Sony Admits They Should Have Had The iPod

By Richard Menta 1/21/05

Few people know that Sony sold one of the first digital music players, the Sony Music Clip, which was announced at the end of 1999 and in stores early 2000. Even fewer know that they also were the first to sell major label music downloads online back in 2000, three years before iTunes. These ventures didn't work, though, and for very good reason. They were not consumer friendly and the products they offered were an overall poor value. The title of a Walter Mossberg article from that year said it all... "Sony's Digital Music Clip Is Cool, But Treats Users Like Criminals". My own August 2000 review of the Sony Memory Stick Walkman, their second player, detailed these problems.

Richard Menta

Now the president of Sony Computer Entertainment, Ken Kutaragi, is admitting their failure.

The cause - as I and many other pundits suspected back then - came partly from the movie and music arm of Sony. Through acquisitions in the 90s the company had become one of the big entertainment conglomerates and that side of the company detested the products Sony Electronics wanted to sell. They felt these products abetted content theft and lobbied Sony's executive management to place limits on them. In the end they succeeded in putting some significant restrictions on these newer electronic products, hampering their usability.

But that wasn't the only problem with Sony's products. While they were digital music players and download services, they were not MP3 players and download services. Sony management forced the electronics arm to only enable these products to utilize Sony's proprietary ATRAC3 codec, an MP3 competitor. The MP3 format was completely cut out.

Users who already digitized their CD collection into MP3 files, now had to repeat that laborious process to turn their songs into ATRAC3 just to get their music to play on a Sony. Once the word got out, most otherwise loyal Sony buyers chose instead to bypass Sony for other makes like the Rio and Creative lines of MP3 players.

The same went for Sony's download services as they too found difficulty not only in attracting buyers, but retaining those who tried the service. These problems also plagued Sony's second attempt at a pay service, a pairing with Universal Music called PressPlay that likewise failed to garner a steady paying audience.

Kutaragi said he was frustrated with management's reluctance to upset Sony Entertainment and their concerns about content rights. He was also direct in recognizing Sony made an error by focusing too much on proprietary technology.

Having covered the growth of digital music since 1998 I can tell you that Sony was not the only corporation that made these mistakes. The entire record industry is still in a state of denial, though iTunes did establish a proof of concept that has partially awaken them to the opportunities they lost in prior years.

And that is the lesson here, an old business concept known as opportunity cost. This is the money lost from failing to effectively exploit a business opportunity. It is also the future opportunity lost when a competitor later enters to achieve what your company did not..

In this case a computer manufacturer (Apple) came late into the game, was able to steal two-thirds of the digital player and paid digital download market, establish their own proprietary technology (FairTunes/AAC), and leave everyone, including Sony, in the dust.

Sony, the early entrant into this market, is now playing catch-up.

As Kutaragi told the press "It's just starting...we are growing up."

The Olympus m:robe MR-500i Digital Music/Video Portable is available on Amazon


Other MP3 stories:
iPod Shuffle Sells Out
The Digital Media Winners of 2004
The Digital Media Losers of 2004

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