No matter what Michael Eisner's intentions were—whether to shift internal conflicts, make peace, or genuinely back down—Dunn wasn't about to give him a chance!
Since April, Dunn had faced relentless pressure from Disney in every form imaginable, barely scraping by. If it weren't for Spider-Man's success, plus the solid network and foresight Dunn had built over the years, Disney would've crushed him without leaving a trace.
Now, Dunn had played his final trump card: the "portfolio investment plan." With the backing of several major players, he finally had the leverage to go toe-to-toe with Disney. And now that Eisner saw the tide turning, he wanted to back off? No way!
You strike when it suits you, and when things get tough, you just walk away? What kind of fantasy world is that? Talk about arrogance!
Dunn had already shown his hand, and he wasn't about to stop until he'd secured enough gains. Even if it was just to vent his frustration, he was determined to teach Disney a lesson. He'd make Michael Eisner understand that, young or not, Dunn was a force to be reckoned with, and he wouldn't tolerate being pushed around.
If everyone could negotiate calmly and fairly, great. But if someone wanted to play dirty, Dunn wasn't going to play nice either.
Back down? Never!
Besides, pulling out now would kill the momentum of the boycott before it could even take effect. It'd make people think Dunn was scared of Disney. He'd planned this from the start: Disney was the stepping stone for Dunn Pictures to claim the top spot in Hollywood. Everything was in place; all he needed was the final push.
Why would he back down now and let all his efforts go to waste?
If they were going to play, it'd be a big game!
Dunn Pictures was going to climb over Disney's shoulders and dominate Hollywood. Once that happened, bringing Universal Pictures under his control would be a natural next step.
Over at Viacom, Sumner Redstone had spent 40 years using bold and aggressive tactics to turn a family business into a global media giant. Whatever Viacom's future might hold, right now, Redstone was at the top of his game.
Since the 1950s, when the "Tosla Act" forced the separation of film production and distribution, studios could no longer handle production, distribution, and exhibition as a single operation. Everyone knew that monopolistic, all-in-one services were the most profitable. While Viacom's Paramount Pictures couldn't own theater chains, Redstone found a clever workaround: a new kind of monopoly.
Video and DVD rentals!
This was a massive opportunity.
Hollywood's movie market operated like an assembly line with tiered sales windows: theaters first, then pay-per-view, cable TV, broadcast TV, and finally video and DVD sales and rentals. Theaters were the traditional cash cow, but as film production ramped up, the rental business became increasingly vital. It was the final link in the chain—and a critical one.
Theater prints were limited, with one copy typically serving a single screen. Rentals, however, were different. A single copy could be reused endlessly, creating massive profits. If Viacom could control this final stage of film distribution, they'd hold a near-monopoly in Hollywood.
And Redstone pulled it off.
In 1993, Viacom acquired Paramount. Just a year later, they spent $8.4 billion to buy 81.5% of Blockbuster's shares. Redstone's ambition and audacity were on full display.
Blockbuster's CEO, John Antioco, understood Redstone's vision and his own role. Under this strategy, Blockbuster aggressively pursued acquisitions, snapping up anything that strengthened their distribution channels or film rights. Within a few years, Blockbuster had nearly monopolized the final stage of the movie market. With over 60,000 employees, 4,141 company-owned stores and 830 franchises in the U.S., plus 1,951 company-owned and 454 franchised stores abroad, Blockbuster was the undisputed king of video and DVD rentals, controlling over 90% of the North American market.
Hollywood's entire industry revolved around Blockbuster's cash flow. Viacom, through Blockbuster, gained unmatched influence in Hollywood—more than even Paramount could claim.
Still, despite Blockbuster's dominance, about 10% of the rental market remained in the hands of small retailers and upstart companies. But with the economic crisis hitting, one of those new players was struggling and looking to sell.
Reed Hastings and his assistant, Sean Anderson, headed to Blockbuster's headquarters to meet with CEO John Antioco. They wanted to sell their two-year-old startup.
"Reed, I still think our asking price is too bold!" Sean Anderson said nervously on the way.
Reed Hastings glanced at him. "Is $50 million really that high?"
Sean grimaced. "Reed, don't forget, the dot-com bubble just burst. We're not getting that kind of offer. Plus, Blockbuster's a traditional rental company—they don't do internet."
Hastings shook his head, resolute. "So what? The future is online. Traditional rentals will get replaced by internet rentals. Blockbuster might look unstoppable now, but if they don't adapt, they're done for."
Sean sighed. "That's not convincing. We're in a tech crisis. Traditional businesses are steering clear of the internet—why would they jump in?"
Hastings replied calmly, "That's why we need to explain our vision to John Antioco. If he's a sharp, forward-thinking leader, he'll see the potential in what we're offering."
"Our potential?" Sean asked skeptically.
"Exactly. Blockbuster's days are numbered. The future of rentals belongs to Netflix's hybrid online-offline model," Hastings said with unwavering confidence.
Sean rolled his eyes. Where was Hastings getting this confidence? Netflix had just 120,000 users, with fewer than 10,000 active monthly. They held less than 1% of the North American market. Blockbuster, on the other hand, had 300 million users—a completely different league.
Even if Netflix's business model seemed more advanced and promising, how could they compete with an industry titan like Blockbuster? And now Hastings was planning to lecture Antioco on the necessity of online payments? It was absurd.
Fifteen percent of Blockbuster's revenue came from late fees—penalties for overdue rentals. Online payments would cut that revenue stream entirely. With digital payments, users could avoid late fees by extending rentals online if they kept a disc too long. That kind of customer-friendly approach was pure internet thinking, completely at odds with traditional business models.
Why would Blockbuster, a traditional rental giant, embrace online payments? And without online payments, services like streaming or online rentals would be off the table. What would Netflix have left? Just 120,000 users—nothing Blockbuster's 300 million-user empire would care about.
Even $5 million might be too much for Antioco to consider, let alone $50 million.
Hastings' vision was bold, but Sean saw no chance of success.
"What if… I mean, what if Antioco rejects our terms? Do we lower the price?" Sean asked cautiously.
"Lower the price? No way," Hastings replied. "When we did our second round of funding, Netflix was valued at $50 million. Now, our user base has doubled, and our business model is more refined. $50 million is my bottom line—it's what we owe our investors."
Sean sighed deeply. "This is going to be tough."
Hastings smirked. "If John Antioco can't see Netflix's value, there's nothing more to discuss. We'll just sit back and watch Blockbuster's empire crumble."
As Sean predicted, John Antioco showed zero interest in Netflix. Since taking over as Blockbuster's second-ever CEO under Redstone, Antioco had followed his boss's aggressive expansion playbook. Blockbuster didn't pause for anything—or anyone.
Hastings' pitch to sell Netflix was just a minor blip among Blockbuster's many investments, barely worth a glance. But when he suggested Blockbuster adopt Netflix's model and pivot to online rentals, Antioco's patience ran out.
Anyone backed by Viacom, trusted by Redstone, and steering a brand toward industry dominance wouldn't take kindly to a young upstart throwing cold water on their success. The result was predictable.
The meeting ended badly.