Bab 225: Chapter 225: Blockbuster
After having some food, Simon Westeros got up and started mingling with the crowd.
Janet wasn't by Simon's side, so Sandra unceremoniously took the role of his companion. Courtney, aware that her relationship with Simon wasn't close enough for this, tactfully left.
After Simon and Orion Pictures President Mike Meadow chatted for a bit, Sandra joined Simon and walked towards the villa, asking, "When are you going to Australia?"
Without stopping, Simon raised his glass to a vaguely familiar guest and replied, "The day after tomorrow."
"The day after tomorrow?" Sandra was surprised. "So soon?"
"Not really. It's been planned for a while," Simon said, seeing Sandra's surprised look. "I'll probably stay in Melbourne for a bit over three months. You can visit the set if you're free."
Sandra looked around, feigning concern, "Australia is Janet's stronghold, her family is in mining. Won't I get thrown into a mine if I go?"
Simon nodded gravely, "That's very possible."
Sandra, seeing Simon's expression, became displeased again, "Aren't you going to do anything about it?"
Simon, with a smile but a troubled tone, said, "It's hard to intervene. They have many mines, some even in Africa."
Sandra rolled her eyes, "Jerk."
Joking like this, Simon approached Wes Craven, the director of "Scream", for a conversation.
Despite some friction over the director's fee for the "Scream" sequel, Wes Craven accepted Daenerys Entertainment's offer of $15 million for directing two sequels.
It was clear that Wes Craven wasn't blinded by the success of "Scream" and didn't repeat the mistake he made with the "Nightmare on Elm Street" series. A $15 million fee for two horror sequels was already quite high.
After chatting briefly, Simon and Sandra were about to move on when Nancy Brill, the newly joined President of the Consumer Products Division at Daenerys Entertainment, approached with a middle-aged man, slightly overweight and about fifty years old.
"Simon, you look stunning tonight," Nancy said, shaking hands with Simon and greeting Sandra. "Simon, this is Mr. Wayne Huizenga, the Chairman of Blockbuster."
Simon had initially thought the man was Nancy's husband, internally sighing about a flower stuck in cow dung. However, upon Nancy's introduction, he realized his mistake.
After discussing the possibility of venturing into the video rental chain business, Nancy had been gathering relevant information while managing Daenerys Entertainment's consumer products division. Clearly, she was not content with just managing one division.
Simon admired ambitious women, especially beautiful and ambitious ones, provided they had matching capabilities. Though he didn't know Nancy deeply, he judged her as a very capable woman.
Thinking this, Simon didn't hesitate to shake hands with Wayne Huizenga, saying with a smile, "Nice to meet you, Mr. Huizenga. Your surname is quite unique."
"Hello, Simon. Actually, the Westeros surname is truly unique," Huizenga replied with a pleasant smile, shaking Simon's hand before adding, "Our family are Dutch immigrants from Northern Europe."
Simon realized, "Northern European surnames, I know some. They are quite a mouthful."
As he chatted casually with Huizenga, Simon recalled Blockbuster's detailed information.
Founded in 1985 by David Cook, a software engineer from Texas, Blockbuster was sold and Cook left the company after just over a year. Wayne Huizenga, who was in the waste management business, discovered the company and, with a few partners, bought Blockbuster, rapidly expanding it within a year from a few dozen stores to 386, almost one new store per day.
At that time, investing in a video rental store cost around $500,000. Including other expenses, Huizenga and his partners had invested nearly $200 million in just one year.
However, Blockbuster's total revenue in 1988 was only around $130 million. Due to continuous heavy investment, the annual report showed a loss.
Huizenga, a self-made man with over twenty years in business, had less than $300 million in personal assets and couldn't continue to support Blockbuster's rapid expansion. Even after sharing investments with partners, Blockbuster still accumulated a debt of $80 million in a year.
Now, with the North American stock market not fully recovered, Blockbuster wasn't suitable for public listing to raise funds. To maintain its current expansion pace, Huizenga had to seek other investors.
Recalling that five years later, Blockbuster was acquired by Viacom for over $8 billion, Simon knew the current valuation wouldn't exceed $300 million, holding less than 5% of the North American video rental market share.
Despite his reservations about the video rental chain business, Simon knew it was the best time to enter Blockbuster, with a sure promise of substantial returns.
As it was a celebratory, entertainment-focused New Year's Eve party, Simon didn't discuss formal matters with Huizenga. They agreed to meet the next morning, and Huizenga left.
Simon, watching Huizenga walk away, turned to Nancy, "How did the talks go?"
He was leaving for Australia the day after tomorrow and didn't have time to drag things out with Huizenga. He had already instructed Nancy to negotiate with Huizenga.
Nancy explained, "He initially hoped to exchange 30% of Blockbuster's shares for $100 million from Daenerys Entertainment. I negotiated up to 35% for $120 million. Simon, we're not the only company interested in Blockbuster. Sumner Redstone's Viacom Group has also been in contact with Wayne."
Simon thought for a moment, "Would $120 million be enough for Blockbuster's expansion next year?"
Blockbuster had invested $200 million this year. Continuing at the same store growth rate, they could reach 800 stores by the end of next year. Even if the company's revenue offset some financial pressure, next year's investment wouldn't be less than $200 million.
Nancy shook her head, "Not enough. However, transferring 35% of shares is the limit for Wayne and his partners, as they don't want to lose control of the company. Viacom wants more shares, which is why they haven't reached an agreement. As for the remaining funds, Blockbuster will likely solve it through loans or, if necessary, by bringing in other investors or an early IPO."
Simon nodded slightly.
If Daenerys Entertainment were in dire need of funds, even with 100% ownership, Simon would be willing to sell a maximum of 35% of the shares.
Huizenga and his partners collectively owned Blockbuster, with none holding more than 30%. Daenerys Entertainment getting 35% for $120 million would likely make it the largest shareholder.
Simon could foresee that in tomorrow's meeting, Huizenga would probably propose terms to prevent Daenerys Entertainment from overly interfering in Blockbuster's operations as the majority shareholder.
However, without involvement in Blockbuster's operations, Simon had little confidence in the company's long-term development.
Blockbuster, initially created by David Cook, had somewhat mimicked Walmart's warehouse logistics and information coordination system. This management style was successful in the early years of expansion but would soon become outdated in the rapidly evolving video rental industry.
Blockbuster's turning point was its acquisition by Viacom five years later. Under Sumner Redstone, who no longer had the energy to manage Viacom's business empire, Blockbuster continued to expand but was actually on the decline, just like the rest of Viacom.
Even until Simon's rebirth, Blockbuster existed, but it was completely different from its later competitor Netflix.
To avoid repeating history, Blockbuster had to adjust its strategy in the coming years. Simon had no confidence in Huizenga's ability to do so. If Simon wanted to be involved in the video rental chain business long-term, taking control of Blockbuster was the best option.
However, this wasn't urgent.
Securing 35% of Blockbuster's shares was most important. As long as Daenerys Entertainment ensured these shares weren't diluted in the next few years, Simon would have enough leverage to take control of the company.
While Simon and Nancy were discussing this, a cheerful greeting came from nearby.
Turning around, Simon saw Robert Redford and smiled, "Bob, I'm glad you could come tonight. How have you been?"
"Good, Simon," Redford replied, shaking Simon's hand. "I saw 'Metropolitan', a very thought-provoking film."
Simon smiled. Although Sundance only accepted one film from Daenerys Entertainment this year, he had no hard feelings towards Redford. As one of CAA's most important stars, Redford couldn't be entirely uninfluenced by those around him.
Moreover, Redford had been a great help to Simon early on. Apart from "Run Lola Run" unexpectedly propelling the Sundance Film Festival forward, Simon hadn't repaid him much. In fact, he owed Redford a favor.
After chatting briefly about their current situations, Redford's expression became serious, and he lowered his voice, "Simon, there's something else. Michael hopes to talk to you in person. Are you free tomorrow?"
Michael, of course, was Michael Ovitz, the President of CAA.
Recently, with the unexpected box office success of "Rain Man", CAA's position in the controversy became awkward. They had also likely felt Daenerys Entertainment's snub of their artists.
Apart from a few who had collaborated, like Redford, Daenerys Entertainment didn't invite other CAA stars to tonight's party. The guests were mainly artists from WMA, ICM, and other agencies.
Daenerys Entertainment and CAA hadn't publicly fallen out, and Simon's encounters with Ovitz were pleasant. However, after the "Rain Man" saga, the rift between them was widely known.
Ovitz sending Redford to relay the message likely considered that Simon might refuse direct contact. Frankly, if Ovitz had prevented Barry Levinson and others from escalating the situation, if CAA hadn't acted behind the scenes before "Rain Man's" release, if they hadn't demanded an exorbitant price for Meg Ryan, there might still be room for reconciliation.
Now, Simon would indeed refuse. He didn't care much about a fallout with CAA. The nature of talent agencies meant they were dependent on Hollywood producers, not the other way around. Even without this incident, the conflict of interest would have inevitably led Daenerys Entertainment and CAA to opposition.
Despite his good relationship with Redford, Simon couldn't agree unconditionally, so he regretfully shook his head, "Sorry, Bob, my schedule is full tomorrow."
Redford didn't give up, "Simon, it's just one movie. Besides, Daenerys Entertainment is already successful. There's no need for this."
Simon rarely got emotional about anything, but he also never easily forgave. How could a reconciliation be possible with a simple 'there's no need for this' after all the behind-the-scenes attacks?
Shaking his head again, Simon forced a smile and changed the topic, "Bob, what's your next movie? I'm really looking forward to it."
Seeing his efforts futile, Redford internally sighed. Despite their acquaintance, he didn't think he could influence Simon much, given his wealth and status. Having relayed the message and met with Simon's firm stance, he didn't waste more words.
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