[Chapter 680: Lessons]
The negotiations between Firefly Group and Columbia regarding sequels to films like Men in Black were personally overseen by Jeffrey Katzenberg. Given Katzenberg's tough demeanor, Eric was not overly concerned that Firefly would be at a disadvantage in the negotiations. As for Columbia's so-called threat of legal action, Firefly considered that hardly worth mentioning. If Columbia did file a lawsuit, it would likely drag on for a year or two without resolution, and Firefly could afford the delay, whereas Columbia would not risk a prolonged battle.
However, Columbia started to turn its attention toward Flower Films, prompting Eric to get personally involved. As soon as the New Year festivities in New York were over, he headed back to Los Angeles.
Although Flower Films appeared to have no direct stake in Firefly, it was a crucial step in Eric's Hollywood expansion plan. The entire Hollywood community was quite aware of the nuances surrounding Flower Films. With the major seven studios essentially monopolizing the distribution channels, any new player in Hollywood would hesitate to produce films with budgets over $50 million without the backing of one of the major studios. If they didn't get that support, they could easily find themselves losing money in the distribution process.
Yet Flower Films, seemingly insignificant, managed to pull off quite a feat. It had not only produced two massive films with budgets around $80 million each but also secured distribution terms from Columbia that would have made many smaller studios envious. This was undoubtedly thanks to the robust support from the Firefly Group.
Flower Films' confidence stemmed from the understanding that if it could not secure reasonable distribution deals with the other major studios for its big-budget films, Firefly would step in to take over.
Columbia's decision to challenge Flower Films right after the New Year seemed motivated by this very fact. Flower Films had two films awaiting release: Night at the Museum and Forrest Gump. Columbia had initially slated both films for the summer of 1995, but now, at the beginning of 1995, the summer release plans of the seven major studios were already being finalized. This was particularly true for Firefly, which had heavy hitters like Jurassic Park 2, Independence Day, and Toy Story 2 lined up for this summer.
If the negotiations between Columbia and Flower Films broke down, even though Firefly could take over Flower Films' two films, it would not have the necessary resources to distribute them effectively. The other major studios might have that capability, but Flower Films would find itself at a disadvantage in terms of the distribution agreement. So, there was a possibility that both films might be delayed.
With Night at the Museum costing $80 million to produce and Forrest Gump at $50 million, a postponement would keep the total investment of $130 million from being monetized in time. Flower Films' subsequent plans would be rendered impossible, leading to a devastating domino effect on the studio.
At Firefly's headquarters on Venice Beach, not too far from the studio, Amy Pascal sat worriedly telling Eric about recent developments. "Columbia's reasoning is based on the disappointing box office for Jumanji, and they point out that Night at the Museum's style is very similar to Jumanji's. Based on the original profit-sharing agreement, Columbia claims they wouldn't just fail to profit but would actually incur losses. Therefore, they're seeking to change the established contract, raising Columbia's North American distribution share from 15% to 20%, and they also want a stake in video and TV rights."
Upon reflection, Eric saw that Jumanji and Night at the Museum shared quite a few stylistic elements, including scenes with lots of animals, monsters, and exotic plants. Even the visual effects for both films had been produced by the same team under Digital Domain.
However, the failure of Jumanji to meet box office expectations was not due to its quality. Despite poor reviews, its standing as a major blockbuster leveraging cutting-edge CGI meant that critic opinions had little impact on its financial success. The lack of box office success was primarily due to fierce competition during the holiday season.
During the summer season, the major studios typically avoided internal competition by staggering major releases, but the competition during the 1994 Christmas season could only be described as brutal. On December 23, in addition to Jumanji, six other films, including Street Fighter, Little Women, and Nobody's Fool, released in over 1,500 theaters simultaneously. In comparison, the week prior saw only three films launched alongside Face/Off.
With so many new releases, the total box office for the week of December 23 to 29 surged to $188 million, marking the highest weekly gross for late 1994. However, during that week, eight films surpassed $10 million at the box office. Despite this fierce competition, Jumanji managed to earn $36 million in its opening week and only suffered a modest 26% drop the following week, showing it performed well. If Jumanji had been launched in a less competitive summer season, it might have easily surpassed $200 million at the box office; its underperformance was merely a matter of timing.
Eric was confident that Columbia's internal team would recognize this. Using Jumanji's box office struggles as an excuse to renegotiate profit-sharing terms with Flower Films felt somewhat disingenuous.
After pondering for a moment, Eric looked up and asked, "What about Forrest Gump? What's their excuse for that?"
"Columbia thinks Forrest Gump is better suited as an Oscar contender with limited box office potential. They've been a bit lukewarm on the release from the start," Amy Pascal replied, glancing at Eric. "Honestly, I agree with Columbia. Forrest Gump is an outstanding film, no doubt, but its inspirational and nostalgic tone seems more appropriate for a year-end release. The summer audience primarily skews younger. So, we should focus on getting Night at the Museum out. If we delay Forrest Gump until the end of the year, it might actually benefit its chances for next year's Oscars. The film has a strong American cultural vibe, and without the Oscar halo, profits from overseas distribution would certainly be limited."
Eric listened patiently to Amy Pascal's analysis. As someone who had once been a powerful player at a major Hollywood studio, her insight into the commercial positioning of Forrest Gump was indeed sharp. But, just like the famous saying from Forrest Gump about life being like a box of chocolates, no one could predict how a film would perform until it was released. Fortunately, Eric already knew the potential of Forrest Gump, so he merely nodded slightly at Amy's analysis without outright agreeing.
He glanced over at Drew, who was quietly listening intently and not putting on any of her usual charming antics. Eric inquisitively asked, "Drew, what do you think we should do?"
Drew considered for a moment before responding, "It depends on what you plan. Columbia's moves seem intended to pressure Firefly into greenlighting the sequels for Men in Black and Mr. & Mrs. Smith -- oh, and definitely now the Jumanji sequel too. If we don't play ball with them, Columbia will probably just keep dragging out the profit-sharing negotiations with Flower Films. Without those two films, Columbia won't find another project to fill their schedule and will also miss out on this summer's box office. It's a lose-lose situation."
Eric nodded, smiling, "Well, to Hollywood, Sony looks like an affluent newcomer trying to rub elbows with the established players. A company willing to spend but not disrupt the industry's rules benefits us. If Columbia had more aggressive backers, it would be much harder for us to navigate these waters. So, I'm not aiming to squeeze Sony too tightly over the rights to those films."
Amy Pascal relaxed and smiled, while Drew shrugged and said, "Then what do we have to worry about? Things can just continue as they are."
Eric chuckled and shook his head at their reactions. "You both seem too nonchalant. This situation illustrates that even close allies can be unreliable. Columbia is pushing things because they see that Firefly wants to help Flower Films, but at the moment, it doesn't have the capacity to do so. Ultimately, Flower Films will have to rely on itself."
Surprised, Amy Pascal asked, "Eric, are you suggesting we should handle the releases of these two films ourselves?"
"Not at all," Eric responded. "You just need to take your time with that. The most important lesson here is that Columbia needs to learn not to antagonize partners without sufficient leverage."
Drew shook her head in confusion, "Eric, you're losing us a bit here."
Looking at his watch, Eric turned toward the television in the office. "It's about time. Do you have the remote?"
Amy Pascal nodded and grabbed the remote. She switched on the TV to find the news channel.
Just then, the screen cut to a report about the auction of mobile communication licenses. The host held a news release and looked into the camera, saying, "Breaking news: At 10:15 AM, Firefly Group's CEO Jeffrey Katzenberg and Sony USA's President Howard Stringer held a press conference at Columbia's headquarters in Culver City, announcing that the two companies would jointly commence production on the sequels for Men in Black and Jumanji this year. Now, let's turn to our reporter in Los Angeles for more live coverage..."
The three of them watched the TV screen, and after a moment, Drew exclaimed, "Eric, this is so sudden! Had I known this was coming, Amy and I wouldn't have worried about the releases of Night at the Museum and Forrest Gump these past few days."
Drew's comment jolted Eric out of his thoughts. He didn't immediately respond but picked up the phone to dial a number. Once connected, he said, "Kelly, I just saw a report about the mobile operating license auction. Find out what's going on. I need detailed information by tomorrow."
After a brief conversation, Eric hung up without explaining his actions. He returned to the previous conversation, saying, "The reason I urged Katzenberg to finalize this quickly is to show some folks that Flower Films' upcoming actions regarding rights issues don't relate to Men in Black."
Amy Pascal asked, "Eric, are you saying you don't plan to have us collaborate with Columbia anymore?"
Eric nodded, "Now that the dispute between Firefly and Columbia is resolved, if Flower Films terminates its cooperation, it will no longer be affected by the Firefly-Columbia rights conflict. Thus, you can search for a distributor without the risk of being taken advantage of. My plan is this: transfer the distribution of Night at the Museum to MGM, which I will personally discuss with Frank Mancuso, ensuring that profit-sharing terms mirror those with Columbia. MGM only has one Bond film this summer, so adding Night at the Museum won't overload them. For Forrest Gump's overseas and ancillary rights, Firefly will handle those, and you'll manage the domestic release. Think of it as good practice. Given that Forrest Gump leans more towards being an Oscar contender, the distribution pressure won't be too intense, and the box office trajectory will likely be lengthy. All you need is to secure over 1,500 theaters for the opening."
Listening to Eric, Amy Pascal furrowed her brow slightly, indicating some hesitation.
Hollywood film distribution, at its core, consists of several key steps.
First, you need to contact theaters willing to show your film. The major studios inherently have the advantage here; for many promising films, these studios often secure distribution agreements with theaters even before production starts, sometimes even receiving substantial upfront payments from distributors. This is also a critical barrier preventing many new players from entering Hollywood.
When the big studios distribute films, theater owners actively seek partnerships, but if a newly established film company wants to release a movie, obtaining those upfront payments or signing preliminary distribution agreements is nearly impossible. Even if they finish production, theater owners often don't show much enthusiasm for screening their films, resulting in many independent movies losing the opportunity to be shown, leading to the second crucial step in film distribution -- marketing.
With similar quality, scale, and timing, films released by major studios generally yield much higher box office returns than those from smaller companies. The primary reason for this disparity lies in marketing. The major studios possess well-established marketing systems, and recent consolidations in the media industry have further enhanced their overall media power, far surpassing that of smaller companies. Since the marketing of films is handled by the distribution side, theaters often prefer to showcase mediocre films from the major players rather than exceptional films from smaller studios, as the major studios' strong marketing power can often lead a below-average film to outperform a highly praised independent film.
However, while Flower Films may seem like a newcomer on the surface, the key problems these newcomers usually face weren't issues for Flower Films.
Amy Pascal, who began her career over a decade ago as a junior staffer at an independent production company and ended up as Columbia's VP, was well aware of every aspect of film distribution. Even without Firefly's help, she could leverage her connections to secure enough theaters for Forrest Gump. With Firefly's backing as the largest media group in America, the marketing concerns for the film would be easily addressed. Therefore, simply handling the North American release of Forrest Gump did not seem challenging for Amy Pascal at all.
Yet at that moment, she couldn't shake the feeling that this was entirely unnecessary... right?
Wouldn't it be better to let Sony or MGM handle the distribution? Just as Eric had stated, MGM only had one Bond film this summer, so adding Night at the Museum wouldn't be difficult. And if MGM truly couldn't manage both films, there were still other major studios, right?
By offloading distribution responsibilities, Flower Films would save ample time to prepare for new projects.
Eric understood Amy Pascal's current mindset. Besides teaching Sony a lesson, he had another motive: to keep as much profit as possible from Forrest Gump for his own team. In the original timeline, Forrest Gump's North American box office made $330 million; passing it off to any company for distribution would mean at least giving away 15% in fees. This amounted to approximately $50 million. Most Hollywood films extract every last penny of profit and still may not yield $50 million for the producers.
As he noticed Amy's expression, Eric smiled and said, "Honestly, this is just my personal suggestion. You and Drew should think it over. If you really want to avoid the complications, just hand the distribution contract over to MGM."
Upon hearing that, Amy Pascal felt assured and replied, "Eric, let's go with your plan. I believe you're considering what's best for Flower Films."
Once they reached a consensus, Drew eagerly leaned in and linked her arm with Eric's. While she absolutely wouldn't oppose Eric's decision, she recognized that showing unwavering agreement without any input could hurt Amy Pascal's feelings. Flower Films still needed Amy's expertise.
*****
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