Chapter 87: Genuine Bottle, Fake Wine

Although the legitimate music market in Huaxia remained weak, as long as outsiders could see its rapid growth, the enormous demographic dividend and the future potential were enough to make entertainment companies across East Asia envious. This was Gu Cheng’s trump card, the means to get to the root of the matter.

In truth, Gu Cheng had little motivation to get involved in the Eastern entertainment industry, but he didn’t wish to see those companies, in their despair, resorting to endless output of cultural garbage. If he could, by chance, use a more thorough approach to control and transform it all, he saw no reason not to try.

Faced with the cooperative model Gu Cheng proposed—reminiscent of Avex’s terms in the Fusang market—Lee Soo-man, purely from a business perspective, was certainly tempted. Yet, as a veteran and elder statesman, the ingrained hierarchy of the Easterners made it hard for him to swallow his pride.

In fact, Kim Young-min’s personal feud with Gu Cheng, which resulted in Gu Cheng’s dismissal and their irreconcilable conflict, was also rooted in this obsession with seniority and face. He felt Gu Cheng had violated the tradition of “respecting teachers and elders.”

Lee Soo-man considered for a moment, deciding to slow the pace: “Mr. Gu, coming here to discuss such a major cooperation so abruptly—isn’t it a bit reckless? Even as the president, I can’t make such decisions alone. You might not know, but when we signed Xiaoya’s Fusang management contract with Avex half a year ago, it took a full shareholders’ meeting.”

Gu Cheng gestured to stop Lee’s half-truths. “You should realize, if you call a full shareholders’ meeting, your company will lose the chance to break through and cooperate with the Huaxia market. Kim Young-min has a grudge against me; he’ll never agree, and neither will the shareholders who back him.

So, I think you’d be better off kicking out Kim Young-min and his financial cronies—they know nothing about art. If an entertainment company spends its energy not on creating good works, but on ‘cultivating artists who aren’t irreplaceable, ensuring the company can always threaten and control them,’ it has no future.”

Lee Soo-man’s eyebrows rose slightly. “You want to buy shares? Ha, you might not understand our Company Law and Securities Law. When an external investor wants to join, existing shareholders have the right to refuse, as long as they can offer the same amount for the shares.”

Gu Cheng interrupted, unconcerned. “Then don’t insist on ‘equal terms.’ I can add a slight premium. I don’t believe those people have that much cash on hand in such a short time.”

Investing in S-M, to Gu Cheng, was no major business—its ROI was certainly less than investing in future internet unicorns. But since it came with the added benefit of transforming the Eastern entertainment industry and reducing cultural pollution, as well as thoroughly sealing off the risks left by his earlier reckless words and actions after crossing over, a slightly lower return was acceptable.

Besides, it wouldn’t be that low. S-M was, after all, the largest entertainment company in the East. The HOT group had pushed its valuation over one hundred million yuan, and Kwon Bo-ya had raised it to five hundred million, eventually leading S-M to a successful listing on Gaosdaq. Later, “Eastern Deities” brought it past one billion, “Girls’ Generation” past three billion, EXO over six billion... Step by step, it grew.

Currently, Kwon Bo-ya had only debuted a year ago, and with HOT’s recent disbandment, S-M was at a low point, worth less than two hundred million yuan. Buying in now, even following the original historical trajectory, holding for twelve years until EXO’s debut, would mean roughly a fortyfold appreciation. (Gu Cheng, after intervening, certainly wouldn’t support so many groups.)

A decade or so, forty times the return. Compared to angel round investments in Tengyun or FACEBOOK, it was negligible. But compared to other businesses, it was already considerable.

Of course, Gu Cheng didn’t know these details. He was a traveler, not a reborn, and only had a rough outline of events before the 2010s. Thus, he only vaguely sensed this was a lucrative deal, though he had no clear idea just how much.

Gu Cheng played to S-M’s difficulties, emphasizing them, and highlighted the benefits of entering the Huaxia market, laying his cards on the table: “I know you’ve never cared for Kim Young-min’s style, but couldn’t withstand pressure from his financial backers. But these mean little to me. After HOT collapsed, your company’s valuation has dropped, now about one and a half hundred million yuan. I can offer a premium, kick them out, and help you through these difficulties.”

Lee Soo-man maintained his composure. “Tell me your price first.”

He did want to get rid of the capital forces restricting him, but that didn’t mean he was eager to introduce a foreigner, especially as he wasn’t sure Gu Cheng would be more liberating than the others.

Currently, Lee Soo-man was S-M’s largest shareholder, holding twenty-six percent. Any cooperation would have to increase, not decrease, his equity and influence. If Gu Cheng entered, it could only affect the financial investors, not him, or there’d be no deal.

Gu Cheng understood all this without needing it spelled out, so his offer was sincere: “I can help you personally increase your holdings to thirty percent. Huaxia capital will hold forty percent, but I’ll forgo voting rights. In addition, I’ll purchase five percent to reward artists who achieve results in the future—these people would remain under your control. All I want is profit, not control. I don’t have time to manage an Eastern company.”

Lee Soo-man felt little about these terms—they were cold, all capital, no substance. He decided to let Gu Cheng lay all his cards on the table at once: “Let’s talk about the channel cooperation model you plan to use in the Huaxia market after buying in.”

Historically, a decade later, S-M gave Alibaba four percent of its shares at a low price, YG gave Tengyun six percent. These deals weren’t just about money, but channels. After all, BT dominated the Huaxia internet traffic a decade later.

In content and internet industries, any ambitious venture capital recipient sought not just money, but resources, channels, and access. Just as in Silicon Valley, if a high-tech company resorted to Middle Eastern oil money, everyone took it as a sign of imminent failure.

Gu Cheng didn’t hesitate, stating his prepared terms: “Just like with Avex, in Huaxia, Chengpin Audio takes forty percent, your company sixty.”

It looked as if he was taking the smaller share, but since he’d hold forty percent of S-M, the Eastern side would actually get sixty percent of sixty percent, or thirty-six percent. In reality, it was a sixty-forty split: Huaxia sixty, Eastern forty.

S-M’s domestic profits would be directly divided by shareholding: Huaxia forty, Eastern sixty.

The gains were balanced. The only variable was whether the Eastern market proved larger than Huaxia’s; then the Eastern side would earn more, and vice versa.

Fair competition, no deception.

Lee Soo-man thought it over and refused: “Mr. Gu, you’re asking too much. The company won’t agree. At most, I can verbally promise a framework agreement for negotiations. Once we’ve discussed it internally, you can send someone for further talks.”

Gu Cheng knew such major deals couldn’t be rushed. Li Shufu’s Volvo acquisition took nine months, and no one complained about the pace. Even if this was just an equity and strategic partnership, not an acquisition, business custom required at least two months.

Only in simplistic novels does a domineering hero settle a company in a few days.

So Gu Cheng rose to take his leave, adding a final chip: “Alright, I look forward to deep cooperation with you, President Lee. But let me remind you of something: Kim Young-min is blinded by hatred and pride; he’s even willing to ruin both our reputations to smear me.”

Lee Soo-man was slightly shaken; the words had an effect.

No matter how deep their strategic differences, it was only a matter of business philosophy. If, for personal vendetta, Kim dragged the company’s reputation down, it was a betrayal—something far more serious.

If that really happened, Lee Soo-man wouldn’t let Kim Young-min off, and even the investors backing Kim would waver.

Lee Soo-man looked at Gu Cheng coldly. “You can’t make such accusations lightly.”

All afternoon, Gu Cheng hadn’t seen Lee Soo-man so serious. He felt a spark—there was hope.

“He’s revealed the circumstances surrounding my dismissal, including company scandals related to that event, to outsiders. He did this because he knew you wouldn’t let him drag the company down for a personal grudge.

And that’s not all—you know I have connections with Young Kwon and Director Kwon, as well as a pure friendship with Miss Kwon Bo-ya. Yet some are trying to make something out of this…”

Kim Young-min wouldn’t be foolish enough to risk the reputation of the company’s most valuable artist. So Gu Cheng’s last words were half-truth, half-misdirection.

Lee Soo-man was indeed shaken. “That guy values his pride and prestige above the company’s business interests? Truly obsessed with fame—this will require careful consideration. But if I find you’re deceiving me, all cooperation is off.”

“Of course. You’re free to verify, even to lure him out and see the truth. As for equity, we can discuss that slowly. I can first sign a forty-six split agency contract for Huaxia market. That should purely benefit your company, President Lee; you could use it to test Kim Young-min’s reaction to our partnership.”

Lee Soo-man’s heart stirred: just signing a forty-six split framework agency contract without letting Gu Cheng buy into S-M would be pure benefit, no harm. It could be pushed through the board on his personal authority.

If Gu Cheng dared bet like this, was he truly so sure of Kim Young-min’s character?

“Fine, I won’t shortchange you. I’ll push the strategic cooperation this week, and the equity discussion can wait. If you’re proven right and Kim Young-min loses his composure, we’ll negotiate further cooperation.”

“Deal.”