BusinessWeek: Sales impact not likely

BusinessWeek Online: For Sony, a pain in the image. The article weighs the customer reaction to the rootkit fiasco and concludes that the effect on Sony’s bottom line will not be great. BW reporter Olga Kharif interviewed me for the article yesterday, and while the article doesn’t link to this site, I think my comments are fairly represented. (Oh, about that cellphone–bought it this summer, a long time before the news broke. If anyone has a suggestion for a good replacement for a Sony Ericsson 710a, I’m all ears.)

I want to offer a counter view to the comments from analyst Mark Stahlman in the article, however. I don’t know that the boycott is going to have a material effect on Sony’s corporate bottom line, but the activity that we are generating is encouraging outraged customers to file class action suits and has forced Sony BMG to recall affected discs, both of which will have material impacts on Sony BMG’s bottom line. The problem for a stock analyst is that Sony BMG, as a corporate joint venture that does not trade separately from its parents, is that those impacts will be largely invisible unless they affect overall market valuation or drag down Sony’s corporate earnings.

28 Responses to “BusinessWeek: Sales impact not likely”

  1. fedge Says:

    I started out my boycott against EMI Music in March 2003. Now with Sony/BMG and Koch, I’m just revving up my anger. The bottomline for Sony/BMG Music will be hurt if we as consumers simply refuse to support these corrupt record labels.

  2. Damian Says:

    I thought this article was quite good. An engineer makes the point that technology has moved on and you no longer need a studio to record in. I hope more and more musicians are going to realize this. At that end of the day this is what could cook the record labels’ goose.

    “… sure, world-class commercial studios that rent for $2500 a day are great to work in. But they’re no longer necessary to make a professional recording. The whole studio thing is kind of dead. DAWs [Digital Audio Workstations] have killed it, because you can mix right on your computer.”

  3. davbod Says:

    I will not buy any more Sony. It’s a done deal. I wouldn’t trust them again. My 10 year old stereo system just croaked. I’m going to buy ANYTHING but Sony. I just purchased a new cell phone last week. You guessed it, it’s NOT a Sony. A friend of mine is coming over so I can help him buy a new computer online. Yep, you are right. It will NOT be a Sony.

    The boycott could not have come at a better time, the Christmas shopping season. While the boycott may not have a huge effect on Sony’s bottom line, I think their image is hurt. And, they are hurting it worse by the way they are mishandling the situation.

    “If you don’t take care of your customers, someone else will.”

  4. Tom Says:

    It is also important to boycott Sony’s family of MP3 players, whose software SonicStage enforces overly-restrictive limitations on how you can use your MP3 files. This software actually contacts a Sony web site for “authorization” before you can upload MP3 files to your device. Unbelievable!

  5. mrs mitchell Says:

    I did find my way here because of the article though so it ’sorta’ linked it ;) Keep up the great work!

  6. Phil Says:

    I started noticing quality issues with sony product many years ago: Sony TV is bright and crisp when new but dims dramatically in a year or two; Sony electronics wears out and start to have problem like clock works usually in a year or two. They always use their own proprietary technologies and force others to accept. To name a few: beta tape, memory stick, music Mini disk. I am fed up with their arrogance and have made a conscientious decision long ago to never give my business to Sony.

  7. Rich Says:

    I truly intended to buy a Sony DVD Player/VCR for Christmas for my wife and myself. Now it will be some other brand. And I intend to sent the receipt for the other player to Sony along with a letter explaining why. If enough consumers do so, it will be powerful ammunition for the electronics divisions of Sony to jump all over BMG. Don’t make Sony guess about lost sales, show them what got left on the shelf!

  8. Robert Dendoro(Real American) Says:

    Dude, what’s wrong with you guys. What’s the matter with you.Have you lost your mind. SONY corporation is the world’s finest and honest companies. The problem was that BMG guys tried to do something to stop piracy. Sadly the “piracy” seems to be the winning team. The BMG headquarters in New York made the software as you are well aware that SONY is not a “Software Company”. I have always believed that their Japanese or European Counterparts didn’t even know about all this.Now what we will see is that SONY will stop investing in US and their competitors (Chinese guys) will take their place.Their only hurdle is SONY because SONY is a major player here. China has already won the “war of Economics” thanks to us .Let them not harm a company which is the greatest gift to mankind in the 21st century.
    I have always used SONY products and their products have been always at par with the best if not the best.
    I humbly request you guys to think like a True American and act in an honourable way.

  9. Tim Jarrett Says:

    Um. Where to start, Robert Dendoro, Real American?

    First, a clarification: both Sony and “the BMG guys” have made investments in DRM, as well as other “somethings to stop piracy,” including suing grandmothers and pre-teens for using peer to peer software.

    Second, a statement of principle: just because they wanted to fight illegal activity doesn’t justify their breaking the various anti-spyware laws they are documented to have broken.

    Third, no, the BMG headquarters in New York did not make the software. They contracted it to a small consultancy in the UK called First4Internet who (as is also well documented) didn’t know the first thing about writing secure Windows software.

    Fourth: I think it is pretty clear from the quotes from Sony BMG management over the course of this incident that there are only two options for their knowledge: either they knew exactly what XCP did and condoned it, or they chose to stay ignorant of the technical details of the software they were about to unleash on the computers of hundreds of thousands of music buyers. If the latter, we know that they were disabused of their ignorance almost a month before the disclosure of the rootkit’s existence and chose to do nothing.

    And in a choice of Sony vs. various unnamed Chinese companies, I’m not sure which is a better outcome if you’re an American company: to compete with a large Japanese firm or to compete with the Chinese. I fail to see your logic here. I’d like to suggest that you read the rest of the site, or at a minimum the timeline of the facts established by Boing Boing, before you rant further.

  10. Steve U.K. Says:

    Well I couldn’t disagree more than with Robert Dendoro(real American)…Where the hell does he get the notion that Sony products are superior to all the rest? Speaking as someone who’s been repairing allsorts of electronic gear industrial & domestic since valves were around & ‘played’ with computers since they were first invented & is still FULLY up to date with this technology, I can certainly advise him that although some Sony products are equal in performance to those of other manufacturers they are nowhere near as repairable when they develop certain faults, the main reason being that Sony use lots of their own specific components in most of their products & are the only vendor for replacements, usually at a greatly over inflated price & that’s if they’ll let you have them at all! This is something that has in the past made & continues to make many of my customers replace what was once their ‘beloved’ faulty Sony item for a similar device from a different manufacturer!….I hope this at least goes a little way to dispelling the absurd view this guy seems to have that Sony are the best, because they’re certainly NOT!!!

  11. Saskboy Says:

    Cross posted to my blog:
    I was in London Drugs [Regina, SK, Canada] today, and found they were still selling the Sony XCP Montgomery Gentry, and Nickleback albums, plus a Keith Urban CD with the same copy protected logo as on the Nickleback album. I told them that Sony had issued a recall for those CDs, and were being sued for selling them, but the sales manager said “their distributer hadn’t issued a recall for them”.

    I haven’t yet verified the Nickleback or Urban CDs as being XCP, possibly they are another DRM? Something to be Proud of CD is certainly on the list, however. If anyone’s interested in contacting London Drugs to see why they sell the CDs that are recalled with a mail-in exchange program, go ahead, I might do it as well later. Let’s get these steaming piles of CD garbage out of stores this season.

  12. David Fedoruk Says:

    You need to think of the logistics of the Christmas season. For the music Inudstry, Christmas starts in July. That’s when they start soliciting Christmans product. Then there’s their new releases for the fall season and into Christmas. By November 15th everything that is going to be ordered for Christmas is ordered. Christmas has been in full swing in the retail sector since the beginning of October.

    Sony/BMG orders are being received at the time this story is breaking. Sony/BMG now has recalled all the product it is going to sell or was going to sell, it has to be re-manufactured. They cannot bill retailers for what is effectively defective merchandise. Retailerrs will not pay that bill if they are any good at the retail business. Sony/BMG ’s supply chain is choked pulling back product and trying to remanufacture for … oh WAIT… that won’t be ’til January.

    What happens in music retail in January. Absolutely nada. There are hardly any customers and its time for the retailers to do returns. Sony/BMG now has massive returns on its hands as well as outstanding receipts that will not be paid until all the “defective”/rootkitted product is returned. Business weekk is thinking only in terms of customer response not in retailers terms. This is a bigger disaster than they think. I thought Business Week would pick up on somehting like this but aparently not. I wonder if any of them has ever worked on a retail floor? Do they know the ebb and flow of the business. I think not.

    I’ve been there.. seen it….

  13. Limor Says:

    So you need a good replacement for your Sony Ericsson 710a? Well, anything would be! As long as it doesn’t include Sony in its name. I used to trust sony’s products, until I heard from a college that had a few Vaio laptops how much of a huge disappointment they all turned out to be. Then, I got a Sory Ericsson phone that turned out to be such a frustration for having a horrible UI. But the rootkit story topped it all.

    We all love to hate Microsoft and I now I’m starting to have that same feeling about Sony. I am officially cutting it off my shopping list. (Thank god I have a Mac)

  14. Down we go Says:

    The Thanksgiving retail rush saw the top 16 albums selling more than 100,000 units this week, according to Nielsen SoundScan figures for Nov. 27. But that represents a nearly 13 percent sales decline compared with the same week a year ago.

    Why by the way music companies requires compensation if somebody has used p2p programs ? there is no damage if somebody uses them according to study.

    they concluded that file sharing actually increases CD sales for hot albums that sell more than 600,000 copies. For every 150 downloads of a song from those albums, sales increase by a copy, the researchers found.

    ( elix Oberholzer-Gee, an associate professor at Harvard Business School and one of the authors of the study. )

  15. Mike Says:

    “I humbly request you guys to think like a True American and act in an honourable way.”

    Most Americans would leave out the “U”, FWIW.

    But that’s by-the-by. I’m English but over here the following is not counted as honorable behavior:

    * rooting people’s PCs
    * spying on people
    * installing software after someone declines a EULA
    * lying
    * breaking copyright
    * price fixing
    * distributing payola

    I’d expect most Americans would agree with me.

  16. Mike Says:

    Here’s another nice example of revolting behaviour by Sony. They’ve now taken to paying vandals to spray graffiti advertizing their products on buildings. They have apparently also paid the building owners, so it’s legal. Still, I’ve little time for anyone who chooses to trash the urban landscape in the pursuit of profit:,1284,69741,00.html

  17. timfy62 Says:

    I’m bit surprised that no one has brought this up before, but maybe most have forgot. In 1989, there was a book published in Japan entitled “The Japan That Can Say No”, it was written by then-Sony Chairman Akio Morita and Japan’s Minister of Finance, Shintaro Ishihara. It’s a telling look at how Sony views consumers - especially American consumers. I’ve been boycotting Sony products since reading it then and would recommend it as a read for anyone, but especially for my fellow “Real Amercian”, Mr. Robert Dendoro. It can be found at:

  18. Saskboy Says:

    A Canadian lawyer will be on later this Monday morning, talking about a Sony class action lawsuit.

  19. SC Says:

    Has anyone compiled a list of Sony’s blunders over the last couple decades? From memory, I think they’ve screwed up with Betamax, MP3 players, memory sticks, and now CD DRM. Are there other mistakes I’m forgetting?

  20. Golem Says:

    Yesterday, I was at Future Shop looking at video cameras because my wife wants to buy me one for Xmas but, even though I liked the Sony video cameras (hig megapixels, Zeiss lenses, good features), I won’t buy Sony because of their DRM stupidity and because all of the Sony products I have bought, including a $3000 XBR TV/monitor, have broken down just after the warranty expires and cost a small fortune to fix. Even after “fixing” that XBR TV has an unfixable (according to the Sony trained and qualified technician) green tinge in the upper left corner of the screen and the tuner doesn’t work anymore.

  21. Steve U.K. Says:

    Sony’s blunders?…Mmm…how about general managment structure & just being so big that no single person or even group of persons employed there it seems can fully understand their own business or know just what all the various arms of the business are doing & what detrimental effect certain actions of certain arms might have on other arms or even the monster as a whole, not to mention ‘The Customer!! Sony as a business seem to be acting exactly like most governments these days & a little confused about those they ‘wish to serve’ …’Serve’ being the joke of course!…I can’t even begin to predict where all this will end, but I really don’t think I’d buy any Sony stock for awhile!..

  22. KJ Says:

    I was giving this a little bit extra thought after seeing the excess flaming going against Sony, after all, that is why we’re here. The usual, let’s not buy their cameras, tv’s, etc, etc,” “they’ve lost a customer for life” etc. The odd thing is that Sony, the electornics corporation itself, doesn’t really have all that much to do with their music division. In the old days, yes- but now they co-own it 50/50 as a split merger with BMG. Sony is obviosuly getting more of the blame since their market presence is higher- if we hate their cd copy protection choices, we can easily team up against their phones, memory sticks, and countless other electronics. It seems a little bit misguided, though- am I right about this, knowing that the music division has absolutely nothing to do with the stereo-building division, which has nothing at all to do with the playstation division or even the phone division?

    I realized this: what about BMG- the other parent of this big monster baby. It’s like the sneaky dad, slowly sneaking away in the middle of the night, leaving an unfortunate mom to clean after thebig baby’s dump. BERTELSMANN is the “B” in BMG- “Bertelsmann Music Group” . BMG owns a few companies, aside from its music division, such as the book pulbisher Random House.

    Any idea on pressure being put on that company?

  23. Mark Sweat Says:

    Texas lawsuit…

    Filed by the state, not consumers, under Texas Consumer Protection Against Spyware Act. Maximum penalty, which the Attorney General of Texas is seekeing, is $100,000 per incident. If 100,000 CDs have been sold in Texas, that’s $10,000,000,000 in penalties possible under law. $10 Billion. I think that might impact the bottom line just a bit.

  24. Mark Sweat Says:

    As for the last post, the boycott of the parent company of the JV can send a message to Sony electronics that we don’t tolerate this from any of its divisions. Not from their CDs, from their DVDs, from their Playstation, from their hardware. We, the consumers, won’t buy anything from you until you fix this. Does BMG get away from this? Yes, a bit. They are hurt from the impact to the joint venture.

    But, Sony has a brand name to worry about. BMG does not. The value of the Sony brand is as valuable as many, if not all, of Sony’s physical assets. They must protect their brand to stay in business. So, an effective boycott would be to boycott anything with the Sony brand on it. Period.

    Case in point? I’ve been a Playstation fan since release day of the US Playstation 1. I’ve decided to buy an XBox 360 instead of the Playstation 3.

  25. Finland man Says:

    In Finland the sales of singles in november has decreased -48% from last year.

  26. James Says:

    My employer and myself have discontinued procurement of Sony equipment, citing a near 100% failure rate of such equipment within its expected lifetime.

    As of late, out of thousands items purchased for general use and production at my location ALL have failed under light use. Sony has not provided a satisfactory solution.

    Products by other manufacturers have preformed well under the same circumstances and expectations. Thus leading to the decision by management (not me) for the removal of Sony from the approved equipment vender’s list.

    In one year’s time, this represents about a million dollars at my location alone.
    We are about to embark upon an origination wide retrofit representing nearly a billion dollars. All of which will fall to other manufacturers.

    Now comes the “Rootkit” mess. I have seen millions in damage to computers with my own eyes. For now we have just dealt with it. However management has referred this problem to the legal department. Which is sure to seek a substantial monetary remedy.

    As I speak with my counterparts in other such originations, this seems to be the case for them as well.

    There are lots of us and just one Sony.

    Dark days are ahead for Sony if the situation does not change.

  27. Terry (Canadian Eh ) Says:


    OK so as I’ve read thru a ton of crap so far from just about all of you i have a few things to add and or correct on your parts

    1. Have any of you actually taken the time to read on the history of this company Sony is Sony and BMG is well BMG what they have is a 50/50 venture which i dont really care about music is music I don’t care where it comes from as long as it still comes

    2. you all gotta problem with Sonyericsson cell phones then maybe you better not buy any nokia or LG or for that matter you might just want to keep away from cells phones all together as incase you didnt do you homework Ericsson has rights to over 80% of the modern cell phone Technology today hell it’s used in just about every GSM/GPRS network and have you even thought to read on the history of Sonyericsson if you did then you might realize that this company and it is it’s own company only started in 2002 with there first model the SE T68 also one of the first blue-tooth capible phones then came a long line of great phones from them i used there phones long before i worked for Sonyericsson and guess what i still use them i have never had an issue with my service or the phones and if i did have a problem it was fixed no question I have an S710a along with a T637 and yes my battery for the 710A was crappy but it got replaced no problem i wasnt even asked if my phone was in warranty hell my T28W phone which is 5 years old still works jsut fine so anyways getting back to this young company Sony owns 50% rights to it as does Ericsson it wasnt a buy out by sony on Ericsson like 80 % of the Us population seems to think it is so if you have a problem with your sony laptop or maybe a digital cam guess what it doesnt have shit to with sonyericsson you got an issue with your sonyericcson phone call the service centre which is located in Canada as the first centre they had in the US bullshitted and craped there way thru ( surprise surprise on the US part there)

    3. so it seems that your major issues is with SONY them selfs boycotting anything with the Sony name in it is well just plain stupid in all honesty yes i had a sony digital cam is sucked ass i have an hp with al lower mp and it works alot better so again Sony is Sony Sony/bmg is that and Sonyericsson is sonyericsson. So please if you really wanna boycott anything sony take your xpold, Koss , akeia sterio systems outta your car take any DVD you have from liongate films, partered movies with MGM, and hell even take anything disney as well might as well throw out your LG,Nokia, Samsung, scala cell phone products cuz well hell Ericssons got there mitts in it and there patered with Sony and if you have cable internet from Canda or thru Comcast better cancell your service too as all modems are made with technologies made by Ericsson gots a two way radio yup get rid of them ericsson oh and while im on it don’t use interact systems sony and other companys help build and maintain the networks as does Ericsson

    mhmm well that leaves us with just about nothing in Tele-comm industry doesnt it leaves us with a bunch of shitty ass no name Wal-mart durabrand and nnexttec from radio shack sorry but i rather have sony stuff and deal with the odd problem in an eletronic device then have nothing decent at all ( and btw in case your really stupid your guna run into problems with anything eletronic )

    didnt like what i had to say oh well just my thoughts

  28. Tom Says:

    Terry, the attitude taken against its customers is not just prevalent at Sony/BMG, it is also in Sony itself. Just look at what Sony subjects its MP3 player users to if they want to put MP3 file on a Sony MP3 player. Their SonicStage will “authorize” your MP3 file (regardless of where it came from) against a Sony web site before it will load the file onto the player. If it fails authorization, then you have to wipe your MP3 player and try again. That is a load of crap.

    Sony may or may not have good electronics, but it seems to me they have taken it upon themselves to protect content providers and restrict my legal rights to use MP3 files I ripped from CDs I purchased. Totally unacceptable.

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