Smart home

Why Sony needs to stop drinking its own Kool-Aid

Something is wrong with Sony, especially when it comes to the game industry. Paying a premium on Sony products because they're made by Sony doesn't appeal to anyone anymore.

Sony is in deep trouble. The company has been forced to slash its earnings forecast by 57 percent amid deteriorating economic conditions and its inability to compete more effectively in markets throughout the world.

Of course, Sony will still post a profit--most analysts claim that it'll be about $500 million--but the downturn speaks to Sony's issues and the fact that this once-dominant company has been downgraded to an also-ran in the industry.

Remember the days of Sony dominance? It was a time when the Walkman was on the minds of tech lovers around the world and the PlayStation moniker was held in the highest regard. Sony TVs were everywhere, and the company's ability to capitalize on any market was truly astounding.

But since then, Sony has lost its way. It's no longer a company that can rely on its name to beat other companies to a pulp, and with more competitors realizing how to beat Sony, it has quickly become irrelevant in many markets.

Sony's presence in the digital-camera sector is suspect, and its gaming business, once one of the most profitable departments at the company, has become an embarrassment of epic proportions. Although its PlayStation Portable is expected to beat forecasts, the Playstation 3 has proven to be one of the biggest blunders the company has ever committed.

At a time when Sony couldn't afford to make the wrong move in the game industry, it did. As Nintendo found a way to solidify itself in the market by offering innovative gameplay and an affordable price, Sony stuck to old conventions and played the "better graphics, higher price" game instead. Microsoft did too, but the Xbox 360's price tag and online experience were able to coax prospective owners to its side.

Much like other markets in which Sony competes, I just don't think it understands how to win anymore in the video game sector. Doesn't it realize that although it believes that the PS3's price point is fine for consumers, it really isn't? And doesn't it realize that it needs to differentiate the product in some way? Games that can be purchased on an Xbox 360 don't cut it anymore.

Oh, and neither does Blu-ray Disc.

Sony is living in the past on too many fronts. It thinks that selling products on its name will work like it did years ago, but I think it has finally become clear that it doesn't. Sure, Sony is still a "household brand," and there are millions of people clamoring for its products, but its name has lost significant appeal over the past few years, as it failed to tailor its strategy to consumer desires.

If Nintendo has shown us anything, it's that consumers want innovation and affordable consoles. Sony has failed on both fronts. And if countless competitors in the other markets Sony competes in have shown us anything, it's that consumers will pay for high-quality products as long as they're priced according to their value. In other words, paying a premium on Sony products because they're made by Sony doesn't appeal to anyone anymore.

There's absolutely no reason why Sony LCD HDTVs are priced as high as they are. Why should I pay a few hundred dollars more for a 46-inch LCD from Sony when I can get an even better HDTV from a company like Samsung or Panasonic for the same price, or even cheaper? I'm not willing to pay for the Sony name, and as Vizio and Westinghouse have shown, most customers aren't willing to do so, either.

And now, as Sony executives look in the mirror and try desperately to find what's wrong, they need only to look at the company they're operating. The culture at Sony is one that tries to make you pay more for a name that isn't held in the high regard it once was. And in the process, it's losing its standing in the industry as more consumers realize that better products can be purchased at a lesser price.

If Sony really wants to turn things around, it needs to do something it never thought possible: bring prices down to a more competitive level. Bring the PlayStation 3 prices down to compete on the same level as the Xbox 360. Get rid of the premium pricing on HDTVs. Eliminate the higher price tags on digital cameras.

And for goodness' sake, stop pretending like it's the 1990s all over again. It's not.

Check out Don's Digital Home podcast, Twitter feed, and FriendFeed.