Chapter 214: Pitfall
Chapter 214: Pitfall
Eric gently set down the coffee cup in his hand and looked up.
“Mr. Murdoch, you surely know a little about me. I’m a very stubborn person. If you make me speak first, then once I state my conditions, there won’t be the slightest room for compromise. And if Fox can’t accept them, things between us will definitely become very unpleasant. So it’s better if you speak first. If Fox’s terms can satisfy me, I’m not a greedy person either.”
Murdoch inwardly cursed the little fox. And this still wasn’t considered greedy?
Still, after only a brief moment of thought, Murdoch spoke.
“Eric, the cooperation between Fox and Firefly has always been very pleasant, so how about this: I’ll use 5% of Fox Film Corporation’s shares to exchange for the same proportion of shares in Firefly. I’m sure you know Fox’s market value, so Firefly would actually be getting the better end of the deal. This would also allow the cooperation between our two film companies to become even closer. In exchange, I want the first-run broadcasting rights to the next four seasons of Friends. The 70% advertising revenue share I proposed earlier will remain unchanged. What do you think this time?”
After hearing Murdoch’s proposed condition, Eric was tempted for a few seconds before instantly losing all sense that he was gaining any advantage.
He had heard very clearly that Murdoch said Fox Film Corporation shares in exchange for the same proportion of Firefly shares, not Fox Television Network shares.
Perhaps the public assumed the two companies were one entity, but Eric clearly understood the difference. Although both were currently under Barry Diller’s management, Fox Film Corporation and the Fox Television Network were completely unrelated companies.
Fox Film Corporation’s current market value was around two billion dollars. Five percent of that was worth one hundred million dollars, while 5% of Firefly was indeed not worth that much at present. Based on the valuation from the merger with New Line, Firefly’s market value was only around six hundred million dollars. By that calculation, agreeing to the share exchange would effectively earn Firefly seventy million dollars.
But matters were far from that simple.
After Firefly merged with New Line, every major Hollywood film company already understood Firefly’s potential for future development. If Eric’s streak of box office success continued, then in just a few years Firefly might stand shoulder to shoulder with the Seven Major Film Studios. Correspondingly, Firefly’s market value would skyrocket and might even surpass Fox.
Eric was very confident that if things went smoothly, the process would not even take five years.
Previously, when he gave up 15% of Firefly’s shares and a large sum of money to acquire New Line, Eric had done so willingly because it compensated for Firefly’s weakness in distribution capability and greatly shortened Firefly’s path to becoming a major studio.
Five percent of company shares was already enough to obtain a certain degree of speaking power within a board of directors. After exchanging shares with Fox, Eric saw almost no benefits at all. Instead, Firefly would end up constrained by Fox.
And furthermore…
Eric lightly curled his lips and leaned slightly forward before asking Murdoch across from him:
“Mr. Murdoch, how much profit do you think Fox Film Corporation will make this year?”
Murdoch’s heart suddenly jumped. Had this little brat seen through it?
Still holding onto a sliver of luck, Murdoch shook his head.
“I’m not very clear on that matter. We’ll only know once the year-end financial reports are released.”
Eric almost let out a cold laugh.
“Mr. Murdoch, perhaps I can help calculate it for Fox. Because Mr. Barry Diller has focused primarily on developing the Fox Television Network, Fox itself hasn’t released many films, and there hasn’t been a single major production with huge box office potential. This year, Fox’s main lineup consists entirely of my three movies: Pretty Woman, Sleepless in Seattle, and Home Alone 2.
“Pretty Woman is already settled. North American box office: 210 million. Worldwide: 530 million. Even after deducting distribution expenses, Fox can still earn at least seventy million dollars in profit.
“And personally, I think Fox will earn at least another hundred million dollars in profit from Sleepless in Seattle and Home Alone 2. Add in Fox’s other releases and the income from videotapes and related revenues…”
Eric laughed lightly.
“What a good year. Maybe Fox might even achieve an annual profit of three hundred million dollars. That would be nearly double an ordinary year.”
Hearing Eric’s conclusion, Murdoch could not help feeling delighted. If things truly turned out that way, Fox would definitely rank first among the Seven Major Film Studios that year. Even Warner Bros., which had earned a fortune from Batman that year, might not achieve such high annual profits.
Once the year-end financial report was released, Fox’s market value would certainly experience a major surge.
However, after the delight faded, the remaining trace of luck in Murdoch’s heart completely disappeared. He could only ask dryly:
“Eric, isn’t that a good thing?”
“Of course it’s a good thing,” Eric replied. “So now let’s calculate Firefly’s profits this year.”
As he spoke, Eric raised several fingers and counted them one by one.
“Pretty Woman: 105 million.
“Running Out of Time—judging from its current box office trend, worldwide revenue should still reach around five hundred million dollars, meaning Firefly can earn another hundred million or so.
“As for Sleepless in Seattle and Home Alone 2 at the end of the year, after deducting costs, Firefly should also be able to earn at least a hundred million, same as Fox.
“And don’t forget, I still have another three films releasing at the end of the year. I’m very optimistic about all three of them. But even if those three combined only earn one hundred million dollars…”
Eric paused slightly.
“When dividends are distributed at year’s end, with the same 5% shareholding, Fox would receive twenty million dollars in dividends, while Firefly would only receive fifteen million.”
At this point, Eric lowered the hand he had been holding in front of him, but inwardly he was extremely furious.
Originally, after Murdoch proposed the condition, Eric had indeed been tempted for a moment by the seventy-million-dollar valuation gap. But after carefully sorting through everything, he realized this was yet another enormous trap dug by the old man across from him.
Exchanging shares and granting Fox the first-run broadcasting rights to the first five seasons of Friends were fundamentally two entirely separate matters. Murdoch had simply blended the two together cleverly, creating the illusion that Fox was being extremely sincere.
But if Eric actually accepted those 5% shares, he might gain nothing at all in the end. Instead, because of the difference in profits, Firefly would effectively end up paying Fox dividends every single year.
Moreover, those shares would definitely come with a long lock-up period. By the time they could finally be sold, Firefly’s market value might already be close to Fox’s.
And Fox would certainly possess the priority right to repurchase the shares. By then, even if Eric sold the shares back to them, the final outcome would still be that Fox held shares in Firefly and could point fingers at Firefly’s affairs, while Firefly would not be able to interfere with Fox in the slightest.
There was another point as well.
Once the shares were exchanged, the interests of Firefly and Fox would become tied together. Even if Eric was unwilling, when necessary he would still have to grit his teeth and prioritize cooperating with Fox. This was probably Murdoch’s primary purpose in seeking a share exchange with Firefly in the first place.
If the soul inside Eric’s body were still that somewhat naïve, somewhat timid, somewhat hot-blooded youthful soul, then after realizing all this, he might already have slammed the table in anger with tears in his eyes and shouted:
“This is too much bullying! I refuse to cooperate with you anymore!”
To be honest, because of the remnants of the original owner’s mentality, Eric had indeed briefly felt that sort of impulsive youthful anger.
But the dominant consciousness inside this body was ultimately still that of a calm middle-aged man in his forties. Coupled with the special experience of being reborn, Eric had already learned to view many things lightly. Flying into a rage over money was simply impossible for him now.
Of course, Eric was still extremely angry at the moment.
“Mr. Murdoch, perhaps Fox never intended to show any sincerity at all. In that case…”
Murdoch revealed a faint bitter smile.
“Eric, listen to me. How about we—”
“No.”
Eric immediately interrupted him. He could not be certain whether the old fox’s next proposal contained another hidden pitfall waiting for him. If he failed to notice it in time, he would truly be screwed.
“I’ll speak instead. I’m not very interested in Fox Film Corporation’s shares. But since today’s discussion is about Friends, then let’s talk about the Fox Television Network instead.”
Eric looked directly at Murdoch.
“I want shares in the Fox Television Network. If Fox wants the first-run broadcasting rights to the next several seasons of Friends, then Fox must transfer 10% of the network’s shares to me at 80% of the Fox Television Network’s market value before Friends premiered.”
Murdoch was shocked by Eric’s lion’s-mouth demand.
Although he was called a media tycoon, he currently only owned slightly more than 30% of News Corporation. And News Corporation itself owned only around 80% of the Fox Television Network. Calculated together, the Murdoch family’s actual stake in the Fox Television Network amounted to only 24%.
If he agreed to Eric’s condition, Firefly would instantly become the second-largest shareholder of the Fox Television Network, with speaking power second only to the Murdoch family. If conflicts arose between them in the future, Eric could potentially seize control of the network simply by gaining support from the other shareholders.
The Fox Television Network was the most important chess piece Murdoch had painstakingly laid out to enter the North American market. No matter what, he could never agree to such terms.
Truthfully, Eric’s appetite had not originally been this large either. His original plan had only been to obtain around 5% of Fox Television Network shares.
According to the information he had gathered, the Fox Television Network was currently worth less than one billion dollars, nowhere near the massive forty-to-fifty-billion-dollar scale of the three major networks.
But Eric knew that a little over ten years later, Fox Television would stand shoulder to shoulder with the three major networks, with a value exceeding thirty billion dollars.
Right now, an investment of less than fifty million dollars would eventually turn that 5% stake into an enormous fortune worth over 1.5 billion dollars.
Moreover, compared to film companies, television networks generated much more stable profits. In the future, even if he did absolutely nothing, he could still receive a considerable annual dividend from the Fox Television Network’s billions in yearly profits.