In the Aftermath of Sony's TV Business Restructuring: Challenges and Opportunities
January 22, 2013 / Francis Tai
22 Page, Topical Report
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Sony had its reign in the global CRT TV (Cathode Ray Tube Television) market where the company was known for high quality and innovative products. Due to the failure to tap into the LCD TV (Liquid Crystal Display Television) development trend and gain the forerunner advantage, Sony has been suffering losses for eight consecutive years, lagging behind Samsung and LG in terms of profits and market share. After Sony's new CEO (Chief Executive Officer) Kazuo Hirai was on board, he initiated a new corporate restructuring plan, in a bid to restore profits and regain its status as the leading player in the global TV market. This report profiles the current status of Sony's business performance, product & technology portfolios, and examines Sony's new corporate restructuring plan and its clout thereafter.
  •  Table of Contents
  •  List of Topics
  •  List of Figures
  •  List of Tables

Sony Conglomerate in Trouble, Not Just TV Business

Compared to its rivals such as Apple, Samsung, and LG, it is found that Sony is facing challenges due to lack of innovation and new offerings, along with relatively high costs and operating expenses. Sony has begun urgently seeking new products and business domains to help the conglomerate regain growth momentum.

In order to return to profitability, following the announcement made by Sony's CEO Kazuo Hirai on April 2012 regarding the strategic course and measures for corporate transformation, Hirai himself presented the product development strategies at IFA 2012 and reaffirmed that those products demonstrated at the trade show would determine the future of Sony. New products demonstrated were mainly focused on establishing Sony's ecosystem to achieve the concept of one-touch sharing. For instance, leveraging NFC (Near Field Communication) technology, Smartphones can share music clips and photos, through the wireless interconnection, with any Sony's NFC-supported devices. During IFA 2012, other than re-insisting the importance of mobile sales, Sony also debuted several new Smartphone models as well as the subsequent model of Tablet S which was then renamed Xperia Tablet under the similar brand name used for its Smartphone, thereby marking Sony's determination to integrate its product lines.

In addition, Hirai also spent US$1.8 billion to acquire new business domains including healthcare apparatus and cloud-based gaming. For instance, Sony purchased 10% stake in optical branded vendor Olympus for US$643 million; nearly 42% stake in So-net Entertainment for US$771 million and acquired Gaikai for US$380 million to set up cloud-based gaming services.

However, the Sony conglomerate has been suffering four consecutive years of losses and its TV business is even worse with eight consecutive years. In addition, the acquisitions aimed for the future growth of the conglomerate cost a fortune and further dampened the financial situation of Sony. Since Hirai was on board as Sony's CEO, the market value of Sony dropped more than US$8 billion as of mid-December 2012. In November 2012, several international prestigious credit rating agencies downgraded Sony's rating, indicating the investment market is not so pleased with the effort made by Sony thus far.

Furthermore, while the acquisitions made during Hirai-as-CEO period do not necessarily guarantee the generation of profits, the time and cash are increasingly under pressure. Sony will require a most explicit and stable business expansion plan to reassure investors the company's determination to restore profits. Other than the serious concerns for its TV business, the Sony conglomerate as a whole suffers more deeply with its business challenges.

Sony's TV Business Remains at Stake

In the speech made by Kazuo Hirai after being appointed as Sony's CEO, Hirai reiterated Sony's determination to stay in the TV business in the hope of regaining the reign that Sony once achieved. Looking at the global TV market, Sony is ranked the third largest TV brand in the world with a market share of 8%. If Sony sells its TV business, neither Samsung nor LG or other Japanese brands will be able to fully take over Sony's market share, and Chinese branded vendors that have just begun to set foot into the global TV market will be out of picture as well.

Since the barriers to withdraw from the market are too high, Sony will have to try its luck. With the global TV market demand growing towards saturation and product innovation facing its bottlenecks, in order to boost sales, Sony is working on establishing a multi-screen and cloud-based ecosystem connecting games, multimedia content, and smart mobile devices to help its TV business regain market share. However, since Sony's Smartphone business is also seeking a comeback, the hope of leveraging its Smartphone business to drive sales of others may not be so promising.

As for Smart TV development, Sony's user-machine interfaces including voice-, gesture-controlled, face recognition, touch control and body sensing technologies as well as keyboard design are not as superior as Samsung and/or LG. Nevertheless, consumers are generally price sensitive and therefore may not appreciate Smart TVs with new technology but at a higher price tag. Furthermore, Sony's ability to catch global attention with new product features is not as strong as Korean branded vendors so that Sony could only play a follower in the areas of LCD TV, LED TV, 3D TV, Smart TV and large-sized OLED TV, and problems seem to be fundamentally stemming from its TV business.

Other than ultra-high resolution development, Sony also rolled out a commercial 84-inch 4K TV leveraging the company's strength in image processing technology to convert FHD (Full High Definition) content to 4K images. Sony has been long devoted itself into 4K technology and corresponding products while incorporating 4K video recorder, movie player, personal consumer electronic products, and home theater devices such as 4K projector to sharpen up its leading brand image in 4K. Releasing the burden in S-LCD panel production, Sony has been given more alternatives when it comes to choose a supplier and technology type, thereby giving Sony more flexibility in response to market changes.

4K panels, due to its relatively high prices, are mostly applied to high-priced TV products with a screen size of over 60-inches. Other than LGD, Sony has been considering the possibility to collaborate with AUO and CMO to solve the cost issue originated from insufficient production scale. Otherwise, 4K technology is unlikely to become mainstream or bring solid profits for Sony. Since the company's low-priced products are facing limited profit margins while its high-end products are unlikely to achieve the economies of scale. Consequently, the current situations are yet to shed the light for Sony's TV business, meaning that the business is still at stake.


Glossary of Terms



Average Selling Price



Cathode Ray Tube



Full High Resolution



Liquid Crystal Display Television



Near Field Communication



Original Design Manufacturing



Original Equipment Manufacturing



Organic Light Emitting Diode



Plasma Display Panel



Thin Film Transistor



Video on Demand

List of Companies























S-LCD Corporation


So-Net Entertainment











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