Chapter 386: Sincerity

As Simon discussed the possibility of cooperation, Koji Aoki's expression remained unchanged, but the draft proposal sent previously by Daenerys Entertainment crossed his mind.

The draft was divided into three parts. The first was a deep brand collaboration, including priority for Daenerys Entertainment's audiovisual products on Matsushita's electronic hardware platforms and advertisement placements for Matsushita within Daenerys Entertainment's film and television content. This was essentially the primary goal of Matsushita's acquisition of MCA.

The second part was the joint construction of Universal Studios Osaka.

In the original timeline, Universal Studios Osaka was completed around the turn of the new millennium, and there were no developments yet.

Given the Japanese admiration for American culture, Tokyo Disneyland, which opened in 1983, was a huge success, recouping its $1 billion investment in just a few years, much to Disney's regret, who had only granted the brand license without investing.

Although Universal Studios Osaka, as Simon remembered, did not reach the success level of Tokyo Disneyland, it was still very popular.

If he could successfully acquire MCA, leveraging Universal Studios' years of operational experience and Daenerys Entertainment's rich content, one of Simon's next major expansion goals was to build Universal Studios Osaka ahead of schedule.

Though named Universal Studios Osaka, once completed, its potential customer base would cover all of Asia, significantly benefiting the promotion of Daenerys Entertainment's brands across the continent.

Simon planned to avoid Disney's mistake of only receiving a mere 10% of Tokyo Disneyland's ticket revenue and 5% of the branding fees. However, he didn't intend to invest alone. As an outsider, cooperation with a local powerhouse was crucial to avoid various difficulties and obstacles.

Matsushita, headquartered in Osaka, was undoubtedly the biggest local powerhouse.

And unlike Oriental Land Company, the partner of Tokyo Disneyland, which didn't involve in theme park operations, Matsushita would not compete for control with Daenerys Entertainment.

The last part of the cooperation was a $1 billion convertible bond issue for five years.

Daenerys Entertainment would issue $1 billion in convertible bonds exclusively to Matsushita. Should Daenerys Entertainment go public during the bond's term, Matsushita could convert this investment into Daenerys Entertainment's stock, deepening the cooperation between both parties.

The amount of $1 billion was carefully considered.

Simon was confident that, with successful integration of MCA in the coming years, Daenerys Entertainment's market valuation at IPO would not be less than $20 billion. The $1 billion in bonds converted to Daenerys Entertainment's stock would approximately equal about 5% ownership.

This 5% stake was not only the minimum reporting threshold for the U.S. Securities and Exchange Commission but also the maximum foreign investment limit in some restricted industries in the U.S.

If U.S. restrictions on foreign ownership of TV stations remained, keeping Matsushita's stake under 5% would avoid violating these bans, as they would be a non-controlling investor.

Each of the three parts of the cooperation had a potential value reaching $1 billion.

The total value of the $3 billion cooperation plan was nearly half of the MCA acquisition deal's scale, demonstrating significant sincerity from Simon.

Seeing Koji Aoki fall silent, Simon also paused his persuasion to enjoy the food in front of him.

After a few minutes of silence in the private room, Koji Aoki finally spoke again, "Simon, what if Matsushita still does not want to voluntarily withdraw?"

"Daenerys Entertainment will not back down either," Simon looked up at Koji Aoki without hesitation and then smiled, "Koji, I remember the Japanese like a book called 'Romance of the Three Kingdoms', right?"

Claire, sitting beside Simon, clearly did not know about 'Romance of the Three Kingdoms', and looked at her boss, translating as best as she could based on her own judgment.

After hearing his translator's low explanation, Koji Aoki showed a surprised expression and responded, "Simon, you know about the Three Kingdoms?"

"Actually, I can speak quite good Chinese." Simon nodded, poured some sake into a dish, dipped his finger in it, and swiftly wrote a standard script Chinese character on the table: 天下大势,分久必合,合久必分 (As the world turns, so periods of division are followed by periods of unity, and vice versa).

Japanese and Chinese share many similarities, and Koji Aoki recognized this famous line from 'Romance of the Three Kingdoms' almost immediately. He read it aloud in Japanese, looking at the beautifully written Chinese characters, and raised his head in astonishment, "Simon, I must say, you've surprised me again."

Simon picked up his chopsticks again, "I didn't write this to surprise you. This actually reflects my view on the trend of development in the American media industry. Hollywood, according

 to the famous 1948 Paramount Decree, was in an era of consolidation before the decree, with major film companies maintaining control through a vertically integrated operation from talent agencies to production studios to cinemas. That was an era of 'unity'. After the Paramount Decree, studios were no longer allowed to own talent agencies or cinemas, plus the rise of the television industry led to the emergence of many new small and medium film companies, competing with traditional major studios until the 1987 stock market crash. The economic boom of the 1980s ended, and the capital-intensive film industry entered a recession, with secondary companies like Cannon Films and De Laurentiis Entertainment closing down, ending that era of 'division'."

Koji Aoki listened intently to the real-time translation by his side, and his eyes inevitably glanced at the Chinese characters Simon had written on the table, "Simon, are you saying that Hollywood is now entering another era of 'unity'?"

"Exactly," Simon nodded, "The merger completed this January between Time Company and Warner Brothers is a very clear indicator. However, this time it's not the vertical integration of many years ago but rather a horizontal integration, with major Hollywood companies driving expansion into music, television, print media, retail, etc., through diversified operations to achieve synergistic effects. Compared to the vertical operations of the old studio era, the diversified management after horizontal integration will more easily suppress the rise of newcomers, and Hollywood's future will see little room for secondary film companies to thrive. The major giants will continue to merge with each other, eventually forming a few large media oligopolies."

Koji Aoki did not wait for Simon to elaborate further, his face already showing some understanding.

Simon added, "Koji, if you pay attention to recent trends in American public opinion, you'll notice there is a strong call against Japanese companies buying Hollywood studios. Even if you could outbid Daenerys Entertainment, this acquisition might not succeed. Moreover, if you insist on paying a very high price to acquire MCA, the first thing Matsushita would have to do under U.S. law is sell off MCA's TV stations. I believe that for a long time to come, the federal government will not lift this ban. On the contrary, to prevent more Hollywood enterprises from being bought by foreign giants, the federal government is already considering lifting the regulations that prevent TV networks and studios from merging. I think this is an inevitable trend. When the time comes, the horizontal integration of the U.S. media industry will accelerate further, gaining increasingly strong industry advantages. Matsushita buying MCA, already as an outsider subject to Hollywood's exclusion and U.S. legal restrictions, is destined not to keep pace with media sector's horizontal integration. With multiple disadvantages stacking up, I can't see any other path for Matsushita but to withdraw."

Simon spoke calmly and finally added, "Moreover, Daenerys Entertainment will not easily give up this bidding because it must take the initiative in this trend of horizontal integration in the media industry. Besides, regarding the funds that can be mobilized, I believe my company is not at all inferior to Matsushita. However, I do not want to start a bidding war with Matsushita; the current price relative to MCA's actual value is already very high."

"But, Simon," Koji Aoki quickly said, "Matsushita buying MCA is also for its own diversified development."

Simon couldn't help but shake his head, "Koji, Matsushita is already diversified enough. Given the current economic situation in Japan, what you should do is prune and trim, ensuring your advantages in some core industries during economic downturns and quickly developing new markets amidst tightening Japan-U.S. trade relations, rather than blindly expanding into areas you have never been involved in."

Hearing Simon's words, Koji Aoki fell into an even longer silence.

Lunch lasted nearly two hours, and afterward, Simon and Koji Aoki rushed to a private residence on the Osaka waterfront, where they discussed the draft cooperation agreement and many other topics for over two hours.

Until the evening, Simon declined Koji Aoki's invitation to stay overnight and boarded his private plane back to Los Angeles.

Before leaving, Koji Aoki promised to give Simon a definitive answer within three days.

Due to the time difference, it was still Monday morning when Simon arrived back in Los Angeles.

The Halloween season had already started during Simon's busy period. On October 26, three new films premiered in North American cinemas: Universal Studios and Daenerys Entertainment's "Dangerous Liaisons", Paramount's "Cemetery Zone", and Columbia Pictures' "Pillow Talk".

From October 26 to November 1, "Dangerous Liaisons", which received excellent media reviews and sufficient promotional efforts, led the pack. With an opening on 1,639 screens, it earned $17.16 million in the first week, far surpassing the combined first-week gross of the other two films, which didn't even

 reach $10 million.

However, during the second weekend, "Dangerous Liaisons" saw a 33% drop from its opening weekend, earning an additional $7.19 million, for a ten-day total of $24.35 million.

Due to the relatively large drop in the second weekend, the projected total North American box office for "Dangerous Liaisons" was between $60 and $80 million, making it the worst-performing of the ten films released by Daenerys Entertainment that year.

Of course, this was only relative.

A North American gross exceeding $60 million was considered a major success in that era, especially since "Dangerous Liaisons", with a total production and promotional cost of around $20 million, could recoup all costs and turn a profit with just the domestic box office.

Moreover, compared to the original, the new female lead, Susan Sarandon, received a chillingly brilliant review from 'The Hollywood Reporter', giving her a good chance to win the Best Actress at the Oscars next year, much like Kathy Bates did in the original timeline. After the film's release, the distributors started campaigning for Susan Sarandon for Best Actress in anticipation of future channel revenues.

After his secretive trip to Japan, Simon spent the next few days focusing on the promotional activities for the two major films Daenerys Entertainment was releasing at the end of the year. Before heading to Japan, he had prepared an additional $20 million promotional budget, which of course had to be spent as effectively as possible.

On another front, James led the team in smooth negotiations with Bell Atlantic.

Many things often do not go as planned, and before leaving Japan, Simon had already sensed Koji Aoki's intention to withdraw. The news of the Bell Atlantic acquisition wasn't as urgent to announce, allowing more time for thorough negotiations between the parties.

This continued until November 8, the final day Simon and Koji Aoki had agreed upon.

After three days without news, when it seemed the next update would likely be Matsushita raising its bid for MCA, Simon and Janet attended a community wine party celebrating Malibu's formal city status. Just after they returned to their villa on the west side of Point Dume, Claire, who was staying at the villa, informed Simon that a call had come from Japan half an hour ago, requesting a callback after he returned from the party.

Simon dialed the number provided, and soon the call was transferred to Koji Aoki.

Koji Aoki did not beat around the bush over the phone, straightforwardly stating that Matsushita was willing to withdraw from the MCA acquisition, provided that the two parties first completed the signing of the cooperation agreement. Moreover, Matsushita hoped for more concessions from Daenerys Entertainment on some detail clauses.

The two discussed some details over the phone for over an hour, and while the basic framework of the contract did not change, Simon made some concessions on certain terms, quickly reaching an agreement.

The next day, Friday, Simon flew to Japan again, this time accompanied by a whole team from Daenerys Entertainment.

Since much preparation had already been done, this trip was only for signing an overall cooperation agreement, with many subsequent details still needing real-time adjustments. Therefore, after two days of negotiations over the weekend, the parties quickly signed the official agreement.

With Simon and Amy appearing in Japan and frequently contacting Matsushita's senior management, it became difficult to keep the related news hidden, and speculation about what exactly happened was rampant in and outside Hollywood.

Subsequently.

On Monday, November 12, Matsushita suddenly held a press conference at its headquarters in Osaka, Japan, officially announcing the abandonment of its acquisition of MCA.

The news, once released, caused a stir in the media across both sides of the Pacific.

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