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The Global Entertainment industries

The Global Entertainment industries. The case of Sony www.sony.com. The beginning: post war Japan 1946. Tokyo Telecommunications Engineering

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The Global Entertainment industries

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  1. The Global Entertainment industries The case of Sony www.sony.com

  2. The beginning: post war Japan 1946 • Tokyo Telecommunications Engineering “create a stable work environment where engineers who had a deep and profound appreciation of technology could realise their mission and work to their hearts content” • Sony = Sonus (latin for sound) + Sonny

  3. Milestones • 1950 Japan’s first tape recorder • 1955 Japan’s first transistor radio • 1960 World’s first transistor TV • 1968 Colour TV • 1971 Philips develop first practical VCR ‘In the seven years it took them to develop the second generation, the Japanese had launched at least three generations of new products’ Kotler (1994) Simultaneous new product development • 1979 The Walkman ‘personal portable sound’

  4. The trauma of BetamaxTerpstra Case 16.2 • 1975 Betamax - superior quality VCR system exclusively made by Sony • Rivals develop VHS system, cheaper and widely-licensed -> more made and sold • far more films released on VHS -> higher sales • 1988 Betamax discontinued • Lessons - content (not quality or innovation) drives sales of hardware? • need for alliances to create networks of value-delivery systems (Kotler)

  5. Sony’s response • 1988 acquires CBS records • 1989 acquires Columbia Studios + Gruber/Peters production vertical integration to protect supply chain • Back-catalogue (3,500 films) Electronic engineering can be copied Creative talent cannot • Rival, Matsushita, buys MCA/Universal

  6. Hollywood meets Tokyo-a clash of cultures • Grueber and Peters bought from Warners for their expertise (Batman etc) • spent $200m on Culver City studios • High budget blockbuster films flop : • Last Action Hero cost $120m lost $40m • stories of lavish entertaining and favouritism • Sony’s profits and net worth fall • Matsushita sell MCA to Seagrams • George Michael sues Sony to escape from his contract

  7. Sony today1,080 subsidiaries worldwide Value Chain Sony Pictures Charlies Angels Dawson’s Creek Riki Lake Sony Music Aerosmith, M Carey Dylan, Springsteen Jackson, Streisand Artists Production Sony Computer Entertainment PLAYSTATION Software design Consoles Sony Music Studios and disk manufacture Culver City Studios Software ColumbiaTristar film distribution Cable channels Distribution Sony Electronics TV, VCR, Camcorders, CD,Minidisk, Walkman WAP phones, DVD Hardware Merchandise Sony Consumer Products

  8. The present • DVD • joint venture Sony Toshiba Philips Warner Polygram • regional coding • Result -faster adoption than the VCR • Playstation 2 - the ultimate integrated machine • games, internet, music, video • "both an electronics company and an entertainment company“ • The challenge of Microsoft • this time Sony has the content (FT 20/11/01)

  9. A new format war – High Definition DVDs • Blu-Ray: Sony, JVC, Philips • HDDVD: NEC, Toshiba • Sony buys MGM to increase its content library • ‘Will people buy new TVs and DVD players just to get better picture quality?’ Steve Busfield, Tuesday November 23 2004 The Guardian

  10. Sony and Music • a low-margin, consolidated, quaintly anachronistic business, catering to an ageing clientele • move the industry towards the revenue model of subscriber television • joint venture with BMG

  11. Sony BMG 50/50 joint venture • controls more than a quarter of the total market • and nearly a third of new releases • Who controls the legal music download market? • Sony wants to use market power to set standards. • to favour its digital encoding standards, online store and playback devices • exclusive content deals, co-promotions and preferential licensing • Osman EralpThe Guardian Thursday June 10, 2004

  12. The battle over Digital Rights Management Content ‘Gateways’ Rights to songs from the 4 major labels E-retailing Format I-tunes Sony Connect Hardware DRM software Authorised devices I-pod Walkman Steve Jobs 6/2/7 http://www.apple.com/hotnews/thoughtsonmusic/

  13. Core business under attack • hit by cheaper rivals such as Samsung of South Korea and Dell of the US • fallen behind domestic rivals such as Sharp in liquid crystal display TVs • PS3 late in the shops v Microsoft • I –Pod v Walkman Has the leader become a follower?

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