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Sony Ericsson pins hopes on 'entertainment' strategy

Marguerite Reardon CNET News

Published: 16 Feb 2009 11:47 GMT

Sony Ericsson has been hit hard by the global recession, but the company says it has a new strategy focused on services and entertainment that it hopes will get it back on track.

On Sunday evening in Barcelona on the eve of GSMA's Mobile World Congress, the mobile-phone maker, which is a joint venture between consumer electronics maker Sony and telecom-equipment maker Ericsson, unveiled a new strategy that it says fuses "communication and entertainment".

At the core of its new strategy is something Sony Ericsson calls 'Entertainment Unlimited'. Executives were thin on details at the press conference in Barcelona, but the company is planning a strategy that will bring together mobile phones with PCs and the TV to share entertainment content.

As part of this strategy, the company announced MediaGo, which is an extension of its PlayNow Music service. MediaGo adds a service that lets users download movies onto their PC and then transfer them over to a Sony Ericsson device. The company announced the W995 Walkman phone, which will be able play the feature-length movies.

The service will also allow the transfer of other media, such as music, photos and podcasts. The service will also allow users to sync their phone's music library automatically, subscribe to podcasts and auto-convert files for the best-quality playback.

The company also gave a sneak peek at a new high-end, touch-screen phone, called the Idou. This 12.1-megapixel camera phone is supposedly designed for all kinds of multimedia functionality. Details about the product are scarce, but it is due to launch in the second half of next year.

That said, executives alluded to the fact that these two new phones will play a much larger role in the company's 'new' strategy to better integrate entertainment on mobile devices and other devices throughout the home.

Yet this supposedly new strategy for the company doesn't sound entirely new. Sony Ericsson was formed in 2001 as a joint venture between a media company and telecommunications equipment maker. And since 2005, it has been selling its Sony Walkman phones, which allow people to listen to digital music on the go.

The company claims its Entertainment Unlimited strategy takes things to a new level, where consumers can share and access media across multiple products from mobile phones to PCs to their TV screens.

"Everything that we have done to date has brought us to this point," said Lennard Hoornik, head of global marketing and a vice president at Sony Ericsson. "We created the music-phone category in 2005 selling over 100 million Walkman phones, and we are now ready to unveil the next chapter in the evolution of the company."

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The idea happens is one that its competitors seem to share. Nokia, the world's largest mobile-phone maker, has been developing an entire service platform called Ovi for more than a year that allows users to share files from the PC to the phone and vice versa. And one of the things that has made Apple's iPhone so successful has been its integration with the existing iTunes media store, where users get access to music, videos and podcasts.

While Sony Ericsson's strategy may not be revolutionary, adding more value to its products is probably a necessary move. The entire mobile-phone market took a beating in the second half of the year, as consumers bought fewer mobile phones due to economic concerns. And that trend is expected to continue until the market starts to pick up.

The recession hit Sony Ericsson particularly hard. For the fourth quarter of 2008, the company lost €187m. This is compared with a profit of about €373m in fourth quarter of 2007.

But it is difficult to say how much this 'new' strategy will help the company. The one bright spot in the mobile-phone landscape for the next couple of years appears to be smartphones. Market-research firm IDC recently reported that while overall mobile-phone sales declined by 12.6 percent worldwide in the fourth quarter, sales of smartphones were up 22.5 percent.

The problem Sony Ericsson faces is that it is not competing very well in the smartphone category. Last year at Mobile World Congress, the company made a lot of buzz with its first Windows Mobile device, the Xperia X1. As of November, the phone has been available in North America.

But the phone is not offered by any major carrier in the US, and the $800 price tag for an unlocked and unsubsidised phone is too high for consumers who can get an iPhone 3G from AT&T, a BlackBerry Storm from Verizon Wireless, or a Google Android G1 from T-Mobile USA for the subsidized price of $200 with a two-year contract.

Given that the smartphone market is where all the action is expected to be over in the next couple of years, it is surprising that Sony Ericsson would choose high-end feature phones to anchor its new 'Unlimited Entertainment' strategy.

The details are still too scarce to know exactly how this will pan out. But Sony Ericsson needs a compelling and affordable smartphone that can take advantage of these entertainment and communication features. And to effectively compete in this market, it is going to need to expand its distribution beyond Europe and Japan. Namely, it needs to bring an affordable and desirable smartphone to North American consumers.

Credit: Sony Ericsson unveils new strategy from CNET News