Apple tells Sony to take a ride
How much vertical integration does it take in consumer products to turn them into a great consumer product. Like the Palm Pilot before it, the iPod is the quintessential consumer hit of the 21st century, yet it is characterized by a highly integrated experience from design to in-store experience to brand experience. Corporations in general have been notoriously bad at creating experiences when they have been successful at the corporate level.
Compare and contrast products like Burberry, Hermes, BMW, Apple, Ikea, Sony, and others. Although they are great consumer products, they are not corporate products and are not intended to create a corporate experience. For example, BMW has successfully built a brand around success and drivability. (This does not translate to the Ford Mondeo or the Chevy Impala, both vehicles in the fleet.) The brand experience extends from advertising to the shopping experience. Those who have been lucky enough to buy through a BMW dealer will understand that it is very different from buying from a Chevy dealer. Both BMW and Lexus understand this and make it a requirement to sell a BMW vehicle. And yes, they offer free latte and muffins and some of them look like Starbucks stores. (BMW dealers prefer the white and stainless steel look like Shelley BMW in Wellington and BMW Sydney in Potts Points, as well as BMW Toronto, where LandRover / Jaguar likes wood paneling.)
Going back to the Sony Walkman, as I said earlier, the Walkman needs to have the music packed and available. Thanks to the compact Phillips cassette, this was possible at the time in large quantities. In fact, it would be reasonable to say that without Sony and the music industry they benefited enormously from the Walkman and created a new level of economy with the music industry. It is now a fact that this level of integration, the cassette and the portable player was a necessary precondition for the market to exist. This is because while it was possible to copy music on the tape table and many of us did, we also bought prerecorded music in bulk quickly and easily.
By June 1989, ten years after the first model was released, the total number of Walkman units manufactured had exceeded 50 million, and by 1992 it reached 100 million. In 1995, the total production of Walkman units reached 150 million. Including a special 15th anniversary model, more than 300 different Walkman models have been produced to date and Sony has remained the market leader. [Source Sony Corporation.]In contrast, the Apple iPOD has sold 67.9 million iPods in its different flavors in its first 4.25 years and appears to reach 100 million iPods in about 6 years, surpassing Sony in about 7 years.
Sony also spent a lot of time on the brand experience. The name Walkman was clever and multilingual. They were able to clearly create the brand around the Walkman that expressed youth and freedom. The ability to listen to your music when and where you need it became the rigor of the day and is a fact we take for granted today.
Walkman as a generic verb or noun
As much as Google may not like the term “Google” as a “search” verb, it is not up to them, but the consumer, to decide which brands are verbs. They should be flattered because it is an esteemed position in the market which means an unmatched market position. Walkman along with iPod, Hoover and Xerox are all brands that achieved this position. Walkman became the de facto name for a portable music player until Apple replaced it with the iPod. Although it is still difficult for the older people to replace the Walkman, for the younger ones, the Walkman is just another music player.
However, Sony was able to create the “Walkman” brand as a class of device that made it almost impossible for anyone else to compete for consumer participation. I challenge anyone to come up with an alternative portable CD or cassette player. I’d say Apple has accomplished this so far and we look to see if the term “Zune” does any on the road or is just another wanabee brand.
Vertical integration must include brand experience
So, the second element is that the brand experience is a vital part of the Vertical Integration strategy that brings us closer to the argument that a platform will not work in the consumer space and that is because they value the experience beyond the device and maybe they buy the device to subscribe to all the values that the brand brings.
What if Microsoft called it MSN Player instead of Zune?
Our natural reaction is that this would not work, why? I would venture to guess that it is because there is already a preconceived brand experience that consumers would apply to the music player and you do not want to pass on those brand values because they are not the experience you want to convey. The MSN network is what we call the ghetto portal. Unlike Google and Yahoo, which have excellent searches and excellent media partners, MSN is a hodgepodge of content with a few apps all around it. If it disappeared tomorrow nobody would care too much because it is a duplicate of Yahoo that does it 10 times better. That’s not to say that Windows Live won’t improve that experience (the fact that they have to do Windows Live shows that MSN will be removed and beaten to death), but Windows Live is trying to extend the brand to the Portal. space.
Does the vertical integration of the operating system argument extend to music players?
Once again, the ability to consistently experience digital music from purchase to listening was an important part of the success of iTunes / iPod. The key flaw of the Sony Digital Walkman is that it did not integrate cleanly with music downloads. Sonic Stage software is unwieldy and difficult to use. It requires a level of skill to bring music to the player that was beyond most consumers and its restrictions on playback were downright counterproductive. This is due to the limitations that Sony imposed on itself when launching the digital product, in fact, it was its worst enemy.
Because Microsoft has eliminated Playsforsure partners, they too have admitted that the iTunes / iPod combination is a necessary condition for competition. They didn’t say that a few years ago when they were looking for partners for this system, they thought a platform approach would work where they would license the software and DRM to manufacturers.
So, to paraphrase, what was the strength of the Sony Walkman, pre-recorded and packaged music and a solid brand experience was indeed its downfall. Because Sony didn’t make using their product as simple and convenient as possible, they failed to capture the iPod footprint and gave the market to Apple and the iTunes / iPod combination. Sony, due to its success in the CD / cassette player market, believed that they could control the consumer experience and how they could use their music. They were also limited in owning a large record company (Sony Columbia) that lobbied hard at the corporate level to cripple the Digital Walkman and ultimately left the way open for Apple to take the lead.
Before we get to the question of whether Windows will make a difference in the Zune ecosystem, we need to understand why the Playsforsure ecosystem failed and Microsoft has learned some lessons from this.