Pioneer Electronic Corporation History

Company Perspectives:

Faithful to its philosophy, the Company will stay focused on satisfying customers with products that "Move the Heart and Touch the Soul."

Company History:

Pioneer Electronic Corporation is one of the leading electronics firms in the world. The company divides its operations into several product groups, with the largest being car electronics, generating nearly 45 percent of net sales. Included in this grouping are Pioneer's car stereos, car CD players, car speakers, and car navigation systems. Pioneer's second largest product group, and the company's original arena, is that of home audio, which generates 20.5 percent of overall sales. Among the home audio products are stereo systems, receivers, CD players, cassette tape decks, and speaker systems. In the video product group, responsible for 13.4 percent of sales, are digital versatile disc (DVD) players, laser disc players, karaoke systems, and plasma displays, color screens that feature high picture quality and thin profiles. The "other electronics" group generates 14.5 percent of net sales and includes equipment for cable TV systems; multifunction, cordless, and cellular telephones; and digital direct-broadcast satellite decoders. Finally, accounting for about seven percent of net sales is the audio/video software group, which sells movies and animation, karaoke and game software, music, and car navigation software in the DVD, laser disc, videocassette, CD, CD-ROM, and other formats. Nearly two-thirds of Pioneer's overall net sales are generated overseas.

1930s Origins

Pioneer is largely a creation of the Matsumoto family. Nozomu Matsumoto was born in Kobe in 1906, the son of a Christian missionary. He inherited his parents' religious faith, which may have played a role in his early desire to bring "technological innovation based on deep emotions" to the Japanese people. Specifically, when Matsumoto heard a new, Western-built phonograph speaker in 1932, he was so struck by its superior tone that he immediately resolved to make such products available in Japan.

In 1936 Matsumoto founded a tiny company called Fukuin Shokai Denki Seisakusho, or Gospel Electric Works. From a workshop in Osaka, Matsumoto and a colleague struggled to devise a "dynamic" speaker like the Philco model Matsumoto had listened to, and after a year of experimentation the A-8 was brought to market in 1937. In recognition of its groundbreaking role Matsumoto christened the speaker Pioneer, and graced it with the corporate logo that was used for decades: the Greek letter omega--symbol of electrical resistance--and a tuning fork.

Matsumoto soon grew dissatisfied with his Osaka location, and in 1938 moved the company to Tokyo. In a factory above which his growing family lived, Matsumoto built and repaired radios and speakers and began to build a modest reputation as a reliable local craftsman. The founder's sons, Seiya and Kanya Matsumoto, helped run the production lines while their father was out making deliveries and sales. Matsumoto's wife Chiyo served as company chef, maintenance staff, and accountant. Before Matsumoto's sons were old enough to take a hand in running the company, war swept over Japan. The Matsumoto family survived intact, as did Nozomu Matsumoto's commitment to bringing audio enjoyment to the Japanese. In 1947, as the national economy slowly regrouped under Allied supervision, Matsumoto incorporated Fukuin Electric and resumed his quest.

Soon after graduating from Chuo University with a business degree, Seiya Matsumoto joined his father's company as head of marketing and sales. Seiya Matsumoto was a natural salesman, remaining in charge of the company's sales division from that time until he was made president in 1982. His brother's talents were more mechanical, like his father's, and when Kanya Matsumoto was finally coaxed into joining the firm, he oversaw the technical and manufacturing aspects of the business.

Stereo Systems in the 1960s and 1970s

Fukuin made great strides in the postwar boom economy, with sales and profits climbing at a steady pace while the company continued to build its reputation as a maker of audio components, especially speakers. The Japanese electric industry as a whole enjoyed similar success, and by the mid-1950s Fukuin was selling a significant number of components to its bigger competitors. This was a profitable business but not likely to build the kind of mass brand-name recognition that would make the company a true audio giant. Achieving such recognition would require the production and effective marketing of complete stereo sets, and in the early 1960s Matsumoto and his sons set out to achieve that goal.

The company first changed its name, from Fukuin (Gospel) Electric to the nondenominational Pioneer. It next brought out, in 1962, the first stereo system with detachable speakers, a variation on the usual one-piece console design. This experiment, known as the PSC-5A, was extremely successful and became the stereo industry's standard format. Pioneer also committed itself to the production of full stereo component sets, hoping to share in the blossoming overseas trade with a full range of audio products.

Having thus raised the stakes by positioning Pioneer as a competitor with Japan's leading audio manufacturers, founder Matsumoto realized that his company would need executive experience on a scale greater than he or his sons could provide, and in 1963 Yozo Ishizuka was brought in from Toshiba as managing director. Ishizuka is generally credited with smoothing Pioneer's transition from family business to multinational concern, something that Nozomu Matsumoto made possible by his graceful withdrawal from the executive suite. Over a period of years Matsumoto gradually relinquished control, eventually naming Ishizuka president in 1971, while he himself remained a rather distant chairman of the board.

In 1964 Pioneer brought out its S-71X modular stereo set, a runaway success that solidified acceptance of separable stereo equipment and put Pioneer on the audio map. The S-71X, introduced at a time when Japanese electronic goods were fast becoming the standard around the world, was instrumental in Pioneer's explosive growth in the 1960s. Under the careful guidance of Ishizuka, Pioneer expanded its range of products, opened the first of its overseas sales offices, and pared its debt burden to virtually nothing. Perhaps of greater significance was the company's decision to enter the nascent car stereo business. With Japan well on its way to becoming one of the world's leading automobile manufacturers, Pioneer was able to popularize the concept of quality stereo systems in even the most modestly priced cars. Car stereo quickly became an important part of Pioneer's overall sales and would remain so. In 1975 the company introduced the world's first component car stereo.

Early Development of the Laser Disc

Along with several other Japanese companies, Pioneer began research into the possibility of home video equipment as early as 1972. Within a few years, however, President Ishizuka and Chairman Matsumoto agreed that their company had fallen too far behind to continue competing in the development of video systems based on magnetic tape, and instead focused on the idea of optical discs that reproduced images by means of a laser beam. As the race for video technology continued, it became clear that Pioneer's technically superior disc equipment would succeed or fail in isolation; none of the competing companies followed Pioneer into laser disc manufacturing, choosing either tape or discs played with a needle similar to that used on a phonograph. Each year Pioneer's risk increased. If it was able to build a cheap, reliable laser disc machine the market would be won. However, it seemed more likely to most observers that the company was digging its own grave.

As befit its name, however, Pioneer persevered with its disc research, in 1978 announcing that it had perfected the first laser optical video-disc player and in 1981 introducing a similar machine for home use. Even if laser disc had immediately taken off, Pioneer would still have been years behind its chief rivals financially. Victor Company of Japan (JVC) had watched revenue from videocassette recorder sales climb from $36 million in 1976 to $1.4 billion in 1981, when Pioneer finally entered the market. As it turned out, disc sales did not take off at all. Pioneer's machine had several drawbacks. The laser disc player was far more expensive than its VCR counterpart; the discs themselves were to be sold, not rented, making them costly; and the discs could not be "rewritten," or recorded on at home.

Despite these formidable problems, Pioneer remained committed to the disc concept, making it its mission to "never let the LaserDisc be a failure," as stated in The Spirit of Pioneer. The company poured an enormous amount of money and effort into the disc program in the early 1980s, only to be greeted with a worldwide recession in audio sales compounded by the falling value of the U.S. dollar, in which Pioneer received a substantial percentage of its revenue. As a result, in 1982 the company lost money for the first time in its 44-year history.

In April 1982 President Ishizuka died suddenly, leaving Pioneer without direction at a critical juncture in its history. Since Nozomu Matsumoto felt that he was too advanced in years to reassume control, Seiya Matsumoto stepped in as the new president while Kanya Matsumoto became his second in command. The brothers faced a difficult situation. Given a lingering recession and consumers' continued indifference to disc technology, neither Pioneer's immediate prospects nor its long-term health was secure.

During the early 1980s the company added to its product line answering machines, dictating machines, cable TV equipment, and, in 1982, its successful first compact disc (CD) player. In 1983 Pioneer introduced a Laser-Karaoke device, which in effect allowed consumers to make their own home music videos; and in the following year, Pioneer began marketing the first CD players for automobiles. The combination of these innovations and Seiya Matsumoto's leadership was enough to restore Pioneer to profitability in 1983 and 1984, but 1985 ended in another deficit, emphasizing once again the critical role of laser-disc sales in the company's future. Pioneer had bet on laser, and after ten years of research, production, and marketing it had little to show for its daring.

During the late 1980s and early 1990s, however, the laser-disc market began to show improvement, as the cost of players decreased and a greater number of movies found their way onto disc format. The Pioneer CLD-100, introduced in 1989, was modestly priced and could play both video discs and CDs. Sales were up substantially, to almost 120,000 players in 1989. Pioneer remained committed as ever to the laser concept, spending $200 million in 1989 to buy DiscoVision Associates of California, a leading optical-disc research firm. The company also posted annual profits from 1986 through 1989.

The Transitional 1990s

An end to the Japanese economic boom in 1991 threw the country's economy into a lengthy downturn. Pioneer, like most Japanese electronics firms, was hurt by the difficult economic operating environment. The electronics firms also felt the effect of the high yen, which made Japanese exports more expensive overseas&mdash did high labor costs. In response, Pioneer and other firms shifted some of their production outside of Japan. Pioneer doubled the capacity of its audio equipment factory in the United Kingdom and set up a Mexican subsidiary to build car audio equipment for the North American market. In 1995 the company also established a subsidiary in Portugal to manufacture car audio equipment.

Still, in the mid-1990s Pioneer maintained two-thirds of its production in Japan, and despite its continued reputation for high-quality products, the high price tags of those products were increasingly being undercut by such rivals as Aiwa Co. Ltd. Thus, Pioneer was losing market share. The company ventured into the personal computer market in 1995 when it introduced the world's first Apple Macintosh clones. However, these high-priced machines quickly failed in the Japanese marketplace as consumers opted for cheap Windows-based PCs. These and other difficulties, including the continued failure of the laser disc to attract a mass audience, led Pioneer to post losses for the fiscal years of 1995 and 1996.

Soon after the end of the 1996 fiscal year, Seiya Matsumoto stepped aside as president, becoming company chairman, while Kaneo Ito, who had been in charge of the company's European sales network, became the new president. Pioneer soon embarked on a restructuring, aimed at reducing the workforce by nine percent, or about 650 jobs, and shifting more production to southeast Asia. Fortunately, Ito took over at a time when the company had already released or was developing some promising new products. Pioneer had introduced the world's first car navigation system into the Japanese market in 1990 and had a leading share of this rapidly growing sector in Japan. The company had also found success with its set-top boxes for cable and satellite TV. Moreover, in the development stages were high-picture-quality and thin-profile plasma displays for television and other applications.

In 1997 Pioneer introduced the PDP-501HD, the world's first high-definition 50-inch, wide-screen plasma display, aimed at the consumer market. Moreover, rather than stubbornly clinging to the fading laser disc technology, Pioneer joined with several other electronics manufacturers during this time in developing and marketing digital versatile disc (DVD) technology, which had the potential to supplant not only the laser disc but also the videocassette. Also, in mid-1996 the company established the Pioneer Music Group, Inc., a Franklin, Tennessee-based music label that was slated to specialize in rock, alternative, and Christian music.

Pioneer returned to profitability during the 1997 and 1998 fiscal years, in part because of the depreciation of the yen against the U.S. dollar. In 1997 Pioneer reorganized itself into three separate operating units: the Home Entertainment Company, which included both home audio and home video equipment; the Mobile Entertainment Company, which included car electronics and mobile communications equipment; and the Business Systems Company, which comprised business/industrial products. In May 1998 the Display Products Company was created as a fourth operating unit dedicated to business operations related to plasma and other types of displays. In August 1998 Pioneer announced a new strategy, called "Vision 2005," through which the company would focus on four key areas: DVD technology, display technology, digital home networks, and the development of new technologies. The company also set a goal of increasing revenues to ¥1.2 trillion (US$9 billion) by 2005. In conjunction with the Vision 2005 initiative, Pioneer introduced a new corporate logo in October 1998 that replaced the longstanding tuning fork logo. Thus began what might be dubbed the "post-laser-disc" era of Pioneer history.

Principal Subsidiaries: Tohoku Pioneer Electronic Corporation; Pioneer Video Corporation; Pioneer LDC, Inc.; Pioneer International Inc.; Shizuoka Pioneer Electronic Corporation; Pioneer North America, Inc. (U.S.A.); Pioneer Electronics (U.S.A.) Inc.; Pioneer New Media Technologies, Inc.; Pioneer Entertainment (U.S.A.) L.P.; Pioneer Electronics Technology, Inc. (U.S.A.); Pioneer Video Manufacturing Inc. (U.S.A.); Pioneer Industrial Components, Inc. (U.S.A.); Pioneer Electronics Service, Inc. (U.S.A.); Pioneer Electronics Capital Inc. (U.S.A.); Pioneer Speakers, Inc. (U.S.A.); Pioneer Music Group, Inc. (U.S.A.); Pioneer Digital Technologies, Inc. (U.S.A.); Pioneer Automotive Electronics Sales, Inc. (U.S.A.); Pioneer International (Miami) Inc. (U.S.A.); Pioneer Electronics of Canada, Inc.; Pioneer Electronics de Mexico, S.A. de C.V.; Pioneer Manufacturing de Mexico, S.A. de C.V.; Pioneer Speakers, S.A. de C.V. (Mexico); Pioneer International Latin America, S.A. (Panama); Pioneer International Do Brazil, LTDA; Pioneer International Latin America, S.A. Agenda En Chile; Pioneer Electronics Eurocentre N.V. (Belgium); Pioneer Electronic (Europe) N.V. (Belgium); Pioneer Electronics Manufacturing N.V. (Belgium); Pioneer High Fidelity (G.B.) Ltd. (U.K.); Pioneer Electronics Technology (U.K.) Ltd.; Pioneer LDCE Ltd. (U.K.); Pioneer Electronics Deutschland GmbH (Germany); Pioneer France S.A.; Pioneer Electronics France S.A.; Pioneer Electronics (Italia) S.p.A. (Italy); Pioneer Electronics España S.A. (Spain); Pioneer Precision Technology S.A. (Spain); Pioneer Optical Disc Europe S.A. (Spain); Pioneer Electronics Benelux B.V. (Netherlands); Pioneer Electronics Denmark A/S; Pioneer Electronics Norge A/S (Norway); Pioneer Electronica Portugal Producao, S.A.; Pioneer Electronica A/O (Russia); Pioneer Electronic Poland Sp.zo.o; Pioneer Electronics Asiacentre Pte. Ltd. (Singapore); Pioneer Electronics (Singapore) Pte. Ltd.; Pioneer High Fidelity Taiwan Co., Ltd.; Pioneer Electronic (Taiwan) Corp.; Pioneer Technology (Malaysia) Sdn. Bhd.; Monetech Audio Sdn. Bhd. (Malaysia); Pioneer Electronics (Thailand) Co., Ltd.; Pioneer Manufacturing (Thailand) Co., Ltd.; Tohoku Pioneer (Thailand) Co., Ltd.; PT Monetech Audio (Indonesia); Pioneer Electronics (China) Ltd. (Hong Kong); Pioneer Electronics Technology (Hong Kong) Ltd.; Pioneer Electronics Trading (Shanghai) Ltd. (China); Pioneer Electronics Manufacturing (Shanghai) Co., Ltd. (China); Shanghai Pioneer Speakers Ltd. (China); Pioneer Electronics Australia Pty. Ltd.; Pioneer Gulf, Fze (United Arab Emirites).

Principal Operating Units: Home Entertainment Company; Mobile Entertainment Company; Business Systems Company; Display Products Company.

Further Reading:

• Flippo, Chet, "Pioneer Explores New Territory with PMG Label," Billboard, July 20, 1996, pp. 6+.
• Hamilton, David P., "Pioneer Electronic, Hurt by Low-Cost Rivals, Pins Hopes on a New President, Restructuring," Wall Street Journal, May 21, 1996, p. C2.
• Lewis, Jeff, "Pioneer's 'Vision 2005': $9B in Sales," HFN, August 31, 1998, p. 57.
• McClure, Steve, "Five Japanese Companies Set to Launch DVD," Billboard, November 2, 1996, pp. 8+.
• "Pioneer Cutting Work Force 16%," Television Digest, March 11, 1996, p. 15.
• "Pioneer 'Early Retirement' Plan," Television Digest, August 26, 1996, p. 13.
• "Pioneer Electronic: Still Committed to Videodiscs After a Wobbly Start," Business Week, January 24, 1983.
• Schlesinger, Jacob M., "Pioneer Rethinks Quick Dismissal of 35 Managers," Wall Street Journal, February 2, 1993, p. A11.
  The Spirit of Pioneer, Tokyo: Pioneer Electronic Corporation, 1989.
• "To Encourage the Others," Economist, January 16, 1993, p. 66.
• Weinberg, Neil, "A Pioneer That Lost Its Way," Forbes, October 21, 1996, pp. 174+.

Source: International Directory of Company Histories, Vol. 28. St. James Press, 1999.