JVC - Company History

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Financial history 1957–2009 — revenue, cost structure, balance sheet, cash flow and key ratios, year by year →

Founded 1927
Origin ビクター米国本社
Founding location 横浜市
Core business at founding Manufacture and sale of gramophones
Listed and delisted 1960–2008 — listed on the Tokyo and Osaka stock exchanges, and continuing today as part of JVCKenwood
Founding
In September 1927 the Victor Talking Machine Company of the United States established the Victor Talking Machine Company of Japan at Nakamura-cho, Minami-ku, Yokohama, as a domestic production base that would get around Japan’s high import tariffs. Its first president, B. Gardner, came from the American side. In 1929 Mitsubishi Goshi and Sumitomo Goshi took equity stakes and the company became a Japanese-American joint venture; in 1937 Tokyo Shibaura Electric joined them, and the following year, 1938, RCA of the United States withdrew its capital. In 1943, at the government’s request, it was renamed Nippon Onkyo and designated a military-managed factory, and air raids then burned down most of the Yokohama plant. In 1945 it changed its trading name to Victor Company of Japan, and in 1954 it concluded a capital tie-up with Matsushita Electric Industrial — the fourth party to hold control of its equity.
The Decision
It took the standard not by keeping the format to itself but by handing it to its competitors. As the mainstream of audio moved to separate components, specialist makers took the market from it, and stereo fell from more than four-tenths of sales in 1965 to 21 per cent in the year to March 1972. Faced with that plateau, the company concentrated its resources on home video and in 1976 licensed its own VHS format to other makers. Winning adoption by Matsushita Electric Industrial, which had both volume manufacturing and a sales network, settled VHS as the de facto standard by the middle of the 1980s. Sales grew to the $2.9B (¥700bn) scale, but falling prices and falling licence royalty rates ran together, and in the year to March 1993 the company passed its dividend for the first time since listing. The very method by which it took the standard — widening the camp — thinned out the share each member took.
Today
The company that had won the standard lost its independence when the standard ended. Consolidated sales peaked at $8.3B (¥968bn) in the year to March 2003 and then shrank, and the year to March 2008 brought a net loss of $459.7M (¥48bn). With no earnings source to replace VHS, in March 2008 it sold the motor business to a new company set up by Japan Industrial Partners and the circuit business to Meiko, and in September that year its shares were removed from the first sections of the Tokyo and Osaka stock exchanges. In October it created a holding company with Kenwood by share transfer, and in its final year, to March 2009, sales had fallen to $4.9B (¥462bn). Today, as part of JVCKenwood, the centre of the business is not home audio-visual equipment but professional radio systems and car electronics.
Competition
What decided the standard was not which recording system was better but how many makers adopted it. In the home video market of 1976, Sony’s Betamax, the V-Cord II of Sanyo Electric and Toshiba, and Matsushita Electric Industrial’s home video were competing, and JVC joined as the fourth camp. Sony was ahead on technology, but VHS was licensed widely, multiplying the makers who would manufacture and sell it, and so the standard was settled. The same method did not work in the phase that followed: in digitisation the company was placed below both its parent, Matsushita Electric Industrial, and Sony. In 1988 its management admitted that the camp had grown too large, while explaining that pressure from various quarters had made it impossible to refuse the technology licences. Failing to keep for itself the volume manufacturing and component strength it had handed to its allies in the course of taking the standard is what defined the twenty years after VHS.

Timeline

1927–1975From a foreign-owned gramophone maker into a Japanese electrical group

  1. 1927The Victor Talking Machine Company of Japan is established in Yokohama
  2. 1929Mitsubishi Goshi and Sumitomo Goshi take stakes; a Japanese-American joint venture
  3. 1931A new Yokohama head-office plant is built
  4. 1937Tokyo Shibaura Electric takes an equity stake
  5. 1938RCA withdraws its capital
  6. 1943Renamed Nippon Onkyo and designated a military-managed factory
  7. 1945The trading name changes to Victor Company of Japan
  8. 1954Matsushita Electric Industrial takes an equity stake
  9. 1960Listed on the first sections of the Tokyo and Osaka stock exchanges
  10. 1961A dedicated audio production site opens
  11. 1968US JVC Corp. is established
  12. 1972The music division is spun out as Victor Musical Industries
  13. 1975Profits fall as competition intensifies

1976–1993Winning the VHS video war, and the growth it brought

  1. 1976Matsushita Electric adopts VHS; the format war with Betamax begins
  2. 1981The Fujieda plant opens to expand VHS output
  3. 1985The long format war is settled in VHS’s favour
  4. 1985Sales reach the ¥700bn scale on video decks and tape
  5. 1987S-VHS is launched as a high-definition format
  6. 1989A rising yen erodes export margins and the VHS business turns down
  7. 1993A net loss of ¥43bn is posted for the year to March

1994–2026The long decline after VHS, and the end in a merger

  1. 1995An Asian regional headquarters is set up in Singapore
  2. 1996A Chinese investment company is established
  3. 1998JVC Europe Limited is set up as the European regional holding company
  4. 1999The company takes a stake in the record label Teichiku
  5. 2000An in-house company system is introduced
  6. 2002The “Leap 21 Plan” is drawn up to transform the business structure
  7. 2007A third-party share allotment is made to Kenwood
  8. 2008The motor business is sold to a new company set up by Japan Industrial Partners
  9. 2008The circuit business is sold to Meiko
  10. 2008JVCKenwood Holdings is created with Kenwood by share transfer
  11. 2011The former Kawasaki head-office plant is sold

Founding Story

1927–1975From a foreign-owned gramophone maker into a Japanese electrical group

JVC did not begin as a Japanese venture. It began as a factory the Victor Talking Machine Company of the United States put up in Yokohama to get around Japan’s tariffs, and over its first half-century the controlling shareholder changed four times — US Victor, then Mitsubishi and Sumitomo, then Tokyo Shibaura Electric, then Matsushita Electric Industrial. Sales were $12M (¥4bn) in the year to March 1957 and $356.5M (¥107bn) by the year to March 1975; what the company accumulated across those unsettled decades was not a settled owner but the habit of assembling its own technology, from analogue recording through audio equipment and on towards video.

Founded as the Japanese arm of US Victor, and four changes of parent

In September 1927, looking ahead to an expanding gramophone market, the Victor Talking Machine Company of the United States entered Japan directly and established the Victor Talking Machine Company of Japan (日本ビクター蓄音機)[1][2]. As a foreign-owned local subsidiary it raised its first factory at Nakamura-cho, Minami-ku, Yokohama, and its first president, B. Gardner, came from the American side[3]; from nothing, the company set about building an organisation to manufacture and sell gramophones. Its founding spirit was a “great family” principle (大家族主義) of justice and service, and the high tariffs levied on imported goods were a tailwind for making the product in Japan[4]. In January 1929 Mitsubishi Goshi and Sumitomo Goshi took equity stakes, turning it into a Japanese-American joint venture[5]. As a pioneer of the audio equipment business in the pre-war Japanese market, the company held a distinctive position. It is also remembered as one of the few cases of direct American capital entering pre-war Japan. From its earliest days, the instability of having no settled controlling shareholder was a constant companion.

In December 1937, as wartime controls tightened, Tokyo Shibaura Electric (Toshiba) took an equity stake, and in February 1938 the Radio Corporation of America (RCA) withdrew its capital, so the foreign colouring faded[6]. In April 1943, at the government’s request, the company changed its name to Nippon Onkyo (日本音響) and was designated a military-managed factory[7]; air raids then destroyed most of the Yokohama plant and every function stopped[8]. In 1945 it changed its trading name to Victor Company of Japan and set out as a domestically owned electrical manufacturer[9]. After the war it fell into financial difficulty and sought reconstruction under bank administration, concluding a capital tie-up with Matsushita Electric in 1954[10]. With Matsushita’s support it restructured under the “V-One Plan” (ブイワン計画), but competition in the consumer electronics market against majors such as Matsushita Electric and Sharp was fierce, and the struggle went on. This complicated lineage imposed its own long-lasting constraints on how the company could be run. Every change of parent shook the management line, and the task of securing independence was put to it again and again. The unsettled capital structure went on constraining its business decisions.

Establishing itself as an audio maker, and the search for a line of its own

The struggle in consumer electronics pushed the company towards specialising in sound, and it concentrated its resources on developing high-quality audio equipment. In 1960 it listed on the Tokyo Stock Exchange[11], and in 1961 it built a dedicated audio production site to put audio equipment into volume manufacture[12]. Drawing on its origins as a gramophone maker, it settled on a strategy of avoiding head-on competition with the big diversified electronics groups by establishing a position of its own in audio products such as record players and amplifiers. From this period it steered back towards being an audio specialist. The intention to secure independence was set out in these years. The distinctive footing built around sound took clear shape from this time.

In the year to March 1975, however, intensifying competition brought lower profits[13], and the plateau in the audio market itself bore down as a management problem. Across an unusual lineage in which the parent changed four times — US Victor, Mitsubishi and Sumitomo, Toshiba, Matsushita Electric[14] — the company kept searching for a line of its own, opening markets with its own technology and its own products. The fruit of that long search was precisely what would decide the company’s fate in the era to come: the development of a home video cassette recorder format. The accumulation of searching and trial and error prepared the later victory in the video war. A conception of extending continuously from sound into video recording began, little by little, to take shape.

Gramophone-bred audio technology, and the groundwork for video

Alongside its pursuit of a distinctive line in the post-war audio market, the company had also been exploring entry into video equipment from an early stage. Home video recording had been a frontier field since the 1960s, with makers competing in prototypes, and the company watched carefully for its chance to enter in earnest, armed with the analogue recording technology it had accumulated since its gramophone days. Even after being taken into the Matsushita Electric group[15], it retained enough latitude to maintain research and development of its own — an organisational precondition that made the later development of the VHS format possible. Holding on to a space for independent research, little disturbed by the parent, worked to its advantage in the format development race that followed. Securing that latitude was what decided the fate of its technical development.

The commitment to quality built up in audio equipment, and the precision-mechanism engineering cultivated in analogue recording, laid the ground for both to bear fruit again on the shop floor of home video cassette recorder development. As Sony showed signs of taking the lead with its Betamax system, the company’s engineers held to a determination to develop a system of their own and pursued patient research towards a format optimised for home use. The path that led to the 1976 announcement of VHS and Matsushita Electric’s decision to adopt it was prepared as an extension of that technical work[16]. The time when years of accumulated research would flower in the new market of the home video cassette recorder was, in this period, drawing close. Continuous technical development prepared the mainstay business of the era to come.

1976–1993Winning the VHS video war, and the growth it brought

In 1976 JVC put its own VHS system into the market and persuaded its parent, Matsushita Electric Industrial, to adopt it rather than Sony’s Betamax — a move that turned the contest from an argument about which recording system was better into a race over which camp could assemble more factories and more sales networks. Sales climbed to the $2.9B (¥700bn) scale as VHS became the de facto world standard, but the same open licensing that had won the war also invited the price collapse and the falling royalty rates that ended the era in a net loss of $386.8M (¥43bn).

Establishing the VHS format and winning a long video war

With the audio market at a plateau, the company poured its resources into developing a home video cassette recorder format. While Sony moved first with its Betamax system, the company developed its own VHS system and in 1976 won Matsushita Electric’s decision to adopt VHS[17]. With Matsushita’s volume manufacturing and sales network joining the VHS camp, the format advanced towards de facto standardisation, and the drawn-out format war with Betamax was settled in VHS’s favour in the mid-1980s. It was a technical victory that stands in the industry’s history. The strategy of diffusing the technology through a licensing scheme was itself the weapon that won the video war. The subtlety of that strategy — taking the market standard by gathering allies — was displayed here.

As VHS spread, demand for video decks and VHS recording media expanded, and the company’s sales reached the $2.9B (¥700bn) scale. In 1981 it built a new domestic production site[18] and put in place a greatly enlarged manufacturing system for VHS-related products. A structure in which, as the format’s proponent, it drew royalty income from other makers also fell into place, and the licensing business came to underpin results. It was also the moment when a company that had started out with gramophones, roughly half a century later, made a dramatic turn to command the world in an entirely different field — video recording. Given where the company had come from, the growth of the VHS business was told inside the industry for years afterwards as the story of an almost miraculous transformation. It was a dramatic turn made across more than half a century.

A high-definition format, and the erosion of the earnings structure

In 1987 the company introduced S-VHS (エスブイエイチエス) as a high-definition format, trying to put a brake on the price falls that had followed VHS standardisation. As VHS spread widely and rival makers established volume manufacturing one after another, the price of video decks fell faster than anyone had imagined. Setting a higher-grade format that appealed on picture quality was meant to soften the effect of falling prices, but incremental evolution of the format alone could not halt the structural deterioration in earnings. Licence royalty rates were also being cut, and the foundation of the earnings structure began to shake. It was also a period in which the reality — that small step-by-step advances in technology cannot stop a structural decline in earnings — was gradually becoming plain. The shelf life of the VHS business itself was approaching at an unexpected speed.

Compounded by the worsening of export margins as the yen rose, the business structure that had grown on VHS turned to contraction as the Heisei era began. In the year to March 1993 the company posted a net loss on the $386.8M (¥43bn) scale, as the disappearance of demand for VHS tape and its late response to digitisation struck management directly. It is hard to deny that the very experience of success — victory for the VHS format — worked as a side effect that delayed investment decisions on next-generation technology. That delay in judgement, bound by the experience of success, became one of the symbolic cases in the Japanese electrical industry. It was a period in which a precarious structure — leaning on a mainstay that weakened by the day while no new mainstay could be established — began to eat away at results from the foundation. The difficulty of finding no next pillar grew heavier by the day.

The delicate balance of staying independent inside Matsushita

The company’s position — commanding the world market with VHS while remaining a consolidated subsidiary of Matsushita Electric[19] — was a rare case even within the industry. Its growth years rested on a delicate balance: working closely with its parent Matsushita on volume manufacturing and sales, while keeping a degree of independence in research, development and product planning. Explicit pressure to integrate from the parent’s side was weak, and the company was allowed to keep the form of an independently listed company for a long time. This distinctive relationship shows its face from time to time through the long prehistory that led to the merger of later years. The difficulty of the distance from the parent was a distinctive element defining the company’s freedom of action, and it lingered to the end. The difficulty of that form — a consolidated subsidiary that stayed independently listed — was exposed.

On the other hand, precisely because the relationship with the parent was too close, there was also a structural weakness: management decisions tended to lag when results deteriorated. Sorting out businesses that overlapped with Matsushita Electric, or committing to bold restructuring, required the parent’s consent, and that worked to slow the speed of decision-making. Behind the growth years, preparation for the dead end that would follow VHS was, in the end, never carried far enough, and was handed on to the next era. Part of the cause of the slump that followed can be seen here. The structural weakness surfaced once results began to slide, and it damaged the mobility of the company’s management decisions. The bonds arising from the parent-subsidiary relationship were not easily untied.

1994–2026The long decline after VHS, and the end in a merger

With VHS spent and no successor in sight, JVC spent fifteen years searching for a second pillar it never found, held back both by its own reflexes and by the consent it needed from Matsushita before it could restructure. In the year to March 2008 it turned $6.4B (¥660bn) of sales into a net loss of $459.7M (¥48bn); in October that year it merged with Kenwood under a holding company, and eighty years of independent history came to an end.

Decline after the loss of the mainstay, and the struggle to rebuild

After the loss on the $386.8M (¥43bn) scale posted in 1993[20], the company was driven into the grave situation of having lost its mainstay business. In 1995 it set up an Asian regional headquarters in Singapore to strengthen its overseas operations[21], and in 2002 it drew up the “Leap 21 Plan” (躍進21計画) in an attempt to transform its business structure[22]. It could not, however, establish a new pillar of earnings to replace VHS, and — constrained too by its position as a consolidated subsidiary of Matsushita Electric — bold restructuring made little headway for a long time. Between the pride of an independent company and the constraints of its parent, management was forced into a state of suspension. It was a phase in which precious time simply ran on while no good plan for rebuilding could be found. Between coordination with Matsushita Electric and its own internal rebuilding efforts, management steered a difficult course throughout.

It tried to expand into digital video cameras and a new generation of audio equipment, but differentiating itself amid competition with Sony and Panasonic was not easy. In the year to March 2008 it posted a net loss on the $459.7M (¥48bn) scale against sales on the $6.4B (¥660bn) scale, and continuing on its own had, in effect, reached its limit. A company that had achieved the technical feat of developing the VHS format met the ironic outcome of ending without making the transition to the next generation — the price of that very success. It became a rare example, handed down to later generations, in which technical victory and managerial defeat lived side by side. The problems hidden in the shadow of success had surfaced after the moment to deal with them had passed. It is an instructive case in the history of the electrical industry: problems hidden in the shadow of success, coming to the surface once the moment to address them had gone.

The Kenwood merger and the move under the JVCKenwood holding company

In October 2008 the company merged with Kenwood, an audio equipment maker likewise suffering weak results, and established the holding company JVCKenwood[23]. The shares in the company held by Matsushita Electric were transferred to JVCKenwood, and the company brought its history as an independent listed company to a close for the time being. In 2011 the former Kawasaki head-office plant was sold as well[24], and much of the company’s physical presence disappeared. The industry received it as a symbolic event marking a break in a history of more than eighty years. That break in more than eighty years of history was also the moment it chose to survive by changing shape — from sound to video to equipment for the car. It was a defining moment that brought deep feeling to those in the industry.

Starting out in 1927 as the Japanese arm of US Victor making gramophones, settling its character as an audio equipment maker through four changes of parent, and winning worldwide renown with the development of the VHS format, the company ended roughly eighty years of independent history as a division of JVCKenwood[25]. Victory for the VHS format was a great achievement, clearly inscribed in the history of Japan’s video industry, but because it failed to transform its business it could not, in the end, preserve its continuity as an independent company. A corporate history in which success and setback cross so vividly is exceptional even in the electrical industry. Eighty years of independent history reached one conclusion in a merger. A complicated lineage unlike any other became, in itself, the company’s greatest defining feature.

Read the full history in Japanese →

Notes

  1. Victor Company of Japan, securities report for the 120th term (FYE March 2008), corporate history section↩
  2. Victor Company of Japan, securities report for the 120th term (FYE March 2008), corporate history section↩
  3. Corporate Histories: A Century of Meiji, Keizai Shunju-sha, 1968↩
  4. Corporate Histories: A Century of Meiji, Keizai Shunju-sha, 1968↩
  5. Victor Company of Japan, securities report for the 120th term (FYE March 2008), corporate history section↩
  6. Victor Company of Japan, securities report for the 120th term (FYE March 2008), corporate history section↩
  7. Corporate Histories: A Century of Meiji, Keizai Shunju-sha, 1968↩
  8. Corporate Histories: A Century of Meiji, Keizai Shunju-sha, 1968↩
  9. Victor Company of Japan, securities report for the 120th term (FYE March 2008), corporate history section↩
  10. Victor Company of Japan, securities report for the 120th term (FYE March 2008), corporate history section↩
  11. Victor Company of Japan, securities report for the 120th term (FYE March 2008), corporate history section↩
  12. Victor Company of Japan, securities report for the 120th term (FYE March 2008), corporate history section↩
  13. Victor Company of Japan, securities report for the 120th term (FYE March 2008), corporate history section↩
  14. Victor Company of Japan, securities report for the 120th term (FYE March 2008), corporate history section↩
  15. Victor Company of Japan, securities report for the 120th term (FYE March 2008), corporate history section↩
  16. Victor Company of Japan, securities report for the 120th term (FYE March 2008), corporate history section↩
  17. Victor Company of Japan, securities report for the 120th term (FYE March 2008), corporate history section↩
  18. Victor Company of Japan, securities report for the 120th term (FYE March 2008), corporate history section↩
  19. Victor Company of Japan, securities report for the 120th term (FYE March 2008), corporate history section↩
  20. Victor Company of Japan, securities report for the 120th term (FYE March 2008), corporate history section↩
  21. Victor Company of Japan, securities report for the 120th term (FYE March 2008), corporate history section↩
  22. Victor Company of Japan, securities report for the 120th term (FYE March 2008), corporate history section↩
  23. Victor Company of Japan, securities report for the 120th term (FYE March 2008), corporate history section↩
  24. Victor Company of Japan, securities report for the 120th term (FYE March 2008), corporate history section↩
  25. Victor Company of Japan, securities report for the 120th term (FYE March 2008), corporate history section↩

References & sources

  1. Nikkei Business (Nikkei-McGraw-Hill / Nikkei BP): 26 May 1975, on a distinguished house at the crossroads between decline and revival; 5 Dec 1988, on the “leader” betting on the revival of the VCR; 14 Jun 1993, on whether JVC could come back.
  2. Yomiuri Shimbun: 11 Sep 1975, on forecasts for video diffusion; 10 Sep 1976, on the intensifying “video war”.
  3. Sixty Years of the Victor Company of Japan (1987), the company’s own history.
  4. Shukan Toyo Keizai (Toyo Keizai Inc.), 20 May 1972, on recovering lost ground in sound after a reliance on colour television.
  5. Diamond special issue (Diamond, Inc.), 25 Feb 1966, on JVC’s aim of ¥100bn in sales. Management, Oct 1955, on the company’s turnaround.
  6. Corporate Histories: A Century of Meiji, Keizai Shunju-sha (1968), the Victor Company of Japan entry.
  7. Victor Company of Japan, Ltd. (annual securities reports), including the corporate-history section and the consolidated financial statements to the year ended March 2009.

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