I’m in Hollywood - Chapter 584
[Chapter five hundred and seventy nine quotes]
Chapter 579
Buffett himself is very optimistic about the videotape rental industry. For this reason, he also studied the information of Blockbuster in detail. Since the mid-1980s, the profit generated by the videotape industry has been no less than that of the movie box office. The Blockbuster branch is undoubtedly the ‘Walmart’ of the video rental industry. Blockbuster’s annual profit last year was no less than that of the seven major Hollywood studios.
And the video rental giant has the cash flow that Buffett is most interested in.
The videotape industry has been booming all these years, but Buffett doesn’t think there is a bubble in this industry. Therefore, Eric’s contempt for Blockbuster made Buffett very puzzled: “Eric, don’t you like videotapes? What is the future of the industry?” The
videotape and the upcoming DVD rental industry will continue to flourish for at least a decade, and Eric certainly cannot be optimistic about this industry. It’s just a business model that is quickly obsolete.
“Mr. Buffett…”
Eric just said, Buffett interrupted him softly, smiled and said warmly: “Eric, you can call me Warren, I don’t want our communication to be like a formal business negotiation. Well,
what do you think?”
“Okay, Warren,” Eric smiled and nodded his head, “if you’ve been to some Blockbuster rental chains, it’s always a hassle to find some tapes, In addition, Blockbuster’s various fees are also very unreasonable. I believe that if a better video rental business model emerges, Blockbuster’s elimination is almost inevitable.”
Buffett continued to ask questions without any tyranny. Said: “I think you must have thought about some of the better business models you mentioned?”
“Sure. For example, the Internet. We can set up a special video rental website. Customers want a certain movie We can easily find detailed rental information for the relevant movie by entering the name of the movie on the website, and we can even set up a special mailing system to make it easier for customers to rent video tapes.”
Buffett doesn’t pay too much attention to the high-tech industry, which can be seen from his investment portfolio Ni Duan, Berkshire Hathaway’s is basically involved in traditional industries, however.
Because of the information superhighway plan that the Clinton administration is vigorously promoting, Buffett has also been exposed to a lot of relevant information: “Eric, don’t you think there are too few Internet users now?”
Eric has recently He didn’t pay attention to the growth of Internet users in North America, but he can easily find similar examples: “It’s not too many, but users who can log on to the Internet tend to have considerable spending power. Moreover, more than ten years ago, personal computers When it was first created, perhaps no one realized that this kind of expensive household appliances that do not seem to be very useful can now sell millions of units every year. In the past ten years, North America and even the world have accumulated thousands of There are 10,000 users with personal computers.
These people’s economic strength is usually not too bad, in the case of more and more rich Internet content. I believe that most people will choose to get involved in the network.”
Buffett is studying Eric’s profile. During the process, he also deliberately logged into the Yahoo portal website and established his own online email account. Although many people think that his personal style is very conservative, Buffett is a person who never forgets to learn and accept new things.
He thinks that the contact method of online email is indeed much faster than that of letters, but due to the current limitations of various software and hardware conditions, Buffett cannot think of the profit prospects of these network services. Buffett has always been a profit-seeking investor. , and strictly adhere to the principle that investment must be rewarded. If he invested tens of millions of dollars but could not get a return, he could not think of any need to continue doing one thing.
“Eric, before I came here, I saw the Yahoo portal you invested in. What I want to know is, did you build this website for investment or purely public welfare?”
“Of course it’s investment,” Eric felt that Buffett had obviously taken the topic off the rails. Today, we are going to discuss Firefly’s acquisition of the TV network. However, Eric is also very clear that Buffett is a person with a strong desire to ask questions. , He can see from many of Buffett’s materials that when Buffett is interested in a company, he often bombards the person in charge of the company with questions.
However, Eric didn’t mean to be impatient at all.
In fact, many business transactions are determined in this kind of chat. As for the kind of talkative business negotiation, it is often a detailed negotiation after the transaction intention is reached.
“So, for example, Yahoo Portal, when do you plan to make it profitable and in what way?”
“In the last few years, I have never considered that Yahoo could be profitable, and it is still in the market cultivation stage,” said Ai Rui. Gradually, he replied, “Warren, imagine if Yahoo had more than 100 million users, how much would those advertisers be willing to pay to advertise on Yahoo’s website
?
”
Eric’s words are considered a fantasy, as Eric just said, ten years ago, no one knew that personal computers can now sell millions of units every year.
If Internet users really grow at the scale of millions or even tens of millions of users every year in the future, then 100 million users is not out of reach.
Because of the advertising profits of newspaper media, Berkshire owns a number of newspapers, but the largest “Washington Post” currently has an average daily circulation of only a few million copies, but even these millions The sales of copies can bring the Post Company hundreds of millions of dollars in profits every year.
Therefore, after the Internet media with 100 million users finds a suitable profit method, the profit generated will definitely exceed that of any traditional paper media.
Although Buffett is not an impulsive person, he has obviously moved at this time, but this move does not allow him to immediately join the Internet wave.
After a quick moment, Buffett took a few sips of the Coke in front of him and put down the glass gently.
Looking at Eric: “Eric. It’s a very attractive prospect. I’m looking forward to seeing Yahoo in the future you’re talking about. So let’s talk about the network, I listen. Said you chatted with Barry Diller the other day?”
“Yes,” Eric said with a regretful expression, “but unfortunately, he didn’t plan to join Firefly.”
Buffett’s expression remained unchanged: ” Well, if I promise to sell it to you, how are you going to place Tom. You know, we are good friends, and I need to think about the interests of my friends.”
“If the acquisition can go smoothly, Firefly won’t do much about the personnel. Adjustment, and the performance of the past few years is enough to prove Mr. Tom Murphy’s management ability, so Firefly will mainly increase its investment in content in the next few years. We all know that the TV network is also like a sales platform. And TV shows are the ‘goods’ it sells. Any customer at the same price will be more willing to visit a store with higher quality merchandise.”
Buffett was clearly satisfied with Eric’s answer.
He began to ask other questions that he cared about, involving Eric’s questions about the possible future acquisitions of the TV network. The two seemed to be chatting about a trivial matter from beginning to end, and never talked about the most important things. The question of purchase price.
After more than an hour, the two finished drinking a large bottle of Coke, and Buffett finally said: “Eric, in general, I am satisfied with your various plans after the acquisition of the TV network, so we are now Let’s talk about the acquisition price.”
Buffett and Tom Murphy now own a majority of the network, which means that as long as the two nod, Firefly’s acquisition will hardly get much help. .
However, Eric was not too relaxed at this time, because he had realized something else. If Buffett just planned to sell to Firefly, he would not have talked with himself for so long. Maybe he would only be very direct. Quote a sale price.
Sure enough, Buffett immediately said: “Eric, although I am more optimistic about this transaction, I do not intend to cash out all the shares. Tom and I have already talked about this, and we will only trade in cash at most. I want to sell 30% of the shares in my hand, and I hope to invest in Firefly Pictures as capital for the other 70%.”
Eric had already anticipated Buffett’s attempt, and from the bottom of his heart, he did not want to use cash and stock exchange. The exchange, but now it is different from when it acquired Disney. When Firefly acquired Disney, Disney’s performance was in a downturn, and Firefly, which was not too large at that time, was completely annexed by a snake swallowing an elephant. Disney.
Most investors are not too optimistic about Firefly’s acquisition. In addition, Disney does not have a controlling shareholder like this, and the equity is quite scattered, so Firefly Pictures can realize the attempt of cash acquisition.
But in the past two years, the performance of Firefly Pictures is really dazzling. Although this year’s financial report has not been released, there is almost no suspense that the net profit exceeds 1 billion US dollars.
Except for the Time Warner Group, which is larger than Firefly, no other film company in Hollywood can achieve such an annual profit. Therefore, the bright-eyed investment institutions around the world have been focusing on Firefly Pictures. Always looking forward to the news such as the listing of Firefly Pictures. In this case, Firefly wants to expand into the TV network. Whether it is, or the less powerful and cbs, they will definitely not give up this great opportunity to invest in Firefly. .
As for Buffett’s proposal to buy 70% of the shares in Firefly, Eric did not rush to bargain, but asked: “So, Warren, I want to know, how many shares of Firefly are you going to exchange for 70% of the shares? What about?”
“49%,” Buffett replied quickly, apparently thinking about it for a long time: “Eric, we can use the current stock price to calculate, the valuation is about 10 billion US dollars. For Firefly Pictures, I give A valuation of 15 billion US dollars, and, I know you will never give up the absolute control of Firefly Pictures, so we do not ask for control, you are still the largest shareholder, and I will not intervene in the management of Firefly in the future. what do you think?”
How, of course not.
Although the business of Firefly is not as extensive as that of Time Warner, the annual profit of Firefly is definitely comparable to that of Time Warner. Although many people follow the normal development trajectory of Hollywood film companies, they will definitely feel that this profit rate is only temporary, but Ai Rick is very confident that Firefly can definitely maintain a high growth state for a long time. Even if there is no TV network, Firefly’s future profits will only increase.
After all, a movie or TV series produced by a film company is also a commodity, but Eric has the ability to produce and select ‘high-quality commodities’ unmatched by anyone.
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“Warren, this price is too high, I definitely won’t agree,” Eric said directly without cutting corners, “Firefly’s net profit last year was close to one billion US dollars, and this year it may even be More than Time Warner, and we all know that the market value of Time Warner Group is now close to 30 billion US dollars, while Firefly has only a valuation of 15 billion US dollars, don’t you think that is too low?”
“Eric, I Acknowledging that Firefly’s performance in recent years has been very dazzling, but we are also very aware that the return on investment in the film industry is very unstable. Although everyone recognizes your talent in film, it does not mean that you will not Failure, just like Spielberg, Hollywood was almost dominated by Spielberg throughout the 1980s, but as soon as we entered the 1990s, Spielberg ushered in the failure of “Captain Hawk”. , We are also very clear that the market value of a company can never be calculated based on the profits in a few years. Time Warner owns all industries such as film, television, publishing and music, which means that its anti-risk ability is very high. Even if there is a major loss in a certain business in a certain year, it will not affect Time Warner’s overall revenue. However, Firefly’s business scope is relatively large, and businesses such as peripheral income are basically dependent on film performance. Very big.” (To be continued.)
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[End of this Chapter]
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