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March 13, 2005
Why Sony lost the digital music race
Randall Stross analyzes why Sony -- despite having invented the Walkman in 1979 and owning major entertainment companies like CBS Records -- was woefully unprepared for the success of Apple's iPod digital music player:
"On one side, Sony has 50 years of experience in producing portable music players, beginning with transistor radios in the 1950's and extended by its Walkman franchise that has sold more than 340 million players. On the other, it owns one of the world's largest music labels to supply content. Yet in the iPod era, Sony's headstart counts for nothing. It's as if the company were the Sony Graphophone and Wax Record Company..."
At the heart of the issue, says Stross, is the fact that "Sony is accustomed to thinking of itself as consisting of two well-matched halves: electronics and entertainment." But can the company be simultaneously an "entertainment company" and a "widget company"? If the two sides of the company talk to each other only grudgingly, the answer is no. There are a whole litany of other problems: a determination to use proprietary standards, fears of digital piracy, an inability to price new product offerings competitively and a naive belief in synergy.
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