Sony’s strat­egy: in­te­grate me­dia with ma­chin­ery

CEO hopes to cor­ral shop­pers with mix of hard­ware, con­tent

Austin American-Statesman - - TECH MONDAY -

Sony Corp. once set the stan­dard for in­vent­ing prod­ucts peo­ple never knew they wanted: the Walk­man, the CD player, game con­soles. That knack for shap­ing con­sumer tastes pow­ered the Ja­panese com­pany’s mar­ket share and abil­ity to com­mand pre­mium prices for its gear.

If that sounds a lot like the re­cent his­tory of Ap­ple Inc., that’s a big part of Sony CEO Sir Howard Stringer’s cur­rent chal­lenge.

So how can Sony set it­self apart in an Ap­ple world? Stringer is tak­ing a page from the iPod maker’s play­book: He wants to dig­i­tally fun­nel Sony’s trove of mu­sic, movie, and gam­ing con­tent di­rectly to its TVs and other de­vices. Key will be Sony’s PlayS­ta­tion 3 game con­sole and its wire­less Blu-ray play­ers, which Stringer is push­ing as me­dia hubs that (like Ap­ple’s iPhone and its Apps store) can link au­di­ences to con­tent with­out a com­puter.

Stringer’s strat­egy faces chal­lenges, as shown on June 29 when Hulu, the video web­site run by NBC Uni­ver­sal, News Corp.’s Fox and Dis­ney’s ABC, un­veiled its much-an­tic­i­pated sub­scrip­tion ser­vice to push TV shows to con­sumer de­vices. Hulu Plus will be avail­able for hard­ware made by Ap­ple and Sam­sung Elec­tron­ics Co. Ltd. at its de­but.

Sony wanted to be part of the ini­tial deal and will now have to wait un­til fall to get in on the ac­tion. It’s a set­back be­cause Sony is ea­ger to use con­tent deals to spur sales of its gear. “That’s the ex­pe­ri­ence you need to drive Sony into the dig­i­tal fu­ture,” Stringer said be­fore the Hulu de­ci­sion.

Stringer’s pre­de­ces­sor, Nobuyuki Idei, tried to marry con­tent and hard­ware and was thwarted by war­ring fac­tions within the com­pany. The re­ces­sion gave Stringer an op­por­tu­nity to up­end the sta­tus quo.

Be­sides fir­ing 19,500 peo­ple and out­sourc­ing much of Sony’s TV man­u­fac­tur­ing, he re­placed long-serv­ing di­vi­sion chiefs with younger, more col­le­gial man­agers.

“There are still si­los at Sony,” says Richard Doherty, who runs the mar­ket re­search firm En­vi­sioneer­ing. “But now at least they’re send­ing smoke sig­nals to one an­other.”

Stringer says he chose his team, dubbed the Four Mus­ke­teers, be­cause he deemed them less likely than their pre­de­ces­sors to use the “past as a blue­print.”

The Mus­ke­teer to watch is Kaz Hi­rai, 50, who worked at Sony Mu­sic and helped pop­u­lar­ize the PlayS­ta­tion. Hi­rai now runs the Networked Prod­ucts & Ser­vices Group. Be­fore his as­cen­sion, the TV, game, and movie units each had their own way of de­liv­er­ing Web con­tent. Hi­rai has them work­ing to­gether, Stringer says, and made it pos­si­ble for con­sumers to use one ac­count to ac­cess movies, shows, and we­bisodes on any Sony de­vice — much as Ap­ple does with iTunes.

Stringer hopes to use the PlayS­ta­tion Net­work as a model for Sony. The 4-year-old ser­vice has 50 mil­lion reg­is­tered users who can buy or rent video, games, and mu­sic over the Web. Stringer aims to sell 350 mil­lion networked gadgets and gen­er­ate $3.4 bil­lion from net­work ser­vices, which in­clude movies and games, by March 31, 2013.

“Peo­ple like their stuff to work to­gether,” says Jeff Bar­ney, who over­sees dig­i­tal prod­ucts at Toshiba. “That’s where Ap­ple has chal­lenged us.” Sony also faces Mi­crosoft, which has sim­i­lar hopes for its Xbox 360 game con­sole.

Stringer’s com­pet­i­tive ad­van­tage might lie in 3-D, a technology Sony is spend­ing $100 mil­lion to pro­mote, ac­cord­ing to U.S. mar­ket­ing chief Mike Fa­sulo. Again, Stringer hopes to spur sales of 3-D TVs and DVRs with a rush of con­tent, from a “Wheel of For­tune” game to World Cup cov­er­age shot in 3-D.

“A tele­vi­sion with­out con­tent is like a re­frig­er­a­tor with­out food or a car with­out gaso­line,” Sony Pic­tures chief Michael Lyn­ton said at a June pre­sen­ta­tion.

Doherty sees Sony ahead of Pana­sonic and Sam­sung in 3-D. “Sony is in the cat­bird seat as far as hav­ing the most Blu-ray play­ers out there, (and) they have the only game con­sole that can be up­graded to 3-D.”

Still, re­ces­sion-squeezed con­sumers might not be ready to spend $3,900 for a 46-inch 3-D set from Sony. Stringer might have a hard time hit­ting his tar­get of $11.3 bil­lion in 3-D-re­lated sales by mid2013, an­a­lysts say.

In fis­cal 2009 and 2010, Sony lost a com­bined $1.4 bil­lion. In May, how­ever, the com­pany said it would earn $540 mil­lion this year, a sign the cost-cut­ting has sta­bi­lized its fi­nan­cial po­si­tion.

To­mo­hiro Ohsumi

Chief ex­ec­u­tive Sir Howard Stringer wants to of­fer more con­tent on Sony de­vices such as Blu-ray play­ers and PlayS­ta­tion 3 con­soles.

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