251-252

*Chapter 251: Acquiring Netflix * 

That night, Dunn spent a passionate evening with Penelope Cruz. 

Unfortunately, neither Natalie Portman nor Nicole Kidman accepted his invitation to join. 

No matter—his private jet was ready, and come the weekend, Dunn could fly straight to the Unsinkable set, where Charlize Theron and Liv Tyler, both former models with more open-minded attitudes, were filming. Their casual relationship with Dunn meant they wouldn’t dare turn him down. 

According to the information provided by Reese Witherspoon, Netflix’s co-founder and CEO, Reed Hastings, came up with the idea for the company after a frustrating experience at Blockbuster. He rented a video, forgot to return it on time due to work, and was slapped with a $40 late fee. 

That steep penalty sparked an idea for a no-late-fee rental model, and thus, Netflix was born! 

Now, in addition to its early online payment system, Netflix had introduced a subscription model—a stark contrast to Blockbuster. 

For just $19.99 a month, users got unlimited rentals, no late fees, free shipping, and no due dates. It was undeniably appealing. 

Blockbuster’s model was like that of a landlord: they owned physical assets—stores—and made money by renting them out. 

Netflix, on the other hand, was asset-light, with no physical stores, operating entirely online. In modern terms, it was an O2O (online-to-offline) model. 

As someone with the benefit of hindsight, Dunn could clearly see the potential in this approach. 

That morning, Dunn welcomed Reed Hastings and his team to his office with great fanfare. 

“Mr. Walker, I know your time is valuable, so I’ll get straight to the point. Netflix’s selling price is $50 million, non-negotiable!” Reed Hastings declared confidently. 

Dunn chuckled, amused. “$50 million? That simple?” 

“What?” 

Reed was taken aback. $50 million was no small sum, yet Dunn’s tone was so casual. 

Dunn smiled. “Reed, I’ve reviewed all of Netflix’s materials, and I’ll let you in on something—I’m very close with a lot of Stanford grads, and I’m genuinely interested in Netflix.” 

Reed’s eyes lit up. Reese Witherspoon had mentioned over the phone that Dunn was optimistic about Netflix, but he hadn’t expected Dunn to be this enthusiastic, not even questioning the $50 million price tag. 

“I… I’m sorry, Mr. Walker, I’m just… surprised.” 

“Surprised? Don’t you have confidence in Netflix’s business model?” 

“No, I have complete faith in Netflix!” Reed paused, hesitant to admit he’d had doubts about Dunn’s judgment. 

With that, the biggest hurdle to their partnership was cleared. 

The rest were just details—but to Reed Hastings, those details were just as critical. 

“Mr. Walker, you can acquire Netflix for $50 million, but not the entire company. You’d get a maximum of 60% of the shares.” 

Dunn raised an eyebrow, glancing at him. “That sounds less like an acquisition and more like financing. That’s not quite what we discussed initially.” 

Reed, visibly nervous, quickly clarified, “No, no, Mr. Walker, this is the plan we worked out with our investors. The $50 million wouldn’t go into anyone’s pockets—it would go straight into Netflix’s accounts to fuel its growth.” 

Dunn said coolly, “So, it is financing.” 

“Regardless, I need to retain operational control of Netflix,” Reed said cautiously, watching Dunn’s reaction. 

Dunn waved a hand dismissively. “That’s a given. Look at PayPal—I’ve never meddled in their operations. But I need an explanation for this financing setup.” 

Reed took a deep breath and explained slowly, “Mr. Walker, with financing… I mean, acquiring over 50% of the shares is essentially the same as an acquisition. We prepared two plans. If you’re not satisfied with this one, there’s a second option.” 

“Let’s hear it.” 

“For $60 million, you can acquire 80% of Netflix’s shares.” 

To Reed, whether Dunn took 60% or 80% made no difference—once the deal was done, Netflix would become a subsidiary of Dunn Capital. 

Dunn’s eyes brightened. “I’m interested in the second option. Tell me more.” 

Reed explained, “Netflix has gone through two rounds of funding, with 20% of the shares held by three venture capital funds. They’re not optimistic about Netflix’s future and declined to participate in a third round. We’ve spoken with them, and if you offer $10 million, they’re willing to sell their 20% stake to you.” 

In this era, recovering initial investments in tech startups was a dream for many venture capital funds. 

Dunn nodded, understanding. “So, you’re saying I can hold a maximum of 80% of Netflix’s shares, correct?” 

Reed confirmed, “Exactly. The management team currently holds 15.3%, and the remaining 4.7% is reserved for an option pool.” 

Dunn smiled, satisfied. “Sounds like you’ve got it all figured out.” 

Reed sighed. “The dot-com crash is hitting hard. I just want Netflix to survive.” 

Dunn grinned. “Alright, let’s say you get the $50 million in financing. What’s your plan?” 

Reed was clearly prepared, rattling off Netflix’s strategy with ease. “Right now, we deliver movies to customers by mail, but delivery times vary due to distance, which creates a poor user experience. With the funding, I plan to build at least 30 distribution warehouses across the U.S. to drastically cut delivery times, ideally so orders placed one day arrive the next.” 

Dunn fell silent, letting out a long sigh. 

It was only 2000, yet American tech companies were already thinking this far ahead. In his past life, some Chinese e-commerce companies touted similar ideas a decade later, claiming their business models were globally groundbreaking. The irony wasn’t lost on him. 

“Your materials mention Netflix’s online streaming business. Is that viable?” Dunn asked, glancing at the documents with curiosity. 

Reed explained, “It’s just a concept for now. Internet speeds are too slow to make online viewing practical, but as the internet evolves and speeds improve, I believe it’s a promising direction.” 

Streaming didn’t truly take off until 2010. 

Netflix spent $1 billion to secure five-year streaming rights from Paramount, Lionsgate, and MGM, and signed deals with premium networks like HBO and Showtime to become a paid distributor. 

But even in the late ‘90s, the seeds of streaming were already being planted. 

Netflix’s current online video-on-demand service had the early makings of a streaming platform. 

Dunn nodded. “Narrowband internet will inevitably give way to broadband. Netflix needs to prepare now for the Web 2.0 era. The streaming business, even if it’s losing money, cannot be cut.” 

Reed wasn’t sure if Dunn was agreeing with him or asserting authority. Testing the waters, he asked, “Mr. Walker, what do you think of Blockbuster?” 

Dunn laughed. “I heard you paid a visit to Blockbuster’s headquarters before this?” 

Reed’s face flushed. “Blockbuster’s the giant in the video rental industry. I thought…” 

Dunn waved a hand, a flash of disdain crossing his face. “Giant? Nonsense! Sumner Redstone’s getting old—he’s out of touch with the times. The future belongs to technology, to the internet!” 

Reed’s face lit up with surprise. He hadn’t expected Dunn, an outsider, to share his perspective. 

In the midst of the dot-com crisis, even many industry insiders had lost faith in the internet. 

Yet Dunn was unwavering. 

He wasn’t done. “Blockbuster’s no threat. They’ll be crushed by their heavy assets sooner or later. Netflix needs to think bigger. At its core, Netflix shouldn’t be an entertainment company—it should be a tech company.” 

With that single sentence, Dunn set the tone for Netflix’s future strategy. 

Netflix’s future lay in Silicon Valley, not Hollywood! 

Dunn held significant stakes in Apple and Google, ensuring his influence in Silicon Valley would only grow. 

And Hollywood? It was a messy, cutthroat world full of shady dealings. Even if Dunn Pictures navigated the Disney hurdle, who knew what challenges awaited? 

Netflix was Dunn’s final stronghold. 

Positioning it in Silicon Valley, far from Hollywood’s chaos, was his safest bet. 

If things went south in Hollywood, Dunn could rely on Netflix, backed by Silicon Valley, to rise again. 

And for Netflix, this was the right move. 

The internet was the future, and even mighty Hollywood would have to adapt, leaning into the digital age. 

Three days later, Dunn Capital, led by Scott Swift, finalized the deal with Netflix. 

Dunn Capital invested $60 million, gaining full control of Netflix! 

Reed Hastings got his $50 million in financing and retained a 10.7% stake in Netflix, securing his operational control and a foundation for future wealth when the company went public. 

At the same time, Dunn brokered a connection between Netflix and PayPal. 

It was a win-win. Netflix could scrap its in-house payment system and use PayPal, the leading, stable, and robust payment platform, to handle online transactions. 

PayPal, in turn, could leverage Netflix’s platform to grow its user base. 

Every Netflix subscriber was also a PayPal user, opening new growth opportunities for PayPal. 

Chapter 252: Disney’s Hired Gun 

The acquisition of Netflix went smoothly, and their partnership with PayPal was thriving. Word was, Reed Hastings and Elon Musk hit it off, chatting from noon until the early hours of the next morning. Both Stanford master’s grads and Silicon Valley entrepreneurs, they had plenty in common. 

Good news also came from Michael Ovitz. He and Sherry Hershler were making rounds among Wall Street’s top private equity funds and had even earned the trust of Merrill Lynch. Negotiations were going so well that by the end of September, they expected to seal deals with three private equity funds and Merrill Lynch. The funds would invest $150 million in equity financing for Legendary Pictures. 

Add Dunn Capital’s $100 million, AMG’s $20 million, and Ovitz’s personal $80 million, and the newly formed Legendary Pictures would boast a staggering $350 million in capital! 

That wasn’t all. Merrill Lynch was set to provide a loan of $120–180 million, prioritized as debt. 

Once these funds came through, Michael Ovitz, after years in the shadows, would reemerge as a Hollywood titan, commanding attention and respect. And Dunn, the force behind Legendary Pictures, would earn his due reverence. 

But the failed truce with Michael Eisner was a problem. Naturally, Eisner had a backup plan. This was a matter of pride. 

At the Spider-Man celebration party, with plenty of onlookers, Eisner and Dunn’s heated exchange had drawn eyes. If Eisner did nothing afterward, his reputation in Hollywood would take a hit. 

In the eyes of Universal Pictures’ executives, Eisner’s legendary aura had already dimmed under Dunn’s onslaught. 

What Dunn didn’t expect was that Disney, despite its weaker film division, would strike from a new angle. Eisner had enlisted Mattel, the toy company, as his hired gun. 

Back in June, Mattel and Disney had signed a deal granting Mattel the toy merchandising rights for the “Disney Princess” line for five years. At the same time, Disney had blocked Dunn Films’ attempt to partner with Mattel on a “Barbie” project. 

Mattel’s conservative and shortsighted move cost them dearly. They ended up forming Mattel Animation Studios to develop Barbie animated films on their own. 

Now, in September, Mattel was starting to see Disney’s true intentions—and they were sinister. 

Mattel had assumed their animation studio, backed by Disney’s clout, would easily produce top-tier animated films. After all, Barbie’s global brand was unmatched. 

But Disney offered no help. Instead, they quietly sabotaged the Barbie movie’s production. The reason was simple: Barbie’s popularity could threaten the “Disney Princess” brand. 

Mattel, a toy company with no filmmaking expertise, was left floundering without Disney’s support. They had no choice but to partner with Mainframe Entertainment—a company with just seven employees! 

Dunn, keenly interested in the Barbie project, had used his Universal connections to view some completed footage. He nearly burst out laughing. 

This was a movie? 

The quality was worse than a cheap, slapdash cartoon. 

Even with the Barbie brand, this film had no chance of hitting theaters. 

Mattel’s refusal to work with Dunn Films was their own foolish mistake, and now they were paying for it. 

On the bright side, the “Disney Princess” toys were selling like crazy! 

Snow White, Aurora, Belle, Ariel—these toy lines were flying off shelves. In just over a month since launch, sales had topped $100 million. 

For context, Barbie’s annual sales were $1.6 billion. 

With a five-year contract with Disney, and having burned bridges with Dunn Films while starting their Barbie movie, Mattel had to keep the Disney partnership alive, no matter Disney’s ulterior motives. 

The “Disney Princess” brand was pure gold. 

So when Eisner came calling, Mattel didn’t hesitate. They became Disney’s attack dog, taking aim at Dunn. 

… 

“Mattel and Disney have built a strong partnership, collaborating on multiple brand properties. Disney is a major player with a wholesome image—exactly the kind of partner we seek.” 

“To be frank, back in May, Dunn Films approached us about collaborating on Barbie and other toy brands. After evaluating their strength and brand influence, we declined.” 

“True, Dunn Films makes high-quality movies, but when it comes to brand marketing, Disney is the gold standard. With nearly 80 years of history, Disney’s legacy and influence far outshine Dunn Films.” 

“And let’s be clear: Barbie is a toy. Even as a film, it’s destined to be animated. Dunn Films has no experience in this area, while Disney’s animation resources are unmatched in Hollywood.” 

“Yes, with Disney’s help, we’ve officially greenlit Barbie’s animated film, set for release next Christmas.” 

“As for Dunn Films’ strategic partnership with Hasbro, we’re not privy to the details, nor are we interested. But it seems Hasbro’s male-oriented toys, like Transformers, just aren’t on Disney’s radar. If Disney wanted in on that market, I doubt Dunn Films would’ve had a chance, haha.” 

… 

Back in Massachusetts, Dunn was filming A Beautiful Mind. During a break, assistant director Abel Smith handed him a few newspapers featuring Mattel’s spokesperson’s remarks from a press conference. 

Dunn was both furious and amused. 

Furious because Mattel had the gall to reject Dunn Films, then step on them to kiss up to Disney—utterly shameless. 

Amused because Mattel’s leadership was clearly clueless, throwing away their dignity for Disney’s scraps. They didn’t grasp how a film could skyrocket an IP’s value. 

Who said Barbie could only be an animated movie? 

If Dunn had the brand, he’d have a live-action Barbie film out within a decade! 

Mattel’s decline in the new century wasn’t for nothing. Their CEO’s vision was too narrow, their strategy too cautious, their thinking too limited. 

Abel Smith, a loyal member of Dunn’s team who’d worked on two of his films, was indignant. “Mattel’s acting like Disney’s lapdog. They’re way too cocky.” 

Dunn scoffed. “Mattel? Honestly, I wouldn’t bother with a half-dead company like that. I didn’t push back when they chose Disney. But now they’re coming for me? Sorry, I’m done playing nice.” 

“Boss, you’re gonna…” Abel’s eyes lit up. He knew Dunn’s style well. 

Dunn sneered. “Mattel’s begging to be humiliated. If they want to be cannon fodder, I’ll oblige!”