Not long ago, Sony (NYSE:SNE) was one of those brands, but over the last decade their media division has prevented their technology division from taking the necessary steps to protect their brand name in the consumer electronics industry.
When thinking about how to successfully integrate a business as diverse as Sony’s, there are essentially two strategies that they can take. They either want to create a horizontal structure or a vertical one. A horizontal structure tries to dominate a single product or category. Once you achieve critical mass you can save from cost savings and by being in a position to lead pricing.
Sony used to be in that position when it cames to television sets, but over the last decade, they’ve lost their control over pricing and now Sony executives are publicly worried that prices on LCDs are dropping so fast that it could have a material impact on the company’s bottom line. Their response has been to threaten no more price cuts even if competitors continue to slash prices and frankly, if they had a premium brand on TV sets, they could get away with this, but consumers are no longer willing to pay premiums for Sony TVs and if Sony insists on not staying competitive, they’ll soon learn the hard way how much value their brand really has.
When it comes to vertical integration, Sony tries to save money by creating products that can compliment and drive demand for other divisions within the company. Their studio division creates music and videos which drives demand for DVD and
CD players mp3 players, which ultimately drive demand for televisions, computers and playstation consoles.
While on the surface this strategy seems like a sound approach for Sony to use, I can’t help but wonder if conflicts within the company have prevented an otherwise stellar technology company from better capitalizing on the innovation we’ve seen over the last decade.
Case in point, the Walkman.
It used to be that Sony dominated the portable music industry, yet they were never willing to embrace the mp3 market until Apple put a gun to their head and forced them to innovate beyond those terrible mini discs that they tried to convince consumers to buy. Was this because Sony the technology company didn’t want to sell a new product? Could it have been because they didn’t see the natural benefits of being able to play mp3s or did they really believe that people wanted to buy their media again on a minidisc or carry around bulky CD walkmans that skipped everytime they tried to take a jog?
While I’ve never been privy to the secret Sony executive meetings where they plot their delusions to try and control the media world, my gut tells me that Sony the music studio didn’t want to embrace this crazy mp3 “fad” and was more concerned about protecting CD profits then innovating and bringing an mp3 solution to the market early on. The result of course was that their precious Walkman has very little brand value today and is more recognizable as a footnote of 80’s subculture, then as a portable phone.
In looking at some of the other missteps that Sony has taken, I can’t help but wonder if Sony the technology company would have ever supported rootkit technology if it weren’t for their media division? Somehow I doubt it.
Would Sony’s PS3 divison have given up their lead on Microsoft just so that they could implement Blu-Ray? Who really knows, but Sony’s insistence to include this technology has created a backlash against their PS3, higher prices that are going to be hard for the non-early adopter crowd to justify and delays in the number of units launched.
While it’s possible that even without their media division Sony would have still lost their cool factor long ago, when I see desperate attempts to build buzz by creating flogs for their PSP, it’s clear to me that Sony has lost their premium status in the marketplace. If they can’t get their users to talk about their product on their own, then something is seriously wrong with Sony’s brand. Sony’s sneaky attempt to try to influence the net culture with their fake internet site is a clear sign that the company has jumped the shark.
How devasting this loss of premium status will be to the company’s bottom line is anyone’s guess, but as long as their technology departments continue to answer to their media divisions, Sony will continue to fail when it comes to bringing new innovation to the market.