Sony Vision

Sony had a successful year in 2002 and are now discussing ambitious plans for the future:

SONY seems to have learnt one basic lesson of corporate public relations: messages are better received when you are making money. Little more than a year ago, when the company reported losses of ¥43.3 billion ($354m) in one six-month period, its chief executive, Nobuyuki Idei, was unusually reserved. Grand talk of long-term plans for the future, he said, could wait until the electronics and media giant showed a better command of the present. Now Mr Idei is basking in record sales and handsome profits – in the most recent quarter, net profits nearly doubled, to ¥125.4 billion ($1.02 billion) – and he has seized the opportunity to crank up the volume and talk about Sony’s big plans for your living room.

Compared with other large media companies, the Japanese giant has earned some right to brag. Over the past few years, Sony has studiously kept its head down, while the likes of AOL Time Warner, Vivendi Universal and Bertelsmann sought to build ever-bigger conglomerates through mergers and acquisitions. Although the details varied, the idea behind all those deals was to buy new outlets through which the behemoths could push their music, films, news and other media content. The outlets ranged from cable and satellite broadcasters to internet portals, and the excursion has ended in much heartache.

….Sony has gone about things differently. But its ambitions are in many ways even bolder than those of the other media giants. Like them, it believes that the spread of broadband and the shift from analogue to digital require media firms to find new ways to sell their content to consumers – in Sony’s case, mostly music, films and video games. It also believes that in the battle to do this, as the slogan for its 1998 film “Godzilla” put it, size matters.

More importantly, however, Sony is pursuing the other big idea in the media giants’ growth strategy: vertical integration. But once again, it is doing it in its own way. The difference is that Sony is reaching much further down the chain, to what Mr Idei believes really matters: the televisions, personal computers, game consoles and hand-held devices through which all of that wonderful content will one day be streaming.

Whatever happens to its media businesses, Sony’s first love is still consumer electronics. From video recorders to compact discs, from Walkmans to PlayStations, it has consistently helped to change the way in which people acquire and use media content. The difference now is that Sony does not expect its next breakthrough to come from a single new electronic device. Instead, as Mr Idei and Sony’s president, Kunitake Ando, are telling anybody who will listen, the idea is to make a whole range of devices more useful by linking them in a networked home-entertainment system.

….To its televisions and DVD players it has recently added a product called CoCoon, an enhanced TiVo-like device that can store televised video or download it from the internet, and that is already selling in Japan. To its Vaio desktop computers and notebooks it has added a new RoomLink device, which can send digital music, photos or home videos wirelessly from a personal computer to other components elsewhere in the house.

Sony’s networking strategy assumes that these audio-visual and computer devices, besides talking to one another, will also share content with a wide range of smaller gadgets, from its cameras and music players to its mobile phones and hand-held computers. (Whether people will also want to link these to the likes of Aibo, Sony’s puppy-like line of personal robots, is another matter.)

Like other consumer-electronics firms, Sony is already blurring the lines between these gadgets by blending their features. Its newest Clie hand-held computer plays digital music and takes pictures. The 3G phone launched in February by SonyEricsson, its joint venture with the Swedish phone manufacturer, has two built-in cameras, two display units and a video facility. One of Sony’s other new devices, the Airboard, is a wireless panel that you manipulate with a stylus. It can be used either to watch television or to send e-mail and surf the internet.

….Now, however, Sony risks learning the wrong lessons from its history. If its desire to protect itself against piracy messes up its other plans, firms such as Apple will continue to design the devices that Sony ought to be making. It can reduce the danger of that by streamlining its media businesses, so that runaway prices for talent do not push up the costs of paid content too high. Sir Howard Stringer, Sony America’s boss, is trying to do this in the music business. Last month, he brought in Andrew Lack, a television executive with few ties to the music industry, to make better business sense out of the unit.

Sony’s film business, by contrast, is coming out of a bumper year, thanks to hits such as “Spiderman” and the sequel to “Men in Black”, backed up by successful DVD sales during the Christmas season. But the music industry should serve as a reminder that success in any content business can be fleeting, especially for a company without a sound business model and sufficiently close attention to costs. With piracy threatening its media businesses, and low-cost copycats snapping at its consumer-electronics devices, Sony is between a rock and a hard place. To steer successfully between them it must focus first on providing consumers with convenience and stylish design. Otherwise, Mr Idei will soon be going quiet again. Maybe for the last time. [The Economist]

“Convenience and stylish design” – that about sums it up.