Chapter 630 – Nurturing the marke
“Brother Feng, why is the Super VCD player not launched yet? I heard from Jiang Wanmeng that the Super VCD technology, your 9 imaging, 4 channel stereo, countdown timer, etc. are all developed. What are you waiting for?” Fu Guangzheng was getting impatient. The overseas VCD brands had started to enter the Chinese market and lowered Wind and Rain Electronics profits.
Fu Guangzheng wanted to introduce the Super VCD player now. Although the technology was not perfect, they can introduce a transition product first. A few months later, they can introduce a better product.
It hurts to see money flowing into someone else pockets.
“Brother Fu, what’s the hurry? The market is booming yet. The traditional VHS is not completely out of the market. The Laserdisc is still making profits. Let’s wait for a while more.” Feng Yu took a sip of his coffee and replied calmly.
“Wait for the market to be booming? The market is already booming elsewhere outside of China. Many foreigner brands are fighting for market share. Although we are receiving patent fees, the fees compared to the profits if we were to produce ourselves was too low.”
The authorization fees for a VCD player was 50 USD. But if they were to produce their own VCD players, the profits will be more than 300 USD! Even when there are more brands now, and the profits are declining, there are at least 200 USD profits.
What was Feng Yu thinking? Giving up all these profits?
Fu Guangzheng was overjoyed when Feng Yu decided to collaborate with Philips to set the industry standard, increase the R&D funds, and successfully develop the second-generation of technology.
He knew that if a company set the standard format for an industry, that means the company was one of the top companies in the industry.
But you cannot only set the industry standards. Now, many companies were racing to develop their encoding technologies. If you succeed in developing your encoding technology, it’s okay. But if you fail? Then you will have to follow another company’s encoding technology. We will fall behind others.
Fu Guangzheng wanted to keep their brand’s advantage and let Wind and Rain VCD continue to be the world’s biggest VCD player manufacturer. They will lead the industry and make profits at the same time. But Feng Yu refused to listen to him.
Fu Guangzheng understood the importance of beating the traditional VHS and Laserdisc. But what’s the difference with beating them one year earlier and one year later? These were what Feng Yu said in the past. Why was he acting this way now?
“Brother Fu, don’t be too anxious. Soon, those companies will be lagging behind us again. You have also seen the performance of our Super VCD player. But the Super VCD player is still not perfect. It is too heavy, and the production cost could not be lowered. The heat dissipation is another problem. All these need to be sorted out, and it will be sorted out soon. Since we are going to introduce a new product, then we must introduce a different product. We will let the other brands eat our leftovers!”
“How different do you want your Super VCD player to be? It is good enough. Didn’t you say the newer technologies are for the DVD players? What if the market is saturated when we introduce our latest product?” Fu Guangzheng was worried.
A family can only afford one VCD player. How many families can afford to buy two? Although the income of most families, especially China, had increased, this VCD player was like TV. Many families will use it for more than 10 years after they bought a TV. As long as it is still working, they will not change it.
By the time Wind and Rain introduce the Super VCD, most people would have bought the regular VCD players. The new players might be better, but those people will not change to the newer ones. Even if the market became prosperous, but the market will not belong to only Wind and Rain Electronics and Aiwa.
Many of those VCD companies were world class consumer electronics brands. In many regions, they have loyal followers. Even if their products were not as good as other brands, but the consumers will still stick to them.
Those top consumer electronics brands had their own territories. It’s hard for another brand to enter its territory. Look at Sony Walkman. Even Aiwa had overtaken them, but Sony Walkman was still ranked number 2 in the world. It was because Sony still has a lot of loyal followers.
Furthermore, it was Sony who allowed Aiwa to grow. Now, Feng Yu had increased the number of brands competing in this industry. Wind and Rain VCD players might not be kicked out of the market, but the market share and sales had been declining. If this carries on, this VCD brand might be obsolete.
“Brother Fu, before the other brands appear, how much is our total VCD player sales? Wind and Rain, Aiwa and AIWA brands add up to about a few hundred thousand units. The results are not satisfying. But now, many brands had entered the market. I am not sure of the total number of VCD players sold. But I know how many units of VCD players were produced by them. In less than a month, these companies had produced more than 500,000 units of VCD players. It is more than our previous two years of sales.”
Fu Guangzheng frowned. Why was Feng Yu so happy? Shouldn’t he be worried?
“Brother Fu, can you still remember if every household owns a TV when you are young?” Feng Yu asked.
“Although Hong Kong is more advanced than China, when I was young, not every household owns a TV. Even now, there are still households that could not afford a TV. Poor people exist in every region.”
“Brother Fu, that’s not what I mean. What I am saying is the popularization rate of the TV. I am not sure about Hong Kong. But I know about China. 10 years ago, it was still the black and white TV era. At that time, most households in China cannot afford a TV. TVs were only bought at people’s wedding. 5 years ago, black and white TV died out and were replaced by color TV. Now, even with color TV, people want clearer and bigger screens. This is the trend.”
“But did you realized that TV technology has had been evolving and the number of users kept increasing. Every time the TV technology evolves, the number of users increases. This was what happened when TV evolves from black and white to color. It was the same when the TV screen increases from 10+ inches to 20+ inches. The initial TV market was created by the black and white TVs, and it was the color TVs that made the market prosperous. In the end, it was those companies that produce big screen TV that gets most of the market shares!”
Fu Guangzheng was confused. “Are you saying that we are the black and white TVs and those companies are the color TVs? We will be the brands that will produce better quality color TV?”
Feng Yu nodded. “The future of VCD will be the same as TV. Every household will be buying one, and the market is vast. We do not need to worry now. We will focus on developing new technologies and nurture the market. Those companies are opening up the market for us!”