Exclusive Interview: Howard Stringer

After several years of struggling financially, Sony finally turned a profit in the first quarter of this year. This demonstrates that Howard Stringer’s strategy is working—at least for now.

As chairman, CEO and president of Sony Corporation, Stringer has had the daunting task of reinvigorating and restructuring the consumer-electronics giant, whose holdings include a Hollywood studio and a bouquet of channels around the world. Simply put, Sony, once associated with super-cool products, had lost its momentum. Starting with the Walkman in 1979, Sony had released a string of awe-inspiring devices, including the first CD player and the PlayStation. The company made a series of missteps with the Walkman and lost its cool factor, which was quickly snatched up by Apple. Someone had to shake up the tradition-bound conglomerate.

Getting the Japanese behemoth, which posted $77 billion in revenues in fiscal 2009, and its 168,000 employees back on track was quite a challenge, made all the more difficult by the fact that Stringer is not Japanese. He is a Welshman, knighted by Queen Elizabeth in 1999.
Not having come up through the ranks in Tokyo made it difficult to break through Japanese corporate culture, reflected in Sony’s abundance of executive “lifers” who aimed to spend their entire career at the company. Not being Japanese allowed him, however, to make the necessary layoffs, reportedly tens of thousands of them, and gradually coax the company’s dozens of divisions, which had previously operated as separate fiefdoms, to work together and share information.

There was much in his background that allowed Stringer to accomplish this. As a child he developed the skill of adapting to new environments—a skill he had to have in order to survive 15 different moves before the age of 18 to follow his father, an Air Force officer.
After moving to the U.S., he was hired by the prestigious documentary unit CBS Reports. As a television producer he learned how to get people to collaborate and find consensus among many differing views. This skill continued to serve him well when he was appointed head of CBS News and then president of the network.

Stringer joined Sony Corporation of America in 1997, where as president he was responsible for the music, studio and electronics divisions. Under his leadership, Sony Music merged with BMG [Bertelsmann Music Group], creating the world’s second-largest music company. And along with Providence Equity Partners, Texas Pacific Group, Comcast and other partners, Sony acquired MGM and its legendary library.
Appointed chairman and CEO of Sony Corporation in 2005, Stringer quickly realized he was managing creative, technical and business people who literally as well as figuratively did not speak the same language. He got them to work together through his “Sony United” strategy; one of his first big accomplishments was leading an industry drive to back the Blu-ray format rather than the competing HD-DVD.

Buoyed by that success, and by improved sales of TV sets and other consumer products, Stringer is now confident that 3D is the way of the future. He wants to envelop consumers in the high-quality transformative experience of 3D with a “lens-to-living-room” approach: feature films shot on Sony cameras and screened in theaters with Sony projectors, 3D movies and video games, the 3D Bravia TV set, the PlayStation3, which not only plays 3D games, but also DVDs and Blu-ray discs. There are even 3D still and video cameras for consumers. In this exclusive interview, Stringer talks about the future of Sony, embracing the company’s tagline: “Believe that anything you imagine, you can make real.”

WS: Why is developing 3D so important for Sony at this point?
STRINGER: We believe that 3D is the next great consumer entertainment experience, both in theaters and in the home. Sony is the only company in the world that can bring together all of the critical assets to create the very best 3D experience. Our not-so-secret weapon in the battle to develop this market globally is a deep reservoir of expertise and experience across Sony—from consumer and professional electronics to software to content in the form of movies, video games and music.

For 3D to be successful, it’s imperative that the customer experience great 3D, and Sony is aggressively doing everything it can, internally and externally, across all of our companies, to ensure that that happens.

We led the way with the opening of the Sony 3D Technology Center on the Sony Pictures lot in Culver City, California, earlier this year. It is dedicated to training and nurturing a community of experts throughout the entertainment industry to produce the best 3D possible. Nearly 400 people have already completed our training on the SPE lot, and another 200 participated in classes held this summer at the BBC Studios in London. The waiting list to get into the program numbers 450. So, clearly, the industry’s intention, as well as Sony’s, to produce much more 3D content is quite strong.

WS: Tell us about Sony’s “lens-to-living-room” 3D strategy. How are you getting all of Sony’s product lines to work together in 3D?
STRINGER: All of Sony’s many parts are working like a well-rehearsed orchestra on a philharmonic stage with respect to 3D. From early in their developmental processes, all of our businesses are connected and engaged so they can tap into individual and specific expertise to make any particular 3D product, whether electronics, content or software, the best it can be.

Our unique 3D technologies; professional 3D cameras and equipment that capture, manipulate and edit images; integrated work-flow solutions for professional production; sophisticated, industry-leading 4K projection systems that display 3D films in theaters; studios and creators that produce state-of-the-art film, television and game content; and, of course, televisions, cameras, Blu-ray players, and PlayStation 3s—as well as many other devices currently being developed—cover all of the 3D bases.

Here’s an example of our strategy at work. When our engineers in Tokyo were developing and fine-tuning plans for Sony’s first 3D television, they spent a lot of time collaborating with the 3D experts at Sony Pictures in California—including Sony Pictures Technical and its Colorworks and Digital Authoring Center units, Sony Pictures Home Entertainment, and Imageworks—to learn everything they could about what goes into creating and displaying high-quality 3D programming. These Sony groups jointly tested and evaluated various technical systems within the TV sets. The engineers at Sony Computer Entertainment also collaborated to make sure that the televisions would provide a great 3D gaming experience as well. All of that information sharing was a critical step in producing the superb Sony 3D Bravia televisions that are being sold today.

WS: Many consumers recently invested in wide-screen HD TV sets. How do you plan to convince consumers to make a new investment in 3D TVs, and how important is content in convincing consumers to adopt new devices?
STRINGER: We believe that 3D in the home is a natural evolution, much like the transition to color from black and white, or standard definition to high definition. While we don’t expect that all consumers will replace their HD televisions with 3D sets overnight, we do believe that, over the next few years, they will experience the best of 3D and make the switch. Good 3D is a rich adventure that immerses the viewer in a unique experience—and the closest to reality one can get. As was the case with the widespread consumer embrace of HD, quality 3D content is the key to 3D adoption in the home. We’re off to a very strong start in the 3D theatrical arena, and that market will continue to grow. Sports enthusiasts, nature enthusiasts and gamers will also drive this market.

WS: Is 3D only for large-screen TVs or would it also work for smaller devices, and how will 3D affect the production of films and television programs at the studio?
STRINGER: There will be many applications for 3D. Sony currently has TVs, Blu-ray players, PS3s and digital still cameras that offer 3D. And we’re working on some other 3D devices that we think consumers will like. You will see 3D become even more prevalent with the addition of 3D-capable computers, which we will introduce next year, and mobile displays.

Michael Lynton, the chairman and CEO of Sony Pictures Entertainment, recently said that when filmmakers begin planning a new film, they now ask, “3D, or not 3D? That is the question.” And more and more frequently, the answer is “yes.” So, clearly, 3D is having a significant impact on film and TV production.

And there are very good reasons why. Half of our box-office receipts for Cloudy with a Chance of Meatballs a year ago were from 3D theaters, including IMAX. Eighty-one percent of Avatar’s box office came from 3D, including IMAX. Not every 3D film will reach Avatar’s phenomenal level of revenue, but, clearly, the hunger is there.

The number of 3D films Hollywood is releasing will expand from 16 in 2009 to 27 this year, and at least 31 in 2011. And the number of 3D screens worldwide is growing—from 7,000 last year to 14,000 by the end of this year and 23,000 in 2012.

In the short term, 3D content will be but one aspect of the range of programs and films we produce at Sony Pictures. As 3D distribution opportunities grow with digital 3D theaters, 3D TVs and other devices, the ratio of 3D to 2D content and the rate of production will increase. Currently, Sony Pictures has a number of 3D movies in the pipeline, including the next Spider-Man and Men in Black films, as well as Resident Evil: Afterlife this fall and The Green Hornet and The Smurfs. We’ve begun testing some popular TV shows, such as Wheel of Fortune, in 3D. We are also well under way, in partnership with Discovery and IMAX, with the first dedicated 3D television channel that will debut in the U.S. next year.

WS: Would 3D technology be applied mostly to blockbuster franchises and animated features, or do you envision the enhancement of 3D technology in most movies?
STRINGER: Not every movie will, or should, be made in 3D. The goal is to use 3D as another tool or method of storytelling—when and where it can immerse the viewer in a story. Hopefully, the days of using 3D as a gimmick to shock audiences—many of us remember being jolted by an arrow or axe flying towards the screen in the 1950s—are behind us.

Sony Pictures has been a leader in the 3D revolution. Columbia Pictures, Sony Pictures Animation and Screen Gems have all produced films in 3D. Sony Pictures Releasing International has issued the studios’ own films in 3D, as well as others’. Sony Pictures’ visual effects and digital productions group, Imageworks, has worked in 3D longer than anyone else in Hollywood and has turned out quality 3D films like Monster House and Open Season for Sony Pictures and Beowulf, G-Force and Alice in Wonderland for other studios.

WS: Tell us about the joint-venture channel with Discovery Communications and IMAX.
STRINGER: The Sony-Discovery-IMAX partnership brings together three bona-fide leaders in entertainment with expertise that complements the others extremely well. Collectively, we have an extraordinary collection of high-quality 3D content, technology expertise, and television distribution and operational strength. We’re very pleased to be working with Discovery and IMAX to deliver the highest-quality 3D content to viewers and establish long-term leadership in the 3D home marketplace.

The 3D network will launch early next year in the U.S. with content from all three partners, as well as third-party acquisitions from leaders in 3D programming and production. The focus will be on genres that are most appealing and effective in 3D—including natural history, adventure, theatrical releases and IMAX movies.

WS: Why is TV by Google an appealing project?
STRINGER: We had been discussing the concept of “Sony Internet TV” for some time—we were calling it “Evolving TV.” The idea was to revolutionize TV viewing with new levels of connectivity and Internet integration, and evolve and enrich the experience through downloadable applications. The strategic alliance with Google helped us realize this concept faster than anyone else, by combining our hardware engineering, technology and design with Google’s open-source Android platform. It will be the first true Internet TV. For example, Sony Internet TV users will be able to simultaneously view content and access the Internet or new applications. Users can also seamlessly search TV programming, Internet content and websites.

WS: Is TV by Google one part of your strategy to focus on software, media and connectivity to reinvigorate Sony? What are the other parts of this strategy?
STRINGER: Over the last several years, we’ve strengthened our software capability and added connectivity across many of our products. Sony Internet TV is part of our mid- to long-term TV strategy that significantly evolves and enhances the TV-viewing experience by providing consumers with increasingly rich, varied and vast content and services. Sony Internet TV is not intended to immediately increase our market share, but it will position us as leaders in the next chapter of the consumer TV experience. We are also engaged in the joint development of other new and compelling Android-based products that will offer dazzling entertainment adventures. Sorry—I can tantalize you, but I can’t give you more specifics right now…for obvious reasons.

WS: Sony was the first studio to become involved in local-language productions around the world. Nonetheless, the studios have fallen behind companies like Endemol and FremantleMedia in the format and local-production business. Is the format business an important part of your television production business?
STRINGER: Sony Pictures Television was the first studio involved in local-language scripted-format productions and is still the industry leader with shows like Married… with Children, which is a huge success in Russia, for example. We’ve produced close to 350 episodes of that series there. Companies like Endemol and Fremantle have been very competitive in the light entertainment/unscripted format business. So, Sony Pictures acquired 2waytraffic in order to build up its unscripted business, and the studio is currently producing shows like Who Wants to Be a Millionaire? and The Dating Game, as well as new formats like The Dr. Oz Show, in many countries around the world.

The local-production business is an important part of our global strategy, so we have hired highly respected personnel and opened production businesses in new territories. The most recent was the establishment of Floresta in Brazil, headed by Elisabetta Zenatti. We are currently in production on a variety of local-language shows, scripted and unscripted, in Europe, Russia, Asia and Latin America, and are doing quite well.

WS: As you work to reinvigorate Sony, is the ownership of channels around the world still an important business to be in?
STRINGER: The channels business is an important and thriving part of Sony Pictures Entertainment. Sony Pictures Television currently operates 125 channel feeds in 140 countries that reach approximately 438 million households in 22 languages. We have also been rolling out our channels in HD around the world, most recently adding feeds in Poland, Spain, Portugal and Italy. From Sony Entertainment Television, which will celebrate its 15th anniversary in India this fall, to our recently launched channels in the Baltics—our first in the region—this business is growing, both in reach and profitability. In the U.S., we’re adding to our channels business with a new branded HD movie network and FEARnet, a horror/thriller destination, plus, of course, the 3D channel set to launch next year.

WS: Some critics say Sony has been overtaken by Apple in the sense that the Walkman was replaced by the iPod and several other innovations. These devices made Apple the hot company Sony used to be. How do you respond to that criticism and what is being done to put the “cool factor” back into Sony?
STRINGER: The Sony image is no longer based on a few iconic products. It is a giant multinational which creates a broad range of products—some are hot, some are cool, most are multi-sellers—and, so, innovation comes in many different places. Our 4K digital movie projector has become the industry’s front-line champion, as cinemas become digital. The Exmor R Handycam is the world’s best camcorder—it won the Nikkei Best Product Award in 2009. The Sony Ericsson Xperia X10 Mini mobile phone won the Red Dot international product design award. It’s the smartest and the coolest. Our panoramic Cyber-shot camera is just as cool. Our Sony 3D TVs were chosen as the best 3D TV in the market this year by the European Imaging and Sound Association. Everyone is now realizing the value of our Blu-ray technology, with its advanced bandwidth. We were the first to use a backlit LED screen in televisions, which is now the standard in the industry. In an international consumer poll this spring, Sony ranked number two behind Google on the list of the world’s most reputable companies, as reported by Forbes magazine. I could go on, but I think you get the point!

WS: How does the “make.believe” marketing campaign help change consumers’ perception of Sony?
STRINGER: Consumers are noticing that “make.believe” has begun to appear in the advertising, promotional materials, product packaging, retail outlets, online content and more, of the Sony companies. The make.believe message is intended to unify the voice of our brand. We want to communicate to consumers that all of Sony’s brands, products, services and content are connected and can enhance their lives in a tangible way. Internally, it’s helping to reignite the innovative spirit of our people and our products. Externally, we hope to inspire consumers to believe, as the tagline says, that anything they can imagine, they can make real…hopefully, with Sony’s help. We encourage them to embrace the make.believe spirit by using their own creativity and passion and interpreting the message for themselves. We like to think of make.believe as a rallying cry for creativity and imagination and a reaffirmation that, despite the world’s woes, there is a place for that in our lives. Millions of people around the world saw make.believe again and again during the FIFA World Cup in South Africa this summer. I thought there might have been divine intervention when the Sony make.believe banners came up just as Keisuke Honda scored the winning goal for Japan against Cameroon. Talk about imagining something and making it real!

WS: How does Sony compete with less expensive electronics products from countries like China and Korea? How do you differentiate your product lines from those of other companies?
STRINGER: While the trend to­ward commoditization has certainly grown in the past several years, the Sony brand still stands for exceptional quality and design, and there remains a huge market for that. Our focus continues to be providing exceptional entertainment experiences for consumers through extraordinary products, services and content that connect easily to each other.

WS: You are the first non-Japanese to take over a major Japanese company. What disadvantages and advantages have you experienced by being a foreigner?
STRINGER: One might have thought that being an outsider would be a disadvantage, but, actually, that is not true. Certainly, there were challenges to be overcome on both sides to build trust, set priorities and goals, and agree on strategies. I think we dealt with all of that pretty well. Ironically, being an outsider has proven to be an advantage. It is sometimes easier to make changes because there are no pre-existing loyalties. While there is a tremendous amount of passion at Sony, I was able to bring a necessary objectivity that is essential for change. The goal was to retain all of that passion while creating some new, more efficient and effective ways of operating. Hopefully, I have brought even more of a global perspective to the company, which is an increasingly critical component of running the business. I’m pleased that we have genuinely broken down most of the silos that existed five years ago. The Sony Group companies are working closely together, and I don’t need to constantly remind employees of the advantages of “Sony United” anymore. Our Blu-ray victory was probably the first meaningful external manifestation of our collective strength. That was a watershed event for us, literally and figuratively, because it demonstrated what could be accomplished when we pooled our expertise and determination. Our effort with 3D is an outgrowth of that Blu-ray success.

WS: How do you balance your grueling travel schedule with your personal life?
STRINGER: I’ll let you know when I achieve it!