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At the 20th anniversary celebration for the CBS/Sony Group, Morita foreshadowed Sony's future when he said, "With the development of software, new hardware products come to life for the first time. Ten years from now, when we celebrate the 30th anniversary of the CBS/Sony Group, I hope that Sony will have developed its software business into a large-scale operation which includes images in addition to sound."
In January 1988, the company had acquired CBS Records Inc. and in November of 1989, Sony purchased Columbia Pictures Entertainment, Inc., one of the largest motion picture companies in the world. These two major acquisitions generated mixed media coverage throughout the United States and Japan.
The acquisition of CBS Records was the result of more than a year of negotiations. At the end of 1986, under instructions from Morita and Ohga, Michael Schulhof who was then vice chairman of SONAM, began discussions with CBS Chairman William S. Paley, CBS President Laurence A. Tisch, and CBS Records President Walter R. Yetnikoff. The negotiations, which covered such issues as the price of the acquisition, continued for almost a year before their conclusion in 1987.
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 | | Norio Ohga signing the contract with CBS at Sony Corporation of America |
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The formal acquisition process began as soon as an agreement was reached. Toshio Sakai, who was then Senior Managing Director and General Manager of the Accounting Division, led Sony's team of lawyers and other specialists who negotiated with CBS through the maze of legal and financial procedures. Like Sony, CBS had assembled a large team to conduct the negotiations. Because Sony was acquiring 100% CBS Records' assets including all personnel, everything relating to the deal had to be worked out in painstaking detail to avoid any problems later. Each team was divided into smaller groups to grapple with specific issues. After a month of exhausting negotiations that often continued through the night, all loose ends were finally tied up, and CBS Records with operations in forty countries around the world was a member of the Sony Family.
The acquisition of Columbia Pictures took place next. Unlike the CBS Records deal, there was no protracted period of negotiation between the two companies. Once the Columbia Pictures board of directors agreed to the acquisition, Sony made a cash tender offer for all of the outstanding company shares. What did take time, however, was deciding how to manage the movie company once it had been acquired. Purchasing Columbia Pictures cost Sony $3.4 billion, which was the largest purchase ever by a Japanese company. But when considered in conjunction with the acquisition of CBS Records, this purchase gave Sony control of vast assets in terms of music and motion picture content.
For Morita and Ohga, acquiring CBS Records and Columbia Pictures meant the fulfillment of the Sony Group's ultimate strategy: to secure high quality software in order to complement and promote Sony's wealth of hardware products. The process of developing the software side of the business had begun in 1968 with the creation of CBS/Sony Records. This experience strengthened Sony management's belief that in the long-run Sony needed to simultaneously develop both AV hardware and software for that hardware. Acquisition seemed the logical route to realize Sony's overall strategy. CBS Records and Columbia Pictures were later renamed Sony Music Entertainment Inc. (SME) and Sony Pictures Entertainment Inc. (SPE).
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| Starting afresh under the names of Sony Music Entertainment and Sony Pictures Entertainment. |
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These two purchases were central elements in Sony's global business strategy for the 21st century. Sony had already gained a strong reputation as a supplier of high quality, innovative products related to technologies such as magnetic recording, optical devices, semiconductors, and digital signal processing. In addition to these hardware-based technologies, Sony now possessed a wealth of "software," which would help to establish a convergence between the two sides of its operations. In doing so, Sony was moving toward a goal of creating a blueprint for audiovisual business in the 21st century.
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