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.

Comments

Sony was an engineering powerhouse

[sjbe]

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.

Re:Sony was an engineering powerhouse

[Thelasko]

And all that was engineering prowess, not manufacturing prowess.

They never understood that every part of the product has to be well executed in order to charge a premium. 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. Once products, like DVD players, became commodities, Sony was blown out of the water by companies that could produce higher quality for a lower price.

Like any industry ever...

[argStyopa]

...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.
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. ...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.

Junk

[Thelasko]

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.

Components

[sjbe]

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.

Re:good riddance

[50000BTU_barbecue]

And even if done correctly like most of their Minidisc machines, always somehow crippled, especially software-wise.

Re:good riddance

[MightyYar]

I completely agree. I disagree with with the AC grandparent who said that Sony hardware was overpriced and subpar - I felt like you always got what you paid for. Sure, they made some crap - but they also made stuff that was a good value. Their mid-range home theater stuff was always pretty nice.

But back to your point, even when I was super happy with my Sony product, it would have some weird non-standard thing that kept it from being perfect. For instance, I had a very nice Sony digital camera - but it used a MemoryStick even though standard storage had caught up in speed by that point. Ditto with a Sony-branded Palm organizer - MemoryStick was completely unnecessary in that product. I still can't believe how they dropped the ball with MiniDisc - they had, almost by accident, the best technology to take advantage of the MP3 craze... and they handed it to others.

Re:good riddance

[gaiageek]

I disagree with with the AC grandparent who said that Sony hardware was overpriced and subpar - I felt like you always got what you paid for. Sure, they made some crap - but they also made stuff that was a good value. Their mid-range home theater stuff was always pretty nice.

I think part of their strategy, at least with home theater gear, was to make certain items quality and others with planned obsolescence, and hope you buy the crap gear to keep your system "all Sony" - and it worked on me. I bought a Sony receiver/amp in the mid-90s which still works fine to this day, but I had two 90's-era Sony CD changers crap out after 2-3 years each, one VCR and one cassette deck die after a few more years. I swore off buying any of their components again after that.

Between that and the other stuff they've pulled which didn't affect me personally (the CD rootkit thing, the retraction of the alternate OS on PS2s), I feel glad that they're getting out of hardware. They've in general treated their customers like shit.

Re:Sony needs to bring back the Trinitron.

[the_skywise]

or the cat whizzed on it...

Re:good riddance

[AvitarX]

I was a pretty big fan of Trinitron.

There really wasn't anything close in terms of TV quality for quite a while.

Pedantic

[sjbe]

You do realize that a camera and a sensor are not the same?

Thanks Captain Pedantic! You saved the day again.

Re:good riddance

[Hallux-F-Sinister]

I hung in there with HiMD but after a while Sonic Stage just became stale; the future was clearly MP3 on flash memory. I do miss the long playing times, simple interface, and good sound quality. Even my MZ-1 was able to drive full size cans to nearly hearing-damage levels.

Absolutely. The NW-E507 (and siblings) was probably the greatest music player ever built. Tiny, sleek, beautiful, intuitive to operate, and with a spectacular battery life, (40+ hrs/chg!!!) loved that thing! Only problems were Sonic Stage was an utter pile of dogshit software, (the software thing...) and lack of expandability because Apple and Sony read from the same playbook on that issue.

I would have TOTALLY bought another if they kept making them, ESPECIALLY if they kept the design the same, and upped the memory capacity... imagine a music player that sleek, tiny, and beautiful, if you could side-load podcasts, music, etc., via MTP or MSC without using the giant pain-in-the-ass, flaming dumpster-fire that was Sonic Stage, and stored more than a gigabyte of music on it... like maybe 16, or 32...

I can’t say I’m saddened or even surprised Sony’s doing this... they’ve always been known for amazing, innovative hardware crippled by laughably shitty software, like the PlayStation. Trouble is, this is an idiotic move, and will end Sony. They’re incorrectly assuming a software only business model is sustainable, because they’re so focused on the near future that they are ignoring the future that’s slightly farther away.

Their leadership seems to have been seduced by the Dark Side of the Force, and boy oh boy is it going to bite them in a whole new asshole that they’re about to get torn. In 5 to 7 years, when Sony is filing for bankruptcy, and their senior executives are committing the rite of Seppuku with a dull, rusty tanto, I will remind people I predicted this, and point out that they could have resurrected the MP3 player market with a rerelease of decent hardware, esp. as the smartphone fad ends, people realize what a spectacularly stupid idea trading privacy for convenience on industrial scales, and how nice it would be if anyone still made a decent goddamned Walkman, that didn’t also function as a 1984-style telescreen, allowing government and the companies that own it to track you everywhere and listen in on everything you say, see everything you do, and narc you the fuck out before you even think about doing something that could harm them and their precious goddamned fucking corporate bottom line.

Re:good riddance

[Archangel Michael]

innovative hardware crippled by laughably shitty software

It wasn't just the software, it was just about everything that was "soft". The hardware was almost always great, but then it was crippled by some ridiculous idea that involved DRM, ongoing fees, and other proprietary schnanagins that weren't "better". Sony could have been Apple during the iPod days, leading up to the iPhone, but it couldn't get its collective head out of its ass long enough to stop crippling their products with bullshit.