It was Tokyo, 1975 and the inventor of the legendary “Walkman”, engineer Nobutoshi Kihara, held a small, shiny video cassette in his hand-Betamax. For Sony, it was more than just a new product. It was the future and, after the Walkman, another technical masterpiece from Sony.
Kihara and the whole of Sony were convinced that Betamax would revolutionize home cinema. but something was stirring in the shadow of the giant.
While Sony focused on technical brilliance, a small group of engineers at Japan Victor Company (JVC) was working on a device that did not seek to adorn itself with glory. Their solution was the system to record for longer periods of time. At the helm of this project was a man whom hardly anyone knew, Shizuo Takano.
The JVC board was divided when Takano presented his version and demanded that the project be abandoned.
At the decisive meeting, Takano proposed a strategy that had never been seen before and was considered economic suicide by the JVC board. “You’re giving away our development crown,” shouted one of the board members, to which Takano replied: “Sometimes you have to share a crown to build a kingdom.“
The decision in Takano’s favour was made late at night, and the consequences of this would have a fundamental impact for JVC, Sony and the entire industry.
A few months later in the spring of 1976, a small group of leading managers from Panasonic, Hitachi, Sharp, and Toshiba received an inconspicuous, almost secret invitation from JVC. This small, hand-picked circle of leading competitors did not know why they had been invited to such an unusual meeting.
When Takano stepped in front of the audience, he and his company had a lot to lose and even more to gain. He presented JVC’s Video Home System technology for the first time, demonstrating its longer recording time, solid mechanics, and disadvantages compared to Sony’s latest Betamax system and then he laid his cards on the table.
“We all know that Sony has a technically superior product to JVC. And for this reason, we have decided to change our distribution strategy. Instead of focusing on exclusivity in technology like Sony, we will give each of you full technical insight into our technology, empowering you to replicate our technology under your own name free of charge. The only thing you have to pay is a license fee on every device and every Video Home System (VHS) cassette produced with VHS technology.”
The guests were stunned.
A promise that every competitor could use VHS technology and build devices under their own name was risky for JVC and revolutionary for the industry.
The license fees were set strategically high enough to cover development costs and secure a profit, but low enough not to be a barrier to market entry. JVC did not want a dominant position -they wanted market penetration with the aim of getting as many manufacturers as possible to make VHS the standard.
While Sony stuck to its exclusive Betamax strategy, the VHS market exploded. The devices became cheaper, and the selection grew. Every department store now has dozens of models – all with VHS technology. Customers could compare, choose, and negotiate which they did in droves.
VHS became the most widely used video technology worldwide, and JVC profited without bearing the entire burden of production. By the end of 1980, JVC’s market share was over 95% (!) and was only replaced in the mid-1990s by the technical revolution of DVDs.
Sony, on the other hand, remained true to its strategy for a very long time. They produced alone, controlled the entire process – but limited themselves, and by the time Sony realized its mistake, it was too late.
What had begun as a risky experiment became one of the greatest successes in the history of technology. Not because VHS was technically superior – but because it was a clever strategy that compensated for the technical disadvantages.
For Shizuo Takano, it was not a victory over Sony. A win beyond thinking outside the box – proof that control isn’t all that matters.
Giving up control is not always easy, especially when it comes to one’s own assets in the private sphere to establishing a personal trust structure or similar.
With over 20 years in the trust business, we at Carey Zurich know the ins and outs of trusteeship. We are committed to serving the needs of trusts and their beneficiaries, foundations, and companies with Swiss-level thoroughness and reliability, as well as the innovation, creativity, and excellence you expect – because we care(y).
This is an abridged version of the original. the original can be found on the carey website
Beat Haering – CEO
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