I am Hollywood

[Chapter 1155: The Crazy Surroundings]

Eric returned to Los Angeles on June 10, just as Firefly Group's second summer film, Cars, finished its first week of screenings.

While Cars maintained Pixar's usual production quality, it was widely regarded by critics as targeting a younger audience, making it less appealing to adult viewers. In its opening week, Cars earned $83.32 million, slightly below the expectations of the distribution department.

However, the toy line developed around Cars saw significant success following the film's release, far exceeding Firefly Group's projections. In just one week, merchandise sales for Cars surpassed $200 million, easily outpacing the merchandise figures from the release of Star Wars: Episode I - The Phantom Menace at the end of the previous year.

Firefly Group's consumer products division even produced an ambitious report predicting that the overall sales of Cars merchandise during its lifecycle could only be second to the Star Wars franchise. Based on initial sales data, the total merchandise sales from Cars for the year were expected to reach between $2.5 billion to $3 billion. Coupled with the successful merchandise lineup for Iron Man, Firefly Group's consumer products revenue was projected to double, reaching about $6 billion.

With an average net profit margin of about 15%, the $6 billion in merchandise sales would potentially yield $900 million in net profit for Firefly Group. According to first-half financial data, even without considering substantial non-operating profits from the Clover Fund, Firefly Group's net profit for the entire 1999 fiscal year was on track to exceed $4 billion for the first time.

This meant the consumer products division alone would contribute over 20% of the total net profit for Firefly Group, a figure that had usually hovered around just 10% in previous years.

...

Although Firefly Group was quietly raking in profits and showed no inclination to publicly promote the strong sales of Cars merchandise, the media quickly uncovered the story, with some 'in-the-know' outlets even accessing the division's prediction report.

Last year, in an effort to gain more leverage during its merger with America Online, Time Warner had carefully designed its annual financial report, barely exceeding $1.9 billion in profits. Now, Firefly Group's consumer products division was already close to contributing half of that. It was no wonder the entire Hollywood was feeling envious.

Although Pixar Animation Studios had established a technological barrier similar to that found in Digital Domain, key personnel at Pixar quickly became targets for headhunters. Even John Lasseter had been approached, with offers that made Eric himself feel a bit 'tempted.'

To prevent talent attrition, Firefly Group had to initiate another round of salary increases at Pixar.

In the original timeline, Eric had often wondered how studios like Blue Sky Studios and Illumination Entertainment could keep their animation production costs down to around $60 million while Pixar's production budgets routinely reached $200 million.

Now, he fully understood.

The primary expense in animated films was labor costs. With a production team of 500 over two years, a team with an average salary of $100,000 versus another with an average salary of $50,000 could drastically differ in production budgets.

Pixar not only had a much larger animation production team than smaller studios, but its staff's average salaries also exceeded those of competitors, leading to higher production costs.

...

Aside from Cars, Amblin Entertainment's The Matrix 3 chose June 9 for its release date.

In Hollywood, a common unspoken rule was that films releasing on days other than Friday typically indicated a lack of confidence in the film's box office prospects. By spreading the initial release week over more days, producers hoped to achieve higher earnings in the early stages.

The Matrix 3 clearly adhered to this rule, as last year's The Matrix 2 had already depleted much of the fan enthusiasm. Although Amblin chose not to expedite the release of the finale by the end of last year, waiting till summer had made many viewers lose interest in the series after the lengthy year-long wait.

After a wave of negative reviews post-release, The Matrix 3's box office earned a decent $35.15 million after two days but saw a rapid decline afterward. The second week's earnings from June 11 to June 17 fell to just $62.53 million, with the following third week witnessing a staggering drop of 67%. It was expected that the film wouldn't even meet its $150 million production budget in North America.

The failure of The Matrix 3 had become the final straw leading to the unraveling of Amblin Entertainment.

Industry whispers indicated that David Geffen, Steven Spielberg, and George Lucas had begun discussing potential splits, and Microsoft had already ceased funding support for the film company, which initially seemed poised to replicate the miracles of Firefly Group and become another major player in Hollywood.

Now, it was clear to many that the future of Hollywood would not see another contender among the current Big Seven.

...

Despite the series of new releases, Iron Man continued to perform steadily at the box office. In its seventh week, it brought in an additional $10.60 million, bringing its North American total to $359.11 million.

Though it would likely dip below the $10 million mark the following week, the approaching $360 million domestic total was already close to Eric's previous directorial work, Casino Royale, which had reached $370 million.

However, based on current trends, the likelihood of Iron Man reaching $400 million in North America seemed slim.

That $400 million mark appeared to be a barrier.

Even so, no one felt particularly disappointed.

At the same time, with increasing box office numbers, Iron Man's overseas earnings effortlessly broke through $500 million. Although it was also nearing its conclusion, it was no stretch to predict that Iron Man's global box office would surpass $1 billion in the coming months, including North America.

Unknowingly, many suddenly realized that although Iron Man was Eric's starring project, along with Jurassic Park and Casino Royale, this was already the third film he had been directly involved in that achieved over $1 billion in global box office.

When a filmmaker managed to create a film that grossed over $1 billion globally, they would immediately be celebrated as a Hollywood superstar.

But when a filmmaker produced three consecutive films surpassing the $1 billion mark, it could only be described as a miracle.

Moreover, with more information about Gravity surfacing, many started to realize that it could likely be another $1 billion box office miracle for Eric Williams.

...

After quickly attending the celebratory dinner for the merger of America Online and Time Warner in New York, Eric returned to Los Angeles and devoted most of his energy to the final editing of Gravity.

Gravity's production was done concurrently with its post-production, with the Digital Domain's 3D conversion studio already working on transforming relevant 2D footage into 3D, including for IMAX-3D.

Eric's approach was a way to continually refine the 3D conversion team during production while optimizing 3D and IMAX technology based on his previous experiences.

Having completed the 3D conversion of Gravity, the Digital Domain's team had begun working on a 3D version of Underworld.

Although the 2D version of The Lord of the Rings: The Fellowship of the Ring had already been completed, Eric still hoped the conversion team would have some experience from Underworld before diving into The Lord of the Rings project. The release date for The Lord of the Rings: The Fellowship of the Ring was set for December 17, allowing ample time.

...

Busy with work, June flew by without notice.

As noon approached, Bill Gates stepped out of his car in the Firefly studio parking lot. Although he had little expectation, seeing only Eric's blonde, tall assistant waiting by the parking lot left him feeling slightly dissatisfied.

"Mr. Gates, hello," Marissa Mayer politely greeted him, seemingly oblivious to his demeanor, shaking his hand and adding, "Please, follow me."

As they walked out of the parking lot together, Gates couldn't help but ask, "Is Eric very busy?"

Merissa Mayer nodded, "Mr. Williams is currently in the final edit of his new movie."

Listening to Merissa Mayer's corporate tone, Gates recalled a recent mishap with a woman and chose not to make things awkward by speaking up. Still, he couldn't help but think Eric Williams had probably encountered far more romantic pitfalls than he had; why had he never faced anything as unfortunate?

Arriving at the Digital Domain's studio, Gates had just settled into the lounge under Merissa Mayer's guidance when Eric entered with a few others, laughing and joking.

Gates hesitated for a moment but stood up nonetheless, smiling as he approached.

"Bill, great to see you again," Eric shook Gates' hand, then introduced the group beside him, "This is Jim, Michael -- you know him for sure -- and Peter, the director of the Lord of the Rings series."

Microsoft had always harbored ambitions of breaking into Hollywood, and despite their recent failure with Amblin, Gates had not abandoned that idea.

At that moment, seeing prominent directors like James Cameron and Michael Bay, he greeted everyone politely, exchanging handshakes and pleasantries before jokingly asking, "Eric, are you planning something big again?"

Eric, settling into his chair, replied, "It's still about 3D movies. Digital Domain has had some new technological breakthroughs, so we wanted to bring everyone in to take a look."

In fact, over the past six months, to further advance 3D-IMAX film technology, a series of directors within the Firefly network had frequently visited Firefly Studios. Eric had even personally approved a budget of $20 million specifically to have these core directors produce 3D short films to familiarize themselves with all aspects of 3D and IMAX technology.

The core technology for 3D and IMAX lay in the hands of Digital Domain, so Eric wasn't worried that these directors would switch to another studio after mastering 3D-IMAX techniques.

After enjoying a coffee and a casual chat for a while, knowing Eric and Bill Gates had business to discuss, Cameron and the others decided to leave.

Eric then led Gates to the big ship's restaurant.

...

After placing their orders, the two quickly transitioned into the day's main topic.

Five years ago, to make Yahoo Browser the default on Microsoft, along with a series of other collaborations, Yahoo and Microsoft signed a long-term equity purchase agreement. The terms stated that after five years, Microsoft could acquire up to 30% of Yahoo's shares.

That agreement's expiration date was next month, followed by a three-month hesitation period for Microsoft to decide whether to exercise this purchase option.

Gates had initially envisioned acquiring 30% of Yahoo's shares first, then gradually increasing that stake through open market strategies, eventually controlling the company.

But now, the situation had evolved far beyond his original expectations.

With the ongoing explosion of tech stocks on NASDAQ, Microsoft's current market value had soared to $560 billion, while Yahoo's recent value had reached $170 billion.

Under the terms of the original agreement, Microsoft had the option to acquire shares through stock swaps or cash payments.

Now, Yahoo's 30% stake was worth over $50 billion, making it impossible for Microsoft to offer that much cash. On the surface, it seemed that Microsoft could simply provide 10% of its shares to get a 30% stake in Yahoo, which could give the impression that Microsoft was getting an excellent deal.

However, many understood that Microsoft's 10% share was inherently worth much more due to its already established monopoly in the industry compared to Yahoo's 30% shares.

Moreover, should a stock swap occur, the Firefly network would instantly become Microsoft's second-largest shareholder and potentially the largest due to Gates' continued sell-offs.

Since Microsoft had not adopted a dual-class stock structure, if the Firefly network were to become Microsoft's largest shareholder, it could threaten Gates' control over Microsoft.

On the other hand, even with a transfer of 30% of Yahoo's shares, the shares directly held by Firefly would still exceed 48%. As long as the Firefly network was willing, it could easily control Yahoo, making it impossible for Microsoft to gradually take control as Gates had originally envisioned regarding Yahoo.

Thus, the current situation was that the once-promising long-term equity purchase agreement had become a bit of a headache for Microsoft.

*****

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