Sony tries over, with a new CEO

Scott Tong Apr 2, 2012

Kai Ryssdal: There was a change at the top of Sony over the weekend. Howard Stringer stepped down as CEO of the Japanese electronics and entertainment conglomerate.

The new guy, Kazuo Hirai, has his hands full. When Sony reports annual profits at the end of the month, best guesses are it’ll be another whopping pile of red ink — almost $3 billion worth in losses.

Marketplace’s Scott Tong was in Tokyo not too long ago, trying to figure out what happened.

Scott Tong: In Tokyo’s electronics neighborhood, Akihabara, shoppers talk about Sony like it’s an aging superhero. Yusuke Akimoto and Koji Hoda land the first punches.

Yusuke Akimoto: I don’t use Sony products recently. My phone is Galaxy from Samsung.

Koji Hoda: All these other companies are able to produce TVs, smartphones at the same price, or even better quality.

Ouch! From another direction, Cassie Harada at a coffee shop.

Cassie Harada: Very, very overpriced. I always say you get the least bang for your buck out of Sony products.

Kapow! Sony’s been losing money four years straight. It’s one-fifth the size it used to be, a long decline for a corporate crusader with a proud history.

An exhibit at the Sony company museum has engineer Nobutoshi Kihara showing a tape recorder from 1949. He talks into the mic. And plays it back. A corporate video picks up the history from there.

OK, it is from the ’70s. There’s Sony’s transistor radio, world’s first CD player, mini TV. The Trinitron color TV assembly factory in central japan mass-produces Trinitron color tv sets.

Ulrike Shaede teaches Japanese business at the University of California, San Diego. She sees a “core brilliance” at Sony.

Ulrike Shaede: The Walkman, when they came up with that idea, we had no idea we wanted to listen to music while we were on the run. But we embraced it.

Sony helped turn Japan into a speeding post-war bullet. In 1950, the average Japanese made one-fifth his American peer. By the late ’80s — poof! — the gap vanished.

But then, Schaede says engineers took over the company, starting ignoring consumers. Exhibit A: Sony’s Betamax versus Panasonic’s VHS.

Schaede: Panasonic, even though it had a lesser technology, they made a tape that that would go for three hours so we could tape a football game. Whereas Sony’s Betamax would only run for one hour. It was less useful for the consumer.

Another challenge is something you see on the subway here. Women carry designer handbags, the men have expensive phones. Japan’s rich. So — like America — labor costs are high, which makes Sony products expensive, compared to say Korea’s Samsung.

Analyst Fumiaki Sato.

Fumiaki Sato: Sony is not catching up with Apple. Samsung is. Japanese companies have to make giant changes to compete.

Samsung blew past Sony in TV sales in 2005. Sony came late to smartphones, tablets, flat screens. Even in portable audio, the maker of the analog Walkman lost the digital market.

Jeff Kingston at Temple University in Tokyo says Sony did develop two song players before the iPod.

Jeff Kingston: They had one product that was created by the Walkman unit, another created by the VAIO computer unit. And they couldn’t decide which one to promote. And both of them never got traction.

These days, he says the company’s “circling the drain.”

Kingston: They’re not really part of the conversation. They are like a shy, retiring company, the dowdy aunt.

Bam! That one hurt.

Sony didn’t comment for tape. But in Tokyo, executives blame outside factors: earthquake and tsunami, floods. Without those, just-departed CEO Howard Stringer says Sony would be in the black.

“Men in Black 3” promo: You knew this was coming.

Stringer promoted the new “Men in Black 3” film at the recent consumer electronics show in Vegas. There, the man who just replaced Stringer — Kaz Hirai — pledged allegiance to the consumer.

Kazuo Hirai: I’ve created a group to explore the user experience. It’s the combination of devices, services and content that makes it easy and fun for you to play, watch listen and share.

Sony’s task, says Ulrike Schaede at UC San Diego, is not to make incrementally nicer devices. It needs a disruptor, game-changer, pick your cliché. The opportunity’s there.

Schaede: The next big battle will be about our living rooms, or our houses, actually. One day we will have intelligent refrigerators and washer-driers. So when we go to the store, we can look at cell phone and tell us if we need milk.

Back in Tokyo, shoppers wonder if Sony can fit into that old superhero suit again. The new boss is open to shedding workers and products. But a superhero’s not all about losing weight. It’s about adding a weapon.

In Tokyo, I’m Scott Tong for Marketplace.

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