- For Keiji Kimura, the problem is small enough to fit in his pocket and just heavy enough to weigh on his mind. Kimura is a senior VP at Sony headquarters in Tokyo, and the problem in question is Apple’s iPod, the snappy little music player that’s revolutionizing consumer electronics the way Sony’s Walkman did some 20 years ago. By rights, Sony should own the portable player business. The company’s first hit product, back in the ’50s, was the transistor radio, the tinny-sounding invention that took rock and roll out of the house and away from the parents and allowed the whole Elvis thing to happen. A quarter-century later, the Walkman enabled the kids of the ’70s to take their tapes and tune out the world. But the 21st-century Walkman doesn’t bother with tapes or CDs or minidiscs; it stores hundreds of hours of music on its own hard drive. And it sports an Apple logo.
“It’s a good product,” Kimura says of the iPod. “It’s exciting. I am positive the hard disk is a key device that will change our lifestyle.”
A broad-shouldered man with a shock of thick black hair and a ready smile, Kimura is in charge of nearly every Sony device that’s portable, from laptops and handhelds to Handycams and Walkmans. And he’s right: When the average consumer has a hard disk not just in the PC but in the set-top box and in half a dozen other gizmos – all connected by wireless networks that zap their contents painlessly from one to another – life will be richer. In fact, this is the vision his boss, Sony president Kunitake Ando, laid out more than a year ago as the company’s core strategy.
Ando wants nothing less than for Sony to reinvent itself. But that will never happen as long as the company is frozen by its fear of piracy. Sony’s digital Walkman device is a good example. Where the iPod simply lets you sync its contents with the music collection on your personal computer, Walkman users are hamstrung by laborious “check-in/check-out” procedures designed to block illicit file-sharing. And a Walkman with a hard drive? Not likely, since Sony’s copy-protection mechanisms don’t allow music to be transferred from one hard drive to another – not an issue with the iPod. “We do not have any plans for such a product,” says Kimura, the smile fading. “But we are studying it.”
….As an electronics company, Sony makes some of the coolest gadgets on the planet, even without an iPod. In its last fiscal year, it sold a staggering 56 million of them: 19 million Walkmans, 6 million stereos, 10 million television sets, 5 million video players, 4 million PCs, 4 million computer screens, 5 million camcorders, 3 million digital cameras – some $36 billion worth in all. Year after year, it beats out the likes of Ford and Coca-Cola to top the Harris Poll of brands Americans consider the best. “Wow-type products – that’s Sony,” Ando exclaims, waving his arms as he sits perched on the edge of his chair in a mammoth conference room. “I call it the power of hardware.”
The problem of hardware is more like it, because for all this, Sony lost money on the stuff. Japan’s consumer electronics giants are being squeezed by upstarts in China, Taiwan, and Korea, where manufacturing costs are far cheaper. Without entertainment, which provided 30 percent of the company’s revenue and nearly all its profits, Sony would be as bad off as Matsushita, NEC, and Toshiba, its traditional Japanese rivals. “The big dinosaurs are struggling to survive,” Ando admits. “And Sony is one of them, of course.”
On the entertainment side, Sony is one of seven global media conglomerates that dominate the industry. The weakest link is its New York-based music arm, where sales are dropping despite hits from Jennifer Lopez, Shakira, Bruce Springsteen, and the Dixie Chicks. (A separate Japanese label is doing slightly better.) Sony Pictures is Hollywood’s hottest studio, producing blockbusters like Spider-Man and Men in Black II along with some of America’s top soap operas, popular sitcoms in Germany, and hit movies in China. And Sony’s PlayStation unit, located in Tokyo, is the undisputed king of videogames, leading the industry in sales of game consoles and software despite a determined onslaught from Microsoft.
The story is full of bizarre internal contradictions (within Sony, not the story) and struggles to make it all sync up, or not as the case may be:
- Idei’s ultimate goal is more distant and more radical: the dematerialization of Sony and its products. Instead of boxes stuffed with electronics, Sony will sell screens. Instead of CDs, Sony will sell sound. Ken Kutaragi, the creator of Sony’s PlayStation, has made a deal with IBM and Toshiba to develop a “supercomputer on a chip” that can power network servers, pumping games with stunning 3-D graphics to Sony devices no bigger than a wristwatch. This is the future Idei envisions: invisible, interactive networks that bring sound and light to almost any nearby surface. Sony networks, Sony sound and light, Sony surfaces. If only it didn’t depend on a bunch of music men who’ve yet to wean themselves from shiny plastic discs.