After navigating some rough seas, Sony's Electronics division has been starting to right the ship.
Over the past year, the company has been forced to rethink its product lineup and catch up to competitors in some cases, but now the Japanese electronics giant's U.S. division is looking ahead and betting big on the future of flat-panel televisions and high-definition media.
CNET News.com sat down with the head of Sony Electronics' U.S. operation, Stan Glasgow, to talk OLED (organic light-emitting diodes) TVs, Blu-ray Disc, the importance of the PlayStation 3, consumer electronics, and the dwindling margins for manufacturers and retailers on notebook PCs.
During our chat, Glasgow made it clear that Sony is only focused on TVs when it comes to the impossibly thin OLED technology and that soon the company's 3mm-thin TV will be even thinner. And, though the company just won a long and drawn out format war with HD DVD, Glasgow spoke openly about the limits of Blu-ray and what the medium still lacks. Plus, he sounds pretty high on the mini-notebook concept, even if he won't admit the company is developing a product yet.
Stan Glasgow, president of Sony Electronics USA
(Credit: Erica Ogg/CNET News.com)The following is an edited and condensed version of the interview.
Q: You have an 11-inch OLED and said you'd be putting $200-plus million into the next stage of investment. How big are we talking here in terms of screen sizes?
Glasgow: In the short term, which is a couple of years--I'm not going to be more definitive than that--we have targeted a 27-inch. We've showed it as CES, we've targeted the initial investment, and that's what we're looking at in the short term. Certainly in the longer term we'd like them to be the same size as LCD. We'd like them to be 52 inch, 46 inch, 36 inch...it's just a matter of time.
What about affordability? How long until these are affordable for the mainstream consumer?
Glasgow: It's going to be years and years until price points come down to where they're anywhere close to LCD. In the not-too-distant future, you'll have a choice in LCD at this size, or you can buy an OLED at the same size at a premium. I almost see it as a potential--and I don't know this, nobody knows the answer--I almost see this as the upper end of flat-panel television.
We can continue to make it thinner. It's 3 millimeters now, but it can get thinner. Eventually it's printable on a plastic substrate that can bend. But I don't think it's going to take many years to get to that level.
What about applications in other devices? I know Samsung's talking about monitors next year.
Glasgow: We are focused on TVs. Our interest is strictly television at this moment. I'm not saying that will never change, but at this moment that is the most complex area to go after. The bigger you make these, the more complicated they are. They're much simpler to make smaller. So it'd be easier to jump into cell phones, and other types of products, but that's not what we're interested in doing. We're interested in television as our major focus. Our engineering is focused there, and our investment is focused there.
Speaking of televisions, the experiment mentioned last week, with Hancock coming out on the Bravia Wireless Internet Link, is that a one-off kind of thing? Or is there more in the works there?
Glasgow: I'd say maybe it's a step above an experiment. It's brand new what we're doing, how we're doing it. We're trying to excite people by giving them content. It's streaming so we don't have the content protection problems...(But) people's bandwidth across the country is very different.
Prototype OLED TVs
(Credit: Michael Kanellos/CNET News.com)The big problem in the United States is we don't have enough bandwidth to really drive content through the Internet and our pipes. Japan has much better pipes, so does Korea, so does Europe. So it's still experimental. we hope to do more in the future, and it's the first one. We're going to try and see what happens.
What about non-Sony content?
Glasgow: It's possible in the future. I'm not going to rule that out; I don't think anyone at Sony would rule that out. (But) we think it's a good first step.
Besides interactive menus feature on Blu-ray, is anyone doing anything that's a really creative use of the medium that we don't know about yet?
Glasgow: There's so much I have no idea about, because we're going to have to open this up as a social network--not just contributions of Sony and other Blu-ray partners. There are going to be contributions from actual customers.
If we had a dream (for) Blu-ray, it would be much more interactive than it is today: No. 1, where you could interface and change things as you want to see them on the screen. No. 2, you could socially interact with other people, it's connected through the Internet...but theoretically you and your friend could watch the same movie, and you could change themes, change endings, all sorts of strange things in the future. Some type of social interaction in the future....And yes, we'll have a lot more (Blu-ray) product out in the next couple of months.
Looking ahead, you're only just getting into Blu-ray. How do you see the future penetration of the format compared with DVD?
Glasgow: That's a good question. DVD took 10 years to really penetrate. We're now in the second year of Blu-ray. My guess is it will probably happen a little quicker in terms of penetration. The pricing is already coming down more quickly than DVD came down. I don't think it will take as long as 10 years, but I don't think it will penetrate to the same percentage because there's a couple of conflicting forces. Certainly, people that want the best picture are going to want it, without a doubt. People that are OK with upconverting DVD players, which is somewhere close to 600, 650, maybe 700 (lines of resolution)--that's not a bad picture either. So a lot of people may be happy with an upconverting DVD player. And (Blu-ray) may not turn over, it may not penetrate to the same extent, because (DVD) was such a big medium change from tape.
But I see it being the major format. It's won the war, that's done. Now it's a matter of: Can we provide an exceptional experience? Can we provide a social part? And can we involve the overall community in, let's say, designing applets and coming up with new things that we can't even think of today?
How critical is the PS3 to your overall electronics strategy here in the U.S.?
Glasgow: I think that there's strength in Sony...it's about having a gaming division and an electronics division, a pictures division, a music division--we've never worked together like we have now. Hancock is a great example. We're so well-connected together. Here we are doing an experiment with a film. We're going to promote the heck out of it through our electronic retailers. The gaming division is working on it at the same time. (The) music (division) is involved. We're operating as a very balanced group. So what I can say is, without the gaming, we wouldn't be as strong and as balanced as we are today. It adds a great deal.
What do you think the effect of these ultra-low-cost computers' popularity will continue to have on the notebook business?
Glasgow: The question is, how important is that in the United States and developing countries? We're doing a lot of research on what consumers want and don't want. And I think we'll get it figured out over time. But is it worthwhile to have a second notebook that starts up quickly, can only do e-mail and connect to the Internet, can't do spreadsheets, and other things you'd normally do? Those are the things we're testing right now.
But what do you think? Do we need fewer devices? Or more?
Glasgow: I'm not the normal consumer obviously. I do an awful lot of e-mail, I connect a lot. I'm not happy with the (BlackBerry-type devices), like this Sony Ericsson I carry around. I find it hard reading, I'm getting older, and it's getting too small. But I don't want to carry my notebook around because it takes awhile to start up. So something in between would be very cool, and it wouldn't bother me to have an extra PC around.
That's sort of what we're thinking in this country. I think the emerging countries are different...But in terms of the U.S., we have a lot of homework to do.
Now, last month there was a report that Quanta was making a mini-notebook for you guys. Is there any truth to that?
Glasgow: I can't say yes or no. I love all the rumors, though.
What do you think about this Blockbuster/Circuit City proposed tie-up as far as retail electronics goes? (Note: later that same day Blockbuster announced its plans to abandon its bid for Circuit City.)
Glasgow: It's fascinating what's happened in the last 10 years in electronics retail. The big have gotten much bigger and extremely successful, like a Best Buy. The smaller guys, regional retailers, have done extremely well. The middle-sized guys have gotten into a lot of trouble. It seems that the companies expanded too much, but haven't prepared the infrastructure properly to service customers.
It's also interesting to watch how well Wal-Mart and Target have been doing, in terms of building more consumer electronics...
Circuit City--we want a very strong No. 2 (electronics retailer). Best Buy is certainly the leading company. We would like Circuit City to be strong. How that gets done--it can be done in many different ways.
My hope is that either by themselves, or by merger, or by working with another company that they'll be stronger than they are today. We think the possibility is there, and we support them. A good, strong No. 2 player in consumer electronics is a positive thing for manufacturers. They've got 800 stores. There are not many companies that have 800 electronics stores.
Sony signed an agreement with the country's six largest cable companies Tuesday to develop a TV that will receive cable services without the need for a set-top box.
The Japanese electronics giant will make an LCD set based on the Tru2way cable platform introduced in January at CES by Comcast. Tru2way allows interactive cable services to be integrated directly into devices.
Comcast, Time Warner Cable, Cox Communications, Charter Communications, Cablevision, and Bright House Networks have all agreed to develop the technology behind Tru2way.
Sony's not the first consumer electronics company to announce a device based on the platform, however. At CES, Panasonic announced two high-definition televisions and a portable digital video recorder that use Tru2Way.
And last month Samsung, the world's largest producer of HDTVs, announced its own Tru2way TV and high-definition DVR.
Sony's CEO Howard Stringer is bringing new meaning to the term "anger management."
Howard Stringer
He wants Sony managers to get mad, according to a report in The Wall Street Journal.
Anger-passion, combined with energy, innovation, imagination, and bold steps, is the ticket to get Sony back on track as it sets out its next three-year growth plan, Stringer is cited as having told the company's staff of more than 1,000 managers during a closed-door annual management meeting in Japan.
"I'm asking you to get mad," Stringer said, according to the Journal report.
The electronics giant is facing greater pricing competition on the TV front, while Apple is giving it a run for its money on the innovation front.
To fight back, Sony has unveiled such products as an ultrathin TV screen that resembles a flat-screen computer monitor and a plethora of devices in February at its electronics open house in Las Vegas.
The Federal Communications Commission says Best Buy and other retailers must pay more than $3 million in fines for selling analog TVs without labels that explain the sets won't work after the digital TV switchover next February.
In a 41-page legal document filed last week (and dug up by Ars Technica), Best Buy essentially says, "Oh yeah? Make us."
There have been many bumps along the way to the February 2009 switch to all-digital TV in the U.S. The FCC is spearheading the transition and has established deadlines to help it along. Best Buy alone was fined $280,000 after FCC enforcement agents found analog TVs for sale in the store without this label, which the commission had previously decreed should be attached to all TVs without a digital tuner:
This television receiver has only an analog broadcast tuner and will require a converter box after February 17, 2009, to receive over-the-air broadcasts with an antenna because of the nation's transition to digital broadcasting. Analog-only TVs should continue to work as before with cable and satellite TV services, gaming consoles, VCRs, DVD players, and similar products. For more information, call the Federal Communications Commission at 1-888-225-5322 (TTY: 1-888-835-5322) or visit the Commission's digital television Web site at: www.dtv.gov.
Best Buy and other retailers like Sears, Wal-Mart Stores, and CompUSA were found to be in violation of these rules. But were the rules enforceable in the first place? That's where it gets a bit sticky.
Instead of paying the measly fine, Best Buy responded in meticulous detail to the FCC's Notice of Apparent Liability, issued last month. Here's a summary of the retailer's five main points on why it believes it doesn't have to pay a cent.
1. You can't make us label anything
Best Buy's attorneys point out that never before has the commission had jurisdiction over retailers, and twice before when it tried to, an appellate court invalidated it.
2. We didn't do it on purpose
The FCC accused Best Buy of purposely selling analog TVs without labels. Best Buy says that's not true, details its efforts to comply, and says the burden should be on the FCC to prove the intention of the retailer.
3. We tried our best
Best Buy details the steps it took to ensure the right boxes were labeled, but admits that it was difficult to determine which boxes needed them. Products with similar model numbers sometimes made it hard to figure out which had just an analog tuner and which had an analog and a digital tuner.
4. Your agents messed up
The retailer points out that some violations pointed out by FCC enforcement agents were just wrong. It does so to point out to the FCC that it's not accusing the commission of purposely making errors, so the FCC shouldn't accuse Best Buy of the same. Also, Best Buy is trying to show how difficult the process is of determining which boxes need labels.
5. You didn't go about this the right way
Best Buy quibbles with the process with which the Notice of Apparent Liability was carried out. It says that it didn't get public comment on the retail Labeling Rule, and also calls the NAL "procedurally invalid" because it wasn't give enough notice of its violation or time to respond.
The amount of money ($280,000) is so small that the retailer is likely not concerned about the fine. Rather, it's trying to make a point about the reach of the FCC's arm in handling the DTV transition.
The outcome will turn on what an appellate court has to say about this. And though Best Buy has a fairly good case, it's a tough call as to how it will turn out, according to Barbara Esbin, senior fellow and director of The Center for Communications and Competition Policy at the Progress and Freedom Foundation.
"There is no law that says the FCC had jurisdiction to promulgate and enforce a labeling rule," she said in an interview. "But the FCC doesn't claim it has express authorization."
What the agency relies on to regulate labeling by retailers is the same as used in the regulation of cable television services back in the 1960s.
"The FCC relied on this doctrine that it has some regulatory authority that is not expressly given, but is in the subject matter of the authority it has over wire and radio communication devices and reasonably ancillary to its express jurisdiction over that entity and its equipment," according to Esbin.
Indeed, when asked to cite the statute giving it authority to regulate retailers' labeling, an FCC spokeswoman pointed to the Code of Federal Regulations that govern the FCC, but are not laws.
"I can't say Best Buy has a slam dunk argument, but they have reasonably good claims," said Esbin. "The labeling rule imposed on retailers rather than on manufacturers are not reasonably ancillary to express jurisdiction."
Besides that, Best Buy (along with other retailers) appears to have gone way out of its way to comply with the FCC on the transition. Best Buy, for instance, was the first retailer to stop selling analog TVs last fall--and from a look at its argument, like a straight-A student who gets criticized by overly demanding parents for getting a B in math, it just wants a break, and maybe, the benefit of the doubt.
Despite that, the FCC probably isn't going to let this one go, so stay tuned.
After a dramatic rise to the top of the LCD TV market last summer, Vizio seemed to have gotten a taste of reality as it settled back down to the No. 3 spot through the end of the 2007.
But it appears Vizio is ratcheting up the price pressure again on its closest competitors, according to new figures from iSuppli, a market research firm that monitors the LCD industry.
For the first quarter of 2008, the top vendors' share of unit shipments, led by Samsung with 13.9 percent of units shipped, and followed by Sony (13.7 percent) and Vizio (13.5 percent), remain separated by 0.3 of a percentage point. The three were separated by 1.8 points in the fourth quarter of last year.
As the economy worsens, and consumers have less discretionary income for luxury purchases like a flat-panel TV, lower-priced sets are going to sell better. Vizio is in a better position than most in its industry to do that because of its distribution channels, which are mainly bargain-friendly outlets like club stores, and Wal-Mart Stores, and because it saves money by not building and maintaining multi-billion-dollar fabs, or panel manufacturing plants. Instead, it buys its panels from those that do.
Both Sony and Samsung have already responded to Vizio's price pressure with lower-cost LCD TVs of their own. But those TV manufacturers that haven't responded similarly to the Vizio threat are finding the North American flat-panel market an increasingly difficult place to do business.
Philips was the first to buckle under the pressure, announcing last month that it would no longer make or distribute its own TVs in North America. Instead, it arranged for low-cost TV vendor Funai to do so on its behalf.
Shipments of LCD TVs were down across the board in the first quarter, reaching 5.6 million units, versus the same quarter a year ago when 7.96 million LCD TVs shipped, iSuppli said. Although the first quarter is always the weakest for the industry, it appears the second quarter may not fare much better.
iSuppli says unit shipments in North America are expected to grow just 26.6 percent overall this year, to 27.4 million units. That's a far cry from the 88.8 percent growth in 2007 and the 92.6 percent seen in 2006.
The flat-panel TV industry is coming of age in the U.S. at a less-than-desirable time.
As energy costs, food prices, and mortgage defaults are on the rise, the first things to go for many consumers are luxury buys. Tightening one's budget can mean ruling out the purchase of a larger TV.
Vizio will face stiffer competition this year.
Give consumers more lower-priced options, according to Paul Gagnon, who monitors the television industry for DisplaySearch. He expects the top-tier TV brands (Samsung, Sony, Sharp, Panasonic, et al) to move in this direction, since TVs in smaller sizes and ones with fewer bells and whistles are going to be a lot more attractive during tougher economic times.
The current economic environment "puts pressure on brands to occupy that middle ground," Gagnon said. "It makes the focal point in the second half of the year on more aggressive price point products, like 32-inch LCD and plasma." LG put out the first 32-inch plasma last year.
Basically, if you shop for a television at Wal-Mart Stores, Circuit City, or Best Buy, your best bet is going to be on newer, smaller sizes because that's where much of the price competition between brands will be. And when TV vendors fight, we all win.
And though the top TV guys are going to be squabbling with each other over consumer dollars and jostling for position on store shelves in the next couple months, they'll at least be united in one purpose: attempting to take down Vizio. The upstart TV maker experienced unbridled success last year selling mainly through club stores and significantly undercutting the top-tier brands on price.
Everyone is gunning for Vizio--it's apparent in both the price competition, and in the snide remarks and left-handed compliments the marketing execs of the traditional top brands make at TV industry conferences. But Vizio isn't alone. Syntax-Brillian (under the Olevia brand) and Westinghouse are also making inroads into territory occupied by the top names in electronics.
"As flat panel transitions to a mainstream, mature category, big brands are looking at more entry-level markets," said Gagnon. "Sony, Samsung are certainly going to try to play head to head with Vizio on their turf. Price points will get pretty aggressive."
Sony actually started this a year ago, when it launched a specific line of TVs for Target and Wal-Mart. The experiment has gone well, as Sony has already said it's expanding the number of models it will sell through those channels this year.
The average price difference on similar models and screen size between Vizio and the mainstream brands was $200 last year, according to DisplaySearch. Competitors will try to narrow that price advantage to $100 this year, and cross their fingers that having a brand name will help them recapture market share.
If you've been eagerly awaiting the opportunity to own the thinnest flat-panel LCD TV, now's your chance.
Hitachi's 1.5 LCDs are just that thick.
(Credit: Hitachi)Though already available in Asia, the 1.5-inch-thick TVs from Hitachi are now available in the U.S. The sets come in three different screen sizes, 32 inches, 37 inches, and 42 inches.
One of the secrets, by the way, of how Hitachi managed to slim down the TVs so much is that they took out the ATSC tuner. And although it is definitely the thinnest LCD TV, it's downright bloated when compared to Sony's impossibly thin OLED TV, which measures a mere 3 millimeters thick.
See my colleague David Katzmaier's take on the latest TV from Hitachi here.
Panasonic has been tapped to pinch-hit for Pioneer.
The two television makers said Wednesday they had come to an agreement in which Panasonic will produce the panels for Pioneer's plasma televisions.
(Credit:
Pioneer)
The news comes a month after reports surfaced that Pioneer was pulling out of the plasma business. When Pioneer confirmed it would be finding someone who could make the panels more inexpensively than it could, there was a sense of dismay and disappointment among fans of its Kuro technology. Pioneer plasma TVs are generally regarded by experts--including CNET Reviews' David Katzmaier--as having the blackest black levels of any TV on the market.
In a joint statement, the two companies said they will build a new type of panel that integrates Pioneer's Kuro technology and Panasonic's NeoPDP, which it currently uses in its Viera TVs. Panasonic will have the panels sporting the new, combined technology ready for Pioneer by the second half of 2009.
Panasonic is the largest producer of plasma TVs, so the panels should be more affordable for Pioneer, which is trying to cut costs. Neither has said how much the panels will cost.
Sony's teased us for a bit with its impossibly thin, 11-inch organic light-emitting diode (OLED) TV, and finally brought it to the U.S. this year. Now it looks like there will be more to choose from in OLED TVs next year. Samsung SDI says that by 2009, not only will it have OLED panels for larger TVs, but also for monitors and notebook displays, according to a report in Digitimes.
OLED TVs on display at CES
(Credit: Michael Kanellos/CNET News.com)The report quotes Samsung SDI's VP of mobile display marketing, Woo-Jong Lee, who says that Samsung SDI will be able to produce 3 million panels in 2009, which is double what they can crank out now. Lee said the company anticipates doubling its capacity again by the close of 2010.
The liquid crystal display (LCD) industry probably doesn't have much to worry about yet. OLED panels are incredibly expensive to produce right now, and, yes, they're awfully pretty. (Sony's 11-inch display achieves a 1 million-to-1 contrast ratio, which is by far the best available for a TV.) But even as production increases from one manufacturer, it doesn't necessarily mean the prices will drop down to where flat panels have sunk. The 11-inch OLED TV from Sony costs $2,500. For that price you could also get a 50-inch Pioneer Kuro, generally regarded as the best plasma TV on the market.
Though Samsung has previously discussed making OLED TVs, the company still has yet to release one. A year ago Toshiba also said it's planning on investing in OLED panels. Sony is betting on OLED's eventual domination of the display market, but it's also heavily invested in LCD.
However, Panasonic, which owns the plasma TV market, doesn't anticipate LCD or plasma TVs fading out anytime soon.
As of September, Philips will no longer make televisions for the U.S. and Canada.
Instead, it is transferring that job to Japanese electronics maker Funai. The two companies agreed to a brand-licensing agreement in which Funai will source, distribute, market and sell all consumer TVs under the Philips and Magnavox brand names in the U.S. and Canada.
The deal begins September 1 and is good for five years. Funai will pay a royalty to Philips.
Beginning in September, Funai will distribute all Philips TV in the U.S. and Canada.
(Credit: Philips)"This agreement secures continued presence of Philips and Magnavox branded TVs in North America in a model that safeguards Philips profitability in this highly competitive market," Philips said in a statement Tuesday.
And so begins the thinning of the herd. The television market is becoming an especially tough business, as prices continue to fall and more inexpensive brands like Vizio and Olevia attempt to edge out the traditional market leaders. Pioneer, a leader in plasma TV tech, also recently announced it would sell TVs but no longer make its own plasma panels.
This means that though the Philips brand name will live on in the U.S., the materials inside those televisions aren't necessarily the same. But the biggest blow is to brand perception.
Philips is a top-tier television maker--it won the Best of CES 2008 Best in Show Award from my CNET Reviews colleague David Katzmaier for its Eco TV--and Funai is, well, not as a highly regarded. This is a boon to Funai, and Chief Executive Tetsuro Funai's comment is pretty much the understatement of the year: "As a premium brand, Philips will add lustre to our existing portfolio."
To be fair, Philips has definitely struggled to compete in the flat-panel TV market. Though the company has attempted to differentiate its brand with Ambilight technology aimed at home theater enthusiasts, it still trailed the big guys, like Sony, Panasonic, and Sharp, in both production and panache.
