An innovative Japanese consumer-electronics company founded by Masaru Ibuka and Akio Morita in 1946, Sony started out manufacturing heating pads, rice cookers, and other small appliances, but soon switched to high technology, bringing out Japan's first reel-to-reel magnetic tape recorder in 1950 and then its first FM transistor radio in 1955. Sony's later innovations in consumer electronics included the Trinitron color television picture tube (1968), the Betamax videocassette recorder (1975), the Walkman personal stereo (1979), the compact disk player (1982), the 8mm video camera (1985), and the Video Walkman (1988).

Sony's success in marketing its products worldwide rested on distinctive styling and "global localization," a practice that retained product development in Japan, while disbursing manufacturing among plants in Europe, the United States, and Asia. To maintain quality control, Sony dispatched large numbers of Japanese managers and engineers to supervise these plants.

Under the leadership of Norio Ohga, who joined the company 1959 and ran Sony's design center, Sony pursued the course of marrying Japanese consumer electronics with American entertainment software. After purchasing CBS Records for $2 billion in 1987, Sony initiated the Japanese invasion of Hollywood by acquiring Columbia Pictures Entertainment (CPE) from Coca-Cola for $3.4 billion in 1989. The following year, Sony's Japanese rival Matsushita Electric Industrial Company, the largest consumer-electronics company in the world, purchased MCA for $6.9 billion. The two takeovers led to charges that the Japanese were about to dominate American popular culture, but the controversy soon died out when it became apparent that Sony and Matsushita would have to stay aloof from production decisions if their studios were to compete effectively.

In 1989, the year Sony acquired CPE, Sony generated over $16 billion in revenues from the following categories: (1) video equipment other than TV--$4.3 billion; (2) audio equipment--$4.2 billion; (3) TV sets--$2.6 billion; (4) records--$2.6 billion; and (5) other products--$2.5 billion. The CPE acquisition, which included two major studios--Columbia Pictures and TriStar Pictures--home video distribution, a theater chain, and an extensive film library, brought in an additional $1.6 billion in revenues.

By becoming vertically-integrated, Sony hoped to create "synergies" in its operations, or stated another way, Sony wanted to stimulate the sales of hardware by controlling the production and distribution of software. The company may have been reacting to the so-called "format wars" of the 1970s when Sony's Betamax lost out to Matsushita's VHS video tape recorder. Industry observers believed that the greater availability of VHS software in video stores naturally led consumers to choose VHS machines over Betamaxes. Sony would not make the same mistake again and found a way to protect itself as it contemplated introducing the 8-millimeter video and high definition television systems it had in development.

To strengthen CPE as a producer of software, Sony spent an added $1 billion and perhaps more to acquire and refurbish new studios and to hire film producers Peter Guber and Jon Peters to run the company, which it renamed Sony Entertainment. Sony performed reasonably well under the new regime until 1993, but afterwards, Columbia and TriStar struggled to fill their distribution pipelines. Virtually all of Sony's hits had been produced by independent producer affiliates and when these deals lapsed, Sony lagged behind the other majors in motion picture production and market share. Some industry observers claimed Sony lacked "a clear strategy" for taking advantage of the rapid shifts in the entertainment business. After top production executives left Columbia and TriStar in 1994, Sony took a $3.2 billion loss on its motion picture business, reduced the book value of its studios by $2.7 billion, and announced that "it could never hope to recover its investment" in Hollywood.

-Tino Balio

FURTHER READING

Lardner, James. "Annals of Law; The Betamax Case, Part 1." The New Yorker (New York), 6 April 1987.

_______________. "Annals of Law; The Betamax Case, Part 2." The New Yorker (New York), 13 April 1987.

Lyons, Nick. The Sony Vision. New York: Crown, 1976.

Morita, Akio. From a 500-dollar Company to a Global Corporation: The Growth of Sony. Pittsburgh, Pennsylvania: Carnegie-Mellon University Press, 1985.

Morita, Akio, with Edwin M. Reingold, and Mitsuko Shimomura. Made in Japan: Akio Morita and Sony. New York: Dutton, 1986.

See also Betamax Case; Camcorder; Home Video; Time Shifting; Videocassette; Videotape