The Sony post

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If business books were ever written like a Greek tragedy, they would probably read a lot like the history of Sony. If you follow this blog at all you will notice that I occasionally review past technologies or gadgets and Sony is the brand which featured most prominently with six posts so far. This is a measure of how dominant they have been in the past.

A library of books could be written about what went wrong at Sony and they would probably touch on a number of factors:

  • Globalisation: Sony struggled to deal with the rise of China
  • The over-priced value of the Yen
  • Japan’s lost decade+ of deflation
  • The tension between the media and consumer electronics businesses – because Sony became a large conglomerate
  • Management that failed to get to grips with the business change required
  • Hardware engineering expertise wasn’t matched by software expertise
  • Move up the value chain of original equipment manufacturers
  • Failed joint venture with Ericsson
  • Loss of differentiating points for the brand with technological change
  • A failure to understand user contexts: the difference between sit-back media consumption and lean-forward interactivity – which fooled them into chasing convergence and playing to their own weaknesses
  • Failed big bets: notably a failure to be able to commercialise OLED displays
  • A wide range of undifferentiated, mediocre quality products aimed at mainstream consumers – I would argue that this was the case since before the Walkman, but it really kicked in to affect the business from the late 1990s onwards
  • A misunderstanding of what brand really means. I would argue that Sony thought their brand was a crutch to pedal a lot of poor products based on the kudos of earlier products and then current halo products
  • Wasted efforts on rolling musical balls and other oddball products

Sony recently announced yet another transformation of their business with low margin TV sets being spun off into another business and the VAIO computer line being sold to a private equity firm. A less well covered announcement was Sony retreating from e-book publishing (at least in North America).

About the sale

All of this revolves around the company looking to refocus, in a rather similar direction to what Panasonic recently announced. A key fact about Sony that the US coverage didn’t mention is that the business helped to stay afloat with a large insurance and financial services offering aimed predominantly at the Japanese market. Sony actually looks more like the Prudential than Apple. Where this financial service arm will fit in the refocused Sony is anyone’s guess. This is the fourth reorganisation at Sony, will it be enough to right the ship? I doubt it, instead I suspect that this is just the opening salvo in an effort to make Sony a smaller but successful organisation, moving away from low margin mass-market products.

The television business

At one time Sony was synonymous with television. It’s Trinitron brand was the gold standard for CRT screens. If you went into any broadcast studio you would likely have been watching the on-camera action via a Sony PVM series monitor with a Trinitron screen. They had tried to carry this legacy through with the Trimaster series of OLED monitors. However Sony’s efforts on OLED technology don’t seem to have delivered dividends, a joint venture with Panasonic was abandoned at the end of last year. Both companies promised to continue independent OLED development but conceded that they were a long time away from a commercial product.

Instead Sony is going to concentrate its development efforts on bringing to market 4K LCD televisions. The challenge with this approach by Sony is that Chinese manufacturers are already making aggressive procurement moves with a view to bringing cheaper 4K televisions to market. Taiwanese | American company Vizio is bringing a US$1,000 4K TV set to market. It is going to be hard for Sony to differentiate itself from cheaper products, rather like the current range of Bravia TV sets.

On the bright side, in some APAC markets notably Chinese and Hong Kong middle-class have a high regard for the Sony brand due to good customer service by the local subsidiary company and the perception of ‘Made in Japan’ products within the range as being superior / demonstration of discernment. Admittedly this premium position maybe complicated or even destroyed by the worsening Japan-China geo-political situation. There maybe a market somewhere around Bang and Olufsen or below Loewe in the premium television sector, but this would be much smaller volumes than what it currently sells.

The VAIO business

Sony’s VAIO business was a rare highlight in the Windows PC eco-system; with a number of innovative hardware designs over the years including the Sony PCG C1 series of notebooks and the UPC devices. VAIO devices also included Sony-developed software that focused on multimedia convergence. The problem is that the Windows eco-system has the value stripped out of it by Microsoft and Intel. PC manufacturers were surviving on as little as 3 per cent profit on each computer, this isn’t a market that a premium product can thrive in. The Windows eco-system  contrasts sharply with the margins enjoyed by Apple which has 10 per cent or less market share.

In addition, the PC market is being disrupted as mobile devices and Google’s Chrome lightweight operating system become useful for at least some of the tasks that Windows PCs currently do.  There is a consistent decline in PC sales. They need to chart a new direction for the VAIO range of devices.

More information
Throwback gadget: Sony Walkman WM-D6C Pro
Throwback gadget: Sony Discman D-250
I like: Sony MDR-A10 headphones | 我喜欢 Sony MDR-A10 头戴耳机
Throwback gadget: Sony Vaio PCG C1 series
Throwback gadget: Sony MICROVAULT
Throwback gadget: Trinitron
The future is divergence | 未来是分歧
Sony exits the North American ebook business and gives its customers to Kobo | GigaOM
Sony Trimaster EL professional monitors
Why the TV of the Future Might Die Before It Was Really Launched | Bloomberg Businessweek
Sony and Panasonic cancel their OLED joint-development project
End of 2013 sees steady rise in 4KTV panel shipments | Rapid TV News
Don’t Be Fooled, 4K TV Is Here | The Motley Fool
How the ‘value trap’ squeezes Windows PC makers’ revenues and profits |