I am Hollywood

[Chapter 1175: We Don't Care]

In contrast to yesterday's simple communication with Ian Gurney, the information at hand provided a more detailed analysis of the reasons behind the Justice Department's sudden scrutiny.

The Justice Department's concerns mainly centered on two aspects: whether Yahoo's high market share in the browser space affected the healthy development and technological progress of the internet industry, and whether its partnership with Microsoft regarding pre-installed browsers deprived users of their right to choose software freely.

Of course, typically, no government agency would launch an attack on a company without reason unless that company harmed user interests or the interests of competing businesses.

The "victims" behind this hearing initiated by the Justice Department were several internet companies such as @Home and Excite that had business competition with Yahoo.

Eric had highlighted @Home in the documents, as it was also an internet company operating search engines and portal websites. However, compared to Yahoo's massive scale, @Home's market value was only just over $7 billion. Furthermore, @Home focused more on search engines, with Microsoft's MSN portal utilizing its search engine tools.

In addition, the documents mentioned that Microsoft not only participated in early-stage venture capital investments in @Home, holding 7% of the company's shares, but was also currently in talks with @Home's board to attempt a complete acquisition in order to develop its own search engine business.

While Yahoo maintained a low profile regarding its expansion in the search engine industry, Eric never held the illusion that competitors would remain oblivious forever. Microsoft's attempts to acquire @Home clearly were not a spur-of-the-moment decision.

Indeed, the world of search engines had a very clear winner-takes-all dynamic. Due to years of accumulation, Yahoo had advanced into the realm of artificial intelligence in internet search engines, while many competitors were still utilizing rather primitive and inefficient tree search models. With its technological lead, Yahoo was also continuously and wholeheartedly investing in this business, giving Eric enough confidence to guarantee that Yahoo's search operations would ultimately come out on top.

Moreover, the key point was that, due to being a step ahead in technology, Yahoo had accumulated a vast number of patents in search engine technology, which would create a patent barrier against many newcomers.

Now, since @Home had taken the initiative to jump out, even with Microsoft's clear shadow behind it, Eric did not mind striking back hard.

...

With that thought, Eric flipped to today's news reports regarding the Justice Department's inquiries about Yahoo, only to discover that the situation seemed more severe than he had imagined.

Most media outlets were either subtly or aggressively accusing Yahoo of monopolizing the browser market, which significantly impacted their own development. AOL's portal notably stated that web browsers should fall under the category of basic internet services. Therefore, this foundational software should not exhibit any bias; Yahoo setting its default homepage to its own portal site was a clear case of unfair competition.

An article in the New York Times went so far as to demand that Yahoo entirely relinquish its monopoly on internet browser patent technology and share it across the industry to promote the rapid development of the entire internet sector.

NBC's online news site even lamented, imploring the federal Justice Department to immediately initiate an antitrust investigation into Yahoo's browser to curb Yahoo's market invasion through this software and squeeze out other competitors' viability.

All in all, the consensus among these media perspectives was that Yahoo's excessive market share in the browser space had severely affected the growth of the entire internet industry and thus warranted regulation.

It was easy to predict that if this sentiment spread further and the federal Justice Department responded with tangible actions at such a crucial moment, then Yahoo's stock price would inevitably suffer a tumble.

Moreover, due to the media's argument that attacking Yahoo's browser would benefit the entire industry, while Yahoo's stock fell, stocks of other similar tech companies would only rise, meaning they would not impact the recently rebounding NASDAQ index.

...

As Eric reviewed the material, the staff prepared for the video conference call from Yahoo's headquarters in Boston.

Finishing up the materials in haste, Eric looked up to see that Ian Gurney and others on the video screen also wore serious expressions. He put on a relaxed facade, clapped his hands, and said, "So, Ian, why don't you start by telling us how you plan to respond to the Justice Department's two inquiries tomorrow?"

Ian Gurney didn't say much. He glanced at the documents in front of him, organized his thoughts briefly, then stated, "Regarding the first inquiry, our response is that Yahoo's high market share in the browser space has not hindered the growth of the internet industry; on the contrary, it has promoted the progress of the entire field. It was Yahoo that first launched an easy-to-use graphical interface browser that connected the chaotic internet to everyday people's lives. Over the years, all COM companies have benefited directly or indirectly from the technical standards unified by Yahoo's browser. If Yahoo had not ventured forward, and allowed the market to exist with multiple internet format standards, the internet industry would not have developed so rapidly."

Eric nodded and asked, "And the second point?"

Ian Gurney continued, "Firstly, Yahoo's browser is completely free, meaning that having it pre-installed on Windows does not incur any additional costs for users. Secondly, Yahoo's browser can be uninstalled, so we do not deprive users of their right to choose. If they find the Yahoo browser unsatisfactory, they can remove the software themselves. On this point, if a stalemate forms, Yahoo can indeed make some concessions, such as adding an option during the Windows installation phase to ask users whether they want to install Yahoo's browser."

Eric silently tapped his fingers on the table, contemplating for a moment before saying, "Ian, you should understand their aim is to have us permit other companies to introduce similar browsers to create competition against Yahoo. What do you plan to do about that?"

"We will not, and we do not need, to make concessions on this, Eric," Ian Gurney was clearly prepared for this response. "The Yahoo browser has already adequately met user needs. Allowing other companies into this space to compete with Yahoo's browser would only lead those companies to set differential standards, which would damage the internet industry as a whole. It's quite like how the entire country has become accustomed to 110V AC electricity, with all household appliances operating under that standard. Now, if someone were to forcibly promote a 220V AC network from another country, it wouldn't create healthy competition but would instead lead to utterly unnecessary resource waste for the entire society."

After listening to Ian, Eric remarked, "That last example about the voltage standard is great. Make sure to bring it up at the appropriate moment tomorrow."

Ian Gurney smiled slightly, saying, "That's exactly what I was thinking."

Everyone then engaged in a free discussion about many details until the meeting was nearly over, when Eric once again adopted a serious tone, stating, "Since our competitors went to such lengths to initiate this hearing, we must also strike back while we respond; otherwise, Yahoo will only be seen as weak and easily bullied, leading to even more companies jumping into the fray."

The previously relaxed expressions of everyone instantly shifted back to seriousness.

After a short pause, Eric added, "Regarding @Home, while we are all aware that Microsoft is clearly behind it, since it has surfaced, it should be ready for the consequences. I just checked, @Home's main business is an internet search engine. While Yahoo's patent system is primarily defensive, it's robust enough for us to use as a weapon when necessary. I'll give you a week to gather evidence of @Home infringing on Yahoo's technological patents, not just in search engines but in advertising business as well. I'm sure they wouldn't overlook imitating Yahoo's advertising alliance model. We need to file not just for substantial damages but also for them to cease infringing on Yahoo's technology. So, do you all understand?"

Everyone in the two conference rooms expressed their agreement, with Ian Gurney nodding as well but saying, "Eric, is a week really enough time?"

Eric looked at the call screen and replied, "I had every company in the Firefly Group set up additional patent management departments and reminded them several times about the importance of patents for the growth of new tech firms so that you all could always be aware of your own and competitors' patent movements. So, don't tell me you haven't been collecting relevant information during that time. If that's the case, then that's your negligence."

"Of course we have, but the evidence can't be fully complete," Ian Gurney acknowledged. "Moreover, if we're to take legal action, our legal team must formulate a detailed litigation strategy, which takes time."

"You have only a week," Eric insisted. "And it seems I need to conduct a re-examination of the patent management departments in all companies. Carly, make a note of that."

Carolyn nodded earnestly and began jotting down notes in her memo pad.

Meanwhile, in the Boston conference room, Ian Gurney couldn't help but painfully smile internally. He had confidence that Yahoo's patent management department wouldn't make any mistakes, but if other group companies found themselves caught off guard due to Eric's sudden attack and there were issues, he would undoubtedly catch some complaints.

However, Eric ignored Ian Gurney's thoughts and continued, "Furthermore, Microsoft is about to launch its own digital music player, right?"

Everyone nodded, and Tina Brown, sitting next to Ian, spoke up, saying, "Microsoft's player is called Zune, set for release in mid-next month. Yahoo just did a feature on it last week, which I personally reviewed. Zune uses Microsoft's WMA audio format, and it's said that Microsoft will also partner with Warner Records to operate an online music store together."

In reality, in June, Sony had already launched a digital Walkman to compete with the Fireflyer player. That product used Sony's proprietary ATRAC audio format, and their online music store had launched simultaneously.

However, compared to the Fireflyer, Sony's digital Walkman lacked in essential features that had already gone through three generations of technological accumulation found in the Fireflyer. Additionally, the product imposed strict anti-piracy restrictions, meaning users could not obtain any audio content outside of Sony's music store.

Simultaneously, Sony had once again portrayed its inefficiency and lack of coordination, as its record division provided music that was almost all outdated in consideration of its own departmental interests.

Regarding price, Sony's digital Walkman was even slightly more expensive than the Fireflyer player.

Therefore, it was clear what the sales prospects of that product would be.

With Firefly Electronics' partnerships with EMI and Universal Records, and as the Fireflyer player continued to gain traction in North America and Europe, its monthly sales had already exceeded 3 million units, and its annual total for 1999 could possibly reach 35 million units.

By comparison, the Sony digital Walkman had not even broken the 300,000 unit mark in the two months since its release, making its performance utterly dismal, posing no threat to the Fireflyer whatsoever.

To Eric, the primary significance of the Sony digital Walkman's launch lay in breaking the monopoly status of the Fireflyer player. Both the Fireflyer player and Yahoo Music Store now had competitors. Therefore, the forthcoming antitrust accusations against the Firefly Group would lessen significantly.

Compared to last year, this year Firefly Electronics planned to sell 35 million units of the Fireflyer player. With the overall cost further reduced, it would bring approximately $2 billion in excess profits to Firefly Electronics.

Faced with such an enticing market, other tech firms certainly wouldn't want to miss out, and Microsoft had already planned to introduce its own digital music player.

However, unlike Sony, which had secured a full set of digital music player patents from Firefly Electronics in exchange for its mini-camera module patents, Microsoft had not received such benefits. This meant that Microsoft would inevitably not escape the well-crafted patent barriers created by Firefly Electronics.

After Tina Brown finished her explanation, Eric directly told Merissa, "Contact Victor and the others later. Since Gates is playing tricks, I won't hesitate to ensure that Microsoft's Zune can't officially launch. Have them disassemble Zune's prototype quickly for an analysis and gather enough evidence."

After giving instructions to Merissa, Eric looked at everyone and concluded, "Lastly, there's one more thing. You've all probably seen today's news. To those people, it seems Yahoo's browser has become the culprit obstructing the entire internet industry's development. People always sympathize with the weak, so this viewpoint will certainly have traction. If it spreads widely and the Justice Department chooses this moment to hassle us, then Yahoo's stock price will undoubtedly plummet, benefiting other new tech companies instead. The entire NASDAQ market won't be affected, and the Justice Department will act without restraint. Hence, we must ensure they don't get an easy time. Does anyone know what our greatest advantage is?"

Curious looks appeared on everyone's faces.

Without waiting for anyone's opinions, Eric continued, "Whether it's Wall Street or the new technology industry, everyone is worried that the NASDAQ index will start to decline again. But we don't care. Whether it's Yahoo, Cisco, Amazon, or others, what we care about is the long-term development of our companies, not the temporary ups and downs of stock prices. So, since they want to find trouble with Yahoo, let the entire NASDAQ market take a hit along with it. We originally planned to announce strategies such as no layoffs and budget cuts only during the next crisis to maintain stock prices. Now that we no longer have such constraints, it just so happens that I need some cash. So starting tomorrow, the Firefly Group will publicly announce a sell-off!"

*****

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