Sony's Leading Man

Nobuyuki Idei's Shrewd Restructuring has
Lifted the Giant Back on Top

By Sandra Sugawara
Washington Post Foreign Service
Thursday, May 29 1997; Page E01

TOKYO It was only two years ago that Nobuyuki Idei, a Sony Corp. executive who was a relative unknown in the clubby Japanese business world and even in Sony itself, took over the demoralized consumer electronics company. And soon skeptics everywhere taunted him to ``show me the money'' (to steal a line from ``Jerry Maguire,'' a film from Sony's Hollywood studio).

Idei, 59, has done just that. Sony recently reported record profits and sales. And many analysts credit that performance in large part to his action-packed style, which parts ways with the deliberate, rule-by-consensus approach of conventional Japanese management.

Idei has combined a series of restructurings with a stream of new and successful consumer electronic products. He has reined in the U.S. operation, particularly Sony Pictures Entertainment, the movie company that had run up billions of dollars in debt. At home he has radically revamped the board of directors, producing a smaller, more Western-style board. And now he says he intends to increase the number of outside directors, who presumably would provide tougher oversight. Now he is plunging the company into potentially risky businesses- satellite television broadcasting, advertising and personal computers.

Taken together, the steps have restored Sony in many analysts' minds to its status as trailblazer for corporate Japan and the entire consumer electronics world. ``I believe that Sony is the first truly global company to be able to offer hardware electronics, software content and distribution services,'' Idei said in written responses to questions submitted by The Washington Post. You have to go back a decade to find Sony so strong. Back then, Sony personified everything that was powerful and threatening about corporate Japan. Its products-Walkmans, Trinitron TVs, camcorders-were everywhere. It seemed to be buying up Hollywood. It was run by an inspiring entrepreneur, Akio Morita.

But then cheaper Asian competitors blasted onto the scene. The strengthening yen made Japanese exports more expensive. The company appeared clueless in handling Columbia Pictures, which was coming out with a series of duds. As the studio drained Sony of resources, the consumer electronics division failed for several years to produce a big new hit.

In 1993,Morita suffered a stroke and the next year he retired. That same year, Sony took a stunning $3.2 billion write-off for its movie operations. After Morita's stroke, Sony old-timer Norio Ohga ran the company, and the seeds of many of today's successful projects were sown. But analysts say he lacked the drive to push the company through the major transition it needed at the speed that modern technology demanded. So in April 1995, in a move in line with Sony's reputation for breaking the mold, the company reached down into the ranks to put Idei in charge.

During the first few months, he frequently urged Sony staff members to ``find ways once again to capture the original pioneering spirit of our founders,'' who started the company in devastated postwar Tokyo in 1946. He focused Sony's attention and resources on a digital future, an era in which traditional consumer electronic products would converge with computers and communications technology. Idei sought advice on the computer business from Intel's chief executive, Andrew Grove; on the movie business from media mogul Rupert Murdoch; and on the digital world from Masayoshi Son, head of Softbank Corp., a fast-growing Japanese Internet company. He has since done major deals with all three-getting Intel's help in entering the PC business, and joining Murdoch and Son in a satellite broadcast service in Japan.

Sony's sales soared to $45.7 billion for the fiscal year ended March 31 and its profits hit $1.1 billion. Part of that was due to the weak yen, which made Japanese products cheaper for foreign buyers. But part was due to Sony's own innovations.

Perhaps the biggest surprise has been Sony's success in the video game market, once the domain of Nintendo Co. and Sega Enterprises Ltd. After only 2 ? years in the business, Sony's PlayStation game machine is No. 1. For the year that ended March 31, Sony sold 9.2 million video game players worldwide, compared with Nintendo's 6.12 million and Sega's 4.6 million.

One computer manufacturing executive said that Sony wisely understood that the key to winning the game-machine sweepstakes was winning over many software developers who write the games. Kids will buy the machines with the best games.

Developers preferred Sony's CD-ROM format because it could hold more data. And Sony reduced the payments that game developers must make to hardware companies for each game sold.

Likewise, its portable Mini-Disc player sales have soared since October, when it introduced a player that was light and small enough to fit in a shirt pocket. Sony's market share for this product in Japan is nearly 60 percent.

Sony also has the best-selling digital camcorder, and by making its analog 8mm camcorder ``passport sized'' it has produced another hit. Because of the camcorder's special features and brand name it has been able to maintain higher prices that its competitors'. Yet production costs are nearly identical, translating directly into greater profits for Sony, according to a Jardine Fleming Securities report.

Sony still faces problems. Although Sony Pictures was the top U.S. movie company in terms of box office receipts for the first five months of this year, it is unclear whether Sony can keep that up. Idei said he has confidence in John Calley, the Hollywood executive appointed late last year to run Sony Pictures.

In a recent interview with Nikkei Business weekly magazine, Idei was more blunt about his strategy. ``The method for stabilizing the movie business in the long term seems fairly clear to me. That is, to move the business out of Hollywood, to make it globally acceptable,'' he said. ``The reason this was not done before is probably because Americans based in Hollywood did not want to be transferred to foreign countries such as Southeast Asia.''

Some skeptics wonder whether Sony should be forging off into new highly competitive areas, such as satellite broadcasting, so soon after the Hollywood debacle. But Idei said he sees little risk in the satellite broadcasting venture.

``From Sony's point of view, entering the field of digital satellite broadcasting will add the distribution element to our global strategy of supplying hardware electronics and software content,'' he said.

Sony Surges

Two years into his new job, Sony's chief executive Nobuyuki Idei, has put electronics back in the spotlight while moving away from such U.S. operations as Sony Pictures Entertainment, which has been saddled with debt despite some notable films such as ``Jerry Maguire'' and ``Sense and Sensibility'' His strategy has proved successful: Sony's sales, profit and stock are substantially higher . . .

Sony Weekly Stock Closes

Last Friday: $83.25 ..and its sales of Mini-Disc players and digital camcorders have been thriving, as has its game player business.

Game Player Sales in 1997*

Sony 9.2 million units
Nintendo 6.1 million
Sega 4.6 million
For fiscal year ended March 31

(c) Copyright 1997 The Washington Post Company

Return to the MiniDisc Community Page.