Sony Corporation Enters the Entertainment Business

Within two years from 1987 to 1989 Sony Corporation spent $7 billion to acquire CBS Records and Columbia Pictures Entertainment as “software” complements to its “hardware” base in consumer electronics. The case describes the company history the consumer electronics, musical record and motion picture and television production industries and the acquisitions themselves. Questions raised by the case include the basis for the acquisitions (Do complementary goods need to be produced under common ownership? Can the necessary coordination be achieved through market relations? Were these the right companies to buy?), whether they make financial sense (Did Sony pay too much? If so, why?), and how should Sony manage the new businesses (What should the reporting relations be? How can the coordination between software and hardware be achieved?). Issues of technical standards and compatibility also arise, especially with regard to VCRs and HDTV, but are not the focus.