Sony remains one of the most important brands in the world, synonymous with quality rich media and the devices that present it. The problem is that, despite a tagline that states “make.believe,” the company is, in a sense, simply playing make-believe with its business. In theory it should be doing as well as other great firms, like Apple, for example; in reality, Sony falls far short. Just look at the difference in market performance: Sony is selling less than a million tablet units per year and is completely restarting its smartphone group. In contrast, Apple is selling over 100 million iPhone units and over 30 million iPads per year.

However, a recent move by Sony could change its fortunes in a positive way, though only if it is able to execute on the opportunity. On Oct. 26, Sony agreed to pay Ericsson $1.47 billion to buy out Ericsson’s position in their Sony Ericsson smartphone venture, created 10 years ago.

Sony Ericsson will initially become a wholly owned subsidiary of Sony and will be integrated into Sony’s platform of network-connected consumer electronics products. Sony will also get a broad intellectual property cross-licensing agreement and ownership of five essential patent families relating to wireless handset technology. Sony Ericsson recently claimed to have the best IPR protection among the handset majors because of its large patent holdings. That could be an important asset when Sony reenters the smartphone market this year.

There are a number of reasons why this transaction could vault Sony into becoming one of the major players in mobile and wireless. Consider the following:

• Sony is a top brand and draws customer respect and credibility more than Sony Ericsson.
• The Android smartphone market is still in gestation mode. It will be a few years before all the major players shake out into long-term winners. Sony could jump on top of the current market left from Sony Ericsson and build a line of popular and innovative smartphones.
• Sony can draw from resources in other parts of the company to provide entertainment, gaming and music in a way in which Sony devices get preferred and integrated access.
• The tablet market is still in its early stage, but it is growing quickly. Sony has the chance to make its tablets “entertainment-centric” in ways that would equal or exceed, say, Apple.

The content strategy

But the biggest reason Sony could become a gigantic success is related to its content. To reiterate, the company could develop products and services that draw from other divisions and leverage its enormous library of rich media content including movies, television and music. Sony also has a tremendous library of content that it can leverage through its existing PlayStation game console, PSP portable, Readers, VAIO notebooks as well as its new smartphones and tablets.  And the company has realized success and brand recognition in consumer electronics. Integration of content from these different divisions along with leveraging promotions of Sony’s mobile division could deliver tremendous value to the mobile and wireless business.

It should be mentioned that there is a notable challenge here, as Sony will need to operate very differently from its past business model, where divisions functioned in separate silos. Sony built its past success by using horizontally diversified business groups (called keiretsu in the Japanese market) that empower each business to work independently, ultimately helping the headquarters’ “master brand” to succeed. It has been difficult for Japanese firms (e.g., Sony and Nintendo) to learn to operate across divisions and leverage innovation in one division through another, and yet that is exactly what Sony needs to do if it wants to succeed in smartphones and tablets.

What Sony needs to do — and quickly — is to create the equivalent of Apple’s iTunes and iCloud services. Sony needs to develop a rich media library, player and cloud synchronization that will:

• Enable the user to easily store, organize and play his own rich media. A good place to start would be allowing users to copy their music, photos and videos already stored on their computers and in their iTunes libraries. In this way, Sony could at least duplicate what Amazon is doing with Cloud Drive(How could Sony push its offering further than what others have already done?). This content also needs to be synchronized to the cloud and then made available on the user’s mobile devices, perhaps at no charge if the user’s devices are Sony products.

• Allow customers to use the cloud-based music service to either stream or purchase music from both Sony and the other leading labels. That includes Universal, EMI, Warner Music Group and major imprints. It will be easier for Sony to integrate cloud services from Sony Music and harder to work with the other major music companies, but these are changing times for the digital music market. All the major music brands need to begin working together in order to build an entire new ecosystem for digital music. If Sony can pull this off, it would equal at least what Apple has already done, and if it is lucky, it could become a major force in providing cloud-based music services. A service such as this should include something similar to Apple’s Music Match, in which titles of songs already owned would be scanned. The Sony cloud service should enable a stored version to be placed in the user’s cloud directory. Sony Music would need to leverage its relationships with the other leading music studios to enable users to have a master copy of their music stored in the cloud. In this case, it would be offering a service to help both itself and its competitors.
• Make it easy to find, view summaries, rent or buy Sony content on any of the user’s devices. This feature must include a synchronization engine that ensures that content stays in sync among the user’s desktop, laptop, mobile devices and the cloud, much like what Funambol’s MediaHub provides.
• Leverage its existing book publisher relationships. This is to ensure that book and magazine content can be easily purchased and viewed on multiple Sony tablets. Amazon and Barnes & Noble have already demonstrated success here. Sony needs to do something similar with, perhaps, preferred (free or low-priced) content from Sony.

Other potential strategies

Sony should also leverage its use of Android by developing its own user interface on the OS. Once it has a user experience on top of Android, the company will have more options for the future, such as creating a look and feel across its mobile products that is intuitive and easy to use. It could also make various gestures and UI icons the same across a number of products such as PlayStation, Vaio notebooks and TV menus.

Sony is also reported to be creating a new kind of TV. Clearly it would have Internet access. But it would also be to Sony’s advantage to facilitate the sharing of rich media (that it owns) through the different screens it offers (TV, PC, PlayStation, tablet and smartphone) to consumers. And it would seem like a slam dunk if Sony could add software to its smartphones to enable them to operate as intelligent remote controls for  TVs, audio surround-sound subsystems, PlayStations and computers. Sony has already surpassed sales of 50 million PlayStations in just five years, which gives it a head start in access to the living room. Sony Mobile needs to leverage this via compatibility and cross access of Sony Pictures Entertainment.

When you think of which vendors could finally and perhaps successfully address the home media center market, you probably include Sony (along with Apple). So when CEO Howard Stringer told the Wall Street Journal that Sony is developing a new kind of TV, my first reaction was to think of a home media center in which Sony would provide a TV, stereo surround-sound audio, built-in DVR, PlayStation game console, smartphone remote control and a large storage system that could enable sharing of content throughout the home. Someone is going to hit a home run here, and it would seem likely that the market could support more than one connected living room system.

Big challenges, bigger opportunity

Sony could join the ranks of Apple, Google and Amazon to become one of the major mobile companies that provides rich content along with its line of mobile device products.

Just think how positive the user experience could be: Consumers could enter a family room that has a Sony TV with built-in TiVo-like DVR that is easily connected to a Sony PlayStation for gaming and to the cloud for access to Sony Entertainment via streaming. All of it could be controlled by a Sony Mobile smartphone or tablet. Consumers would flock to purchase such an easy-to-use family entertainment environment. The question is, Can Sony actually accomplish this?