While many Americans see the battle for a single industry standard in digital videodisc technology as a rerun of the 1970s war over videocassette standards – a war that Sony’s Betamax eventually lost to the VHS format backed by Matsushita – electronics insiders in Japan view it differently.

“This isn’t a rerun of the videocassette war,” says a Toshiba executive here. “This time, it’s a war between Sony and Hollywood. Just look, the industry is already almost entirely with us.”

“Us” in this case means Toshiba and Time Warner, which have partnered in designing DVD technology that is not compatible with a version designed by Sony Corp. and Philips Electronics. Unlike the VCR war, this time Japanese electronics and communications giants picked the perceived winner remarkably early in the race – and most are behind Toshiba.

In a corporate culture where slow “consensus-building” is almost a religious process, the early commitment Toshiba managed to gain for its DVD format from major players like Matsushita was a stunning achievement.

Matsushita led an alliance of nine major electronics and entertainment firms in announcing support for the Toshiba-Time Warner format at a news conference on Jan. 24. Two other majors, Sharp and Sanyo, are understood to have also assured Toshiba of their support.

The extent of cooperation and the deep involvement of foreign firms with key Japanese players – both features of the DVD battle – are virtually unprecedented in the Japanese electronics industry.

Why now?

The DVD battle emerged just as corporate Japan became painfully aware of its slow pace on the information superhighway.

There’s now broad agreement that this is no time to divide the industry with bitter internal battles. There’s also a sense of urgency about catching up.

And when it comes to speeding up on the “highway” – just like Japan’s earlier rush into semiconductor technology, auto manufacturing and heavy engineering – there are no sleeker wagons to hitch up with than U.S. firms.

Sony, which still holds some sway in the industry as a trendsetter, hit the mark on that front by announcing a global partnership last month with Microsoft – the world’s largest computer software company.

The deal, which is Microsoft’s most substantial collaboration with any hardware manufacturer, took six months of tough negotiation and was described by an electronics analyst in Tokyo as “a brilliant strategy” on Sony’s part.

The early development of its own DVD format, in collaboration with Philips Electronics, also seemed a master stroke – up to six months ago. Now, the likelihood of another disastrous defeat for Sony has fueled the sense of urgency in corporate Japan to secure access to superior technology and innovations overseas.

“Euro countries and the U.S. pursue strategies to have their national standards adopted as international ones,” The Yomiuri Shimbun, a major daily newspaper, warned last week.

The race – like many others Japan runs – started slowly, but it is rapidly warming up.

The Japanese government in recent months has targeted multimedia technology and international standardization as priority areas for Japanese companies. It has launched massive deregulation in telecommunications and satellite broadcasting, and is now actively encouraging firms – sometimes with subsidies – to enter partnerships and share technology.

Barely a week passes now without news of one Japanese firm or another buying or tying up with a U.S. company in multimedia and related fields. Among the many interesting deals is the move by trading houses such as Itochu Corp., (now in partnership with Toshiba and Time Warner), and Sumitomo Corp., (in a co-venture with Tele-Communications Inc.) into cable television.

Electronics giants, meanwhile, are entering multiple ventures in communications and entertainment. Matsushita, which bought MCA Inc., is moving into entertainment software and recently announced it was negotiating a tie-up with IBM in the multimedia business, which could lead to joint development of a next-generation personal computer.

Toshiba, meanwhile, after its move into the communications and entertainment business through its tie-up with Time Warner, has forged ahead with its DVD format. The firm recently announced a joint project with IBM and Siemens AG on production of super-advanced computer chips.

Among large computer firms, Fujitsu is currently setting up a business base in California to “look for possible American partners and stay in touch with developments in the multimedia business,” according to a spokesman. Last week, Fujitsu and NEC, another Japanese computer giant, announced they had joined an American group of high-tech companies to “develop the information superhighway.” The Virginia-based group, the Cross Industry Working Team, is focusing on the standardization of multimedia equipment.

One of the most interesting, though smaller, partnerships of late, involves both Sony and Matsushita.

It revolves around Japan’s Ministry of Intl. Trade & Industry (MITI), which is leading six major electronics manufacturers and a computer software house in a joint company to develop and share core multimedia communications technologies.

The companies involved, apart from Sony and Matsushita, are NEC, Toshiba, Fujitsu, Hitachi and Ascii – a lineup featuring some of the most bitter foes in Japanese electronics.

The joint venture, Digital Vision Laboratories, is 70% government-owned and 30% by the seven companies. It is small in terms of capitalization (6 billion yen), but significant in its structure and aims.

On other fronts bitter rivalries have brought some of the firms into direct conflict with others in the alliance. But government insistence, alongside the fear of being left behind, provided the all-powerful glue.

The bottom line, as an announcement of the joint venture put in the baldest terms, is the need for “coordinated Japanese government-business efforts to catch up with advanced U.S. technologies and alleviate the burden of heavy development costs on individual companies.”

Follow @Variety on Twitter for breaking news, reviews and more
Post A Comment 0