HardandSoftMega-Media.PDFVIP

Keio Communication Review No. 25, 2003 Hard and Soft Mega-Media Conglomeration: Has Sony’s Strategy Created Synergies? by Yasuhiro INOUE* Introduction Sony Corporation acquired CBS Records and Columbia Pictures in 1988 and 1989, respectively. The total of seven billion-dollar acquisitions made pos- sible the vertical integration of hardware (Sony) and software media companies (CBS Records and Columbia Pictures). Now, Sony (media and entertainment divisions only) is one of the largest media group in the world. It is apparent that Sony aimed at creating synergies out of the integration (Neubauser Cowley, 1992; Jeffrey, 1993). A few years after the acquisition, however, critics said that the combination of hardware and software did not churn out any magical “synergy” at all (for example, see Sims, 1993; Williams, 1993; The Economist, 1994 1997b). However, it may have been too early at the early stage to judge whether or not Sony’s conglomeration was a successful case that created “syn- ergy.” In addition, new information technology such as WWW (World Wide Web) was still in its infancy in the early 1990s, but it drastically changed the media business environment in the late 1990s. For example, Internet business and media content business have been merged into a single entity such as AOL Time Warner. It is thus necessary to investigate synergy effects in the new media environment. More than a decade after the big deals, it may be the right time to assess the synergies from the hard-soft combination, if any. The purpose of this study is to examine the effects of Sony’s acquisitions of these two entertainment compa- nies on its economic performance by focusing on the U.S. market. The effects of mergers and acquisitions (MA) in terms of synergies is controversial. Adams and Brock (1989) criticize mega-mergers and acquisitions in general and say that MA is “[a] profitable game, perhaps,