On July 12, Sony announced the release of its 77-inch OLED TV, the A1. The price in China is 1,499,000 yuan, which is nearly a year's salary for the average worker. However, despite this seemingly exorbitant price, it is not entirely unjustified. The driving force behind this cost is, in fact, the consumer demand itself.
Prior to the launch of the 77-inch A1, Sony had already introduced 55-inch and 65-inch OLED TVs earlier this year, priced at 24,999 yuan and 35,999 yuan respectively. According to Sony, with its unique screen sound field technology (which allows the screen to vibrate and produce sound) and minimalist industrial design, within just four months of the A1 series' release, it captured more than 30% of the Chinese OLED market share and over 50% in Japan.
"We initially thought that the 65-inch A1 would outsell the 55-inch version, but the results proved otherwise," said Gao Qiaoyang, President of Sony (China) Co., Ltd. during an interview with the media. "After investigating, we found that many consumers were waiting for us to release larger-sized TVs." The 77-inch A1 is Sony's response to this consumer demand.
Looking at Sony's official mall sales price information, we can see that these three TVs are not even the most expensive in Sony's TV lineup. Its 100-inch LCD TV, the Z9D, is priced at an impressive 49,999 yuan, enough to buy a 70-square-meter apartment in some second-tier cities. Surprisingly, there are still buyers willing to invest in the 100-inch Z9D—Wang Sicong being one of them.
The Z9D is Sony's flagship model in the LCD TV segment, representing the pinnacle of LCD display technology. The A1, however, marks Sony's return to the OLED TV market after a decade. The company aims to lead the OLED TV segment rather than follow.
The launch of the A1 is helping Sony tap into a new TV market, primarily targeting two distinct user groups. One group includes fashion-forward young women who are drawn to the industrial aesthetic of the TV. The other group consists of gamers, whose screen performance capabilities enhance their gaming experience. Traditionally, Sony targeted wealthier individuals, tech enthusiasts, and many cable fans.
However, looking at the broader TV market, the OLED camp, led by brands like LG, Sony, and Skyworth, hasn't yet made this category widely accessible. Data from Yikang, a third-party research firm, indicates that from January to May 2017, OLED TV sales in China totaled over 30,000 units. Meanwhile, from April to June, the total sales volume of the color TV industry was 5.87 million units, showing that OLED TVs still have a relatively low market share.
The low yield and high costs of OLED TVs compared to mature LCD TVs are the main reasons why this product hasn't gained widespread popularity quickly. Nevertheless, this hasn't deterred Sony from continuing its investments in OLED TVs, with full confidence in the product's potential.
This confidence stems largely from the product itself and Sony's comprehensive strategic approach to the TV market. During a comparative experience between the Sony 65-inch A1 and LG OLED E7 of the same size, it became clear that the former excels in detail performance and shadow light control. Additionally, its sound quality and design are highly distinctive. Sony's engineers are meticulous in adjusting the screen's color performance to achieve the best balance, rather than simply emphasizing brightness and vibrancy.
Earlier, Sony adjusted its TV product line, cutting out many smaller-sized TVs in the Chinese market and focusing on larger sizes, starting from 55 inches and above. The advantage of this strategy is that more energy and resources can be focused on high-end TVs, reversing previous losses. On the other hand, Sony's sales staff must resist temptations and forego many immediate benefits.
Hong Gang, Vice President of Sony China Consumer Electronics Sales Department, told the Interface News reporter that many channels had hoped for more high-performance, cost-effective TVs with large-scale shipments, but these requests were denied by Sony. "If we accepted their requests, we would no longer be 'Sony,'" Hong Gang believes that the fundamental reason Sony managed to overcome its difficulties and shed the shadow of loss is knowing when to give up and persevere.
President Gao Qiaoyang of Sony (China) Co., Ltd. has repeatedly emphasized publicly that "Sony has been operating for over 70 years and has experienced highs and lows, but we have never entertained the idea of relying on our brand to sell at low prices. Once the brand image is affected, it takes five to ten times the effort to rebuild it."
From the financial figures, Sony's persistence has not only achieved profitability but also revitalized its core business. Sony's fiscal year-end report as of March 31, 2017, showed that while home entertainment and audio service revenues decreased by 10.4% year-on-year to 1,039 billion yen (US$9.277 billion), operating profit increased by 7.9 billion yen to 58.5 billion yen ($522 million).
Another set of figures from Zhong Yi Kang also illustrates some issues. In April-June 2017, the sales volume of the Chinese color TV market fell by 9%, whereas Sony saw a 30% increase. Sony executives attributed this success to focusing on mid-to-high-end market segments and preparing products that met these customers' needs. According to Senior Executive Vice President Takahashi Ichiro, high-end products currently contribute more than 60% of the profits in Sony's color TV business.
In addition to the above factors, the resurgence of Sony's TV business is directly linked to the organizational restructuring from 2012 to 2014. At that time, Sony announced it would turn the TV business unit into an independent subsidiary, granting it greater autonomy and responsibility, allowing it to make decisions without needing approval from headquarters.
"The most noticeable change is that frontline staff are more enthusiastic and motivated. The decentralized operations have helped Sony turn a profit," Gao Qiaoyang said. While decentralizing, Sony also integrates everyone's strengths. The company frequently holds technical exchange liaison meetings. If duplicate technologies are found, individual technologies are handed over to one company for centralized development and shared afterward.
"Sony OLED TVs utilize much technology from the audio sector. Sony phones are useful in the digital imaging industry. Mobile phone sensors come from semiconductor companies," Takahashi added.
The 2017 fiscal year is the final year of Sony's second medium-term plan for fiscal years 2015 to 2017. At a business policy briefing on June 29, CEO Hiroyuki Hirai commented on the progress of the medium-term management plan, stating his commitment to achieving an ROE of more than 10% and an operating profit of over 500 billion yen.
This is a significant challenge for Sony. To know that in the past 20 years, Sony only achieved these financial goals in 1997. If Hirai's goal is realized, it will signify that Sony, despite countless setbacks and challenges, will return to a historic high.
Among these, the TV business will undoubtedly continue to play a crucial role as a profit contributor. Hiroshi Hirai stated that "Sony's performance improvement starts with the television business and will prioritize ensuring profits over pursuing scale. It is expected that all consumer electronics sectors will turn a profit this fiscal year."
Many Sony employees can sense the importance of the television division within the entire organization. Externally, this company seldom participates in price wars initiated by domestic Chinese TV brands. "Our biggest rival is ourselves," Takahashi Yang emphasized.
In the most profitable areas of gaming and network services, Sony raised its 2017 sales target from "1.4 trillion to 1.6 trillion yen" to "1.8 trillion to 1.9 trillion yen," and the operating profit rate from "7% to 9%" to "8% to 10%." Music and financial services will also continue to contribute high profits.
It seems the company already has the foundation to meet these high-profit targets. But what's more important is whether it can reshape a creative Sony in the future.
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