The Sun Never Sets on an Electronic Empire

Akio Morita met Masaru Ibuka in a Japan convulsing during the last throes of World War II. The men were both engineers for the Imperial Navy, where Ibuka had devised a strategy to correct radar oscillations by training female music students to adjust them with a tuning fork. Morita was entranced, and though as an eldest son he was expected to run the family sake business, he joined Ibuka after the war to begin an electronics company.

Sony’s first invention was a simple but imperfect rice cooker, then repairing radios smashed during bombings. Next came a tape recorder, Sony’s first real break. The company’s dedicated mechanical engineer devised a way to make the tape magnetic by cooking batches of oxalic ferrite in a pan, then coating it onto special paper, cut by hand, with costly badger-hair brushes. The jerry-rigged tape worked and in 1952, the modified version was a hit in Japan.

The tiny company, which had been calling itself Tokyo Tsushin Kogyo, decided to go international and rename itself. Morita chose Sony, which he considered an elegant combination of the Latin word sonus, sound, and the American expression sonny boy. Next on the agenda was a move to New York, where Sony established its American headquarters. Morita staffed the entire U.S. office with Jews, whom he admired for their alleged business savvy, and grew to appreciate the joys of both Yiddish and matzoh ball soup.

Sony grew to dominate the U.S. electronics market with inventions such as the Walkman (originally called the “Sound-About”), and fighting and winning brutal legal battles over Betamax and compact disc technology. The introduction of the CD, to Nathan’s mind, perfectly illustrates one of the essential differences between the Japanese and the Americans. When Sony executives proudly unveiled the new technology, American record execs were aghast. They liked the pops and hisses of a record, and many began chanting, “The truth is in the groove!” before the shocked Sony lifers. Sony president Norio Ohga, an opera buff and classical conductor in his spare time, was deeply surprised—to his mind, any music lover would prefer superior sound to a record that could be easily scratched. But the dominance of the CD was established, especially after Sony acquired CBS Records.

As Sony’s influence in America grew, these differences became more pronounced, and came to an ugly head after Sony’s acquisition of Columbia. Nathan is at his best in dissecting Sony’s machinations during this period. Sony purchased the ailing Columbia to please an aged Morita, and the company’s ignorance of standard due diligence caused them to overspend massively on Columbia and its fatally flawed first leaders, Peter Guber and Jon Peters. When the magnitude of the loss became apparent to Sony, they hid the truth from Columbia investors for several months before declaring a $2.7 billion write-off in 1994. The SEC later fined Sony $1 million for misleading the public.

Sony has shown an amazing ability to reinvent itself, however, and is quick to enter markets it thinks it can dominate. Its current earnings driver, for example, is neither a traditional home electronics product nor a movie studio. It’s Play Station, and the introduction next Spring of Play Station 2, which combines gaming with the Internet and DVD technologies, will presumably keep throwing money into Sony’s coffers, which were $445 million in the third quarter, despite a surprisingly strong yen (which makes Sony’s Japanese-made products relatively expensive for American consumers).

Nathan had rare access to Sony’s top echelon and being a professor of Japanese at the UC-Santa Barbara helped him get inside the secrets of the notoriously enigmatic company. The book closes with a riveting account of the illness of both founders, who for a time lay ailing in adjoining hospital rooms. Morita’s stroke left him a permanent invalid, and Ibuka died in 1997, and Morita’s wife delivered a stunning eulogy to Sony insiders which Nathan beautifully translates. It is this combination of the personal and corporate that makes SONY a compulsively readable business biography.

SONY: The Private Life by John Nathan (Houghton Mifflin, 396 pp, $26.00 ISBN: )