Chapter 309: Netflix got it

In Burbank's business club, Ronan and Reed Hastings once again sat at the negotiating table after several rounds of contact between the negotiating teams of both sides.
Although Reed Hastings decided to sell Netflix, he still had to fight for a good price.
"I never deny that Netflix is ​​currently in a bad situation, which is why I seek opportunities from outsiders." Reed Hastings is not stupid enough to deny some basic things, but he does his best: "But Netflix There are also advantages that cannot be ignored. Netflix is ​​a well-deserved leader in the film and television online leasing industry."
Ronan did not answer, and Garcia timely inserted: "That's because the online rental market share is extremely small."
Reed Hastings looked at Garcia and was unaffected. He said: "The market share of online movie rentals will become larger and larger, and Netflix has a talented and self-disciplined team and is growing in online rentals. Occupies the largest market share in the market."
His voice was loud and confident: "After 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 money. In order to initiate a challenge, thereby dismantling an inherently obsolete industry and creating a new sunrise industry!"
Although Ronan did not speak, he knew that Reed Hastings's remarks were essentially self-proclaimed and boasted, 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 his self-proclaimed words would become reality in the future.
Netflix changed the movie rental industry and broke the old order in this industry.
The serious disparity in information between the two parties has brought about the current situation.
Reed Hastings has a loud voice, and his words are matched with his body movements, which is very contagious: "The industrial model created by Netflix has created a fashion leader, a technology innovator, and a Starbucks-level brand power. !"
Ronan knows very well that according to the development of his previous life, Reed Hastings's remarks are not exaggerated.
But as a buyer, Ronan would of course not admit it. At this time, he said faintly: "I don't have so many thoughts about Netflix. Relativity does not require Netflix to create a new industry, nor does it need to take such unnecessary risks. Relativity Entertainment What is needed is just a supplement to the peripheral sales channels."
Reed Hastings is a little unhappy about this obviously not paying enough attention to Netflix, but he is a businessman and will not affect tens of millions of dollars in business just because he is not happy.
Reed Hastings said directly: "Mr. Anderson, you must have heard that I sold Netflix to Blockbuster at a price of $50 million. Now my mind has not changed. If Relativity Entertainment acquires Nai Fly, I ask you to pay 50 million US dollars in one lump sum."
Ronan replied unceremoniously: "For the theory of relativity, a channel that is losing money, $50 million is too costly."
Reed Hastings smiled slightly and said with a sarcasm: "Your company can try your original plan. I tell you with practical experience that at $50 million, you will definitely not reach the current scale of Netflix! "
He said conclusively: "My investment in Netflix over the years has exceeded 70 million US dollars!"
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 US dollars in 1999 and nearly 19 million US dollars in 2000. The loss may reach 30 million U.S. dollars! If such a company that cannot generate profit, if it does not want to supplement the peripheral sales channels, I would be interested?"
Reed Hastings's face remained unchanged: "Netflix continues to lose 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 unpredictable. So far there are less than 200,000 registered users! Mr. Hastings, My evaluation team has made a comprehensive understanding of your company. Based on Netflix’s current business conditions, 100,000 films must be sent every day in order to protect the cost. What about Netflix’s current number of films? No more than 2,000!"
He questioned: "For such a company, are you sure you want to sell it for $50 million?"
Reed Hastings was unable to refute in this regard, because Ronan's words were not very different from Netflix's true situation.
"Mr. Anderson!" Reed Hastings said instead: "I want to remind that Netflix’s debt burden is very low! Most of Netflix’s loss of funds comes from my investment and the investment I pulled. In today’s market, you simply cannot buy any Internet company with a lower debt burden than Netflix."
Ronan said: "If Netflix has heavy debts, I won't sit here and talk to you." He offered the price of Relativity Entertainment: "35 million U.S. dollars, and Netflix stripped all debts."
Reed Hastings's complexion finally changed: "This does not match the actual value of Netflix!"
This time the negotiations ended up unhappy, but the two sides did not settle down, and when they ended, they agreed on a time for the next meeting.
Ronan dared to keep prices down, and the biggest reliance was on Netflix's current situation.
Just like Blockbuster’s treatment of Reed Hastings, Netflix’s model is not recognized. Since the collapse of the stock market bubble in 2000, the Internet industry has been sluggish. Even if some Internet star companies lack investment, let alone Netflix’s A small company.
During the negotiation, Reed Hastings made many efforts to continue to sell Netflix to other companies or investment institutions. As long as one or two of them expressed their investment intentions to Netflix, he could win at the negotiating table. Certain initiative and advantage.
And the emergence of Relativity Entertainment also made him think that Netflix might be an effective channel supplement for Hollywood film distributors.
Reed Hastings visited the six major Hollywood companies and other medium-sized film companies in just ten days. However, Blockbuster can firmly occupy the leading position in the film rental industry, which also shows that Hollywood is Recognition of the Blockbuster model.
As for Netflix's model, these companies are not interested now.
Perhaps a year later, when Reed Hastings sells Netflix's model to Hollywood, he will get a completely different result.
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 continued until late November, and both sides made concessions to varying degrees.
The appraisal team of Relativity Entertainment gave Netflix a valuation of between 35 million and 45 million US dollars.
In the four years since its establishment in 1997 to the end of 2001, Netflix’s losses have doubled year by year. Under the influence of the general environment, Netflix’s industrial model has not shown enough vitality. The overall market looks bad, and the low evaluation is very serious. Normal situation.
At the most intense stage of the negotiation, Ronan also came up with this assessment report. Any of the above data is well-founded and supported by sufficient market research. Even Reed Hastings can't stand his head. refute.
By the end of November, the two parties finally reached an agreement in the negotiation that Relativity Entertainment will acquire Netflix wholly-owned for US$42 million, but this does not include Netflix’s debt.
This small amount of debt is borne by Netflix's original shareholders.
However, Relativity Entertainment needs to pay off the equity transfer of $42 million in a lump sum within one week of the signing of 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 a few years.
Reed Hastings was very satisfied with the one-time payment.
Relativity Entertainment currently has sufficient cash flow. A one-time payment of $42 million is not a problem at all. Even if you continue to invest funds on Netflix, 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 on behalf of Relativity Entertainment and Reed Hastings, who represented Netflix, signed a formal equity transfer agreement. 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 aside 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, rather than becoming a division of a film company."
Ronan glanced at Mark Randolph next to Reed Hastings, and solemnly said: "Netflix was, is and will be an independent Internet company."
Hearing this, Reed Hastings was noncommittal ~ EbookFREE.me~ Mark Randolph next to him was relieved.
What Mark Randolph worries most is that after Relativity Entertainment completes the acquisition, it will turn Netflix into a division of the film company, and completely cut off Netflix's future.
An independent company and a department of a company have completely different development space.
"Mark." Reed Hastings greeted, "We should go."
Ronan shook hands with Mark Randolph and Reed Hastings: "Goodbye, two. I hope we will have a chance to cooperate in the future."
Reed Hastings responded, "I hope so."
Mark Randolph shook hands with Ronan, wanted to say something, but didn't know how to speak, so he had to accompany Reed Hastings to leave.
After the Netflix people left, Ronan said to his assistant Connie: "Notify Mary to settle with Reed Hastings as soon as possible. In addition, after the transaction is completed, you will make an appointment with Mark Randolph for me. Just said I want to talk to him about Netflix's future."