What happened to Japan's electronic giants?

[Text below extracted largely from my comments on this Hacker News discussion about this BBC news item although there is slightly more there it needs the context of the thread which I can't pull into this blog post easily (or legally given copyright laws).]

There is some truth in this article but it misses some of the really key factors.

  1. Value of the Yen. The Yen is seen as a safe haven and has been at almost ridiculous levels (considering trade balances and government debt) at least since late 2008. This is crippling exports (and/or profitability) in these price sensitive markets (TV's, computers, phones) as even though much production is abroad they still have massive cost bases in Japan.
  2. Development of Korea. LG and especially Samsung took the place of the aggressive upstarts driving down prices and then building up the quality as Japan once did to the West in markets such as cars. It will be interesting to see what China's development does to Korea in 15-20 years. So far the aggressive pricing from Korea has kept Chinese TV brands from prominence but that may not last.
  3. As Japan prospered and incomes rose it became uneconomic to manufacture commodity items there. Outsourcing and offshoring production damages the feedback and development loop between production and design that enables efficient optimum design of products. Also they narrowed the parts of the supply chain that they supplied to focus on the high value ones that could still be profitable but that costs control and foresight into important developing areas. e.g. Samsung could develop LCD panels in exact form factors to fit their devices and to use them as structural elements in TVs getting a jump start on Sony. (Sharp had[has?] their own panels but the quality wasn't uniformly high and they were overly dependent on their home TV market anyway).
  4. There is very little profit in many electronics items. TVs especially are not a source of profits (maybe Samsung makes some but it is hard to tell from their annual reports). Aggressive and falling prices, unstable panel supplies and the fact egos and ecosystems are on the line means that the once stable profit source of CRT TVs has been replaced by an LCD bloodbath. Even in mobile phones only Apple and Samsung are really making money (along with a number of component suppliers getting their slices).
[In response to a comment about Sony having missed the boat on the idea of connected devices and the ecosystem that "Google and Apple have done so very well."]

[Sony have, movie studios, TV studios and record labels] however they lacked the internal structure and strategy to really deploy them effectively. Plus someone would have had to choose a suboptimal strategy for their division's financial results if they were to avoid selling some rights or exclusivity externally but to use it for joined up strategies. (Or the low profit hardware arm would have had to paid commercial rates.)

It also surprisingly gets harder in many ways to negotiate for other rights when you have your own studio/record label and who wants to only watch/listen to Sony content. Anti-trust law may be a factor in this (as a content owner Sony couldn't legally do an Apple and tell their competitors what pricing model to accept) but also it changes the tone of the negotiation and attitude of other parties when they are your competitor.

And finally just when the network technology and the products are getting to the point where a useful internet delivered content ecosystem can be established somebody high up the organisation decides to split the platform and bend over for Google in order for the honour of making the Google TV for US only under ridiculous contract terms based on Intel hardware costs and to be supported by a dreadful marketing campaign it still sows FUD amongst content partners.

geon > I don't see why being a competitor would make it impossible for Sony to build a media store. It worked for Valve...

Firstly I didn't say it would be impossible just potentially harder than if not a competitor.

I don't know the history of Steam that well but my understanding was that it started as an easy way to get their own games. Yes Sony Music could have done the same (maybe they did but I can't remember) but a store with a seemingly random selection of about 25% of pop music doesn't make a great hit in the era of Napster and when they are still pushing DRM (which Steam also uses).

I don't believe that as a company with about 25% of the music market could legally impose pricing conditions on it's competitors (Valve may allow flexible pricing but iTunes did not at least at the beginning and I don't believe was such a proportion of the market at the time).

Can anyone here give (and defend) an example of a good patent? - I'll play

https://news.ycombinator.com/item?id=5482547

I'll play: US20080002776.

Although I no longer work for the BBC and have already received my bonuses for the filing and granting (after I left the BBC) of this patent I have a personal curiosity as the core inventive step was (I believe) mine although it was greatly extended and improved by others with greater domain knowledge in MPEG encoding. As far as I know it was a novel idea and wasn't obvious in advance to experienced video encoding engineers.

The original idea was to treat encoding losses as errors/defects that can be fixed or patched by additional data distributed separately. This was extended to arbitrary enhancements and changes and potential implementations, consequences and techniques.

I believe that there was a real non-obvious inventive step in considering encoder losses as patchable bugs. Given that idea alone a (suboptimal) implementation is relatively easy to create but was not obvious if the task being discussed is using the early 2000's Internet to deliver better video quality than broadcast (SD) TV could.

I am not aware of any current usage of the ideas in this patent or what licenses the BBC may or may not have granted.

[Comments and responses here.]

CEO Pay - Productivity Multiplier

Comment on Hacker News.

The range of potential CEO productivity effect is much greater than that of most employees and I suspect is a multiplier effect on the whole company rather than a simple addition. The worst case is a negative effect on a scale that bankrupts the company. On the positive side if a great CEO gets 1% more productivity out of their staff than a good one that difference in a company employing thousands is worth paying upto 1% of the total salary budget for a great rather than good CEO (if that is what they cost in the market and you can identify them).

There are big issues about how you identify great CEO's but there are real reasons to pay massively for the best.

The other factor is that people (CEO's, traders, salesmen) who can directly point to profit/income that they are responsible for can more easily show their value and in many cases claim a portion of that rather than a wage based on more normal market competition.


Why is no-one attacking the Smart TV space with gusto?

[Original Hacker News comment.]

I used to work for Sony in TV Product Planning and the Business Development for TV platforms in Europe.

> Why is nobody attacking this space with any gusto? Boxee, Roku, Apple TV, Google TV, YouView, Windows MCE and various no-hope proprietary platforms (Samsung - you'll never build a platform anyone wants to build on. Please give up).

It is hard. Smart isn't what people really want from TVs. They want content (games may be a exception but games consoles have that mostly covered for now). The interaction is too indirect (opposite of touchscreen) and the TV screen is shared with everyone in the room making even less suitable for interaction.

To be an interesting content platform you need real scale so Samsung should be interesting as they probably sell 20-30% (haven't been following recently) of TVs globally. If you have compelling content it makes massive sense if you have a working revenue model. If you don't have strong content I wouldn't bother.

> Will someone sort this out? We need a decent open Smart TV ecosystem.

No we need (fairly) dumb TVs able to play various sorts of local and internet content streams with standardised interfaces allowing content selection on tablet devices. DLNA/UPNP has the local network side quite well covered but the TV companies fed up of their zero margin business are trying to get some revenue on the content side and it a complex massive job getting good local content available globally.

andybak > Maybe I'm abusing the term 'Smart TV' but what I mean in the short term is something fairly close to your last paragraph BUT with some way for 3rd parties to innovate on the platform.

Your argument largely consists of 'people don't want that' or 'it's the wrong format' which sounds suspiciously like how people described smart-phones pre-Apple.


Why would anyone want information services or casual games (apart from those to be played with others in the room) on the big screen rather than the phone/tablet?

In the pre-iPhone case there were lots of people wanting information services on phones (on the move especially) and people trying to provide solutions greatly limited by available technology and bandwidth prices (no wifi on phones at the time either). People were trying to read books off phones, listen to music and do many things including some apps even when the capabilities were extremely limited.

Its really not just a "people don't want" argument but TV prolonged screen interactions don't generally fit into people's lives except in a very few narrow scenarios watching, sharing and showing content. In all these cases controlling with a smart controller and interacting offscreen really works better than indirectly manipulating a big-screen GUI.

If we imagine a TV with unlimited computing power what would it be used for? Well it would replace games consoles. It would offer smarter ways to find content (but the availability of content is probably at least as important) and better search isn't generally a game changer in this market.




Sony's decline

[Original Hacker News comment.]

I worked at Sony until about 18 months ago (European TV Product Planning and Business Development getting content onto the TV Internet platform).

This data makes it look like it could be going down quicker than I thought but it did have major problems and no clear route through them.

I think a lot of the engineering problem is that now the growth has gone there isn't large amounts of fresh recruits bringing new ideas. It also isn't THE place to work anymore which it once was in Japan (think Google 8 years ago levels of cool). The engineers are now mostly managers and outsourcing large amounts of development (particularly software to India). Manufacturing is outsourced so the benefits of having deep understanding of production and being able to optimise the products for that just isn't there. These combined outsourcings may be essential for short term survival but rob further from capability to differentiate and innovate.

Exchange rates are also killing Sony (and the other Japanese manufacturers). Massive proportions of their costs are in Japan and inflexible but their income is significantly in dollars and euros. They would be much better off if they spread their costs to regions where their income is.

The end of CRTs removed Sony's price premium in TV and Samsung at the high end and LG at the low end are brutal competitors in an industry where no-one is making money. However it is almost impossible to escape the TV industry as that would completely kill all the Sony franchise retailers (and with it a lot of other electronics sales) and any potential position as an entertainment platform/gateway company. It would also be a big admission of defeat and a lot of jobs would disappear.

A lack of real leadership has been a core problem but I'm not sure there is any way to fix it now.

Don't get me wrong many of the products are still really good and even competitively priced but that doesn't mean Sony is profiting on them. In TVs I think the processing on the mid-high models is better than most competitors and the internet services are pretty competitive but there is a lack of nimbleness and imagination to really take a lead in anything other than picture quality. The PS3 is a good value product these days.

Thinking about it some more I think the best chance of surviving into the medium term is some cataclysmic shift in exchange rates (maybe not so improbable given the Japanese Government debt). An effectively free drop of 20% in Japan based costs would give quite a massive boost that might give time to attack other problems but isn't enough on its own (assuming Sony's debts are in Yen as the value of many assets would also fall which could put them under before they could benefit from trading against the stronger currencies).

Japan printing itself out of debt might be quite a good move although clearly not without its costs amongst savers.

Anyway getting well out my expertise here.

elchief > Man, I had a Sony Wega CRT, and I seriously couldn't tell the difference between it and the first incarnation of 720 flatscreens.


Yes the first flatscreens were rubbish and for interlace SD video the best type of screen is a CRT (the screen, the encoding and the transmission technology were all built around each other to actually gain benefit from the weaknesses).

However the deinterlacing, upconversion and motion interpolation are massively different now to the first models. Plus content is available in HD (progressive) formats and you can get 1080P models.

A 40" LCD can be moved by one person and a 36"CRT would probably need two people to move it at all, was full of nasty chemicals, used more power and takes up more space in the room. If you still have a CRT that you use much it is probably worth replacing it, the phosphors will be substantially diminished in brightness so power consumption will need to be higher to achieve the same colours/brightness as before and HD video is truly here now.

Progress is amazing (even if there are the odd dips on the way). I joined Sony just as they were killing the non flat screen products.