Pioneer Electronic Corporation

4-1, Meguro 1-chome
Meguro-ku, Tokyo 153
Japan
(03) 3494-1111
Fax: (03) 3495-4428

Public Company
Incorporated: 1947 as Fukuin Electric Works, Ltd.
Employees: 7,250
Sales: ¥511.70 billion (US$3.56 billion) Stock Exchanges: Tokyo Osaka Amsterdam Luxembourg New York

Pioneer Electronic Corporation has played a significant role in the development and popularization of consumer audio equipment in the post-World War II era. Pioneer concentrates on three areas of the entertainment market—home audio, car stereo, and video products. Home audio was the company’s original arena and remains the source of 38% of its sales, while car-stereo revenues have gradually declined to 30% of the corporate total. The variable in Pioneer’s future remains its effort to market a home video player using laser discs in place of the more popular tapes. Video-disc technology is at the heart of Pioneer’s video division, which accounts for 28% of company sales. Relying on its solid position in home and car audio systems, Pioneer has devoted its resources to bringing its disc concept to the brink of mass-market acceptance; the warmth of that reception will largely determine Pioneer’s future growth.

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 its workshop in Osaka, Matsumoto and a colleague struggled to devise a “dynamic” speaker like the Philco model he 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 still in use today: 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.

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 less denominational 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, 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 remains so.

Along with a number of 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 reproduce 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, but 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. Victor Company of Japan (JVC) had watched revenue from video cassette 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 of 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 not 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 allows 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 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 can play both video discs and CDs, which means that the CD revolution will likely carry Pioneer’s video concept along with it. Sales were up substantially, to almost 120,000 players in 1989, and if the industry finally manages to design discs that are rewriteable, the future will belong to laser technology, and to Pioneer. The company also posted annual profits for the remainder of the decade.

Pioneer remains as committed as ever to the laser concept, recently spending $200 million to buy Disco Vision Associates of California, a leading optical-disc research firm. Optical discs will eventually be used for many kinds of information storage, including computer information, and it is possible that Pioneer’s long years of persistence in laser technology will yield unforeseen dividends in such potentially vast markets, although it will have to contend with Sony, Hitachi, and other giants now crowding the field.

Principal Subsidiaries

Pioneer LDC, Inc.; Pioneer Communications Corporation; Tohoku Pioneer Electronic Corporation; Pioneer Video Corporation; Pioneer Precision Machinery Corporation; Hiwada Electronic Corporation; TECHNO Corporation; Pioneer North America, Inc. (U.S.A.); Pioneer Electronics (USA) Inc.; Pioneer Communications of America, Inc.; Pioneer LDCA, Inc. (U.S.A.); Pioneer Laser Entertainment, Inc. (U.S.A.); Pioneer Electronics Technology, Inc. (U.S.A.); Pioneer Industrial Components, Inc. (U.S.A.); Pioneer Video Manufacturing Inc. (U.S.A.); Pioneer Electronics of Canada, Inc.; Pioneer Electronic (Europe) N.V. (Belgium); Pioneer Electronics Manufacturing N.V. (Belgium); Pioneer Electronics Deutschland GmbH (Germany); Pioneer Electronics Denmark A/S; Pioneer High Fidelity (G.B.) Ltd. (U.K.); Pioneer Electronics B.V. (Netherlands); Pioneer Electronics B.V. (Netherlands); Pioneer Electronics France S.A.; Pioneer Electronics (Italia) S.p.A. (Italy); Pioneer Electronics Espana S.A. (Spain); Pioneer Electronics Australia Pty. Ltd.

Further Reading

“Pioneer Electronic: Still committed to videodiscs after a wobbly start,” Business Week, January 24, 1983; The Spirit of Pioneer, Tokyo, Pioneer Electronic Corporation, 1989.

—Jonathan Martin