Chapter 625 – Full cooperation continued
The negotiations went on smoothly. It was also because Thomas was impressed by Wind and Rain’s “strength” and gave lots of concessions.
In terms of branding and electronics industry, Philips was much stronger than Wind and Rain Electronics and Wind and Rain Home Appliances.
But Feng Yu made it very clear. If Philips were to work with Wind and Rain, they will be able to develop many electronics products which would change the world. The VCD, Super VCD, the upcoming DVD and optical drive for computers and even the home appliances like vacuum robots, lightwave microwave oven, etc. will bring lots of profits to Philips.
Because of these profits, Thomas and Philips agreed to Feng Yu’s terms. They will cooperate fully and will set the industry standards together. They will popularize the VCD and DVD together and will also introduce the rest of the new home appliances.
Wind and Rain Electronics and Wind and Rain Home Appliances will let Philips have access to their technologies. Philips will share its optical disc technology, TV technologies, LCD display technologies, and optical communication technology with Wind and Rain. Technologies will be shared between both companies at no cost.
The companies will still retain the patents they own, but the other party will get to use it for free. All new patents developed from the related technologies will still be owned by the company.
Feng Yu had made serious considerations before exchanging the VCD technologies with Philips. He had thought why the VCD developments were not as fast as his previous life. There was only one reason. It was because there were only two companies in the market, producing VCD players, and both companies belong to him.
Feng Yu could not compete with the several companies who worked together in introducing the VCD players in his previous life. His marketing and distribution channels were not sufficient to popularize this product. In his earlier life, most of the top Japanese electronics companies own VCD technology. They were the ones who discovered that this technology was not patented, and they rushed to apply for patents.
This was why, in the future, the Chinese VCD companies still had to pay patent fees to those Japanese companies. The Japanese companies used the fees collected to develop better technologies and became the best in the industry.
In this life, this patent belongs to Feng Yu. Japanese companies will not share this pie. But the VCD was not growing as fast as Feng Yu’s previous life. But it was still the same as history. All the companies were trying to develop DVD players to replace VCD.
DVD will replace VCD in time to come. The technology and user experiences were better than VCD. The companies had acted fast, but Wind and Rain Electronics were still able to develop the latest DVD technology before them.
It was like the gaming industry. Nintendo and ditched Sony and Sony used the next 2 years to develop the PlayStation gaming console. In the end, Sony occupied most of the market share and profits!
Aiwa had beaten Sony in the Walkman industry, but that was because Sony’s focus at that moment was on the Columbia Pictures. Columbia Pictures was their most significant investment in the 1990s. It was still an overseas investment. Nothing must go wrong with this investment.
Once Columbia Pictures start to make money, Sony would have more time and resources to fight against Aiwa. But Feng Yu was not worried about this. By the time Columbia Pictures makes profits, Walkman will be almost obsolete. If Sony wants to get back the Walkman market at that time, they can have it.
But now, Sony and Toshiba had teamed up and wants to set the industry standards. They realized this DVD is better than VCD. It will ultimately replace traditional VHS players. Also, this was what Sony wanted for their Columbia Pictures. With this technology, they would be able to sell their films on DVD.
Columbia Pictures owns the rights to an enormous volume of movies. If Sony was able to introduce a good DVD player and those movies in DVD formats, then Columbia Pictures’ profits will increase. This will revive this struggling production company.
So, Sony would definitely increase its investments on its DVD research and developments. Feng Yu knew that if he were to go against Sony head-on, he might still win in the end. All he needs to do was to increase his investment into Aiwa and Wind and Rain Electronics. But it was not worth doing this.
There’s a lot of advantages by collaborating with Philips. Especially one specific term in the contract. Both companies will help the other party manufacture products.
Aiwa only has a factory in London, and it was manufacturing Walkman. That factory had to fulfill the orders for the whole of West Europe, and the factory had no more space to produce VCD players. Aiwa and Wind and Rain brand of VCD players were all manufactured in China. The cost was high due to the transportation of the goods to the Europe and US markets.
Those VHS player manufacturers had lowered their retail prices to compete with VCD players. All VHS players manufacturers were working together to prevent VCD players from gaining popularity in the western countries.
Feng Yu got to admit that those companies were influential and could stop VCD players from becoming popular overseas. Although there was still profits, it was still a different feeling from monopolizing the market.
In Feng Yu’s previous life, the VCD market was doing very well. The manufacturers were selling an astronomical number of VCD players every year. But now, after Feng Yu had monopolized the VCD market, the sales of the players remained low and Feng Yu was worried.
But now, with Philips coming into the picture, the VCD player sales will surely shoot up due to its distribution channels in Europe and the US. Thomas also had the same thinking as Feng Yu. He also wanted to introduce the Super VCD immediately. He did not want to introduce the old VCD players. 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’ authorization could be given to more companies, and it would be a collective effort to open up the VCD market. But the biggest slice of the pie still belongs to Wind and Rain Electronics.
The returns from setting the industry standards cannot be seen anytime soon. But the profits from producing Super VCD was immediate. Thomas also accepts Feng Yu request for manufacturing Wind and Rain Electronics for 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 the market.
In China, Feng Yu’s main focus was still Wind and Rain VCD players and Aiwa VCD players. For the overseas, Feng Yu would use AIWA VCD and Wind and Rain VCD players. Aiwa brand was used to target China and the Southeast Asia markets.
(Aiwa = Ai Hua, Chinese characters for Aiwa brand. Feng Yu had set up a sub-brand for Aiwa, which is in Chinese characters. This is to target the China market. AIWA is the international brand and its written in English characters.)
Philips will also benefit from this deal. They will also get profits from the Super VCD players and the future DVD players. Also, there will be profits from other innovative home appliances.
With so much more profits coming in, Philips would be able to increase their R&D funds for their medical equipment. They would be able to overtake Siemens in the medical machines industry!
After knowing Feng Yu had a Pager manufacturing company under the Aiwa brand, Philips felt that they could also cooperate on telecommunication devices and develop mobile phones. Philips also felt that mobile phones would replace pagers in the future.
Philips felt that it would take at least 10 years for mobile phones to replace pagers, but Feng Yu felt pagers would be a sunset industry in 3 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 with Feng Yu that if the demand for pagers start to decline in 3 years, and mobile phones replaced pagers in the next 5 years, he would agree to one condition set by Feng Yu!
After signing the agreement, Thomas returned to Holland immediately. They had no time as the race to set the DVD industry standards had started!