In the early 1970s Matsushita became deeply involved in the development of a commercial home videocassette recording system, or VCR. Matsushita seemed close to an acceptable design when Akio Tanii, then head of the VCR group, saw what he believed was a far superior design under development at JVC. Tanii convinced Matsushita to delay the introduction of a VCR until JVC's Video Home System, or VHS, could be perfected and adopted. This meant allowing Sony, the company's largest competitor, to enjoy a one-year monopoly on the market.

Sony refused to share its Betamax VCR technology with other manufacturers. But Matsushita knew that despite its VCR monopoly, Sony had a limited VCR production capacity. He gambled that there would be enough pent-up demand when JVC and Matsushita entered the market for the two companies to establish VHS as the industry standard. To help this prediction come true, Matsushita made licensing agreements with RCA, General Electric, Philips (which had abandoned its own VCR design), NEC, Toshiba, and Sanyo, all of whom introduced VHS-compatible machines. Sony's Betamax lost so much market share so quickly that Sony's chairman, Akio Morita, was compelled to ask for a compromise. Konosuke Matsushita refused, telling him that such a desperate display was both unacceptable and dishonorable. Eventually even Sony began to manufacture VHS machines. Matsushita (Panasonic) made VHS VCRS dominated the market from 1983 - 2000.