Sony trying to get back to the future

PlayStation 3. Photo / Supplied

Sony once set the standard for inventing products people never knew they wanted - from the Walkman to the game console.

That knack for shaping consumer tastes powered the Tokyo-based company's market share and ability to command premium prices for its gear.

If this sounds a lot like the recent history of Apple, that's a big part of Sony chief executive Howard Stringer's challenge: how to make Sony stand out in an Apple world.

Stringer, 68, is taking a page from the iPod maker's playbook. He wants to digitally funnel Sony's trove of music, movie and gaming content directly to its TVs and other devices.

"That's the experience you need to drive Sony into the digital future," Stringer said after a product event in May.

Key will be Sony's PlayStation 3 game console and its wireless Blu-ray players. The company is pushing them as media hubs that - like Apple's iPhone and its apps store - can link audiences to content without a computer.

The strategy faces challenges. That became clear this week when Hulu, the video website run by General Electric's NBC-Universal, News Corp's Fox and the Walt Disney's ABC, unveiled its subscription service to push TV shows to consumer devices. Hulu Plus will be available exclusively for hardware made by Apple and Samsung Electronics at its debut.

Sony, which is keen to use content deals to sell more gear, wanted to be part of the initial rollout. Now it will have to wait to get in on the action.

Sony shares are down about 14 per cent this year compared with a 13 per cent drop in the Nikkei and an 8 per cent drop in the Standard & Poor's 500. Sony is off more than 40 per cent since Stringer was named chief executive in 2005.

Stringer's predecessor, Nobuyuki Idei, tried to marry content and hardware and was thwarted by warring factions within the company.

The recession gave Stringer an opportunity to upend the status quo. Besides firing 19,500 people as of last year and outsourcing much of Sony's TV manufacturing, he replaced division chiefs with younger, more collegial managers.

"There are still silos at Sony," said Richard Doherty, who runs the market research firm Envisioneering. "But now at least they're sending smoke signals to one another."

Stringer chose his team - dubbed the Four Musketeers - because they were less likely than their predecessors to use the past as a blueprint, he said. The Musketeer to watch is Kazuo Hirai, 49, who worked at Sony Music and helped popularise the PlayStation. Hirai now runs the Networked Products & Services Group.

Before his ascension, the TV, game and movie units each had their own way of delivering web content.

Hirai had got them working together, Stringer said, and made it possible for consumers to use one account to access movies, shows and webisodes on any Sony device - much as Apple does with iTunes.

Sony hopes to use the PlayStation Network as a model for the entire company. The four-year-old service has 50 million registered users who can buy or rent video, games and music over the web.

Stringer aims to sell 350 million networked gadgets and generate US$3.4 billion ($4.9 billion) from network services, which include movies and games, by March 31, 2013.

No one doubts networked gadgets are the future, and most of Sony's rivals are pursuing them.

"People like their stuff to work together," said Jeff Barney, who oversees digital products at Toshiba. "That's where Apple has challenged us."

Sony also faces Microsoft, which has similar hopes for its Xbox 360 game console.

Stringer's competitive advantage may lie in 3D, a technology Sony is spending US$100 million to promote, according to US marketing chief Mike Fasulo.

Still, recession-squeezed consumers may not be ready to spend US$3900 for a Sony 46-inch 3D set. So Stringer could struggle to hit his target of US$11.3 billion in 3D-related sales by mid-2013, analysts say.

In fiscal 2009 and 2010, Sony lost a combined US$1.4 billion.

- BLOOMBERG