Chapter 104: You Came to Suppress Me

Time passed quickly, and it was soon April; Annabelle had finished shooting and entered post-production.

This movie was simple, the sets were simple, they just followed the storyboard exactly; the Hollywood team was mature, unlike Fang Hong's amateur crew, so it shouldn't have taken so long.

But Fang Hong's team wasted some time early on; things improved greatly after Liu Tianxian arrived!

And Liu Tianxian was returning to China; she had A Chinese Ghost Story to promote and couldn't stay long.

Yet Fang Hong wouldn't let her return, insisting she help him visit Warner to finalize the distribution.

That crappy movie A Chinese Ghost Story doesn't matter whether it's promoted or not—it has no future.

Warner was introduced by CAA; they were chosen because this company started with horror film distribution and has deep experience in this area—they know quality.

So the two of them took the rough cut to Warner; the film had been edited as it was shot.

The U. S. distribution system differs from China's; it's a complete separation of production, distribution, and exhibition.

That is, production, distribution, and exhibition are three independent powers!

You can't produce if you distribute, you can't distribute if you produce—even if you hold shares, you must maintain two independent brands, independent finances, and different boards.

To enforce this system, they split Paramount and split Metro-Goldwyn-Mayer.

For example, everyone knows Disney, but few know Disney's distribution company is Buena Vista Pictures.

Although these two have a master-servant relationship, Buena Vista Pictures has its own board and independent finances and remains a separate brand.

This is to prevent big fish from swallowing small fish, forming a powerful group that could become a monopoly.

That would be uncontrollable!

But the Big Eight can still circumvent the rules to control distribution and build their own global distribution systems.

Even so, one truth holds: whether the Big Eight or any other distributor, all are fully open to every producer.

They accept all producers' films for distribution; in this country, distribution is where the real money is—not production.

Some companies earn massive profits by doing nothing but distribution!

They have many channels, wide coverage; dozens of countries worldwide are their backyard for content dumping.

As long as a film made in Hollywood is legitimate and domestic, someone will always distribute it.

Put simply, distribution is the core interest and competitive advantage of these Hollywood companies—the reason cultural products spread globally is their powerful distribution capability.

In the back seat of the car, Fang Hong and Liu Tianxian sat shoulder to shoulder, heads close; Liu Tianxian whispered, explaining the local distribution and revenue-sharing model.

"I know the revenue-sharing model—I registered a company, the minimum I can get is 25%," Fang Hong said.

"Listen to me finish," Liu Tianxian glanced at him, signaling him to shut up.

Fine, Fang Hong could only listen carefully.

"The U. S. box office revenue-sharing calculation is very flexible, not fixed.

If a film is a huge hit and earns extremely high box office in the first two weeks, the split can reach 9-to-1.

That is, the studio gets 9, the theater gets 1.

If the box office is $100 million, the studio takes $90 million."

Fang Hong was stunned—this country makes money by squeezing theaters; in China, that's unimaginable, where theaters and chains are legally entitled to 59%.

That is, 7% to the chain, 52% to the theater!

This was also why Chinese distributors later tried to cut theater shares, nearly sparking open conflict.

The theaters took too much; distributors and producers got too little, cash flow was always insufficient, and later they were invaded by capital with no way to resist.

Hollywood never had this problem!

"Then how do theaters make money?" Fang Hong asked.

"They don't pay the 5% film fund like in China—it's waived. Also, theaters need film content and foot traffic so people buy snacks and fast-moving consumer goods," Liu Tianxian explained.

Fang Hong thought about it—no wonder Americans are fat; they all got that way eating popcorn and drinking soda during movies.

High consumption, high spending—not relying solely on ticket sales; without living in the U. S., you'd never notice these details.

Even some people in China think theater chains are invincible: "Your movie's great, but if they won't screen it, what then?"

Come on—if they don't screen films, where do they get content? How do they cover operational costs?

Staff salaries, rent, water, electricity—all expensive; a big theater sitting there costs money every day.

So they must have content—they love big hits, for foot traffic, for profit.

Like Xu Guangtou later—he'd already negotiated with theaters, then changed his mind; theaters had no content, no foot traffic, and that broke the fundamental rule.

Fang Hong had never offended theaters; how much they got was entirely up to the distributor to negotiate—he didn't interfere, just took his share.

Liu Tianxian warned: "Don't get excited about the 9-to-1 ratio—it has conditions."

"What conditions?"

"That ratio is after deducting taxes and the theater's fixed costs—you're paying the theater's expenses. If your movie flops but the theater's fixed costs stay the same, you'll go bankrupt," Liu Tianxian said.

"So this model only works for blockbusters and big studios—they guarantee the film will be a hit, especially IP Movies."

"Exactly!"

Liu Tianxian nodded and continued: "And this model isn't static—it's a tiered reduction. If box office drops in later weeks, it's no longer 9-to-1 because fewer patrons mean losses, so the split drops to 7-to-3 or 6-to-4 to ensure the theater doesn't lose money."

That is, the longer a film runs, the higher the theater's share, because it generates less foot traffic.

Fang Hong roughly understood: besides the waived fund, the mature revenue-sharing system, foot traffic is also a major revenue source.

Today's foot traffic equals traffic—advertising, consumption, all can generate profit.

Just these alone guarantee theater profits.

Don't underestimate the 5% fund waiver—it means an extra $5 million on a $100 million box office, equivalent to 35 million in China—a huge sum.

North America's annual box office is $10 billion, so annually, $500 million is freed up, equivalent to $3.5 billion redistributed.

Add other mature advertising and consumption revenue, profit margins can rise to 20%.

"So if you say it like that, even under normal ratios, theaters get at most 40%, and studios get 60%," Fang Hong mused.

"Yes, but don't get your hopes up—there's also distribution; their share could be anywhere from 10% to 50%," Liu Tianxian said.

That means if the theater takes 10%, the remaining 90% could be taken by the distributor, up to 50%.

If the theater takes 40%, the remaining 60% could still be taken by the distributor, leaving only 10% for the producer.

In this country, distribution is the most profitable part—these 600-plus film and television companies are just working for the distributors.

There's nothing you can do; their distribution channels are too powerful—North America, South America, Ouzhou, Australia, Japan and Korea. Such massive markets—they deserve to make the money!

"Then what about the guaranteed 25% for the producer?" Fang Hong felt the calculations were too complicated; domestic terms were simpler and clearer.

"The intention was to protect producers from losses by guaranteeing them at least 25% of the profits—but do you really think you'll generate any profit?" Liu Tianxian countered.

Fang Hong's expression changed—he remembered from his past life how a Hollywood distributor had falsified accounts for a hugely successful film, turning it into a loss and even demanding money from the producer.

The movie was Harry Potter, and the company was Warner.

And now they were on their way to Warner—wasn't this like sheep walking into a tiger's den? How could someone at his level compete with Hollywood's big capital?

Even rebirth wouldn't help—back in his past life, Hollywood was far beyond his reach!

Thinking of this, Fang Hong grabbed Liu Tianxian's hand tightly and said seriously: "Yifei, you have to help me!"

"Don't worry, don't worry—I'll definitely have your back."

Liu Tianxian patted his shoulder and comforted him: "If I weren't going to help you, I wouldn't have stayed. Isn't that right?"

"That's true," Fang Hong nodded.

It was true—Liu Tianxian had originally planned to leave; the domestic team for A Chinese Ghost Story was pressing her hard.

But to prevent this man from being cheated, she had voluntarily stayed.

He had accompanied her for so long before, telling her life philosophies every day, easing her psychological stress—she remembered every bit of it.

That companionship warmed her heart!

And starting a business is never easy; she'd already seen him endure so many hardships at home, and here she still hoped he'd have an easier path.

Liu Tianxian didn't pull her hand away, letting him hold it, and went on telling him countless details.

She truly understood all the intricacies of Hollywood.

Fang Hong only knew the broad strokes, all from research and hearsay—he didn't understand the actual situation or the specifics.

After all, his knowledge from both past and present lives was extremely limited.

After chatting for a while, Fang Hong remembered something: "Can you do me a favor?"

"What favor?"

"I started a company here, and they require me to create five to ten jobs, and they must be held by United States citizens. Why don't you take a position in my company? That counts as one job—I won't have to go through the hassle." Fang Hong said.

"What position will you give me?" Liu Tianxian asked, intrigued.

"You have to be President!" Fang Hong said.

"So you mean the Chairman will be above you?" Liu Tianxian's eyes sharpened.

Fang Hong spread his hands: "Isn't it normal for me to be above you?"

"Get lost!"

Liu Tianxian glared at him: "You want to tower over me? I'm lucky if I don't tower over you!"

"Then go ahead and tower over me—I'll let you!"

Fang Hong laughed, his laughter carrying an ambiguous meaning—only adults would understand.

Liu Tianxian couldn't help laughing too, hitting him twice—she was being utterly unserious.

As for filling that slot—no problem at all. It wasn't like she'd actually do anything; it was just to avoid hiring another person.

United States unemployment? What did that have to do with them?

The driver up front couldn't understand their conversation, but through the rearview mirror, he saw them talking and laughing together—it looked quite affectionate.

(End of Chapter)