The morning after the Ali fight, Duke was back in his Paramount office. Barry Diller sat comfortably in the leather chair opposite Duke's desk, a copy of the Los Angeles Times folded in his lap.
Duke was recounting his encounter with Kirk Kerkorian the night before, with Diller's laughter as they spoke.
"You actually said that to his face?" Diller wheezed, wiping his eyes. " 'Duke, the man's worth half a billion dollars."
"He has terrible taste in hotels," Duke said, grinning. "And he's lucky I didnt told him about his movie taste."
Diller shook his head, still chuckling. "He's a vulture, Duke. Everyone in the industry knows it. The way he's selling off MGM it's turning the stomachs of every producer and director in town."
His expression turned slightly more serious as he leaned forward. "But he's not the only one feeling the squeeze. The industry is brittle right now. Look at the landscape, between 1969 and 1971, the major studios loss over six hundred million dollars collectively. Almost everyone is suffering, Duke. We're the only ones who went by unscathed."
Duke leaned back, eyes narrowing as he mentally mapped the industry. "Explain it to me, Barry. Why is the rest of the town struggling to keep the lights on while we're doing just fine?"
Diller began ticking off names on his fingers, "MGM hasn't had a legitimate hit in two years. They're surviving entirely on selling off props, costumes, even the backlot."
"United Artists is also suffering, their last big success that wasn't a Bond picture was Fiddler on the Roof back in 1971."
"Columbia is so underwater they essentially handed you ten percent of their equity for two million dollars just to survive a little longer."
"Disney is wandering around, trying to find their identity now that Walt's gone. And Fox is so desperate to balance the volatility of their box office that they're looking to pivot into resorts and real estate."
Duke tapped his fingers on the desk, the rhythmic sound filling the silence.
By aggressively diversifying Paramount into gaming, comics, music, and television, he had fundamentally altered the industry. He was starving the other studios of resources and talent.
He looked at Diller, his voice dropping to a calm tone. "Well, Barry, when there's a strong being, there's bound to be weaker beings. That's the natural order."
"If they can't adapt, they get absorbed. I been thinking and I want to start planning our first theme park. It'll take a couple of years to even break ground."
Diller nodded, a slow grin spreading across his face. "A theme park. That's a bold leap, but with the cash flow we have, it's entirely doable."
Duke checked his watch. "Let's check if the numbers back the ambition. Get the head of Internal Accounting in here. I want to see the debt, the revenue, and the profit."
A moment later, the accounting head was ushered in, carrying a thick, leather-bound folder. He looked nervous, unused to presenting such a high-level overview directly to the Chairman but he stepped up to the desk with professional composure.
"Mr. Hauser, Mr. Diller," the accountant began, "we've finalized the 1972 audit."
"Regarding our debt structure: Paramount currently holds eighty-five million dollars in total liabilities. Sixty million stems from the initial Paramount acquisition, and fifteen million from the Ampex acquisition. Both are owed to Lehman Brothers."
"The interest rate is locked at six percent, which is exceptionally favorable given current market conditions. If we were to secure the same loan today, we'd be looking at ten percent at minimum. We're essentially operating on very cheap, long-term capital."
Duke nodded. Six percent was a great thing, they didnt have to rush to pay it back.
"Now, the revenue," the accountant continued, flipping to a series of charts. "It's been a good year."
"Our Home Pong console has brought in 14.8 million dollars with 150,000 units sold. Our arcade division, combining sales and coin-split royalties, has pulled in 43.5 million. Plus, we've raked in 3.9 million in pure patent royalties from other manufacturers using our licensed tech."
"Total gaming revenue is over 62 million."
Duke whistled softly. The gaming division was their golden goose. "And film?"
The accountant cleared his throat. "Total gross ticket sales for the 1972 slate including The Godfather, Cabaret, Lady Sings the Blues, Last House on the Left, Aguirre, Play It Again, Sam, Shaft's Big Score!, and Blacula is approximately 192.6 million dollars."
"Adjusting for the studio rental share, about forty-five to fifty percent, we're looking at roughly 92.5 million in revenue from theatrical rentals."
The report continued, each number adding another layer to the scale of Paramount.
"DC Comics has brought in 18.6 million, and Pulse Comics added 3.1 million, total of 21.7 million in print revenue."
"Television did better than ever, we can almost begin to compete with Universal. The Brady Bunch, The Odd Couple, Mission: Impossible, Mannix, Columbo, and All in the Family have generated 72.8 million in revenue."
"And our music division, under Clive Davis at Paramount Records featuring Billy Joel, Bruce Springsteen, Queen, The Eagles, Aerosmith, Chicago, and Earth, Wind & Fire has brought in 45.5 million."
Duke absorbed the figures.
Total revenue sat at approximately 294.7 million dollars.
A massive machine, churning out entertainment on every conceivable platform. But revenue was very different than profit.
He gestured for the accountant to get to the point. "How much do we actually get to keep?"
The accountant adjusted his glasses. "Let me break down net margins."
"Home Pong: manufacturing cost of forty to fifty dollars per unit. Sold at $98.99, that's roughly fifty dollars profit per unit, 7.5 million pure profit."
"Arcade machines: after manufacturing and operator splits, about seventy percent margin, so 30 million profit. Patent royalties: virtually no production cost so 3.9 million."
"Films: studio rental share of 92.5 million, with our typical net profit margin of fifteen percent about 13.9 million."
"DC and Pulse Comics: 7.5 percent margin, 1.6 million. Television: also 7.5 percent, 5.5 million. Music division: 9 percent margin, 4.1 million."
"Total net profit," the accountant concluded, his voice steadying, "is 66.5 million dollars."
"And that's without factoring in the R&D reinvestment we must pour into Atari. A 22.6 percent net margin is amazing in this industry."
"Most S&P 500 companies struggle to break ten or twelve percent, Mr. Hauser."
But just as the room began to feel like triumph, the accountant hesitated. He shifted, his face losing some of its earlier confidence. He opened a different, thinner file.
"Mr. Hauser, there's one more item about the Music Division. And it's… sensitive."
Duke's stomach did a involuntary flip. ]
He knew the history of the music business, payola, kickbacks, the dark corners of the music world.
He thought of Clive Davis, the mastermind behind their incredible record revenue. The rumors that followed him.
"Speak," Duke said, his voice hard.
The accountant nodded. "I've been tracking expenditures at Paramount Records. There are discrepancies."
"Specifically, Clive Davis has been using company funds for significant personal expenses. We're talking about a 54,000 dollar Bar Mitzvah for his son, extensive home renovations, and other high-ticket luxury items billed to the company as promotional or administrative costs."
He paused, waiting to continue. "The total misappropriated amount, as far as we can tell, sits at 1.3 million dollars."
The room went dead silent.
Duke felt his anger rising. He hated being played. He looked at Diller, expecting him to call the police or fire Davis on the spot.
Diller, however, didn't react. He looked thoughtful, and turned to the accountant. "Thank you. That will be all. Please wait outside. Do not speak of this to anyone else."
The accountant nodded quickly and hurried out, happy to be relieved of the burden.
Once the door clicked shut, Duke turned to Diller. "1.3 million, Barry. That's not a misunderstanding. That's a fireable offense. I want him gone. Today. I don't care how many records he's sold."
Diller sighed, leaning back and rubbing his face. "I know it's theft. And believe me, I'm as disgusted as you are. But listen to the math."
"Before Clive, the music division was pulling in three million a year. Clive turned it into a forty-five-million-dollar and with way better prospects. He has a roster that includes Bruce Springsteen, Queen, and the Eagles."
"If we fire him today, he walks out that door, and he takes every single one of those artists with him. They're loyal to him, not to the Paramount logo. The music industry works differently than Hollywood."
He paused, letting that sink in. "Are you prepared for a forty-five-million-dollar hole in the budget just to satisfy a point of principle?"
Duke paced the length of the room, the conflict playing out in his mind.
He was a businessman, he understood leverage. Clive had all the leverage in the world. If he cut the head off the snake, the snake would poison the entire well on its way out.
"So what are you suggesting, Barry? We just let him steal from us?"
Duke's anger was still there, but it was being tempered by cold reality. The music business wasn't like film, it was built on personal relationships, and right now, Clive Davis was the core of those relationships.
"No," Diller said, his voice calm and pragmatic. "We don't let him steal. But we don't fire him either at least not today. I'll go to New York myself."
"I'll sit him down, lay the evidence on the table, and make it clear he's on a very short leash, and then I'll install a CFO of our choosing at the label, someone who answers to us, not to him." Diller looked at Duke.
"It's not clean, and it's not what we'd do in a perfect world. But we don't live in a perfect world. We live in reality."
Duke stood by the window, looking out over the studio lot.
Clive Davis was a thief. Yes. But he was a profitable thief. And in the world of high-stakes corporate conglomerates, profit was the ultimate qualification.
"Fine," Duke said, finally turning back to Diller. "Do it. But I want that CFO in place by the end of the month. And if he tries to move a single cent, I want his head on a platter, and I don't care how many records he's sold. We'll rebuild the label from the ashes if we have to."
Diller nodded, standing up to head to the airport. "I'll handle it. By the time I'm done, Clive will be grateful we didn't send him to prison, I want him productive and contained."
As Diller left, Duke walked to his desk and sat down, picked up a pen and started drafting a memo to his department heads.
He wanted a theme park feasibility study, land costs, zoning requirements, projected attendance.
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