Sony’s strategy: integrate media with machinery
CEO hopes to corral shoppers with mix of hardware, content
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.
Chief executive Sir Howard Stringer wants to offer more content on Sony devices such as Blu-ray players and PlayStation 3 consoles.