Chapter 140: Chapter 140: Avi Arad
"Charles, can you tell me what you plan to do with Marvel after this?" In a conference room at the Central Park Hotel in New York, Avi Arad had just signed the transfer agreement for a significant percentage of Marvel's shares.
Avi Arad was unable to refuse a $38 million cash check.
Watching Avi Arad sign his name, Charles smiled and remarked, "I'll make my own movies, just like I've been doing at Capet Pictures!"
Avi Arad shook his head and reminded with a wry smile, "That's tough. Shareholders led by Ike Perlmutter won't agree, even if you're the genius Charles Capet."
Charles walked to the window and gazed at the closed Plaza Hotel on 59th Street where the Plaza Accord was signed by the US, Japan, UK, France, and Germany years ago.
"Look, the famous Plaza Hotel needs extensive renovations and upgrades to reopen. Marvel's current business model is no longer suitable for modern Hollywood."
Avi Arad, with his scruffy beard and balding head, joined Charles at the window and agreed, "Relying on selling character rights to other studios means only getting scraps. Marvel indeed needs a revamp!"
"A bunch of people who don't understand Marvel can't run it properly," Charles said while glancing at Avi Arad meaningfully, "Sometimes you have to break it to rebuild it."
After Capet Pictures acquired the shares from Avi Arad, adding to those previously bought from the market, Charles now owned a significant percentage of Marvel's shares.
Including the shares acquired through a proxy, Charles had become Marvel's second-largest shareholder.
"Annie, notify Marvel that I request a shareholders' meeting to be held next month!" Back on Greenwich Street, Charles soon instructed CFO Annie Depp to prepare for a major showdown with Marvel's shareholders.
"Got it!"
"Boss, there's an invitation to a charity gala at the Metropolitan Museum of Art in New York. Are you attending?" Phyllis placed the invitation on Charles's desk.
Charles picked it up and tossed it into the trash, muttering, "A bunch of over-the-top clowns trying to grab attention."
Phyllis Jones stuck out her tongue, feeling it was a bit of a waste. The invitation alone could sell for at least $10,000.
"The script for The Pursuit of Happiness is loved by Will Smith. He not only wants to star in it but is also interested in being its producer. The production department has proposed a $55 million budget!"
"Will Smith as the producer? I'm on board with that!" Charles really didn't have the time to oversee frontline productions himself.
"Will Smith's upfront salary is $14 million, with an additional $6 million profit participation, totaling $20 million!"
Charles nodded. The upfront salary was included in the production budget, and the profit participation would be settled after the movie's release, provided the performance was decent.
"The Pursuit of Happiness is positioned as an inspirational film. A $55 million budget is quite substantial for a non-commercial film. Will Smith's compensation is indeed $20 million."
"Brokeback Mountain earned $85 million domestically and $95 million overseas, totaling over $180 million globally!" Phyllis Jones excitedly pointed out.
Brokeback Mountain was distributed by Focus Features, with a commission rate of 12%, meaning they pocketed $21.6 million.
From the $85 million domestic gross, Capet Pictures received $33 million after deducting 49% for theater negotiations and 12% for distribution commissions. Focus Features spent $8 million on marketing, leaving Capet Pictures with a profit of $25 million.
In the international market, Capet Pictures earned a net profit of $22 million, roughly 23% of the total overseas gross.
Charles carefully reviewed the financial statements. Focus Features had handed over numerous international regions to Universal's United International Pictures for distribution.
In many international markets, distribution involved local partners, with international distributors typically taking 40-45% of the box office, about 10 percentage points lower than in the U.S.
Even after deducting distribution fees and exchange rate costs, the production side should still get no less than 30%. Additionally, international markets had lower promotional expenses compared to the U.S.
The U.S. was the world's largest film market and the center of the film industry. Properly established in the U.S., international distributors often voluntarily joined in, covering promotional costs to leverage film marketing to promote their brands.
"Focus Features is being shady. They spent $8 million domestically, but they didn't even give us 25% of the overseas box office revenue!" Charles scoffed at the hefty international expenses. Thankfully, this was the last movie contract with Focus Features.
"International promotion, film festival PR..." Charles sighed as he scanned the various expenditure reports. However, he aimed to renegotiate DVD, TV rights, and VOD streaming deals overseas with Universal.
Phyllis Jones stood silently, deeply shocked by the financial dealings of Hollywood studios as she delved deeper into the industry.
Currently, Capet Pictures' profit from the box office of Brokeback Mountain was $47 million, but the initial $15 million development budget for the film, being an art piece, meant directors and actors were paid modestly.
Thus, they had signed deals for a share of the global box office profits, amounting to $1.5 million production budget plus $2 million for PR and marketing.
The net box office profit was $30 million, with creatives taking 25%, amounting to a $7.5 million post-release income.
Of course, Capet Pictures could easily make Brokeback Mountain appear unprofitable by inflating PR, promotion, interest, legal fees, marketing taxes, and various other expenses.
After all, every film is operated by a dedicated company, and Capet Pictures also charges interest for funding these operational companies.
However, there was no need since the success of Brokeback Mountain owed much to the team, with Ang Lee winning the Oscar for Best Director and other lead actors receiving Oscar nominations for acting categories.
Capet Pictures had invested $15 million in Brokeback Mountain last year and this year had almost recouped $40 million from the box office.
Of course, it could have been higher, but Focus Features' distribution methods were problematic. However, Capet Pictures could now distribute films independently in North America, although they still had to share a portion of international profits.
The $15 million production cost for Brokeback Mountain, with global box office revenue over $180 million, brought Capet Pictures a net profit of just over $20 million.
However, the real profit from Brokeback Mountain was yet to come from the DVD market, TV rights, and subsequent VOD streaming revenues.
*****
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