Akio Tanii listened as Simon brought up the topic of cooperation. His expression did not change much, but the draft proposal Daenerys Entertainment had sent earlier surfaced in his mind.
The draft was divided into three main parts. The first involved deep brand collaboration, including priority rights for Daenerys Entertainment's future audiovisual products on Panasonic's electronic hardware platforms, as well as the placement of Panasonic branding within Daenerys Entertainment's film and television content.
This was actually the primary goal behind Panasonic's pursuit of MCA.
The second part was the joint construction of Universal Studios Osaka.
In the original timeline, Universal Studios Osaka had only been completed around the turn of the new millennium. There were still no concrete plans for it at present.
Thanks to the Japanese people's admiration for American culture, Tokyo Disneyland, which opened in 1983, had achieved massive success right away. The one-billion-dollar investment had been fully recouped in just a few short years. This left Disney, which had only licensed the brand without investing, deeply regretful.
Although the Osaka Universal Studios in Simon's memory had not reached the same level of success as Tokyo Disneyland, it had still been very popular.
If they could successfully acquire MCA, Simon's important expansion goal in the next phase would be to build Universal Studios Osaka ahead of schedule, drawing on Universal's years of theme-park operating experience and Daenerys Entertainment's rich content library.
Although it would be called Universal Studios Osaka, once completed the park's potential audience would cover all of Asia. This would greatly benefit the promotion of Daenerys Entertainment's brands across the entire region.
Simon had no intention of repeating Disney's mistake of only receiving ten percent of gate revenue and five percent in brand licensing fees from Tokyo Disneyland. At the same time, he did not plan to invest alone. As an outsider, failing to partner with a strong local player would almost certainly lead to various obstacles and complications down the line.
Panasonic, headquartered in Osaka, was undoubtedly the biggest local powerhouse available.
Moreover, unlike the Japanese partner for Tokyo Disneyland, Oriental Land Company, Panasonic was not involved in theme-park operations and therefore would not compete with Daenerys Entertainment for control.
The final item was a five-year convertible bond worth one billion dollars.
Daenerys Entertainment would issue Panasonic a one-billion-dollar convertible bond. If Daenerys Entertainment conducted an IPO during the bond's term, Panasonic could convert the amount into shares in the company to further deepen their partnership.
The one-billion-dollar bond amount had also been carefully calculated.
Simon was confident that once MCA was successfully integrated in the coming years, Daenerys Entertainment's market capitalization at listing would not fall below twenty billion dollars. Converting the one-billion-dollar bond would give Panasonic roughly a five percent stake.
A five percent shareholding was not only the SEC reporting threshold but also the upper limit for foreign investors in certain restricted industries in the United States.
If the U.S. government still had not lifted its restrictions on foreign ownership of American television stations by then, keeping Panasonic's stake below five percent and treating it purely as a non-voting investor would avoid triggering those prohibitions.
Each of the three cooperation items carried potential value at the billion-dollar level.
The total cooperation package worth three billion dollars was nearly half the scale of the MCA acquisition. It could be said that Simon had shown considerable sincerity.
Seeing Akio Tanii fall silent, Simon also paused his persuasion for the moment and began enjoying the food before him.
After several minutes of quiet in the private room, Akio Tanii finally spoke again. "Simon, what if Panasonic still does not wish to withdraw voluntarily?"
"Daenerys Entertainment will not withdraw either," Simon looked up again and answered without hesitation. Then he smiled. "Tanii, I recall that Japanese people like a certain book very much. It is called Romance of the Three Kingdoms." [TL/N: Won't change the title here]
The C-girl beside Simon clearly did not know the title. She glanced at her boss and translated as best she could based on her own judgment.
Akio Tanii listened to his interpreter's quiet explanation, surprise showing on his face. He asked in return, "Simon, you know about the Three Kingdoms?"
"Actually, I speak very good Chinese." Simon nodded. He poured some sake into a small dish, dipped his finger in it, and quickly wrote a line of standard Chinese characters on the table: The empire, long divided, must unite; long united, must divide.
Japanese and Chinese shared many similarities. Akio Tanii recognized the most famous line from Romance of the Three Kingdoms almost without translation. He recited it once in Japanese, then stared at the elegant line of Chinese characters and looked up in astonishment. "Simon, I must say you have surprised me once again."
Simon picked up his chopsticks again. "I did not write that to surprise you. It actually reflects my view on the development trend of the American media industry. Taking the famous Paramount Decree of 1948 as the dividing line, Hollywood before that was the era of the studio system. The major film companies maintained tight control over Hollywood through a vertically integrated system that stretched from talent agencies and production studios to theater chains. That was an era of consolidation. After the Paramount Decree, studios were no longer allowed to engage in talent representation and were forced to divest their theater chains. Combined with the rise of television, many new small and medium-sized film companies emerged to compete with the traditional majors. This could be considered a period of fragmentation. It lasted until the 1987 stock market crash and the end of the economic boom of the eighties. The capital-intensive film and television industry fell into recession, second- and third-tier companies like Cannon Films and De Laurentiis Entertainment collapsed one after another, and this era of fragmentation finally came to an end."
Akio Tanii listened attentively to the real-time translation, his gaze occasionally drifting back to the Chinese characters Simon had written on the table. "Simon, are you saying that Hollywood has now entered another era of consolidation?"
"Exactly," Simon nodded. "The merger of Time Inc. and Warner Bros. completed in January this year is a very clear sign. However, this time it is no longer the vertical integration of many years ago, but horizontal integration. Major Hollywood studios are using film and television content as the driving force to expand into music, television, print media, retail, and other fields, achieving synergies through diversified operations. Compared with the old vertical studio system, the diversified model after horizontal integration can more easily suppress the rise of newcomers through comprehensive industry barriers. In the future, Hollywood will have very little room left for second- and third-tier film companies. The major giants will continue to swallow one another until only a few large media oligarchs remain."
Akio Tanii's face showed some understanding even before Simon finished explaining in greater depth.
Simon made the point clearer. "Tanii, if you have been following recent public opinion trends in the United States, you will have noticed very strong calls to restrict Japanese companies from buying Hollywood studios. Even if you could outbid Daenerys Entertainment on price, this acquisition might still not succeed. On the other hand, even if you insist on acquiring MCA at a very high price, the first thing Panasonic would have to do is sell off MCA's television stations in accordance with American legal restrictions. I believe the federal government will not lift this ban for a very long time. In contrast, to prevent more Hollywood companies from being acquired by overseas giants, the federal government has recently begun considering removing the regulatory barriers that prevent television networks and studios from merging. I believe this is an inevitable trend. At that point, horizontal integration in the American media industry will accelerate further, creating even stronger industrial advantages. After buying MCA, Panasonic would first face rejection as an outsider in Hollywood and then legal restrictions in the United States. You would inevitably be unable to keep pace with the horizontal integration wave in the media sector. With multiple disadvantages piling up, other than withdrawing again, I cannot see a second path for Panasonic."
Simon finished speaking at an unhurried pace and finally added, "Moreover, Daenerys Entertainment will not easily withdraw from this bidding war because we must seize the initiative in this major trend of media industry horizontal integration. In addition, when it comes to available capital, I believe my company is in no way inferior to Panasonic. However, I have no desire to start a bidding war with Panasonic. The current price is already extremely expensive relative to MCA's actual value."
"But Simon," Akio Tanii said quickly, "Panasonic's acquisition of MCA is also aimed at its own diversification."
Simon could not help shaking his head. "Tanii, Panasonic is already diversified enough. Given Japan's current economic situation, what you should be doing is pruning non-core businesses, preserving your advantages in key industries during the downturn, and quickly exploring emerging markets against the backdrop of tightening Japan-U.S. trade relations, rather than blindly expanding into fields you have never touched before."
After hearing Simon's words, Akio Tanii fell into an even longer silence.
Lunch lasted nearly two hours. After the meal, Simon and Akio Tanii went to a private residence by the Osaka waterfront, where they spent more than two additional hours discussing the cooperation draft and many other topics.
It was not until evening that Simon declined Akio Tanii's invitation to stay overnight and boarded his private plane to return to Los Angeles once again.
Before leaving, Akio Tanii promised to give Simon a definite answer within three days.
The journey back to the United States was long and tiring. Because of the time difference, it was still Monday morning on the West Coast when they arrived in Los Angeles.
The Halloween release window had already begun amid Simon's busy schedule. On October 26, three new films had opened in North American theaters: the Universal and Daenerys Entertainment co-production Misery, Paramount's Graveyard Shift, and Columbia's Postcards from the Edge.
During the opening week from October 26 to November 1, Misery, which had received excellent reviews and sufficient marketing support, dominated completely. Released on 1,639 screens, it earned 17.16 million dollars in its first seven days, far surpassing the combined opening week total of the other two films, which had not even reached 10 million.
However, over the following three-day weekend, Misery dropped 33 percent from its first weekend, adding another 7.19 million dollars for a ten-day cumulative total of 24.35 million.
Because of the relatively large second-weekend drop, Misery's projected North American total was estimated between 60 and 80 million dollars. This could be considered the weakest performer among the ten films in Daenerys Entertainment's current slate.
Of course, that was only in relative terms.
A North American total exceeding 60 million dollars was still considered a solid hit in this era. Moreover, the combined production and marketing cost of Misery was only around 20 million dollars. Relying solely on domestic box office, both Daenerys Entertainment and MCA could recoup their full costs and turn a profit.
In addition, compared with the original version, the new lead actress Susan Sarandon had delivered a chillingly brilliant performance that Hollywood Reporter had praised highly. She had a strong chance of winning the Oscar for Best Actress the following year, just as Kathy Bates had in the original timeline. After the film's release, both distributors had already begun campaigning for Sarandon in hopes of boosting future ancillary revenue.
After the secret trip to Japan, Simon spent the next few days focusing on the marketing and promotion of Daenerys Entertainment's two major year-end releases. The additional 20 million dollars in marketing budget prepared before leaving for Japan naturally could not be spent without purpose. It had to deliver maximum impact.
On the other side, the negotiations with Bell Atlantic led by James were also progressing smoothly.
Many things never went exactly according to plan. Before leaving Japan, Simon had already sensed Akio Tanii's inclination to withdraw. As a result, he no longer rushed to announce the Bell Atlantic acquisition. This also gave both sides more time for thorough negotiations.
The situation continued until November 8, the final day Simon and Akio Tanii had agreed upon.
After three straight days without any news, Simon had begun to expect announcements of Panasonic raising its bid for MCA. That evening, after he and Janet attended a community reception following the formal incorporation of Malibu, the couple had just returned to the villa on the west side of Point Dume when Claire Grey, who was staying at the house, reminded Simon that a call had come from Japan half an hour earlier. The caller hoped Simon would return it once he got back from the event.
Simon dialed the number left by the other party and was quickly connected to Akio Tanii.
Tanii did not beat around the bush on the phone. He stated directly that Panasonic was willing to withdraw from the MCA acquisition on the condition that both sides first complete the signing of the cooperation agreement. In addition, Panasonic hoped to obtain more concessions from Daenerys Entertainment on certain detailed terms.
The two men discussed the details over the phone for more than an hour. The basic framework of the contract remained unchanged. Simon made some partial concessions on a few clauses, and they quickly reached agreement.
The next day was Friday. Simon flew to Japan again, this time bringing an entire team from Daenerys Entertainment.
Because a great deal of preparation had already been done, this visit was only to sign an overall cooperation agreement. Many follow-up details would still need real-time adjustments. After two days of discussions over the weekend, both sides successfully signed the formal agreement.
Simon and Amy had both appeared in Japan and were frequently meeting with Panasonic executives. It became difficult to keep the related news hidden, and people inside and outside Hollywood began speculating about what was happening.
Then, on Monday, November 12, Panasonic suddenly held a press conference at its Osaka headquarters and officially announced its withdrawal from the MCA acquisition.
The news caused an uproar among media outlets on both sides of the Pacific.