In Good Company with Nicolai Tangen - Sony Group Chair & CEO: Future of gaming, music, AI and Japanese culture

Episode Date: November 8, 2023

Kenichiro Yoshida Sony Group Chair and CEO provide unique insight into one of the worlds most creative companies. He has been the CEO since 2018 and been really successful! How does he foster innovation, what innovations can we expect to see in gaming, music and entertainment? Tune in! The production team on this episode were PLAN-B's Nikolai Ovenberg and Niklas Figenschau Johansen. Background research was done by Sigurd Brekke with input from portfolio manager Doug Shell. Links:Watch the episode on YouTube: Norges Bank Investment Management - YouTubeWant to learn more about the fund? The fund | Norges Bank Investment Management (nbim.no)Follow Nicolai Tangen on LinkedIn: Nicolai Tangen | LinkedInFollow NBIM on LinkedIn: Norges Bank Investment Management: Administrator for bedriftsside | LinkedInFollow NBIM on Instagram: Explore Norges Bank Investment Management on Instagram Hosted on Acast. See acast.com/privacy for more information.

Hi, everyone, and welcome to our podcast, In Good Company. I'm Nikolaj Tangen, the CEO of the Norwegian Suburban Wealth Fund. In this podcast, I talk to the leaders of some of the largest companies we are invested in, so that you can learn what we own and meet these impressive leaders. Today, I'm speaking to Kenichira Yoshida, CEO of Sony. Sony is behind the iconic Walkman that revolutionized how we listen to music, to PlayStation, Blu-ray, and Alpha series cameras that capture the world in stunning detail. Sony is also in movies, different electronics, semiconductors, financial services, and much more.

We own almost 2% of Sony, translating into 17 billion kroner or 1.7 billion US dollars. We have been invested in Sony for more than 20 years. Proper long-term thinking. Ken is an impressive leader and Sony is a fascinating company. You don't want to miss this one. Well, it's a huge pleasure and honor to be here with the CEO of Sony. I mean, we all know Sony. Sony is all over, all around us, and has been for a long time.

So big thanks, Ken, for taking the time this morning. Thank you for having me. Now, you have a tremendous history in coming up with new world-changing products. Do you want to just give us a brief recap of some of the ways you have changed consumer electronics? Looking back on a long history of 77 years, I believe Sony is a company that has expanded its business based on its origin in sound. The Sony name and brand comes from Sonos, which is Latin meaning sound. Since 1946, we have developed businesses in electronics, entertainment, and semiconductors. Our electronics products initially focused on sound,

such as tape recorders and transistor radios. Sony's entertainment business also began with music. We launched the joint venture CBS Sony Records in 1968 and a move into pictures came in 1989 with the acquisition of Columbia Pictures and then in the mid-90s, we started our gaming business, PlayStation. We also engaged in transistors, which were used in transistor radios through our semiconductor business. Sony has the largest share of CMOS image sensors. So I'll stop here for now. Yeah, no, it's for sure a very impressive history. And one of your biggest fans ever was actually Steve Jobs,

and his famous turtleneck even is inspired by the uniform you had at Sony. So what do you think it was that he admired so much with Sony? Steve Jobs has left great influence on technology and entertainment. So we feel honored to have such praise. Now, you have been part of this great comeback for Sony, first as a CFO and now as the CEO. So tell us about the shift that you made after you took over. Well, one point is, I think, entertainment.

Entertainment content used to be our method for packaged products such as CD and Blu-ray players. And at one point, the method itself became our purpose. People are emotionally moved by the content. It plays an important role in filling people's desire. So this will remain unchanged. So entertainment is now our purpose. That is one point.

The other point is focus on creativity. So entertainment has become our purpose. So the most important decision was to shift our focus to creativity. In other words, our pursuit of Kando. Kando is a Japanese word for emotion. First, we exited from our PC business. Then for TVs and smartphones, we focused on premium buy. Second, we divestedested battery and display panel businesses

and focused on seamless image sensors. Third, we invested in entertainment. We strengthened our ability to create IPs, but also invested in direct-to-consumer services in specific areas. How are you making Sony more creative? What is the key to spurring creativity? Well, creativity is what we have been focusing on lately.

Since I became CEO in 2018, we have been investing in content, that is games, music, and pictures. These investments have been led by our acquisition of EMI music publishing business, which was a $4 billion deal. And in addition to producing hardware like TVs and smartphones, we are also focused on making products that support creators like photographers and cinematographers. The same applies for our semiconductors. In the past, we produced batteries and display panels. But now we are concentrating on CMOS image sensors. The primary use for these image sensors is smartphone cameras.

It plays a role to turn users into creators. Taking more of a helicopter view when you think about Sony's corporate culture what are the things that come to mind for you? Well, thank you for the question First and foremost I believe that corporate culture has a significant impact on the success of a company

It influences execution which is more important than strategy. Culture is what ensures the ability to execute. What I especially value is the culture of not fearing failure and learning from failure. I have one example actually. Back in 2015, we launched a DTC service that covered general entertainment such as live TVs, movies, and sports. However, we were not able to obtain many subscribers, and we learned that covering broad entertainment requires a high level of capital. So after less than five years, we had to announce the closure of the service.

This was a business failure. However, through this initiative, we learned a great deal about DTC services. It has led us to the idea of focusing on communities, specific areas of entertainment. So examples are PlayStation Network and Crunchyroll

and Anime DTC service. You say that you need a culture where you should not fear failure. Is that a particular challenge in japan where you are not supposed to lose face you want you want to preserve your face and um is it more difficult to find to get that kind of culture embedded in the firm well um yeah that's that's That's challenging, but I think nowadays, even in Japan, there are many startups. So I think the culture of challenge is now being nurtured in the Japanese culture or Japanese society, I think.

Continuing on corporate culture, the first thing you told me when we met was, you know, thank you, Mr. Tangen, because you have been now, you know, the Sovereign Wealth Fund has been a shareholder in Sony for 25 years. And I thought it was an amazing thing. And, you know, long term thinking, in my mind, is completely underrated. And Sam Altman, who we had on recently said it was a competitive advantage because nearly nobody, long-term anymore. So tell us about the way you think long-term in Sony. Companies must face many stakeholders, such as customers, employees, shareholders, and society. And I also believe that for all of us, the most important stakeholder is planet Earth.

The time horizon differs depending on the stakeholder. However, I believe it's important for companies to have long-term thinking to build a sustainable future for the next generation. Historically, people in Japan had often one job for life. And, you know, when we read the books about Sony, it's the whole thinking about employees as part of the family is really interesting. How do you view this? Long-term employment is maybe that is Japanese culture. And there are merits to having employees who knows the company well. However, I believe that having diverse backgrounds

and experiences is important for your career. Sony has many businesses, and we provide opportunities to our employees to work at different groups. We also have a program called Sony University designed to foster global leaders. Through this program, employees from diverse backgrounds can interact with each other and build relationships that go beyond business boundaries.

Very interesting. Now, last question on the corporate culture. We recently did an interview with a leading expert on perfectionism. Now, how do you view perfectionism? Well, rather than demanding perfection, I think it is more valuable to experience failure. This is because people can learn and grow from mistakes. What is the biggest mistake you have made? Well, that's it.

I led the project of General DTC Service. It was a complete failure. That is called PlayStation View, but that was the General Entertainment DTC Service. And how did you cope with it? general entertainment DTC service. And how did you cope with it? Well, we closed the service and we learned from the failure quite a lot.

Ken, I'd love to spend a bit more time on your various business lines because you are a leader in so many different things. And perhaps if we kick off with gaming and PlayStation, which is truly an iconic product for you, how do you see the future of gaming? In short, it will be ubiquitous. Wherever there is computing, users will be able to play their favorite games seamlessly. Gamers will be able to find a place to play in different spaces.

While PlayStation will remain our core product, we will expand our gaming experiences to PC, mobile, and cloud. Are you a gamer? The reality is I don't have much time to play games on a daily basis now. But I am personally looking forward to playing Marvel's Spider-Man 2. It seems like the trend in gaming is more towards subscription models. How are you looking at these models compared to what you are doing? Well, we do subscription business models. At the same time, people usually play one game at a time. So all you can type on many games and may not be so valuable compared with video streaming services.

So we have kind of balanced or hybrid service on Network, subscription as well as paper content. Do you think the link up between Microsoft and Activision will change the landscape a lot for you? Healthy competition is necessary for the game industry to grow. And at Sony, we believe it is important to provide gamers with different options to play. So we will continue our efforts to achieve this. Moving on to music, you have a lot of labels, vast catalogs and so on. Just how do you see Sony's role in the music industry going forward? Our role is to foster and support artists and songwriters around the globe.

Our top artists include Beyonce, Harry Styles and SZA. It's interesting when you read the books about Sony, many of the CEOs have had close relationships and close friendships with some of the leading musicians of the times. Well, both classical and more pop-related, I guess. Do you have musician friends? Well, I recently met,

not really a friend, but I met Adele and Harry Styles recently. Are you a big fan of Adele's? Yes, very much. Now you have also had a successful movie business. What is your strategy in movies? Our strategy in movies in the pictures business is becoming

a strategic supplier. We do not own the general entertainment DTC service so as an independent studio, we work with our partners and identify the best place to distribute creators' content. However, we directly deliver content to users in specific categories, such as anime. We share the data gained through our service so that creators can utilize it to enhance content creation. So again, we are focusing on the creation side. We are seeing now that some companies are spending more resources on developing, Some companies are spending more resources on developing, well, we don't know what it is going to be yet, but hardware in order to make us experience AI in a different way, be it telephone, headsets, these kind of things.

Just how do you think AI will change the way we consume entertainment? The convergence of computing and entertainment is a megatrend. And AI is also born out of computing. So we cannot get in the way of technology. But at the same time, entertainment is a people business. For example, it is technically possible to create a movie scene in which Tom Hanks speaks Japanese with a perfect lip sync. But should we? That is a question. The content that forms the basis of entertainment is creator-generated and copyrighted. Creator's involvement is essential. Therefore, Sony positions AI as a technology that supports creators.

AI should not replace them. One example is a game. Games are computer software. It is made by programming language. LLM, large language model, will help streamline game development, allowing creators to focus more on creativity. moving on to you ken as a person okay were there any moments in your upbringing which formed you as the leader you are today there are many moments throughout my experience at sony but if i were to choose one it would be my experience as a president at Sonic. After becoming president and going public,

I changed the company name from Sonic Communication Network to Sonic Entertainment. I believed that the 21st century would be the era of entertainment. And in that, the Internet would play a central role. So I managed the company with a vision to make it a strong presence in this field, network entertainment. I also removed the Sony brand, aiming to become independent from Sony. So the experience I gained at Sonnet definitely helped me to become the leader I am today. How do you look at the trade-off between delivering steady profits

and investing in innovation and creativity, which potentially could land you a blockbuster further out? I think communication is the most important. Communication with our people, at the same time communication with our stakeholders, including shareholders. So our vision is quite long-term. Our purpose is quite long term.

So I think as a CEO, direction and decision and people are the most important thing. You are by many people considered one of the most curious CEOs. How can we see your curiosity in your everyday life? Yes, because I think I still have a lot to learn from others. Dreams and curiosity is actually the first values that I define along with a purpose which I drive our employees to change. How do you spend your time outside work? Well, I have a 27-year-old son. He's on the autism spectrum.

He spends weekdays at a group home and comes home on weekends. So during the weekend, we go out by car or train and have lunch together. It's usually Japanese noodles or Japanese omelet rice. Actually, for me, spending time with him is relaxing. Those on the autism spectrum are very diverse. In my son's case, he can remember the full names of people he meets and never forget them. But he cannot communicate in the same way that you or I can. While my son has a different way of communicating, he has an incredibly pure perspective. So my wife and I often talk about how much we are influenced by his innocence.

He also makes me realize that people operate differently. And Ken, this appreciation for people who are different, what do you think it has done with you as a person and as a leader? Well, as a leader, there are many people in the Sony Group. We have 110,000 people and we have diverse businesses and diverse people. And Sony's diversity is a belief. This is a strength. And I strongly believe one of my mission is to leverage this diversity.

is to leverage this diversity. Last thing, we have got tens of thousands of young people listening to this podcast. What is your best advice to young people? I feel humbled to give advice because I'm actually the one that learns a lot from younger generations. But if I was to provide one that learns a lot from younger generations. But if I was to provide one piece of advice, it would be always challenge yourself. I left Sony to try working at an internet service provider,

and I tried many things such as online games, network services, and animation. Many of them were not successful, but they have led me to where I am today and have become assets for me. Even if you fail, you can learn from your failures. So I encourage you to continue to take on new challenges. I am still on the

learning journey. Well, Ken, it's been an honor to have you on here. Very much look forward to my next visit to Tokyo. I hope we can share a bowl of noodles together and continue this very interesting conversation. Thank you, Nicolai.