March 7, 2005 12:13 PM PST

Sony breaks the mold

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for its portable players--something the company proudly resisted for years in favor 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 its iPod player.

"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."

"He's really very well-equipped to go out and better mesh the divisions of Sony that have been grating against each other."
--analyst Richard Doherty

"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.

The company has been promoting its Connect service internally to make it a distribution channel for not just music but for movies. Sony's acquisition of MGM will also play a key role in making more content available on emerging technologies such as Blu-ray Discs--Sony's bet for the replacement of DVDs.

Stringer can help overcome divisional politics partly because he's not inextricably tied to one arm of Sony, Goodman said.

"Hopefully, Howard Stringer can inject a more market-driven viewpoint, because his entire life has not been Sony," he said. "He's been there long enough to make his mark at Sony, but not so long he's identified with one particular division. I would hope he's acquired this viewpoint that Sony is part of bigger ecosystem."

Stringer has been vice chairman of Sony and chief executive of the U.S. electronics and entertainment businesses, which have contributed nearly 30 percent of revenues to the parent company.

As the head of the entertainment properties, he's placated artists and executives when it has helped his efforts, and gotten rid of those who may have gotten to big for their britches. Well-known Sony Music head Tommy Mottola was replaced with Andrew Lack, the former head of NBC, in early 2003.

Stringer will be busy. The former journalist turned media executive will be commuting from his home base in New York to the Tokyo corporate offices of Sony.

He'll have help from Ryoji Chubachi, who will take over for Ando. Chubachi, a Sony executive with an engineering background, will help make up for Stringer's lack of technical training. Chubachi will be in charge of Sony's electronics division.

The two will face significant challenges as they try to transform Sony amid failing fortunes. However, analysts say that Stringer's ability to build consensus among warring parties has been his strength.

Richard Doherty, an analyst with research firm Envisioneering Group, said it's not too late for Sony to become a significant force in digital music. Stringer, a "renaissance man" with experience in marketing, content and, more recently, technology, is the one to make it happen, he said.

"This is a guy who has a very high social IQ," Doherty said. "He's really very well-equipped to go out and better mesh the divisions of Sony that have been grating against each other."

"Once Sony gets their resources working in the same direction instead of competing against each other divisionally," Doherty continued, "they're going to be quite a force. I think within a year, they'll be mentioned in the same breath as Apple in digital music."

If they are, it will be because the diplomat in Stringer was able to mend the fences and bring Sony together.

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Sony, the comeback kid?
It's great to see Sony coming back with a vengance. I remember the hype of the Walkman back when I was young and how much of a status symbol it was-(Sort of like the obsession over Fila shoes). Sony needs to create some new technical gizmo that can capture the minds, hearts, and most importantly (for Sony that is) our wallets. I don't think the Network Walkman will be that gizmo, at least for a while anyway. But it's a good start. And with the new management shake up, I think Sony looks very promising. If they can quickly tap their synergies and push new products and services that live up to the Sony quality that everyone loves, then they have the power to come back with a vengance. Imagine, you buy a Blu-Ray disc of say, Spider Man 3 (a Sony Studios production of course) and watch exclusive bonus content unlocked by the Sony Blu-Ray player, or thru a Sony PC. Sony could even create a
"Sony Life" club, where members would pay dues to get access to free tickets to Columbia/BMG artists' events and concerts. If a 23 year old can think of simple things like these, I'm sure Sony's executives have the power to implement incredible, new ideas. Let's just hope that they get it in gear and fulfill their greatness.
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