Sony's Slide

In the late 1990s, a product manager from Zenith brought me the company's first HDTV set for review. After an afternoon spent checking out the TV - an engineering marvel for its time - I told him how impressed I was with it. "Yeah, we'd sell a ton of them if it said 'Sony' on the front," he wisecracked.

How times have changed. The company that completely dominated the TV market in the '90s and through the early years of the '00s has since been eclipsed by rivals, most notably Samsung and Vizio. Sony is now third in U.S. market share, and feeling pressure from LG and Panasonic, too. Its TV business has been losing money for eight years straight. Sony has long outsourced some of its manufacturing to other companies, and is now shifting its business even more in that direction.

Some pundits and consumers have predicted Sony will slide into irrelevance the same way RCA did after it got bought and sold so many times that even the people who own it now might forget who owns it. RCA TVs ruled the market for decades before Sony assumed the lead in the '90s, yet today RCA is nothing more than a brand name. (Although you do occasionally see that brand name on a really cool product.)

I reject that idea that Sony is doomed. The suggestion that there's something wrong with Sony's business model is silly, because there's no clear indicator of what business model works best in today's TV market. Consider Samsung and Vizio.

Samsung fits right into the corporate behemoth mode; it's pretty much Sony II. The company develops its A/V products at a huge corporate campus in Suwon, South Korea with a couple of skyscrapers and about 30,000 employees - and that's not even a fifth of the company. It develops its own technologies and product designs, and manufactures most of its products in factories it owns.

This model works: While Samsung's not the biggest consumer electronics company, it's certainly one of the most successful, and probably the most influential (with the possible exception of Apple).

Vizio develops its products in a modest building in an office park in Irvine, California. I don't know how many people work there but I bet they could all fit in your local TGI Fridays. (Incidentally, some of them used to work for Sony.) Instead of doing its own engineering, Vizio works with outside vendors to develop the products it sells. This business model doesn't allow Vizio to develop its own technologies, but it does allow the company to pick from the best of several competing designs instead of being forced to live with whatever its in-house engineers cooked up this year. Vizio has even proven it can innovate, as it did when it bucked the trend and launched TVs featuring passive 3D.

This model works, too: Only nine years after its founding, and with minimal investment and fixed costs, Vizio now dukes it out with Samsung for the #1 spot in the U.S. market.

So Sony's decision to outsource much of its manufacturing and even some of its product development doesn't condemn it to a future as a half-forgotten brand tacked onto all sorts of random products. Sony still has the benefit of brand recognition most competitors would kill for; what it needs to reclaim is its culture of innovation. Combine that great brand with a few passionate, driven, radical-thinking product managers-and the willingness the company has already demonstrated to go outside its walls when it needs to-and Sony could again become one of the consumer A/V industry's true trendsetters.

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