Chapter 122: Overseas Channels

From the initial news release to its final removal from all North American theaters, "The Blair Witch Project" created a significant stir among audiences. Initially driven by curiosity, followed by enthusiasm, and ultimately devolving into accusations and even curses, the film's reputation had severely deteriorated.

Despite this, it was peculiar to many media outlets and industry insiders that even after the main cast and crew were exposed through media interviews, a considerable number of viewers still went to the theaters amidst the criticism to watch this so-called film, often cursing it while they watched.

This phenomenon led to a misconception that the buzz generated by the criticism could carry over to a sequel.

By the time "The Blair Witch Project" left theaters, its North American box office gross stood at $156.52 million.

This amount temporarily placed "The Blair Witch Project" eighth on the 1999 North American box office chart.

The top seven films were all highly renowned.

At the top of the list for the year was "Star Wars: Episode I - The Phantom Menace," followed closely by "The Sixth Sense," along with "Toy Story 2," "The Matrix," and others.

Being listed alongside these renowned films, "The Blair Witch Project" was awarded by the media a potentially historic title—"the pioneer of the pseudo-documentary horror film."

As the mastermind behind the scenes, Michael Davenport remained obscure.

This was the outcome he desired.

Anyone who wanted to grab the limelight could do so, but Michael would not foolishly step forward.

Not everyone had Michael's clarity, such as the film's director, Daniel Myrick.

This director, pushed to the forefront by Michael, graced the cover of the latest issue of "Time" magazine, nearly overshadowing all the hype generated by "The Blair Witch Project."

Subsequently, Daniel Myrick appeared on the Oprah Winfrey Show.

He took all the credit for himself.

For a time, Daniel Myrick basked in glory.

If there were a selection for the "Hollywood Person of the Year" in 1999, Daniel Myrick would undoubtedly be a contender.

DreamWorks took advantage of this momentum, holding a press conference to announce the preparation of a sequel to "The Blair Witch Project."

Only then did the media realize that the film rights to "The Blair Witch Project" had already been transferred to DreamWorks.

At this point, many media outlets commented that the decision-makers at Relativity Entertainment must be out of their minds, branding them as a bunch of idiots.

Some media reporters even sought to interview them, but Relativity Entertainment adhered to Michael's strategy, remaining silent and quietly counting their money.

Develop quietly, don't be flamboyant.

Being flamboyant in this situation could easily lead to being drowned in spit.

With "The Blair Witch Project" off the screens, the North American box office revenue was quickly accounted for. Since the film did not involve external investment, there was no need for special accounting, and the profits merely circulated between Relativity Entertainment and Embassy Pictures.

In the conference room of Embassy Pictures, Garcia looked at the report and said, "As of yesterday afternoon, all North American box office shares have been accounted for. We have earned a total of $79.5 million in North American box office revenue."

As soon as he finished speaking, the conference room erupted in applause.

Theatrical Distribution Director Thomas, Home Entertainment Director Terry, Vice President Robert, Marketing Director David Villa, and the newly appointed Finance Director Fiona, all applauded enthusiastically, looking towards Michael.

Though he remained anonymous to the public, no one knew better than them that this was a victory belonging to Michael Davenport!

A team leader with such capability, vision, intellect, and execution is invaluable to a company!

Michael could sense the growing cohesion among Embassy Pictures' management. He joined in the applause and, once it subsided, said, "The success of this film is the result of collective effort. I am having a reward plan drawn up based on the revenue from 'The Blair Witch Project.'"

Once again, applause filled the room, this time even more enthusiastically.

As a company leader, and potentially leading an even larger team in the future, Michael understood that for a team to perform beyond expectations, the leader's ability and charisma must be complemented by tangible benefits and rewards for followers.

Having witnessed the immense success of "The Blair Witch Project," Garcia had to admit that the new boss's capabilities were undeniable, with the $79.5 million being the best proof.

Over the past ten years, all of Embassy Pictures' revenues combined did not total $79.5 million!

And this was just one film. Upcoming films like "Kingsman" and "Final Destination" were still to be released.

Garcia, who had worked at the company for many years, found that the slow pace and the former boss's conservative strategies had nearly eroded his ambition.

At this moment, he felt capable of achieving more and reaching higher heights.

"Let's discuss the financial handling," said Michael.

Finance Director Fiona, her voice slightly hoarse, reported, "During the entire run of 'The Blair Witch Project,' Embassy Pictures spent $12 million on marketing, $7 million on distribution, and $1 million on purchase costs and other expenses. Additionally, $2 million will be spent on the upcoming VHS and DVD releases. In total, we spent $22 million on marketing and distribution."

No one, including Michael, spoke.

Anyone with a bit of sense knew that this low-budget film, costing only $80,000 to produce, had achieved its success through massive market spending.

Typically, Hollywood films spend about half their production cost on marketing, sometimes even equaling the production budget.

But this film? Garcia knew the costs but was still shocked by the $22 million figure.

Looking back, he realized that the initial market test responses and the complete ownership of the film rights were key reasons they had agreed to and executed what seemed like a crazy plan.

Spending $22 million wasn't beyond Michael's expectations. Given that just the North American box office revenues amounted to $79.5 million, and with VHS, DVDs, TV rights, and various overseas rights still to come, it was worth every penny.

This is the advantage of having a distribution company and being upstream in the industry chain.

Even if the $22 million were added to the $25 million spent acquiring Embassy Pictures, distributing "The Blair Witch Project" alone made it worthwhile.

Robert, indifferent to these costs, followed Michael through successive successes, believing that any money Michael spent would inevitably bring more revenue.

His thoughts wandered elsewhere: "Why am I so looking forward to Michael's plan? Why am I so eager for the upcoming trip to India?"

Fiona continued, "The $22 million came entirely from a loan from Relativity Entertainment, to be repaid with interest within the week. The principal is $22 million, with a fixed interest rate of 15%, totaling $25.3 million."

"Additionally, Relativity Entertainment transferred the five-year offline rights to 'The Blair Witch Project' to Embassy Pictures for a total price of $18 million."

Everyone in the room, being insiders in Hollywood, was familiar with such financial maneuvers.

"The remaining funds," Fiona continued, "will temporarily serve as reserves and working capital, staying in Embassy Pictures' accounts."

Michael added, "These funds will primarily be used to develop overseas distribution channels for Embassy Pictures. Our next step is to extend our distribution reach overseas!"

Establishing overseas distribution channels is much more challenging than in North America. Currently, apart from the Big Six studios, only a few companies have overseas distribution capabilities, and even the ambitious DreamWorks has yet to establish an overseas distribution network.

However, without attempting to build overseas distribution channels, they might end up like DreamWorks, never establishing such capabilities.

Think of Lionsgate, which initially lacked overseas distribution capabilities, but later expanded through acquisitions and self-development.

If they wanted to maintain independence like Lionsgate, rather than being swallowed by large conglomerates like many mid-sized Hollywood companies in history, they needed to distribute films both in North America and globally.

The group then discussed the establishment of overseas distribution channels.

This task required dedicated personnel, and currently, Embassy Pictures lacked suitable candidates. Michael planned to poach talent from competitors.

Ideally, he could bring over an entire team.

The distribution of "Kingsman" and "Final Destination" was also on the meeting agenda.

Michael reiterated that the marketing and distribution funds for these two films must be resolved through loans from Relativity Entertainment.

Relativity Entertainment was about to receive $43.3 million, so there was no need to worry about bank repayments for now. They could lend more to Embassy Pictures for the operation of new films.

Additionally, the proceeds from selling sequel rights to DreamWorks would soon be received.

They could then secure significant interest income from the revenues of "Kingsman" and "Final Destination."

This was Relativity Entertainment's legitimate income.

"Garcia, Embassy Pictures can continue its previous business operations," Michael suggested. "Purchase independent small productions from overseas, release them in North America or distribute them on VHS and DVD. You used to do this well, so don't give up on it."

Embassy Pictures had survived on this type of business, indicating it had some profit margin.

If it could make a profit, it shouldn't be abandoned.

Some overseas films, repackaged for the North American market, could yield decent returns in the VHS and DVD market.

In the future, attending more film festivals would be beneficial.

Two days before Halloween, the VHS and DVD versions of "The Blair Witch Project" were officially released. With Embassy Pictures' distribution channels, prominent displays in chain stores like Walmart and Blockbuster featured the film and related posters.

Audience psychology can sometimes be unpredictable. Despite the film's bad reputation, people were still willing to pay for it. In the first three days of release, combined sales and rentals generated nearly $7 million.

The film's TV broadcast rights were also in negotiation.

After Halloween, Michael planned to hold a celebration party, inviting no media personnel. Apart from staff from both companies, he invited some collaborators, including directors, actors, and other key positions who had worked with or were currently working with them.

Naturally, the main cast and crew of the film were also invited to this event.