Chapter 200: 200: The Rise of a New Independent Film Kingdom

On movie box office websites like BOX, the top 10 global box office films of 2002 were led by “The Lord of the Rings: The Two Towers,” a New Line Cinema production that boasted an impressive $925 million; second was Warner Bros.’ “Harry Potter and the Chamber of Secrets” with $878 million, and third was Sony/Columbia’s “Spider-Man” with $821 million, marking the three films that year to gross over $800 million worldwide.

Fifth was 20th Century Fox/Lucasfilm’s “Star Wars: Episode II” with $649 million, eighth was Sony/Columbia’s “Men in Black 2” with $401 million, ninth was MGM’s “Die Another Day” with $400 million, and tenth was IFC Films’ “My Big Fat Greek Wedding” with $368 million.

The fourth, sixth, and seventh spots were all taken by the same independent film company, described by Fortune Magazine as an “explosively expanding” Flame Film.

Following the Golden Globe Awards and the announcement of the Oscar nominations, “District 9” re-opened in fewer than 100 theaters in North America, scraping up some missed box office revenue; earlier in the year, it also made its way onto the big screens in mainland China.

Despite the prevalence of both clear and unclear pirated versions of “District 9” on the Internet, where street vendors were selling them for 5 yuan each and deals like “buy ‘District 9’ and get ‘Juno’ for free” or “Get ‘The Hangover’ + ‘Paranormal Activity,’ for a scream!” were common, and some even copied a “Wang Yang Movie Collection” also for 5 yuan.

However, under the allure of “Chinese-American Wonder Director,” “Widely Acclaimed Worldwide,” “Special Effects Blockbuster,” and Wang Yang’s own popularity, “District 9,” with some “non-impactful on viewing experience” bloody scenes cut by the State Administration of Press, Publication, Radio, Film, and Television, managed to garner a fine $10 million in mainland China. “Spider-Man” made $4.983 million, and Zhang Yimou’s “Hero” made $30 million.

Therefore, “District 9” has now raised its North American box office to $330 million and global box office to $765 million, ranking it fourth on the overall list for 2002. In Movie Weekly’s “Top 10 Films of the Year” list published in January, it was said: “Many people will hate the ‘Magical Yang,’ it is bound to become a sci-fi benchmark that will be referred to for decades into the future when discussing both commercial and artistic values, it’s that kind of film.”

Year-end Top 10 Films lists are essential for many magazines, including Entertainment Weekly, Empire, Vanity Fair, TIME, etc., and also in newspapers by well-known film critics, such as Roger Ebert of the Chicago Sun-Times, all featuring “District 9.”

“The Hangover,” with a North American box office of $320 million and a global revenue of $617 million, ranked sixth overall in 2002, as the highest-grossing comedy film of the year and the highest-grossing R-rated comedy film in history; “Ice Age,” with a global take of $476 million, ranked seventh as the highest-grossing CG animated film of the year.

“The ticket office miracle of ‘District 9’ can be attributed to the creative new viral marketing, whether it’s viral websites, campaigns, or posters and three-dimensional posters, all have become the new trend in the movie industry. ‘Superman Returns’ has launched a viral website, ‘The Incredible Hulk’ has launched a viral website too… The novelty for the fans is rapidly decreasing.” — Los Angeles Times.

“In 2002, Hollywood discovered two gold mines: the massive success of ‘Spider-Man’ led many film companies to refocus on superhero movies, signaling the coming era of big CGI effects productions; facing ‘My Big Fat Greek Wedding’s’ $5 million budget and $368 million global box office, and ‘The Hangover’s’ $25 million budget and $617 million global box office, many independent companies saw hope, and major companies saw a way to reduce investment risks, with six R-rated comedies already scheduled for a big release in 2003.” — Empire Magazine.

In the top 10 box office films of 2002, major studios and independent companies each had five films, with Flame Film producing three of the latter; among the North American total box office of $9.25 billion from January 1 to December 31, Sony/Columbia ranked first with $1.407 billion and a 15.2% market share, Disney’s distribution brand Buena Vista had 12%, Warner Bros. had 10.7%, Universal had 8.5%, and Flame Film ranked fifth with a total of $810 million and an 8.7% market share.

Following Fox’s 8.5% share, another independent film company, New Line, ranked seventh with 10 movies grossing a total of $771 million and a market share of 8.3%. Next came Paramount, which released 19 films and held 7.4% of the market share, and then in ninth place, another independent company, DreamWorks, captured 5.1% with seven films. In tenth place was MGM, which released 19 films and held a 4% market share.

If we only look at the year 2002, Flame Film has already become the leader among all independent film companies. Indeed, it may still have shortcomings, but undoubtedly, it has been rapidly growing and growing…

In the scenic Santa Monica, a bright executive meeting room at the Flame headquarters buzzed with activity as a board meeting unfolded. Company executives in suits filled the seats on both sides of the table, with Wang Yang, dressed in a black suit, taking his place at the head of the table as the chairman. Looking at the financial reports and figures, he felt no surprise whatsoever.

The Flame Group currently consists of five main parts: FF Company, FM Company, Flame Home Entertainment, Blue Sky Studios, and Image Engine. Blue Sky Studios and Image Engine do not contribute much profit, as most of the investment costs go to the salaries of the special effects technicians and animators. At the same time, the I&B Department needs to develop new technologies, which means that the parent company has to pour money into them. This is precisely why many companies can’t afford to support animation and special effects companies.

The group’s primary business is still the film market, with FF producing high-cost, high-quality films they have confidence in, FM handling mid-to-low-budget films, and Home Entertainment in charge of television business. The business strategy is divided into two parts, “theatrical release films” and “home video market,” with the former generating box office and various post-release peripheral income, and the latter relying on rentals, copyright taxes, pay-per-view, and other smaller markets, as part of their “Film Library” plan.

“Sweetheart” with a global box office of $170 million, “Ice Age,” “District 9,” “The Hangover”… “Mr. Hughes” with $160 million… DVD, original soundtracks, copyrights… allocating $175 million for Blue Sky Studios to produce “Ice Age 2,” “Kung Fu Panda,” “Prison Break”‘s 22 episodes with a production cost of $30 million, “Furious” with a production cost of $60 million, “The Hangover 2,” with a production cost of $50 million, “MIT-21-TEAM,” with a production cost of $25 million…

“Hmm…” Wang Yang studied the list of income and expenses. The company naturally had to pay taxes and administrative expenses, and they had also distributed dividends to shareholders at the beginning of the year. Now, the company’s account had over $384.5 million in liquid cash, while his personal account had over $301 million. Previously, he had invested $100 million to establish a charity fund, managed by a dedicated team without a specific target group, but mainly focusing on out-of-school children worldwide and sudden disasters.

Obviously, Flame Group’s cash was not limited to the $384.5 million. The value of the studios, worth $100 million, all subsidiary assets and business, and the movies in production… The entire group’s value was estimated to be around $1 billion, and it was debt-free and not publicly listed.

However, today’s meeting was not about financial reporting; otherwise, Wang Yang would not have “specially” returned from Las Vegas. After half a month of shooting, the crew had completed their work in Boston and moved to the gambling city of Las Vegas for nearly a week of filming. It was now March, and Wang Yang had come back because the company was finalizing a major purchase, waiting for his final decision.

It wasn’t the acquisition of the women’s website iVillage—that project was still under negotiation. This time, the target of the acquisition was Artisan Entertainment, for $160 million US dollars.

“With just our approval, we can acquire Artisan Company’s film library of over 6,000 titles,” Mark Slant said excitedly from the chief seat on the left, looking at his smiling colleagues and Wang Yang before adding emphatically, “6,000 titles! Adding to our own 2,500, that’s 8,500 titles! Warner Brothers only has 1,400, Universal 4,000…”

In recent years, Flame Film had consistently adhered to the Film Library plan, buying film rights from all over the world, which naturally included Chinese films from mainland China, Hong Kong, and Taiwan. Last year’s “Infernal Affairs,” which was hailed as the film to “save the market,” had its overseas rights owned by Flame, including the adaptation rights.

“With these 6,000 films, we’re estimated to generate $200-300 million cash annually from the ‘home video market,'” said Mark Slant, pausing for a moment with a sense of achievement in his eyes, and continued with a smile, “This sum is enough to cover all of the company’s day-to-day operations.”

“””

With a library of 6,000 films, it’s like the Super Mushroom in “Super Mario” or the fruit in “Pac-Man” — once consumed, the film library plan would quickly get on the right track… Wang Yang gazed at the “Artisan Films” documents in his hands, vaguely recalling the situation from 5 years ago when he took a deep breath and walked confidently into the doors of Artisan, Nicole Kidman, Stephen Thomas…

“Let’s buy it,” Wang Yang nodded and scanned the crowd before stating, “Let’s purchase it.”

Although this was expected, the chairman wouldn’t have agreed to initiate the acquisition plan otherwise, but the boardroom still erupted in excited applause, and everyone cheered and laughed. Mark Strong, who had proposed the plan, was particularly pleased and laughed heartily, saying, “This is insane! Our company’s development just sped up by 5 years!” Wang Yang raised his hands and shouted, “The rocket has launched, everyone hold tight, Let’s-GO!”

After signing the contract, the acquisition payment of $160 million could be immediately transferred to complete the purchase, and the remaining $224.5 million in Flame Movies’ account was more than sufficient for this year’s release plan. The independently operating FM Company planned to release 4 major films this year, including “Saw,” which caught attention at the Sundance Film Festival earlier in the year and would be released in April. FF is currently set to release three films: “MIT-21-TEAM” at the end of July during the summer slot, “Step Up” in the slower month of October, and “The Devil Wears Prada” during the Christmas season.

During this time, Lauren Weisberger, the author of “The Devil Wears Prada,” had already reached an agreement with Flame to sell the adaptation rights, and Flame Movies immediately started production preparations. It was first announced that the lead role of Andrea would be played by Jessica Alba; now there was widespread media speculation that Wang Yang would personally adapt and direct it, although Flame’s officials had not yet responded.

This was also a marketing tactic: let the market speculate first, generate curiosity and interest among movie fans, and only then officially announce something that’s 99% certain to attract more attention than if they’d laid it all out at the beginning.

After the meeting ended, the executives left the boardroom with smiles, and Wang Yang headed towards the chairman’s office, while saying to Mark Strong beside him, “Mark, I’m planning to start my own music label. You know a TV station always needs music, MVs, and stuff. It can even collaborate with Flame Movies’ original soundtrack business.” He said, laughing, “Robert Downey Jr. has a pretty good voice; I told him, I’d produce his album.”

Mark Strong knew he meant starting it on his own, unrelated to Flame’s finances; besides, to a person worth over a billion dollars, owning a music label was nothing extraordinary. Many film and sports celebrities owned their music labels and signed artists, typically only collaborating with larger companies for distribution. Having nothing to persuade or suggest, Mark responded with a jest, “Yang, you could release an album yourself. You sing very well; the sales would definitely be good!”

“Me? Singing off-tune could be quite entertaining, right?” Wang Yang replied with an enthusiastic look, then immediately waved his hand dismissively, saying, “Maybe not now, I’m too swamped.”

“To be honest, boss, I truly wish you could make 12 films a year,” Mark Strong said with a covetous look, chuckling, “One every month, then we wouldn’t have to consider this issue. Once the foundational phase of our film library plan is complete, we can think about increasing production.”

Wang Yang, reflecting on this, knew increasing output meant the snowball would roll faster but also meant higher risks and the beginning of financing and borrowing. He pondered and said, “Regardless, I do not agree with borrowing money to increase production when we’re financially healthy; it’s not wise. We are already moving quickly; what’s most important is to stand firm and not fall back or collapse.”

“I never said to borrow money for filmmaking; the interest rates are too high now, and the return on investment is hard to guarantee,” responded Mark Strong with a shrug. Wang Yang hummed in agreement. Why is borrowing money bad? DreamWorks had always relied heavily on financing to produce movies, with gains and losses but accumulating debts. From what he remembered, eventually, it would be acquired by Paramount. Appropriate financing can accelerate the pace, but over-reliance would only dig your own grave.

“””

Mark seemed to have thought of this as well, and he continued, “However, borrowing money could allow us to continue acquiring and merging, speeding up the expansion of our film library. The risk involved in this project isn’t high.”

“Let’s talk about it later, one step at a time. We haven’t acquired Artisan Entertainment just yet,” Wang Yang turned to look at the CEO. The company’s rapid development these past few years was linked not only to blockbuster films but also to the hard work of the senior management. He smiled as he shared the plan he had long considered, “Mark, by the end of this year, I’m planning to adjust the company’s equity. Everyone will receive a reward.”

“Oh… what a pleasant surprise!” Mark Slant immediately grinned with wide eyes. No one disliked rewards—it was invigorating! He exclaimed with excitement, “It looks like this Christmas will be full of surprises!”

Wang Yang firmly patted his shoulder and said with a laugh, “This isn’t a Christmas gift. By the way, do you really think I sing well?…”

A couple of days later, a fresh piece of business news from the movie industry was served hot: Flame Film completed the acquisition of Artisan Entertainment for 160 million US Dollars! Just like the previous acquisition of A-PIX, this was a total purchase—Flame acquired everything about Artisan, not excluding even a broken chair from the company headquarters.

Flame Film announced that it would cut and reorganize the original staff of Artisan Company, integrating them into Flame’s business operations; also, Artisan’s films would no longer carry the “Artisan” brand name and would uniformly be rebranded as “Flame.”

This was not a bailout-style capital injection and restructuring but an asset swallow. Many business media were puzzled—injecting capital into a broken company was evidently worthless, so what was the point in swallowing it up? Flame Film naturally offered no explanation, as this was a trade secret, only to be revealed when the market stabilized; now, countless competitors were speculating about the thoughts of Flame Film and the enigmatic Wang Yang.

Actually, with some deduction, the answer was easy to arrive at: Flame definitely wasn’t after the office chairs; what they coveted were the copyrights to those more than 6000 films. However, there was a stark reality—nearly all of those were “junk movies”! The highest-grossing film from Artisan Company was “Veggie Baby Adventures,” a CG animated film released in October 2002. Made with a 14 million dollar budget, it had garnered only 25 million in global box office revenue.

Was Flame Film not satisfied with “Ice Age”? Buying over 6000 films that had virtually no market value, was it just for the sake of appearances?

Regardless, Flame Film’s latest acquisition once again showed the media and the public its relentless stride and ambition. Based on past experiences, they had every reason to believe that this was yet another successful purchase for Flame; they had every reason to believe that a new kingdom of independent cinema was on the rise.

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PS: Wow, thank you everyone for your blessings! Thank you so much!