Watch CBSN Live

Sony Needs a Dose of Reality, Not Brand Loyalty

So Sony (SNE) has a great new: use a that new online service connecting gadgets to movies to help build brand loyalty. Too bad management is so completely out of touch with reality:
Executive Vice President Kazuo Hirai said the service, set for launch next year, highlights an advantage that Sony has over rivals like Samsung Electronics Co. and other manufacturers that don't produce their own content. Sony's business empire spans gaming, electronics, movies and music."That's the kind of combination that I think is not seen anywhere else," Hirai said in an interview at Tokyo headquarters. "That I think is where our core competence lies, and that's a differentiator for Sony."
There is a degree of naiveté in this that is startling. At the foundation is an unstated expectation that "synergy" will improve the company because people who buy Sony devices will then purchase Sony content, bringing more money in. But that expectations quickly falls apart under any critical inspection:
  • The console gaming business, at least since the PS3, has shown that selling products at a loss today with an eye to future licensing revenue from content (game titles, in this case) isn't necessarily a wise financial move.
  • Apple (AAPL) didn't make it's money on the iPod and the iPhone because it owned all the content. It made its money because there was a vibrantly diverse amount of content, whether music or apps, that third parties created, and the company was smart enough to set up a storefront -- and probably created the devices with that end in mind.
  • Devices these days need to use content from a variety of sources. Given that, unless you're providing a bodacious discount, there is no "core competency" advantage to creating content. Think anybody cares that Apple, to bring it up again, doesn't produce music and sees this as a reason to pass on iTunes? Not a chance.
And there are many places you can find content online, whether video, images, music, e-books, or anything else you could possibly think of. When there are many sources, the premium sources are those that can aggregate intelligently and provide access to the selection that users want in an easy form. So what if Sony has an online site for its own content? How does that begin to compete with Apple, Amazon (AMZN), YouTube (GOOG), Hulu, Netflix (NFLX), or literally hundreds of other sources?

It's not as though Sony is without brand. It has one of the most recognizable names in the industry. And there's definitely some brand loyalty, at least in console gaming. But the way you broaden brand loyalty is not to sell more stuff to the same people. It's making people want to buy from you because they value the experience. It's emotional, not simplistic commercial addition. And that's what Sony seems to be missing. What they need isn't an appeal for people to spend more money. What they need is something that makes people clamor to spend money. Absent that, the new online site is empty management activity intended to cover up a list of consistently bad decisions that itself could fill any web site.

Image via stock.xchng user phaser4, site standard license.