Sony is reshuffling its corporate management to capitalize on
the convergence of entertainment and technology--and to better compete against AOL Time Warner.
Sony Electronics of America (SEL) yesterday said it will reorganize
parts of its electronics business to better realize the company's goal of
becoming a "broadband entertainment company" by getting internal operating
units to work together more effectively. The end result, it is hoped, will
be that digital devices, as well as interactive services and new forms of entertainment to animate those devices, will get into consumers'
hands more quickly, executives said.
Clearly, pressure has been placed on Sony in the aftermath of the AOL-Time
Warner merger to make more
authoritative moves in combining its entertainment and technology assets.
Sony's goal, as with AOL, is to provide new interactive services
over a growing array of gadgets such as digital music players, cable
set-top boxes, cell phones and game consoles.
"Sony has been thinking more and more in terms of products fitting together
(with their content properties)," said Schelley Olhava, an analyst at
International Data Corp. "That's been an overarching theme for a
Turning rhetoric into reality hasn't been easy for Sony, though. This is
SCA's second major reorganization in two years, the last one being in March 1999. In that reorganization, all of Sony Corporation, including
its U.S. operations, were realigned to become a more effective
competitor in an Internet-driven economy.
Still, the company is described by former employees and observers as consisting of many
independent fiefdoms that sometimes fight against each other for
resources and in the market with competing products.
"It has taken Sony longer than they expected to get the pieces working
together," another source, who has worked with Sony on various projects, said on a condition of anonymity.
Sony has taken a number of steps in the last few weeks that indicate Sony
Corporation of America (SCA) chairman and CEO Howard Stringer is taking
concrete steps toward breaking down those walls between the various units.
(Sony Electronics is a business unit within SCA.)
According to a plan drawn up by executives at Sony Electronics, one of
these steps involves taking the group responsible for audio-video products
such as DVD players, TiVo, DirecTV, WebTV set-tops boxes and stereo
equipment and placing it alongside a group consisting of the company's PC
and digital imaging operations (encompassing digital cameras and the like).
The formerly separate entities will be headed by Fujio Nishida, former head
of the company's Consumer Products Marketing Group. Dick Komiyama, former
head of the Personal Network Solutions Company, will serve as deputy of the
new Consumer Electronics Group. The pair will report to Teruaki Aoki, who
continues in his role as president and COO of Sony Electronics.
Additionally, sales and marketing operations for the PC and digital imaging
group will be consolidated into the company's San Diego offices.
Changing the company's structure is not a matter undertaken on a whim.
Sony's electronics business continues to account for about 60 percent of
the company's overall profit, compared with about 35 percent for the
PlayStation games business during the most recently completed quarter.
"I think the indication is that Sony has recognized how these product
groups need to work together to (bring about) convergence," said an
entertainment industry source familiar with the company's plans. "The only
way to force that to happen is through moves like this."
Stringer has made other moves in recent days as well. On Monday, Sony
created a new business unit in its Sony
Pictures Entertainment division targeted at providing content delivery to online and
game services over broadband networks. Broadband refers to technologies
such as DSL and cable modems that provide faster delivery of data over the
Yair Landau, who was head of business development initiatives for the
studio, is president of the new unit, called Sony Pictures Digital
Entertainment. Landau is charged with tapping into the company's film and
TV archives and business relationships to create new online content and
interactive TV programming such as online games, video-on-demand services
and other initiatives.
"This important venture clearly demonstrates Sony's intent to marshal our
tremendous range of assets in film, television, new media and content
creation to take a leadership position in the burgeoning field of broadband
entertainment," Stringer said in a statement concerning the changes at Sony
Additionally, Sony last month created a new Broadband Services Unit that
has a similar charge, but with a focus on the partnerships that will help
Sony with bringing that content to customers. For instance, the Broadband
Services Unit, headed by Emily Susskind, will be responsible for developing services for use by cable
operators such as Cablevision in New York.
The lesson for AOL Time Warner in all of this is that it may be hard to
realize the vision of a synergistic relationship between content producers
and service providers.
Stringer has been working on the plan to integrate Sony's operations for about 18 months already, according to other
individuals close to the company. "The content business and hardware
business have different interests, so there's a need to coordinate them,"
"AOL Time Warner will run into the same kinds of problems," he speculated.
Last month, speaking on the issue of how Sony is trying to become a
"broadband entertainment company," Aoki, president of Sony Electronics,
told CNET News.com that 10 years ago, Sony
bought music and movie studios to provide content for its hardware.
"We really didn't realize any synergies in the past 10 years," Aoki said of
the acquisitions. "Now it's really time for us to exploit the
synergies between the software and
content and hardware by using the broadband network (to distribute content)."
The restructuring has come about because there is the basic idea in the
high-tech industry that there will be some sort of hardware device--either a
PC or a cable set-top box--that is connected to the television. This device
will store and play content that comes from DVD, traditional
video programmers like cable companies, and the Internet.
Sony is hoping that by combining formerly separate units, they will be able
to come up with a hit in a market IDC says will eventually outpace even
consumer PCs. Even if Sony Electronics' TV-centric devices such as Internet
enabled DVDs, TiVo personal video recorders and cable set-tops don't take
off, there's always the PlayStation 2 game console, which will do many of
the same things but will be targeted at a younger audience.
Overall, the market for devices, including set-top boxes, handheld
computers and gaming consoles, is set to grow from 11 million units shipped
in 1999 to 89 million units in
2004. The market will grow from revenue of $2.4 billion last year to $17.8
billion in 2004, according to IDC.
"Sony has a wonderful opportunity to sell different platforms into
different markets depending on what demand is and where the (devices) are
most likely to be accepted," said Paul Di Senso, senior media analyst with