This is a crazy story I had never heard before about one of the worst fumbled bags in history.
In 2000 Sony was worth $100 billion.
Apple was worth $8 billion.
Eleven years later the numbers flipped:
Apple $376 billion, Sony $20 billion.
Twenty-six years later:
Apple $4.5 trillion, Sony $133 billion.
In 1999 Sony held every structural advantage in digital music.
- 400 million Walkmans sold
- A 22-year reign as the portable-music leader
-
A major record label
- World-class hardware
And they saw the digital shift coming early.
At a conference that fall, president Nobuyuki Idei walked on stage to show the future and unveiled TWO devices:
The Memory Stick Walkman from the Personal Audio division.
The VAIO Music Clip from the PC division.
These devices were from two SEPARATE Sony divisions launching competing portable music players at the SAME conference... without either knowing the other existed!
And they had:
- Different formats
- Different software
- Been built largely in ignorance of each other
It was a mess.
Whats crazier is that Sony had a THIRD digital-music effort ALSO underway somewhere else inside the company.
Audience members saw the contradiction quickly:
Sony was competing with itself in public.
Whats worse is they built products that nobody wanted!
Sony Music (protecting CD revenue) forced the hardware groups into proprietary ATRAC and clunky DRM with neither device playing MP3s (the format customers actually used).
Enter Apple.
Apple shipped the iPod in 2001 with no music business to protect and one unified team. Youre familiar with this part:
~450 million units sold
- At its height the iPod drove 40% of Apple’s revenue and held 70%+ of the U.S. portable media player market
- iTunes sold 4 billion songs in under five years and passed Walmart to become America’s #1 music retailer
Sony's full market-cap collapse had other drivers:
- TVs
- Phones
- The 2008 crisis...
But the music franchise was the clearest structural failure.
The interesting part is not that Sony was slow or stupid.
Nobody at Sony did their job badly.
The label was paid to protect CD revenue and it did.
Each hardware division was paid to maximize its own product line and they did.
Every actor behaved rationally inside their local scoreboard and the company still lost the category it invented.
Without changing the business economics, no amount of effort could have produced an iPod.
The Walkman teams could not ship what the label would not allow.
@girdley this fumble HAS to be up there, right?