Chương 385: Chapter 385: Undermining from Below
In the forward cabin study of the Boeing 767, Claire Gains knocked on the door to inform that they had entered Japanese airspace and, as usual, brought in a box of watches adjusted to the time zone.
Simon randomly picked one to wear and checked the time.
Japan is 18 hours ahead of the US East Coast, making it the morning of November 5th, Monday, just after 10 AM.
The purpose of this trip to Japan was to meet with Matsushita's President Koji Aoki, and it was not a spur-of-the-moment decision.
Since the Hearst family had abruptly taken 20% of ESPN's shares from Simon's hands, he had been contemplating a way to persuade Matsushita to pull out of the transaction on their own.
The Hearst family had recently acquired the shares from Reynolds Nabisco for $180 million, using their 'influence' once more, a full $20 million less than Simon's initial offer.
However, despite holding several bargaining chips, Simon had no intention of forcing Matsushita to withdraw.
In this era, Matsushita's market value was comparable to American giants like DuPont and General Electric. As a local power, Daenerys Entertainment had the potential to force Matsushita out of the acquisition, but it would be unwise to do so.
Compared to the Hearst family, who used their power to oppress, Simon preferred cooperation.
The future development of the Westeros system would increasingly touch more people's interests. To continue expanding, it was essential to gather as many allies as possible rather than continually creating enemies. This was a decision Simon had made after several months of contemplating the development path of the Westeros system; even if it grew strong enough in the future, he did not plan to change this approach.
Thus, Daenerys Entertainment had started contacting Matsushita last week and had already sent a preliminary cooperation draft. Simon and Koji Aoki had finally agreed to meet this afternoon.
As it was nearing noon, Simon and his party disembarked from the plane, and Matsushita had also prepared a lunch banquet, though it was very small in scale. Excluding the translator, only Simon and Koji Aoki attended. Simon had not intended to make his sudden visit to Japan widely known and was pleased with the discretion.
Moreover, the presence of only Koji Aoki at the lunch suggested his reasons.
Simon's purpose for this trip to Japan was to persuade Matsushita to withdraw from the MCA acquisition. For Matsushita, since the founder Konosuke Matsushita had passed away last year, the huge conglomerate was not entirely united internally. Koji Aoki wanted to acquire MCA, but there were quite a few opposing voices within Matsushita. Koji Aoki likely did not want news of his meeting with Simon to spread.
At a refined Japanese restaurant in downtown Osaka, Koji Aoki appeared as a man around sixty years old, somewhat short, wearing glasses, and looking quite serious.
After introductions, they entered a private room.
There were four people in total: Koji Aoki and his translator, a tall, thin middle-aged man.
Simon was accompanied by Claire Gains. Due to frequent economic cooperation between Australia and Japan in the 1980s, Claire, who graduated from the University of Melbourne, majored in civil engineering and also took advanced Japanese, making her more than capable as a translator.
Indeed, the new housekeeper Janet had selected the ABCD 'vases', and although they did not have the scholarly background of the new housekeeper Alice Ferguson, they were all elite in their own fields, or else the new housekeeper would not have been slightly tricked by Claire on her first day.
According to Janet, the ABCD could complement Simon in areas he was unfamiliar with, such as Claire's major in 'civil engineering' and Japanese, both of which were Simon's weaknesses.
The four sat cross-legged at a typical Japanese dining table. At first, they casually discussed various topics until the server brought in the lunch and left, then the conversation became more open.
Claire, not shy, leaned close to Simon and whispered, following the translator across: "Simon, what's your take on the current state of the Japanese economy? Will it continue to worsen?"
Simon expertly handled his chopsticks to taste the sashimi in front of him, and looking at Koji Aoki across the table, he said, "It probably won't worsen, but it might remain in a downward trend for a few more years."
The middle-aged translator quietly relayed this to Koji Aoki.
After hearing the translation, Koji Aoki seemed somewhat incredulous and asked something else.
Claire immediately said, "The Japanese government has already taken many measures to save the situation, and the foundation of Japan's economy is very solid, shouldn't it recover before too long?"
Simon responded, "I've been keeping an eye
on this. The Bank of Japan has once again started to lower interest rates recently, which I think is very unwise. The economic bubble in Japan has not been completely cleared, especially the real estate bubble. Hastily reducing interest rates to increase liquidity will only lead to capital flowing into the real estate market, which isn't much help to the real economy."
"Do you mean Japan should completely abandon the real estate industry?" asked Koji Aoki.
Simon nodded, smiling, "It's a tough choice, but a necessary one."
"Simon, when do you think the Japanese economy will start to recover?"
Simon shook his head with a smile, "I'm not sure about that. There have been many economic crises in history. Some countries recover in just two or three years without much trouble, while others never recover and continue to decline. It all depends on how the Japanese government acts."
"So, Simon, besides the real estate bubble, what do you think is the most severe problem facing the Japanese economy?"
Simon was surprised that Koji Aoki pursued these issues so persistently, noting the translator across the table who seemed even more focused than Koji Aoki himself. Simon guessed something from this. After all, the operations around the Japanese stock market by Cersei Capital last year could indeed be described as classic. And Simon's own rise to power was considered legendary, often relying on bets at the macroeconomic level to amass significant capital.
After a moment's thought, Simon didn't hold back, as speaking out now, even if someone cared, involved a country's future, and few would easily follow an outsider's advice.
"I think the most severe problem facing the Japanese economy is corporate debt. If this issue isn't addressed properly, the Japanese economy could remain depressed for a long time, possibly even over a decade."
"We've already lowered the bank interest rates; that should help alleviate corporate cash flow pressure."
"No, Koji, you've got it wrong," Simon shook his head. "The problem with Japanese companies isn't a lack of money, but a reluctance to borrow more. After the stock market bubble burst and corporate market values plummeted, many Japanese companies saw their debt ratios significantly increase. For the next few years, these companies will focus on reducing their own debts to make their balance sheets look healthier. Therefore, measures like lowering interest rates won't do much for the real industry."
Across the table, Koji Aoki stopped asking continuous questions for a moment, pondering before speaking again, "This sounds like an intractable situation."
Simon nodded, "Yes, companies focused on reducing debt and afraid to borrow will definitely cause liquidity to decrease and further lead to deflation. Once that happens, the entire country's economy will lose its vitality and never recover."
After thinking for a while, Koji Aoki looked up at Simon again, "Is there really no solution?"
Simon replied, "There are solutions. What Roosevelt did was good, investing heavily in infrastructure through government spending. The key is to spend money. However, Japan's infrastructure is already quite developed, so what you need to do is still spend money, but it would be better to spend it abroad."
After hearing the translated explanation, Koji Aoki smiled and said, "Simon, you are a very honest man."
Simon roughly understood the meaning of Koji Aoki's words and the implication, smiling, "Yes, if I were strictly following my agenda for this trip, I would advise you to keep your cash and avoid foreign investments. However, I think Japan's more appropriate investment targets should be the emerging developing countries, like in Asia and Eastern Europe. The US is not a good choice, and Hollywood, in particular, is even less suitable for Matsushita."
When Simon mentioned Hollywood, Koji Aoki didn't change the subject but asked seriously, "Simon, why do you say Hollywood is not a good choice for Matsushita?"
Simon thought for a moment and said, "Koji, are you familiar with 'Hollywood accounting'?"
Koji Aoki nodded, "I've heard a bit about it. It's a common accounting practice among Hollywood studios that turns most of the profits into expenses to reduce tax burdens and payouts to creators."
"That's just one type of Hollywood accounting," Simon nodded. "There's another type meant for outsiders. For example, if Matsushita invests $10 million in a film that earns $100 million at the North American box office, how much do you think you would get?"
Koji Aoki calculated briefly and said, "If Matsushita owns MCA, I think after deducting production and distribution costs, the company should make at least $30 million, right?"
"No, even if Matsushita becomes the owner of MCA, you could still end up losing money."
"How so?"
"I heard you're planning to let Wasserman and Zimberg continue to run the company. According to my example, an investment of $10 million and a box office of $100 million might seem to earn you
more than $30 million. But more likely, Wasserman will sign very generous profit-sharing contracts with the creatives, 20% of the net profit to the director, like Spielberg, and 20% to the star, like Dustin Hoffman. Then, there's the producer's cut and the inevitably inflated marketing costs after a big hit. Even if a $10 million movie makes $100 million at the box office, you might not make a cent."
"Simon, I don't think that will happen."
"Actually, it already has. Koji, you could have someone look into the current production of 'Captain Hook' by Columbia Pictures, they are using this type of split. Moreover, with Spielberg directing, Dustin Hoffman and Robin Williams starring, the production costs of 'Captain Hook' are far more than $10 million. I don't believe Sony is making much money from this project. Even with Spielberg and Dustin Hoffman involved, Sony isn't likely making money, so what do you think about the profits from other films Sony invests in?"
Koji Aoki hesitated for a moment and asked, "Simon, actually, we don't necessarily need Wasserman and Zimberg to run Universal. Plus, we will strengthen the oversight of this company."
Simon shook his head, "Hollywood is actually a very closed circle, I know you might still be considering letting Michael Ovitz run the company. Ovitz is indeed a very capable agent, but you might not be fully aware of what he's been doing these years. For the past decade, Ovitz has been trying to get higher pay for CAA's clients. Even if he runs MCA, this mindset won't easily change. He will still attract talent with very generous profit-sharing contracts, which might bring you a superficial prosperity, but the benefits will, of course, stay with Hollywood's own people, and you'll still be outsiders."
Koji Aoki was still somewhat unconvinced, "Simon, that's just your word."
Simon smiled, continuing, "Actually, there's one last option, for Matsushita to send its own people to run the company. Actually, that would be correct. Because what a Hollywood studio needs is autocratic, family-style management, not professional managers. However, for Matsushita, this idea is even worse because you don't understand the entertainment industry. And by running the company yourselves, you'll become even more of an outsider, and Hollywood will extract profits from you without any consideration. Even a 500-pound sumo wrestler would come out of Hollywood looking emaciated."
Claire, who had been listening intently, couldn't help but laugh at Simon's last analogy. Realizing her lapse, she quickly apologized and clumsily picked up her chopsticks, pretending to be busy.
Koji Aoki didn't laugh, his expression becoming serious, as he stared at Simon, "I suddenly realize something, Simon, you are one of those 'Hollywood people' you mentioned. What you're saying is ultimately just to get Matsushita to pull out of the MCA acquisition."
"I won't deny that, this is why I came to Japan," Simon nodded. "But, Koji, I am a very honest man, you just said it yourself. And, you can have someone check everything I've said. Hollywood has many similar cases. For example, Columbia, although Sony and Matsushita are competitors, you can investigate the actions of the two people Sony hired to run it over the past year, they're basically hollowing out the company."
Koji Aoki hesitated for a moment, then nodded seriously, "I will."
"Let's talk about our cooperation," Simon turned the conversation, "Matsushita's acquisition of MCA is largely to follow Sony, to prevent them from using their content advantage to invade Matsushita's market share in film and music hardware. What you want, Daenerys Entertainment can provide, and even more effectively than Matsushita acquiring MCA. For instance, in terms of movies, Daenerys Entertainment has dominated the top ten box office in North America in recent years, that's our content advantage. Now, Daenerys Entertainment also owns the largest video tape chain in North America. In both content and distribution, Daenerys Entertainment has unmatched advantages in Hollywood. As long as we cooperate, even completely pushing Sony camcorders out of the market is not impossible. You should have already seen the materials I had sent ahead of time, and this is just one of the aspects of our cooperation."
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