Sony’s woes smoulder on

Sony is at the heart of an embarrassing product recall on a grand scale, while the PSP, its much-hyped portable multimedia player, was lambasted at a gaming industry convention at Leipzig earlier this month for failing to woo consumers.

Despite promising a return to form, Sony is again in the doldrums after its laptop batteries were deemed unsafe. Add to that sluggish PSP sales and rumours the PS3 launch is to be further delayed, and it seems the electronics giant is relying on sales of its Bravia TV. Nathalie Kilby reports

Sony is at the heart of an embarrassing product recall on a grand scale, while the PSP, its much-hyped portable multimedia player, was lambasted at a gaming industry convention at Leipzig earlier this month for failing to woo consumers.

Last week, Japan’s trade ministry ordered Sony and Dell to investigate the problems that led to Dell recalling 4.1 million laptops at risk of catching fire. The announcement was swiftly followed by Apple Computer being forced to recall 1.8 million of its older laptops after complaints of overheating. They are also powered by Sony batteries.

Sony Computer Entertainment, the company’s gaming arm, is facing its own troubles. The PSP is attracting criticism from games publishers concerned about poor sales. Consumers have not taken to the PSP, deterred by its high price and unconvinced about its multimedia functionality.

As if that wasn’t enough, Sony Computer Entertainment America president Kaz Hirai admitted last week that production of the next-generation PlayStation3 games console has not yet begun. This sparked a frenzy of blogging as to whether the console will launch as planned in November.

Sony is the world’s second-biggest consumer electronics manufacturer after Matsushita, owner of Panasonic, and has opted to promote its various sub-brands rather than adopt the monolithic “berbrand” approach favoured by rivals such as Sharp and Panasonic. In recent years, however, it has struggled and last year Sony Corporation chairman and chief executive Sir Howard Stringer was brought in to address the company’s failings.


Sony had been synonymous with entertainment, commanding the colour television sector and then introducing the world to portable music with the Walkman in 1979. But it was caught on the back foot in these core markets as rival electronics companies attracted consumer attention with new and exciting products. Apple launched its iPod, capturing consumers’ imagination with an innovative and stylish product, while the likes of Sharp and Panasonic rolled out flat-screen technology as Sony looked on.

It was determined it wouldn’t be caught out again, but it seems it has been. The issue of combustible batteries at first looked likely to damage Dell’s reputation rather than Sony’s, but now that Apple is affected too, the blame is being firmly laid at Sony’s door. Interbrand’s senior analyst in brand valuation, Alex McAuley, suggests the battery issue will not affect consumer perceptions, as it is essentially only an issue in the business-to-business arena.

But Nexus/H media director David Nix, who heads media planning and buying for Sharp in the UK, disagrees/ “Most media reports are pointing the finger at Sony. This is very much its problem as opposed to Apple’s or Dell’s. It can’t help but affect consumers’ perception of the brand.”

Sony admits the problem is likely to hit the company, predicting the recall will cost it between 20bn and 30bn [90m to 135m]. The company forecasts operating profit to be 130bn (590m) for the year ending March 31, 2007, but that could be dented.

Yet a company spokesman refuses to accept that the PS3 launch will be delayed or negatively affect Sony. He admits production has yet to kick off, but denies this will mean a shortage of consoles in November. “We will ship 2 million consoles for the launch and by the end of March 2007 we will have shipped 6 million units globally,” he adds.

Delayed launches and a shortage of hardware are nothing new in video games. Many gamers wonder whether Hirai’s statement is a marketing ploy, with games companies looking to generate greater hype and ensuring their consoles are premium products. Jupiter Research analyst Nate Elliott says: “We’ve heard this before and it’s not such a problem. It can help fuel marketing. Microsoft did a good job of leveraging the hardware shortage in its marketing of Xbox 360.”

But Nix is not so sure. He worked on the Xbox launch in 2001 and says it suffered from Sony stealing a march on Microsoft by rolling out the PlayStation2 almost six months earlier. This time, Microsoft has the upper hand. It launched its next-generation console, the Xbox 360, last year. Nix says that if Sony delays the PS3 still further – it was initially due to launch in the spring – it will suffer as Xbox 360 can shore up its position even more. Delays would also antagonise frustrated gamers.

Playing for time

Elliott counters such concerns saying that any gamer who wants an Xbox 360 will have already purchased one by now, while observers say PlayStation consumers are “loyal brand advocates”. Yet sales of the PSP have been disappointing despite record sales at launch. In the first half of 2006 Sony sold less than a million PSPs, while Nintendo sold 2.6 million units of its handheld DS Lite and a further 1.3 million of the original DS. Observers blame poor marketing, price issues and the product’s multi-functionality.

Its marketing has failed to make much noise, attracting attention for the wrong reasons. Print ads in the UK, created by TBWA/London, were slammed for being sexist and insensitive, and poster ads in Europe and the US were criticised for having racist connotations. The product itself – which can play games, music and films, and store photos – is an attempt to be all things to all people. But Interbrand’s McAuley suggests it is too clunky for many consumers, who also don’t “get” what the PSP is really about. To compound the problems, the universal media disc, which plays films and games on the PSP, has also failed to take off.

Sony’s computer arm may be struggling, but it is at least experiencing success with its Bravia high-definition TV brand. The “Balls” marketing campaign, by Fallon, has won industry and consumer plaudits across the globe, and the product itself is a return to the high quality that is synonymous with Sony televisions. McAuley says it is important that Sony gets the Bravia right because, as TVs are a focal point of most people’s living rooms, it is a core brand touchpoint that will have a knock-on effect on Sony’s other products.

He states: “Historically, television has been the backbone of Sony’s business and the brand has dominated the category. In recent years it has lost market share and profit margins and was hurt when Panasonic and Sharp raced ahead in the category. But the Bravia has been a huge success. It is a quality product and consumers are willing to pay a premium for a high-quality Sony TV.”

Screen idle

Nix agrees the Bravia has been a success, but says Sharp and other rivals remain confident, as Sony has yet to return to its glory days of the iconic Trinitron 1970s TV brand.

And despite his praise of the Bravia, McAuley believes the PS3 launch is critical for Sony. He agrees PlayStation has made little noise this year, but says the marketing around the PS3 will be huge: “For Sony, the PS3 is critical. It is a chance to showcase Blu-Ray technology [also backed by other companies including Philips, Twentieth Century Fox and Dell] as the bigger battle lies in high-definition DVD. The fact the PlayStation brand’s strength lies in gaming is certain to give Blu-Ray a youthful and exciting edge.”

Sony’s corporate culture has been at the core of its problems and Stringer’s declared mission on accession was to tackle this. Yet protracted pitches, such as the ongoing direct marketing pitch for PlayStation, in which observers say goalposts are often moved and briefs altered, are just one indication of the confusion that continues to hold back the brand.

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