IN Spider-Man 3, the new $200m (£100m) movie from Sony Pictures, the hero
Peter Parker is consumed with pride about his past achievements, and makes
errors of judgment that leave him fighting deadly rivals for his survival.
Can he rediscover his true character, his essential goodness, to emerge
victorious?
It’s a story that should resonate with Sir Howard Stringer, the Welsh-born chief
executive of Sony Corporation, who has spent nearly two years battling to
turn round the ailing Japanese electronics giant.
For decades one of the world’s most trusted brands, Sony ran into problems
when it failed to react to the technological changes that transformed the
markets where it had scored two of its biggest successes — Trinitron
televisions and Walkman music players.
As consumers switched to flat-screen LCD TVs and the iPod, Sony was plunged
into loss — an analogue company in a digital world.
The crisis provoked Sony, a corporate icon in Japan, to seek a saviour in
Stringer — doubly shocking since he was neither Japanese nor an electronics
engineer. Stringer, 65, is a former journalist who spent much of his career
in American TV, before joining Sony to shake up its US operations in 1997.
Stringer set to work in 2005 by laying off 10,000 staff, closing 11 factories
and launching his Sony United initiative to break down the “silo walls”
between the group’s notoriously independent divisions.
Yet still the problems continued. Playstation — one of the few bright spots at
Sony — was forced to delay its third-generation gaming console, leaving the
way clear for the successful launches of Microsoft’s Xbox 360 and the
Nintendo Wii. Playstation 3 finally reached Europe last month, after
disappointing initial sales in Japan and America.
Then last summer, there was a new fiasco. A rare fault in batteries made by
Sony prompted Dell and Apple to recall millions of laptop computers for fear
that they might overheat. The story rumbled on for months as Lenovo,
Fujitsu, Siemens and other computer manufacturers reported similar problems.
By the time Sony agreed to foot the $450m bill to replace 9m batteries, the
company had made itself look both incompetent and secretive. Worse, in
allowing his executives to lead the public response to the crisis, Stringer
appeared distant and out-of-touch, adding to concerns that he was spending
too much time on the group’s entertainment businesses in America and Europe,
and was not on top of the problems in the core electronics business.
At the worldwide premiere of Spider-Man 3 last Monday — the first Hollywood
movie to make its public debut in Tokyo — Stringer admitted the battery
foul-up was a watershed moment: “I said, ‘enough already’.”
Stringer has sought to manage Sony in keeping with the consensual style of
Japanese business. But there had to be limits — and last year’s problems
went beyond them. “I was able to use it to my advantage,” he said.
Within weeks, he had sidelined Ken Kutaragi, the brilliant but difficult
founder of the Playstation business and the head of Sony Computer
Entertainment. Kutaragi continues as chairman and chief executive of SCE,
but operational control has shifted to Kazuo Hirai, who comes across as more
American than Japanese.
More generally, Stringer has ignored previous advice and is taking a higher
public profile. Despite all the problems, Sony is making progress, he
believes, and it should be better understood.
Since November — when the battery problems were resolved, Hirai promoted and
Playstation 3 launched in America — Sony’s shares have climbed by 40%, and
are now close to a five-year high. An important factor is the palpable
confidence in the fast-growing TV business, which returned to profit in the
final quarter of 2006 after two years of losses (see panel below).
Stringer said last week: “We’ve got momentum — not just because of the share
price, and not just because consumer electronics has rebounded from flat
[operating profit margins] to more than 4%.
“There’s a sense of self-belief at last, and [we have begun] building
relationships between the companies so that our devices can talk to one
another.”
The lack of an internet-savvy digital platform — “the missing element that
left us behind in the iPod stakes” — would not damage Sony in the video
stakes, said Stringer. When downloading films and TV programmes over the
internet becomes commonplace, Sony will be ready, he insists.
“Steve Jobs [of Apple] is running round trying to line up [deals with]
studios; I’ve already got one. I ought to be able to use the content of the
studios, both in Hollywood and worldwide.”
This is one reason why Stringer — who clearly has a keen appreciation of the
importance the Japanese attach to symbolism — was so pleased to be spending
a rumoured $3m on the Tokyo premiere of Spider-Man 3.
Sony struggled in Hollywood in the first few years after Akio Morita, its
co-founder, bought Columbia Pictures in 1989. And Stringer said he still
finds it hard to convince the Japanese, in particular, that Sony is more
than an electronics company.
But after huge hits with the Spider-Man franchise, The Da Vinci Code and the
James Bond movie Casino Royale, “we now have the most successful movie
studio in Hollywood”, Stringer told his guests at the Tokyo premiere.
The significance of this goes beyond the $220m profit that Sony Pictures
contributed to the group in the final quarter of last year. Sony is using
its movies, along with other high-definition (HD) DVDs, to drive sales of
its televisions and, more particularly, of Playstation 3.
The current success of Sony’s HD TV business is one of the most encouraging
signs of the group’s recovery.
The Trinitron television, first introduced in 1968, was one of the products
that established Sony’s worldwide reputation. But Sony was late in spotting
the shift from cathode-ray tube technology to flat-screen LCD panels, and
suffered a calamitous loss of market share as a result.
But Sony regrouped, entered into a display-panel-manufacturing joint venture
with its great Korean rival Samsung, and in October 2005 launched its Bravia
range of HD TVs — with its own backlight and picture engine technology to
offer superior image quality.
The Bravia business has grown explosively. Sony sold 6m Bravia televisions
last year, reclaiming its position as world No 1 within 18 months of launch.
Katsumi Ihara, a rising star who has just become head of Sony’s
consumer-products division, said he expects the company to sell 10m LCD
televisions this year.
Best of all, Bravia’s market share is particularly strong in larger television
sets, where profit margins are better and price deflation less severe. As
more consumers buy televisions with 40in screens or above, Sony’s average
price per unit is increasing, said Ihara.
Analysts have more doubts about the progress of Playstation 3. Ryoji Chubachi,
Stringer’s right-hand man as chief executive of its electronics division,
said Sony had achieved its initial target of shipping 6m consoles by the end
of March.
However, in America Playstation 3 is being outsold by more than two-to-one by
the Nintendo Wii, a much cheaper games machine with an eye-catching
motion-sensor control that allows players physically to swing the tennis
racket or sword they can see on screen.
Nintendo has taken a very different approach to Sony and Microsoft. It is
seeking to broaden the market by offering simpler games with wider appeal,
rather than simply pouring in more of the technology and graphics quality
that matter most to hardcore video-gamers. So far, it is an approach that is
proving wildly successful.
Sony’s ambition for Playstation 3 — and the reason it is so
expensive — is to establish the console as a home-entertainment hub. For
quite apart from its games capability, Playstation 3 incorporates a HD-DVD
player, another crucial new battleground in consumer electronics which pits
Sony’s Blu-ray technology against Toshiba’s HD-DVD.
This is why each Playstation 3 is being sold with a DVD from Sony Pictures —
Casino Royale in Britain. Sony wants consumers to understand that
Playstation 3 is more than a games console.
It appears to be getting its message across. Kiyoshi Nishitani, senior
vice-president of the group’s television and video-business unit, said early
research in America suggested that 90% of Playstation 3 owners had used
their machine to play a Blu-ray disk, and about three-quarters of them
planned to buy or rent further movies in the format in future.
“We believe that eventually — very soon — Blu-ray will win,” said Ihara.
Stringer said the hugely successful launch of Playstation 3 in Britain, where
it racked up £100m of sales in two days, had “rescued the perception wars”.
Having launched with more game titles available, “we’ve lived up to
expectations in Europe in a way that we perhaps did not in Japan”.
Stringer said games publishers had still to take advantage of the huge
“bandwidth”, or technical capability, of Playstation 3. This meant there was
lots of untapped potential.
Hirai, the new head of SCE, said: “It’s a marathon, not a sprint. The real
test of a console’s longevity is only seen when we look back three years
from now, or five years from now or ten years from now, [when you can see]
what’s the installed base, what support you’ve got from publishers, what
support you’ve got from consumers.
“I’d be saying the same thing if we were top in the market or second or third.”
Nevertheless, it’s hard to believe that Sony will persist with its current
pricing. The Playstation 3 is twice as expensive as its closest rival, the
Xbox 360. Chubachi said the company was reviewing pricing strategy.
Stringer is the first to admit that the turnround at Sony is still a work in
progress. “The nightmare for me is complacency. The stock price going up
bothers me. I don’t want anybody feeling that this job is done, because it’s
not. I am going to finish this job before I go. [I‘ll be here] for as long
as it takes.”
Only a few months ago, the chance of Stringer pulling off a successful
turnround of Sony looked remote — indeed, much like the odds of Peter Parker
surviving the climactic showdown with the forces of darkness in Spider-Man 3.
But guess how the movie turns out?
