Sony

Name: Sony

Controls a huge amount of digital content but has made a number of missteps in dealing with media convergence; its slowness to develop on online service for its Playstation 3 console is just one example. However, Sony has moved quickly to bring new media devices to market, including e-readers and televisions that support Internet video.

Stock Symbol: SNE
URL: www.sony.net
Location: Tokyo
Telephone: +81 (3) 6748 2111
Year Founded: 1946
Number of Employees: 171,300

Executive Leadership:

CEO: Howard Stringer

Bio: Bachelors and Masters in modern history from the University of Oxford. He had a 30-year career at CBS, rising to be president of the company, before moving to Sony.

EVP: Keiji Kimura

Bio: Kimura joined Sony in April 1977 and previously served as Managing Executive Officer and Senior Managing Executive Officer, among others, in the Company.

Board Members and Advisors:

Roland A. Hernandez, Vail Resorts

Peter Bonfield

Fujio Cho, Toyota Motor Corp.

Ryoji Chubachi

Tsun-yan Hsieh

Katsumi Ihara

Yotaro Kobayashi, Nippon Telegraph & Telephone Corp

Yoshihiko Miyauchi, ORIX Corp

Howard Stringer

Fueo Sumita

Sakie T. Fukushima, Korn/Ferry International

Yukako Uchinaga, Benesse Holdings, Inc.

Mitsuaki Yahagi, Sumitomo Mitsui Financial Group Inc.

Yoshiaki Yamauchi, Amana Holdings Inc.,

Ryuji Yasuda, Sony Corporation

R&D:

Total R&D spending: $5.5 billion

R&D as a percentage of revenue: 6.99 percent

Percentage of employees engaged in R&D: 32.49 percent

Technology

Sony Corp owns patent rights and license agreements worth $334 million.

Sony is one of the biggest innovators in the games industry. Its Blu-ray technology gives it an important advantage over the Xbox 360, as the PlayStation 3 (PS3) can play Blu-ray movies. However, it was slow to introduce an online service for the PlayStation 3, but Sony Corp recently patented and has plans for an upcoming technology which would allow consumers to not only watch movies, but interact with them while watching videos and other media. The combination of this technology with the recently announced PlayStation 3 Netflix integration, could give a competitive advantage to Sony over its two main competitors, Microsoft and Nintendo.

Market:

Sony Corp operates on four digital media segments: Electronics, Games, Video, and Music.

Electronics is the bread-and-butter business of Sony, representing 65% of the total revenues. In this segment, two products are key: TVs (25% of the electronics revenues) and digital and video cameras (21% of the revenue). According to Datamonitor, the global consumer electronics market grew by 4% in 2008 to reach a value of $267.2 billion. In 2013, the global consumer electronics market is forecast to have a value of $306.1 billion.

Games represents Sony’s second-largest revenue-generating unit (Sony Computer Entertainment Inc. (SCEI) with sales accounting for 13% of its revenue and is currently the market leader with 53.5% share of the market’s volume. In 2012, the global games consoles market is forecast to have a value of $24.6 billion.

Sony Pictures Digital Entertainment division encompasses motion picture, television, home entertainment and digital content creation, acquisition and distribution, amongst others. It recorded revenues of approximately $7.5 billion in 2008, a decrease of 11.2% compared to 2007.

Sony Music Entertainment Japan, a Japanese domestic recorded music business which produces recorded music and music videos through contracts with artists. The segment also operates an internet-related service business subsidiary operating mainly in Japan and recorded an increase in revenues of 7.6% between 2007 and 2008.

Strategy:

Sony Corp uses an “umbrella branding strategy” as it uses the corporate name while promoting its products and services across different digital media segments. In this way Sony Corp can leverage its corporate identity for launching new products and adding brand extensions for its existing and new customers.

In electronics, Sony is trying to recover from its delay in embracing the LCD display format for flat panel displays. Hence, it has set-up a joint venture company, called Sharp Display Products, that started operating in October 2009. Moreover, Sony Corp is investing in S-LCD technologies that provides a source of high quality large screen LCD panels in order to differentiate Sony’s line of Bravia LCD televisions.

After the 2008 economic crisis in which Sony incurred a $1 billion loss, Sony Corp’s strategy is to become more international by producing and distributing content worldwide. In 2009, Sony is uniting the domestic and international divisions of Sony Pictures Entertainment and it has recruited a more international management.

Finally, Sony Corp is focusing in becoming leaner and faster. In 2008 some 18,000 jobs were cut, manufacturing plants where shuttered and the company’s electronics product lines were reduced by 20%. By March 2010 it plans to sell 90% of its stake in its main North American TV factory, located in Mexico, to a Taiwanese company.

Challenges and Next Steps:

Three trends figure in Sony’s future. In electronics and media, Sony needs to focus on bringing web-based video content to televisions. Given that Sony sells 15 million TVs a year, this is a very important development for Sony. As Robert Wiesenthal, the head of strategy for Sony’s entertainment businesses said “We can no longer afford to only offer great TVs. Otherwise, we set the stage for someone to become the Google of the TV.”

Another trend is the development of its digital media content and services. In 2008 Sony Corp acquired two digital media companies: Gracenote, a global leader in technology and services for digital media identification, enrichment, and recommendation and “2waytraffic” a Dutch entertainment company engaged primarily in creating, producing, licensing and distributing light entertainment content across television, mobile and digital platforms.

Finally, Sony is also planning a new online store, similar to Apple’s iTunes. It is expected that it will launch in 2010. It will offer music, movies, books, and other downloadable content geared towards its different electronic products, such as TVs, mobile phones, music players, and computers.

Its main competitive advantage is that it will link Sony’s devices with digital content that it produces, closing the whole circle of digital media creation, production and distribution.

Compiled by Jimena Almendares