At the age of 81, Norio Ohga has passed away in Tokyo, Japan. It is a sad day for electronics and media industries as it was his legendary vision that merged hardware and software for a fully vertically integrated industry was overseen throughout his career and reign at Sony.
After discovering that his reel tape recorder didn't record his performances in full, the young Ohga sent a letter of complaint to Sony which grabbed the attention of then CEO and Chairman, Akio Morita. Morita offered Ohga a position as a part time consultant at Sony recording devices which he decided to accept. In 1959 Ohga was promoted to head of Sony's tape recorders division where he would control the designs and rectify problems he saw in the division.
After great success he was promoted to the head of Sony's design lab, and he was then in charge of all product design at Sony and is credited with Sony's success in consumer products. At the age of 46 he was made the deputy president of Sony, he and Morita made the perfect partnership. Morita would expand Sony's foreign operations while Ohga would concentrate on winning designs and detailed plans for media integration.
In 1968 Ohga got his first taste of media synergy. Sony, the company that made cassette tapes, Walkmans and audio equipment entered the recording industry by forming Sony/CBS records. Ohga himself would lead the newly formed division and he made bold moves and eventually bought the whole of CBS Records for $2 billion in 1987. Through vertical integration, he was able to raise margins so that bigger, and more successful artists would join Sony Music Entertainment. Today Sony Music own a sizeable proportion of the world's music catalogue and have around 25% market share in the recording industry.
Next on Ohga's hit list was film. With Sony having massive interests in the visual medium, he saw the opportunity for further vertical integration. Sony were one of the world's premier VHS player and recorder producers, but had no interest in visual media production. Ohga decided that as a producer of all visual consumer products that they required another media acquisition. In 1989 Sony completed the purchase of Columbia Pictures from Coca-Cola for $3.4 billion and Ohga founded Sony Pictures Entertainment.
At first there was a lot of scepticism in Hollywood over a Japanese takeover, but after a lot of hard work SPE have become one of the leading studios in Hollywood. Sony also own around 20% of MGM, and have just entered into a publishing and production deal with them for the future of James Bond which will now be released under license by SPE. Further examples of Ohga's vision could be seen recently, when SPE supported Blu-ray ahead of HD DVD in the latest format war and the voice of Sony as a prominent member of the Hollywood inner circle carried a lot of weight with other studios as they were able to get Fox and Disney to support Blu-ray exclusively too.
In 1994 Sony released the PlayStation games console and founded Sony Computer Entertainment and it has been a classic example of Ohga's vertical integration strategies at work. The first PlayStation integrated CDs, which he was personally credited with forming, and it used many parts made by Sony internally instead of farming out production to external parties. In 1999 the same vertical integration ethos were at play when Sony announced its successor, the PS2. It used DVD as the game format and was able to play DVD movies which SPE were pushing into the market over DIVX, and as one of the principal founders of the DVD format it was in their interest for DVD to take over the home video market. It turned out that the PS2 would go on to become the most successful home console of all time, shipping over 150m units, and helped Sony and the other studios establish DVD has the home video format of choice all over the world. SCE also bought many game studios across the the USA and UK and established SCEA and SCEE as premier games publishers with franchises such as WipEout, Crash Bandicoot and Killzone. Just like Ohga did for music and film, SCE found that owning content is vital to a platform's success.
In 2006, with the PS3, we saw another continuation of Ohga's vertical integration ideals. Sony announced that it would use Blu-ray as its primary format. Where the PS2 could use CDs for games in the early days, the PS3 has only ever been able to use BDs for games. This continuation of Ohga's vision was instrumental Blu-ray beating its rival format HD DVD and the establishment of BD as the next physical format of choice for home video. The PS3 also leveraged Sony's Cell processor which was designed in partnership with IBM and Toshiba. By keeping their designs in-house it has enabled Sony to pursue a huge cost savings plan with the build cost of the PS3 driven down from over $1000 for early prototypes at the start of 2006 to under $300 for the PS3 slim edition which was released in 2009.
The passing of this industry titan has been marked by the current CEO and president of Sony, Sir Howard Stringer. He has continued the vertical integration strategies ingrained by Ohga by overseeing the launch of the Qriocity platform which is a content delivery network with a single account sign in that people can use across multiple Sony devices with content being made available by both SME and SPE. He said,
"When I first joined Sony in 1997, Ohga-san was serving on the frontlines of Sony management as Chairman and CEO. His numerous and successful endeavors were well-known both inside and outside of Sony. Witnessing Ohga-san's leadership firsthand was truly an honor, and one I continued to enjoy and benefit from in countless ways in the years that followed. By redefining Sony as a company encompassing both hardware and software, Ohga-san succeeded where other Japanese companies failed. It is no exaggeration to attribute Sony's evolution beyond audio and video products into music, movies and game, and subsequent transformation into a global entertainment leader to Ohga-san's foresight and vision. I offer my deepest condolences on his passing and pray that he may rest in peace."