[Chapter 1041: Authorization]
"From where things stand now, it's unlikely any other buyers would be willing to take over our film company in the short term," Nobuyuki Idei shook his head, dismissing Howard Stringer's proposal. "Moreover, this would completely sever ties between Sony and Firefly."
Howard Stringer fell silent. The series of counterattacks from the Firefly system had made him fully aware of their strength. It wasn't just that their media business was powerless against Firefly; despite Sony's strong technical foundation in electronics, in sectors like portable music players and mobile phone manufacturing, both areas where Sony was trying to strengthen its position, companies within the Firefly system had taken a clear stance of dominance.
Additionally, while Firefly Group had only hinted at a marketing ban on Sony Pictures' films, it became clear that Sony's electronics products couldn't achieve good promotion in North America without significant advertising. Firefly had already seized nearly half of the television media resources in North America -- a fact that Sony couldn't ignore. Any multinational corporation would be foolish to overlook such a massive market.
Recalling how, during the last call from Eric Williams, he thought the man was too young and arrogant, Howard Stringer felt a wave of self-mockery and regret wash over him. If he could turn back time, he would never have crossed Eric Williams over a mere script.
Now, to avoid a complete deterioration of their relationship, it was almost inevitable for Sony to compromise with Firefly. After a week of discussions, the Sony board had basically decided to abandon their film business. But someone had to take responsibility for this decision, and there was no doubt about who that would be.
Noticing Howard Stringer's dejected expression, Nobuyuki Idei sighed. He had always admired Howard's management philosophy and even hoped he could one day become his successor. However, that was clearly off the table now.
After a brief pause, Idei addressed his assistant, who had been waiting for instructions: "Tell Eric Williams to set it for this Saturday at noon. I'll treat him to lunch in Los Angeles; make arrangements on your end."
...
As September rolled in, the summer movie season was winding down, and the fall television season was approaching. Meanwhile, major studios had nearly completed the films scheduled for the year-end release, and promotional campaigns were about to kick off.
On Saturday morning, Eric, Katzenberg, and other senior executives from Firefly gathered in one of the screening rooms at Firefly Studios to watch a screening of Ted. This film, which combined motion capture technology with live action, was set to be released over the Thanksgiving holiday on November 13, a week ahead of MGM's Mission: Impossible 3.
The teddy bear had a long history, having first appeared over a century ago. This meant that even executives in their forties and fifties seated in the room might have some childhood memories associated with it. Thus, despite having read the script, as they watched the plush bear comically disregard its moral standards on the big screen, they couldn't help but feel a mix of amusement and shock.
After the ninety-minute film ended, the lights came on, and the expressions of the other executives, apart from Eric, reflected an awkwardness as they tried to suppress their smiles, likely feeling that such reactions were inappropriate for the setting.
Eric, however, was pleased with the final cut. He had made some adjustments to the overly local details in the script compared to the original, aiming to make it more appealing to an overseas audience.
Relaxing with his legs crossed, Eric looked at the other attendees and asked, "So, what did you all think?"
No one spoke at first. Finally, Robert Thompson, the president of Firefly's distribution division, was the first to break the silence. "Eric, don't you think the film might be pushing the envelope just a bit too far?"
"R-rated shouldn't be a problem, right?" Eric smiled, countering. "Besides, the overall theme of the film remains positive."
"I mean," Robert continued, "the portrayal of the teddy bear seems a bit too raunchy. Audiences might not accept that; after all, it is a beloved stuffed toy."
Eric replied, "Bob, I believe you're implying that the film could negatively influence children, but the target audience isn't kids; it's adults. So as long as we clearly explain the content and positioning during the promotional phase, we needn't concern ourselves with that. Besides, any criticism we might face could actually generate buzz for the film."
Frank Wells nodded slightly, but followed up quickly, "Eric, we absolutely cannot let this film be associated with the Disney brand."
Eric agreed, "That's a given."
After a thorough discussion, they roughly solidified a release strategy. The group started leaving the screening room, and since it was the weekend, most opted to head home and rest.
It was only Eric and Katzenberg who remained in the theater as they left the office building, strolling along a tree-lined sidewalk in the park.
...
Casually chatting about some recent company matters, Eric mentioned, "Jeffrey, I've already set lunch plans with Nobuyuki Idei for noon. This should finally secure Columbia Pictures. However, I'm leaning towards having Firefly's investment fund handle the acquisition on its own, allowing Columbia to maintain its independent operational strategy."
Katzenberg's expression flickered with disappointment at that, yet it was somewhat expected. The size of Firefly Group was already quite substantial; integrating Columbia into the group would inevitably require restructuring, which could sap Columbia's remaining vitality and diminish it to an expendable part of the Firefly conglomerate.
By keeping Columbia operating independently, they could continue to hold their ground as one of the seven major film companies in Hollywood and potentially rise again like MGM.
"That actually sounds good. If we added Columbia into our mix, we'd likely become unwieldy. Keeping them independent would allow the Firefly system to gain more market share overall."
"I'm glad you understand," Eric nodded with a smile.
Although he relied heavily on Katzenberg, he wouldn't allow too much power to concentrate in the hands of any one executive, as it wouldn't benefit either side.
As they continued talking, they arrived at the office area for Digital Domain, where, despite it being the weekend, many employees were still hard at work.
After about an hour in the Digital Domain office reviewing some post-production effects for Iron Man, Eric checked the time and said goodbye to Katzenberg as they left Firefly Studios and drove towards Culver City.
...
Half an hour later, outside an upscale restaurant in Culver City, despite feeling quite frustrated, Howard Stringer managed to put on a smile as he saw Eric get out of the car. He quickly approached, saying, "Eric, good afternoon."
"Hello, Howard," Eric replied politely, shaking hands with him. He then turned to Bill Mechanic, standing beside Stringer, and greeted, "Bill, good to see you."
Bill Mechanic spoke with a respectful tone as he shook Eric's hand. "Hello, Mr. Williams."
After the pleasantries, Howard gestured for Eric, "Let's head inside. Nobuyuki is already waiting for you."
Eric didn't mind Idei's formalities as he walked into the restaurant with Howard.
Inside a private dining room, more small talk followed. Eric had actually hoped that Chris would make it today, but the stock distribution plan for America Online managed by Morgan Stanley was at a crucial stage.
Next Monday, the 15% of America Online stock that Firefly had tasked Morgan Stanley with distributing would officially go on sale. Although most of it had already been subscribed before, Chris had many details to iron out with Morgan Stanley over the weekend, so he couldn't come to Los Angeles.
After they ordered lunch and sent the waiter away, there were only four of them left in the dining room.
...
As soon as Idei ordered the waiter to delay serving the meal, he got straight to the point. "Eric, Sony is willing to divest its movie division, but your offer simply won't do. Given the current valuation of Sony Pictures, Firefly will need to pay at least 5 billion dollars and also assume Sony Pictures' existing debts."
Eric smiled but didn't respond directly to Idei's point. Instead, he shifted the conversation. "Nobuyuki, if I'm not mistaken, Sony is about to launch a fully digital MD player, isn't it?"
Idei was taken aback for a moment but nodded in acknowledgment. Since Eric had brought it up, there was no need to hide the truth any longer.
From the time Firefly launched the original Fireflyer player, Sony had already initiated the development of a digital music player. With Sony's technical capabilities, they could develop a similar digital music player in under six months.
So far, Firefly Electronics' second-generation player had been consistently shipping over 2 million units globally each month, with last month's shipments even surpassing 2.5 million units. Although the big five record companies had been trying various means to halt the spread of digital piracy in recent months, everyone knew that music digitization was an unstoppable trend.
Therefore, Sony had decided to swiftly release its own digital music player -- the MD player Eric had mentioned. This player used mini discs as its playback medium. Since it also targeted the compact player market, Sony chose not to change the name but to keep its digital music player under the same branding.
Compared to Fireflyer's player, Sony's MD would employ its unique ATRAC audio format, which not only had stringent restrictions against piracy but was also exclusive to Sony Pictures.
After getting Nobuyuki Idei's confirmation, Eric continued with a smile on his face, "Idei, you should know that Firefly Electronics applied for a complete set of patents related to digital music players a long time ago. Although your MD player uses an audio format exclusive to Sony and can sidestep some of Firefly's audio decoding patents, there are still other areas like system control chips, micro hard disk storage technology, and software operating systems where Sony would find it impossible to circumvent Firefly's patent walls to achieve the necessary functions for a digital music player."
Idei had yet to speak when Howard Stringer interjected, unable to restrain himself, "Eric, this is monopolistic behavior; it's illegal."
Ignoring Stringer's comment, Eric kept his gaze fixed on Idei.
Idei was clearly much calmer than Stringer. "Eric, since you brought this up, does that imply Firefly is willing to license those patents to Sony?"
Eric leaned back in his chair slightly and nodded, "As long as Sony can offer a sufficient price, of course, we can."
Howard Stringer, who had just moments ago appeared furious, now bore a look of incredulity, unable to believe that Firefly Electronics would be willing to transfer their digital music player patents.
Idei's expression began to waver as well.
It had been over a year since Firefly Electronics released the Fireflyer player. As a technology-wise simplistic electronic product, if it hadn't been for strict patent regulations, major electronics companies would have already rushed to release competing products in the rapidly evolving MP3 player market.
With the Firefly system tightly controlling the full set of MP3 player technology patents, no other company aside from Nokia had acquired relevant patent licensing, which led to the current near-monopoly of the Fireflyer player.
Sony's MD digital player indeed could not escape the patent barriers set by Firefly Electronics, as Eric had mentioned.
Initially, Sony had prepared to engage in a drawn-out legal battle with Firefly Electronics, similar to the legal wrangling that had occurred between Apple and Samsung over smartphones. While Samsung eventually skirted closure in the American market, HTC phones, which had risen earlier and surpassed Apple in market share, were effectively ousted from North America due to legal pressures, leading to its sharp decline and relegation to a third-tier smartphone brand.
Thus, the possibility of Sony losing in a legal battle against Firefly Electronics was very high.
At this moment, knowing they could acquire digital music player patents from Firefly Electronics, Idei could no longer contain his excitement.
After all, just with Fireflyer's current monthly shipment of 2.5 million units, they garnered over 800 million dollars in sales revenue every month. The forecast was that in the coming years, the annual market scale for digital music players would easily reach hundreds of billions of dollars -- a market that no electronics manufacturer would overlook.
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