Sony Music woes extend to digital sales
The struggling music units of Sony Corp. and Bertelsmann AG merged in 2004 so that a combined company could better fend off illegal file sharing and shrinking CD sales.
(Credit:
Ellen Ng/CNET Networks)
The new recording company, named Sony BMG, was expected to wield the kind of resources that could challenge Universal Music Group as the largest of the four top labels. Sony BMG would own a chunk of U.S. music sales almost as big as Universal's.
To say the deal failed to deliver on the promise is probably an understatement. More than four years after the merger, there isn't a more troubled major label around.
In fairness, Sony is trying to regroup after buying out Bertelsmann late last year. It remains the second-largest recording company and currently has the No. 1 album in the country: Bruce Springsteen's Working on a Dream. Sony Music could also become the first major to renew its music licensing agreement with YouTube, according to sources close to the deal. For the recording industry, YouTube represents a potential new market.
But in recent weeks, Sony's woes have taken center stage, overshadowing at times the accomplishments of its stars. Last month, Sony Music reported a 22 percent decline in revenue from the previous year. In December, the Federal Trade Commission fined the label $1 million for collecting information on 30,000 children without obtaining parental consent. The New York Times recently reported CEO Rolf Schmidt-Holtz was steamrolled in negotiations with Apple's Steve Jobs. There is the unflattering press about the unorthodox managerial style of Rick Rubin, the record producer hired to run Colombia Records--he doesn't wear shoes or show up at the office--and the controversial hiring of Amanda Ghost, a songwriter with little administrative experience, to run Epic Records. A Sony spokeswoman declined to comment for this story.
As for Sony Music's digital efforts, the news isn't any less gloomy. The company's market share of digital album and song sales has plunged from 28.6 percent at the time of the merger to 22.5 percent, according to Nielsen SoundScan.
The setbacks at Sony's music division were a hot topic in Los Angeles last week as the industry gathered for the Grammy Awards. To outsiders, the label's troubles can be traced to Sony and Bertelsmann's conflicting corporate cultures. The deep fractures at Sony BMG first became public when executives from the Bertelsmann side of the venture worked to oust Andy Lack, the company's first CEO. Lack had been handpicked by Sony Chairman Howard Stringer, but he lasted just two years.
On the technology side of the house, insiders say Sony has struggled to recover from the Rootkit scandal. In 2005, Sony attempted to quietly place copy-prevention software on CDs. The technology, however, opened security holes on a person's hard drive when a CD was loaded into a computer. The software made the PC vulnerable to malware.
Sony was sued by several parties and was widely attacked by the public and press.
Behind the beat
Since then, Sony has rarely been out in front of the music industry's most important digital initiatives. For example, Universal was the first major recording company to sign a licensing deal with social network, MySpace, and was instrumental in the formation of MySpace Music, the jointly operated music service founded by all four major labels and Rupert Murdoch's News Corp.
When it came to partnering with YouTube, the Web video powerhouse, Warner Music was the first to sign a licensing deal. Sony Music was even the last of the majors to join Sony Ericsson's PlayNow online music store, according to an October story in The Los Angeles Times.
Sony Music's missteps have opened the door for rivals. As the company's share of digital music has declined, Warner Music's has increased. Warner's share of digital sales jumped from 18.10 percent in 2004, to 22.08 percent in 2008, according to SoundScan. This is a vital area, as digital download sales are expected to replace CD sales in coming years.
Certainly, Sony Music has plenty of resources to fuel a comeback. The company owns one of the largest music libraries as well as a stable of established and promising young artists, including Springsteen, Beyonce, and the band Franz Ferdinand. Sony also has a long history in music. The Sony Walkman, its iconic tape and CD players, were synonymous for decades with mobile music.
Of course, the Walkman was eclipsed by the iPod as the public's favorite mobile music player years ago and Sony's attempts to compete with the iPod and iTunes have gone nowhere.
Nobody can say that Sony Music hasn't tried new approaches to building a recording company equipped to compete in the digital age. The trouble is that few of the company's ideas have caught on.
In 2007, Sony raised eyebrows when it began turning to the industry's creative wing for managerial talent. The label hired Rubin, the bushy-bearded co-founder of hip-hop's pioneering record label, Def Jam Recordings. Rubin has produced hit albums for the Beastie Boys, the Red Hot Chili Peppers, Johnny Cash, and Neil Diamond, but his maverick managing style--he continues to produce records for bands at other labels--has irked some at Sony Music, according to The Times' piece.
Sony hasn't had much more success on the digital side. Remember the Ringle?
In 2007, Sony BMG spearheaded an effort to combine songs with ringtones and package them on CDs. This half-single, half-ringtone offer was supposed to help record stores cash in on the ringtone craze as well as help boost physical sales. At best consumer adoption has been lukewarm.
Unfortunately, the same can be said for much of what Sony Music has been trying to sell.
Greg Sandoval covers media and digital entertainment for CNET News. He is a former reporter for The Washington Post and the Los Angeles Times. E-mail Greg, or follow him on Twitter at http://twitter.com/sandoCNET. 
If you can't find the song/album you want from a particular artist in digital format for purchase, then the next likely method of getting that song/album is to grab it for free from someplace else that has it.
Going to the brick and mortar store to listen to tracks in 2009 is antiquated. The new way is to sign yourself in online and browse the tracks of hundreds of thousands of artists all grouped by genre.
As a record label, if your artists aren't online and widely available, too bad for you and your artists. Charge too much for each song, and see your sales plunge. This is not your mama's CD store.
Just say NO to dracoian DRM.
Personally I think they world would be a better place without them. At least, maybe all the leadership in the company will be canned and replaced with ethical people (if any exist in todays world).
Sony's efforts in environmental stewardship tend to lead their competitors. They also invest heavily in R&D, take more risks, and innovate on the electronics side more than their competitors.
It's never black and white.
<i>They shouldn't be</i> but they are.
I remember reading a story when Sony was trying to combat the iTunes/iPod paradigm with their own Sony Connect/Walkman brand. If anyone could unseat Apple, so early in Apple's rise, it would be Sony. But Sony created separate business units with separate business leaders with separate business agendas. And they screwed it all up because they're too big and they could care less about the customer.
So the hardware group, Sony, created really good Walkman hardware which is something they've always done. You like this group. This is the group so many people associate with Sony. It's a good group and they really do make some amazing hardware.
But the hardware group doesn't own the content to Sony's entertainment group, Sony BMG. They had to request access to Sony BMG's catalog of music so they could at least compete with iTunes. But Sony BMG said no! They actually said no to their own hardware group. So when Sony Connect launched it was with music from all of the other labels except their own, Sony BMG. Clearly Sony BMG didn't learn squat from this as they did the exact same thing to the Sony Ericsson mobile group where they were the last major label to sign.
Instead of Sony beating Apple at their own game, Sony got caught up in the empirical corporate grand standing of their own design. They screwed themselves.
And of course we can't forget Sony's insistence that those original PMP Walkman's only worked with their proprietary ATRAC system. No support for MP3, AAC, or even WMA. ATRAC-only. This is a corporate stance for most of Sony's products. They want to control the format of the media as well as the hardware. This has often backfired in Sony's face with Betamax, PSP movies, MiniDisc, and Sony Memory Stick. I'm not sure who to blame for that one. There is probably another group above all of the other groups that comes up with proprietary formats that they can try to cram into everything.
Then there's BD+, and Sony wonders why Blu-ray sales have slowed now that the hi-def video format battle is over? HD DVD, despite its own DRM, would have been a more consumer friendly hi-def source product, but I digress. Sony must become more consumer friendly if it expects to survive in the digital age.
Sony was a great company in the analog days and before becoming a media company. Now it's just a consumer unfriendly company that just needs to go the way of the dinosaur.
Also, without competition like Sony, do you really think you?d be paying the same price for your iPod, MAC, or music?
Granted, I think every single person responsible for the Rootkit issue should be fired, and Sony should start fresh. But to say only Sony tries to push proprietary formats on its consumers is thinking way too obtuse.
Sony has hardly provided any competition to industry leaders like Apple and Microsoft thanks to its lack of innovation. What has Sony come up with in the past 5 years that has propelled Apple to do anything new and innovative? Nothing that I can think of.
Their prices have never been what I would consider competitive, but at least they once could claim to have superior quality products. However, long ago the Samsungs and Toshiba's of the world surpassed them on most fronts so I have pretty much sworn off their brand for life. I can find equivalents from other companies who actually view me as a customer they must earn brand loyalty from rather than a money font that they can simply attempt to suck dry by roping me into buying their proprietary formats that I can't use on devices by other manufacturers. The fact that Sony products are still more expensive than other brands in many cases is just pure lunacy and hubris on their part and it will eventually be their downfall when other people finally see through the ruse.
- by Axiomatic13 February 12, 2009 7:33 AM PST
- When Sony BMG's business model is diametrically opposed to everything their customers believe in their business is going to suffer. It's pure arrogance that is keeping SonyBMG afloat at the moment and until they re-learn to embrace their consumers desires they will continue to falter.
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(16 Comments)As an owner of a PS3 I really want them to succeed, but not if they are going to continually violate my fair use rights and limit my use of my Sony hardware devices.
Consumer is KING.