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Can Stringer fix Sony on the run?

STEVEN LEVY
WHEN Sir Howard Stringer became the first gaijin (non-Japanese) to head the legendary electronics-and-entertainment giant Sony last June, it didn't really seem so shocking.
Several years earlier, such a selection would have been mind-boggling, as Sony, despite being one of the more cosmopolitan corporations in Japan, was as deeply steeped in tradition as a strong brew of green tea. What mitigated the surprise was the company's plight, a grim combination of red ink and the humiliation of losing in the very product areas it once dominated: things like televisions and portable audio. Plus, its movie studio had made “Gigli.”
Likewise, it's no big jolt that after months of Magellanesque travel between New York and Tokyo (with stopovers to see his family in Britain), Stringer has come up with the first fruits of his plan to save Sonyand they focus on firing 10,000 people and reorganising the company to make it a flatter, less feudal organisation. Stringer, though famously affable in person, has previously expressed pride in his willingness to cut staff when he revitalised the US branch of
the company in his previous role as CEO of Sony America. And he would often argue that all of Sony should do what he did here, and level the “silos” that keep its divisions from running efficiently.
“It's a double-barreled reorganisation,” he told me in an interview in his New York office, explaining how painful it was to cut expenses when his predecessors had already gone through a tough round of downsizing. The good part, he added, is that the new, streamlined organisation in Sony's electronics realm (which still sounds pretty complicated to me, with five business groups, two “units” and one division) will aid in producing “championship” products. And what may those be? “Things where we have a chance to have an edge over everybody else,” he says. “I keep saying to everybody, think about Apple's $44 billion market capit's based basically on two products. We have to be more focused and less of a department
store.”
But creating championship products, or improving Sony's successful ones like the PlayStation Portable, is much tougher when your company is still grappling with some of the difficulties of the digital era. Its products remain hobbled by the need to use nonstandard proprietary technology (like its Memory Stick) and, worse, punitive copyright-protection schemes that make potentially great products almost useless.
It would be refreshing and ultimately a boon to Sony and all of us -- if Stringer figured out how to use his company's music and movies in a way that let his products fulfill their potential in an era when consumers are increasingly taking a more active role in ripping and remixing content.
Instead, he's arguing in the other direction, for higher prices for legal song downloads. Responding to Apple CEO Steve Jobs' recent gibe that the labels are “greedy,” he says, “If
we're greedy, we're not doing very well. If you compare the amount of money made from the iPod versus the (amount made by the) music companies, it's not exactly a match.” Actually, the labels get almost all the money from the 99-cent online-music fees. Is the guy whose company makes the Walkman saying that music companies should share in the profits of electronic firms? (For the record, Stringer says Sony isn't giving up on competing with the iPod: “We're trying,” he says.)
It's hard to move a ship forward when you're still plugging its leaks. “We're trying to achieve a revolution with the appearance of evolution,” Stringer says, and he's made a reasonable first step. But other companies are free to cut straight to the revolution.
© 2005, Newsweek Inc. All rights reserved. Reprinted by arrangement.