progressing smoothly. We expect all installations and staff training to be completed by October, giving us a month to conduct all required tests and screenings to ensure everything is flawless."

Switching to a map displaying the global distribution of IMAX theaters, Katzenberg returned to his seat and began detailing the specific cooperative plans. The IMAX theaters would be operated solely by Firefly Group, so they wouldn't need to give it too much thought.

...

For the 3D screens, Firefly Group and major theater chains throughout North America and abroad confirmed that a revenue-sharing partnership would be established. In North America, 3D films distributed by Firefly Group would adhere to the same split as traditional 2D films.

In addition, considering the annual average box office revenue from the 2,000 refurbished screens in recent years, Firefly Group would provide a guaranteed annual minimum box office revenue of $300,000 per screen for three years. If, within three years, any screen's annual income fell below $300,000, Firefly Group would make up the difference. This compensation wouldn't count as box office revenue, so the company wouldn't share in the proceeds, allowing theater chains full ownership.

If any screen exceeded the $300,000 mark, the excess would belong to the theater operator's share of the box office, from which Firefly Group would extract 80% to cover the RealD system's equipment costs. Internationally, while some details would differ, the overall cooperation framework remained similar to that of North America.

However, once the 3D screening model succeeded, to facilitate the future promotion of the RealD system, Firefly Group included an option for theater owners to buy the equipment outright. This meant that after films like Gravity premiered with box office successes, if theater operators were optimistic about the prospects of 3D formats, they could buy the equipment in full, effectively severing their profit-sharing tie with Firefly Group. This would ensure that the original 3D theaters competed under the same conditions as new 3D theaters joining the system, rapidly expanding the number of 3D screens and providing more profit for Firefly Group.

On the surface, this cooperation agreement appeared to be a rather unfavorable contract for Firefly Group. Nevertheless, this was a price the company willingly paid to quickly promote the 3D system. Furthermore, once the 3D system was successfully promoted, Firefly Group, as the primary initiator, would secure industry advantages and direct profits that would completely offset the risks they bore themselves.

...

In the preliminary plan, while adjustments would be made based on theater status and screening times, the average ticket price for 3D theaters was determined to be $7.50 -- 50% above the North American average of $5. IMAX screen prices were set at $10, effectively doubling the North American average ticket price.

This ticket price premium would lead to significant profits for Firefly Group, especially as the company monopolized 3D and IMAX film sources and successfully promoted these formats. Additionally, while offering theaters guaranteed box office revenues, Firefly Group gained another potential advantage -- solidifying the standards and authority to promote the RealD system.

In the future, all theaters employing the RealD system would display the RealD logo during movie screenings, and those 3D films produced using Firefly Group's RealD conversion system would feature a distinct RealD prologue. For a long time to come, all mainstream 3D theaters would be required to display the 'Dual D Certified' logo.

As the most advanced 3D projection system and conversion technology, establishing a strong brand image in the audience's perception would hinder other 3D device or conversion manufacturers from competing for RealD's market share, especially if these rivals did not present obvious technological superiority. If certain theaters employed inferior 3D systems, they would inadvertently contribute to RealD's brand image, and subpar 3D systems would be perceived by audiences as 'pseudo-3D', which they would resist.

Therefore, with everything proceeding smoothly, as the monopolistic provider of equipment and technology, the RealD system not only brought direct and substantial profits to Firefly Group but also provided significant competitive advantages for its films in the 3D market. After all, the RealD conversion system would prioritize serving the Firefly Group.

...

The meeting regarding the '4200' plan lasted through the morning.

At lunchtime, Eric and Jeffrey Katzenberg and others headed to the ship's restaurant for their usual meal. Compared to before, this small restaurant on the ship seemed unchanged on the surface. However, following the previous eavesdropping incident, the company's security department had implemented strict security measures for this internal dining area used frequently by upper management.

The restaurant was no longer open to anyone other than senior executives, and 24-hour surveillance systems had been installed in both the restaurant and kitchen. The chefs and servers responsible for the dining area also signed more stringent confidentiality agreements, and the company security would conduct random checks to ensure no eavesdropping occurred.

The high-level executives from the morning meeting entered the restaurant in small groups rather than gathering in one place. Eric sat with Katzenberg and Frank Wells.

Seeing Eric, Amy Adams confidently approached him. The other three girls seemed slightly envious but didn't dare to compete with Amy and instead moved to other tables.

"Wow, Amy, you look beautiful today," Eric said casually, smiling. "I'm fine with my regular order."

"Oh, thank you, Mr. Williams," Amy said, her cheeks dimpled as she turned to Katzenberg and Frank Wells. "Mr. Katzenberg, Mr. Wells, how about you two?"

Katzenberg replied with a smile, "Same as Eric."

Frank Wells, owing to his age, ordered a light meal.

...

After the three of them placed their orders, Eric got straight to the point once Amy left. "We've confirmed the situation with Iron Man, but I intend to follow up on that recent incident; let's have the home entertainment department start with Blockbuster."

During this time, Eric had expressed his intent to investigate the online gossip scandal more than once, and both Katzenberg and Frank Wells had stopped trying to dissuade him.

Among the businesses owned by Viacom -- Paramount Pictures, CBS, MTV, Paramount Animation, and Blockbuster video rental and sales chain -- Blockbuster was undoubtedly the most vulnerable to Firefly Group's influence. In recent years, Eric had gained a deeper understanding of Hollywood and realized that Blockbuster's decline hadn't stemmed from the rise of internet video rental companies. In reality, Netflix had also emerged, but it lay still at a seedling stage and posed no threat to a giant like Blockbuster.

Moreover, while VHS tapes had rapidly been replaced by DVDs in recent years, the scale of the home entertainment market had been steadily increasing. Other traditional video rental chains, such as Hollywood Video and Movie Gallery, ranked just below Blockbuster in the industry, were consistently expanding while large retail chains like Walmart were also ramping up business in the VHS and DVD sectors.

Ultimately, the reason behind Blockbuster's swift decline amid the rise of internet renters lay in Viacom's own significant mismanagement. Thus, even as the home entertainment market thrived, what had once been formidable, Blockbuster rapidly weakened. Its market share, once a peak of 45% during Viacom's acquisition, had dropped below 25%, and its valuation had plummeted to just $3 billion, less than half of what it was at the time of the acquisition.

Firefly Group had no intention of entering the traditional video DVD sales business, so Eric didn't feel the need to analyze exactly where Blockbuster had erred.

However, if Firefly Group aimed to further push Blockbuster into the abyss, accomplishing that proved to be simple -- cease supplying Blockbuster with new film DVDs.

In this regard, Firefly Group could easily cut off Blockbuster's lifeline. After all, last year, seven of the top ten highest-grossing films in North America were from Firefly Group, and as the list extended back further, most blockbuster hits had originated from the Firefly Group.

At this point, last year's films, having completed their half-year distribution window, were about to enter the home entertainment market.

In reality, over 70% of profits for the end-point DVD retailers came from lower-budget films with larger quantities. Since distributors demanded higher sales shares for popular films, profits from those films contributed less than 30% to retailers.

Nevertheless, retailers willingly provided higher sales percentages for hit films, demonstrating the importance of such blockbuster movies.

Simply put, a popular film acted like a signature dish for a restaurant. While a few standout dishes might not yield much profit, they could significantly boost the establishment's advertising.

If Firefly Group severed the supply of films to Blockbuster, it would essentially damage Blockbuster's brand image.

Additionally, not only hit films but Firefly Group's extensive production scale also provided a plethora of quality lower-budget films, outperforming those made by independent studios. This film supply remained crucial for Blockbuster.

...

As they sat in the restaurant, Eric laid out his plan. Although Frank Wells didn't oppose, he remarked, "Eric, cutting off film supply to Blockbuster directly is one thing, but we shouldn't overlook the potential losses for the company. Viacom won't take this lightly; they will definitely pursue us with anti-trust lawsuits."

"Then we'll find a legitimate reason," Eric replied and glanced at Katzenberg. "That should be easy to come by, right?"

What's that saying? If you want to charge someone, you'll never lack a reason.

Katzenberg nodded seriously, "I reviewed a report from the Buena Vista home entertainment division last time, which suggested that Blockbuster might be hiding DVD sales figures for certain films. Perhaps we should audit Blockbuster's sales data and, in the meantime, temporarily suspend our partnership with them. I believe MGM, Columbia, and Fox will likely follow suit; after all, Blockbuster wouldn't just target Firefly Group alone."

Frank Wells looked puzzled. "Such a significant issue, and I had no idea?"

Katzenberg replied earnestly, "The documents aren't ready yet; I'll show them to you once they are."

Frank Wells blinked in surprise but then chuckled. "Fine, you young folks and your plans."

*****

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