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Sony Reorganizes for convergence, again

Sony is still fighting the last war—the convergence of content with software and hardware—but the next war has begun, which is the convergence of soci

By PETER WHITE

Published: 17 March, 2011

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Sony is still fighting the last war—the convergence of content with software and hardware—but the next war has begun, which is the convergence of social networking with content and hardware. To accelerate the convergence process, Sony chairman Howard Stringer has created a new group that combines all of Sony’s consumer electronics and network services.

Kazuo Hirai, currently managing the PlayStation operation, will head the group, which includes all of Sony’s consumer electronics, including PlayStation, televisions and digital cameras. It’ll be called the Consumer Products & Services Group.

Sony has lost badly in the marketplace to Apple, both in hardware and iTunes, plus Netflix, Samsung, Amazon in e-book readers and, in the US TV market, Vizio. There is no Sony iPod, iPhone, iPad or Netflix. Samsung and LG have out-designed and out-priced it in TV sets, including 3D TVs and Blu-ray players, which Sony alone practically invented. At CES, Vizio showed a new line of TVs, almost all of which were smart TVs.

Mitsushige Akino, who manages about $450 million in Tokyo at Ichiyoshi Investment Management Co, told Bloomberg.com, “Sony needs to reform itself from its engineering-oriented past so it’s significant that a generalist take the helm. If you look at Apple, it’s not about their technology anymore. It’s how they attract consumers with marketing strategy.” He might have also said that Apple out-designs Sony in everything from mobile phones to portable music players and tablets. Apple has assembled an enormous amount of content and developed an online service that makes it easy for customers to acquire, download and use throughout the home. Sony has not done this despite owning Sony Pictures studio and Sony Music.

Hirai replaced Ken Kutaragi as head of the PlayStation operation in 2006, one of the few bright spots in Sony’s urge to converge. PlayStations have Internet connectivity and an online network for music, movies and games. However, Sony has not extracted the technology from the PlayStation to produce an equivalent to the $100 Apple TV.

Scuttlebutt has Hirai as the likely heir for the top post at Sony, replacing the 69-year old Stringer. Sony did not mention it, of course, but Stringer’s objective was also to oversee the convergence of content with hardware and software. He managed to cut 30,000 employees and shut factories, which increased profits. He also oversaw the industry acceptance of Blu-ray as the standard for HD optical discs. Sony was the first maker of TV sets and Blu-ray players to adopt the Google TV platform.

Jay Defibaugh, an analyst at MF Global FXA Securities in Tokyo, told Bloomberg.com, “Sony’s attempt to boost synergies between its hardware products and software services hasn’t gone well. If anyone can accomplish this, it’s probably Hirai. Hirai isn’t an engineer but he has an international background and good understanding of the overall entertainment industry.”

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