CARLSBAD, Calif.--Sony CEO Howard Stringer says the culture of profitability has returned to his company. But, he says, it still has work to do.
In an interview with Stringer at the D6 technology and media conference, The Wall Street Journal's Walt Mossberg started by pointing out the failures of Sony's digital music player and interactive TV ventures. Stringer said that Sony is now running about 5 percent profit margins. Those margins need to get bigger to sustain the company, or, he says, "If we have any more success, we'll be bankrupt."
Speaking about the culture of the Japanese business he runs, he said it's difficult to adapt quickly--there's no laying off of white-collar workers or engineers. Hence, perhaps, his "get mad" rant last week. Stringer also delved into what's in Sony's future--from OLED TVs to game consoles and "craplets."
What's after LCD TVs?
LCD growth is beyond expectations, Stringer said, but OLED technology, while still too expensive, is the next thing. Or the current thing, if you want to spend $2,500 for an 11-inch screen. Its contrast ratio is a million to one, he said, a hundred times brighter than an LCD screen.
In a bit of D6 showmanship, Stringer showed a new version of the screen that's only 0.3 millimeters thick, and that could be formed in curves "wrapped around your arm," he said. A 27-inch version will be out soon. "It will be quite expensive. The only people who could buy them will be in this room."
The technology will eventually supplant LCD, Stringer believes, although at the moment he calls it "a perfect television companion."
It appears that Sony is pushing this technology in part because it's actually manufacturing these panels, unlike many Sony-branded LCDs, which it sources from other vendors.
Game consoles and Blu-ray
The expense of the PlayStation 3 at first led to a "mildly catastrophic" profitability curve, Stringer said, but the prices are coming down and the game titles are generating profits. He said the next game coming out, in June, will use the "full capacity" of the console and will be "spectacular."
The console is beginning to become a platform for more than just games--a hub for the PSP, for example. The PlayStation Network was key to Sony winning the Blu-ray/HD-DVD battle, Stringer said, since the PS3 was a great movie-playing platform.
In standard Blu-ray players, Sony did lose money on the players as the company had to chase the HD-DVD player market and its $99 retail prices. But the studios supported the Blu-ray format, which made the bigger difference.
Mossberg asks how many years of value Sony will be able to eke from that victory, especially as the move is to digital distribution. "There's a long lead time," Stringer said, "before you get the quality, you get on Blu-ray." He thinks the media format will last for 10 years or beyond, especially as people migrate to better and better television screens.
"Had I lost that war," Stringer said, "the headline would have been, not that HD-DVD won, but that it was Betamax 2. That would have been on my tombstone."
Movies and theaters
"It's a battle of pocketbooks and reality," Stringer said. "4K" digital projects are a better experience and will keep the theater experience unique. It's "transformational," he said. However, the economics of the movie experience, from cameras to projectors, will take time to rebuild.
Children drive the movie economy, especially in summer. "Whether the baby boomers will continue to go the theaters is a bigger issue," Stringer said.
"We had our best year ever last year. We had a 7 percent margin, our best ever." Mossberg asked about market share, though. It's because, "ours is the most expensive," Stringer replied.
"Our engineers like being on the cutting edge," he said. And "we have signs of life all over the place."
Mossberg gave Stringer a hard time about Sony PCs' pre-loaded software, or "craplets." Other vendors are removing the pre-loads, Mossberg said. "Are you willing to get rid of these craplets?"
Stringer: "No, I have to examine the joy of craplets. And you're not a typical consumer." But, he said, "I promise you a craplets review."
"We've sold about 170 million music-enabled phones--about 75 million to 80 million are Walkman phones." Which is more than iPods, he said. Stringer said that Sony's Walkman phones revitalized the brand, and drove the success of the Sony-Ericsson phone lines.
And, Stringer said, we're doing more download relationships, like one we're announcing today with Usher.
The Sony music player, which had been overshadowed by the iPod, is "back in the game. We keep trying."
Mossberg asks: Will phones kill the dedicated portable media player? Stringer: "Steve [Jobs] keeps up, but there's room for two devices."