Sony's big chance?
In 1979 Sony launched the Walkman cassette player that revolutionized the way we listen to music whilst on the move. Over the next twenty years Sony consistently improved the Walkman, created new lines and despite the attempts of Samsung, Creative Technology and a number of others, Sony controlled the mobile music market. Then in October 2001, Apple announced the launch of the iPod. Despite its hefty US$400 price tag and a panning by the critics the 5GB iPod was an immediate hit and Apple soon wrestled the mobile music crown from Sony.
Almost 4 years to the day since the iPod was launched, and at the same time as first generation models of the latest iPod, the Nano causes red faces at Apple, Sony is on the warpath. And the giant is tooled up with a new line of snazzy digital music devices that carry the venerable Walkman name, but sport iPod like features such as tiny display screens, disc-controlled menus and an internal memory capable of storing up to 13,000 songs.
Sony is desperate to reclaim its global dominance of the portable music player segment. And to get the ball rolling, Sony has set an ambitious goal of selling 4.5 million of the new Walkman models worldwide before the end of March 2006. Bearing in mind the new models will only be launched in Japan in mid November and the rest of the world after that, that’s a tall order. And there is also the small matter of the head start Apple has. Apple sold around 6.5 million iPods in the last quarter (mind you this was below the anticipated 8 million and sent shares tumbling 10% - this despite the announcement of the launch of an iPod that plays videos) and there are now around 28 million pod-addicts worldwide.
Back to Sony. The limited geographical release is an interesting strategy from Sony because to loosen the Apple stranglehold on the mobile music business, Sony will have to do more than dominate Japan, its home market. But it is further proof that it takes more than creative advertising to sell a brand, even if it is one of the greatest brands of the now defunct mass economy. In 2000 and 2001, Sony spent an incredible US$2.5 billion on advertising worldwide. The result? The first three months of 2003 saw stunning losses, a 25% slide in the company's share price in just two days and layoffs of more than 20,000 workers worldwide. Further layoffs this year of 10,000 workers, as part of the three-year restructuring plan called “Transformation 60” that aims to cut fixed costs by around US$3 billion by the end of the year will see a much leaner, performance based organization.
The Sony strategy appears to be use its home market and one of the largest and most competitive technology markets in the world to fine tune the product and tidy up the branding strategy before heading off to Apple’s home territory. It is also where Apple may be at its most vulnerable. Apple’s mobile music player market share in Japan appears to be slipping. Down from around 50% to less than 40% in the last six months. Sony meanwhile has seen its share rise from around 6% to nearly 17% over the same period.
And Apple is still pre-occupied with the launch in Japan last August of its iTunes online music service. According to Apple, it sold more than a million songs in the first four days of the launch, more than all other online music sites in Japan combined sell in a month. That’s a pretty good effort. It may also make sense for Apple to focus its future efforts away from it’s hardware (market share down to 1.87% worldwide in 2004 from 2.19% in 2003), iPod platform and software to focus on the iTunes business that is likely to generate greater profits in the long term and keep shareholders happy.
This may be what Sony is gambling on. If it is, it’s a major gamble. It’s also a major gamble that Sony needs to pull off because, despite the success of the Walkman, very deep pockets and one of the best consumer electronics names, not to mention one of the finest research and development departments on the planet, the company was slow to see the potential of the MP3 format and only released a similar player in 2004. This was a massive mistake.
“Sony has the ability to give Apple a run for its money”, says Nick Wreden CEO of Fusionbrand, “Sony was slow to realize the potential of the MP3 format and when they did realize, tried to rush out models without correct research, planning and testing. Those early models did not easily play MP3 files, the most common format for digital music. Sony tried to force the Atrac format onto consumers. They Atrac format did not support standard software such as Microsoft's Windows Media formats and consumers were not impressed.”
Nick continues, “Sony listened to consumers and has sorted out those problems. The new Walkman models will work seamlessly with MP3 and Atrac. They will also support Windows Media.”
The new Walkman will also offer unique software features. It will have an "Artist Link" function that will make recommendations of bands and songs based on those stored on the player. It will also track which songs are most frequently played to build a list of the owner's top 100 or favorite tunes, and the list will constantly be updated. Furthermore, this time Sony is working smart. The firm has communicated with consumers to determine what it is they want form a mobile music player and incorporated that feedback in the product. Sony now realizes that to build a brand, you must first carry out research to determine what is required by the consumer.
Nick Wreden sums the new realities of branding, “If you don’t carry out the research you are simply guessing! And guessing is not a sound strategy for the long term profitability of the brand. Sony is dispensing with the mass economy tactics of old and replacing them with tactics more suited to the customer economy. It is a major policy change.”
According to Sony, the new Walkman will offer similar storage and performance capabilities to iPods. They will be however, more expensive. The two-gigabyte flash-memory version to be launched in Japan will retail for around US$290, compared with US$200 for a similar iPod.
If anyone can break Apples stranglehold on a market once dominated by Sony, it is Sony. But Sony's biggest challenge will be overcoming iPod's four-year head start. Most difficult of all will be convincing consumers to switch from iTunes, already the software of choice for online music buyers.
TEXT
Almost 4 years to the day since the iPod was launched, and at the same time as first generation models of the latest iPod, the Nano causes red faces at Apple, Sony is on the warpath. And the giant is tooled up with a new line of snazzy digital music devices that carry the venerable Walkman name, but sport iPod like features such as tiny display screens, disc-controlled menus and an internal memory capable of storing up to 13,000 songs.
Sony is desperate to reclaim its global dominance of the portable music player segment. And to get the ball rolling, Sony has set an ambitious goal of selling 4.5 million of the new Walkman models worldwide before the end of March 2006. Bearing in mind the new models will only be launched in Japan in mid November and the rest of the world after that, that’s a tall order. And there is also the small matter of the head start Apple has. Apple sold around 6.5 million iPods in the last quarter (mind you this was below the anticipated 8 million and sent shares tumbling 10% - this despite the announcement of the launch of an iPod that plays videos) and there are now around 28 million pod-addicts worldwide.
Back to Sony. The limited geographical release is an interesting strategy from Sony because to loosen the Apple stranglehold on the mobile music business, Sony will have to do more than dominate Japan, its home market. But it is further proof that it takes more than creative advertising to sell a brand, even if it is one of the greatest brands of the now defunct mass economy. In 2000 and 2001, Sony spent an incredible US$2.5 billion on advertising worldwide. The result? The first three months of 2003 saw stunning losses, a 25% slide in the company's share price in just two days and layoffs of more than 20,000 workers worldwide. Further layoffs this year of 10,000 workers, as part of the three-year restructuring plan called “Transformation 60” that aims to cut fixed costs by around US$3 billion by the end of the year will see a much leaner, performance based organization.
The Sony strategy appears to be use its home market and one of the largest and most competitive technology markets in the world to fine tune the product and tidy up the branding strategy before heading off to Apple’s home territory. It is also where Apple may be at its most vulnerable. Apple’s mobile music player market share in Japan appears to be slipping. Down from around 50% to less than 40% in the last six months. Sony meanwhile has seen its share rise from around 6% to nearly 17% over the same period.
And Apple is still pre-occupied with the launch in Japan last August of its iTunes online music service. According to Apple, it sold more than a million songs in the first four days of the launch, more than all other online music sites in Japan combined sell in a month. That’s a pretty good effort. It may also make sense for Apple to focus its future efforts away from it’s hardware (market share down to 1.87% worldwide in 2004 from 2.19% in 2003), iPod platform and software to focus on the iTunes business that is likely to generate greater profits in the long term and keep shareholders happy.
This may be what Sony is gambling on. If it is, it’s a major gamble. It’s also a major gamble that Sony needs to pull off because, despite the success of the Walkman, very deep pockets and one of the best consumer electronics names, not to mention one of the finest research and development departments on the planet, the company was slow to see the potential of the MP3 format and only released a similar player in 2004. This was a massive mistake.
“Sony has the ability to give Apple a run for its money”, says Nick Wreden CEO of Fusionbrand, “Sony was slow to realize the potential of the MP3 format and when they did realize, tried to rush out models without correct research, planning and testing. Those early models did not easily play MP3 files, the most common format for digital music. Sony tried to force the Atrac format onto consumers. They Atrac format did not support standard software such as Microsoft's Windows Media formats and consumers were not impressed.”
Nick continues, “Sony listened to consumers and has sorted out those problems. The new Walkman models will work seamlessly with MP3 and Atrac. They will also support Windows Media.”
The new Walkman will also offer unique software features. It will have an "Artist Link" function that will make recommendations of bands and songs based on those stored on the player. It will also track which songs are most frequently played to build a list of the owner's top 100 or favorite tunes, and the list will constantly be updated. Furthermore, this time Sony is working smart. The firm has communicated with consumers to determine what it is they want form a mobile music player and incorporated that feedback in the product. Sony now realizes that to build a brand, you must first carry out research to determine what is required by the consumer.
Nick Wreden sums the new realities of branding, “If you don’t carry out the research you are simply guessing! And guessing is not a sound strategy for the long term profitability of the brand. Sony is dispensing with the mass economy tactics of old and replacing them with tactics more suited to the customer economy. It is a major policy change.”
According to Sony, the new Walkman will offer similar storage and performance capabilities to iPods. They will be however, more expensive. The two-gigabyte flash-memory version to be launched in Japan will retail for around US$290, compared with US$200 for a similar iPod.
If anyone can break Apples stranglehold on a market once dominated by Sony, it is Sony. But Sony's biggest challenge will be overcoming iPod's four-year head start. Most difficult of all will be convincing consumers to switch from iTunes, already the software of choice for online music buyers.
posted by Marcus Osborne at 7:46 pm
2 Comments:
ClickZ Experts on Strategic Advertising Issues
What is the role of an authoritative voice in the information cornucopia we call the Internet? Are authoritative sources still authoritative? More channels and more sources of information exist than ever.
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hey did you know you can get a free ipod pretty easily?
just go to www.getipodsforfree.com, sign up and do an offer
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