Chapter 1121: The Record Empire - PolyGram

Fok Kin-ning's face was a little solemn as he said slowly, 'The first problem is cost. The production process for CD discs and CD walkmans is very demanding, and the production cost cannot be reduced for the time being.'

'The production department has done a detailed accounting. If the annual production is set at 100,000 units, the cost of each CD Walkman will be US$162, which is very close to the wholesale price of the Tiangong SP-S1 Walkman!'

'Considering the company's operations, investment in the research and development of follow-up technologies, marketing and a series of uncertain costs, the ex-factory price must be controlled at US$575, and the unified official retail price will have to be around US$760.'

'This price is too high, more than three times the price of the Tiangong SP-S1 Walkman.'

'Such a high price will seriously hinder the development of the CD Walkman market, and the sales prospects are uncertain.'

'Therefore, the company cannot make a decision internally at this time, whether to launch it now or to continue to develop it for a period of time in response to cost issues, and wait until the cost has dropped before commercial production.'

After saying this, Huo Jianning looked straight at Xia Yu, waiting for his opinion.

The fact that the company could not reach a consensus also meant that he was still hesitating. If the company president made a decision, how would the people below dare to oppose it?

It was not that simple to launch a product on the market, especially when it was used to open up a market for the first time. If it was successful, it would be fine, but if it failed, the impact would be huge.

Even if it was successful, it was not a time to rest on one's laurels, because the high price would limit the number of customers. Even if it had an initial advantage, as long as similar products could be sold at a lower price, it could quickly seize the market.

Fok Kin-ning was considering whether to continue reducing costs and then seize the market as quickly as possible, occupying an absolute leadership position, so that even if he faced later competitors, he could calmly deal with the competition.

Xia Yu thought about it, his eyes narrowed slightly, and he said in a deep voice: 'I know your concern, but since the product has already been developed, let's not waste any more time.'

'It doesn't matter if the price is high or low. There are marketing methods for low prices and high prices. It all depends on how you market it. There is no shortage of wealthy people in the world, and there are always a certain number of avid fans of portable players among them. So let's target this group of people first.'

'As long as our products win over these people, they will naturally help us promote it, and our market position will be occupied first.'

'The window of opportunity before other competitors launch the same product is the time for us to work hard to reduce costs. This requires Dr. Lu and you to work even harder.'

'After our competitors launch similar products, we will launch a second offensive and bring the cost-reduced products to the market to continue capturing the mid-to-low-end market.'

Upon hearing this, Lu Chao said with determination, 'Chairman, I will do my best!'

Xia Yu looked thoughtfully at Fok Kin-ning and suggested, 'Kin-ning, I have an idea for marketing. You can ask distributors around the world to investigate all the avid fans of the Walkman. When the product is released, in addition to media resources, we also need to invite these influential fans to the event. They are the spreaders and fermenters of our reputation.'

Fok Kin-ning nodded and said, 'Chairman, I understand. I will do as you say.'

Xia Yu smiled and nodded, and casually asked, 'What was that second question?'

Huo Jianing suppressed the smile that had just appeared on his face, took a deep breath, and said, 'Chairman, this second question is about CD records. The CD record market is brand new, unlike the vinyl record market, which already exists. So while we are developing CD portable players, we also have to develop the CD record market.'

'Without an adequate supply of CD records, consumers won't be able to make use of the CD portable players they buy.'

Hearing this, Xia Yu already understood what Fok Kin-ning meant, and his brows could not help but furrow.

This was indeed a big problem.

After thinking about it, he asked, 'Since you have considered this problem, you should have thought about how to promote CD records, right?'

'Chairman, we have analysed it,'

'It has to do with the current global music market. There are two modes of record production. The first is the asset-light model, where the music company does not have its own record pressing factory and instead commissions professional record pressing factories to do the pressing. The second is the asset-heavy model, where the music company operates the entire industry chain, with its own record pressing factory, producing and pressing its own albums for distribution. Your Universal Music Company is the second model.'

'Due to technical issues with CDs, the cost of a recording device is five times that of a mature vinyl recording device, and the cost of a CD disc is also higher than that of a vinyl tape.'

'Therefore, in the face of market uncertainty, other music companies and recording companies may not necessarily invest heavily in buying CD recording equipment from us, and they may even deliberately confront us. After all, CDs are competitors of vinyl records, and we are infringing on the interests of those with vested interests.'

'Your Universal Music Company will definitely support you, but Universal Music's music copyright restrictions are very strict. Europe and the United States don't listen to our Mandarin and Cantonese songs.'

'In fact, this is the most critical issue, and it is difficult to solve at the company level.'

'The most obvious thing is that the world's largest music giant, PolyGram International Limited, is currently being suppressed by Universal Music in Hong Kong, but its music library is much stronger than Universal Music's.'

'I have deliberately investigated this. The predecessor of PolyGram International Limited, the DGG/PPI Group, was formed in 1962 by the merger of Philips Records, a subsidiary of Philips, and Deutsche Grammophon, the world's most famous classical music record company under Siemens. In 1980, it merged with the famous British classical music company Decca Records. Philips Records had already merged with the American company Mercury Records, so PolyGram International Limited's influence and repertoire are all over the world.'

'Now there are only two major shareholders in PolyGram International Limited, one being the Dutch company Philips and the other being the West German company Siemens. Philips is our main competitor, so we dare not go to PolyGram International Limited. If we do, Philips will know, and they will definitely not let PolyGram International Limited cooperate with us. If they get wind of it, we will be extremely passive.'

After Fok Kin-ning had finished speaking all at once, he suddenly felt a sense of relief.

This problem had been weighing on his mind for a long time, but Chairman Xia Yu had never returned, and the CD walkman had not been developed before, so he waited until now to tell Xia Yu.

In his opinion, at this level of difficulty, only the chairman can solve it, and he is at his wits' end.