Matsushita’s Vision Goes Beyond Horizon
Why is Matsushita Electric Industrial Co. of Japan, one of the world’s largest consumer electronics firms, interested in acquiring MCA Inc., the giant U.S. entertainment company?
In the short term, the answer is easy. Matsushita, with $44 billion in annual sales, wants films and TV shows it can sell along with televisions and VCRs in all parts of the globe and songs to go with its stereo and compact disc players.
And if it pays up to $7.5 billion for MCA, Matsushita will get films and songs in abundance. MCA, with $3.5 billion in sales, owns Universal Studios (“Back to the Future,” “Field of Dreams,” “Jaws,” “E.T.” and many more), plus an enormous library of television programs that includes “Murder She Wrote” and “Miami Vice,” plus one of the largest record companies in the world, plus the Universal Studios Tour theme parks. In a single purchase, Matsushita would buy a worldwide distribution system for films and records, an incomparable value.
But Matsushita’s reasons go beyond the short term. It is looking at the development of home entertainment technology--at high-definition television and, later, more complex, computer-like instruments. There’s vision in Matsushita’s moves.
The deal isn’t signed yet, and merger talks involving MCA have fallen through in the past. Still, something is afoot. So we should understand what the deeper implications are.
In the next few days you may hear a lot of noise about Japan buying up U.S. movie studios. But chances are the noise will miss the underlying issue, which is vision in Japanese business and lack of vision in American business.
So why does Matsushita want to own MCA’s films and shows? That’s essentially the same question that was asked a year ago when Sony bought Columbia Pictures. And the answer is that humble products change and develop--the phonograph becomes the stereo and then becomes the compact disc player. The mundane TV set is becoming high-definition television and nowhere more prominently than at Matsushita, which employs HDTV’s inventor, Takashi Fujio.
Owning the programing is important because it gives you something to show on the advanced TV set and also persuades producers to film for your new technology. “If you get the technology going, producers will begin shooting HDTV because they think of the rerun market, of the future value of their product,” says a senior television executive.
The vision used to be American. When Radio Corp. of America originated radio, it also created the National Broadcasting Co. to have something to broadcast; when the same RCA developed color television, it pushed programmers to film in color. But, sadly, RCA lost its vision, declined and ultimately sold out to General Electric, which unloaded its TV-making business.
Matsushita’s vision looks beyond tomorrow’s marketplace to what its annual report calls “emerging new products in audio-visual technology, including liquid crystal and digital TV. “Our long-range plans encompass computer-controlled audio visual and home automation systems. We will revitalize the home electronics market.”
What do reruns of “Jaws” have to do with computers? Plenty, says Paul Saffo, research fellow of the Institute for the Future, a Menlo Park, Calif., research firm. “Entertainment programing is better at getting computer-like machines into the home than more technical software,” says Saffo. “Just look at Nintendo and its game systems.”
With MCA, of course, Matsushita would buy great libraries of entertainment software. But the MCA deal would be only one part of the mosaic.
Early this year, Matsushita made another, much smaller deal. It agreed to invest in Owl International, a Bellevue, Wash., software company that makes a “hypermedia engine.” That’s an electronic equivalent of a library card catalogue, allowing you to pick programing through your TV set-computer. So you might come home some future night, flick on a screen in your wall and choose to view the Battle of Hastings or the life of a Chinese empress.
Clearly, it’s a long leap from Matsushita’s negotiation with MCA to the coming of walk-in television. But nobody doubts that information technology will develop massively in this decade, that computers and communications will come together.
Certainly, Matsushita understands that. In an interview in Osaka two years ago, Masayuki Nakajima, director of engineering at Matsushita’s Central Research Laboratory, summed up the company’s business.
“The greatest inventions of the 20th Century are the semiconductor and the laser,” he said. “The semiconductor has brought progress in the field of computers and the laser has contributed directly to communications. We are devoted to progress in both.”
Now, lots of U.S. companies think like Matsushita; the U.S. electronics and computer industry sees the trend of technology. But are U.S. companies acting on their vision as Matsushita is? If the TV set and the TV show make a good combination in consumer electronics, why does NBC no longer have the TV sets? Why is MCA for sale and not Matsushita?
