A lesson from the markets

A couple of products coming from Sony are worth noticing for their potential to signal novel approaches to markets. One is Sony Cybershot DSCH1, the 5.1MP digital camera, and the other is Sony MZ-DH/RH line of minidiscs.

Both these products indicate some remarkable departures from several of Sony's directions. The lower pricing, about half of what Sony used to charge for its high-end new to market products, could be aimed at better positioning of the camera against Panasonic's Lumix, and the minidisc against Samsung's players and Apple's iPod.

The feature sets have also gotten less impressive than what we've come to expect. Except for the higher optical zoom and stabilization for the camera, and Organic EL Display for the minidiscs, several of the high-end/marketing driven gimmicks are gone. Among the missing features in the new lines are: the magnesium body, hi-def digital amplifier, and long battery-life in minidiscs, and the InfoLithium M battery as well as the Zeiss lens and the ability to use non-Sony memory supports for the camera.

So, besides the price adjustment, what else is there? Sony gave in and its minidiscs support now both MP3 and Atrac3plus direct playback. Moreover, the $6-1Gb Hi MD removable disc can store music-, and data-files of all types, thus enabling the player to become a storage device as well. Considering Sony's attachment to ways of protecting its content copyrights at all costs, this is no small change in a world where consumers want to freely move content among devices. As for its DSCH1 camera, this seems to offer a refreshing price vs. feature-set balance that takes into account both competitors' prices as well as the rise of consumer preferences for other brands, and maybe the diminution of its own following.

Since all these are product-events that must have been in the making at a time when Mr. Stringer, Sony's recently appointed non-Japanese CEO, was still the British executive of Sony's American entertainment operations, it is safe to assume that even the old guard at Sony had heard the message from the markets. However late, market capitalism seems to be alive and well and has finally taught a lesson that Sony's executives could not afford to ignore.

The To Do List at Sony should include the making its 1Gb Hi MD discs widely accessible, by lowering the price and licensing the standard out. In an increasingly commoditized world, the competitive game has not remained about engineering alone as much as great engineering and design followed by ubiquity and standards. In this sense, the expected truce in the next generation DVD media support is another sign that the folks in the big league get it.

Nota Bene: According to 54-year-old Ken Kutaragi, the "Father of the PlayStation," Sony executives had been too restrictive in controlling Sony content in a world where consumers of digital movies and music want hassle-free access.

He was of the opinion that Sony must revive its original innovative spirit. The Company also has been hurt by its insistence on making its content proprietary, Kutaragi said.

Mr. Kutaragi's latest creation, the handheld PlayStation Portable, is selling very well. An estimated 3 million have been sold since it was released in Japan in December and the United States last month. Considering his recent demotion, he has lost his board seat recently, Microsoft or Samsung could do well by making him an offer


Anonymous said...

Sony learned its lesson. Will Microsoft follow?
Here is something I took notice and saw some similarities with Microsoft. First the news:
"....Because we had a music business, Sony was reluctant about introducing an iPod type of new product but we (learned) many lessons," said Ken Kutaragi, executive deputy president of Sony, speaking Thursday at The Foreign Correspondents' Club of Japan.
Source: Sony learned its lesson in digital music, says exec

And here another one from forbes.com
"...Kutaragi said the entertainment electronics giant missed out on potential sales from MP3 players and other gadgets because it was severely proprietary about music and entertainment content."

Sony was reluctant because it also owned music and movie units and were worried about content rights. It also owned many proprietiery formats that it wanted to promote. But it realized it is not good for the company. But Microsoft has't yet learned its lession. For the fear of losing Windows business, it is not shipping any of its applications in other platforms. Oracle or any other applications companies don't have this problem and build their applications in all popular OSes.

I still would like to see Microsoft split into OS & Applications business so that one division is not pulled down by the other and are free from obligations to the other business and can work on building world class software w/o the external push/pulls.

Source: http://lushootseed.blogspot.com/2005/01/sony-learned-its-lesson-will-microsoft.html

Anonymous said...

Sony's Unlikely Mogul, at the Crossroads

WHEN Sir Howard Stringer was anointed the unlikely emperor of the Sony Corporation in March, it was one for the history books, and in a few ways. For one - and much noted at the time - Sir Howard is the first foreigner to run Sony, the global electronics and entertainment colossus based in Tokyo. For another, he intended to telecommute mainly from his base in New York, while still finding time to visit his family in Oxfordshire, England, at regular intervals.

In another rarity, Sir Howard, 63, may be the first media executive to attain mogul status without actually lobbying or angling for it. Until the former chief executive, Nobuyuki Idei, rang him up during the Oscars and asked if he'd like the job, Sir Howard, jovial pragmatist that he is, considered his ascension implausible. But once Sir Howard, a native of Wales who had been the head of Sony's United States operations, accepted - and he had to think about it for a couple of days - he plunged in.

In June, he told the company's annual meeting that he was a "Sony warrior." He vowed to unveil a plan this fall to set right the core Sony electronics business, which accounted for 70 percent of the company's $66.9 billion in revenue in the last fiscal year, ended March 31, but has reported $650 million in operating losses since April 2004.

Over all, Sony was profitable in its most recent year: its net income was $1.5 billion - thanks to its performance in entertainment, video games and financial services. But it lost money in the first quarter of its new year, and has cut profit forecasts by more than 80 percent for the remainder of the year. Its price on the New York Stock Exchange has sunk by about 65 percent over the last five years as its flagship business has been besieged by competitors: Samsung and Sharp with their flat-screen TV's, Apple with its iPods, and you-name-it with laptops and DVD players.

Despite some victories in other divisions - the video game unit with its PlayStation, and Sony Pictures, which had some strong years - Sony's shortcomings in electronics undermined Mr. Idei's vision, which was to use his powerhouse brand and media assets to dominate the next generation of home entertainment doodads.

Sir Howard's moment is at hand. Along with his new president, Ryoji Chubachi, he is set to introduce his master plan - known internally as Project Nippon - this Thursday in Tokyo. Why and how Sir Howard became Sony's chief change agent offers some fairly telling clues to what he is, and isn't, set to announce this week.

He got the nod largely on the success of Project USA, the company's code name for the radical reshaping of its stateside operations. Completed in 2004, the three-year project eliminated 9,000 jobs - roughly one-third of Sony USA's work force - and $700 million in costs while getting its disparate operations to work together.

At the same time, Sir Howard positioned the company's long-challenged entertainment businesses for growth. He did so by merging Sony's music business with Bertelsmann's BMG Entertainment - eliminating an additional $300 million in costs between the two companies - and, last year, by acquiring the MGM studio to shore up Sony Pictures' vast library of movies and TV shows.

It would be easy to extrapolate that the Project Nippon will look like Project USA writ large. But that would probably be wrong. It's far more likely that his plan to turn Sony around, at least by American standards, will be less radical than what some investors and analysts have been expecting.

Surely, there will be costs cut and jobs eliminated, though not on the scale of what was done in the United States, which accounts for just under 30 percent of Sony's global sales. There will be business lines that Sony will exit: the company now produces a bewildering array of consumer products.

Centralization and focus are likely to be watchwords, with implications for everything from the $4.7 billion that the company spends on research and development each year to the way it buys office supplies in bulk and operates internal computer systems.

But rather than a plan to "fix" or "reinvent" Sony, Sir Howard may settle for something more measured and realistic: uniting Sony. He has already said that one priority is to break down the walls among Sony's historically noncommunicative divisional fiefs. As the company's embarrassing ceding of the digital music space to Apple has shown - Sony invented the Walkman and runs one of the world's big music companies, for crying out loud - engineers must work more closely with the media side of the business as well as the marketers who are supposedly in touch with what consumers want.

A prelude to the unification mandate was the appointment last week of Sony's first global chief marketing officer. Whether Sir Howard can get famously autonomous executives like Ken Kutaragi, the brains behind the money-spinning PlayStation, to play ball internally will be fascinating to watch.

STRATEGICALLY, Sir Howard must intensify the focus on those businesses in which it can be a leader - such as video games, high-definition camcorders, flat-panel TV's that will run on a new processor it is developing; digital projection systems and music-playing mobile phones it sells in partnership with Ericsson, which are hot in Europe. What can go are businesses that have become commoditized, like low-end versions of DVD players, cathode ray televisions and laptop computers. One imagines that even nifty niche products like Sony's Aibo robo-pets will need to bark and fetch toward meaningful profits in order to continue.

But Sir Howard's reputation as the "affable ax wielder" - as this newspaper dubbed him in 2003 - may not precede him this week. After all, Mr. Idei already eliminated 20,000 jobs en route to a grand plan called Transformation 60, pegged to the company's 60th anniversary next year, without much effect on the company's performance. And although comparisons have been drawn between Sir Howard and Carlos Ghosn, the non-Japanese C.E.O. whose tough measures rescued Nissan, Sony is not in the financial peril that Nissan was.

Sir Howard's company has a relatively clean balance sheet, and agitating shareholders like Carl C. Icahn are not a big part of Japanese business culture. Sir Howard likes to say that while Japan takes pride in its work ethic, its corporate culture favors harmony over prosperity, and "maximizing shareholder value" can be viewed as a crass American notion. Institutions and investors in Japan own 52 percent of the stock, and 62,000 of Sony's 150,000 employees are based there.

Whether it is the Blu-ray high-definition DVD format, its latest Walkman offerings, its new Bravia television or the much-anticipated PlayStation 3, Sony simply and badly needs more hits. (The same goes for its film business, which has slipped to fifth place among the six major studios in market share so far this year.)

For all the significance of being the first foreigner to lead Sony, Sir Howard cannot rely strictly on importing to Tokyo what he learned in New York. His success will hinge on a familiar phrase: made in Japan.