[Chapter 658: The Auction House]
Eric sat at the back row of the auction hall, quietly observing the major company teams as they positioned themselves for the auction.
Suddenly, it was announced that the payment period for purchasing the animation division was extended. This decision came after careful consideration by the upper management of Firefly Group.
Initially, to ensure that no Hollywood forces interfered during the acquisition of Marvel, Eric had held the animation division as a 'golden asset' for more than a month. In that time, interested buyers certainly discussed and evaluated the deal thoroughly. The major film companies likely calmed down from their initial surprise and excitement over Firefly's decision to sell the animation division. They would have determined their final bidding limits based on their own financial situations. It was even possible that there was some collusion among the companies.
By announcing an extension of the payment deadline from one year to three years, Firefly left the eventual buyers with plenty of time to finance their bids. This could easily disrupt the auction strategies established by potential buyers. After all, Disney's animation division was incredibly attractive to companies wanting to enter the animated film market, especially with the soaring box office of The Lion King.
Of course, this obvious tactic would elicit some grumbling from bidders, but the 'concessions' provided by Firefly left them without any reasonable excuse to refuse.
As the crowd thinned, Jeffrey Katzenberg made his way to the podium and sat next to Eric, eagerly asking, "Eric, how much do you think we can bid for this?"
Eric replied, "I'm sure it will exceed $2 billion. The recent unified boycott of production companies trying to cut pay should have affected them, driving prices higher. After all, animated films can bring in even more revenue than live-action films, and the characters don't demand the hefty salaries that major stars do, which also allows them to reduce their dependence on live-action films."
Frank Wells, sitting on Eric's other side, chimed in, "Eric, do you think it's possible we might hit $3 billion?"
"That seems highly unlikely," Eric shook his head. Although he recalled that in the original timeline, Pixar's valuation soared to $1 billion right after the success of Toy Story, the technical differences between traditional animation and computer-generated imagery restricted Disney's animation division's value. "Unless we broaden the copyright licensing for The Lion King and a few other animations, or even completely transfer the rights, but then Disney theme parks and stores would need the rights to those characters. We can't do that."
...
As the conversation continued, the previously departed bidding teams gradually returned to the hall. Half an hour later, Jeffrey was back at the podium, briefly lightening the mood before picking up the small gavel and announcing that the bidding officially began.
There was a moment of silence in the hall, as if no one planned to make the first move. After a few seconds of tension, a middle-aged man in the third row raised his paddle for the first time: "One billion."
Eric looked over to see that it was MGM President Jon Glickman. He chuckled to himself, knowing that MGM was merely participating for show. Of course, Glickman's early bid likely stemmed from some unrealistic fantasy, thinking that if other bidders hesitated, Katzenseberg might let it go for just $1 billion. But even if MGM hadn't fully regained its glory, Eric believed its shareholders and creditors wouldn't hesitate to produce that $1 billion.
Fortunately, reality proved this was unlikely.
"Lot 9, one billion..."
Katzenberg gestured to Glickman but barely got any further words out before another bidder raised their paddle, "One billion ten million."
The minimum raise for this auction was $10 million. Although the second bidder had cautiously upped the ante by just $10 million, the competitive atmosphere intensified quickly, and the auction prices began to soar.
One billion three hundred million, one billion five hundred million, one billion seven hundred million, one billion nine hundred million...
Less than ten minutes into the auction, when Summer Redstone personally called out an offer of $1.9 billion, half the potential buyers in the auction hall had already been eliminated. Only Paramount, Fox, Warner Bros., and the soon-to-be acquirer, Seagram Group, remained active.
After uncertainty arose around the bid of $1.9 billion, Fox President Joe Roth raised his paddle. "Two billion!"
"Lot 4, from 20th Century Fox, at two billion," Katzenberg's voice rose again from the podium, full of persuasion. "I must mention that just The Lion King can bring in a net profit of $1 billion for any movie company. Thus, the $2 billion represents merely the net profit of two films like The Lion King. I believe that Disney's outstanding team, built up over half a century, will produce a second, third, or even more Lion Kings in no time. Now, $2 billion, going once..."
As Eric listened to Katzenberg's elaborate pitch, he looked towards the Fox team.
Following Eric's suggestion, Elisabeth had clearly not gotten involved in this endeavor, and for reasons unknown, Murdoch was also absent.
The only representative from Fox at the auction was President Joe Roth. Interestingly, in the original timeline, Home Alone was produced by Roth and released by Fox, and he was supposed to leverage that film's remarkable box office success to land a high-paying job at Disney. In the original timeline, he temporarily served as president of Disney following Frank Wells' untimely death, before Michael Ovitz took over.
However, in this timeline, thanks to Eric's presence, Roth had managed to maintain a collaborative relationship with Fox and had secured the position of president of 20th Century Fox after Barry Diller left the company, while Rupert Murdoch took on the role of CEO himself.
Since Murdoch was absent, it was almost a certainty that Fox would drop out after Firefly unexpectedly played its card to extend the payment terms. After all, compared to Summer Redstone's aggressive bidding style, Murdoch tended to be much more conservative, making it likely that $2 billion would be Fox's final offer.
As the price reached $2 billion, the frequency of bids from the audience noticeably slowed. Very often, the bids showed up only as Katzenberg's gavel came down.
After a few more rounds of bidding, following Fox's exit, Seagram CEO Edgar Bronfman also opted out at the $2.2 billion mark, leaving only two competitors: Paramount and Warner Bros.
This outcome had not escaped Eric's expectation. Acquiring Universal was Seagram's top priority. If they secured Disney's animation division at such a high price before finalizing the purchase of Universal, it would weaken Seagram's position. If they ended up overpaying for the animation division and that caused them to lose Universal, Bronfman would certainly be left in a difficult situation.
In the hall, Time Warner CEO Terry Semel called out a bid of $2.33 billion, but Eric could tell that, compared to the still eager Summer Redstone, Semel was not as assured.
"It seems the outcome is pretty clear," Frank Wells whispered to Eric.
Eric nodded slightly, listening as Summer Redstone quickly followed up with his own bid. "Compared to Summer, Terry Semel faces too many constraints. Time Warner can only have someone like Steve Ross truly at the helm, and the current factional situation within Time Warner was largely created by him. Unless another widely accepted manager emerges, it's unlikely that the company will stabilize for a long while."
Having worked for Time Warner for many years, Frank Wells greatly agreed with this sentiment but then shook his head slightly, saying, "The type of universally accepted manager you're referring to is just too unlikely to appear. Right now, the leaders of major factions within Time Warner, like Warner Communications, Turner Broadcasting, Time Inc., and Warner Bros. Entertainment, are all very powerful within their departments. They wouldn't accept a brand-new manager easily, let alone relinquishing their positions to let someone else take the helm. Only a dominant figure like Steve Ross, who built Time Warner, could command their obedience, but tragically, Ross passed too soon."
Steve Ross, similar in age to Warren Buffett, Summer Redstone, and Rupert Murdoch, had just crossed into his sixties. Compared to the older executives still alive and kicking two decades later, it did seem that media mogul Steve Ross had, indeed, left the stage a bit too early.
Eric glanced at Semel, who seemed to hesitate again after hearing Summer Redstone's bid. "If I were a Time Warner shareholder, since we can't seem to unite, I would prefer to split the company up. Otherwise, this prolonged internal strife would only lead to the decline of Time Warner's overall strength."
In his memory, Time Warner eventually did embark on a path of constantly splitting its businesses. However, the timing of that decision was clearly too late. By the time it was acquired by AT&T, Time Warner's market value, once comparable to Disney's, had fallen to around $50 billion, while Disney's market valuation even approached $300 billion during that period.
Frank Wells lamented, "Everyone thinks a bigger group is better, and finding peace at Time Warner isn't easy. However, having them part ways also isn't straightforward. Eric, if Firefly becomes too bloated in the future, would you consider splitting the group?"
Eric smiled and pointed at Katzenberg on stage. "Aren't I doing just that now?"
Frank Wells nodded in realization. "I completely overlooked that."
As the two chatted quietly, the auction entered its final phase. Eric clearly heard Semel, almost trembling, call out a bid of $2.41 billion. He turned his gaze toward Semel's back.
Eric's focus on Semel hadn't shifted when Summer Redstone raised his paddle again with powerful conviction, shouting, "$2.5 billion!"
Clearly, Semel's shoulders sagged.
Katzenberg, on stage, again made a few persuasive remarks. After counting three times, Semel still showed no intention to raise his paddle, leading him to bring down his small gavel.
With a sharp sound, Katzenberg announced, "Congratulations to Mr. Summer Redstone. Paramount Pictures will acquire Disney Animation!"
As the applause gradually grew, everyone in the hall rose. Many approached Summer Redstone and his team.
Eric walked over with Frank Wells and others, enthusiastically offering his congratulations.
The formal signing would take place after Paramount confirmed the detailed contracts and asset lists for the animation division, so following a brief press conference, Firefly hosted all the auction participants at a Hilton hotel banquet.
...
After mingling with champagne in hand, Eric and Katzenberg moved to a quieter corner.
"The final price exceeded our expectations by at least $300 million," Katzenberg said, still beaming with excitement. "It seems that the payment extension strategy really worked. From Semel's reaction here, it appears Time Warner's original bid ceiling was around $2.2 billion. Past that point, Semel's demeanor noticeably changed. And while Summer's response remained unchanged, my guess is his initial base bid was also around $2.2 billion."
"Let's not dwell on that," Eric replied, smiling. "How's the new Disney animation division coming along? I haven't seen any relevant documents in the past few days."
Katzenberg replied, "I plan to fund a digital animation production program at both the California Institute of the Arts in Los Angeles and the San Francisco Art Institute. It will include a short-term training class lasting six months and a standard two-year program. The short-term training will mainly recruit experienced digital animators with computer and drawing skills from existing software or advertising companies for professional software training. This way, we can assemble the new Disney animation division as quickly as possible, though this will require quite an investment. However, for the long term, we need to ensure a continuous supply of highly skilled digital animators through the two-year training program. I'm currently having the strategic planning department draft a budget, and you should see the report by the end of the month."
*****
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