Sony-Columbia Pictures: Lessons from a Cross Border Acquisition

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Case Details:

Case Code : BSTR119
Case Length : 17 Pages
Period : 1989-2004
Organization : Sony Pictures Entertainment
Pub Date : 2004
Teaching Note :Not Available
Countries : US/Japan
Industry : Media and Entertainment

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This case study was compiled from published sources, and is intended to be used as a basis for class discussion. It is not intended to illustrate either effective or ineffective handling of a management situation. Nor is it a primary information source.

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EXCERPTS

Reasons for the Acquisition

Sony envisioned the convergence of electronics and entertainment devices in the early 1990s. Hence, it felt that it made good business sense to merge the company's electronics division that developed products like VCRs and CD players, which it called the "hardware," with entertainment synergies between its hardware and software businesses - CBS and Columbia would supply the software (music and movies) to fuel demand for the company's next generation hardware (digital video technology).

Sony's decision to acquire Columbia was also driven by the company's previous experience of losing to Matsushita in the video cassette recorder (VCR) business in the 1970s.

According to Morita, Sony's Betamax video format standard would have been a great success (more than Matsushita's VHS video format standard), if only the company had owned a library of films and tapes to release in Beta format.

Sidney Sheinberg, president, MCA Inc.(a rival company of Sony) also supported this view and said, "Had Sony owned Columbia at the time, I suspect the prevalent system would now be Beta."

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Apart from this, Morita's dream of owning a Hollywood film studio was also one of the major factors that led Sony to acquire Columbia...

Post-Acquisition Blues

After acquiring Columbia, Sony encountered many problems, which analysts attributed to its poor corporate governance and mismanagement. However, some analysts also felt that the vast difference between the Japanese and American management cultures was also responsible for the failure of Sony to manage Columbia efficiently.

CORPORATE GOVERNANCE

In light of the negative and anti-Japanese publicity generated among the Americans as a result of the acquisition, Sony proclaimed that it had no intention to influence things at Columbia or dominate Hollywood through the studio. The company reiterated its main objective behind the acquisition - to benefit from synergies accruing from combination of its hardware with Columbia's software. To further ensure Americans and media that it had no intentions of tampering with the culture of Hollywood, or Columbia, Sony chose to allow the American managers of the company complete control and granted total autonomy to them...

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