Sony’s not making PCs any more. It recently announced it wouldn’t be making new e-readers, either. The company’s also taking a long hard look at the TV business that it dominated for decades. In the ’90s, its TVs stood up alongside the Discman, Walkman and even that new games console that could play CDs. Sony was cool; it had cachet. But a narrow focus on proprietary technology and its slowness to adapt to the dizzying speed of consumer tech in the last two decades have taken their toll. While it’s created a new department solely dedicated to making the next big thing, it remains to be seen if the company can bounce back from decades of failures.
The Walkman, the PlayStation, all those TVs, countless radios in increasingly smaller sizes, studio cameras and equipment, the compact disc and (possibly) AIBO, the robot dog. These are old success stories.
For decades, Sony practically defined high-end TVs, and they were everywhere. The Trinitron series even won an Emmy in the ’70s. But success didn’t last. Flat-screen TVs killed chunky CRT sets. Around 1992, companies like NEC and Hitachi, both Japanese rivals, became some of the earliest companies to manufacture bigger LCD displays with decent viewing quality. By 1996, Samsung had also figured out its own techniques for flat-screen TVs and by the end of 2007, LCD TVs were outselling CRTs globally.
Sony was slow to adopt, confident in its then-popular Trinitron TVs. But by 1996, its patents on the design ran out, and cheaper competition emerged. Instead of moving into LCDs like other companies, Sony revealed its slightly flatter FD Trinitron series, which was unable to recoup the popularity of the original. In 2002, it finally launched its debut WEGA LCD TV, but by Christmas of 2004, despite a 5 percent increase in TV sales, it suffered a 75 percent plunge in profits. It’s been an increasingly tough market ever since. In the last decade, Sony’s TV arm has bled nearly $8 billion. The company, in its entirety, has also had a few rough years. Make that several rough years. Losses in 2013 totaled 128 billion yen, roughly $1.2 billion.
In 2007, Sony developed the first OLED TV: a tiny, (beautiful) 11-inch TV on an articulated arm, but the company ceased production in 2010 when it decided 3DTV was the next big thing. Not soon after, Korean rivals like LG and Samsung introduced 55-inch, actual TV-sized OLED screens that were deemed the future of television. And it happened again more recently with curved TV sets: LG and Samsung got there first and Sony came after.
Was the company unlucky? Nearsighted? Arrogant? Take its Blu-ray disc business. According to Sony’s own news alert earlier this year: “Demand for physical media contracting faster than anticipated” led to the company reducing its estimates even further. The alert later states, “The fair value of the entire disc manufacturing business also has decreased.” Sony totaled this loss at an incredible 25 billion yen. Blu-ray is a Sony invention — the latest, though not the last, proprietary technology it’s tried to sell. The idea was to keep us, its dear customers, close to where we were spending our money — on media, on content, on software. This myopic aim is partly to blame for why it’s been slow to deliver on new trends: It’s been trying to get value for money from its physical media inventions.
Tech’s history books paint an unflattering picture in that regard: Sony’s Memory Stick was beaten by USB and SD card storage; Betamax was bested by VHS; and while Blu-ray won the battle with HD-DVD, it looks like it’s losing the real war with downloadable, streamable content. We don’t need discs so much — something that also hit the MiniDisc. Remember ATRAC? Sony’s heavy-handed DRM music format? The other options won out. Sony likes control and relinquishing it — or changing with the times — has been a big problem. (Interestingly, after the failure of Betamax, Sony turned its knowledge there into crafting smaller videocassette recorders, adding cameras and ushering in the age of camcorders.)
Maybe the recent lack of a hit, and weak business performance has been due to arrogance. The company’s latest CFO, Kenichiro Yoshida, put it surprisingly bluntly earlier this year: Sony has been very slow to respond to consumer trends. But thanks to previously strong movie and financial arms (Sony sells health insurance in Japan), the poor performance of its electronics company had been buffered. That was until its movie business suddenly turned sour last year and a very harsh spotlight was thrust upon its electronics arm. Yoshida added that to strengthen the company, it was cutting down on pricey (prime) Tokyo real estate, likely to be seen as another dent to Sony’s battered pride.
Another sell-off, its VAIO PC business, was an “agonizing decision,” according to CEO Kaz Hirai. The machines even caught Steve Jobs’ eye at one point. Both its laptops and desktop PCs commanded premium prices, but underneath those classy exteriors were the same components you’d find in far cheaper machines. In the last few years, however, it hasn’t even been a price issue: PCs simply aren’t selling as well as they did 15 years ago. They’ve been taken over by the smartphone, by the tablet — and unfortunately for Sony, these now-ubiquitous gadgets aren’t Xperias. They’re iPads; they’re Galaxy S devices. While it was the fourth largest mobile phone maker in 2009, by 2010 it had dropped to sixth, and its smartphone sales dropped last quarter.
Many believe Sony should be right up there, battling for smartphone dominance with Samsung and Apple, but it isn’t. It may have defined big-screen TVs and the personal music player pre-iPod, but it’s struggled to grab another product category and dominate it like it did before.
Sony was an e-reader pioneer, however. The company launched the first e-ink reader, the LIBRIe (above), in 2004, but hamstrung it with an e-book rental system. The Sony Reader series followed in 2006, but a year later, Kindle arrived and Sony’s limited book selection (along with Amazon’s sales strength) decided the rest. It helped that Amazon continued to refine (and discount) its e-readers. Backlit displays arrived inside Kindles in the second half of 2012, but Sony’s latest (and last) e-reader — announced a year after — still didn’t have one. Sony was slow. Again. Kindle now dominates e-readers. According to the Codex Group, in the US it’s responsible for around 64 percent of all e-book sales.
And now, Project Morpheus, a VR headset, arguably the coolest Sony hardware we know about isn’t coming from its electronics arm, but from Sony Computer Entertainment. SCE has somehow managed to hold onto that Sony magic: The PS4 is off to a very good start, after the messy launch of its predecessor. Perhaps SCE maintains enough distance from the rest of the Sony corporation that it can react and develop faster — whatever it’s doing, it’s working.
Sony’s huge successes in the preceding decades have thrown the weight of expectations onto whatever it does. “The difficulty Sony faced was that we could not forget the success of the past,” Sony’s former CEO Nobuyuki Idei explained in Sea-Jin Chang’s Sony Vs. Samsung. “Sony’s success was based on the tape format, CD format and transistor TV.” In recent shareholder meetings, investors cried out for another hit and complained that it’s another Japanese company, SoftBank, that’s making headlines by selling humanoid robots, not Sony.
Can it get back on track? The company wants to show that it’s at least trying. Earlier this year, Sony announced a new business-development department, aimed at tapping into the creativity and ideas of its youngest employees and people with ideas for The Next Big Thing. Its head, who apparently has a degree of autonomy outside Sony’s chain of command, insists there are still a lot of passionate people inside the once-dominant Japanese multinational. However, the onus will be on delivering new businesses and products that people want — definitive ideas that beat the competition — if it’s to ever return to its influential peak. Then, it’ll have to keep doing it.
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Sony, the catch-up king
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