Echoes of Hollywood

The information primarily came from CAA's analysis department and a consultancy firm hired by Robert's law office. The latter provided more insider news, while the former had established a comprehensive database on Netflix, given its rising prominence as a Hollywood distributor, including very detailed data.

All this was beneficial for Murphy to make an informed judgment.

No matter what, Murphy had to be cautious with projects involving tens of millions of dollars. Despite his current wealth, he wasn't foolish enough to throw away millions just for fun.

Hidden away in his home office, Murphy spent an entire day reviewing various materials on Netflix. Gradually, he understood why Reed Hastings had made such an offer.

Combining various data and analyses, Murphy could see Netflix's need for content creation. "Desperate" was the only way to describe it.

In Hollywood, labels with broad distribution channels have a higher position in the industry chain than content creators. However, for a distributor like Netflix to enter the realm of content production was both a strategic choice and a necessity.

A company that pursues commercial profit suddenly offering to forgo significant profit to secure a partnership would raise anyone's natural suspicion, especially with a business titan like Reed Hastings, who emerged through fierce competition. Murphy wouldn't readily agree without understanding the situation.

Currently, entertainment industries are exploring ways to grow and strengthen. Whether building a large entertainment ecosystem or expanding the entertainment industry chain, companies are rapidly and decisively expanding their business scope and upgrading their structure.

In today's market competition, where entertainment knows no borders and industries know no boundaries, integrating and building a full industry chain to diversify profit points and profit models is Netflix's strategic plan.

For commercial companies, the best industries are monopolies, as monopolies mean pricing power and producer surplus. Though not necessarily beneficial for social welfare, they are certainly advantageous for profit.

But did Netflix ever have pricing power? From the data, Murphy concluded that Netflix did not.

Netflix had always avoided price hikes because it gained an advantage over Blockbuster with low prices. Netflix even gave some users a lifetime promise of a $7.99/month rate, known as the "grandfather clause," which meant keeping old contract terms for some users.

On the other hand, since it couldn't create content like the Hollywood majors, Netflix had no advantage over downstream content producers. They lacked pricing power and faced rising content licensing costs every year. Without producing their own content, Netflix would fall into a vicious cycle of stagnant user fees and rising costs.

To break this cycle, they had to raise prices without losing users. This required cultivating user engagement through content, making content production the easiest way out.

Thus, Murphy understood why Netflix was on the path of content creation.

Looking at these points, he also realized why Netflix and Reed Hastings sought his collaboration over other directors or production companies.

Murphy Stanton was a prominent brand in Hollywood, synonymous with quality productions and high profits since the turn of the century. Every film Stanton Studios invested in and produced could easily turn a profit, and films involving Murphy not only made money but also received rave reviews.

In contrast, Netflix's streaming plus original content model wasn't unique. Many companies had similar plans, and the industry barrier wasn't high. Companies with resources could easily enter the market.

From the information provided by CAA, Murphy saw a long list of competitors in Netflix's streaming service business: Amazon with Prime Video, media giants Walt Disney, 21st Century Fox, and Comcast with Hulu and Hulu Plus, HBO with HBO Now and HBO Go, Disney with Sling TV, Google with YouTube Red and plans for YouTube Unplugged, Facebook recruiting media companies, celebrities, and influencers, Walmart acquiring Vudu, and even Apple eyeing the space, having already collaborated with HBO on HBO Now.

Indeed, Netflix remained the undisputed leader in online streaming services. However, they were closely followed by a pack of powerful competitors from other industries.

Despite Netflix's popular phrase "Netflix and chill," meaning "watch Netflix and hook up," Netflix couldn't afford to make a misstep. With such formidable competition, one wrong move could spell disaster.

"So that's why they chose you."

Bill Rossis, who had come to Waverly Estate, explained to Murphy, "Because you guarantee success. Even if Netflix loses some profit, they can use quality content to increase user engagement and attract more new users."

For Netflix, a rookie in content production, Murphy's involvement was a crucial reassurance.

Murphy closed the materials in front of him, confidently stating, "While content production isn't Netflix's only option, it's the easiest path."

Given the fierce commercial competition, it was no wonder Reed Hastings offered such favorable terms.

In the end, to attract users, they needed outstanding content. Technology and data were just frameworks, easily replicable by others.

For Netflix to keep rolling its fast-growing snowball, it needed the best original content and the ability to raise prices, possibly even doubling them. They couldn't rely on the global market's untapped potential.

In today's international political environment, penetrating global markets in the cultural and entertainment industry is incredibly challenging. For instance, in the tantalizingly vast market across the Pacific, Netflix had to concede defeat. Therefore, Netflix's best route was to attract customers in accessible markets with top-notch content.

After carefully reviewing the information, Murphy found that subscription fees were Netflix's only revenue stream for streaming services, making user growth the most direct goal.

How could this goal be achieved? By launching outstanding shows that people felt they couldn't miss, and by making Netflix's services easier to enjoy.

But why should people choose Netflix?

Murphy and Bill Rossis exchanged opinions, concluding that the answer was "exclusive and original content."

Original content also aimed for exclusivity, at least for the initial years, to be exclusively on their platform. These shows made people feel they had to watch, and successful original series could advertise Netflix, enhancing the company's recognition and ultimately increasing new user numbers.

"Netflix is pushing hard on series development not only for those advantages," Bill Rossis confirmed to Murphy, "but also because this guarantees exclusive rights."

Bill Rossis further analyzed, "Competition among streaming sites is fierce, and the cost of broadcast rights is rising. Netflix paid nearly $100 million for 'Mad Men,' with an average cost of several million dollars per episode. Other popular shows like 'House' and 'Gossip Girl' also have hefty exclusive rights fees."

Murphy nodded. Netflix's cooperation indeed seemed sincere.

"And these exclusive rights are only for second-run broadcasts." Bill Rossis continued, "For series still airing on TV, Netflix usually has to wait until after the TV broadcast ends to stream them."

"So," Murphy concluded, "producing their own series is actually more cost-effective?"

Bill Rossis nodded solemnly, "Exactly! That's not just my analysis but also CAA's conclusion."

With a super client investing tens of millions of dollars, even Murphy's agency was cautious. Everything had to be carefully planned before taking action.

Commercial investments weren't about trusting someone's word. Murphy's extensive research was just the basic preparatory work before investing and partnering.

Rushing into a partnership without thorough understanding wasn't boldness but foolishness.

Confident that Netflix was sincere and not setting a trap, Murphy believed it was time to start formal negotiations.

"Bill," he instructed, "give Reed Hastings our answer next week. Once Gal goes to Boston to sign the agreement with The Boston Globe, we can begin formal negotiations."

Bill Rossis reminded, "What about the series?"

"I'll draft a story outline quickly." Murphy replied, "Once Stanton Studios and Netflix reach an agreement, we'll hire writers to develop the script."

He added, "I'll be the producer, with Paul as the director. I've discussed this with Paul before."

"I know how to proceed." Bill Rossis, experienced in this field, stood up to leave, "Let's end here for today. I'll return to Death Star Tower to prepare."

Murphy waved, and as Bill Rossis reached the door, he remembered something, "Bill, don't forget to attend my and Gal's engagement party on Saturday night."

Bill Rossis turned back, "I'll be there."

In Hollywood, secrets are rarely kept. Besides, Murphy hadn't planned to keep it secret. News of his and Gal Gadot's engagement was already widespread in the industry.

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