The Sony Reformation

We know them as a hardware company, but over the past few years, Sony has been slowly transitioning away from hardware and towards being a service type company. Many factors are at play here. In the TV and computer markets, they were outdone by competitors who could produce for far more cheaply. The strong yen did not help them in being competitive overseas either. In their other portable electronics departments, the smartphone happened. With it came the convergence of devices. Now a phone serves many functions that previously required multiple devices. It’s now your camera, videoplayer, music player, gps and now it’s even your handheld gaming device all in one. It’s great for the consumer, but for a hardware company, it’s a nightmare. Even Apple struggles with hardware realities. For a while they refused to listen to consumers requesting larger screens in Iphones which was probably in an effort to make their Ipads a more attractive prospect. This was after their iPhone consumed their ipod sales. However, they eventually had to relent and now it’s going to be interesting to see iPad sales post IPhone 6.

It’s a well-known fact that Sony now makes most of its money from financial services. They lose most of their money in hardware manufacture. Sony, like us, has always seen themselves as a hardware company and has been slow and reluctant to move away from that image. The Cell, that piece of alien tech that was brought forth with their PS3 was an attempt to break into a new area of hardware manufacture, but even that failed to yield results. They’ve now sold off their TV and Vaio lines and cutting back on other consumer electronics divisions. The future of Sony is not hardware.

The thing is, Sony is a very diverse company and over the years, they established excellent movie, television and music studios. They’ve previously used their influence in these sectors to great effect. One of the reasons that they won the format war against HDDVD was their ability to influence other movie studios (notably Disney) to adopt the Blu-ray format. But even that victory was short lived, and Blu-ray sales are declining faster than expected. The culprit seems to be the rapid adoption of streaming services. Netflix, Hulu and many others provide content on demand on a multitude of devices using a single account at one low monthly fee. No longer is there a need to buy content on a disc and go through pesky conversions to get the content on multiple devices. Now Sony is a bit late to the movie and television party with the streaming service Playstation Vue, but that does not preclude success. I’ve used their Music unlimited music streaming service, and it was horrible in that it hardly ever worked. I never used video unlimited, so I can’t really pass judgment on that. Whether or not Playstation Vue succeeds will depend upon whether Sony can make something that works and if they can use their relationships and influence to provide content that has thus far eluded other streaming services. HBO would be a major win.

To make a long story short, Sony entered the home console space because Nintendo pissed off some of their engineers. Now, 20 years later, the Playstation brand is a pillar of the company. Life never ceases to amuse me. After being behind the curve in other areas, they are leading the way with a subscription model for gaming in the form of Playstation now. The days of iterations on gaming hardware are numbered. Games are too expensive to risk them on a small install base. That’s why the first year of almost every console is very slim pickings. This generation has been no different. Nobody wants to keep going through this. Not the gamers, not the publishers. I still have my reservations about never truly owning content and the erosion of consumer rights, but yet I am intrigued by PS Now. To be able to have one account and play the same game on consoles, handhelds and PC would be a very interesting future – even I can admit to that. So far, Sony is far ahead in this race and the one complaint I have about their plans is the seeming lack of interest in the PC platform for PS now. I think that that remains a great untapped market for their software.

If you ever wondered why Microsoft keeps sticking their noses in every sector, then this whole story serves as a great lesson to the need to diversify a business. One day, just like Sony, Microsoft will find themselves with their cash cow (Wndows) dying and will have to throw their efforts in another direction. Whether Sony’s attempts at rebirth works remains to be seen, but it does serve as a great lesson as to the need to never put all your eggs in one basket.

[freshslicepizza]

ripping your own music and movies to a hard drive is a much better way to access your content. it's too bad we can't do that with games unless we go digital. the convenience factor is even better with streaming services but the quality isn't as good. the gaming industry is definitely behind the times as are consumers willing to go this route.

sony tried to get playstation on mobile and that failed so i'm not too sure what the future lies with playstation now. it is now a subscription model that should have been that way on day one.

high speed internet is limiting its potential because of the adoption rate and access around the world. the future is streaming services without the need for proprietary hardware. sony is likely to be reluctant to be pro-active on the pc market because they don't sell hardware for it or have their own operating system. same thing with nintendo who is even more apprehensive about mobile and the pc.

[BitbyDeath]

XB1 just tried an always-online model and it was not accepted by the consumers. 10 years won't make a difference, we will still have physical hardware nextgen.

No doubt about it.

[LightDiego]

Sony has no interest to put PS Now on Pc, some people still insist on that? It's like saying Nintendo should make games for another platforms, competition it's great. It's not their platform, simple as that. PS games should and will stay on PlayStation consoles, PS4 it's a huge success, the fanbase will continue to grow.

[lex-1020]

I disagree. Sony has stated that they want to get PSNOW out on as much as possible. The reason is because Sony can claim royalties off that. Let's say you don't own a PS4 but you own a PC and there's a game you want to play on the PS4. Well you're probably not going to go out and spend $400 on a PS4 just to play one game. But you might spend $30 to rent the game via PS Now. Sony claims royalties off those sales, so they have now made at least some money where they originally wouldn't have made anything. Ideally they would want you to buy a PS4 so they could have the most money from the sale but some money is better than no money.

[ravinash]

Most of the money that Sony makes from Playstation are from the royalties from 3rd party and their own games.
If Sony is first to offer the service to other devices along with their own games, then they can continue to gain those royalties regardless of whether it's running on their console.

[bunfighterii]

It's been sad to witness their decline as a maker of hardware. They still produce quality stuff, but nothing like their heyday. I remember the days when they were unrivalled in design of their tech and the build quality was second to none. Their good, Made in Japan Walkmans, TV's etc. were streets ahead of everything else on the market.

[ravinash]

I don't think the quality went down as such, rather the competition just undersold them with products just under that level of quality at a much lower price.

Sony don't have as much of a head start on quality as they used to as R&D costs so much more these days. Plus the economic problems in Japan and the recession has left it's mark over the years.

[lex-1020]

The thing people seem to forget a lot when they talk about Sony's "financial problems" is that they're a multibillion dollar company. They make excellent HDTVs, Smartphones, tablets, and sound systems. You put a Sony Tv near any other TV and people will pick the Sony TV everytime even if they don't know it's Sony because the picture quality is so much better. Professional artists in the music industry use Sony headphones when they're recording. Most notably "Dr." Dre. He has his own headphone line of "Beats by Dre" but if you watch videos, or see pictures, of him in the sound studio he is wearing Sony headphones. Sony phones and tablets are high end devices that are starting to sell very well.

As for Music Unlimited it has come a long way and is much much better now then when it started. However I am excited about Sony's partnering with Spotify.

Video unlimited is simply just a movie service. It works well but with lots of other services like Google Movies or Amazon instant video there's no real reason to use Video Unlimited since it is limited in what devices can be used.

I don't have a cable subscription because all the shows I watch can be watched online, however I might check out Playstation Vue because if it's cheaper than cable my wife might want it for cooking networks.

Overall when you look at Sony as a whole, instead of looking as one section like Playstation, you notice that they are actually doing pretty good for themselves.

[bunfighterii]

It's a multi-billion dollar company losing multiple billions of dollars a year. They still make good products, but not enough people are buying them and they cost too much to make. Their mobile division is losing billions despite having one of the best Android phones on the market, their TV division has been making huge losses for years, and the company hasn't made an annual profit since 2008, in-fact they've lost billions and billions and are in a huge amount of debt which is rated BB- (ie. junk status).

Music Unlimited is being shut down and their devices will shift to support Spotify; in their February quarterly update they openly floated the prospect of abandoning their TV manufacturing altogether, and their most profitable segments are image sensors (not actual cameras) largely because they sensors go into iPhones, and the Playstation division off the back of the success of PS4.

It's sad but true - its just not the dominant market player it once was.

[NixonMonoxide]

Gotta love the thumb downs you're getting for telling the truth. Not to mention SONY's numerous anti-consumer actions, and shady practices in its other divisions.

Their products were top notch, but very very overpriced. Why would a consumer spend £550 on a new SONY phone? Especially when SAMSUNG has something with even better features and value for £350?