Developing VHS and licensing it into a world standard (1976)

The strength and the weakness of opening a format to win the standard

The core of this decision was that JVC did not keep the technology it had developed to itself but opened it to other firms, competitors included. Where Sony sought to defend Betamax within its own camp, JVC supplied the format to a range of makers — its parent Matsushita among them — and bundled their manufacturing and selling power behind a single standard. Behind it lay a reading that the standard would be decided less by the merits of the technology than by how many allies could be gathered, and what made that reading workable was Takano Shizuo’s development ability and his skill at holding the participating companies together. This strategy of opening up is what allowed a late entrant to take the market.

That said, the very success of holding the standard also dulled the company’s turn to the next era. A strategy of widening the market by adding allies, once diffusion neared saturation and prices fell, thinned the earnings base as royalty rates came down with them. The confidence won with VHS produced an over-reliance on video recorders, and the delay in responding to digitalisation is written in the later losses and the merger. A company that conquered the world with a single technology finds that same victory makes it hard to move — the strengths and weaknesses of opening a format to win a standard ran together through the second half of JVC’s life. The question this decision leaves is one that today’s platform competition still asks.