America: Starting with the acquisition of MGM...

Chapter 17.17. The Role of AK Films

In the United States, acquiring a publicly traded company is a very complicated process, involving numerous procedures and lengthy steps, often taking six months or even longer.

However, MGM has its own unique characteristics. It is indeed a publicly traded company, but 92% of its shares are directly or indirectly concentrated in the hands of Kerkorian, with only 8% of the shares actually circulating in the market.

Of these 8% of shares, MGM's senior and middle management hold 5%, such as Harry Cooper who holds 1%, so only 3% are actually held by retail investors.

And just after the disastrous failure of "Windtalkers," the 3% stake held by retail investors in the market had been completely sold off and quietly bought up by the father. So, theoretically, Harry Cooper can now be considered MGM's second-largest shareholder.

As for the shares held by the other mid-to-high-level executives at MGM, Harry Cooper certainly couldn't buy them all; he had conflicts with those people. But while he couldn't, Kerkelien could.

So in a very short time, Kerkelien increased his stake to 96%, and the two of them actually controlled 100%.

Then comes delisting, which is the real purpose of consolidating equity and privatizing MGM.

Ultimately, they sold it directly to the Coopers, saving a lot of time in the acquisition process and resolving the conflict within a month at the earliest.

While listed companies can raise funds for development, that's relative to ordinary companies. For Eric, who has the advantage of foresight, it's completely unnecessary; going public would only be a drag on him.

Moreover, MGM is in such a bad state now that it is not favored by the market. Even if it goes public, it will not be able to raise much money and will only cause more trouble. It is really unnecessary.

As for the government departments, that was even less of a problem. Money can buy anything, and the process went surprisingly smoothly!

As the $20 billion gradually arrived in the bank, news of MGM's impending acquisition began to circulate in the market.

At this time, the company was still gloomy because of the box office failure of "Windtalkers". Upon hearing this news, some middle and senior managers began to investigate the acquirer's information, but the lower-level employees did not react at all.

Whatever, it's not really their business. Whoever takes over, they'll still have to be used. If they dare to fire them, they'll cause trouble. The union isn't just sitting around doing nothing.

However, Sony and Warner were actually more concerned than the top executives.

Both companies had long wanted to take over MGM and had spoken with Kerkelion privately many times, but the results were not satisfactory.

The reason is simple: they didn't pay enough!

Sony and Warner were only willing to offer $4-5 million in exchange for a stake in MGM, thereby gaining control of MGM.

These two companies believed that they had the strength to revive MGM, then gradually dilute Kerkellyn's stake, thereby acquiring MGM at a relatively low cost, although it would take a long time.

However, Kerkorian wasn't buying it. He only wanted cash, plenty of cash. Anything else was just nonsense.

Kerkelien had absolutely no interest in the plans that Sony and Warner Bros. had talked about, such as IPs, studios, directors, and special effects.

In the eyes of this casino tycoon, any acquisition that doesn't involve paying cash is nothing but a sham, a free ride.

So when Sony and Warner learned that the acquisition price was as high as $28 billion in cash, they gave up their idea of ​​getting involved.

$28 billion. Even if the two companies split it equally, each would still have to pay $14 billion. Moreover, it's impossible for them to split it equally.

The most important thing is cash. No matter how much fixed assets you have or how big your IP is, it's useless if it's not cash.

With no one causing trouble, the delisting was completed in just one month, and the subsequent acquisition process went smoothly. Major Hollywood companies and even some forces on Wall Street all turned their attention to the Cooper family.

No one thought they could suddenly raise $28 billion. In the market's view, the father and son must have been acting as fronts for some big spender.

Regardless, Eric suddenly became a hot commodity in Hollywood, while Charlie Cooper's status rose even higher.

Previously, he was just the CEO of MGM, an insignificant employee under Kerkelien.

He is still the CEO of MGM, but his identity has changed to that of a movie mogul with billions in wealth.

By mid-August, after a busy month and a half and spending over $800 million to smooth things over, the acquisition was finally completed at a remarkable speed.

In Harry Cooper's opinion, there was no need to rush; it was eight million dollars, enough to make a B-movie.

But Eric insisted on speed, because post-production on "Red Dragon" and "Barbershop" was complete and they would be released soon.

These are two big-budget movies, and who knows what Kerkorian might think, such as demanding exorbitant prices at the last minute—similar things happen all the time.

Moreover, Eric was also uneasy about the other major film companies. In short, delays could lead to unforeseen changes, so it was better to secure the profits first.

That night, the Cooper family was hosting a party. There weren't many guests, just Eric's four best friends and a few of his father's friends.

The reason for inviting these people is, of course, to carry out a major reshuffle of MGM's top management.

The structure of a film and television company is very complex, including multiple departments such as marketing, production, creative, administration, finance, and scriptwriting, and each department has multiple branches.

For example, the publicity department is responsible for art, poster production, Google Ads placement, and other tasks, and has more than 2000 employees.

Including the number of employees in other departments, MGM employs more than 3000 people, with monthly salary expenses reaching several million dollars.

However, don't think that 3000 people is a lot. Compared to Warner Bros. and Disney, MGM is nothing, because Warner Bros. has more than 8 employees worldwide, which is terrifying.

Among the seven major Hollywood studios, MGM has the fewest employees, which reflects its most depressed state.

Even with more than 3000 employees, there are many factions within the company. Although Harry Cooper is the CEO, he cannot control the overall situation, and there are many people in the company who disagree with him.

So at the beginning of this acquisition, my dad contacted executives from several small companies and invited them to join MGM to replace the disobedient guys.

As for Judy, Warren, Bordeaux, and Billy, it's too early to put them in charge. Let them learn first, and then we'll talk about it when they're capable of handling things on their own.

Standing around the barbecue grill, Eric took a gulp of beer: "I've been incredibly busy lately, but things are finally looking up. Are you guys ready to get into the industry?"

Upon hearing this, the four of them immediately started talking all at once.

"Having come this far, is there really a better option? Hahaha."

"That's right, I did put up $300 million, even if it's just a small amount, but at least I'm a shareholder now."

"In the film and television industry, I seem to see the call of countless beauties."

"Seriously, Eric, what positions are you planning to assign us?"

Eric flipped the grill: "Go and learn in your respective departments for two months. I need you to become familiar with all the tasks in your department within those two months. I need to know what you are best at. Of course, you also need to do other tasks that I assign you."

"What kind of job?"

"There are many, such as discovering and acquiring copyrights, including promising comics, novels, games, and so on."

"Take Spider-Man, for example? It's the highest-grossing film in North America so far!" Warren said.

"Resident Evil is also good. Although I haven't played the game, the movie is great. Milla Jovovich is so hot after being infected! And the box office was also very high."

Eric nodded: "That's right. Zombies are a very marketable subject. I'm also planning to shoot a TV series. I need you guys to do some market research to ensure there are no copyright issues. Once you're on the job, work with the marketing department to make this happen."

"In addition, Transformers has great potential for adaptation, but the copyright is held by Hasbro. It's a lucrative business that we need to acquire."

"There's an author named George R.R. Martin, and he has a really good book called 'A Song of Ice and Fire.' He used to work in Hollywood. No matter what it takes, I'm going to get his copyright."

"There's one more very important thing: who among you likes watching bad movies?"

The four looked at each other, not understanding what it meant.

"It's the kind of movie with simple special effects, low cost, melodramatic plot, and low ratings that won't be shown in theaters."

Warren swallowed a piece of roast meat and mumbled, "DVDs? As long as there's an exciting cover, there are plenty of these movies on the DVD market. My dad loves them; he bought a ton. I've seen quite a few myself."

Eric's eyes lit up: "That's right, the television and DVD markets are indeed the main battleground for bad movies. Warren, are you interested in helping me manage a bad movie company?"

"What?"

Warren choked, looking like he couldn't catch his breath.

Judy delivered a powerful Five Thunder Strike to his back, causing him to spit out the roasted meat.

"I understand companies, but what exactly does a company that makes bad movies do?"

"It's a film company that specializes in making bad movies. Of course, 'bad movies' isn't a derogatory term. What I want is a small investment with a big return. It's all about high-risk, high-reward, like many B-movies, understand?"

Warren frowned. "You mean something like Blair the Witch?"

"Pretty much, but the marketing for The Blair Witch Project is too expensive. We're not going for that model. I want the pure, cheesy, lowbrow movies, you get it?"

Warren hesitated: "I've seen plenty of these kinds of movies, but can they really make money? And is it really a good idea to do this?"

The other three were speechless: "Eric, making bad movies is like ruining your own reputation."

"Yes, big companies certainly wouldn't do something like that, which is why I had you register a company a while ago, didn't I?"

"You mean AK Movies?"

"Yes, after we take over MGM, I will select a group of professionals to join AK Films. It will be my front man, used specifically to produce bad movies."

The four suddenly realized that Eric had stopped following up after asking them to register the company; it turned out he had already made up his mind.

Eric's actions were not a spur-of-the-moment decision, as there is indeed a Hollywood company that specializes in producing shoddy knock-off movies, called Asylum Films.

Its films include, but are not limited to, "Atlantic Rim," "Battleship," "The Hobbit: The Age of the Hobbit," and "Avatar vs. Alien," and just by looking at the names, you can tell they have a strong sense of knock-offs.

Moreover, the cost of a movie about a mental hospital is generally kept under $100 million. You read that right, less than $500 million, only $100 million.

Whether it's the special effects, costumes, or props, it gives off a cheap, street-stall vibe.

Strangely, every movie in The Asylum makes money, and it even produced a well-known series of terrible movies called Sharkball, which earned it a notorious reputation in the global world of bad movies.

Even after making many bad movies, they have formed a fixed fan base.

We know you're terrible, but we just want to see how bad you've gotten this time, and we'll even buy a set of original DVDs to collect.

This phenomenon of appreciating ugliness is somewhat similar to the release of the Chinese film "Dwelling in the Fuchun Mountains" years ago, where a large number of viewers went to the cinema with the intention of appreciating ugliness, contributing to the box office.

As for whether such blatant attempts to ride the wave of popularity and create knock-offs will lead to lawsuits, the answer is no.

Madhouse Films embarked on its path of plagiarism in 2005, and by 2023 it had plagiarized more than 300 Hollywood blockbusters. No major Hollywood company escaped Madhouse's clutches, but it was only sued twice.

Original content companies are too lazy to go through legal procedures because they are time-consuming and almost impossible to win. Have you ever seen Nanshan Invincible lose a case?

The Asylum Films was sued by Warner Bros. over "The Hobbit Age," but Asylum Films argued that its Hobbits were a primitive race from Indonesia and presented various scientific reports, proving that they were not the same as Warner Bros.' fictional Hobbits.

This is why, in addition, bad movies from mental hospitals generally don't go to theaters; they're almost all on TV and DVD. Since they target different demographics, there's no point of competition.

Moreover, not only is there no competition, but after Madhouse Pictures makes a name for itself, the knock-off blockbusters can actually help promote the original. It's a win-win situation, so why not?

In Eric's vision, AK Films and the Madhouse are similar yet different. The similarity is, of course, that they make all sorts of terrible movies. The difference is that AK also makes some low-budget B-movies, which may not be terrible, but the cost is definitely not high.

Another very important point is that Eric really needs money. He currently owes the bank $20 billion, and the annual interest is an astronomical figure for ordinary people.

So he needed to make money, no matter what, he had to make money. But the film and television industry is a slow-return business. After delisting, he couldn't take advantage of shareholders anymore. The only thing he could rely on was himself.

So money! Money! Money!

I'll say it three times: Eric has to make money like crazy!

He has even turned his attention to the stock market. Although he doesn't know much about the industry, he's sure that buying shares in a few companies will guarantee a profit.

Furthermore, AK Films is their front company, so they can start with knock-off MGM movies.

It's only 2002 now, and Madhouse Pictures hasn't even gone down this path yet, so sorry, I'm going to take over the race ahead of time.

(End of this chapter)