Vendor focus: Sony – where did it all go wrong?

By Sooraj Shah
28 Nov 2012 View Comments

However, while many recent setbacks have been beyond Sony’s control, others could be said to be self-inflicted. In 2011, the PlayStation Network was attacked, and 77 million customers’ credit card details were leaked online. It cost the firm a reported $171m (£107m) to repair and secure the network. Other attacks attributed to hacktivist group Anonymous also affected the firm’s reputation. Throughout this cyber security crisis, Sony came across as ill-prepared, ill-equipped, and just plain bad at communicating with its customers.

Further reading

Bad decisions

But while all big firms make mistakes, Sony has made more than most, including many that were eminently avoidable.

For example, in the late 1970s Sony stuck by its Betamax video cassette recorder (VCR) format long after it was clear to everyone else that the technology had lost out to JVC’s VHS product. Despite a rapidly dwindling market share, Sony refused to introduce a VHS line until the end of the 1980s.

This self-defeating stubborn streak also caused Sony to cling to its failing MiniDisc players until 2011, a full 10 years after MP3 players had effectively consigned the technology to the dustbin of consumer electronics history.

Perhaps Sony’s greatest mistake was allowing Apple’s iPod and iTunes service to dominate the market that the Japanese titan created. The company’s attempt to hit back with the Sony Connect music store failed miserably.

This failure was partly down to a turf war within Sony, according to Interscope Records chairman Jimmy Iovine.

“How Sony missed this is completely mind-boggling to me, a historic fuck up. Steve [Jobs] would fire people if the divisions didn’t work together, but Sony’s divisions were at war with one another,” Iovine told Steve Jobs’ biographer, Walter Isaacson.

In March 2011, the electronics giant said it would combine its TV, entertainment, mobile and PC businesses into one unit in a bid to resurrect its fortunes. But according to several reviews on social careers website Glassdoor, the management culture at Sony remains problematic.

One employee complains that Sony is a very hierarchical organisation that has not adapted to recent changes in the market.

“If you are non-Japanese, you always come second to them – and if you are a woman, you come last. Do not just say that you want to change how the company is working, actually do something. You need to adapt to how the market place is today or you will not survive in the long run,” the employee says.

When asked to comment on this, Sony said it was unable to locate an appropriate spokesperson.

IHS iSuppli’s Selburn believes Sony’s leadership is more enlightened than the firm’s critics allege. “Of the Japanese companies, Sony was supposed to be the one with the more flexible, more Western-like management system. When a company is struggling it is easy to cite problems with the management,” he says.

The here and now

Sony’s stubbornness has most recently been found in its decision to back the Blu-ray format. Its determination to use the technology in the PS3 delayed the console’s launch and significantly added to its production costs. Indeed, Sony makes very little from its games hardware, but what it loses on its consoles it now hopes to regain in the longer term. Much of its entertainment division’s profits come from licences for games, while by pushing the Blu-ray format to putative dominance it hopes to reap the rewards of selling more movies.

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