Sony v. Universal, also known as the “Betamax case”, is a bit of legal history so beloved of geeks, passed on from grizzled hacker to Slashdot newbie, that it deserves the title of “myth”.
The story goes like this: Once upon a time, an innovative consumer-electronics company called Sony invented a wonderful machine called the Betamax, which could record TV shows on tape. Then a big mean entertainment conglomerate called Universal sued them, saying that people could use the Betamax to break copyright laws and it was Sony’s fault. Universal sued Sony over and over and over again, until finally the United States Supreme Court gave Sony a pat on the head and a big hug and said they hadn’t done anything wrong. And in the years that followed, Universal earned millions and millions of dollars by selling its movies and TV shows on tapes that could be played in Sony’s machines. The moral of this story is that innovative content-liberating technology is good for everyone, even big mean entertainment conglomerates.
There is, however, a small detail of history that didn’t make it into the myth.
At the same time that Sony was developing the Betamax, Universal’s parent company, MCA, was developing a playback-only video medium, the laserdisc. MCA wanted to partner with Sony on developing laserdisc playback machines and convince Sony to discontinue the Betamax. So, in September 1976, top executives of MCA and Sony met to discuss videodisk development. At the very end of their discussion, the president of MCA and Universal threatened to sue Sony if the Betamax were not discontinued or modified. Akio Morita, steeped in the Japanese way of doing business, was certain that MCA would not follow through on its threat; as he told a colleague, “friends don’t sue”. Except, of course, they did.
If Universal’s negotiators had been savvy enough to shut down the videocassette industry without suing, or if they had swayed one more Supreme Court justice, then they still would be collecting millions and millions of dollars from home video sales. They just would have been comforted knowing that their customers’ home video equipment used a non-recordable medium.
The moral of this story is that big mean entertainment conglomerates are not always as dumb as they look.
source: Bargaining for Advantage