In the forward-cabin study of the Boeing 767, C-girl Claire Grey knocked on the door to remind Simon they had entered Japanese airspace and, as usual, brought in a box of watches already set to the local time zone.
Simon casually picked one out and slipped it on, checking the time.
Japan was eighteen hours ahead of the U.S. East Coast. It was now Monday, November 5, a little past ten in the morning.
The purpose of this trip to Japan was to meet with Panasonic president Akio Tanii. It was not a spur-of-the-moment decision.
Ever since the Hearst family had stepped in and snatched the twenty percent stake in ESPN from his hands, Simon had formed an idea: find a way to make Panasonic withdraw from the deal on its own.
The Hearst family had recently taken ESPN shares from RJR Nabisco for only one hundred eighty million dollars. He wondered if they had used their "influence" again. The price was a full twenty million dollars lower than Simon's original offer.
Yet although he held plenty of cards, Simon had no intention of forcing Panasonic to back out.
In this era, Panasonic's market capitalization was on par with American giants like DuPont and General Electric. As the local powerhouse, Daenerys Entertainment could certainly use its advantages to pressure Panasonic into quitting the acquisition, and success was not impossible. But that approach would be extremely unwise.
Compared with the Hearst family's heavy-handed tactics, Simon preferred cooperation.
In the future the Westeros system would encroach on more and more interests. To keep expanding under those conditions, it was necessary to win as many allies as possible rather than keep creating enemies. This was the conclusion Simon had reached after months of careful thought about the system's development path, and he had no plan to change course even when Westeros grew far stronger.
That was why Daenerys Entertainment had begun contacting Panasonic the previous week and had sent over a rough draft cooperation plan in advance. Simon and Akio Tanii had finally arranged to meet this afternoon.
Because it was close to noon when Simon's group landed, Panasonic had not been negligent and had specially prepared a lunch.
The lunch itself, however, was very small. Excluding the interpreter, only Simon and Akio Tanii were present. Since Simon had no wish to publicize his sudden arrival in Japan, he was perfectly satisfied with the arrangement.
Moreover, the fact that only Akio Tanii had shown up told Simon roughly what was going on.
The goal of this trip was to persuade Panasonic to abandon the MCA acquisition. For Panasonic, after founder Konosuke Matsushita's death the previous year, the giant corporation was far from united. Akio Tanii wanted MCA, but there was considerable internal opposition. Tanii clearly did not want word of this meeting to spread.
Inside an elegant Japanese restaurant in downtown Osaka.
Akio Tanii was a short, sixtyish elderly man wearing glasses and wearing a rather stern expression.
After brief introductions they moved to a private room.
There were four people in total: Akio Tanii and his interpreter, a tall, thin middle-aged man.
Simon had brought Claire Grey. Thanks to frequent economic ties between Australia and Japan in the eighties, the C-girl who had graduated from the University of Melbourne had majored in civil engineering and also studied Japanese to a very high level. She was more than qualified to serve as interpreter.
Come to think of it, the four "vases" Janet had chosen for him might not possess the academic superstar credentials of the new housekeeper Alice Ferguson, but they were all elite in their own right. Otherwise the new housekeeper would not have been lightly tricked by the C-girl on her very first day.
According to Janet, each of the ABCD girls complemented Simon perfectly.
The C-girl's university major in civil engineering, for instance, was something Simon knew nothing about, and Japanese was likewise one of his weak points.
The four of them sat cross-legged on the floor around a typical Japanese table. At first they chatted lightly about various topics. Only after the waiters had served the lunch dishes one by one and withdrawn did the conversation loosen up.
Claire did not hold back. Sitting close to Simon, she leaned toward his ear with orchid-like breath and translated along with the man opposite. "Simon, what is your view of the current Japanese economy? Will it continue to worsen?"
Simon deftly used his chopsticks to taste the sashimi in front of him. He looked across at Akio Tanii and answered, "Worsen? Not to that extent, but it should remain in a downward phase for several more years."
The middle-aged interpreter whispered the translation into Akio Tanii's ear.
After listening, Akio Tanii seemed unconvinced and asked another question.
Claire relayed it in real time. "The Japanese government has already taken many rescue measures, and the foundation of the Japanese economy is very solid. It should not stay depressed for long, right?"
Simon said, "I have been following this closely. The Bank of Japan has recently begun lowering interest rates again. In my view that is very unwise. The bubble in the Japanese economy has not fully dissipated, especially the real-estate bubble. Rushing to cut rates and increase liquidity will only drive money into real estate and bring little benefit to the real economy."
"You mean Japan should completely abandon the real-estate sector?"
Simon nodded and smiled. "It is a very difficult choice, but it is also the necessary one."
"Simon, when do you think the Japanese economy will begin to recover?"
Simon smiled and shook his head. "That I cannot say. History has seen many economic crises. Some countries pass through them lightly in two or three years. Others never recover and remain in decline. The key lies in how the Japanese government acts."
"Then, Simon, aside from the real-estate bubble, what do you consider the most serious problem facing the Japanese economy?"
Simon had not expected Akio Tanii to press so hard on issues involving the national economy. Noticing that the interpreter across from him seemed even more attentive than Tanii himself, he roughly guessed the reason. After all, Cersei Capital's operations around the Japanese stock market last year had indeed been classic. And Simon's own rise had been legendary, built several times over on macro-economic bets that amassed huge capital.
After a moment's thought, Simon decided not to hold back. Even if someone paid attention to his words now, few people would lightly follow an outsider's opinion when an entire nation's future was involved.
"I believe the most serious problem facing the Japanese economy is corporate debt. If this issue is not handled well, the Japanese economy could remain depressed indefinitely, possibly for more than ten years."
"We have already lowered bank interest rates. That should ease the cash-flow pressure on companies."
"No, Tanii, you have misunderstood one thing." Simon shook his head. "Japanese companies do not lack money. They simply no longer dare to borrow. After the stock-market bubble burst and market values plunged, the debt ratios of many Japanese firms rose sharply in relative terms. Over the next few years these companies will focus only on reducing their own debt to make their balance sheets look healthier. Therefore measures like cutting interest rates have little real effect on industry."
Across the table Akio Tanii finally stopped firing questions in quick succession. After thinking for a moment he said, "This sounds like an unsolvable situation."
Simon nodded. "Yes. When companies focus on lowering debt and stop borrowing, liquidity inevitably declines and deflation follows. Once that happens the entire national economy loses vitality and never recovers."
Akio Tanii thought again, then looked up at Simon. "Is there truly no solution?"
Simon said, "There is actually a way. What Roosevelt did back then was effective: use government investment to vigorously develop infrastructure. The key is to spend the money. Japan's infrastructure is already very complete, however, so what you need to do is still spend the money, preferably overseas."
After the interpreter finished explaining, a smile appeared on Akio Tanii's face. "Simon, you are a very honest man."
Simon roughly understood both the literal meaning and the implication behind Tanii's words. He smiled and replied, "Yes. If I were following the purpose of my visit today, I should be advising you to keep as much cash as possible and avoid foreign investment. But I believe Japan's more suitable investment targets are emerging developing countries, such as the various nations in Asia and the countries of Eastern Europe. The United States is not a particularly good choice, and Hollywood, for Panasonic, is even less appropriate."
Hearing Simon mention Hollywood, Akio Tanii did not dodge the topic but asked seriously, "Simon, why do you say Hollywood is not a good choice for Panasonic?"
Simon thought for a moment. "Tanii, have you heard of Hollywood accounting?"
Akio Tanii nodded. "I have heard of it in general. It is a common accounting practice among Hollywood studios that turns most profits into expenses in order to reduce taxes and the profit shares owed to creative personnel."
"That is only one kind of Hollywood accounting," Simon nodded. "There is another kind for outsiders. For example, Panasonic: if you invest ten million dollars in a film that earns one hundred million dollars at the North American box office, how much do you think you would receive?"
Akio Tanii calculated briefly. "If Panasonic buys MCA, I think, after deducting production and distribution costs, the company could earn at least thirty million dollars."
"No. Even if Panasonic becomes the owner of MCA, you could still lose money."
"How so?"
"I heard you plan to let Wasserman and Sheinberg continue running the company. According to my example, a ten-million-dollar investment and one-hundred-million-dollar box office would seem to yield more than thirty million in profit. But the more likely scenario is that Wasserman will sign extremely generous profit-sharing contracts with the key creators: twenty percent of net profit to the director, for example Spielberg; twenty percent of net profit to the lead actor, for example big names like Dustin Hoffman. Then there are producer cuts and the distribution and marketing costs that are certain to balloon after a hit. Even if a film with a ten-million-dollar investment earns one hundred million at the box office, you may not see a single penny of profit."
"Simon, I do not believe that situation will occur."
"In fact it has already occurred. Tanii, you can have someone look into the information on Hook, the film Columbia Pictures is currently producing. They are using exactly this kind of profit-sharing model. Moreover, because it is directed by Spielberg and stars Dustin Hoffman and Robin Williams, the production cost of Hook is far more than ten million dollars. I do not think Sony will make much money from that project. If Sony cannot profit even on a film involving Spielberg and Dustin Hoffman, do you believe the other films Sony invests in will generate profit?"
Akio Tanii hesitated a moment and asked, "Simon, actually we do not necessarily need Wasserman and Sheinberg to run Universal. We will also strengthen oversight of the company."
Simon shook his head. "Hollywood is actually a very closed circle. I know you may still be considering letting Michael Ovitz run it. Ovitz is indeed an outstanding agent, but you may not fully understand what he has been doing all these years. For the past decade Ovitz has done everything possible to help CAA clients obtain higher pay. Even if he takes charge of MCA, that mindset will not change easily. He will still attract talent with very generous profit-sharing contracts and may give you a surface-level prosperity, but the real benefits will still be kept for Hollywood insiders. You will ultimately remain outsiders."
Akio Tanii still looked unconvinced. "Simon, these are only your words."
Simon smiled and continued, "There is actually one final option: Panasonic sends its own people to run the company. This is in fact the correct way, because Hollywood studios need a patriarchal, one-person-decides-everything style of management. They do not need professional managers. For Panasonic, however, this idea is even worse, because you do not understand the entertainment industry at all. And if you personally run the company, you will become even more complete outsiders. Hollywood will have no scruples at all about extracting profit from you. Even a five-hundred-pound sumo wrestler who entered Hollywood for a spin would probably come out skin and bones."
The C-girl, who had been listening intently, could not help laughing at Simon's final comparison. Realizing her lapse, she quickly apologized, lowered her eyes, and clumsily picked up her chopsticks to pretend to be busy.
Akio Tanii did not laugh. His expression grew grave as he stared at Simon. "I suddenly realize one thing, Simon. You are also one of the 'Hollywood people' you just described. Everything you have said is fundamentally only to make Panasonic withdraw from the MCA acquisition."
"I do not deny it. That is exactly why I came to Japan," Simon nodded. "However, Tanii, I am a very honest man. You just said so yourself. Moreover, everything I have said can be verified. Hollywood has many similar cases. Take Columbia. Although Sony and Panasonic are competitors, you can investigate the two executives Sony hired. Their actions over the past year amount to hollowing out the company."
Akio Tanii hesitated, then nodded seriously. "I will."
"Instead, let us talk about cooperation," Simon changed the subject. "Panasonic's acquisition of MCA is largely to keep pace with Sony and prevent it from using content advantages to seize market share in Panasonic's film and music hardware. Whatever you want, Daenerys Entertainment can provide it, and with better results than an MCA acquisition. In film alone, over the past few years Daenerys Entertainment has taken a large share of the top ten North American box-office titles. That is our content advantage. Now Daenerys Entertainment also owns North America's largest video-rental chain. In both content and distribution channels, Daenerys Entertainment holds unmatched advantages in Hollywood. If we cooperate, it is not impossible to completely squeeze Sony VCRs out of the market. You should have already seen the materials I sent in advance. That point is only one part of what we can achieve together.