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The negotiations went on smoothly. It was also becauseThomas was impressed by Wind and Rain’s “strength” and gave lots ofconcessions.
In terms of branding and electronics industry, Philips wasmuch stronger than Wind and Rain Electronics and Wind and Rain Home Appliances.
But Feng Yu made it very clear. If Philips were to work withWind and Rain, they will be able to develop many electronics products whichwould change the world. The VCD, Super VCD, the upcoming DVD and optical drivefor computers and even the home appliances like vacuum robots, lightwavemicrowave oven, etc. will bring lots of profits to Philips.
Because of these profits, Thomas and Philips agreed to FengYu’s terms. They will cooperate fully and will set the industry standardstogether. They will popularize the VCD and DVD together and will also introducethe rest of the new home appliances.
Wind and Rain Electronics and Wind and Rain Home Applianceswill let Philips have access to their technologies. Philips will share itsoptical disc technology, TV technologies, LCD display technologies, and opticalcommunication technology with Wind and Rain. Technologies will be sharedbetween both companies at no cost.
The companies will still retain the patents they own, b.u.t.the other party will get to use it for free. All new patents developed from therelated technologies will still be owned by the company.
Feng Yu had made serious considerations before exchangingthe VCD technologies with Philips. He had thought why the VCD developments werenot as fast as his previous life. There was only one reason. It was becausethere were only two companies in the market, producing VCD players, and bothcompanies belong to him.
Feng Yu could not compete with the several companies who workedtogether in introducing the VCD players in his previous life. His marketing anddistribution channels were not sufficient to popularize this product. In his earlierlife, most of the top j.a.panese electronics companies own VCD technology. Theywere the ones who discovered that this technology was not patented, and theyrushed to apply for patents.
This was why, in the future, the Chinese VCD companies stillhad to pay patent fees to those j.a.panese companies. The j.a.panese companies usedthe fees collected to develop better technologies and became the best in theindustry.
In this life, this patent belongs to Feng Yu. j.a.panesecompanies will not share this pie. But the VCD was not growing as fast as FengYu’s previous life. But it was still the same as history. All the companieswere trying to develop DVD players to replace VCD.
DVD will replace VCD in time to come. The technology anduser experiences were better than VCD. The companies had acted fast, but Windand Rain Electronics were still able to develop the latest DVD technologybefore them.
It was like the gaming industry. Nintendo and ditched Sonyand Sony used the next 2 years to develop the PlayStation gaming console. Inthe end, Sony occupied most of the market share and profits!
Aiwa had beaten Sony in the Walkman industry, but that wasbecause Sony’s focus at that moment was on the Columbia Pictures. Columbia Pictureswas their most significant investment in the 1990s. It was still an overseasinvestment. Nothing must go wrong with this investment.
Once Columbia Pictures start to make money, Sony would havemore time and resources to fight against Aiwa. But Feng Yu was not worriedabout this. By the time Columbia Pictures makes profits, Walkman will be almostobsolete. If Sony wants to get back the Walkman market at that time, they canhave it.
But now, Sony and Tos.h.i.+ba had teamed up and wants to set theindustry standards. They realized this DVD is better than VCD. It willultimately replace traditional VHS players. Also, this was what Sony wanted fortheir Columbia Pictures. With this technology, they would be able to sell theirfilms on DVD.
Columbia Pictures owns the rights to an enormous volume ofmovies. If Sony was able to introduce a good DVD player and those movies in DVDformats, then Columbia Pictures’ profits will increase. This will revive thisstruggling production company.
So, Sony would definitely increase its investments on itsDVD research and developments. Feng Yu knew that if he were to go against Sonyhead-on, he might still win in the end. All he needs to do was to increase hisinvestment into Aiwa and Wind and Rain Electronics. But it was not worth doingthis.
There’s a lot of advantages by collaborating with Philips.Especially one specific term in the contract. Both companies will help theother party manufacture products.
Aiwa only has a factory in London, and it was manufacturingWalkman. That factory had to fulfill the orders for the whole of West Europe,and the factory had no more s.p.a.ce to produce VCD players. Aiwa and Wind andRain brand of VCD players were all manufactured in China. The cost was high dueto the transportation of the goods to the Europe and US markets.
Those VHS player manufacturers had lowered their retailprices to compete with VCD players. All VHS players manufacturers were workingtogether to prevent VCD players from gaining popularity in the westerncountries.
Feng Yu got to admit that those companies were influentialand could stop VCD players from becoming popular overseas. Although there wa.s.still profits, it was still a different feeling from monopolizing the market.
In Feng Yu’s previous life, the VCD market was doing verywell. The manufacturers were selling an astronomical number of VCD playersevery year. But now, after Feng Yu had monopolized the VCD market, the sales ofthe players remained low and Feng Yu was worried.
But now, with Philips coming into the picture, the VCDplayer sales will surely shoot up due to its distribution channels in Europeand the US. Thomas also had the same thinking as Feng Yu. He also wanted tointroduce the Super VCD immediately. He did not want to introduce the old VCDplayers. This way, it will widen the gap between VCD and the traditional VHS.It would be easier to kick them out of the market!
Feng Yu had only authorized Philips to use his technology.Once Feng Yu got hold of newer technologies, his VCD technologies’ authorizationcould be given to more companies, and it would be a collective effort to openup the VCD market. But the biggest slice of the pie still belongs to Wind andRain Electronics.
The returns from setting the industry standards cannot beseen anytime soon. But the profits from producing Super VCD was immediate.Thomas also accepts Feng Yu request for manufacturing Wind and Rain Electronicsfor him. This will lower the cost for Wind and Rain VCD and Aiwa VCD players.It will shorten the time taken to introduce newer models and open up themarket.
In China, Feng Yu’s main focus was still Wind and Rain VCDplayers and Aiwa VCD players. For the overseas, Feng Yu would use AIWA VCD andWind and Rain VCD players. Aiwa brand was used to target China and theSoutheast Asia markets.
(Aiwa = AiHua, Chinese characters for Aiwa brand. Feng Yu had set up a sub-brand forAiwa, which is in Chinese characters. This is to target the China market. AIWAis the international brand and its written in English characters.)
Philips will also benefit from this deal. They will also getprofits from the Super VCD players and the future DVD players. Also, there willbe profits from other innovative home appliances.
With so much more profits coming in, Philips would be ableto increase their R&D funds for their medical equipment. They would be ableto overtake Siemens in the medical machines industry!
After knowing Feng Yu had a Pager manufacturing companyunder the Aiwa brand, Philips felt that they could also cooperate ontelecommunication devices and develop mobile phones. Philips also felt thatmobile phones would replace pagers in the future.
Philips felt that it would take at least 10 years for mobilephones to replace pagers, but Feng Yu felt pagers would be a sunset industry in3 years. In the next 5 years, it would be replaced by mobile phones!
Thomas felt Feng Yu was too radical. He even made a bet withFeng Yu that if the demand for pagers start to decline in 3 years, and mobilephones replaced pagers in the next 5 years, he would agree to one condition setby Feng Yu!
After signing the agreement, Thomas returned to Hollandimmediately. They had no time as the race to set the DVD industry standards hadstarted!
Translator’snotes:
A pictureof the inventor of the world’s first VCD player, Jiang Wanmmeng. The article isin Chinese, but there is a handsome picture of Jiang Wanmeng.
An articleon Zong Qinghou, CEO of Wahaha. The author named him as Zhong Qingxian and thecompany as Lehaha in this novel. There is a picture of him in the article too.
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