Can Stringer restore Sony to its former glory?
Published: 08 Mar 2005 18:05 GMT
The opposite has happened. Competitors with fewer advantages, such as Apple, and lesser-known brands emerged to push Sony to the innovation roadside. Stringer's new role is meant to bring in sweeping and immediate changes for the wayward company to get it back to the head of the pack.
Standardisation of key parts and the increasing role of contract manufacturers in the electronics industry have led to falling margins and a tougher competitive landscape. Infighting among Sony's entertainment and electronics divisions has slowed moves to promote a convergence strategy that would use content to help sell gadgets, and vice versa.
While other electronics companies have flourished, Sony's fortunes have shriveled. Leading competitor Samsung's shares have soared 72 percent since early 2000. After reaching record highs five years ago, Sony's shares have lost almost three quarters of their value — the lowest point came two years ago when the company reported dreadful financial results and saw a 25 percent drop in share price. Analysts called that happening "Sony Shock".
Opening the door to rivals
"The interesting thing is that technology companies and pure content companies sometimes have contradictory impulses," Stringer said in a recent interview. However, "in the last year and a half, building a relationship between content and devices has taken on a new urgency as a part of Sony's convergence strategy."
The best example of that urgency is the company's acceptance of the MP3 digital-audio format for its portable players — something the company proudly resisted for years in favour of its own proprietary ATRAC format. By refusing to support MP3 natively on its players, Sony helped opened the door to rivals including Apple, the current market leader with the iPod.
"Sony Music didn't want those players supporting something they viewed as the format of pirates," said Michael Goodman, an analyst at research firm Yankee Group. "But if you're looking to sell any of these devices, MP3 support is crucial. They made a very Sony-specific position on MP3, and it killed them in the market."
"Sony does those kinds of things over and over again," Goodman continued. "They put their desire to continue to use proprietary formats ahead of everything else, and they make these decisions that are in conflict with market forces."
Company executives have said Sony's proprietary formats are becoming less of a priority and that getting more content to play on its device is the key.
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