ColdFusion - What's Happening to Sony? (The Rise and Stagnation of Sony)

Starting point is 00:00:00 You are watching Cold Fusion TV. Hi, welcome to another Cold Fusion video. Previously, in the last episode of the story of Sony, we saw how they went from a failing company making rice cookers and electric blankets to an innovative group of engineers who influenced American society with their breakthrough portable radio. Today we'll continue the story from 1960 with the timeline of Sony's global rise. Let's begin. In 1960, Sony would expand into the United States.

Starting point is 00:00:38 States with the formation of Sony Corporation America. Shortly after this, using the transester technology that they had perfected five years earlier, Sony would create the first transistor television. For context, TVs of the time were still huge because they were using massive bulky vacuum tubes to power them. So Sony's model was a revolution, much smaller than anything that had ever come before it. In 1968, Sony would release their Triniton TVs. It had twice the brightness of regular TVs with the day, and was the greatest TV product series of the entire century.

Starting point is 00:01:13 These Triniton televisions were known for their great quality. The Triniton TV system was so good that it supported Sony's growth for the 30 years after its launch in 1968. Before this, all Japanese products were seen as cheap and of low quality. Sony's color TVs changed the perception of Japanese products. 1975 saw the release of Sony's Betamax home video tape format and camcorder. The Betamax tape system was far superior to JVC's VHS release later that year, but it ultimately failed as it had less tape running time and was more expensive. In 1978, a Sony executive would take a trip to Europe to see a

Starting point is 00:02:20 spin-off technology of the Phillips Laser Disc that could play audio. Phillips and Sony already had a healthy relationship since the late 60s and decided to pair up. Phillips was a world leader in optical video discs and Sony had considerable expertise in digital audio signal processing technology. When the two companies joined forces, they would create the digital audio disc, now known as the compact disc. It would be released in 1982. In July of 1979, Sony releases the first stereo cassette player called The Walkerman. It is considered one of the most iconic music players and has sold over 400 million units. Of course, there were portable music players before The Walkman, but Sony's was the first that was easy to use and convenient.

Starting point is 00:03:06 With a Sony Walkman The Sony Walkman Is a tiny stereo cassette player With truly incredible sound Put on a walkman And see the world in a whole new light The Walkman The Sony Walkman ushered in the company's golden age

Starting point is 00:03:31 It created a brand new culture Of listening to your own personal music Outside In late 1982 The first CD player was introduced to the world By Sony And just two years later in 1984, they would create a portable version. It was called the Disman.

Starting point is 00:03:52 Sony were on fire by this stage, and according to cultural critic Stephen Bailey, in this period, Sony was the apple of its day, and much more. By the end of 1988, Sony had acquired CBS Records for $2 billion and renamed its Sony Music Entertainment, and also Columbia Pictures Entertainment. 1993 would be a year that would change the gaming landscape forever. In November of this year, Sony Computer Entertainment was established, and one year later, the Sony PlayStation was released. It was the first video game console to ship more than 100 million units. The year 2000 kicked off with the release of the Sony PlayStation 2.

Starting point is 00:04:37 It went on to become the best-selling home console of all time. The next year, Sony would establish its own bank and Sony Erickson Mobile, now known as Sony Mobile. 2004 saw the release of the PSP to compete with the Nintendo DS and the PlayStation 3 would come two years later. In 2007, Sony would innovate yet another world first product, the first OLED TV. 2011 would see the PlayStation Vita and one of the first 4K TVs. Two years later, the PlayStation 4 would be released, and in 2016, the PlayStation VR headset was launched. According to one patent consulting firm, Sony has 366,000, patents for virtual reality. All these achievements over the lifetime of the company are

Starting point is 00:05:23 nothing short of remarkable. But as some spectators are noticing, Sony has been stagnating a little. The company's sales haven't been what they used to and the clarity of their direction is a little muddy. Let's take a look at some reasons of why this is happening. Just quickly before we get to the company itself, we should take a look at the background environment Sony was facing when they started to falter. In 1990, there was a devastating economic recession in Japan. It was caused by a shift in the nation's demographics and faulty central banking policies. The Central Bank of Japan loaned too much money pushing up asset prices until it all finally burst in 1990. This resulted in rampant stagflation in the country.

Starting point is 00:06:09 Wages fell, prices stayed stagnant and businesses struggled. It was so bad that there's a name for it. It's called the Lost Score, or the Lost 20 Years. Because of this recession, Sony had to replace full-time staff with part-time staff, and job security became scarce. During this time of uncertainty and low staff morale, Sony had to start fighting off strong industry competition from a rising South Korea, Taiwan and China. So the question must be asked, why did these countries suddenly rise? Well, in the 1990s and 2000s, the global electronics industry experienced a structural change. After the PC and internet revolution, the industry began to standardise parts and outsource production and assembly work to companies in low-cost emerging economies.

Starting point is 00:06:59 This was cheaper and more efficient on a macro scale. Meanwhile, most of Sony products were still being made in Japan, which had a higher cost in the manufacturing pipeline than its competitors. All of a sudden, Japanese products were expensive compared to the emerging manufacturers. When questioned on why he didn't want to drop prices, Sony chairman Akio Marita said, We are selling diamonds. At the time, this was true, as Sony products were of high quality in the early 90s. But eventually, the other manufacturers got better at their craft, and the quality of their products improved. Suddenly, there wasn't all that much distinction to justify Sony's high price. The next issue for Sony began in the year 2001. This is when hardware manufacturing

Starting point is 00:07:43 began to make room for the endless applications of software. It began with the iPod, a device that uniquely got music enthusiasts tied into software like never before. Amazing little device holds a thousand songs and it goes right in my pocket. Do you remember what it was like when you got your first Walkman? Remember that feeling? When you got a first Walkman in your hand, it was like, wow. Well, I haven't picked up any MP3 player that has made me go, wow, okay, I want to carry this wherever. I go. This is the first thing that makes me feel wow, okay. But this particular trend really

Starting point is 00:08:21 accelerated from the year 2007 with the iPhone. With this, Apple achieved a breakthrough innovation in handsets. It allowed users to expand the functionality of their phones through applications developed by engineers and even individuals worldwide. So, how did Sony respond? Nobu Yuki Ide, president of Sony during the early 2000s reacted by trying to combine Sony's audio and video technology departments with its IT departments. Idae stated that he just couldn't do it. The company was simply too big. Although he was aware that there was a need to shift Sony's business strategy, he could not change the mindset of all 140,000 employees and managers. The top leader is not a person with supernatural powers, he said. During this time, Idae even considered acquiring Apple.

Starting point is 00:09:10 In an effort to save themselves, Sony has recently streamlined its operations focusing less on audio and visual manufacturing. Unfortunately, according to one executive who spoke with the Times of Japan, quote, Now that many excellent workers have left Sony as a result of structural reforms, the company's power of innovation has declined sharply. In the sphere of manufacturing, Sony has been outmaneuvered by the Koreans, Chinese and Taiwanese. In fact, in the early 2010, most of Sony's profits actually came from their financial services and not their manufacturing operations.

Starting point is 00:09:46 In 2013, it was so bad that some investors suggested that Sony had just abandoned their hardware division and just stick to making financial loans. Even the entertainment area of the company has taken a hit. It's fallen into a two-way tire with Paramount as Warner Brothers surges passed. In addition to this, the Experia phone brand has had disappointing sales and a backlog of source issues. And this isn't to mention that Sony is getting steamrolled in the TV department by Samsung. In short, today, Sony is losing ground everywhere. It's simply too large, too diverse in its categories and focus too much on the sub-brand names. With all of that being said, it's not all bad though.

Starting point is 00:10:31 In late 2016, Sony started to turn around. Their smartphone department was losing money all throughout 2015 but did manage to post a reasonable profit in 2016. They did this by streamlining the phone product range, cutting costs and focusing harder on premium phones with profitable margins while identifying better target markets. With this being said, this doesn't mean that Sony's phones are doing well versus the rest of the market. Samsung, Apple and the Chinese brands still largely dominate. The brightest spot for Sony is the PlayStation 4. It's doing very well selling over 7,000. 17 million units in fiscal year 2016. The strength of the PS4 has helped Sony reach its full first year of profit in three years.

Starting point is 00:11:17 The PlayStation 4 was so good that it amounted to 78% of all profits in Q1 of 2016. Some other bright spots is Sony's digital camera division and also their smartphone sensor division. Sony's smartphone camera sensors are used in other popular brands like Apple, Samsung, LG, Motorola, One Plus One, and of course the Sony Xpuri range. There's also talk of a new Sony smartphone camera that can shoot full HD at get this, 1,000 frames per second. So now that we've seen how and why Sony's began to falter, what are some solutions?

Starting point is 00:11:58 Some analysts say that Sony needs to break from its past by completely transferring its existing businesses to overseas or even separate companies in a bid to create innovation. Since the PlayStation is so successful, perhaps they should double down on that and focus on that segment. Things like partnering with content creators to make even more killer games from the PS4 line, as well as some intuitive and addictive VR titles, could really provide some growth. Doubling down on differentiation with their smart-friend camera line does also have some potential. All in all, as was seen time and time again on Cold Fusion, this is a common problem for companies. Their rise is meteoric, but when they become too large and diverse, management becomes more

Starting point is 00:12:42 fragmented and often bureaucratic, and it becomes difficult to see where the next clear step is. Usually when this happens, increasing competition creeps up from behind to steal some thunder. In conclusion, the future of Sony is hanging in the balance right now. They've arguably been stagnating for over a decade, but in the last year, the company has been starting to show some promising glimpses of hope. Ultimately, we have to wait and see how they react to their environment moving forward. That being said, if there's anything that we've learned from Sony in the last 60 years from the previous video, is that they've got a very innovative DNA, so a renaissance is a possibility.

Starting point is 00:13:20 Anyway, so that's what we'll leave the story of Sony today, hope you enjoyed that. I found it quite an interesting history to go through and kind of analyze where they've been starting to falter. If you're new here, don't forget to subscribe to this channel, and I also want to thank all of you for helping me pass a million subscribers. I should have a little thank you video coming out soon. Oh yeah, if you want to see the previous video of the origins of Sony, which is a fascinating story, I think you really should watch that if you haven't already.

Starting point is 00:13:43 I'll leave it in the link below and also an end of this video. But yeah, anyway, this has been Dago, you've been watching Cold Fusion, and of course I'll see you again soon for the next video. Cheers guys, have a good one.

ColdFusion - What's Happening to Sony? (The Rise and Stagnation of Sony)

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