[Chapter 310: Acquisition Strategy]
After a week of thorough investigation and assessment, the consulting firm presented their evaluation report on UPN Television Network.
Thanks to Paramount Pictures' continuous eight-year investment, UPN's total asset value reached $320 million. This included two directly owned channels, signal towers established across 51 states and territories, capable of transmitting signals to all local affiliate stations nationwide. There were 125 affiliate stations in total, covering 64% of the U.S. population.
The copyright library held rights to 2,100 TV drama episodes and 190 variety shows. Unfortunately, there were hardly any blockbusters -- mostly series with mediocre ratings. The company carried liabilities totaling $110 million, with net assets amounting to $210 million.
The crucial downside was its bleak profitability. Since the company's inception, it had never turned a profit, surviving each year only through Paramount's financial support. Moreover, the losses had been increasing yearly: $8.3 million, $9.5 million, and $12 million in the past three years respectively.
...
During a break from shooting the MV, Linton gathered Robert, Winnie, and Goodman in the evening to analyze this report and discuss the acquisition strategy.
After reviewing the data, everyone involuntarily gasped.
Robert asked incredulously, "With such terrible profitability, is this TV network even worth acquiring?"
"Judging purely by financials, UPN is clearly a secondary asset, not worth acquiring. But as newcomers trying to rise in Hollywood, relying on only movie production and distribution isn't enough without media resources backing us," Winnie explained, aware of Linton's media expansion plans and having studied Hollywood's ecosystem.
"Among media resources, television networks are crucial; otherwise, Paramount Pictures wouldn't have kept bleeding money for so long. But currently, well-operating networks aren't up for sale. Since last year, the boss instructed us to find suitable TV networks to buy, yet no opportunities arose until now, when UPN is up for sale."
"Exactly, media influence is growing, and television remains the most impactful and wide-reaching platform. Who would sell a good TV network? The reason UPN is on the market is that Viacom, after acquiring Paramount, has enough internal TV resources. Otherwise, Paramount wouldn't sell even at a loss."
Goodman, who personally leaned toward the acquisition, pragmatically analyzed the critical issue. "The key problem must be the management team. If we really buy it, we need to overhaul the leadership and introduce scientific incentive and assessment systems."
Robert, after hearing Winnie and Goodman, responded, "Linton Films has achieved initial success, but to keep growing, we must transform into a media group. Without that, we won't get far. Acquiring a TV network is a milestone for us. Your concerns are practical, but as long as we improve operations, raise management quality, produce shows audiences love, and reverse losses, it shouldn't be too difficult considering our movie industry experience. I'm confident. We can discuss those details later; for now, let's talk about the offer."
"From an asset perspective, UPN should be worth $210 million. But by earnings, this company is nearly worthless. I suggest offering 50% of net assets -- that's $105 million," Robert said, drawing on previous acquisition experience with Miramax Films.
"Although UPN has been losing money, it already has complete TV network resources and conditions. Just replacing management and bringing in advanced operating tactics can turn profits around. Besides, we won't be the only bidders. If we bid too low, we risk being knocked out early and missing the negotiation altogether," Winnie added, considering bidding competition.
"Both points make sense. We can't act foolishly and overpay, nor bid so low to lose the chance. Let's settle on 80% of net assets, $170 million," Linton concluded.
"Boss, there's another matter we should consider," Robert said.
"What's that?"
"Our company's rapid growth has already made the Hollywood Big Seven -- except Universal -- wary. There are even signs of coordinated suppression. If we acquire UPN now, it might further stoke their suspicion. Even Universal, a longtime collaborator, might shift stance."
Robert's understanding of Hollywood ecology was sharp.
"You're right. This will inevitably happen. Suppressing emerging film companies is an unspoken pact among the Hollywood giants. But to grow stronger, we have to face it. And even if we did nothing, as long as our films kept doing well at the box office, they'd still try to push back.
Like the time Warner Bros.' Interview With the Vampire went head-to-head with our The Rock. That was more than just CAA's involvement; Warner Bros. had an agenda to hinder us but simply didn't succeed."
"So, what's our move?"
"It comes down to the quality of our movies. Movies and TV are ultimately for the public -- the audience holds the real choice. The giants can't control them. As long as we keep delivering hits they love, we won't worry much. The Rock is a perfect example.
Our acquisition strengthens our competitiveness and ability to withstand risks. Besides, we aren't crossing their hard limits; we're not chasing MPAA seats or building overseas distribution. In this scenario, their crackdown capacity is limited."
"Understood. I fully support your decision, boss."
"Any other questions or opinions?"
"None here," the three shook their heads.
"Then Robert will lead this, with Winnie and Goodman assisting, to quickly finalize the initial offer and submit it to Viacom. Also, keep monitoring competitors' moves closely."
*****
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