originally from nytimes.com
Last July, while most people were taking summer vacations, the Sony Corporation of America made a little noticed, but crucial announcement. Jay Samit, a longtime music industry executive, was appointed general manager of Sony Connect, a new subsidiary that will sell songs online and allow consumers to play them on their Sony gadgets.
His appointment was largely overlooked outside the company, but inside, the move was immediately understood as a way to unite the sometimes conflicting electronics and content divisions.
That internal battle was seen by many as the reason Sony, the inventor of the Walkman and the biggest player in the portable audio market, was being trounced by Apple Computer and its hit, the iPod music player, in the emerging digital segment. Something had to be done.
How Sony got outflanked is as much about Sony's inflexibility as Apple's initiative. With its ownership of premier music labels and its foundation in electronics, Sony had all the tools to create its own version of iPod long before Apple's product came to market in 2001. But Sony has long wrestled with how to build devices that let consumers download and copy music without undermining sales in the music labels or agreements with its artists.
Mr. Samit, 43, came from the EMI Group with experience untangling technological and legal knots. He had had a long career selling traditional content in new formats. And he was an outsider, and considered better able to bridge the gap between Sony's engineers in Tokyo and its music team in the United States. "The only reason we didn't do this earlier is the guys didn't talk to each other," Mr. Samit said of Sony's new digital music venture.
A lot is riding on the Connect online store, which will be released in a few weeks. If it catches on with consumers, it will help validate the company's long-held goal of integrating its electronics, music and movie businesses - and give it a shot at re-establishing its leadership in the latest generation of portable music.
"Now it's about integration," said Robert S. Wiesenthal, the chief strategy officer of Sony Broadband Entertainment, who works with Mr. Samit. "Unless you have the integration, it won't work."
Sony's brand name, vast retail network and expertise in electronics are notable advantages, which Mr. Samit said made it possible for Sony to offer a more affordable and more convenient alternative to Apple's music system.
Like Apple's iTunes online music store, Connect will have 500,000 songs that can be downloaded for 99 cents each. But while iTunes songs can be played only on iPods, Sony already sells a variety of devices, including minidisc and compact disc players, which can play songs bought on Connect's Web site. Sony's new Hi-MD disc player, for instance, will hold up to 45 hours of music on one disc, which will retail for about $7.
One of Sony's flash memory players will store up to 22 hours of music and have batteries that last about 100 hours.
"We're not about one-size-fits-all," said Mr. Samit, sitting in his Manhattan office with Louis Armstrong playing in the background. "You can't believe it's about just one brick that people will carry," he said, referring to the iPod.
Steven P. Jobs, Apple's chief executive, said the minidisc player, which uses discs that can be recorded on, much like a cassette player, would not catch on in the United States the way it had overseas.
"We have a very healthy respect for Sony," Mr. Jobs said in a telephone interview. "But Sony believes very strongly in the minidisc, and we don't. It might work in Japan but not here." Apple's most expensive iPod, by contrast, uses a hard drive that can store up to 10,000 songs.
Mr. Samit said Sony would cover all bases when it releases a player this year that included a hard drive just like the iPod. Sony is also developing a portable device that plays video downloads, he said.
Sony will compete strongly on price. The most expensive iPod costs $499, while Sony's devices capable of using Connect - including network Walkmen and players that use memory sticks - will sell for $60 to $300.
And Sony is planning to market broadly, starting this summer with promotions with McDonald's - buy a Big Mac and get a free downloadable song - and United Airlines, which will let fliers exchange mileage points for songs.
Apple will remain a formidable rival. The company's new mini version of the iPod and longer battery life for its products make its brand as sought after as ever. To extend its reach, Apple has licensed iPod technology to Hewlett-Packard and made the iTunes site available to AOL and its 25 million subscribers. It wisely made iTunes compatible with Windows operating systems.
"This is a different phenomenon from 15 years ago," said Megan Graham-Hackett, an equity analyst at Standard & Poor's. "Sony wouldn't have looked at Apple as a competitor then. Apple has been quite innovative."
Apple, though, is not the only rival Sony faces. Dell and other manufacturers have come out with digital music players. What's more, songs downloaded from Dell's MusicMatch Web site can be copied onto a much wider variety of devices.
"We don't like to lock people and force them to use this or that service," said Mark Vena, director for the digital home marketing team at Dell.
Dell, like many others, is betting that the digital audio market will become like the computer industry, where prices for computers fell as more machines used the Windows operating system. If this happens, Apple and Sony, with their more proprietary services, may fall victim to the music software program that is most widely used. Microsoft, with its Windows Media format, is trying to become that standard. Already, dozens of online stores use its software, which is compatible with hundreds of devices.
"Sony is coming out with their own format, but we don't need another standard," said Joe Wilcox, an analyst at Jupiter Research. "The market for protected digital downloads is in the early stages of a format war. It's a recipe for consumer confusion."
Still, Mr. Wilcox and other analysts said that Sony had a loyal following that could help it seize a share of the digital music market quickly.
"Look at the resources at their disposal," said Douglas Krone, the chief executive of Dynamism.com, a Web site that sells high-end electronics. "They own all the intellectual property and they have the retail channel. It will be hard for Apple to maintain its market share."
While the competitors take on each other, they are also fighting music piracy. Despite the efforts of the recording industry and government, more than 99 percent of the songs downloaded or swapped on the Internet are still copied illegally. This has forced legitimate companies to charge low prices, even before they pay the recording artists or cover their costs.
Even so, the market for downloadable music and digital music players is potentially lucrative. By 2008, the percentage of music sales online is expected to triple, to 12 percent, according to Jupiter Research. Online music sites sold 25 million songs in the first quarter this year compared with 19.2 million in the second half of 2003, according to Scoop Marketing, which tracks legal music downloads.
The majority of those songs were downloaded from the iTunes site, and Apple sold a whopping 807,000 iPods in the quarter ended in March. The company, analysts said, has done the best job in the industry of using music as the link between its computers and audio devices.
Sony would like to emulate that success, but catching up will not be easy. Sony entered the digital camera market late, yet became one of the top makers in that field. But its computers and cellphones have struggled and remain niche products while others grabbed those markets.
This time, Mr. Samit and other Sony executives say they can recover lost time because all parts of their corporate empire are on the same page.
Laurie Flynn contributed reporting from San Francisco for this article.
