Sony insiders in Japan have confirmed to ChannelNews that Sony is set to try and transform itself from being primarily a consumer electronics Company to being a network services Company that delivers content to display, sound and PC devices.
We have been able to confirm that Sony is planning the relaunch of the Company to coincide with the 2010 World Cup and among the new initiatives will be a new network gaming console, a brand new content network, for movies, music and gaming and new display devices including OLED TV’s and a modified reader to compete with the Kindle.
The multimillion dollar investment is critical to the future of the Company which is banking on networking to turn their fortunes around say insiders.
In 2008 Sony swung from making profits to record losses. Cash flow plummeted from US$5 billion to minus $3 billion. Some of the blame for Sony’s losses can be attributed to their poor decision making over Bravia TV’s. Where in the past Bravia models have sold well against those of rivals like Samsung they are now starting to lose market share. In week 25 in Australia Sony has only 18% market share of the TV market compared to 36% for Samsung and 15% for LG.
In recent interviews with both the Economist in London and Fortune in the USA Stringer has been open and frank about Sony losses.
This is in sharp contrast to Sony Australia where their strategy is to black ban media organisations like ChannelNews for daring to write negative stories about Sony. They also hate the fact that it was SmartHouse and ChannelNews that first identified their price gouging strategy in Australia where Sony products are priced up to 300% higher than the same products in the USA.
In frank admissions Stringer has admitted that a lot is resting on the decisions he makes over the next months. He admits that Sony’s woes are mired in problems. He is also questioning whether he should have taken on the task of trying to turn the Japanese Company around.
Struggling from a recent sickness that saw him hospitalised Stringer told Fortune writer Richard Siklos that “I feel like I’m on the fringes of my old life,” he says. “If I had this to all do over again, I don’t know sometimes.”
In the all import gaming market where Soy has already lost billions Sony is suffering due to smart marketing by Nintendo and Microsoft.
Running dead last to their 3 main gaming competitors Sony is set to bet on network gaming with the company already working with third party Companies and their own developers to deliver a new generation of network gaming software.
Insiders at Sony Computer Entertainment say that the Company plans to extend its PlayStation Network (PSN) service beyond the PS3, to TV’s, PSP handheld devices netbooks, PC’s and a new device that will take on the Amazon Kindle.
Sony have already had two tries at delivering a reader device and twice they have failed with Stringer admitting that content and the delivery of information such as news and newspapers to the device was their downfall.
Speaking to Fortune, Robert Wiesenthal, head of strategy for Sony’s entertainment business said, “TV is where we have to win. We can no longer afford to only offer great TVs. Otherwise; we set the stage for someone to become the Google of the TV.”
In the past, Japanese management at Sony have been obsessed, with proprietary technology, going back as far as the Beta format. Of late it was their Memory Sticks.
Now the Company is being urged to open the network up to multiple devices other than Sony devices.
Closed, proprietary systems are a product of the traditional Sony style that one assumes Stringer is trying to move away from. Being able to download content from Sony’s network to an iPod, for instance, is the type of flexibility that consumers want, according to analysts from Display Search.
Analysts say that If Sony’s multimedia offerings become an integrated service that operates over multiple devices including competitors products they have a chance to turn their fortunes around.
However some analysts are sceptical William Drewry, a long time Sony follower who now heads media investments for Diamond Castle, a private equity firm told Fortune magazine: “This probably is going to be Stringers last chance to run this company back to the top of the mountain. It’s a daunting task. Sony’s stumbles in sectors it once dominated Apple is No. 1 by a large margin in portable music players, and Microsoft and Nintendo have taken swaths of share in gaming consoles are old news by now, but upstart competitors continue to gnaw away at the Japanese giant”.
As tipped by ChannelNews Drewry is also tipping Cisco as being a real threat to the struggling consumer giant who is seeing consumers walk away from their brand in droves.
He said “In just two years a start up called Pure Digital, now owned by Cisco has grabbed some 17% of the video recorder market with its easy-to-use, pocket-size Flip. Sony first showed an e-reader in 2006, but bookseller Amazon swooped in two years later with its Kindle and has won consumers and acclaim largely because it boasted a feature the Sony Reader lacked: a wireless connection for downloading books, newspapers, and magazines”.
As Stringer pushes for transformation he admits that he has been hamstrung by the Japanese management culture in Sony’s home market and the repercussions of bad decisions made years ago that still haunt the company.
At an internal management meeting last October, Stringer made a veiled reference to the Titanic to illustrate that tougher more Western-style reforms were coming to Sony. “If the captain hits rough seas, he looks after his crew,” Stringer recalls saying. “When you hit the iceberg, you worry about the ship”.
The man who is critical to Sony’s future is Kazuo “Kaz” Hirai, 48, marketing executive who had been running Sony’s struggling games business. Stringer has given him the job of developing networked-products and services.
His job is to create a new set of digital services that will tie all of Sony’s products together on one Sony content network.
Last month the main Japanese business newspaper the Nikkei said that Stringers actions “smacked of desperation”. Jonathan Nelson, the head of private equity firm Providence Equity and a Stringer confidante. “He’s doing as well as anyone can under the circumstances.”
The problem for Sony is that LG, Panasonic, Apple, Nintendo and the Korean giant Samsung now have Sony’s measure and every time Sony to deliver a new product they will be there with a similar product including networking.
Fortune say that a classic example of Sony stupidity is exemplified in how they introduced its gold-plated PlayStation 3 in 2006 with all kinds of futuristic capabilities, including a built-in Blu-ray player, but it was expensive to make and fell short of expectations.
Nintendo swooped in with its innovative Wii system and grabbed a big share of the games market — and a nice chunk of investors’ mind share. With one-fifth the revenue of Sony, Nintendo now boasts a market cap of $38 billion, more than 40% larger than Sony’s $27 billion valuation. Another head-slapping miss: How was it that mega-hit music games Guitar Hero and Rock Band were developed elsewhere, while Sony owns one of the world’s largest music companies?
Another example the magazine says is the Sony Reader. The device was first developed in isolation by a group of engineers in the home-audio division flopped. So they tried again and flopped again this time up against the Amazon Kindle.
The future for Sony claims Stringer is networking and if this does not work out there is every chance that a Company like Cisco who has $54 billion dollars in the bank and are networking experts could well step in and take a share of the Company with or without a Sony JV partnership.
