Sony portable music players Technology and strategy SBS-EM 2010-2011 Franquien Anaïs Jehin Maxime Xhauflair Gilles

Table of content Introduction Evolution of Sony’s portable music players Walkman Discman Mini-disc player MP3 player Conclusion

Introduction

Walkman (1) Developed for internal purpose Launched in 1979 Playback function, cheap components, headphones Commercialization not obvious: engineers did not believe in the project uncertainty of customer requirement right time to lauch the product?

Walkman (2) Launch: Accelerating the market acceptance Managing expectations Sign of youth Initially, complementary product to the cassette tape Became a dominant product Incremental Innovation embedded in a technology push Competence enhancing

Walkman (3) Competition: Sanyo, Aiwa, JVC, Sharp First mover advantage: Brand loyalty Perceived quality

Discman First CD produced in 1982 (in collaboration with Philips) First CD portable music player worldwide launched in 1984  First mover Discman  CD Walkman (strong brand image) Complementary product More incremental innovation

Mini-Disc (1) 1980’s: working on improving the CD, they developed the digital audio tape and the recordable cd Philips: Digital Compact Cassette (DCC)  compatible with cassette players 1992: Sony Mini-Disc Not with compatible existing systems Use of complementary assets from Sony 18 software and 32 hardware agreements before the launch of the Mini-Disc Audio quality a bit inferior to the CD

Mini-disc (2) Standard War: DCC had superior quality and compatibility Consumers: wait and see who the winner would be Philips: discontinued DCC in 1996 (old cassettes were cheaper) 1999: competition with MP3 players  slow growth for MD 2000: format considered to be a failure by industry analysts Australian company (Xitel): card allowing the transfer of MP3 to MD  saved the MD

Mini-disc (3) 2001: Sony exploited the MP3 opportunity and launched the NetMD and the Hi-MD allowed the transfer of MP3 to MD in an easy and rapid way Nowadays: Sony still produces MD players with Hi-MD formats allowing up to 45 CD’s to be uploaded onto one Hi-MD with an upload speed of one CD per 40 seconds

Mini-disc (4) Strategy based on Porter’s values: Sony wanted to create the new technology coming after the audio cassette, not to be an imitator of the next technology Dominant design: use of well-established Walkman standard  shift concentration from design to cost quite rapidly Appopriability regime: aggressive patenting policy to contain imitators Complementary assets: used a lot of complementary assets it had in-house, which helped to reduce the lengths of the projects and the costs

Mini-disc (5) Creative destruction strategy: achieved growth through the cannibalisation of audio cassette S-curve: knew better than any other company that the cassette had reached its limits since Sony invented it

Mini-disc (6) Sony made a few mistakes: It didn’t understand that the MD didn’t need to be prerecorded in the eyes of the consumer and that the industry saw it as an enemy of CD It didn’t understand the growth of computer-based music in the early 1990’s with the rise of MP3 music. Only a small portion of new technology leads to new product and only few new product are successful… Before arriving at maturity, the MD was already “old fashion” due to the arrival of the MP3…

MP3 player (1) 1996: Audio Highway released the first portable MP3 player which had a capacity of 32 Mbytes (6 songs) and was based on flash memory 3 leaders: Apple (iPod), Microsoft (Zune), Sony (Walkman) Market share in 2006: Sony 10% and Apple 75% Goal of Sony: capture a market share of 20% with its Walkman. Difficult task: make customers switch from iPod to Walkman  switching costs due to the use of iTunes

MP3 player (2) Porter 5 forces Competitive rivalry within the industry Numerous competitors, all electronics companies Increasingly mature industry Fixed costs not so high Low exit barriers (some companies try and discontinue the MP3 activity) Low differentiation but dominant design emerged with the Ipod

MP3 player (3) Porter 5 forces Threat of entry Low barriers to entry Strong retaliation possibilities of MP3 titans (Apple) Access to supply and distribution channels quite easy No legislation on MP3 manufacturing Very low switching costs for the customers (except for iTunes)

MP3 player (4) Porter 5 forces Threat of substitutes The price/performance ratio of the main players is quite high but doesn’t turn customers off Extra-industry influences: mobile phones industry integrating MP3 players into mobiles but most players are both active in the MP3 player and mobile phones industries

MP3 player (5) Porter 5 forces Power of buyers Unconcentrated buyers (media stores, electronics retailers) Low switching costs but dominance of Apple in the market No backward vertical integration Power of suppliers Concentrated suppliers (few CPU or hard disk manufacturers) High switching costs because of high volume contracts with suppliers Sandisk producing hard disks becomes increasingly important on the MP3 player market

Conclusion Although Sony created the market for portable music with the Walkman, it missed the shift to digital music-players. ”The youth-in-motion” brand has been overthrown by the more dynamic and cool iPod…

Does the FUTURE look bright for Sony? Coming next… Does the FUTURE look bright for Sony?