System in Hollywood

"I recall that in the promotional contract we signed with Warner, the initial box office split with theaters starts at 50%, right?" Wayne was the first to ask.

"Yes," Sera nodded, explaining, "The split between production companies and theaters typically ranges from 45% to 60%. For major blockbusters from the big studios, they can even take 65% to 70%."

"Our movie is still a mid-to-low-budget production. Aside from Natalie Portman and Hugo Weaving, there aren't any big-name stars in the cast. A 50% split is already pretty good."

"However, if we accept Wiggins' new proposal, they'll likely increase the number of theaters for the premiere and adjust the box office split to boost their own earnings. I estimate the theater count could exceed 2,000, and the split could rise to 55% to 58%."

It was clear that this was the difference between treating someone else's child and their own.

"If Warner invests in this film, it would also avoid some unnecessary issues, like the MPAA rating or promotional challenges," Sera added.

Wayne understood what she meant. Simply put, if Warner invested, it was like paying for protection—having a big player on your side.

"So, you're suggesting we agree?" Wayne asked.

"Yes," Sera replied candidly.

This was standard Hollywood practice. Small production companies that don't align with a major studio often face all sorts of unforeseen difficulties.

Wayne fell into deep thought.

He didn't remember how much box office revenue *Accepted* made in his past life, but it had garnered a good reputation in both America and China. It also sparked some social discussion in the U.S.

Sera predicted that the North American box office could reach between $25 million to $30 million. In other words, the film could make a small profit just from North American earnings, with any international box office and DVD sales being pure profit.

According to her estimates, the conservative profit would exceed $15 million.

Of course, her predictions weren't always spot on—otherwise, the last big-budget film she primarily invested in wouldn't have flopped so badly.

However, given Wiggins and Warner's current interest, the chances of reaching these profits seemed likely. Why else would Warner push to renegotiate the deal?

"So, can we try a different approach and directly sell the global rights to Warner?" Wayne suddenly suggested.

Sera was taken aback.

"What? Sell to Warner?"

"Yes, except for retaining the streaming rights, sell all other rights to Warner in one package."

Wayne explained, "While selling the rights outright will reduce our overall earnings, it also minimizes our risks. Plus, waiting for box office revenue and DVD sales is a slow process. Selling everything now means we get the money immediately."

Sera's eyes gleamed with understanding. She knew exactly what Wayne was getting at.

For most theatrical releases, it takes months to see any returns. Small production companies usually have tight cash flow and can't afford such a long wait.

Most importantly, Hollywood giants like Warner and Paramount are notorious for creative accounting, sometimes turning a box office hit into a loss on paper.

Promotional costs can be a particularly tricky area, especially for international releases. Without sending a large team of accountants to monitor things, it's too easy for the books to be manipulated.

But sending an accounting team overseas for months? That's another big expense.

Therefore, selling the rights to a distributor was standard practice for small or mid-sized production companies making independent films.

Hermara Studios had done this before for its low-budget films, which cost hundreds of thousands or a couple of million dollars.

This strategy helped small companies ease cash flow problems and ensured that the hard-earned profits from their films ended up in their pockets.

However, for a film with an $8 million budget, this approach was less common.

After all, who wouldn't want to make as much profit as possible?

Even Wiggins, Warner's department head, hadn't suggested outright buying the rights in this "unreliable" manner.

But Wayne was willing to give up potential profits and suggest this approach himself?

Wasn't that like surrendering before the battle even began, without the other side even planning to fight?

Still, the movie and the entire company were Wayne's to decide on. If he wanted to do it this way, Sera wouldn't object.

"Also, while the box office revenue may be reduced, Warner will likely put more effort into promoting the film, leading to better results."

"As the writer, lead actor, and producer, along with you and Hermara Studios, our reputation will increase. Isn't that valuable?"

With more fame, Wayne could command a higher salary. Plus, getting the money upfront made selling the rights the best option for his personal interests.

It was only then that Sera remembered her young boss was also an actor.

"Alright, Wayne, you've convinced me."

"Then I'll leave the negotiations with Warner to you, Sera."

"No problem, that's my job," Sera agreed with a smile.

With over ten years of experience, this type of task was second nature to her.

One week later, Wayne received another call from Sera.

"Wayne, Warner just finished their third internal screening this morning. We've secured a price of $19.5 million. It's unlikely we can push it any higher."

"Let's go with that! But I want the payment in one lump sum," Wayne decided.

After some thought, he accepted the offer.

The $19.5 million was for the rights alone. With promotional costs, even with a 60% theater split, Warner would need to make over $45 million globally to break even.

That figure wasn't impossible for an enhanced version of *Accepted*, but there were risks.

Though the film's DVD sales and TV rights would generate profits after its theatrical run, Warner wouldn't care about small margins.

Sera had done a great job securing $19.5 million, especially considering the production budget was only $8 million.

After factoring in the $2 million in refunded promotional costs and tax deductions, Wayne could expect to pocket about $18 million after taxes.

Eighteen million dollars!

Even 20 years later, that would still be an amount most people could only dream of!

It's worth noting that Hermara Studios was registered in Delaware, a state with low tax rates, like most Hollywood production companies.

"What should I spend all this money on?"

"Hmmm, maybe I should buy a house first!"

Wayne's Chinese instincts immediately led him to think about buying property.

After signing the contract and receiving the payment that afternoon, Wayne quickly had Sera transfer most of the money into his account, leaving $1 million for loan payments and company operations.

Then he prepared to go house-hunting with Mia.

"You know, if you buy the house under the company's name, it can count as an operating expense and help reduce taxes," Sera reminded him.

This was a common tax-saving strategy in the U.S.

If Wayne did this, he could save hundreds of thousands in taxes, reducing the bill to just a few tens of thousands.

But after some thought, Wayne declined. His ingrained habits made him uncomfortable with the idea of putting his house under the company's name.

At least for his first home, he didn't want to do that.

Sera was visibly surprised but didn't push further. After all, it was Wayne's money, and he could spend it however he liked.

"Also, I've spoken to my backers, and they've seen the final cut of the film and are very impressed. They've decided to continue investing in us, and the next round of funding will increase to $30 million."

"Thirty million dollars?!"

Even Mia gasped at the figure, and Sera couldn't help but exclaim in surprise.

"So, Sera, your next task is to continue collecting scripts and expanding the company's production team. Once I finalize a new project, we'll start prepping right away."

"Got it, Wayne. I'm on it!"

Having just wrapped up intense negotiations with Warner, Sera had been planning to take a well-deserved break. But now, any thoughts of rest were gone.

The $30 million investment had fired her up, and she was ready to dive back into work immediately.