Sony Corporation of America

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Sony Corporation of America

also known as: sony

Contact Information:

headquarters: 550 madison ave.
new york, ny 10022-3211 phone: (212)833-6800 fax: (212)833-6956 url: http://www.sony.com

OVERVIEW

Sony Corporation of America ("Sony America") is one of almost 1,000 subsidiaries of Sony Corporation ("Sony"), a Japanese corporation that is a world-renowned manufacturer of consumer electronics products. Founded just after World War II by a former officer in the Japanese navy and a Japanese defense contractor, within a decade the company had opened a market in the United States with its new invention—the transistor radio. In recent years it continued to introduce innovative products such as the Walkman and the Trinitron television.

In the late 1990s Sony America was a large corporation that produced televisions, VCRs, camcorders, home video games, personal cassette players, compact disc players, audio cassettes, and compact discs, as well as feature length films that are distributed worldwide. It continues to be a pioneer in the development of new technology such as digital videodiscs. The largest component of Sony America is Sony Electronics and also includes Sony Pictures Entertainment, Sony Music Entertainment, and Sony Online.

The company relies on developing technologies that translate into consumer products. While Sony is usually in the forefront in introducing new products to the market, it sometimes falters, as when it introduced the Betamax VCR, before standards for that technology had been set, and ultimately lost its investment. With Sony's diversification, the company easily cross-markets products; a movie made under the Sony label, for example, will feature a soundtrack by musicians under contract to the company. Sony looks to leverage its technology and solid brand name in the marketplace. New products are constantly introduced and old ones updated.

COMPANY FINANCES

In 1996 Sony's overall sales in Japan increased by 24.9 percent, in the United States by 9.4 percent, in Europe by 16.4 percent, and in other regions by 8.6 percent, with expanded sales in Asia. Sales within Japan accounted for 30 percent of Sony's total sales, with sales in other countries accounting for the remaining 70 percent.

Sony posted record sales and profits in 1997 and 1998, and all divisions recorded higher sales in 1998 than in 1997. Sales in fiscal 1998 were $15.9 billion, 31 percent of the parent company's total record sales of $51.2 billion, which was an increase of 19.3 percent over 1997. The Electronics Group had weak sales in Asia and Brazil, but strong products and favorable exchange rates pushed 1998 sales up 13.5 percent over 1997 to $35.5 billion. Due to strong demand for Sony's PlayStation and accompanying software, the Game Group reported $5.5 billion in sales for 1998, up 72.3 percent over 1997, and the Music Group's sales were $5.3 billion, up 17.3 percent over 1997. Contributing heavily to these figures was the soundtrack to the movie Titanic. A record number of people went to the movies, resulting in the Pictures Group recording $4.9 billion in sales in 1998, up 46.7 percent from 1997. The Insurance Group, due to expansion of the life insurance business in Japan, posted $2.2 billion in revenues in 1998, up 27.7 percent from 1997.

Internationally, sales to the United States were $15.9 billion, up 28.2 percent from 1997; Japanese sales accounted for $14.0 billion, up 15.9 percent over 1997; and Europe had sales of $11.9 billion, up 20.1 percent over 1997. Other areas had sales of $9.4 billion in 1998, up 10.2 percent from the previous year.

Sony forecasts sales to remain the same in 1999 as in 1998, with slightly lower profits due to a less favorable exchange rate, weak electronics sales in Asia and Brazil, increased research and development costs for games, and new business startup costs.

ANALYSTS' OPINIONS

In 1996, Sony decided to enter the personal computer market with a machine that blended the features of televisions, stereo systems, and personal computers, offering many features at a relatively high price. With this move, some analysts say that Sony missed the trend towards affordable (less than $1,000) computers, and others point out that Sony designed a machine that is inappropriate for living rooms, where people rarely use word-processors and spreadsheets. Others remark that this product launch neglected to target gamers, the primary users of powerful computers. Some analysts believe Sony should focus instead on desktops as a way to enter the computer market.

Sony is also in the race to develop digital televisions. As with the Betamax, however, many analysts believe that its efforts may be stalled by standardization and compatibility issues. In the rush to get products to market, the company may fail to identify a product's function clearly or label it in a way that consumers can clearly understand.

FAST FACTS: About Sony Corporation of America

Ownership: Sony Corporation of America is one of 988 subsidiaries of Sony Kabushiki Kaisha (Sony Corporation), a publicly owned Japanese company. The parent company is listed on numerous international exchanges, including the New York Stock Exchange.

Ticker symbol: SNE

Officers: Howard Stringer, Pres. & CEO; Nick Henny, Exec. VP & CFO; Ted Masaki, Deputy Pres.

Employees: 25,299

Principal Subsidiary Companies: Sony Corporation of America has four divisions: Sony Music Entertainment, Sony Pictures Entertainment, Sony Online Entertainment, and Sony Electronics.

Chief Competitors: As a manufacturer of electronics, music, and movies, Sony competes against many companies worldwide. Competitors include: Pana-sonic Corporation; Buena Vista Pictures; and Mitsubishi Corporation.

HISTORY

Sony began in 1946 as Tokyo Tsushin Kogyo (TTK, translated as Tokyo Telecommunications Engineering Corporation), a partnership between Akio Morita, a former officer and weapons researcher in the Japanese Navy, and Masaru Ibuka, a defense contractor. Their first product for the consumer market, a rice cooker, was a failure. The partners wisely decided to switch to developing electronic products, beginning with a tape recorder. Norio Ohga, an opera student, wrote letters criticizing the sound quality of the recorder, so impressing the partners that they invited him to join the company. He later rose to become president and then chairman, a position he still held in the late 1990s.

TTK had its first great success in the mid-1950s, when Ibuka heard about a new invention called a transistor that had been developed for hearing aids. The company adapted the transistor for use in a miniature radio, which it called "Sony," from the Latin word sonus, meaning sound. The radio was an instant success in the United States. In 1958 Morita and Ibuka changed their company's name to Sony Kabushiki Kaisha, and in 1960 an office was established in New York City, the beginning of Sony Corporation of America.

STRATEGY

Sony wisely positioned itself as one of the few multinational companies that both manufactured consumer electronics and produced entertainment products such as films, videotapes, and recorded music. It thus was able to produce entertainment products with the aid of technology created in its own research and development facilities.

Sony sells its products only through licensed dealers, believing that such control gives customers direct access to qualified advice and demonstrations of its products. It also provides a way for Sony to dictate retail pricing. In 1998, Sony discovered that the British supermarket chain Tesco was buying Sony products from a third party and selling them at a discount. Tesco claims the authorized-dealer distribution system merely adds to the cost of products. Since there is no legal way to stop Tesco, Sony is making its case in the media.

Many movies released in the United States have product tie-ins—merchandise ranging from toys to candy bars that bears the name of movies or likeness to a movie's character. The prevailing strategy has been to license as many items as possible and release them well before a movie's release date to generate interest. With Sony's blockbuster Godzilla, released in the summer of 1998, the company took the opposite view: instead of flooding the market with products, Sony required licensees to wait until the opening weekend of the movie to sell merchandise, believing that the strategy would pay off in the long run because of the potential for future books, television shows, and sequels.

INFLUENCES

During Sony's half-century of existence, it has been responsible for numerous groundbreaking electronic inventions. Among them are the first transistor radio in Japan (1955); the first transistor television in the United States (1961); the world's first color home videotape recorder (1966); the Betamax VCR, the first home video-cassette recorder using one half-inch tape (1975); the Walkman personal stereo (1979), which was placed in the Smithsonian Institution in 1987; the Watchman personal television (1982); the first one-piece compact disc player (1984); the first video cassettes for digital VTRs (1987); and the Digital Video Disc (1996).

CHRONOLOGY: Key Dates for Sony Corporation

1946:: Tokyo Tsushin Kogyo is founded
1955:: The company's first radio is developed and called Sony
1958:: Tokyo Tsushin becomes Sony Kabushiki Kaisha
1960:: Sony Corporation of America is established
1975:: Sony introduces the Betamax VCR for the consumer market
1976:: Walt Disney and Universal file a lawsuit against Sony claiming a VCR would enable copyright infringement
1979:: Sony introduces the first compact cassette player—the Walkman
1980:: Introduces the first 3.5 inch floppy disk
1984:: Sony purchases Apple Computer's hard-disk technology operations; produces the first one-piece compact disc player
1989:: Purchases Columbia Pictures
1996:: Sony enters the personal computer market with a combination television/stereo/and computer
1997:: Sony enjoys record sales and earnings
1998:: Introduces a 3.5-inch floppy disk that could store 200 megabytes of data

Despite these inventions and Sony's huge growth, it has endured setbacks. After developing the Betamax VCR technology, Sony failed to cooperate with competitors to assure that the Betamax format would become the industry standard. As a result, its competitors developed other technologies, and Sony's Betamax was made obsolete by the newer VHS format. Soon after Sony acquired Columbia Pictures Entertainment from Coca-Cola in 1989, the motion picture industry was hit by a recession. The rapidly growing multinational business also became unwieldy to manage. A major reorganization took place in the early 1990s, but Sony's net income nevertheless fell 50 percent in 1994. Sony regained its footing in the latter part of the 1990s, largely due to a series of film and recorded music successes.

Sony's push into the personal computer (PC) market was also a misstep. At a time when computer makers were offering simpler machines at low prices, Sony introduced a PC that was home-friendly and didn't resemble the office computer. This PC was intended to be the focal point of the family living room. Although the computer industry as a whole was slowing, losing profits, and cutting prices, Sony was convinced its brand name and reputation for quality would lure consumers. The venture was instead a resounding failure. Even so, Sony claims that it learned much from the experience about manufacturing, customer support, changing technology, and trends.

CURRENT TRENDS

In fiscal 1997 Sony marked its fiftieth anniversary with record sales and earnings. Its president, Nobuyuki Idei, and chairman, Norio Ohga, wrote to shareholders in the 1997 annual report about the future direction of the company, including Sony America. Sony hoped to continue building on its unique position as a multinational leader in producing both electronics and entertainment. Information technology would be emphasized as the company's key development component. In addition to expanding digital technology, Sony would extend its broadcasting, music, and film operations and continue to emphasize quality and production of such audiovisual products.

One of those products is digital television. Sony is committed to getting new equipment and products to broadcasters and consumers by the fall of 1998, when broadcasting is scheduled to convert to digital technologies. Sony is proceeding with a marketing campaign that proclaims "digital reality."

Sony introduced the original 3.5-inch floppy disk in 1980, adapting to the trend toward greater storage capacity. In the spring of 1998 the company introduced the HiFD, which offers 200 megabytes of disk space, in contrast to the 1.44 megabytes available on traditional floppy disks.

PRODUCTS

Sony places great emphasis on research and development of new electronic products. In the late 1990s it was working on numerous new inventions, including Plasma Addressed Liquid Crystal (PALC) display technology; "microkernel" computer operating systems; camcorders using Digital Video (DV) format; MiniDisc (MD) audio equipment; optical discs; and Direct Stream Digital (DSD) optical disc technology, which will provide exceptional musical recording quality.

Sony had great success in its entertainment division in the late 1990s with blockbuster hits such as the film Jerry Maguire and the albums of singer Celine Dion. In 1997 its Columbia/Tri Star division also released the hit films Men in Black and My Best Friend's Wedding.

Looking towards the teenage market, in 1998 Sony introduced the Freq (pronounced "freak"), a smaller and cheaper version of its Walkman mini AM/FM cassette player that features a see-through case with bold graphics.

CORPORATE CITIZENSHIP

In 1972 Sony was the first Japanese company to set up a nonprofit philanthropic foundation in the United States. The Sony USA Foundation, Inc. funds both national and local projects in education; environment; health and welfare; minority affairs; civic initiatives; and arts and culture. Employees are encouraged to become involved in community projects. Sony Electronics Inc., the largest component of Sony America, sponsors an Ethics in Action program, which supports Sony's philosophy of operating fairly and honestly in its business and management practices. It also sponsors Community Involvement Councils run by employees and the Sony Student Project Abroad program, which has sent 350 American high school students to Japan every year since 1990. All Sony facilities in this country adhere to a corporate Environmental Action Plan adopted in 1994.

GLOBAL PRESENCE

Sony's Japanese corporate parent believes in manufacturing products in the markets where they will be sold, and in maintaining a corporate structure that is not at the mercy of changing foreign exchange rates. As a result, Sony's manufacturing operations are widely distributed, with 15 in the United States, 12 in Europe, and 30 in other areas as of 1996. Emphasis has been placed on expanding manufacturing within Asia.

Sony sells its electronic products in 190 countries and territories. In addition to its headquarters in Tokyo and Sony America's offices in New York City, Sony maintains a key office in London and manufacturing facilities in numerous countries including Australia, Austria, Brazil, Canada, France, Hong Kong, Indonesia, Malaysia, Mexico, the Netherlands, Spain, and Singapore. Feature-length films produced in the United States by Sony America are distributed worldwide.

SOURCES OF INFORMATION

Bibliography

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lyons, nick. the sony vision. new york: crown, 1976.

morita, akio. made in japan, akio morita and sony. new york: dutton, 1986.

partyka, jeff. "sony, fuji develop 200mb floppy drive with complete backward compatibility." emedia professional, february 1998.

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For an annual report:

on the internet at: http://www.sony.co.jp/soj/corporateinfo/index.htlmor telephone: (212)833-6849 or write: sony corporation of america, investor relations, 550 madison ave., 33rd fl., new york, ny 10022-3211