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Sony’s Remarkable Transition From Hardware To Services Brings A Bit Of Sadness

It’s not often that a company makes a giant pivot without being forced into it. Most companies try to change their DNA way too late after the market train has left without them, but Sony is different in that it’s management has read the tea leafs and has been proactive in driving a massive corporate change from being a maker of hardware to services-oriented.

Sony’s Hardware Influence On Modern Music

Post World War 2, Sony was one of the first Japanese companies to utilize an inexpensive workforce to manufacture consumer goods (a scenario that has played out many times in different parts of world since then). However, it wasn’t until the introduction of the miniaturized transistor radio that its fortunes took off.

It could be said that the music industry was turbocharged thanks to the arrival of Sony’s small palm-sized TR-63 radio and The Beatles at virtually the same time in late 1963. The radio became a popular Christmas present, and the Fab Four had just debuted at the top of the American charts. The radio’s handy single earphone was perfect for teenagers to listen to their favorite music secretly under the covers while falling asleep, and vinyl record sales boomed as a result.

But it really wasn’t until the release of the Walkman in 1979 that the fortunes of Sony exploded. Until then, listening to music either through vinyl records or the recently released cassette tape format was strictly limited to listening at home because the components were so large. The advent of the Walkman made it possible for the first time for a person to take their own music with them anywhere. The company went on to sell over 200 million units until it was discontinued in 2010, but it really put Sony on the map as a major consumer electronics player.

Sony went on to develop the compact disc along with Philips PHG , and that product once again changed the face of the music business. As many fans repurchased their music catalogs in this new digital format, the major record labels rolled in new-found revenue, becoming targets for takeovers by larger entities. The music industry changed forever as its entrepreneurs were replaced with corporate executives, profits soared, and it was all because of this round piece of plastic. Sony would go on to collect royalties on sales of almost a trillion CDs of various formats over the years, but any revenue generated was just a small piece of the product’s actual influence on the music business.

Of course there was a time when the best television set on the market was a Sony Trinitron, and the company’s consumer and high-end audio gear was considered some of the finest you could buy. Cameras, computers, printers, semiconductors, batteries, and so much more were staples in Sony’s vast product lines.

The Move Into Media

Sony execs were smart enough to realize that the best way to enhance its hardware electronics sales was by having lots of media software material available for it (a strategy later successfully followed by Apple). In 1988 the company shocked the music world by purchasing Columbia Records, the largest and most influential label at the time. A few years later the name was changed to Sony Music, as it remains today.

In 1989 the company took another huge step into the media world by acquiring Columbia Pictures from the Coca-Cola Company KO , eventually renaming it Sony Pictures Entertainment.

Then, when Sony’s Playstation game console was released in 1994, the company had already created a subsidiary called Sony Computer Entertainment (now Sony Interactive Entertainment) to keep the console well-supplied with games. Since then, this division has been one of the most profitable for the company.

Exit Hardware

All this leads up to the Sony’s recent announcement that it was de-emphasizing its hardware business, and going harder into gaming, media, and services. The company indicated that it intended to make $18 billion in strategic investments over the next three years to meet that end, with the exception of a commitment to its sensor business. The company is already a major supplier of sensors for smartphones and cameras and they reportedly want to expand into automotive sensors as well.

The nostalgic way to look at Sony’s hardware de-emphasis is that the company was on the forefront of what was new and cool for many years. That’s now left to other companies to pick up that slack. In recent years you could already get the feeling that Sony was heading in a different direction just by looking at the products released at the Consumer Electronics Exhibition in Las Vegas. The writing was already on the wall.

Sony is obviously doing well in its current direction as last year it hit record revenues of around $81 billion (up 9% over the previous year) and record net profits of $10 billion (+101% over the previous year). That doesn’t mean that at least a little sadness doesn’t creep in while looking at the situation.

Sony has always made excellent consumer hardware products. Whatever Sony product you purchased, you knew it would work as advertised or better, and be reliable. There are a lot of great hardware manufacturers still around, but Sony was always special. Our quickly changing physical world will be a little worse off without its physical products.

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After working many years in the music business as a producer, engineer and musician, I decided that writing about it is just as much fun and the hours are more regular.

After working many years in the music business as a producer, engineer and musician, I decided that writing about it is just as much fun and the hours are more regular. I’m now the author of 24 books on recording, music, the music business and social media that are staples in college and university programs around the world (including the best selling “Music 4.1: A Survival Guide For Making Music In The Internet Age),” as well as hundreds of articles in a variety of industry magazines and blogs, and even the occasional television appearance (CNN, ABC News’ “20/20”). When not writing or in the studio, I also keep a busy schedule of keynote addresses, master classes and workshops at various schools and conferences. I also post daily on my popular music production blog and Music 3.0 music industry blog. Find out more at bobbyowsinski.com.