Sony Ericsson's Mobile Music Strategy
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Case Code: BSTR215 Case Length: 19 Pages Period: 2001-2006 Pub Date: 2006 Teaching Note: Not Available |
Price: Rs.400 Organization: Sony Ericsson Industry: Consumer Electronics Countries: Europe, Asia Themes: Growth Strategy, Strategic Alliances |
Abstract Case Intro 1 Case Intro 2 Excerpts
Excerpts
The Mobile Music Strategy
In February 2005, the company announced its 'mobile music strategy' at the 3GSM World Congress, Cannes, France. The focus of the strategy was to integrate of high quality digital music players into stylish mobile phones under Sony's world famous Walkman brand. Husni Al-Assi, General Manager, Sony Ericsson Middle East and Africa, said, "The move by Sony Ericsson in collaboration with Sony Group will create a compelling consumer proposition capable of redefining the digital music market and driving operator revenue. Based entirely on open standards, the strategy will focus on delivering easy-to-use music phones supported by a full range of exciting music download services, including the Sony Group digital music offering." Apart from a digital music player, the phone would be equipped with a digital camera, FM radio, games, and other key features such as easy-to-use software to copy music to the device, large music storage capacity, long battery life, quality headphones, and cutting edge design...
The Impact
The Walkman phones were launched in the third quarter of 2005, and their impact was visible in the next quarter itself in terms of increased volumes, sales, and net income for the company. Analysts attributed this success to the company's strategy of targeting a specific product portfolio like Walkman phones rather than providing all kinds of mobile phones across various price points. Chris Ambrosio, Director, Strategy Analytics, said that camera phones had helped Sony Ericsson get back to the profitable path in 2004 and Walkman phones were taking the company's success forward. He added, "That's their product niche and they do it very well." For the fourth quarter of 2005, Sony Ericsson reported pre-tax profits of 206 million euros (US$ 249 million), which was a 36.4 per cent increase over its third quarter figures and 47.1 per cent higher than the figures for the same period in 2004...
Reviving The Walkman Brand
The success of the Walkman phones was also seen as a major boost for Sony's Walkman branded music players. Ever since the iPod was launched by Apple Computer Inc. (Apple) in 2001, the Walkman had been steadily losing market share and popularity in the music player market. As of October 2004, the iPod had a 90% market share for hard-drive-based players in the US and an over 70% market share for all music players. Apple had shipped over 30 million iPods between 2001 and 2005. Earlier, Sony's music players sold under the Walkman brand did not support popular music compression formats like MP3 and AAC. The company wanted customers to use its self developed ATRAC (Adaptive Transform Acoustic Coding) music compression format. However, customers preferred the MP3 format and they turned away from Sony to the iPod. Sony later realized its mistake and brought out music players that were compatible with all music formats. But analysts felt that the move had come too late as the iPod had already become popular...
Keeping up the Tempo
Sony Ericsson capitalized on the success of its W800 Walkman phones and introduced new models. Flint said "In the fourth quarter (of 2005), we continued to announce exciting new products at a variety of price points; from high-end 3G products like the new W900 3G Walkman phone to attractive mid-tier clamshell phones like the Z520 model to lower-priced essential phone models such as the J230, J210, and Z300 that will appeal to consumers who want a simple and stylish handset." On February 28, 2006, Sony Ericsson announced the launch of the W300 Walkman phone which was aimed at the lower segment of the mobile phone market. The phone would be available from the second quarter of 2006 worldwide...
Competition
Though Sony Ericsson was the first company to introduce a full-fledged music player in a mobile phone in 2005, the concept of a mobile phone with a music player was present much before the entry of the Walkman phone. The Samsung D-500 mobile phone, which won the GSM Association's award for the "Best Mobile Handset" at Cannes in 2005, was introduced in the final quarter of 2004 and it came with a MP3/AAC music player. Strategy Analytics, a global research and consulting company, considered the Motorola E1 ROKR phone, that was compatible with iTunes, and the Samsung A970 as the real competitors for the Walkman phones...
Portable Players Vs Music Phone
The success and promise of mobile music phones prompted analysts to predict that the future of Walkman phones and other mobile music phones was good. Analysts also said that these phones were Sony Ericsson's response to Apple's iPod. In an article published in The Wall Street Journal in April 2005, Christopher Rhoads and Nick Wingfield said the iPod faced a challenge from the mobile phones with music players. They stated that the Motorola ROKR phones compatible with iTunes and the Walkman phones from Sony Ericsson were a potential threat to iPod music players...
Exhibits
Exhibit I: Summary of Sony Ericsson's Financial Performance
Exhibit II: Sony Ericsson's Brand Name and Logo
Exhibit III: W800 Walkman Phone
Exhibit IV: Different Walkman Phone Models
Exhibit V: Home Audio System Mds-70 with W900
Exhibit VI: Most Popular Brand: Poll Conducted at Mobile-Review.Com
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