Buying CBS Records and Columbia Pictures: hardware meets software (1988–89)

Owning the vessel, and earning from what fills it

The core of this decision was a hardware maker reaching to own the very content it would carry. Betamax’s defeat had taught Sony that the supply of content decides a format war. Buying CBS Records and Columbia Pictures was an attempt to act on that lesson in advance — to place hardware and software inside the same company. Yet owning content and turning content into profit are two different problems. Making films runs on a logic unlike the mass production of electronics, and the fruit of integration did not ripen quickly. The 1994 write-down was the price that distance exacted.

At a high tuition and over a long time, Sony changed from a television company into a content company. Today, that games, music and film carry about half of group profit cannot be drawn without the back-to-back acquisitions of 1988 and 1989. The investment in America — attacked at the time as buying “the soul of the United States” — was, in hindsight, a pre-emptive move to put hard-to-obsolesce content at the centre of earnings in an age when the edge in hardware goes stale within years. Morita’s idea, that one company should hold both the format and the content, still speaks to a present in which distribution and platforms compete. What is tested is not owning the vessel but whether its contents can be grown into a business that earns for the long run.