. . . Monday March 7, 2005

What Happened to Sony?

Howard Stringer has become the first non-Japanese CEO of Sony, a company that has been, in many ways, synonymous with the rise of Japan as an economic power.

If the pattern of his performance holds, the future for Sony may involve a tectonic shift in its own culture, away from pre-eminence for its technology-based businesses and toward its media holdings. There has been recent speculation that Stringer may even seek a public offering to spin off the entertainment properties, including Sony’s filmed entertainment division, its music division and the newly acquired MGM studio, as a separate entity from Sony’s business in electronics.

So why, in the age of the portable music and the computer and the plasma and LCD televisions, does Sony of all companies feel the need for a tectonic shift?

The culprit could be the internet.

Ten years ago, if you were going to buy a television, you’d go to an electronics store and try to shift your focus away from the commission-driven sales pitches that were being shoved in your face. Brand familiarity was huge. You might have been willing to pay a bit more for a brand you trusted. Sure, Sony products cost more because they were Sony, but they were always at least good and their design was usually excellent, so you went for it.

Cut to today. You’ve been on the web. You’ve read reviews by the journalists, experts and television-watchers just like yourself. If you go to a terrestrial store at all, you already know what you’re there for and what you’re willing to pay. Your brand trust comes from your research. You’re not willing to pay more for something just because it’s a Sony (and let’s face it, paying more is still one of the requirements for owning a Sony). You can repeat the above story for laptops and other products that Sony sells. Pushing consumer grade products at just above consumer grade prices just doesn’t play in this new world.

There’s more to it of course. Apple’s iPod explosion didn’t help much. The MP3 player market was one you’d have assumed Sony would lead. Always adopting their own weird standards has long been an odd strategy. And the whole software/hardware mix is a tough business to pull off on a global level. But I think, strange as it might sound, that the internet hurt Sony as much as anything else. We changed the way we shop. Sony didn’t change the way they sell.

Concentration is important!