Ronnie05's Blog

Profiling Sony’s accumulated losses across categories

Posted in Industry updates by Manas Ganguly on April 16, 2012

Sony’s loss in key categories such as Music and Televisions is the key to a accelerated downward spiral. The second part of the three series (Read part 1 here) blog examines the losses by the electronics giant across its key categories.

With its catalog of music and foundation in electronics, Sony had the tools to create a version of the iPod long before Apple introduced it in 2001. The Sony co-founder, Akio Morita, envisioned as early as the 1980s marrying digital technology with media content for a completely new user experience. It didn’t happen. Initially, Sony engineers resisted the power of the company’s media divisions. Then Sony wrestled with how to build devices that let consumers download and copy music without undermining music sales or agreements with its artists. The company went its own way: its early digital music players, for instance, used proprietary files and were incompatible with the fast-growing MP3 format.

Sony held aces in Televisions till about middle of last decade with impressive technologies such as Trinitron. However, lower-cost manufacturers from South Korea, China and elsewhere, are increasingly undercutting Sony. As TV’s shifted to larger and typically thinner formats, Samsung truly leveraged its expertise in thin panel screens to dislodge Sony and take the top mantle in Televisions. As Sony’s brand started losing much of its luster, the company found that it had a harder time charging a premium for its products.

The conundrum of many
Sony still makes a confusing catalog of gadgets that overlap or even cannibalize one another. It has also continued to let its product lines mushroom: 10 different consumer-level camcorders and almost 30 different TVs, for instance, crowd and confuse consumers. The diffused attention on multiple product lines has led to a divergence in focus (in sharp contrast to Apple’s focused strategy)

An area where Sony has found success — and perhaps one that most crystallizes the transition from stand-alone consumer electronics into a digital, Internet-centered world — is video games. Sony marketed its PlayStation 3 console, for example as an integrated entertainment system that serves as a hub in the living room, connecting the Internet and television. But Sony’s obsession with hardware has marred that strategy. A delay in developing the console’s Blu-ray DVD player forced Sony to push back its release. Sales suffered because the PlayStation 3 cost much more than rival models from Nintendo and Microsoft. Sony was also slow to move into the world of online games, giving Microsoft a head start.

Sony’s online strategy is problematic as well. The company has yet to come up with an integrated common platform to deliver music, movies and games, each of which, until recently, had its own network, with other platforms like the PlayMemories photo- and video-sharing services to boot. Now, these disjointed services, developed by far-flung units, are being forced into the Sony Entertainment Network, which Sony says will be its overarching content delivery platform. Experts say it will have to start exiting some product lines. It has already spun off a chemicals business, for instance, and some analysts wonder about its money-losing TV business.

to be continued

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