Chapter 621 – Setting the Industry standards together Part 1 of 2

“Philips will be cooperating with our Wind and Rain electronics and Aiwa to set the industry standards for DVD (Digital Versatile Disc), and we will change the world!” Feng Yu said.

“Since Mr. Feng knew the purpose of my visit, then shall we talk about the terms of our cooperation?” Thomas asked eagerly.

“Of course. What does Philips want? You can speak your mind. Hmmm…… We also have our terms.” Feng Yu wanted to hear what Philips wanted from him before telling Thomas his conditions.

“We are very interested in MPEG technologies, regardless of whether it is the first- or second-generation technology. These are what we wanted. We have advanced technologies for Laserdisc and Compact Disc. The compressing technology used by your VCD is invented by us, and we own the patent.”

“We are using new technology. It is not your patented technology, and it is not an infringement.” Jiang Wanmeng interrupted.

“You misunderstood me. I am not saying you all had infringed our patents. Compact Disc technologies are changing every day. There are changed to technologies almost every month. But as the inventors, we have the best technologies. If we cooperate, we will surely let Compact Disc replace the tradition cassette tapes. This is a win-win situation for both of us.” Thomas explained.

“Currently, our VCD occupies 20% market share of the video market, and it is still increasing. In China, our VCD had taken over more than 60% of the videocassette market. In the US, we owned more than 30% market share. Even without your company’s help, we are confident that Compact Disc will replace cassette tapes in 3 to 5 years.”

Are we fools? With your help, the process will only speed up slightly, but we still have you give you a cut of our profits. Without your help, we can still succeed, and we are still able to get all the profits. To Wind and Rain Electronics, both ways will work. But for Thomas, Wind and Rain Electronics was walking down the wrong path.

If the VCD was just invented, what Thomas said was not wrong. But after so long, VCD had been accepted by consumers, and this was the time to reap the profits. There is no difference between getting the benefits two years earlier and two years later.

“If this is completed one day earlier, you get the profits one day earlier. Don’t you agree that capturing the market is more important?” Thomas asked.

“We only take a few months to invent this technology from scratch and used two years to introduce to the rest of the world. We are occupying the market right now.” Feng Yu replied calmly.

Thomas did not retort and continued: “Ok. Then I will talk about other things. You all invented the Digital versatile disc is to sell this product and the players, right? Then the technology for the players is very critical. I believe that you all have already started the developments for this. However, are you confident that you all will be faster at developing the encoding technology than Sony and Toshiba?”

The encoding technology was what Feng Yu wanted. If the players could only read and could not encode the disc, the uses of the disc will be limited. If a PC was equipped with a burning optical drive, then compact disc can replace the floppy disk. The profits from this will be huge!

If Lenovo could use this technology effectively in its computers, then Lenovo’s development would be much faster. Maybe it will become one of the world’s top PC manufacturer!

On the other hand, Wind and Rain Electronics and Aiwa also needed this technology. If not, they will only be able to encode VCD disc, or the DVD they produce will not be compatible with other companies’ players. That will hinder the introduction of the DVD players.

DVD will ultimately replace VCD. That’s for sure. If the industry standards were like the VCD, which was set by Wind and Rain Electronics, then Wind and Rain Electronics status in the international electronics industry will rise. The profits will be significant.

“How can you prove that the development speed will be faster than Toshiba and Sony if we cooperate with you? Furthermore, Pioneer, Hewlett-Packard, etc. are also researching into this technology.” Feng Yu asked.

“Because our company is Philips! We are the first ones to invent the encoding technology. We have the best foundations!” Thomas replied proudly.

“Fine. Even if you all were the best in this technology, but why are we faster at developing the MPEG technologies than you? We can also cooperate with other companies, and the results will still be the same.” Feng Yu replied.

Damn. You are talking as if Philips is the best company in the world. If Philips is really that good, then why didn’t you all invent the VCD? You all are just greedy and wanted a slice of the pie now.

“Manager Feng, let us analyze the market situation. After you all announced your latest technology, Toshiba and Sony immediately introduce another set of standards for the industry. Pioneer also started to look into this technology. Hewlett-Packard also announced that they will be researching this technology. That means 4 world class consumer electronics companies are entering the market. This does not include us. I want to know in the consumer electronics industry, where does Wind and Rain Electronics stand? What position does your company stand?”

This was a slap on Feng Yu’s face! If we are in the first position, do we still need to cooperate with others?

“Compare to the whole industry, our position might not be high. But when it comes to video players, our technologies are one of the best in the world. Just look at VCD. This is a product that will change the consumer electronics industry. We will be introducing Super VCD soon, and we will surely beat the old school video cassette players. When we introduce the DVD players, we will become one of the top consumer electronics company.”

“Time, Mr. Feng. I would like to remind you that time is an important aspect. What if other companies introduced DVD when you introduced your Super VCD? Your disc can store 100 minutes of high-quality video. What if other companies introduce a disc that can store 200 minutes of video? The disc is not only used to store movies. There is another popular option for consumers. TV dramas. Your disc can store 2 to 3 episodes, but others can store up to 10 episodes. It will be a great difference.”

“Don’t forget we are still partnering with Aiwa.”

“Aiwa is a good company. But its strength is only in the Walkman industry. Their CD technologies are not better than Sony and many other companies. Aiwa is only making use of its reputation as a good music player. When it comes to video, Aiwa is still a newcomer. It is not known for video players, and their technologies are not outstanding. It cannot be compared to us, Philips!”

Damn. How can he belittled Aiwa to this extent?! If Heitaro Nakajima knew about this, he would bring his samurai sword to duel with you! If he loses, he might even cut his own belly.

Feng Yu stop frowning. “Mr. Thomas. The more you say, the more you look like you want to cooperate with us. Tell me your conditions.”