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Sony and Samsung: a study in contrasts
Groups reveal diverging paths at CES show in Las Vegas

RICHARD WATERS

Richard Waters JANUARY 8 2014

Watching Sony and Samsung strut their stuff at the Consumer Electronics Show in
Las Vegas this week has been a stark study in contrasts. They amounted to two
very different responses to a pressing set of problems: how to make money when
older product categories are shrinking, profit margins are under more pressure
than ever and the smartphone revolution is moving into a new, lower growth
phase.

Take Samsung first. For devotees of its often over-the-top tech demonstrations,
this was one for the ages. To the accompaniment of booming music, it promised
flatscreen TVs that curve at the touch of a button, lights that dim when you talk
into your watch and fridges that channel telephone calls to you while you’re in the
kitchen.

These and other fruits of Samsung’s fevered techno-imagination prompted an

inevitable question: Why? The unspoken response from the company seemed to
be: Because we can.

This was technology in search of a purpose. As a fast follower, Samsung is a

fearsome competitor. But it needs someone to follow.

In its effort to define new markets like “wearable” gadgets, Samsung seemed more
than ever to be throwing ideas at the wall to see if anything would stick. In a week
when it issued an earnings forecast that was well short of estimates, this was not
particularly encouraging, even if it was entirely in character.

The contrast with Sony could not have been greater. Yes, there was plenty of
hardware fetishism on display. It almost seemed a throwback to better times, as
Sony executives talked of packing ever more into smaller, sleeker devices. In truth,
though, Sony’s ability to differentiate itself through miniaturisation went out with
the analogue world.

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More significant were the promises of new services to stitch together its disparate
devices, putting digital media experiences above hardware fetishism. These
included an online games network and plans for a streaming service that combines
live TV and premium video and could be viewed from any device.

Hardware also took a back seat with Sony’s approach to wearables. It came in the
form of a faceless widget, intended to be embedded in any number of future
“smart” wristbands or brooches. More important than the device is the data it
collects about the wearer, to power a service called Lifelog.

The hope for Sony fans now is that chief executive Kaz Hirai can succeed in two
areas where predecessor Sir Howard Stringer failed. One is to make the hardware-
plus-services model work. This is hard to do well – which increases the potential
returns for getting it right.

Sony has already demonstrated how not to do it, from its first, clumsy venture into
digital music to the 2011 hack of its PlayStation network. But Apple has also
struggled in the cloud: Steve Jobs’ final hurrah, the iCloud, gets mixed reviews and
has yet to make a user’s personal information and media seamlessly available on
all Apple devices.

Having a foot in the entertainment camp should also help. The promise that buyers
of its latest Xperia smartphone can watch the Sony Pictures movie Captain Phillips
on the first day of digital release may not do much to lift sales on its own. But
Sony’s ties in the entertainment world will be important as it tries to assemble the
rights needed for its new digital services. The promise of a full live internet TV
service is both a tantalising glimpse of where Sony could be headed and a big risk:
no one else has pulled it off yet.

The other area where Mr Hirai needs to do better than his predecessor is in
overhauling Sony’s hardware line-up. It’s no good using services as the glue for a
hardware-focused business if the hardware products themselves fail to yield decent
gross margins. A lot rests on making up lost ground in smartphones, but
abandoning unprofitable products in shrinking areas of consumer technology must
also be faced.

Looking further ahead, the disruption to Sony’s hardware business from the shift
towards software and services could be even more profound. Cloud gaming doesn’t
require a console – and nor does cloud TV, which can be streamed to any screen.

Sony this week even offered a vision of a future in which screens themselves
become redundant, using projectors to beam video straight from the internet on to
a home’s walls, ceiling and windows.

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Mr Hirai is trying to pick up the pace as Sony searches for its digital destiny. But
the familiar questions remain: can it execute on the plan, how fast can it move –
and how much pain is it prepared to take along the way?

Richard Waters is the FT’s West Coast managing editor

richard.waters@ft.com

Copyright The Financial Times Limited 2021. All rights reserved.

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