The Best Entertainment Era

In the business club in Burbank, Ronan and Reed Hastings sat at the negotiating table again after several rounds of contact between the negotiating teams of the two sides.

Although Reed Hastings decided to sell Netflix, he also had to strive for a good price.

I never deny that Netflix is ​​in a bad place right now, and that's why I'm looking for outside opportunities. Reed Hastings won't be stupid enough to deny some basic things, but he also strives hard: But Netflix There are also advantages that cannot be ignored, and Netflix is ​​a well-deserved leader in the online film and television rental industry.”

Ronan didn't answer, and Garcia interjected at the right time: That's because the online rental market share is extremely small.

Reed-Hastings took a look at Garcia, unaffected, saying: The market share of online movie rentals is going to grow, and Netflix has a talented self-disciplined team and a growing online rental market. occupying the largest market share in the market.”

His voice is loud and full of confidence: After several years of hard work, Netflix has begun to change the way consumers rent audio-visual products. It is true that Netflix's performance is not good enough, but this is not just for money, but for In order to launch a challenge to disintegrate an inherently outdated industry and create a brand new sunrise industry!

Although Ronan didn't speak, he also knew that Reed Hastings said these words were essentially boasting, and wanted to attract the attention of his own side as much as possible, so that the transaction price could meet psychological expectations.

Reed Hastings didn't even know that the words he boasted about would become reality in the future.

Netflix has changed the movie rental industry and disrupted the old order of the industry.

The serious asymmetry of information between the two parties has brought about the current situation.

Reed-Hastings has a loud voice, and his spoken words match his body movements, which are very contagious: The industrial model created by Netflix has created a fashion leader, a technology innovator, and a Starbucks-level brand power. !

Ronan knew very well that according to the development of his previous life, what Reed-Hastings said was not an exaggeration at all.

But as a buyer, of course Ronan would not admit it. At this time, he said lightly: I don't have so many thoughts on Netflix. Relativity does not need Netflix to create a new industry, nor does it need to take such unnecessary risks. Relativity Entertainment All that's needed is a supplement to the surrounding sales channels.

Reed-Hastings is a little unhappy about this obviously not paying enough attention to Netflix, but he is a businessman, and he will not be unhappy because of a little bit of unpleasantness.

It affects tens of millions of dollars in business.

Reed-Hastings said directly: Mr. Anderson, you must have heard that I sold Netflix to Blockbuster at a price of 50 million U.S. dollars. Now my idea has not changed. If Relativity Entertainment wholly acquires Netflix Fei, I ask you to pay 50 million U.S. dollars in one lump sum.

Ronan replied unceremoniously: For Theory of Relativity, a channel that is losing money, the cost of 50 million US dollars is too high.

Reed-Hastings said with a mocking smile: Your company can try your original plan. Let me tell you from practical experience that with 50 million US dollars, you will definitely not be able to reach the current scale of Netflix!

He said convincingly: I have invested more than 70 million US dollars in Netflix over the years!

Ronan was unmoved: But this cannot change the fact that Netflix is ​​a serious loss-making company. According to what I have learned, Netflix lost $9.9 million in 1999, nearly $19 million in 2000, and this year's Losses could reach $30 million! Would I be interested in such a non-profitable company if it wasn’t for supplementing peripheral sales channels?”

Reed-Hastings' face remained unchanged: Netflix keeps losing money because it is creating a brand new industrial model.

Then what's the result? Ronan said calmly: Netflix's order fulfillment costs are too high, and the cost of damaged and lost DVDs in the mail is too high to predict. So far, there are less than 200,000 registered users! Mr. Hastings, My evaluation team has a comprehensive understanding of your company, and with Netflix’s current operating conditions, it must distribute 100,000 films a day to maintain its capital, but what about Netflix’s current release volume? The maximum is no more than 2,000 films!”

He asked: A company like this, are you sure you want to sell it for $50 million?

Reed-Hastings is powerless to refute in this regard, because what Ronan said is not very different from the real situation of Netflix.

Mr. Anderson! Reed-Hastings turned: I want to remind you that Netflix's debt load is very low! Most of the funds that Netflix lost came from my investment and the investment I brought in. In today's market, you can't buy any Internet company with a lower debt load than Netflix.

Ronan said: If Netflix had a lot of debt, I wouldn't sit here and talk to you. He offered the price of Relativity Entertainment: $35 million, and Netflix divested all debts at the same time.

Reed-Hastings complexion finally changed: This does not meet the actual value of Netflix!

This time the negotiation ended unhappy, but the two sides did not talk about it deadlocked. When the meeting ended, they agreed on the time for the next meeting.

Ronan dared to lower the price, the biggest reliance was the current situation of Netflix.

Just like Blockbuster treated Reed-Hastings, Netflix’s model is not recognized. Since the stock market bubble burst in 2000, the Internet industry has been in a downturn. Even some Internet star companies lack investment, let alone Netflix. A small company.

During the negotiation, Reed-Hastings made various efforts to continue to promote Netflix to other companies or investment institutions. As long as one or two of them express investment intentions to Netflix, he will be able to win it at the negotiating table. Certain initiative and advantage.

Moreover, the emergence of Relativity Entertainment also made him feel that Netflix might become an effective channel supplement for Hollywood film distributors.

Reed-Hastings visited the six major Hollywood companies and other medium-sized film companies successively in just ten days, but Blockbuster can firmly occupy the leading position in the movie rental industry, which also shows Hollywood's importance to the film industry. Recognition of the Blockbuster model.

As for Netflix's model, these companies have no interest right now.

Perhaps a year later, Reed Hastings will sell Netflix's model to Hollywood, and the result will be completely different.

However, the reality forced Reed Hastings to sit back at the negotiating table again and continue to negotiate a wholly-owned acquisition with Relativity Entertainment.

The negotiations dragged on until late November, and both sides made concessions to varying degrees.

Relativity Entertainment's appraisal team valued Netflix at between $35 million and $45 million.

From its establishment in 1997 to the end of 2001, in the four years since its establishment, Netflix’s losses have doubled year by year. Under the influence of the general environment, the industrial model has not shown enough vitality. It is considered bad by the market as a whole. The low evaluation is very normal situation.

At the most intense stage of the negotiation, Ronan also produced this assessment report. Any data above is well-founded and supported by sufficient market research. Even Reed Hastings could not bite the bullet and force refute.

By the end of November, the two parties finally reached an agreement in the negotiations, and Relativity Entertainment acquired Netflix for $42 million, but this did not include Netflix's debts.

This small amount of debt is borne by Netflix's original shareholders.

However, Relativity Entertainment needs to pay off the equity transfer fee of 42 million U.S. dollars in one lump sum within a week of signing the agreement between the two parties.

This is also one of the reasons Reed Hastings made concessions. It is not uncommon for some transaction fees to drag on for a year or even years.

Reed Hastings is very satisfied with the one-time payment.

Relativity Entertainment currently has sufficient cash flow, and a one-time payment of 42 million US dollars is not a problem at all. Even if it continues to invest in Netflix in the future, there will be no pressure for the time being.

After several years of accumulation, Ronan also has a certain amount of capital.

Before the arrival of December, Ronan signed a formal equity transfer agreement on behalf of Relativity Entertainment with Reed Hastings representing Netflix. As long as the funds are paid in place, Relativity Entertainment will become the new owner of Netflix.

Congratulations, Mr. Anderson.

After signing the contract, Reed Hastings shook hands with Ronan: You got a company with unlimited future.

Ronan smiled and said, If Netflix really has an infinite future, would you sell it to me? He put away his smile and said seriously, Anyway, this is a win-win deal.

Reed Hastings couldn't help but said: I hope Netflix can still exist and develop as an independent company, instead of becoming a department of a film company.

Ronan glanced at Mark Randolph next to Reed Hastings, and said solemnly: Netflix was, is, and will be an independent Internet company.

Hearing this, Reed Hastings was noncommittal, but Mark Randolph next to him was relieved.

What Mark Randolph is most worried about is that after Relativity Entertainment completes the acquisition, it will turn Netflix into a department under the film company and completely cut off the future of Netflix.

An independent company and a department of a certain company have completely different development space.

Mark, Reed Hastings greeted, we should go.

Ronan shook hands with Mark Randolph and Reed Hastings respectively: Goodbye, both. I hope we will have the opportunity to cooperate in the future.

Reed-Hastings coped: Hopefully.

Mark Randolph shook hands with Ronan, wanted to say something, but didn't know how to say it, so he had to accompany Reed Hastings to leave.

After the people from Netflix left, Ronan said to his assistant Connie: Notify Mary to settle with Reed Hastings as soon as possible. Also, after the transaction is completed, you can make an appointment with Mark Randolph for me. Just say I want to talk to him about the future of Netflix.