I am Hollywood

Chapter 503: Chapter 504: The Market Value of Firefly Films



[Chapter 504: The Market Value of Firefly Films]

The media in North America, interested in Firefly's revenue situation, began to analyze information collected through other channels after being denied access to Firefly's public annual financial reports and having their interview requests rejected by the higher-ups at Firefly.

The professional financial media provided somewhat reliable data, whereas the non- professional entertainment outlets didn't bother with fact-checking, often concocting sensationalized stories purely for attention.

Before long, speculation about Firefly's operations flooded various publications, with most of them making baseless exaggerations that remarkably boosted their sales. Within just a few days, articles claimed that Firefly's annual profit had skyrocketed to $2.6 billion, leaving even Eric puzzled as to how the magazines had arrived at such figures.

Jeffrey pushed open the door to Eric's office and found Eric deeply sunk into his leather chair, legs propped up on a dark red desk. Eric casually flipped through a thick printed document when Jeffrey knocked on the doorframe.n/o/vel/b//in dot c//om

Eric straightened up, set the document on the table, and gestured to Jeffrey, "Jeffrey, what's on your mind?"

Jeffrey walked over, pulled out a chair to sit across from Eric, and glanced at the document Eric had been reading. Curiously, he asked, "Is that a new script?"

"No," Eric chuckled, sliding the document toward him. "Take a look; it's from Chris." Seeing it was something from his son, Jeffrey took the document and discovered it was a draft contract for an incentive plan for the management of IE Company. After skipping through a few pages, Jeffrey began to feel dizzy; it was over a hundred pages long and looked more like a thick book than a simple contract. The clauses were even more complicated than the agreements Hollywood stars signed with production studios.

"Chris and I discussed this during Thanksgiving. We plan to grant around 20% equity rewards to the management of IE, Yahoo, and Hotmail based on their performance in 1995," Eric explained upon seeing Jeffrey set the document aside so quickly.

Given the market expansion shown by both IE and Yahoo, both of which had previously exited product lines but were now valued at over a hundred million dollars in the capital market, the 20% equity incentive was significant. Chris had negotiated with management from all three companies for a full month before reaching an agreement. Furthermore, the contract detailed every possible scenario meticulously, which surprised even Eric when he first saw it. But upon reading it, he realized all the clauses were well-founded, showing Chris had dedicated substantial effort to this matter.

"I don't really understand all this," Jeffrey said with a smile, shaking his head. Then he added, "Carolyn has already completed the annual financial report. You should have a look." With that, he handed Eric another document he had brought in.

"Oh, that was quick! I thought it would take another week," Eric remarked, taking the document. New Year had just passed, and he hadn't expected the finance department to work so efficiently.

"I pushed Carolyn a few times," Jeffrey said, watching Eric go through the document. "With all the commotion outside, I figured it was better to get it done sooner rather than later. Say, Eric, should we ask Carolyn to hold a press conference to reveal a bit of information? Otherwise, the media won't let up."

Eric, perusing Firefly's 1992 financial report, responded, "They already inflated Firefly's annual profit to $2.6 billion. Anyone with any sense knows that's nonsense, so let them guess. We're not obliged to satisfy their curiosity."

Jeffrey chuckled, looking quite pleased. "Even though $2.6 billion does sound outrageous, if the North American and overseas film and entertainment markets continue to expand at this rate, Firefly could reach that level in a few years."

"Of course, that's just a matter of time," Eric agreed.

...

Currently, Firefly's primary revenue streams included film and entertainment, merchandise, theme parks, and television. Unlike a decade later when film and entertainment profits represented only a small fraction of revenue for media conglomerates, at that time, revenue from Hollywood's top seven studios was still the main cash cow.

In Firefly's 1992 financial report, total revenue from film and entertainment -- covering North American box office, overseas box office, and video distribution -- amounted to $4.2 billion. Although overseas box office revenue led with $1.8 billion, its profit margin was the lowest; after deducting costs such as theater shares and distribution budgets, profits from overseas stood at around $250 million with a mere 14% margin. In contrast, North American box office revenue was highly profitable, bringing in $1.5 billion, of which Firefly netted $520 million after deducting marketing and production costs. Finally, the profit margin from video distribution was the highest, yielding $580 million from $900 million in revenue after production costs, and even surpassed North American box office earnings.

The merchandise earnings primarily came from the Disney merchandise stores. After acquiring Disney, Firefly delegated the development rights for the hit Toy Story merchandise to Disney's relevant departments. As a result, Disney store sales reached $1.6 billion this year, yielding $330 million in profit. Earnings from theme parks and resorts amounted to $3.7 billion, but with a hefty operating cost, the profit margin was only about 10%, generating $360 million.

Additionally, the financial department classified the television show licensing earnings from Firefly's films under the television business segment. The total profit from shows like Friends, The X-Files, and Who Wants to Be a Millionaire, along with Firefly's 10% stake in Fox Television Network, reached $720 million.

If operating expenses were ignored entirely, the total profit from these streams would equate to $2.76 billion, which was quite close to the $2.6 billion annual profit reported in the media.

However, even with some costs already deducted, the salaries for the thousands of employees within Firefly's system, along with other expenses, remained substantial. Firefly also needed to provide ongoing funding for the technical departments of Digital Domain and Pixar Studio, as well as start paying off part of the $2 billion debt owed from the Disney acquisition. After all these deductions, Firefly's profit narrowed down to around $1.5 billion.

That didn't even account for the profit that actually fell into Firefly's pocket. Let's not forget that the state tax rate in North America was a staggering 35%. After paying taxes, Firefly's net annual profit came down to about $980 million.

...

"980 million!" Eric exclaimed upon seeing the final figure, feeling a strong urge to battle the tax issues with the IRS.

"Yes, $980 million!" Jeffrey's tone was quite exhilarated. Among the seven major studios in Hollywood, due to owning higher-profit entities like Turner Broadcasting, Warner's annual profit stood at $950 million. Warner had maintained its dominant position in Hollywood for nearly a decade, but Eric's report marked the moment Firefly would surpass Warner as Hollywood's top dog. Jeffrey could not help but inquire, "Eric, what do you plan to do next?"

Eric set the financial report down, shaking his head. "I haven't made any further plans yet -- at least not until next year."

"Why not? We already have all this cash on hand. It would be a shame not to invest it," Jeffrey countered, surprised.

"But we can't just invest for the sake of investing, and this cash might not even cover my needs," Eric replied. According to historical trends, as film investment scales grew, profits in film and entertainment tended to diminish; meanwhile, television network profits had been steadily climbing. In a decade, they could represent more than half of all revenues for any

media conglomerate.

Thus, Firefly's next expansion plan would undoubtedly need to pivot towards television. However, even though the three major television networks in North America had yet to fall into the hands of any media conglomerates and their values hadn't begun skyrocketing, attempting to acquire them wouldn't come cheap. The oil crisis during the Gulf War was a rare opportunity for large profits, and Eric didn't want to heavily leverage investment institutions. The best strategy was to accumulate funds through Firefly's own strength.

While this year's profitability had already energized the company, if next year's Jurassic Park could achieve the same sensation and record-breaking box office as in the original timeline, then Firefly's profits would surge once more, allowing them to gather sufficient funds for

acquiring a television network.

...

While Eric was sharing his future plans with Jeffrey, Allen knocked a few times on the office door and, after receiving permission, walked in.

"Eric, there's an interview request here for you. I think you need to see this," Allen said,

nodding at Jeffrey as he approached.

Eric was puzzled. He had told Allen to reject all media interview requests, and since Allen had

brought this one to him, it likely wasn't a typical invitation.

"From Forbes magazine?" Eric raised an eyebrow at the interview invitation, sensing

something unsettling.

Allen nodded, looking quite pleased. "This is an invitation from Steve Forbes himself, the editor-in-chief of Forbes Magazine. There are some materials attached."

Eric acknowledged with a murmur but continued reading.

Since the early 1980s, Forbes had published a sensational list of America's billionaires. In

1985, due to the rapid rise of Walmart, Sam Walton had been atop that list as the richest

American.

However, unfortunately, Sam Walton had passed away last April, with his wealth of over $20 billion distributed among his wife and children. Under such circumstances, although the Walton family remained the richest in the U.S., none of its members could climb to the top of the North American wealth rankings again.

At that moment, the materials accompanying the interview request from Forbes outlined an overall valuation of Firefly Films, which came to $10.5 billion. After accounting for Firefly's liabilities and assessing Eric's assets from the Firefly Investment Company, Forbes estimated Eric's net worth at $9.5 billion, a figure capable of securing the top spot on the American billionaires' list.

In the original timeline, in 1995, Bill Gates had skyrocketed in wealth thanks to the success of

Windows 95 and topped the wealth list at over $12 billion. Yet in the current context, the North American economy hadn't begun its recovery, and with Sam Walton's passing, Eric's valuation of $9.5 billion was sufficient to take the number one spot.

Counting carefully, Eric held over 98% of Firefly's assets, while Jeffrey and Michael Lynn's

shares had been diluted after the acquisition of Disney. Jeffrey's share was down to 1%, and Michael's was even less, while Pixar executives like John Lasseter, Ed Catmull, and Stan Winston merely held stakes in corresponding subsidiaries. Therefore, it could be said that Eric owned nearly all of Firefly.

If Firefly had been a publicly traded company, given its performance this year, crossing Forbes' valuation of $10.5 billion wouldn't have posed much of a challenge once the annual report was released. However, Forbes seemed acutely aware of the volatility of film investments, and thus provided a relatively accurate valuation. This number, minus Firefly Films' liabilities, reflected Eric's net worth. Additionally, after Cisco's many expansion- oriented mergers and acquisitions, Firefly Investment's shareholding has slightly decreased, but it still maintains a 36% shareholding, which at Cisco's current valuation was worth around a billion dollars, representing Firefly Investment's most valuable enterprise. The cash reserves of a billion dollars in Firefly Investment evidently eluded Forbes' grasp. Putting it all together, $9.5 billion seemed to align closely with Eric's current wealth status.

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