Sony is bleeding money - business strategy discussion

[patsu]

Recordable CD and CD recorders have a much smaller impact compared to Napster and the slew of P2P sharing services that followed.

All the music labels -- not just Sony -- misread the market and lost control. I remember reading that Sony Electronics folks were fighting with Sony Music on this very issue. The movie studios are more fortunate, and learn from the music industry's mistakes.

Only Apple managed to execute and dominate. None of the earlier MP3 makers and Windows music services made sufficient impact. I remember at that time, people were wondering if Steve Jobs would bring iPod over to Windows.

 

[deathindustrial]

There's also aspects of Sony software that has been good (because each software product comes from a separate division with its own software expertise and vision, so it can all vary greatly). Sony Vegas is one example.

Not sure if it makes any difference to your point but Sonic Foundry developed Vegas, Sound Forge and ACID long before Sony entered the picture - Sony bought a mature product plus 70 employees back in 2003.

Cheers

 

[joker454]

Not sure if it makes any difference to your point but Sonic Foundry developed Vegas, Sound Forge and ACID long before Sony entered the picture - Sony bought a mature product plus 70 employees back in 2003.

It actually is a good point to show that Sony has difficulty understanding software trends and users needs. I've been using Vegas since 4.0, and use it daily now for my business and the sentiment often echoed on the video editing forums is that the Vegas has been on the decline since Sony got involved in it. One problem for example is that they put their own marketing needs ahead of users needs, so like they have added 3d support to Vegas which very few people have asked for but they did it to help promote other 3d products they sell because that's where their priorities lie. In the meantime they have totally ignored gpu assisted playback on the timeline which makes Vegas unusable if you have many hd videos stacked or need to to extensive color correction, etc, which has resulted in people defecting to Adobe Premiere Pro 5 which does offer that. Sony even *removed* network rendering support from Vegas 10!

There seems to be a fundamental problem when dealing with software at Sony. The fact that 3d was not a heavily requested feature for Vegas never mattered to Sony. Instead they decided that they want to push 3d since it will help push 3d tv's, 3d camera, etc, that they sell and thats the direction they went, customers be damned.

 

[rekator]

The problem of Sony is simple… They are their best enemy…
All divisions try to not disturb the bizness of others, so at the end you got a lethargically corporation.
Like said by tkf, Sony don't go in the mp3 player a first due to their Major division who blocked this, same for their video product they blocked the streaming until the death (or when the market imposed it) due to the Blu-ray division.
They can't be reactive 'cause they are afraid to move and lost their well-known situation. And the end they are under the market, not a good position for a company who keep the feeling they're the Leader. And continued to invest in this objective…
And for the fun of "be a Analyst" personally I'm thinking that NGP will sell far less than PSP, hope that Sony make the product and bizness plan in this direction, and it's not necessary a bad thing, it can be more profitable than PSP, if made right.

 

[patsu]

The problem of Sony is simple… They are their best enemy…
All divisions try to not disturb the bizness of others, so at the end you got a lethargically corporation.
Like said by tkf, Sony don't go in the mp3 player a first due to their Major division who blocked this, same for their video product they blocked the streaming until the death (or when the market imposed it) due to the Blu-ray division.
They can't be reactive 'cause they are afraid to move and lost their well-known situation. And the end they are under the market, not a good position for a company who keep the feeling they're the Leader. And continued to invest in this objective…
And for the fun of "be a Analyst" personally I'm thinking that NGP will sell far less than PSP, hope that Sony make the product and bizness plan in this direction, and it's not necessary a bad thing, it can be more profitable than PSP, if made right.

Agree mostly except for the bolded part. To my knowledge, Sony is one of the most aggressive studios pushing for streaming. They earn more $$$ that way.

They support Blu-ray because based on their studies, consumers are not ready to give up packaged media yet. In short, they believe both streaming and Blu-ray can survive at the same time. It looks like the studios will continue to optimize their revenues in streaming and packaged media until one give way to the other.

 

[Shifty Geezer]

While at the same time selling recordable CDs? And cd recorders?
I'm sorry, but that's bullshit, Sony misread the market.

Yes - that's what people were saying. Their view of MP3 players was wrong.

 

[Shifty Geezer]

Not sure if it makes any difference to your point but Sonic Foundry developed Vegas, Sound Forge and ACID long before Sony entered the picture - Sony bought a mature product plus 70 employees back in 2003.

I forgot that, but at the same point it shows you can always buy in programmers, just as Sony did with their first party games. A lack of software nonce in themselves wasn't enough to stop them producing a decent network service utilising their assets - they just needed to get the right people. But they didn't because they didn't chase the vision.

As for Joker's point, TBH that's sadly the case for a lot of great programs! They get bought out by a bigger fish and then the bigger corporate controls stifle the product. There aren't many programs or devices I've used where the software has been as good as you'd hope/expect it to be, and it boggles my mind. Even the big fish like MS, Apple, and Google, can produce monstrous pieces of software. But Sony's failure at a full-fledge SonyNET release in 2005/6 wasn't due to them producing crappy frontends to their network, but them not producing the network!

 

[Nesh]

Yes - that's what people were saying. Their view of MP3 players was wrong.

It is one of those cases where Sony had to stop focusing on current business protection and watch where competition is heading the market.
It appears that Sony is not taking steps because they are afraid to compete against their current businesses.
What do I mean?
It reminds of of Sega during the 32 bit era. Sega of Japan was reluctant to promote the Saturn as a home system that would serve as a substitute to the arcade machines because they wanted to avoid cannibalizing from their arcade business. But they ignored that competition was trying to market their product as such and bring the arcade quality experience to households. They didnt see that this is what people wanted and competition would give it to them
So Sony who had nothing to lose from the arcade business, came up with a product that offered more than the Saturn, and gave people the experience they wanted that would eventually pull more and more people towards the home gaming experience as a much better alternative.

Just like Sega, Sony ignored that a competitor like Apple would invest in MP3 players and evolve the market towards that direction since they had nothing to lose from Music records, CD's and disk based devices

If you are not alone in the market you cant prevent how competition will change the market. Better do what he will do before he destroys your old business and takes control of the opportunity laying in front of your eyes

 

[wco81]

Netflix is looking to expand internationally. I've heard they've hired localization people aggressively around here. Though the studios are going to demand higher and higher licensing fees from them so it'll be interesting to see if it takes off elsewhere.

I think Sony would have had a problem offering a digital music store back in the day because competitors would have been reluctant to make a deal with them. Only an outsider like Apple might have been able to bring all the studios together.

Sony's problem was software. People hated ATRAC not only because it was proprietary at a time when everyone was going MP3 but because it required transcoding and other processing just to load music to their players. I remember reviews pointing out how horrible their software was.

They even poached some guy from Apple to spearhead their software division but apparently nothing came of it.

Now, the digital audio player market has pretty much flatlined and growth is in smart phones. Guess which companies dominate that market. Yes software companies again. Sony Ericsson phones tried to compete with Nokias for high-end camera phones, before the smart phone wave hit, or tried to make pretty designs.

Sony never had the software DNA for the world we're in right now, software and services being the secret sauce for hardware. As soon as electronic products required putting more and more intelligence in them, with a UI to access that intelligence, Sony wasn't going to have a chance.

Even in hardware and industrial design, competitors have caught up. XBR doesn't carry the cachet that it used to (it doesn't help that TV has become a commodity business), as other companies are offering sleek displays. Sony had invested in some exotic display technologies (GLV, SXRD, OLED) but now it's reduced to being one of many vendors of LED-backlit LCDs. They try to sell VAIO laptops at a premium but bottom line, they're just another Windows OEM, which sometimes lead the market for thin, small designs but eventually is caught up -- every PC maker uses the same Chinese/Asian contract manufacturers.

NGP is interesting but it's using industry-standard tech, nothing like the Cell or Blu-Ray. So NGP is going to have to rely on exclusive IP, which are ports of PS3 games. Will that be enough, especially in a world of 99 cent smart phone games?

PS4 will face similar questions. Smart move is not to invest in custom processors or other custom components. But PS2 and PS3 were hyped with the Emotion Engine and the Cell, pushed by Kutaragi's vision of other fanciful uses (Cell Storage, Cell grid, etc) which never came to pass.

But the console business has become more about software now. Sony no longer has the big 3rd-party exclusives and while some of its first-party franchises are well-received critically, they're no longer the dominant system sellers that they were in the PS1 and PS2 days. Beyond game software, software services have become more prominent as consoles have become set tops for playing back digital video and audio. So the software front-end (XMB) and the online presence (PSN) have brought to light Sony's shortcomings in those areas.

Sony will have to prove they can compete on these fronts. Certainly the skeptics are having their day now.

 

[-tkf-]

You could put music from sources you owned on an iPod even way back in 2001. Please stop making it sound like Sony was trying to take some moral high ground or something.

You are reading stuff into my post that shows more about you than is good.

The thought process for anything MP3 related back then was MP3 = illegal pirate copies done by filthy thieves. And in the past 15 years the media and industry at least scored one succes and that was creating the idea that a illegal copy was theft. The rest left them bleeding and dying.. well deserved btw.

And back then most MP3´s was actually pirate copies that changed "hands" over the internet. Nobody owned MP3 players compared to today. Portable audio was Minidisc or Cassette based.

Sony and others screwed up and didn´t understand the fundamental shift that was happening back then.

 

[-tkf-]

While at the same time selling recordable CDs? And cd recorders?

I'm sorry, but that's bullshit, Sony misread the market.

History lesson?

CD-Recorders and the media was so expensive to begin with that it had nothing to do with lost CD sales.
When prices dropped enough to make a real difference the MP3 train had already left the station and the brakes didn´t work....

 

[AlphaWolf]

History lesson?

CD-Recorders and the media was so expensive to begin with that it had nothing to do with lost CD sales.
When prices dropped enough to make a real difference the MP3 train had already left the station and the brakes didn´t work....

History lesson, CD-Recorders were released in 1990. Yes they were really expensive in 1990 and for the first 5 years or so, by 2001, cd-r was already plenty cheap (pennies per disc), 10+ years after their introduction and already well into the mass adoption of DVD.

MP3 was just a boat that Sony missed, not because of any moral misgivings, but that they either preferred their own proprietary tech and figured they could edge out MP3, or they just never felt MP3 would catch on.

 

[patsu]

They were just trying to find a business model in the digital era.

In the end, MP3 may be a red herring. Who made big money from it ? Most of the vendors tried to sell MP3 players (like people trying to sell their own brand of cellphones today). There is no barrier of entry. A few companies tried to sell songs but the DRM got in the way.

Apple promoted AAC instead of MP3 (perhaps to distant themselves from pirated content), simplified the DRM and was the first to deliver an integrated experience. No one else did. Not Sony. Not Microsoft. Not the P2P sharing sites or other dotcom companies. Because of Mac's captive and relatively small base, the music labels were comfortable to run the experiment with Apple. It is said that Steve Jobs took 2 years to convince the execs.

Should Sony jump in to make MP3 players, I doubt the picture would change much. It's probably very hard even for Apple to repeat the feat today.

 

[-tkf-]

History lesson, CD-Recorders were released in 1990. Yes they were really expensive in 1990 and for the first 5 years or so, by 2001, cd-r was already plenty cheap (pennies per disc), 10+ years after their introduction and already well into the mass adoption of DVD.

MP3 was just a boat that Sony missed, not because of any moral misgivings, but that they either preferred their own proprietary tech and figured they could edge out MP3, or they just never felt MP3 would catch on.

Obviously you have no idea of what you are saying. Sony did whatever they could to protect their Music business, they supported MP3 on their first "net players" but only if you converted it to Attrac. And you couldn´t just move the tracks freely around. A friend of mine owned one of these players back then, it was a disaster and just felt so "restricted" that it really was obvious what Sony was trying, and failing to do.

They did everything wrong about MP3 and i only see reasons that align with their core music business.

Someone within Sony didn´t like the idea that they could sell Music CD´s with one hand, and the other would be selling the devices to play the piracy copies.

And moral had nothing to do with it. They considered MP3 evil because their Music business was feeling the "love" of the new idea of free music through MP3 files. They could have created a massive business for themselves with MP3 supporting Minidisc players, but it was first in 2005 (wiki helped here) that they made it happen.. A Minidisc with MP3 support 5 years before the iPod..

http://www.pcworld.com/article/10425/sony_building_digital_walkman.html

Sony officials say they will not sell MP3-based products and strongly emphasize the need for a secure system that protects copyrighted material from piracy.

"We want to make rules because MP3 is already making a market," said Fujio Noguchi, producer at Sony's Creative Project Office in Tokyo.

 

[-tkf-]

They were just trying to find a business model in the digital era.

In the end, MP3 may be a red herring. Who made big money from it ? Most of the vendors tried to sell MP3 players (like people trying to sell their own brand of cellphones today). There is no barrier of entry. A few companies tried to sell songs but the DRM got in the way.

Apple promoted AAC instead of MP3 (perhaps to distant themselves from pirated content), simplified the DRM and was the first to deliver an integrated experience. No one else did. Not Sony. Not Microsoft. Not the P2P sharing sites or other dotcom companies. Because of Mac's captive and relatively small base, the music labels were comfortable to run the experiment with Apple. It is said that Steve Jobs took 2 years to convince the execs.

Should Sony jump in to make MP3 players, I doubt the picture would change much. It's probably very hard even for Apple to repeat the feat today.

Apple went with AAC because of DRM and the music business requiring it. They supported MP3 files just as well. By 2003 the music industry had nothing to loose with a few tracks on iTunes.

Had Sony played ball earlier they would have a chunk of the market today. There weren´t any good quality MP3 players before the iPod.

 

[patsu]

Apple went with AAC because of DRM and the music business requiring it. They supported MP3 files just as well. By 2003 the music industry had nothing to loose with a few tracks on iTunes.

Had Sony played ball earlier they would have a chunk of the market today. There weren´t any good quality MP3 players before the iPod.

There were some interesting MP3 players but they were too "techie". Sony may find it hard to compete later because Sony CONNECT tanked. 8^/

But yes, compared to MP3, AAC is more loved by the studios because it is not anti-DRM.

 

[AmFreak]

Had Sony played ball earlier they would have a chunk of the market today. There weren´t any good quality MP3 players before the iPod.

What do you mean with "good quality"?
I was kind of an early adopter and bought one around 2000 (rio 800?) and i had no problem with it, aside from the tiny 32 MB storage .

 

[AlphaWolf]

Obviously you have no idea of what you are saying.

I really can't stand these condescending bullshit comments that keep flowing from you, I know what I am saying. Please stop.

Sony did whatever they could to protect their Music business, they supported MP3 on their first "net players" but only if you converted it to Attrac. And you couldn´t just move the tracks freely around. A friend of mine owned one of these players back then, it was a disaster and just felt so "restricted" that it really was obvious what Sony was trying, and failing to do.

Yes, they misread the market. They were market leaders in portable media and they didn't even understand what their customers wanted (ease/freedom of use) or they felt they were big enough that the market would follow them into something they could control, unfortunately their option was complete crap.

They did everything wrong about MP3 and i only see reasons that align with their core music business.

of course you do

Someone within Sony didn´t like the idea that they could sell Music CD´s with one hand, and the other would be selling the devices to play the piracy copies.

All the while they had been selling cassettes and cd-r's for eons. IT MAKES NO SENSE. The piracy angle doesn't play.

And moral had nothing to do with it. They considered MP3 evil because their Music business was feeling the "love" of the new idea of free music through MP3 files. They could have created a massive business for themselves with MP3 supporting Minidisc players, but it was first in 2005 (wiki helped here) that they made it happen.. A Minidisc with MP3 support 5 years before the iPod..

http://www.pcworld.com/article/10425/sony_building_digital_walkman.html

Considering mp3 evil is exactly what I'm talking about regarding morals. I very much doubt they had any such internal belief (of mp3 being evil) as mp3 was merely a logical extension of what portable media players had been bringing to consumers for 20+ years. More and smaller. It was a problem for them in that they didn't have a way to capitalize on it or be a leader in that market.

I very much doubt mini disc was ever poised to do anything as long as it was a closed ecosystem. It never reached more than niche status, there's no reason to expect that MP3 support would have done more for it while it remained a more expensive option.

As for the PR blurb, I'd take that with a truckload of salt. They'd been selling recordable media and recorders for eons, it's fine with them as long as they have a hand in it.

 

[patsu]

I very much doubt mini disc was ever poised to do anything as long as it was a closed ecosystem. It never reached more than niche status, there's no reason to expect that MP3 support would have done more for it while it remained a more expensive option.

It's more a problem of Sony unable to communicate and demonstrate the value of mini-disc vs digital download music. Being a closed ecosystem has its advantages... like Apple's ecosystem and XBL. Being an open system has other advantages... like Android and Blu-ray.

 

[RudeCurve]

Sony bet on MD, UMD and ATRAC...they lost the bet. Memory stick is somewhat sucessful but still lost out to SD.