Rhino -- The Lefsetz Letter

"Sooner or later

Everybody's kingdom must end"

"The King Must Die"

Elton John

All hail Samsung.

There's a reason all the network TV shows skew young. They're advertiser supported. And advertisers want to reach young 'uns. Get them addicted to their brands in their formative years, where'll they stay, hopefully, forever more.

I go back to Sony transistors. And reel to reel tape decks. They were the coolest. They had the best design. They had cachet.

And then came the Trinitron. The hype was convincing. There was one gun. You could SEE the sharpness.

And, of course, I bought a Walkman.

I was addicted to Sony.

But people under the age of twenty have lived through none of the above. They're not addicted to the radio, and if they listen to music it's on an Apple iPod. When it comes to television, buy Korean. Why pay a premium for Sony when Samsung is BETTER! Furthermore, kids know Samsung from cell phones, their initial high tech purchase, what they're addicted to. Sony Ericsson cell phones are a joke. Known for quality and reception problems.

All Sony has going for it is the PlayStation. And even there, Microsoft is nipping at its heels with the Xbox 360. Which is going to be on the market BEFORE Sony's latest iteration of its game console.

Call it mismanagement.

What was Sony doing getting into the content business. Matsushita learned the error of its ways. It sold Universal to Bronfman. But Sony has held on to Sony Music and Sony Pictures. The latter of which had a few good years recently under John Calley, but his tenure is history and the studio is in the doghouse again. This is a classic case of brand dilution. What does Sony STAND for? But now it's worse. The content companies are negatively impacting the electronics business.

I'm not sure why Howard Stringer is seen as such a genius. There are no great victories on his resume. And his appointment of Andy Lack to be head of Sony Music will ultimately be not only his undoing, but the entire company's downfall. In one fell swoop Sony has succeeded in alienating an entire generation of potential customers. Who have PLENTY of other places to go.

What Sony needed wasn't an English-speaking manager but to shed its content divisions and give control of the remaining electronics business to the man responsible for the PlayStation. We've seen this movie before, with Apple Computer. Slick marketer John Sculley just about ran the company into the ground. It was mercurial techie Steve Jobs who resuscitated it. After all, a corporation's ultimate customers are those shelling out dough for its products, not Wall Street analysts. The only chance Sony has of coming back is great products. But even that has been botched.

Sony MP3 players are now eclipsed in sales by the iPod in the company's HOME MARKET of Japan! (http://japantoday.com/e/?content=comment&id=866)

Sony leads nowhere. And does a bad job of following up.

Why doesn't the company license its music to Apple in Australia? What is it trying to prove, other than it's an ignorant isolationist?

Furthermore, there's the ridiculousness of the music company issuing copy-protected CDs and the computer division hyping a PC capable of burning 100 CDs at a time.

But what's worst is the PERCEPTION of the company.

Corporations are not much different from musical acts. They're sustained on image and credibility. In one fell swoop Andy Lack and his minions have eviscerated Sony's image and credibility. Not only of its MUSIC division, but of ALL its myriad parts. What made Sony a success was its BRAND! Which has to be managed and massaged at all costs. By not realizing this was his mission, by only thinking about the short term bottom line. Andy Lack has negatively impacted the entire company forever. Just take a gander at what people are saying about the company: http://www.nytimes.com/2005/11/21/business/21link.html

Never mind the negative impact of the class action lawsuit: http://www.breitbart.com/news/2005/11/21/051121193222.z2c7g6tk.html

Not only did Sony Music fuck up, they didn't handle their fuck-up well. And isn't it interesting that all the negative publicity has been directed at SONY, not BMG. But, you see, BMG doesn't have a stellar brand name in the U.S. Bertelsmann is a faceless corporation. The average person is unaware that the Germany company owns Random House.

Watch this closely. Sony is ill-prepared for the future. It's got no hot products other than the PlayStation. It's never going to come back, it's going to fall back, to middle of the pack at best.

Bob Lefsetz, Santa Monica-based industry legend, is the author of the e-mail newsletter, "The Lefsetz Letter". Famous for being beholden to no one, and speaking the truth, Lefsetz addresses the issues that are at the core of the music business: downloading, copy protection, pricing and the music itself. His intense brilliance captivates readers from Steven Tyler to Rick Nielsen to Bryan Adams to Quincy Jones to EVERYBODY who's in the music business. Never boring, always entertaining, Mr. Lefsetz's insights are fueled by his stint as an entertainment business attorney, majordomo of Sanctuary Music's American division and consultancies to major labels.

While Rhino may occasionally disagree with some of Bob's opinions, we certainly agree with his right to state them. At the bottom of each column we give you, the reader, the opportunity to respond and we encourage you to do so. We will post select comments.

LET US KNOW WHAT YOU THINK.

A word about submissions: We post what you give us, so please don't include your email address or any personal info. Your comments reach Rhino, not necessarily the writer, so don't expect a reply from them (or us, see our help section for contact info). We gather and post your submissions in batches, so do expect a short delay. And don't get bent if we edit your comments. We probably won't, but we reserve that right.

Comments:

Bob Lefsetz can say all he wants about Sony--true, perhaps they've fallen down on the job of promoting their products well; Sony Connect cannot compete with iTunes, despite the introduction of the ATRAC3 format, a file format that is half the size of MP3, yet MP3s continue to dominate. The MiniDisc had a lot of promise--I know I invested in a couple of different players--and it still does, but only if Sony would license the technology to more companies, which they have not done. And the copy-protected CDs represent a huge blunder; I stopped short of buying the new Leo Kottke-Mike Gordon CD for my brother this Christmas just because it had the copy protection. (In truth, I've no idea if he plays music on his PC or not.)

But they *did* give us the Super Audio CD, and while it's true that the majors really don't support that format anymore--which is a shame, since the DualDisc, which they *are* supporting enthusiastically now, is a problematic format--there are still plenty of them being issued every month from the smaller labels like Germany's Stockfisch and the UK's Linn Records. Sony themselves still issue SACDs from time to time, which is more than can be said for the other majors; Warners never supported the format, Universal did so but petered out before achieving their full promise, and EMI was marginal at best. And yet, the hybrid SACD plays on all CD players without issues; the same certainly cannot be said of the DualDisc (and I now have four titles in this format in my collection). Every now and then, Sony does come up with a winner, which is what keeps them viable in the face of possible irrelevance. Also, of all the majors, they are still the only one that maintains a product-quality help line and offers an 800 number to call where you can return your CDs and have them replaced for free with a quality-checked copy. That's got to count for something!

The Lefsetz Letter

Sony

LET US KNOW WHAT YOU THINK.

Comments:

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