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How Sony failed to Connect, again

Electronics giant had a secret weapon in its fight against Apple's iTunes, but got "unmitigated disaster" instead.

Early in 2005, more than a dozen Sony employees from the company's consumer electronics divisions gathered for an unusual meeting in the tiny Palo Alto, Calif., headquarters of digital media start-up Kinoma.

Kinoma Chief Executive Peter Hoddie, an Apple Computer alumnus, had been put in charge of high-profile Sony software development, including the Connect digital music project. For a company historically averse to using outside technology, this was a significant step.

For more than two hours, the group met in the futon-lined public area of Kinoma's offices. According to attendees, Hoddie gave a sales pitch, but not much more. When asked for details on the technology they'd be using for Connect, Hoddie declined to provide them, and the meeting turned contentious before breaking up, employees said.

Programmers went to work on the project, intended to be Sony's answer to Apple's iTunes. But the tone had been set for a dysfunctional mix of politics, programming and pique that would prove deeply destructive to Sony's digital music ambitions. Fourteen months later, a disastrous product launch doomed Sony's latest attempt to catch Apple.

"There were a lot of problems with Connect, but there were some things that could have gone right," said one Sony employee familiar with the project's history, who like most of the insiders interviewed for this story, asked to remain anonymous. "The software was on a trajectory to be OK. But that got wiped out."

The effects continue to resonate inside Sony. On Tuesday, CEO Howard Stringer informed the company that Phil Wiser, a Connect champion inside Sony and chief technology officer for Sony Corp. of America, would be leaving effective Friday, sources close to the company said.

Wiser is leaving to join a Silicon Valley-based digital home entertainment firm called Building B, according to a source familiar with his plans. The Connect division is being taken over by Steve Bernstein, a Sony senior vice president who previously oversaw the company's Media Software group.

A Sony representative declined to comment for this story, or to provide Sony executives to discuss the company's music business. Hoddie also declined comment.

The effort to reel in iTunes opened the door to Sony's ultimately unsuccessful flirtation with another company's technology--a relationship that's continued in Kinoma's oversight of Sony's highly touted eBook project.

Why did the electronics giant turn so uncharacteristically to an outsider for technology so critical to its future?

Past and present insiders at Sony say Apple's meteoric rise in music has left top Sony executives with both respect and envy for Apple's products, even while they resist becoming dependent on Microsoft's digital music technology.

Kinoma and Hoddie appealed to their envy of Apple and their aversion to Microsoft.

From QuickTime's creation to Sony's secret weapon
Hoddie is far from a household name. But he's well known in digital media circles.

Before striking out on his own, Hoddie spent 10 years at Apple, serving as team leader and chief architect of the company's early QuickTime multimedia software project. People who worked at Apple during that time say much of the early code was Hoddie's, and in the days before it was ported to the Windows platform in 1994, he was one of the only people at Apple to have a full picture of the software's code base.

"He was an absolutely brilliant individual, and one of the great treasures of Apple," said Jonathan Hirshon, a technology marketing consultant who served as a technology evangelist on Apple's QuickTime team.

In early 2000, Hoddie created Generic Media, a streaming media company that included Sony among its investors. In 2002, that was succeeded by another multimedia software company, Kinoma, founded with two former Apple colleagues.

Kinoma's announced products today are a digital media player, a photo album, and a media manager aimed at people who use media on portable devices, particularly Palm-based handhelds and Sony's Portable PlayStation. Kinoma consults for outside companies and has worked with Sony on smaller projects.

But its crown jewel is a code base called FSK, a new system for handling multimedia files as they're transferred online, to PCs and between handheld devices.

Hoddie's history at Apple made him appealing to Sony executives who felt Steve Jobs stole a digital music crown that was rightfully theirs. By early 2005, he could demonstrate prototype digital music software dubbed KTunes, which was based on FSK. It seemed to provide a way to jump-start Sony's own digital music effort.

But the project, said one high-level Sony insider, was an "unmitigated disaster."

FSK was not a mature technology, according to critics, and lacked most of the documentation sought by Sony programmers working with the system. It wasn't designed to integrate with Sony's existing Web or commerce systems, and wasn't based on the HTML or XML standards used by traditional Internet applications, so it required significant work to build almost any feature.

Sony insiders say Kinoma's core technology was designed to function on a portable device and on the PC. A prototype FSK-based version of the Sony Walkman was created, but the company decided early on to avoid this route and stick to Kinoma on the PC.

In late spring, questions from the U.S. programmers resulted in memos from top executives in Tokyo reaffirming Hoddie's role as chief architect of the Connect project. That certainly didn't help what some insiders later described as a communications breakdown.

By early summer, the Connect programmers were saying they had no way of meeting plans to release the software with a new generation of Walkman devices in late summer. They blamed the platform. Hoddie blamed them.

The issue finally came to a head when the co-presidents in charge of the Connect project, New York's Wiser and Tokyo-based Koichiro Tsujino, flew to San Jose, Calif., for a meeting with the programmers, briefly attended by Hoddie. The executives were presented with data and complaints about the project, and told again, unequivocally, that the schedule could not be met.

The meeting provided a dose of reality. Features began to be cut. Relations between the core Sony programmers and Kinoma declined so far that a team in Japan was asked to serve as a buffer between the two camps, relaying communications from San Jose to Palo Alto, and back.

The software that finally emerged pleased few. In a move virtually unprecedented in Sony's history, executives in the company's U.S. operations refused to release the software in their market. The European division didn't have the same option, and Connect was released there and in Japan in November 2005.

Customers began reporting critical bugs, sometimes rising to complete unusability. By January, Sony issued an apology to its customers, and recommended that if the repeated updates weren't working, people should simply download the old pre-Connect SonicStage software.

Executives looked at fixing the project, and decided against it. Patches were released until April, when development on the Connect software stopped altogether.

A second life for Kinoma?
The end of Connect wasn't the end for Kinoma and Hoddie's role at Sony, however.

By early 2006, work began on Sony's new, high-profile eBook Reader, using Kinoma's FSK as a foundation.

According to insiders, Hoddie was given more direct control over this project than he had with Connect. It was touted by Stringer at January's Consumer Electronics Show in Las Vegas, and Sony said it was slated for release in spring 2006.

How will this project fare? Some point to the successful prototype demonstration of the Reader running FSK-based software at the Consumer Electronics Show as proof that it has already come much farther than the Connect software ever did.

Other insiders note that it has been substantially delayed, without a clear end date in sight. They contend that programmers are again having difficulty integrating Kinoma's proprietary technologies with a standards-based Web content system.

Critics now say the Connect software debacle has further destabilized Sony's online music plans, and ceded 14 critical months of development and consumer awareness to Apple.

Insiders say the former Connect division is in turmoil. Tsujino left the unit in January. The loss of Wiser, who helped found the original Liquid Audio digital music company, further drains the company of people with experience in the digital music service business.

Sony has explored working with other online music companies, but nothing has yet come of it. For now, its hopes are pinned on the new generation of SonicStage, which some insiders say will be hard-pressed to handle features already planned for Sony's devices.

Sony is powerful and rich, no doubt. But it could be a long, tortuous climb back into the ring with Apple.

"Sony is still number two, three or four in almost every region, shipping millions of players," said Envisioneering analyst Richard Doherty. "It's the services side that has remained such a challenge for them."

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