Editor's Note: The following is a transcription of a keynote address delivered by Sony Corp. president Nobuyuki Idei, November 20, in New York to the First Worldwide TV Summit, sponsored by the National Academy Of TV Arts And Sciences. Michael Schulhof resigned as president of Sony Corp. of America two weeks later.
Today, I'd like to tell you why Sony's dreams are Sony's challenges. It has been seven months since I was appointed president of Sony Corp. With the mega speed of technological change, and the mega competition and convergence that comes with it, I find my new responsibilities most challenging. I would like to take this opportunity to address you frankly about what I have thought in these past seven months and what I feel now.
Sony has had a long relationship with the National Academy Of Television Arts And Sciences. Our company has been honored with many technical Emmy Awards, 20 in total, and many more awards in entertainment. The first Emmy we received was for the development of the Trinitron TV. Later, we were recognized for the development of the U-Matic and Betacam recording formats that enabled electronic news gathering, and for the video cassette recorder, which offered the concept of time-shift recording and viewing. Along with these technological developments for the broadcast industry, two major contributions for consumers have been the introduction of the Walkman, by which we have changed consumer lifestyles, and the development of the compact disc, which changed the music industry completely. In its 49-year history, Sony has had relations with the television, music and home video industries through these hardware technologies.
The Emerging Industry
So, Sony has been the name for a hardware manufacturer. Competitors were electronics manufacturers such as RCA, Philips and Panasonic. Our major issue was how to win the competition among them. In those good old days, Sony made electronics equipment, three national networks ruled the airwaves, "computers" referred to IBM mainframes, and phone companies minded their own business. Now, digital technology has brought many changes. Mainframe computers have been replaced with PCs, and as the era of networking has arrived, PCs have come to serve as terminals for network communications as well. And because PCs now handle not only text data but also graphics and sound, they have come to be regarded as entertainment electronics, just as Sony's products are.
It seems that everyone is jumping into everyone else's business domain, and all the old rules are broken. Boundaries between industries are disappearing. Our concern now is more about creating and finding new markets and business opportunities, rather than competing for market share within one industry. The same rule can be applied to the broadcasting industry as well. As the number of channels has dramatically increased, competition with the new delivery systems has become as important as the traditional ratings competition,
Sony's First Challenge
At the very beginning, I referred to this era as one of mega competition and convergence. In this environment, there are three major challenges for Sony as it moves into its next 50 years. The first challenge will be within the electronics business. Based on our electronics technology and know-how, which is specialized in audio and video, we must create new consumer electronics businesses using digital technology. In this respect, I have developed a catch-phrase, "Digital Dream Kids," as a way to focus our future product development. It reflects the happy image of our future customers.
Regardless of their ages, our future customers will be excited about digital technologies, and I want Sony to be the kind of company that lets these future customers achieve their dreams through our products and services. I want Sony's engineers to become the Digital Dream Kids, and I, myself, want to be a Digital Dream Kid. It is my assignment to encourage the continued development of many exciting products, which will enable us to keep our brand power high.
Let me give you quick examples of our Digital Dream Kids concept: Imagine next-generation television. While old TV sets could only receive terrestrial waves, now we can watch cable and satellite broadcasting. By connecting with PCs through the Internet, we can read e-mail and search for needed information. I am not referring to merely putting a PC into the living room. I believe a new concept of television will be created as the intelligence of computers, the access power of online communications, and the visual power of full-motion video are integrated into a new form of viewing experience that will seamlessly blend the best of both television and computers. Whether delivered via broadcast, satellite or cable, this "Intelligent TV" format will transform linear programming into a hybrid media format offering explosive growth potential. Imagine simple graphical user interfaces that allow the viewer to access only the shows of personal interest or to block access to objectionable programming. By communicating with a program database, these personal TVs could automatically locate and record whatever shows or topics the viewer has previously told it to locate, or they could prevent children from seeing those programs parents consider off-limits.
Another example is Visortron. This is a transparent, full-motion TV screen, through which I can also see you. It is similar to a Heads Up Display on a fighter jet. I can use this to watch TV or play back a video from my portable VCR or DVD player, or to engage in multiple interactive game playing. In the future, I will be able to read e-mail and surf the Web, and also communicate with you with sound and pictures. Or I can work without being disturbed or peeked at on an airplane.We don't have all of the answers today to the questions you are probably thinking right now. But the point is that traditional paradigms of television viewing must be re-examined in a digital world.
Sony's Second Challenge
So far, I've been talking about our hardware technology. Needless to say, the success of such products has depended and will continue to depend to a large degree on what content they carry. Therefore, through our acquisition of CBS Records and Columbia Pictures, we have had relations with your industries as a content creator. I understand that there has been some criticism about these acquisitions. Some said that Sony did some expensive shopping, which was a big mistake. Or some said that the write-off at Sony Pictures Entertainment last November was a sign that Sony is not satisfied with its software business and therefore would soon withdraw -- as another Japanese company did.
While it is difficult to say that our management of studio operations has been a total success over these past five years, it was quite a natural step for Sony to aim for the convergence between software and hardware. The founders of Sony acquired content creation with their long-term vision to become the "total entertainment company." We believe that the future holds the potential for significant opportunities and benefits for Sony and supports our decision to have undertaken this ambitious plan. As you are well aware, studio management is not easy. Production costs continue to increase, and it is our responsibility to manage them effectively. On the other hand, the software business provides us with many positive opportunities. The window of the movie business is broadening, with more distribution channels through satellite and cable.
The international market now holds bigger revenue opportunities than the U.S. domestic market. Although rapid growth of distribution channels will lead to the commoditization of software, the need for content is getting more and more important. Game applications and software for PCs will bring new revenues to the movie business. Additional distribution channels will create new need for lower-cost movies globally. Sony, as a global company, would like to invest in local content creation to respond to this trend. These positive global initiatives will enable us to make our software business healthy and profitable. But we know that it will not happen overnight. We all recognize that there are differences in the management of the entertainment and the hardware businesses. But as technology and software come together, we need to train our management to understand the essence of both businesses and what they have in common so that we can maximize our strengths.
Sony's Third Challenge
The software operation brings us to our next challenge, to link the value chain of our hardware activities with the value chain of software. Our hardware business ranges from physical program production, to program distribution, to the devices consumers use. Our movie software starts at the box office, becomes packaged media and television programming, and leads into merchandising and other forms of consumption. We are aggressively looking for opportunities in content distribution between software creation and the hardware business. PlayStation, which we have just launched, will sell approximately 4 million players and 20 million games by the end of 1995. I believe that the creation of these new markets and business platforms can be achieved with a harmony between competition and coexistence. For example, recent progress in achieving a single DVD format is a very symbolic event, as Sony is trying to achieve coexistence with others. We didn't choose the format battle, but chose to coexist to create a new platform. The single format will offer us huge new markets in which we can compete.
Most importantly, however, is the need to focus on the consumer and to determine what combination of features offers the best benefits for our customers. I'm happy to say that the single DVD format appears to be technically superior to either of the independently proposed formats. The DVD user will enjoy the benefits of the very highest level of computer and video technology. Sony will compete and coexist with more companies in the future, just as the broadcast industry must look for increased competition from outsiders, and seek cooperative alliances with new kinds of companies for strategic and tactical reasons. In these converging environments, management must face new challenges and tough management decisions. However, we should be reasonably optimistic. What we face now is a huge opportunity, not a threat.
Sony is, and will continue to be, a global company. We will pursue the advantages of network technology in our products, and in the distribution of our products. Entertainment and electronics will go hand in hand for Sony. The development of one will require the development of the other. In short, we want to become a N-I-C-E company. By this, I refer to the coming Networking of Information, Communications, Entertainment and Education. We expect to harness the technology of our many companies, the talents of our human resources, and the dreams of our colleagues to create the foundations for many new businesses and products.
At Sony, our dreams are vast. We intend to achieve our dreams. This is our challenge. We look forward to working with all of you and hope we can help you achieve your dreams as well. And as a result of our continuing contribution to the television industry, it would be our honor to be awarded more Emmys in the future.
Zenith Tests Waters With Inteq, New Premium TV, Video Brand
Jerry McCarthy, Zenith Sales president, confirmed reports that his company is "experimenting" with a new premium brand -- called Inteq -- for television and video products. Downplaying the issue, which was termed a "non-story," the Inteq line is being explored with about 10 dealers across the country, most from urban market territories, according to a company spokesperson. McCarthy said Zenith will examine the possibility of adding a high-end value line, but thus far, the results have not been determined. If the company decides that significant market potential exists for another tier above the existing Advanced Video Imaging (AVI) television line, a formal announcement and line showing will be scheduled for later in the year, McCarthy said.
Word of the Inteq trial run follows similar steps taken by Thomson with ProScan, Sony with XBR, and most recently, Philips which is planning to show for the first time the new Magnavox "MX" premium line time at Winter CES. Sony's PlayStation was expected to sell approximately 4 million players and 20 million games worldwide last year.
Sony Corp. president
This prototype Sony MMCD DVD player, shown in Japan, will be modified to use the unified DVD standard -- a symbol of the company's desire to achieve "coexistence."