Posted by: Kenji Hall on December 11, 2007
Sony Chairman and Chief Exec Sir Howard Stringer met with reporters in Tokyo earlier today. Here are edited excerpts from the hourlong Q&A.
On the PlayStation Network
It’s not proprietary. It’s based on open standards. We’re using an open DRM (digital rights management technology). We’re being very careful to be more open than anyone else.
We have tested the PlayStation Network. It hasn’t been publicly launched. I don’t want to get ahead of myself. If we’re gonna go forward we will find ourselves in competition with Apple and Microsoft. That’s the bad news. The good news is that because we have so many devices—-(Microsoft’s) Xbox doesn’t have a whole lot of devices it can connect to. We have the PS3 which we connect to the PSP. We then have a whole long line of devices, some of which are already networked like Sony Ericsson phones. If we can ever connect the dots then we have a great advantage against our [consumer electronics] rivals and some advantage in competition with Apple and Microsoft. I would never suggest that’s an easy challenge. We have a global hardware organization that makes us competitive in a lot of countries. We’re putting a lot of effort into Russia, China and India. All three have something in common. All three have major independent content opportunities both for music and pictures.
On innovation and investments
[Organic light-emitting diode, or OLED, TVs] are a serious investment. You don’t think we’re going to make money off OLED in the short term. You always have to pick your bets. The decision not to go off in the direction of robots—-robots are profoundly capital intensive and you’re up against Toyota and Honda and whoever else. Don’t think that I’m against expensive investments. What on earth is PS3 but an expensive investment? PlayStation Network will cost a lot of money. I just have to pick and choose.
I think big companies have a harder time being as nimble as smaller companies. One of the things we have to do is roam the world looking for people. There are investors in Silicon Valley now who do not talk to anyone over 25. And famous investors. They say everything is coming out of young people, like Joost and Spot Runner. Can a big company produce those? Can a Japanese company produce those when essentially that comes out of the entrepreneurial energy of America? It's a byproduct of American capital and the education system. We as a company have to find a way to tap into to those. If it means sending young Japanese software engineers to Silicon Valley then that's what we have to do. You sure as hell can't create those things by bringing someone into an environment with lifetime employment and saying 'Get in line. Wait for seniority to give you the opportunity.'
On the profitability of Sony's electronics division
So far [Sony's] electronics sales seem to be holding up well. Obviously the economy is dodgy in the U.S. and elsewhere. So what will happen after the turn of the year? Your guess is as good as mine. We're on target for [overall operating margins] of 5%, understanding that exchange rates are volatile and subprime loan markets are generating continuous negative headlines in the U.S. I don't think anyone really knows whether the end is in sight. It hasn't affected electronics sales in the U.S. so far.
On what comes after Sony hits its three-year targets
The first year was about financial restructuring and getting our financial house in order so we would achieve a certain level of credibility with Wall Street and shareholders and you. The second was preparing the company for the digital future. Much of the breaking down of silo walls was to prepare the company for horizontal, harmonious communication. This would sugest that the next cycle is actual innovation. If the company reaches its 5% the level of confidence will be widespread. The gradual transition from analog hardware to a digital environment in which more of our devices will be networked will be made more effective by the inclusion of software architects in each product group. Obviously the next level of growth beyond OLED and Rolly. OLED brings back some of the Sony wow factor. The PlayStation Network next year puts us in the direct line of fire with Apple and Microsoft...As we build that—albeit with some catching up to do—we have the opportunity to connect PS3 to the PSP and then beyond. If you look beyond the way music will be delivered over the Sony Ericsson phones and our new network partnership with Microsoft and other as more and more of our devices become networked because we have so many of those devices. A lot of you have questioned our ability to connect those devices with some justification.
The core businesses will be video games, content and electronics... The fact that we're emphasizing for the first time return on capital, which is what all great companies do, you're all probably thinking 'It's about time.'
The last time Sony said it would get to 10% it was followed by the Sony shock. So I'm not saying anything of the kind. I think the global competition is so fierce. We've gone through the private equity experience in which people were offering $100 billion to companies globally and saying we'll fix you. That period has subsided. My goal was to get through that in the first two years. 5% is not going to get us into the Guinness Book of Records. And 5% buys us credibility with [Wall] Street and the press...I don't know how far we can take this.
On Sony's video game unit
The PS3 and PSP situation has improved considerably. During Black Friday we sold over 200,000 in the U.S. In Europe we continue to sell around 200,000 a week. Here in Japan, it's more like 40,000 or 50,000. The PSP is flying off the shelves. That's very helpful for the future of the PlayStation Network. As it evolves it will connect to the PSP.
On alliances with others
We're very competitive with Microsoft but we just opened up a relationship with the Walkman player using the Microsoft network. Obviously we have a relationship with Microsoft on Sony Vaio [laptops]. But you go trudging in one door remembering that a few weeks earlier you were trudging out another. That happens quite a lot. We're competitive with Toshiba in the DVD formats but we sold our Cell [chipmaking] factory to Toshiba which was very helpful to us.
On Stringer's own future at Sony
I was asked by the Japanese if I was going to be here for the next three years and the answer is yes. Will I be here for the next 10 years? Probably not.