I am Hollywood

[Chapter 1150: The Profit Chain]

In stark contrast to the vast, monotonous soundstages and the busy administrative areas, the Digital Domain office loft within Firefly Studios, primarily constructed of glass and steel, was undoubtedly the most comforting place to be. The artfully aligned buildings seemed like pieces of artwork nestled under green trees and vines, resembling a separate little world within the studios.

However, as one of the core departments of Firefly Group, not just anyone could access the Digital Domain office area.

With the guidance of Caroline, Tom Freston managed to reach the second floor of an office loft.

As he walked, Tom Freston discreetly observed his surroundings.

What truly attracted Tom Freston, however, was not the exquisitely decorated office loft or the numerous special effects movie models on display but rather the company name itself -- Digital Domain.

As one of the two co-presidents of Viacom, primarily responsible for the film entertainment division, Tom Freston had a profound understanding of all aspects of Digital Domain's operations.

The visual effects company, known as Shadowlight, established by Warner Bros., Paramount, and Universal, intended from the start to emulate Digital Domain. However, over the past six months, senior executives from the three companies had to admit it was nearly impossible to catch up to Digital Domain.

This company, part of the Firefly system, had begun its groundwork in CG effects eight years ago and had firmly entrenched itself in Hollywood over that time.

If Shadowlight wanted to chase after them, the traditional method would certainly involve poaching talents from Digital Domain. But that approach no longer worked, as even if Shadowlight managed to lure away technical staff from Digital Domain, they could not access the company's proprietary special effects software. Digital Domain's core special effects software had ceased to be sold outright and instead was now licensed out for rental in collaboration with several small and medium-sized effects companies.

Naturally, Shadowlight was not on the list of authorized licensees from Digital Domain.

Unable to secure the software licenses, Shadowlight could only opt to partner with longtime software vendor Autodesk to develop their exclusive CG effects software.

Autodesk had previously turned down a collaboration with Digital Domain on software development due to their skepticism about the future of CG effects. Now, in an attempt to rectify that previous oversight, they were pouring considerable resources into software development. However, the eight-year technological gap was certainly not something that could be bridged overnight.

Even if Autodesk managed to match Digital Domain's software technology in a few years, they would certainly struggle to penetrate the strong profit chain Digital Domain had established in Hollywood's effects industry.

It is important to note that even with a film that didn't utilize Digital Domain's unique top-tier effects technology, just using commonplace CG shots, effects companies leveraging Digital Domain's software and technical support often enjoyed comprehensive advantages over their competitors, both in terms of effects quality and production costs.

Therefore, even knowing that there was a risk of being choked by the Firefly system at any moment, it remained difficult for other Hollywood film companies to decisively wean themselves off their dependence on Digital Domain and its affiliated effects companies.

...

"Mr. Freston, Eric needs about ten more minutes. Please have a seat," Caroline explained politely as she led Tom Freston to the lounge on the second floor. After instructing the staff to prepare coffee for him, she turned and left.

Having already waited three days, Tom Freston didn't mind the final ten minutes. After thanking the Digital Domain employee who brought him coffee, he quickly sat at the table, reorganizing his thoughts on how to handle Eric Williams. Moments later, he let out a sigh of relief.

His gaze scanned the room again, and he picked up a copy of the Hollywood Reporter from a nearby bookshelf, intending to pass the next few minutes.

The front-page headline happened to announce the box office numbers for Iron Man.

As it entered its third weekend, Iron Man saw a box office decline of only 39%, grossing another $37.88 million over the three-day span.

Meanwhile, this superhero blockbuster had raked in a total of $260.51 million at the North American box office within just two and a half weeks. It was almost a sure thing that it would surpass the $300 million mark within the following week and a half. With over $300 million at the North American box office in four weeks, it was entirely predictable that the film would ultimately reach $400 million without any suspense.

In contrast, the box office for Paramount's competing film, The General's Daughter, was almost painful to look at.

After ten days in theaters, this $95 million large-scale production had managed only $35.13 million at the box office.

Of course, it was not just The General's Daughter. Under Iron Man's overwhelming impact, the film Entrapment, which premiered the previous Friday, only grossed $19.15 million during its opening weekend.

However, Columbia Pictures had kept the production budget for this film -- sustained majorly by the first 007 actor, Sean Connery -- well managed at $60 million.

Even if the North American box office didn't perform as well as hoped, the potential for overseas box office revenue for Entrapment was significantly higher than that for The General's Daughter. Ultimately, a global box office expectation of around $200 million would be sufficient for Columbia to recoup its entire production and distribution cost, leaving them with net profit from the film's future capabilities in VHS and DVD sales, as well as television distribution.

Furthermore, to Tom Freston, the significance of Entrapment for Columbia was not even in its box office performance.

The cost control of $60 million for this film symbolized that after leaving Sony, Columbia had been rapidly integrated into the Firefly system without any significant buffer period, meaning that their movie production no longer indulged in reckless spending without a plan -- a chronic issue that had been difficult to rectify during Sony's control of Columbia for nearly a decade.

In recent years, as financing for Hollywood films had become exceedingly easy outside the Firefly system, spending patterns had grown lavish.

Take The General's Daughter, for example. If Paramount could have earnedestly tightened cost controls, even a budget of $60 million would have been more than feasible instead of the $95 million already overspent. Reducing the budget to $60 million would significantly relieve Paramount's financial pressure.

However, to win over director Simon West, who rose to fame with Con Air, the production department of Paramount chose not to do so and instead inadvertently coddled him during production. Although it raised the production costs by more than 50%, the director, on his second outing with a big production, failed to deliver a satisfactory product.

In contrast, the performance of the Firefly system was much more robust.

In recent years, CAA had once inflated Sean Connery's salary to $20 million, but Columbia stood firm in offering the veteran 007 actor only $12 million with no option for box office revenue sharing.

Though Sean Connery had often threatened to exit the project, he ultimately accepted the terms.

Clearly, Sean Connery understood that without Sony's deep pockets, obtaining $20 million from Columbia was simply impossible; in the eyes of other major Hollywood studios, he was certainly not worth that amount anymore. As for companies like Carolco Pictures that frequently offered exorbitant salaries to Hollywood's veteran stars in the past, following various media group consolidations and the further monopoly of film distribution channels, they had gradually fallen silent after experiencing consecutive losses in recent years.

...

Absently flipping through the newspaper, Tom Freston immediately snapped back to reality upon hearing footsteps nearby. He stood and walked over to Eric as he entered the lounge. "Eric, it's great to see you."

"Hello, Tom. Please, have a seat," Eric replied politely, shaking Tom Freston's hand as he settled into a chair nearby while sizing up the slightly aged middle-aged man before him.

Although Tom Freston was only in his early forties, his graying hair and facial wrinkles made him appear a good ten years older.

Tom Freston took a seat as well, subtly assessing the casually dressed young man who exuded a calm demeanor. He initiated, "Eric, I came here hoping to clear up some misunderstandings we had the other day."

Eric accepted the bottle of water Caroline passed him, casually placing it on the table, and nodded with a flat expression, "Hmm, and then what?"

Tom Freston didn't glean any useful information from Eric's demeanor and pressed on. "Wayne Lewellen will soon be leaving Paramount, and regarding Viacom, we could offer a compensation package to seek a resolution with Firefly Group and similar companies."

Eric raised an eyebrow in confusion, asking, "Who is Wayne Lewellen?"

Given that the young man across from him didn't miss any Hollywood gossip about employee departures, it was hard to believe he wouldn't know Wayne Lewellen.

Nonetheless, playing clueless, Tom Freston had no choice but to explain, "Wayne Lewellen is the vice president of Paramount Pictures, primarily responsible for distribution. The misunderstandings from last time were caused by his unilateral decisions."

"Oh," Eric nodded but continued, "I don't know that person. At Paramount, I only know Sherry Lansing."

Tom Freston paused for a moment, then understood and instinctively shook his head, "Eric, that's not acceptable."

"Whether it's acceptable or not is for you to decide," Eric stated, his casual demeanor shifting as he sat up straight, locking his sharp gaze onto Tom Freston. "In any case, at Paramount, I only know Sherry Lansing, so since there's been a problem, it should fall to Sherry Lansing to be held accountable."

Eric's sudden assertiveness diminished Tom Freston's confidence. "Eric, there's really no need for that. After all, what happened last time didn't impact you much."

If one of the seven major studio heads were to leave due to a wholly uneventful gossip incident, not to mention the potential effects it could have on Paramount's operations, this situation itself would severely damage Viacom's credibility and standing in the media industry.

"But what if it did?" Eric glanced at the newspaper in front of Tom Freston. "Just like Iron Man; if Firefly Group hadn't handled things appropriately, how much box office revenue could this $1 billion global film's final tally have left? $500 million, $300 million, or even less? So, I will not allow this to happen a second time. You have to accept the risks you brought to Firefly Group with the same degree of accountability. Now, if you wish to settle, Sherry Lansing must go."

After a moment of silence, Tom Freston reluctantly nodded, "Alright, I'll convey that to Sumner. Now, regarding Viacom?"

"Speaking of that, Tom, do you know what conditions must be met for a lizard to survive by shedding its tail?" The split of Viacom's subsidiary, Blockbuster, announced just last Saturday, had proven to have little effectiveness.

Upon hearing Eric's words, a flustered expression crossed Tom Freston's face, and he shook his head, "I'm not quite sure about that."

A slight smile appeared on Eric's face, resembling a young teacher suddenly eager to impart knowledge. "It's simple. The portion of the tail that the lizard sheds must attract the attention of the predator. If the predator behind it has no desire to chase that tail, then what's the point?"

Tom Freston nodded helplessly, "That does seem to be the case."

"So, if you're going to do this, you should choose a tail that's attractive enough."

Tom Freston felt an ominous feeling growing in his gut but could only go along with Eric's train of thought. "Eric, what exactly do you want?"

"Showtime," Eric replied directly, "Fire Sherry Lansing, and transfer Showtime -- those are my conditions. Once these two points are addressed, we'll consider the previous matter resolved."

Eric deliberately avoided mentioning Wayne Lewellen again, but it was clear that, regardless, Wayne Lewellen wouldn't be able to remain in Hollywood.

In recent years, with HBO's continuous expansion and the rapid growth of FFM, Viacom had poured more resources into its Showtime network, recognizing the commercial potential of paid cable channels.

Although Showtime's development had not been as swift as FFM, which was supported by multiple companies, it had still become one of Viacom's fastest-growing businesses. Thanks to its relatively low fees and content channel resources, Showtime had accumulated over six million paying subscribers.

"Eric, your demands are excessive; Sumner would never agree to that."

"I'll repeat myself; whether it's feasible or not is for you to determine. Just as you've troubleshot your issues, so must I. Now that I've addressed my problems, you need to deal with yours," Eric added. "Moreover, relative to what others have proposed, my demands are actually quite reasonable."

"We're aware of Carl Icahn's visit to you, Eric; you won't succeed. Even if you do, you'll face a lot of trouble, as your manipulative behavior is illegal."

"Then it's yet another problem for me; it's not your concern," Eric shrugged. "Feel free to let Sumner try to keep his position. Oh, and I want to remind you of something: next week we'll announce a list of upcoming collaboration movies. Although they mainly consist of some non-core projects from MGM and Columbia, film funds on Wall Street would certainly prefer to collaborate with Firefly Group. So, you might want to consider once again if you'll take the plunge and shed your tail, perhaps even spinning off Paramount Pictures."

*****

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