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Sony Is Done Working For Peanuts in the Hardware Business, New CEO To Detail Shift Away From Gadgets (bloomberg.com)
Kenichiro Yoshida, who took over as chief executive officer in April, is set to unveil a three-year plan on Tuesday that embraces Sony's growing reliance on income from gaming subscriptions and entertainment. From a report: The transition is already happening: even though the company sold fewer hardware products such as televisions, digital cameras, smartphones and PlayStation consoles in the year through March, it was able to post record operating profit. It's a tectonic shift for a company built on manufacturing prowess. Sony popularized transistor radios, gave the world portable music with the Walkman and its TVs were considered top-of-the-line for decades. With the rise of Chinese manufacturing, making and selling gadgets has become a business with razor-thin profit margins. Investors have applauded the transformation that's been under way since Kazuo Hirai took over as CEO in 2012, with the shares climbing more than five-fold amid a turnaround.
Sony hardware has always been subpar and overly expensive.
It was those yellow walkmans in the 90s. Those where like a 90s iPhone, every kid had to have one. That was a long long time ago.
And other good hardware that they used to make, instead of becoming reliant on gimmick revenue sources. A Playstation with OtherOS too.
Soon all you are going to get to buy is immaterial rights. MMmmm Immaterial rights, GRlrlrlrllrlrlrll
Huh... unfortunately the change is a bit late for Sony Online Entertainment which was sold off in 2015 and renamed "Daybreak Games". Then came the layoffs.
Samurai say much ress ovah-head to manufactah nussing.
remember the bro code and check your 6. sony gets it.
I think this is nothing new, and began when Sony dumped the Vaio PC line and decided if you can't sell people premium hardware for profit anymore why bother to do it. Not selling selling a Sony TV or PC will mean more Sony services sold. Unlike Playstation which the console is probably the least profitable hardware in gaming. Its all about online services, and games.
It's a tectonic shift for a company built on manufacturing prowess.
Sony was never really a manufacturing juggernaut though they certainly were/are competent at it. Manufacturing was always a means to an end for them. Their core competency was in engineering hardware historically and they were quite good. They ran into problems with software which to this day they still struggle with on many of their product lines - at least the bits of it that interface the customer. A lot of this was because they historically had a culture of hardware engineers who didn't really grok software. That's changed somewhat in recent years for some of their divisions though not all.
Sony is/was quite competitive on non-commodity hardware or hardware where they have patent protection. For example their mirrorless cameras are really good and they supply the camera sensors to much of the industry for digital cameras. (for example the iPhone has a Sony camera sensor in it) I use one of their A9 mirrorless cameras and it's a remarkable bit of tech. (though the software interface still sucks)
Sony popularized transistor radios, gave the world portable music with the Walkman and its TVs were considered top-of-the-line for decades
And all that was engineering prowess, not manufacturing prowess. Sony never was a low cost manufacturer so they usually had to compete towards the high end of the market. None of that has changed. The company has also diversified quite a lot. Sony is a huge insurance and financial services company. They also are big in entertainment (games, movies, etc) They're best known for consumer electronics but that provides increasingly less of their revenue anymore.
Chinese manufacturing strikes again.
TFA shows a nice graph of their hardware sales by year. It's interesting to note that smartphone sales dominated until around 2015. Incidentally, 2015 was the year they came out with their first flagship phone featuring a fingerprint sensor (Xperia Z5). Smartphone sales started declining ever since. I wonder if it has anything to do with their moronic decision to limit fingerprint sensor functionality to the EU market only. It will be interesting to see how the Xperia XZ2 does considering it's the first flagship they've made to have a globally functional fingerprint sensor.
...when your product has become a commodity, you have three choices:
1) try to buy your way to control of the market. If there are high capital barriers to entry in the field, and you already have a lot of the costs invested, you have a chance. As a 90% dominant player, you might be able to undercut/destroy any new entrants before they can get established (or better, make it clear that you COULD do this to intimidate any investors contemplating getting into your market enough to dissuade them from even trying).
2) upscale: use your ostensible experience and sunk investments with the product to deliver more product for the same price. If they can make a walkman that plays mp3's, you offer one that plays mp3 AND will pull content from the web/youtube. If they copy that, you offer one that's waterproof, etc.
3) sell your brand and GTFO. Parlay what is ostensibly a good reputation into short-term cash by licensing your brand to one of the better commodity producers for a fee. They get to make their shitty knock-offs but put your label on it so they can gain extra sales (and possibly a slight margin) trading on your name/history, while you just get $ for doing nothing. Then you can fire your workers, sell your factories, and make serious money with no capital employed at all as long your reputation is worth something for them to pay for it, which is probably a while.
The problem with choice 1 is that sometimes it's simply not possible, particularly when your competition is in China. ...which is why we see #3 as the very common option. For example, I've seen that result for a certain brand of food products - a company with a deep historical reputation as pretty much become little more than an office managing the licensing of their brands.
The problem with choice 2 is that with electronics the capital investment is rarely a big barrier to entry (unless you're talking like chip-fabs or something). A quick reverse-engineering (or even simply knowing something is conceptually possible) is enough to allow low-cost commodity competitors to quickly catch up to you without bearing much of your research/dev costs.
-Styopa
They're getting beat up in the hardware market because they didn't invest in quality control. Sony used to be a premium brand. Rather than invest in high quality products, they tried to force vendor lock-in through a variety of boondoggles. This was a poor investment choice as only one of these technologies took off (Blue-ray, but only kinda). Had they spent that much money on quality, they could charge a premium over the competition.
One of our competitors trademarked the term "hypothesis". From now on, we will call them "boneheaded ideas".
It was those yellow walkmans in the 90s. Those where like a 90s iPhone, every kid had to have one.
You do realize that every iPhone has a Sony camera in it?
Also I'd suggest that the Playstation at least at one point qualified as a hit gadget.
And here I thought that Sony just bought a stake in Peanuts from DHX Media.
http://money.cnn.com/2018/05/14/news/companies/peanuts-dhx-sony/index.html
....another company ditches their durable goods manufacturing for intangible shit,
this time in Japan.
I guess China will be eating the world's lunch.
Nearly everything else from Sony had real problems. That company has been making a lot of junk in the 21st century.
Services are lame. Sell cool hardware or die, Sony. Be who you are.
You purposefully installed malware on our machines and when called on it, you told us it was good for us. Nobody trusts the name Sony anymore. I trust Sorny more than Sony.
Companies continue to find that making stuff doesn't make money.
There are a lot of very successful companies that are going to be astonished to hear that. I don't really get idiots like this who think there is not money in manufacturing. China and Germany and Japan and yes the USA are hugely successful at making stuff and being profitable doing it. Lots of money in manufacturing. The US manufacturing sector alone is worth about $3 Trillion annually. The notion that there is no money in making stuff is complete nonsense. There is and always will be money to be had in making stuff.
What happens when nobody makes anything anymore?
What color is the sky on your planet?
I have to admit I'm slightly bothered by the trend, overall, in shifting away from building physical things to selling virtual stuff.
Right now, lots of companies are finding it's easier to make good profits by selling subscriptions to stream content to people than it is to actually BUILD something tangible, and then deal with shipping it out to be sold, handle repairs of the broken units that come back, etc. etc. (Look at IBM and their selloff of their entire notebook computer division to Lenovo, in favor of becoming a service provider. Even companies like HP basically split the company down the middle so they could detach sales of hardware from all the service-related stuff they wanted to sell.)
The problem is -- a lot of these businesses have been engineering and building consumer electronics goods for a LONG time. So now, that talent gets jettisoned and we have to hope it goes someplace else useful. A lot of stuff seems to just fall to, "Ah well ... someone in China will build and sell it!", resulting in sub-par quality electronics junk. At best, it's only successful because it's a complete ripoff of the engineering originally done by one of these big companies in the past.
Sony did a lot of "lock in" with needlessly requiring Sony-branded accessories for its products, so I'm not so sorry to see THAT part vanish. (Sony memory sticks, for example? Ick.) But all in all, I think we're going to lose some quality products with this.
They never understood that every part of the product has to be well executed in order to charge a premium.
True. Especially true for their software. I have a Sony A9 camera. It's a fantastic piece of hardware with amazing capabilities. But the one glaring flaw it has is that the software interface and network connectivity is just atrocious. (to be fair I could say the same about Canon or Nikon) Sony built an amazing device but didn't get the user interface bit because they are just clueless when it comes to that. That's been my experience with a lot of Sony kit. Good hardware, interesting design, well made, but shits the bed in software. If they got that bit right they could absolutely mop up in certain product lines.
They invested a ton in R&D, and not nearly enough in manufacturing. That resulted in capturing only early adopters, and not the mass market.
That's not necessarily a problem if you outsource manufacturing. Apple invests rather little in manufacturing and instead outsourced most of it. Apple played to their strengths (software and design and brand) whereas Sony did not. When it comes to manufacturing you either have to be all in or get out. Samsung is all in. Apple is all out. Both are fine but you can't do it halfway like Sony has for so many years. You'll get eaten alive by lower cost producers.
You do realize that a camera and a sensor are not the same?
Thanks Captain Pedantic! You saved the day again.
And like the early iPhone, you only had a walkman if you had money.
I grew up with the walkman and remember when it first came out. The initial version cost something like $150 which is around $500 adjusted for inflation in todays money I think. It didn't take long for them to fall enough in price that they were almost everywhere. Most of my classmates in school had one at some point including me and my parents were far from rich.
I don't know if Sony was able to do that. I don't think I every had enough money to buy a real walkman.
For a long time Sony made a killing with the walkman. Go check out their old financial statements. It's pretty interesting. Your analogy to Apple isn't a terrible one in some ways. It was definitely the hot portable electronic gadget of the 80s. Probably more similar to Apple with the iPod than the iPhone though. The iPhone is FAR more useful than the Walkman could ever have hoped to be.
Is it taught in MBA classes now that the only way to make money is to sell subscriptions and non-tangible goods? That makes sense in web startup land...(how many copycat subscription box services are there? There's at least 2 in each category.) But yeah, it's like the entire manufacturing industry has decided that just because something isn't as insanely high-margin as software, that it should be abandoned.
Are there any companies not thinking this way? Even GM and Ford probably want to sell you autonomous car subscriptions instead of getting the measly $1000 or so profit on each car sold.
Why do you call MiniDisc a "boondoggle"? It was decent idea to try at the time, in my opinion. You gotta try new things in the market to stay competitive. Some will secede and some will fail, and hopefully average out for the better.
True, they could have managed it better, such as trying to increase market share over profits by having more lower-end player options. Recording labels would then offer more choice in the format. Limited content choice was a problem. Perhaps they would have eventually got a clue, but iPod and MP3 players then came along and cleaned their clock. Again, sometimes you lose such that you have to keep a lot of irons in the fire.
Their general problem is that China squeezed their profits on the hardware side, and they were slow to catch up on the software/UI side when products grew more digital. The profit margins shifted toward software and away from hardware. Being a hardware company, it is hard to switch overnight. Are you going to turn thousands of hardware engineers into software engineers? Fire them and start over? That would be a morale kicker, and hardware quality would suffer even more. Change put them into a tough spot.
Similarly, the gasoline engine car giants will probably have some ugly battles with electric-oriented co's, and a giant or two may fall.
Table-ized A.I.
Remember the Sony rootkit fiasco ?
Enough said.
Sony has been on my boycott list since 2005 due to their attempted (attempted is the keyword here, +1 Linux) cracking of my personal hardware. Hope their "illegal" (we know it isn't really illegal if a corporation does it) practices were worth it. https://en.wikipedia.org/wiki/Sony_BMG_copy_protection_rootkit_scandal
Also, Sandisk is on my shit-list too for refusing to honor a mail-in rebate for $5. I hope they enjoyed missing out of $1000s (literally, thousands (I like storage)) of dollars in sales to save 5 bucks.
As someone pointed out, Sony was/is an engineering giant rather than a manufacturing one. However, ever since they became a movie studio and a media company, Sony HW and engineering has been hamstrung by the media division. This is for 3 reasons (1) more resources have been diverted from HW to media (including game development). (2) And more importantly, HW is seen at the service of media at the company. That is if they don't see the HW causing greater media sales, they nix or underfund the project. (3) [this is related to #2] There is a natural conflict of interest between media and engineering. As a strong general rule, media conglomerates are very short-sighted and will not know a great invention if it hit them over the head. Media loves subscription model. But engineering prefers to free the users from artificial shackles. You can go as far back as a 100 years ago with the media industry trying to kill the Player Piano (old self-playing pianos). Ditto for the VCR, the DVD, the streaming movies, etc. The same is true today. There are many improvements to Play Station or even digital cameras that Sony could make which would push their sales over the top. But the media side of the business will not like them.
Sony should just spin off their HW and engineering business. Better to have 2 great companies than one mediocre one.
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Their second tier sensor...to get Sony's best sensor in a cell phone you have to buy a Sony phone.
Unless you can provide evidence I'm calling bullshit. Apple is Sony's largest customer for camera sensors by a fair margin. I'm pretty sure they are getting whatever sensor Apple wants.
Sony is up to their old tricks.
And which tricks do you figure those are?
That doesn't mean they're making any money from it.
Sony has made plenty of profit from the Playstation. You should check your facts more carefully. In 2016 the Playstation division accounted for 3/4 of Sony's profits for the whole corporation.
The PlayStation hardware was sold at a significant loss
The Playstation has been a significant cash cow for Sony for quite a few years now. Microsoft tried to buy into the market with Xbox but Sony has been making money on Playstation for a long time.
There is also more to it than just the sensor, hence why Nikon can obtain higher image quality than Sony at times.
Nikon uses a lot of Sony sensors though they seem to be trying to get away from that. You are right that other things matter to the final image (including lenses especially). But outside of some specialty lenses, Sony has cameras and lenses that equal or sometimes surpass the offerings that Nikon has these days. Sony's A9 and A7-3 and A7-R3 cameras are remarkable pieces of kit that are kind of game changers along with their G-Master glass. I'm not saying Sony cameras get better results than Nikon - I'm just saying they are roughly at parity for most use cases. You could buy either one and get really good results.
I think Nikon as a company is kind of in trouble actually. They have fallen behind Sony on sensor tech and mirrorless cameras (which are replacing SLRs) as well as some other important technology in areas like autofocus. Nikon is also reluctant to cannibalize their DSLR sales and has less budget to throw into R&D than Sony (or Canon for that matter). They're kind of living on their existing user base and most of the really interesting new tech is coming from Sony. I don't have anything against Nikon and I quite like some of their gear but I'm worried that they may not be able to keep pace with Sony if they don't get a really compelling mirrorless camera out there that is competitive with the A7-III.
Keeping their best sensors and lowest defect sensors for their own cameras.
Even if that were true (and you haven't established that it is) so what? I don't see why that is a problem.
Sony's best phone, with a _much_ better sensor then is in the iPhones..
Several problems with that argument. 1) You have no idea if Apple actually wanted that sensor given their other design parameters. 2) It's not clear if the sensor was available early enough in Apple's design process. 3) You have no idea if Sony was ready to produce the sensor in the volumes Apple would need (WAY more than Sony sells under their own brand). Ramping production up to Apple volumes is not a trivial endeavor and there are lead times involved. 4) Apple is their largest customer for their camera sensors - it is unlikely Sony is going to piss off Apple especially with Samsung making noises about becoming a big player in the camera sensor market. I suspect if Apple wants that sensor or any other sensor Sony makes they'll get it. 5) It's not a dual camera sensor so there are design tradeoffs to consider. It's also not immediately clear for which use cases the MotionEye sensor might be superior.
I use to really like Sony. First with their walkmans and later with their Clie line of PalmOS based devices. It was a company with loads of imagination and the ability to make their ideas exciting to the market. When the Sony BMG Rootkit Scandal hit, it spoke volumes about the company's mindset in the newish internet-age. They never did enough to repair their image. They still feel dirty.
There's a very obvious difference between the Playstation hardware (you know, the stuff everyone else here is talking about) and the Playstation business unit (which only you are talking about).
A distinction without a difference. There is no Playstation without both the hardware and software. It's an integrated product. You can't meaningfully talk about one without the other. The fact that they don't try to make a profit on the base console is IRRELEVANT because that isn't their business model. To argue that Sony makes no money on the Playstation hardware requires you to narrow the scope of your accounting analysis so narrow as to render it meaningless. (I should know because I'm a certified accountant)
It is a verifiable fact that at launch, Sony lost money on every Playstation 4 sold,
Sigh... When was the last time anyone bought a Playstation console and nothing else? Oh that's right... never. It's a razors and blades model. They make a ton of money on the hardware - just not up front. The hardware is useless by itself. Talking about the component cost of the Playstation hardware is near as makes no difference a meaningless discussion unless it is part of a broader conversation about the entire business model for the product.
The latest generations of Xbox have also allowed the Xbox division to become a profitable unit within Microsoft as well, despite them also selling their console hardware
Microsoft spent years losing billions of dollars trying to buy their way to success. I can't be bothered to check to see if they've finally recouped their investment. Presumably they have by now but they were deep in the red for a very long time. Only their deep pockets allowed them to stay the course.