I am Hollywood

[Chapter 867: Unstable Factors]

Three days after the wedding, Eric held a three-day meeting with more than a dozen executives from the Firefly Group in an empty barn on the farm. The theme of the meeting was relatively informal; Eric initially presented a topic titled "Digital Life in the Internet Age," prompting everyone to prepare relevant speeches based on their respective fields of expertise for improvised discussions.

Under the umbrella of Firefly Investments, companies like Cisco, America Online, and Yahoo had already established a complete industry chain in internet technology. The future layout involving Qualcomm, Sprint, and Nokia was also taking shape. As long as these companies could achieve seamless cooperation and maintain strong market positions in their respective fields, Firefly would essentially control a massive and formidable high-tech business empire that would inevitably impact everything from the global political economy to the daily lives of ordinary people.

However, during these three days of meetings, Eric also identified some unstable factors within the Firefly system.

...

On May 24, the day after the meetings ended, John Chambers, Ian Gurney, and others headed to the White House for a banquet at Clinton's invitation from the wedding day. But Eric and Chris opted not to join the festivities.

Outside the barn, in a small pasture, Eric and Chris leaned against the fence and watched the scene unfold nearby. Jeffrey was walking a pony, with Emma joyfully waving her hands while riding, and Joanna carefully nearby. Emily and Virginia chatted with two other kids in the vicinity.

After quietly observing the heartwarming scene for a moment, Eric finally checked the thick meeting notes in his hand. These were the records taken by several assistants during the meetings. Among them, Steve Case's speech on "The Media Development Advantages of Internet Companies" was particularly troubling to Eric.

Initially, America Online, as part of the "Information Industry Alliance" plan, was meant to serve as an internet service provider. Its future direction was also aimed at developing into a comprehensive telecommunications operator like AT&T. Eric had even discussed with Steve Case the possibility of acquiring either Verizon or Sprint, and potentially expanding into the cable TV sector.

Understanding the bubble-like boost that portal websites and online email services would give to America Online's stock price in the coming years, Eric had not placed restrictions on America Online's growth in these areas; he even provided substantial technical support. Currently, Yahoo commanded a 70% market share in the online service sector, with America Online trailing at around 10%, while latercomers like Microsoft shared the remaining 20%.

But perhaps spurred by the recent explosive growth of internet concepts, Steve Case's speech indicated a clear preference for America Online to shift towards being a content provider, even reminiscent of the formerly proposed acquisition of Time Warner, which would transform America Online into a comprehensive internet media group.

Despite ambitions to dominate Hollywood, Eric did not wish to see this scenario unfold.

No one understood better than he did that the currently thriving internet industry was merely an extravagant bubble. From memory, America Online had strayed from its path as an internet service provider and was among the first to fall after the bubble burst.

More importantly, if America Online deviated from its established trajectory, Eric's carefully crafted industry chain would face a significant fracture.

Reflecting on these thoughts, Eric spoke first. "According to yesterday's closing price, America Online's market value has already surpassed $20 billion, right?"

Chris nodded. "Yesterday's closing stock price was $138, with a total market cap of $20.7 billion. We have 45 million shares, which is still 30%. Oh, those over at Clover must have absorbed quite a bit, huh?"

Eric considered. "They probably hold around 3 million shares."

"That's about 32%. However, even though we're the largest shareholder, we don't have absolute control," Chris noted. "Based on America Online's current market value, we can't muster enough capital to pursue absolute control."

Eric grimaced, realizing that not securing America Online tightly was a misstep. When he initially invested, many elements were just taking off, and he never harbored such ambitions; he mainly acted on a speculative mindset, hoping to cash out when the stock price surged.

That initial decision had laid the groundwork for the current struggle over America Online's control.

It's clear that internet-related businesses were far more favored by investors than traditional telecom services. Thus, if Steve Case insisted on pushing America Online to develop its media business, Eric, even as the largest shareholder, couldn't ensure he could unseat Case as CEO.

Shaking his head in self-mockery, Eric asked Chris, "If we tried to oust Steve Case now and seize control, how certain could we be?"

Chris tapped against a nearby wooden post and thought. "Not even 40%. America Online's current momentum is strong; the board wouldn't agree to a shake-up."

With such favorable conditions surrounding America Online, Eric wasn't keen to stir up any news about discord between management and shareholders.

However, should Steve Case continue on his current path, focusing America Online on the inflated internet media business, the bubble's burst would hit the value of Firefly's America Online shares hard. While Yahoo had also focused a substantial amount of energy on internet media content, Eric had always seen Yahoo as a technology company. The search engine business it was quietly developing was Yahoo's future, whereas America Online's survival, based on its internet access service, was clearly insufficient to shift in that direction, and Eric would not allow it to.

After hesitating for a moment, Eric queried, "What if we decided to cash out in a few years?"

If he couldn't control America Online's direction, cashing out while the stock price was high would undoubtedly be the best outcome.

"We hold over $6 billion in stock value. Selling that amount in the open market would cause a major impact on stock prices. Ideally, we'd look for institutional buyers, but moving $6 billion is a tall order," Chris shook his head, then added, "Besides, based on the current landscape, America Online's stock price hasn't peaked yet. Over the next one or two years, that 30% stake could reach astronomical values."

In Eric's memory, America Online peaked at a market cap over $160 billion, and he believed the extent of that bubble exceeded 80%. Therefore, he would be content cashing out even 10% of his stocks during that high.

If he could net $16 billion, even after the internet bubble burst, he could use that to mitigate the damage from America Online's deviation from Firefly's information industry alliance plan.

Of course, if America Online could stick to the established route laid out by Firefly, even if it faced a bubble burst eventually, Eric would not choose to cash out.

But all that was likely a matter for a year or two in the future.

"Forget it; we're ultimately unsure of what Steve will do. Right now, it's best we focus on what we can control."

Chris nodded. "I'll take steps to rally support from other board members. If necessary, we'll attempt to get Steve Case replaced. Also, considering how tightly intertwined America Online and Yahoo are, do you think we need to limit that in any way?"

"No need; America Online doesn't pose a threat to Yahoo," Eric shook his head. "Limiting America Online would only affect our own interests and create opportunities for competitors."

"Okay, we'll leave it at that for now."

Even with 30% voting rights on America Online's board, Eric decided to let America Online "grow wild" for the time being, waiting to see what Steve Case ultimately chose.

If Case insisted on pursuing the media route, Firefly would try to replace him. If that attempt failed, Firefly would aim to exit as soon as feasible, before the bubble burst.

However, if Steve Case allowed America Online to develop on the outlined trajectory, the outcome would undoubtedly be mutually beneficial. After all, acquiring a traditional telecom operator would allow America Online to maintain a strong position in the internet service provider market even after the bubble burst, and it could also expand into mobile communications.

But if they followed the same path as in the original world by merging with Time Warner, America Online would be doomed to collapse quickly once the bubble burst, given its business model would not align with Time Warner's.

...

After spending two additional days in Maryland, Eric returned to Los Angeles on May 27.

By that time, the North American summer blockbuster season of 1997 had officially commenced.

This year's summer lineup kicked off with Luc Besson's long-prepared The Fifth Element, a sci-fi blockbuster that cost 450 million francs, approximately $90 million, making it the most expensive movie ever produced in Europe at that time.

Before its North American release, The Fifth Element had already premiered in Europe, Southeast Asia, and Latin America, receiving moderately promising box office results.

Due to their collaboration on Leon: The Professional, Gaumont Film Company had hoped Firefly would handle the North American distribution of The Fifth Element.

However, Eric wasn't optimistic about the film's commercial potential. He recalled that the movie had a completely polarized reception, likely translating into poor box office performance. Furthermore, the copyright was held by Gaumont, and merely taking on the role of North American distributor didn't align with Firefly's interests, so Eric chose to decline.

Ultimately, as a special effects movie, even though Firefly wasn't interested in the distribution rights, Eric still introduced it to Fox. With proper marketing, such a recently popular CG-animated film could easily gross more than $100 million at the North American box office. However, disagreements on the distribution split between Fox and Gaumont ultimately led to the rights falling into Sony Pictures' hands.

This left Gaumont in quite a predicament.

With Godzilla also slated for release in the summer, Sony dedicated almost all of its distribution resources to this highly anticipated monster flick. The Fifth Element missed out on valuable June and July slots, and its marketing scale fell drastically short compared to Sony's own release, Godzilla.

Ultimately, The Fifth Element opened on May 16 with a first-week box office of just over $22 million. Although its second-week drop was a mere 30%, given the impending wave of summer blockbusters in June, The Fifth Element's final North American gross would likely stall between $60 million and $70 million, far from Gaumont's expectations. Struggling in this crucial North American market made it exceedingly unlikely for Gaumont to recoup its $90 million production cost.

The fate of The Fifth Element illustrated one reason European commercial cinema struggled to gain traction.

The film markets in Europe, particularly in countries like Britain, France, and Germany, were limited and couldn't support the survival of a major film company. While Gaumont was the largest commercial film production company in France, in Hollywood, it would only be classified as a second or third tier player. Such a studio couldn't sustain the production and distribution of a film the scale of The Fifth Element, and as a foreign entity, the road to success became even more daunting.

Upon returning to Los Angeles, Firefly's first summer release, Con Air, was set to officially debut on May 30, facing off against Paramount's The Lion King 2.

Some media clearly hadn't forgotten the earlier reports of a joint blockade against The Lion King 2 by Firefly and Fox, and everyone was curious about the outcome of Con Air versus The Lion King 2.

However, before Eric's thoughts fully shifted to the film, he welcomed two visitors from San Francisco: Larry Ellison and Steve Jobs.

*****

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