Sony Group — Company History

A laboratory of twenty, and a patent as the first barrier to entry

Sony’s predecessor was the Tokyo Telecommunications Research Institute, which Ibuka Masaru (井深大), a former navy engineer, started in October 1945 with about twenty colleagues from the old Nihon Sokuteiki (日本測定器, Japan Measuring Instrument Company), researching and building communications equipment and measuring instruments in a corner of the Shirokiya department store in Nihonbashi, Tokyo. Its products were taken up by the Ministry of Transport and the Ministry of Communications and orders grew; in May 1946, joined by Morita Akio (盛田昭夫), the son of a sake-brewing family, they incorporated Tokyo Tsushin Kogyo Co., Ltd. with capital of ¥190,000 and a little over twenty employees. The first of the objectives Ibuka set out in the founding prospectus was the establishment of an ideal factory, free-spirited and convivial, and from the war years he had held the idea that if we survive and can begin new work, that will be the moment to take up consumer products aimed at the great mass of ordinary people (The World of Ibuka Masaru, 1993). Maeda Tamon (前田多門), a former Minister of Education, was brought in as nominal president and Bandai Junshiro (万代順四郎), a former head of the Imperial Bank, as adviser, so that the firm could borrow their standing. Technical strength alone, however, was not enough to stand with the majors, and the first weapon the company laid hold of was a barrier to entry in the form of a patent.

The company began with measuring instruments such as vacuum-tube voltmeters, but chose to develop the tape recorder as a product the majors were not making and its own technology could serve, and in 1949 it succeeded in prototyping magnetic tape and a recording machine. In 1950 Ibuka acquired the patent on the high-frequency bias method from Anritsu Electric and Nippon Electric for ¥250,000 and entered the tape-recorder market. That patent ran until 1960, and it became a shield that in effect barred Toshiba, Hitachi and Matsushita Electric Industrial from the market for ten years. In the year to October 1951 the company recorded sales of $283,333 (¥102m), raised its capital to ¥20 million and bought the land adjoining its head-office plant. In August 1959 the press called it the champion of small and medium-sized enterprises — Sony, riding the wave of technological innovation, noting that thirteen years ago this company was an ordinary small back-street works; today it has climbed to a firm of two thousand employees (読売新聞 Yomiuri Shimbun, 23 August 1959), and it was treated as the representative post-war venture.

Choosing a technology because it was difficult, and narrowing the frontage

In February 1952 Ibuka travelled to the United States for the first time, heard that Western Electric would license the transistor patent for ¥9 million, and opened negotiations. Tokyo Tsushin Kogyo then had about 120 employees, more than a third of them engineers. Ibuka later admitted that it was the sheer difficulty of the thing that drove him to it: The tape recorder did not seem to me a technology of any great depth, and I was troubled about what to do with all those engineers afterwards. The transistor, on the other hand — this looked genuinely hard (技術開発の昭和史, A Showa History of Technology Development, 1986). The Ministry of International Trade and Industry, however, would not entertain it — how could a little back-street works possibly manage anything as presumptuous as developing a transistor radio? — and approval did not come until the end of January 1954. Regency of the United States put a set on sale first, at the end of 1954, and Japan’s first transistor radio, the TR-55, did not go on sale until August 1955.

The first radio cost ¥18,900 a set and, being no smaller than the miniature-valve portables then in fashion, sold poorly at home. Ibuka set as his target a size that would fit in a pocket, and went to Mitsumi Electric and Foster Electric to have new small speakers, capacitors and transformers made, down to a dedicated six-volt battery; in 1957 the company put the world’s first pocketable radio on the market. Morita Akio moved with his family to New York, turned down an offer of OEM supply from a large American distributor, and staked everything on exporting under the company’s own brand, SONY. Japanese manufacturers of the day exported as subcontractors to American firms as a matter of course, and to sell under one’s own unknown name was an extraordinary choice. In January 1958 the company renamed itself Sony Corporation, and in December of that year it listed on the Tokyo Stock Exchange.

The company did not take the road of expansion into general electricals. Yoshii Hei (吉井陛), a managing director, told a lecture audience in October 1966 that if you widen the frontage, something will be lacking in the concentration of your technology, resting the case for staying a specialist on that concentration. In colour television, Ibuka introduced the Chromatron system of Paramount, which he had seen at an American conference in March 1961, but the yield in volume production never reached one in ten and each set carried a loss of ¥100,000. To switch to RCA’s shadow-mask system would have damaged the company’s technological standing, so Yoshida Susumu (吉田進), who led the development, asked Miyaoka Senri (宮岡千里) for a structure that would fire three electron beams horizontally from a single electron gun. A prototype gun was ready at the end of 1966, Ogoshi Akio (大越明男) completed the aperture grille in the summer of 1967, and in April 1968, six years after the original idea, Sony announced the Trinitron.

Scaling up, and a first step outside electronics

In March 1970 Yoshii disclosed that the company had committed ¥20 billion of capital investment to bring the Trinitron into volume production, describing it as a sum equal to the cumulative total of all investment over the past twenty-three years, to 1968. In the same lecture he showed that exports accounted for 60 per cent of total sales, with the United States alone taking 37 per cent. Foreign shareholdings had reached 24.5 million shares, or 32.14 per cent, all but touching the 33 per cent ceiling then permitted. Since issuing American Depositary Receipts in June 1961 the company had raised money through issues at market price, and free allotments had come to 35.6 million shares, equivalent to 44.4 per cent of all shares issued. The portable player launched in 1979, the Walkman, sold heavily around the world, and Morita later put the test of a consumer product this way: A product is not the real thing unless an amateur can pick it up and enjoy using it (読売新聞 Yomiuri Shimbun, 10 May 1983).

In August 1979 the company set up Sony Prudential Life Insurance in a joint venture with Prudential Life of the United States, taking a 50 per cent stake and entering a financial business that looked to have nothing to do with electronics. It was renamed Sony Life Insurance in April 1991 and became a wholly owned subsidiary in March 1996. Complementing an earnings structure weighted towards equipment sales, this business — together with Sony Bank and Sony Assurance, founded later — came to occupy a corner of the group. In April 2004 Sony Financial Holdings was established to bring them together, and in October 2007 it listed on the First Section of the Tokyo Stock Exchange. While the core electronics business swung, finance supplied steady earnings, and its operating profit reached $1.2B (¥130bn) in the year to March 2020.

The limits of hardware, and two years of investment in Hollywood

In the first half of the 1980s Sony’s earnings still rested on equipment, and in the format contest for the home video recorder Betamax had lost to the VHS camp, so that the advantage of its own technology was slipping away. In 1987 Morita Akio voiced his alarm: Competing with others on hardware alone can only take you so far. In that sense Sony, too, has to change (日経ビジネス Nikkei Business, 3 August 1987). He later explained where the idea of owning software had come from: While we were making tape recorders, pre-recorded software appeared, and we learned that where there is software the hardware business still grows. That was the start of my thinking that we should run a record company — the trigger for going into software (New wave, April 1990). CBS/Sony Records, established in March 1968 as a joint venture with CBS Inc., became a wholly owned subsidiary in January 1988.

In January 1988 Sony bought the record division of CBS Inc. of the United States for about US$2 billion. In November 1989 it acquired Columbia Pictures Entertainment; the annual securities report records the cost of the interest acquired as about US$3.4 billion, while the 日本経済新聞 Nihon Keizai Shimbun of the day put the total at US$4.4 billion. To commit several billion dollars to Hollywood within two years was a decision of outstanding scale even in the history of Japanese investment in the United States. American media reacted fiercely — are Japanese companies going to buy up the very soul of America? (日本経済新聞 Nihon Keizai Shimbun, 24 January 2003) — and the deal became a symbol of the Japan-bashing years. The purpose was to accelerate the spread of the compact-disc player with a music catalogue of Sony’s own, and to use the power to supply content as a bargaining chip in the next format war; Morita placed it as an incidental event that rode on top of our philosophy and our policy (New wave, April 1990).

Columbia Pictures suffered from the moment of purchase from executive turmoil and swelling production costs, and in 1994 Sony took a vast impairment charge centred on the goodwill of the film business. As a result the consolidated accounts for the year to March 1995 sank to a net loss of $3.1B (¥293bn). In the short run it was expensive tuition, but the fact that a film studio and a music label had been added defined the shape of earnings for the following thirty years. In October 1995 Sony established the music publisher Sony/ATV Music Publishing in a joint venture with Michael Jackson, taking it to full ownership in September 2016. In June 2012 it acquired EMI Music Publishing through an investor group, making it a wholly owned subsidiary in November 2018.

Games as a second pillar, and the partitions that grew inside

Sony Computer Entertainment was established in November 1993, and in December 1994 the home games console PlayStation went on sale in Japan. Adopting CD-ROM brought the manufacturing cost of software below that of the cartridge format, and the design deliberately drew in a wide range of outside development houses. In May 2004 it became the first home console in history to pass a cumulative 100 million units shipped worldwide, redrawing a market that Nintendo and Sega had divided between them. The PlayStation 2, announced in 1999, played DVD-Video and sold at ¥39,800. Oga Norio (大賀典雄) set out the scarcity value of content assets: Our film division has 3,000 films and more than 30,000 television programmes. Hardware such as televisions and video recorders can be mass-produced without limit if you build the factory. Good software cannot (日本経済新聞 Nihon Keizai Shimbun, 6 December 1994).

The wider the range of businesses grew, the thicker the walls that rose inside the organisation. The company system introduced in April 1994, replacing the business-division structure, encouraged each business to stand on its own accounts, but it also became a partition that blocked the fusion of hardware with software, and of electronics with games. In April 1999 the companies were consolidated and reorganised into a network-company system, and in January 2000 three listed subsidiaries were taken into full ownership through share exchanges — yet the integrated offering of hardware, software and services that the digital age demanded was never assembled. When Apple swept the music-distribution market in 2001 with the combination of the iPod and iTunes, it was Sony, the company that had produced the Walkman, that was left behind.

The mobile joint venture, the Sony Shock, and the first loss since founding

In mobile telephones, Sony signed a memorandum with Ericsson of Sweden in April 2001 to combine the two businesses, and in October that year the equally owned Sony Ericsson Mobile Communications began trading. Ericsson brought its distribution network and communications technology, Sony its implementation technology and product planning, and the two shared the burden of development costs. A depressed world market kept the venture in the red after its launch, so in January 2003 the two parent companies agreed a further capital injection of €150 million each, €300 million in all, backing the continuation of the business with capital. It then recovered on the success of camera phones and Walkman phones, and in 2011 Sony bought out Ericsson’s holding and took full ownership.

In April 2003, when Sony announced a downward revision to its results for the year to March 2003, the share price fell limit-down two days running and dragged the whole Nikkei average with it. The episode, called the Sony Shock, forced on the market the structural deterioration in the earnings of the electronics business. In the later part of Idei Nobuyuki’s (出井伸之) time as chief executive the weakness of televisions, personal computers and mobile phones became chronic, and in June that year the company changed the form of its governance by adopting a committee-based board. Howard Stringer, who became the first foreign chief executive in June 2005, began structural reform, but the losses in the television business did not stop, and S-LCD, the liquid-crystal panel company set up on an equal footing with Samsung Electronics in April 2004, did not improve the economics either.

The financial crisis of autumn 2008 struck the follow-up blow, and in the year to March 2009 the company recorded the first operating loss in its history, $2.4B (¥228bn), and a net loss of $1.1B (¥99bn). A worldwide fall in demand and a sharp appreciation of the yen hit an electronics business with a high export ratio head-on. Net losses continued in the following years, and the year to March 2012 brought the largest in the company’s history, $5.7B (¥457bn) — the accumulated effect of impairment of the television business, restructuring costs and the amortisation of goodwill, with flat-panel televisions by then in their eighth consecutive year of operating losses. Consolidated sales fell from ¥8,871.4 billion in the year to March 2008 to ¥6,493.2 billion in the year to March 2012, some ¥2.4 trillion lost in four years.

A swap that decided first what to drop, and semiconductors as a new pillar

In April 2012 Hirai Kazuo (平井一夫), who had come up through the PlayStation business, became president and chief executive. The first policy he set out was a swap of the business portfolio, and the focus lay not on what to grow but on what to discard. In February 2014 the company agreed to transfer the VAIO-branded personal-computer business to the investment fund Japan Industrial Partners, handing it to the new company in July that year and hiving off the television business at the same time. The battery business was settled by a definitive agreement of 31 October 2016 for transfer to Murata Manufacturing, at a price of about $160.8M (¥18bn), with the Murata group taking on the employment of some 8,500 staff. This was withdrawal by handing the business on whole rather than closing the plants — a decision to concentrate resources on growth areas even at the cost of giving up the lithium-ion battery the company itself had commercialised.

What Hirai left inside Sony were five things: the PlayStation, the CMOS image sensor, music, pictures and finance. In April 2016 the imaging and sensing solutions business was hived off and began trading as Sony Semiconductor Solutions. As smartphone cameras rose in quality that business grew, and by 2019 its share of image sensors for smartphones was above 70 per cent, earning an operating profit of $1.3B (¥144bn). The three-year medium-term plan announced in February 2015 placed return on equity at the head of its management indicators. In the year to March 2018 consolidated operating profit reached $6.7B (¥735bn), two and a half times the previous year and the highest for twenty years, since the year to March 1998.

Integration against the break-up demands, and the pure holding company

A structure holding many businesses drew the persistent charge of a conglomerate discount — a market capitalisation below the sum of the values of the individual businesses. In 2013 the American hedge fund Third Point, as the largest shareholder with about 7 per cent, proposed a partial separation listing 15 to 20 per cent of the entertainment business in the United States; Sony declined it by unanimous vote of the board on 6 August of that year, citing the synergies of full ownership. On 13 June 2019 the same fund, holding about US$1.5 billion of Sony shares, submitted a 102-page proposal titled A Stronger Sony demanding the separation of the semiconductor business. Yoshida Kenichiro (吉田憲一郎) rejected it in a letter to shareholders on 17 September, and the board unanimously placed semiconductors as a driver of growth.

In April 2018 Yoshida, who had come from the chief financial officer’s post, became president and chief executive. He remade a company that had relied on the centripetal force of its founders into one bound by a shared word, its purpose, defining the direction with the phrase we want to be loved by creators (日経ビジネス Nikkei Business, 31 January 2025). From 20 May to 13 July 2020 the company ran a tender offer at ¥2,600 a share that lifted its holding in the listed subsidiary Sony Financial Holdings to 93.46 per cent, acquiring the remainder by share exchange and taking it into full ownership on 2 September. The total cost of the acquisition was about $3.7B (¥396bn). The offer price carried a premium of roughly 30 per cent to the recent share price, and the effect was that the whole of the finance subsidiary’s profit would now be consolidated.

In April 2021 the company changed its name to Sony Group Corporation, and the electronics business moved under the holding company as a newly established Sony Corporation. With the pure holding-company structure complete, the restructuring that had run since 2012 reached a resting point. Consolidated net profit for the year to March 2021 reached $9.4B (¥1.03tn), one of the few instances of a Japanese company passing ¥1 trillion. With sales of ¥2,604.7 billion in game and network services, ¥927.3 billion in music and ¥757.6 billion in pictures, the three entertainment businesses together came to account for almost half of consolidated sales.

Concentrated investment in games, and finance separated in its forty-sixth year

In July 2022 Sony Interactive Entertainment acquired the independent American games developer Bungie, Inc. for about US$3.6 billion. Bungie was known as the studio behind the Halo series and at the time of purchase was operating the live-service games of the Destiny series. The investment aimed at strengthening first-party content on the PlayStation and at establishing a recurring-revenue model, an attempt to shift the earnings base away from dependence on one-off packaged sales. In the year to March 2025 game and network services reached sales of ¥4,543.6 billion and an operating profit of $2.8B (¥415bn), the largest earnings pillar in the group.

In September of the same year, 2022, Sony established Sony Honda Mobility Inc. on an equal footing with Honda Motor. The joint venture combines Sony’s sensing technology, including CMOS image sensors, and its entertainment technology with Honda’s vehicle design and manufacturing, to develop electric cars. At CES in January 2023 it unveiled the electric-vehicle brand AFEELA, with Kawanishi Izumi (川西泉), formerly of Sony, as president. Rather than competing on volume with the large carmakers in finished vehicles, it is an attempt to find a way of earning from the platform on which technology and content ride; no earnings contribution from the mobility business is yet visible as of 2026, but consolidated sales for the year to March 2025 reached ¥12,957.1 billion and operating profit ¥1,407.2 billion, renewing the highest levels in the company’s history.

On 13 February 2024 Sony obtained certification of a business reorganisation plan under the Act on Strengthening Industrial Competitiveness for a partial spin-off of the finance business, announcing the start of preparations the following day. Taking 30 September 2025 as the record date, it distributed one share of Sony Financial Group in kind for each Sony share, passing more than 80 per cent of the wholly owned stock to shareholders and keeping just under 20 per cent in hand. It was a direct listing with neither a new issue nor an offering: the shares were relisted on the Prime Market of the Tokyo Stock Exchange on 29 September at an opening price of ¥205, against an opening price of ¥4,230 for Sony Group shares the same day. Finance, begun in 1979 to make good the fragility of the core business, was returned to the capital market forty-six years later, and the group was left concentrated more tightly still on entertainment and semiconductors.