Sony is bleeding money - business strategy discussion

[patsu]

So boommoob1 is a Sony employee! If all the departments had been getting along and the content and services had been crafted and implemented in a unified Sony experience, Sony wouldn't be in this mess. Probably not where Apple are because Sony's design is lacking, but they'd be seeing large market share all round.

Ha ha, I have that feeling as well. ;-)

There are at least 4-5 conflicting positions in a large, multi-disciplined organization. Contents vs hardware is not the only clash. I have seen hardware vs software, and legal vs product, and CFO vs CEO. It is not unique to Sony per se.

e.g., In the UltraViolet thread, you see a Universal execs claiming that there is no time to lose. They want to supplement the declining DVD sales quickly, and released UV + Flixster before proper product marketing has been done. For a product oriented company, the staff would want the products to be properly done and marketed. If things are rushed because of contents or other needs, then the product folks usually get the blame for bad sales. The contents folks may get used to the hit-and-miss title business.

OTOH, Blu-ray won the war because they have more exclusive contents. So if Sony knows how to manage both camps well, then they can have the best of both world. One of the things they may want to revisit is the short term measurements due to Wall Street.

Rushing ahead measured by snapshot numbers may not be effective in today's world, with so many things falling apart. They should just take the time to work out an end-to-end strategy. Kaz's moves so far are not stupid, but they will also be impacted by the same weight that has been holding Sony back.

Sony is a company of excess. Even if they play a bad hand or two, they are unlikely to go down that quickly and easily. Even though they probably knew they need to consolidate their forces on fewer products, they may not agree on what to focus on (Too many decision makers). I suspect this is where Kaz needs work.

At the next level, we also hear Shuhei declaring that they have been working together for PS Vita. But I feel that Andrew House has not given him a product marketing goal to hit (What is the end user experience for PS Vita ?). I think Phil Harrison gets it. I am not so sure about Shuhei. He doesn't seem like a product guy, and may need help in that area.

 

[NathansFortune]

They will need to cut the extras at the same time. Even if they have a winning design on hand, they will need to commit more $$$ to market and distribute it at a good price. It is not a company that rolls out subpar hardware. Even today, they have good and interesting products every now and then. Problem is they adopt the slow and traditional marketing approach. The SKUs will have too low volume and too high price, before others catch up.

The extra complication from their many SKUs approach drains marketing funds and dilute R&D resources. e.g., Playstation Suite would be easier to implement if they have more controlled rollout and fewer SKUs.

Yup, I think their way to success is to opt out of the LCD/LED market in the medium term and go all in with OLED and only have a single range of TVs - like Apple one range with different storage sizes, Sony could have a single range of TVs but with different sizes and make the smallest an entry level version with the lowest price.

Advertise it with a whole new brand, dump Bravia as a type of brand and call it something new and make a clean break, or they could bring back Trinitron and live out the glory days all over again. Have a massive buzz and advertising campaign, make it the second coming of TV, call it magical, get Kaz on stage announce that he is becoming CEO and this is his first product that he has worked on with Sir Howard and all of that kind of stuff. Announce PS Suite as the overarching software and OS base for all Sony devices, say it is rolling out on PS3 and Xperia smartphones, and select third party devices as well as all Sony MP3 players, TVs, Vita, Vaio PCs and Tablets. Make PS Suite Sony's iOS. If they are smart they will turn PS Suite into a proper spin off of Android like Amazon did for the Fire. The possibilities for a company like Sony are endless, they just need to get in gear and make it happen.

 

[AlphaWolf]

sounds great... just have to explain to shareholders "if this doesn't work you can still wipe your behind with the stock"

They have billions invested in LCD tech/production, walking away probably isn't going to be a realistic option. It would take years of transition and severe cuts in revenue during that transition. And no guarantee that OLED will win over consumers (how much will it cost, how will it compare to products down the road etc).

 

[NathansFortune]

sounds great... just have to explain to shareholders "if this doesn't work you can still wipe your behind with the stock"

They have billions invested in LCD tech/production, walking away probably isn't going to be a realistic option. It would take years of transition and severe cuts in revenue during that transition. And no guarantee that OLED will win over consumers (how much will it cost, how will it compare to products down the road etc).

The thing is LCD/LED already has them on the death march, it's just a bit slower. At least going all in with OLED gives them a chance against Samsung.

 

[patsu]

They have already decided to pool LCD production resources with other manufacturers. Are they really doing any serious LCD R&D ?

Yup, I think their way to success is to opt out of the LCD/LED market in the medium term and go all in with OLED and only have a single range of TVs - like Apple one range with different storage sizes, Sony could have a single range of TVs but with different sizes and make the smallest an entry level version with the lowest price.

Advertise it with a whole new brand, dump Bravia as a type of brand and call it something new and make a clean break, or they could bring back Trinitron and live out the glory days all over again. Have a massive buzz and advertising campaign, make it the second coming of TV, call it magical, get Kaz on stage announce that he is becoming CEO and this is his first product that he has worked on with Sir Howard and all of that kind of stuff. Announce PS Suite as the overarching software and OS base for all Sony devices, say it is rolling out on PS3 and Xperia smartphones, and select third party devices as well as all Sony MP3 players, TVs, Vita, Vaio PCs and Tablets. Make PS Suite Sony's iOS. If they are smart they will turn PS Suite into a proper spin off of Android like Amazon did for the Fire. The possibilities for a company like Sony are endless, they just need to get in gear and make it happen.

PS Suite is a nice idea, and they probably need to invest in it. But it is a double-edged sword. e.g., PS Suite for Tablet S (and other devices) may suck if the base OS doesn't run it fast enough. They need to guarantee a decent level of user experiences across all the SKUs. We'll see what happens with Android 4.0 is released.

 

[NathansFortune]

They have already decided to pool LCD production resources with other manufacturers. Are they really doing any serious LCD R&D ?

If you are talking about the recent merger, that is for mobile sized displays up to 17.3" rather than full size TV displays. Sony don't have any real LCD/LED display factory now that they are going to dispose of their half of S-LCD. I honestly think they are going all in to OLED, it's the only strategy that makes sense right now for them. They have lost the LCD TV war to Samsung and giving up is going to be cheaper than continuing, OLED gives them a new path to success, a third way. Sony so far have got closest to marketisation of large screen OLED. Samsung are pretty good at AMOLED for mobile displays, but they are really far behind in large screen because they have been concentrating their firepower at LCD and mobile AMOLED. Sony have invested huge amounts in large screen OLED and are probably the only company that could bring out an > 40" OLED TV next year in serious quantities.

While I have heard the production isn't ideal, many engineers believe they can scale up and fix them along the way, again, another reason I think Sony will have at least one consumer oriented OLED (they already have professional OLED on sale now) at CES which will be on sale before the first half is over in September. Premium products with premium pricing and good marketing will win, Sony can't play the margins like Samsung, they don't have crazy cheap North Korean labour or massive South Korean government subsidies and tax breaks. They have to corner the next big thing and they tried with 3D, but people don't really want 3D. The Visor is a cool idea and it is really great, but it's just not mainstream enough (though a great halo product to give Sony the cool factor again like Aibo). OLED is the only thing I can think of that makes any amount of sense.

PS Suite is a nice idea, and they probably need to invest in it. But it is a double-edged sword. e.g., PS Suite for Tablet S may suck if the base OS doesn't run it fast enough. They need to guarantee a decent level of user experiences across all the SKUs. We'll see what happens with Android 4.0 is released.

Of course, but as a long term strategy Sony need to be looking seriously at not being reliant on Google. If they can get Suite off the ground and get the app-makers on board to customise for PS Suite I think they have a good chance of going it alone with their own custom version of Android. Remember that of all mobile telephony companies, Sony and Moto are the only ones who have not been threatened by any other companies, Sony are armed to the teeth with smartphone IP and it's about time they exploited it for a truly amazing product.

 

[patsu]

If you are talking about the recent merger, that is for mobile sized displays up to 17.3" rather than full size TV displays. Sony don't have any real LCD/LED display factory now that they are going to dispose of their half of S-LCD. I honestly think they are going all in to OLED, it's the only strategy that makes sense right now for them. They have lost the LCD TV war to Samsung and giving up is going to be cheaper than continuing, OLED gives them a new path to success, a third way. Sony so far have got closest to marketisation of large screen OLED. Samsung are pretty good at AMOLED for mobile displays, but they are really far behind in large screen because they have been concentrating their firepower at LCD and mobile AMOLED. Sony have invested huge amounts in large screen OLED and are probably the only company that could bring out an > 40" OLED TV next year in serious quantities.

Not just the small LCDs. I thought they also share large screen LCD facilities with other manufacturers ?
Sony has been toying with large OLED screen for many years now, but produced no commercial result yet.

...

The Visor is a cool idea and it is really great, but it's just not mainstream enough (though a great halo product to give Sony the cool factor again like Aibo). OLED is the only thing I can think of that makes any amount of sense.

I agree. I want one that is integrated with the net and live video feed. Would be so cool if I can wear it to help my wife navigate. Don't have to look up and down constantly to map our direction. A vehicle HUD display would be useful too.

The true potential of that visor can only be realized with proper software and hardware bundling (plus great 3D contents).

Of course, but as a long term strategy Sony need to be looking seriously at not being reliant on Google. If they can get Suite off the ground and get the app-makers on board to customise for PS Suite I think they have a good chance of going it alone with their own custom version of Android. Remember that of all mobile telephony companies, Sony and Moto are the only ones who have not been threatened by any other companies, Sony are armed to the teeth with smartphone IP and it's about time they exploited it for a truly amazing product.

Well... Motorola is Google now.

To really play the software platform game, I think Sony need a few more years and also a critical mass of top tier software engineers and QA. PS Suite is not an easy monster to tame if they are shooting for a world class platform (that can differentiate from Google, Apple and MS).

I am glad they embarked on the project. Need to keep a tight rein over expectation, QA and applications in the mean time.

 

[RudeCurve]

The next big thing is autonomous home robotics with self induction charging systems and wireless remote FPV beamed to your smartphone. Add in voice and facial recognition and you've got a huge lead over the competition. Sony needs to do this before Apple, Google, Nintendo, Microsoft etc enters that market. A couple years ago I predicted voice recognition would be the next big thing and I was right Kinect has it Siri has it now Google will have their version too.

 

[Prophecy2k]

The next big thing is autonomous home robotics with self induction charging systems and wireless remote FPV beamed to your smartphone. Add in voice and facial recognition and you've got a huge lead over the competition. Sony needs to do this before Apple, Google, Nintendo, Microsoft etc enters that market. A couple years ago I predicted voice recognition would be the next big thing and I was right Kinect has it Siri has it now Google will have their version too.

I'd hardly consider Kinect and Siri as a validation for voice recognition being the "next big thing". We've had voice recognition in some form for our phones for ages, and siri will go mostly ignored by the majority of users. It isn't as though the millions upon millions buying iPhones are buying them because of Siri. Plus, kinect hasn't made any meaningful use of its voice recognition yet. It's the full body tracking and "you are the controller" marketing message that's selling Kinect. I just think its too premature to declare voice rec the "next big thing", give it three more years and we'll see what the landscape looks like, and if it just gets relegated to one of those "additional features in CE products that no-one uses" or not.

I must say though, autonomous home robotics sounds like a bloody fantastic idea. I've always thought that the first company to bring out a robotic housemaid that can be programmed to handle your chores, will be the one to rule the world

 

[RudeCurve]

The next dash update will make more use of voice same with win8. Regardless the point is there is a time window where certain technologies make sense. It's not a coincidence that the big players are putting a lot of R&D into actual working mainstream products. As for robotics there are already players with actual products out there like Roomba and Wowee but they aren't smart with AI, voice or face recognition.

 

[patsu]

I gave Siri a try. It's more accurate than others but general recognition is still somewhat hit and miss. The good thing is they integrated the apps deeply, added Wolfram Alpha and gave it a personality. Those additions will benefit the users with and without voice input.

I wouldn't mind they add a mic to the visor too.

 

[NavNucST3]

Recent downgrade

Sony Rating Cut to One Level Above Junk by Fitch on TV Losses, Acquisition

“Sony’s balance sheet has worsened,” said Ichiro Takamatsu, a portfolio manager at Tokyo-based Bayview Asset Management Co., which manages about $2 billion. “Sony is pressed to rebuild its business model, as televisions are no longer a cash cow. The company needs to develop something innovative that can integrate its software like Apple.”

...


Fitch assigned a negative outlook to Sony and said a further downgrade by one level is likely within two years, according to the statement. Chief Executive Officer Howard Stringer has announced $8.4 billion of acquisitions this year as the Tokyo-based maker of Bravia TVs and Walkman music players tries to compete with Apple Inc. (AAPL) while forecasting a fourth consecutive loss, a first since it began trading in 1958.

More stuff at the link, I don't believe there is anything new in the article but the downgrade(s) just make a tough situation tougher.

 

[liolio]

Necromonger FTW:
http://www.eurogamer.net/articles/2013-08-01-playstation-hardware-sales-lull-as-ps4-storm-brews

It got barely better for Sony, they sold a lot of assets. Hum let hopes it doesn't turn into a blood bath once the ps4 ships.

 

[-tkf-]

Seems the bleeding has stopped!

Now with a $35 million quarterly profit

http://www.sony.net/SonyInfo/IR/financial/fr/13q1_sony.pdf

 

[DieH@rd]

TV is profitable, Vaio lowered great success of their smartphones, and PS4 R&D put gaming division into 149 million deficit. After PS4 and Honami launch, they will make much more.

 

[liolio]

Seems the bleeding has stopped!

Now with a $35 million quarterly profit

http://www.sony.net/SonyInfo/IR/financial/fr/13q1_sony.pdf

35 millions is close to peanuts, better than losing money but hardly satisfying.

TV is profitable, Vaio lowered great success of their smartphones, and PS4 R&D put gaming division into 149 million deficit. After PS4 and Honami launch, they will make much more.

Much more what? I guess between subsidized hardware and marketing expenses, R&D, the development of the first exclusives that moves relatively few units, etc. it is set to get worse not better.

 

[-tkf-]

35 millions is close to peanuts, better than losing money but hardly satisfying.

Much more what? I guess between subsidized hardware and marketing expenses, R&D, the development of the first exclusives that moves relatively few units, etc. it is set to get worse not better.

But aren't they on track to bettering themselves by billions compared to other years? Peanuts, hardly

It's going to be interesting when we look at the 2014 numbers and see just how much money they are throwing after the PS4.

 

[liolio]

Selling asset is a one shot move, you can't evaluate the company based on that. Serious people don't by the way the company is still rated awfully by Fitch and the like.
By the way MSFT should not do that great either at launch, that is not the profitable part of the product life cycle.

 

[Shifty Geezer]

35 millions is close to peanuts, better than losing money but hardly satisfying.

If the analogy is blood loss, the first step to recovery is to stop the bleeding. 35 million means the 'wound' has 'healed over'. It may open up again, perhaps with a temporary bandage in effect at the moment, or it may heal fully and the rest of the organisation start producing 'blood' to get back to healthy.

 

[-tkf-]

Selling asset is a one shot move, you can't evaluate the company based on that. Serious people don't by the way the company is still rated awfully by Fitch and the like.
By the way MSFT should not do that great either at launch, that is not the profitable part of the product life cycle.

I though the 2012 financials was helped by selling assets, it's my impression that is not the case with this quarterly result. Feel free to find the numbers.