Big losers in the hacking game
IF YOU were looking for the digital equivalent of an oil spill, hackers lifting personal details of up to 100 million people would probably qualify. And so Sir Howard Stringer, the Welshman who is the first non-Japanese to lead Sony in its 65-year history, finds himself in much the same position as Tony Hayward did when the Deepwater Horizon explosion occurred.
At least nobody has been killed in this event; but the news that the PlayStation Network with 77 million users and the Sony Online Entertainment Network with 25 million users have been hacked leaves Sir Howard struggling to apologise and clean up the mess.
Can the Sony brand recover? This, after all, is the company that invented the Walkman, which once dominated games consoles with the PlayStation, and steamrollered the TV market in the 1970s with the Trinitron.
But now? If you think of music players, you think of Apple's iPod; Nintendo's Wii and Microsoft's Xbox 360 both outsell the PlayStation 3; and in the TV market margins are thinner than next year's sets.
Sony's problem is that it is losing brand equity, which translates directly into sales, but more importantly to profits - because if you're not a brand leader, you can't charge a premium.
Interbrand's 2010 report found Sony had fallen from 29th in the world to 34th, with a 5 per cent fall in brand value. (Among electronics rivals, only troubled mobile phone company Nokia and computer maker Dell had bigger falls.)
Neil Gaught, of Gaught Conlon, a brand consultancy, thinks that Sony has frittered away the brand equity it used to have and has sacrificed itself on the altar of price competition.
Not that price competition is doing it any favours. Yes, Sony is enormous: last year's annual revenue was ¥7.2 trillion and profit ¥27 billion, but the slimness of the pre-tax margin - a third of 1 per cent of revenue overall - points to the difficulty it faces.
Here's the pattern: every year in electronics there is a bumper Christmas quarter, often followed by a loss-making one, and then two quarters that climb back to profit, and a bumper Christmas again.
Meanwhile, the two US media businesses perform adequately. Sony's film studio - Columbia Pictures - tends to run in the middle of the pack. Last year (in the US) the studio had The Social Network but Phil Contrino, the editor of BoxOffice.com says the coming Sony slate may struggle to match its success. Sir Howard has had better luck in music recently, but music remains a tough business. Sales fell 14.5 per cent year on year in the past quarter as the bottom continued to fall out of the CD market. With music in decline and film steady, when electronics stumbles, the whole business falls flat - and that happened with the global crisis of 2008.
Where did Sony go wrong? Ten years ago, when Apple was labouring to produce the first iPod, the fear that consumed its executives was that Sony would notice the growing MP3 player market, step in, and crush the upstarts.
''We thought we would have a year's lead on Sony,'' Apple's then head of hardware, Jon Rubenstein, told Steven Levy, author of The Perfect Thing, a book about the iPod's creation and success. ''We didn't figure it would be five years.''
How could Sony get it so wrong when it used to get it so right? Because, as it has grown bigger, its ''silos'' have grown deeper, to Sir Howard's frustration. Sony's size is its strength and weakness.
So what's next? ''Never count them out,'' says Peter Shankman, a branding consultant. ''All they need is one product, one hit, and they could be back. But I'll tell you one thing … it's not going to be a 52-inch TV screen.''
(Source: brisbanetimes.com.au)
