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Sony gears up for major offensive against Apple's iPod, iTunes service
The Asahi Shimbun

Shamed but not yet defeated, Sony Corp. says it can no longer sit back and watch as Apple Computer Inc. gives it an ignominious beating in the markets for portable digital audio players and online music download services.

To that end, Sony has established Connect Company, a division exclusively tasked with developing products and services to rival Apple and its immensely popular iPod players and iTunes Music Store service.

For Sony, which virtually created the market for portable audio players with the Walkman, the new division represents an attempt to regain lost ground to latecomer Apple.

Sony released the first Walkman, for cassette tapes, in 1979 and launched Bitmusic, a Web site for music downloads, in 1999 through wholly owned subsidiary Sony Music Entertainment (Japan) Inc.

Apple, on the other hand, was a relative stranger to the music industry until its iPod and iTunes debuted in 2001 and became an overnight success.

``It's a business that we should have carved out ahead of our rivals,'' a Sony executive said in reference to the iPod's success, echoing a view shared by the company's leaders.

In the domestic market for portable digital audio players, Apple holds a commanding 35-percent share, eclipsing the 9.5-percent stake of fourth-ranked Sony, according to unit sales figures for Nov. 29 through Dec. 19 compiled by market researcher BCN Inc.

Connect Company was established on Nov. 1 and brings together Sony experts from Japan and the United States. The division will enter into operations early next year and will eventually employ 300 to 400 workers.

Engineers will work on new portable audio players equipped with hard disk drives like the iPod or with computer memory chips. The first product is expected to hit shelves by the end of next year.

Connect Company will also operate music download services similar to iTunes that will be personal computer- and cellphone-compatible. In the future, the division is expected to offer video and game distribution services.

U.S.-based Sony Connect Inc., which operates an online music download service in the United States and Europe, will fall under its jurisdiction.

In the market for portable digital audio players, Sony has been slow to embrace large-capacity hard disk drives, preferring instead its own memory chip technologies.

As to why the company had made only lukewarm efforts to expand its online music download services, Chairman Nobuyuki Idei admitted it has been largely hamstrung over copyright concerns at its recording company affiliate.

But rivaling Apple in the music download business is one thing; making a profit from it is another. Industry analysts say even Apple is bleeding red ink with iTunes.(IHT/Asahi: December 29,2004)


Herald Tribune/Asahi

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