Strictly speaking, compared to the not-yet-prominent Miramax, Orion Pictures posed a more significant threat to Highgate Pictures in the realm of art films. Throughout the 1980s, Orion produced numerous acclaimed films like "Amadeus" and "Platoon," both of which garnered multiple Oscars.
If not for the ripple effects of Simon's interventions, projects such as "Dances with Wolves" and "The Silence of the Lambs" would also have been Orion's releases.
Simon chose not to target Orion because, despite its decline, the company had formidable backing.
In the 1980s, a fierce battle for Orion's shares took place between Sumner Redstone of Viacom and media mogul John Kluge. In recent years, realizing Orion's diminishing prospects, these media titans sought out the equally powerful Seagram Group of Canada to take over.
While Daenerys Entertainment could easily outmaneuver New Line and Miramax, dismantling Orion, with stakeholders like Viacom, John Kluge, and Seagram Group, was far less feasible.
Nevertheless, Orion was too small a prize to satisfy the Bronfman family's long-standing ambition to break into the entertainment industry.
Back when Warner Bros. merged with Time Inc., Seagram attempted to acquire shares in Time Warner during the early 1990s when the group was heavily indebted and its stock prices were low. However, the strong-willed Steve Ross firmly rebuffed their advances.
During Daenerys Entertainment's acquisition of MCA, Seagram also expressed interest in the competition but ultimately decided to withdraw, considering the disparity in strength between the two parties.
Currently, among Hollywood's big seven, Warner Bros. is experiencing a steady recovery, MCA is now part of Daenerys Entertainment, Columbia is under Sony's control, 20th Century Fox belongs to News Corp, MGM is dominated by Australian capital, and Disney's robust financial performance makes it too costly for an acquisition.
Thus, Paramount remained the only viable acquisition target for Seagram.
In fact, unless one were willing to engage in a hostile takeover at a very high price, such as targeting Disney, the only remaining suitable acquisition target for any party interested in a major Hollywood studio was Paramount.
Paramount was originally just a subsidiary of Gulf+Western Industries.
In the 1980s, under the backdrop of a revived entertainment industry, Paramount thrived under the leadership of Barry Diller, Michael Eisner, and Jeffrey Katzenberg, releasing annual box office champions like "Grease," "An Officer and a Gentleman," and "Raiders of the Lost Ark."
Gulf+Western gradually divested its energy and food businesses, shifting more resources into media.
The turning point came in 1983 when Gulf+Western's chairman, Charles Bluhdorn, died of a sudden heart attack, and Martin Davis succeeded him.
Unlike Bluhdorn's laissez-faire attitude, Davis couldn't tolerate the growing prominence of Diller, Eisner, and Katzenberg overshadowing his own, eventually forcing them out and sowing the seeds of Paramount's decline.
Over the years, Gulf+Western reorganized into Paramount Communications Group, diversifying into films, television, music, theaters, and publishing.
However, compared to its heyday in the early 1980s, Paramount's film division, once led by Spielberg's "Indiana Jones" series, has waned significantly.
In the most recent fiscal year, Paramount Communications reported revenues of $4.3 billion with net profits of $260 million.
As a publicly traded company with 120 million total shares, Paramount Communications' stock recently hovered around $39, valuing the company at $4.7 billion with a price-to-earnings ratio of just 18 times.
Given the broader recovery of the US stock market, this low P/E ratio made Paramount an attractive acquisition target.
Despite its undervalued market cap, Paramount's net asset value exceeded $7 billion. Even a breakup and sale of the company's assets could yield a substantial profit.
Indeed, a few years back, corporate raiders Carl Icahn and Ron Perelman attempted to capitalize on this, nearly succeeding in dismantling Paramount for profit until federal investigations into insider trading, prompted by Michael Milken's downfall, disrupted their plans.
Seagram, meanwhile, rose to prominence during the Prohibition era in the US.
When Americans craved alcohol during the Prohibition, the only way to obtain it was through smuggling. Canada, which did not enforce Prohibition, profited immensely from the smuggling trade.
Seagram's true ascent began in 1981 when it invested heavily in Conoco, a US oil company, which was later acquired by DuPont. This acquisition, executed through a stock swap, made Seagram the largest shareholder in DuPont with a 24.3% stake.
Over the years, DuPont's rapid growth increased the value of Seagram's stake significantly.
However, the relationship between Seagram and DuPont remained strained.
Edgar Bronfman Jr., who took over Seagram from his father, was keen on venturing into the entertainment industry and had little interest in DuPont. Conversely, DuPont resented having such a large shareholder impede its operations. The two parties have been exploring ways to resolve this issue for years.
Now, any move by Seagram to acquire a media company would likely be financed by selling off their DuPont shares.
The media's valuation of Seagram's 24.3% stake in DuPont ranged between $8 billion and $9 billion. With such substantial capital, acquiring Paramount Communications, which recently had a market value of $3.9 billion, would be feasible even with a significant premium.
Given that Paramount remained the most viable acquisition target in Hollywood, other capital forces naturally took notice as well.
Barry Diller, who had helped Rupert Murdoch establish Fox Television Network and integrate 20th Century Fox, left News Corp last year to start QVC Media, backed by cable giants Comcast and TCI. Although there was no indication of interest yet, Simon knew that Diller would be eager to acquire Paramount and return to Hollywood if given the chance.
Historically, Diller lost out to Sumner Redstone in a bid for Paramount.
This time, facing the equally powerful Seagram, Diller's chances were slim. Comcast and TCI, his backers, were unlikely to commit substantial funds to support his bid.
As for Viacom, Sumner Redstone would also likely eye Paramount with interest.
Unfortunately, Viacom was not in a position to compete effectively.
In the original timeline, Redstone's family capital had invested in Blockbuster, which provided the necessary cash flow for Viacom to acquire Paramount through a stock-for-stock exchange involving Blockbuster's resources.
Currently, Blockbuster is an important subsidiary of Daenerys Entertainment and cannot provide funding for Redstone.
Viacom itself isn't faring as well as it did in the original timeline.
In 1992, Viacom's revenue was only $1.9 billion, with a net profit of $56 million, and its market cap stood at $2.9 billion. The market's optimism about Viacom's cable channels, like MTV and Showtime, pushed its P/E ratio to 51 times.
Simon's memory of AOL's merger with Time Warner at a valuation of hundreds of times earnings was an anomaly.
Now, with Viacom's high valuation and low market cap, buying a net asset-rich but undervalued Paramount Communications was feasible through a stock swap. However, if a cash offer was on the table, sensible shareholders would likely opt for it over a stock exchange.
Without Blockbuster, Viacom simply lacked the cash for such a transaction.
In contrast, Seagram, which could liquidate more than $8 billion in cash at any time, seemed to have the upper hand.
While Seagram's approach to Paramount was still in the exploratory phase, Simon received the news immediately. He had been closely monitoring the situation and favored Seagram's potential acquisition of Paramount.
Under current US media regulations, foreign investors could not own US television stations. Rupert Murdoch, for example, had to change his nationality to develop Fox Television in the US. As a Canadian company, Seagram would have to divest its TV assets upon acquiring Paramount.
Specifically, this would involve USA Network, which was once jointly held by MCA and Paramount and is now co-owned by Daenerys Entertainment and Paramount Communications.
Furthermore, based on historical outcomes, Edgar Bronfman Jr. clearly lacked the acumen to manage a media empire effectively. Given Paramount's decline over the years, Simon welcomed the prospect of Bronfman's stewardship weakening the studio further, aligning with Simon's strategic objective of strengthening Daenerys Entertainment by diminishing its competitors.
Hollywood, in Simon's view, only needed two or three major media conglomerates.
Looking twenty years ahead, Hollywood tended toward Simon's "ideal state" of balance, with Disney, Warner Bros., and Comcast-backed NBCUniversal dominating. The post-Disney-Fox merger only reinforced this triad.
Although Hollywood technically still had five majors, the declining Paramount and struggling Sony had little real influence.
Simon aimed to consolidate this landscape in the 1990s, aspiring for a scenario where, despite appearances of a tripartite balance, Daenerys Entertainment would be the dominant force.
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### Malibu, Daenerys Studio
The date was Wednesday, June 2nd.
Over the past weekend, the two new releases, "Super Mario Bros." and "Happily Ever After," performed disastrously at the box office.
With a budget of $48 million, "Super Mario Bros." managed only $8.53 million in its opening weekend. As one of Disney's "blockbusters" for the summer, this failure led to a 3.6% drop in Disney's stock price on Monday.
"Happily Ever After," which tells the aftermath of Snow White's story and had been tied up in litigation with Disney for over two years, made no splash upon
release, grossing just $1.75 million over its first weekend. It was clear that it would quickly disappear from theaters within two weeks.
The poor performances of these films cleared more potential market space for the upcoming release of "Superman" on June 4.
On June 4, "Superman" would dominate the box office as the sole new release. Warner Bros., in charge of its distribution, planned a grand premiere tonight at Hollywood's Chinese Theater for the superhero film.
At noon, Simon dined with Nancy Brill and the newly recruited Robert Shaye and Weinstein brothers, who had recently joined Blockbuster Entertainment.
Originally, Simon intended to have lunch with his assistant. Now four months pregnant and starting to show, she had recently moved to a mountain villa in Woodside, San Francisco. Jennifer's mother, Carol Reybold, had taken leave from work to personally care for her. Simon's trips to San Francisco had increased as a result, with him traveling back and forth at least two or three times a week.
After New Line's assets were auctioned at the end of May, the company formally dissolved.
Blockbuster acquired New Line's valuable film library for $68 million and discreetly absorbed part of its team, including CEO Robert Shaye.
Despite experiencing significant setbacks with "New Nightmare" due to Daenerys Entertainment's strategies, Shaye was persuaded by Nancy Brill to join Blockbuster. At 54, Shaye was far from retirement and had little financial cushion following New Line's bankruptcy. Thus, continuing to work in the industry was his best option.
With the survival of mid-tier Hollywood studios becoming increasingly difficult, Shaye found it nearly impossible to start afresh. Joining the well-resourced Blockbuster was indeed the best choice.
The Weinstein brothers faced similar circumstances.
They were quite surprised by Blockbuster's offer.
Despite being backed by the powerhouse Daenerys Entertainment, Blockbuster had many better options than three Hollywood "failures."
Thus, in Simon's presence, even the somewhat contentious Robert Shaye was exceedingly respectful, and the Weinstein brothers abandoned their notorious aggressive demeanor. The lunch turned out to be quite pleasant.
After lunch ended at 1 PM, the trio left temporarily, and Nancy Brill remained with Simon in the executive dining area, asking, "What do you think of them?"
Simon shrugged. "I only care about results."
Simon knew well what to expect from the trio, especially the Weinstein brothers. He was already considering imposing restrictions on them to prevent the kind of scandal that had marred Hollywood's past. As long as they remained within Daenerys Entertainment's system, the likelihood of such incidents was low.
As for Hollywood's underbelly, there were too many like Weinstein. It was impossible to control them all.
Simon wasn't a moral purist. After all, he himself was the apex predator in Hollywood's hierarchy. As long as scandals didn't erupt, many matters were inconsequential.
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