An article in the New York Times once again illustrates how tenuous “market power” is. In How the iPod Ran Circles Around the Walkman, Silicon Valley based historian Randall Stross points out that all of Sony’s market dominance of the past did not help it when the iPod came along, (emphasis mine):
At first glance, digital music is the field in which Sony’s considerable assets seem best suited, with a little rearrangement, for a comeback. On one side, Sony has 50 years of experience in producing portable music players, beginning with transistor radios in the 1950′s and extended by its Walkman franchise that has sold more than 340 million players. On the other, it owns one of the world’s largest music labels to supply content. Yet in the iPod era, Sony’s headstart counts for nothing. It’s as if the company were the Sony Graphophone and Wax Record Company.
This important point cannot be emphasized enough. The oft-told tale of the market Goliath being defeated by the entrepreneurial David illustrates the important theoretical point that however high a businessman rides today, his position is precarious and subject to the consumer. As Mises writes in Human Action:
A “chocolate king” has no power over the consumers, his patrons. He provides them with chocolate of the best possible quality and at the cheapest price. He does not rule the consumers, he serves them. The consumers are not tied to him. They are free to stop patronizing his shops. He loses his “kingdom” if the consumers prefer to spend their pennies elsewhere.
One of the important implications of this point is that fear of “market dominance” is misplaced as regards companies that achieved their position through pleasing consumers as opposed to being part of corrupt “public-private partnerships”. The government’s anti-trust case against Microsoft, for example, is based on a misunderstanding both of how Microsoft achieved its success and how it will, eventually, be superceded. Because it isn’t just in the iPod era that a headstart counts for nothing.
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A perfect reason to boycott iPods & buy Sony products instead.
Then, when Sony’s back on top, start boycotting their products for the benefit of other underdogs.
Again and again, ad infinitum, for all companies and all industries…
If Sony had remained a customer-oriented electronics company, they could have been the ones making the iPod instead of Apple.
However, Sony’s concerns these days are mostly controlled by the entertainment side of the corporation – the music and movie publishing part. This half of the company is terrified of innovation in electronics and computers, since these technologies are beginning to make traditional music and movie distribution obsolete. Sony Entertainment would rather rely on DRM, litigation, and laws that make simple computer functions illegal. Making products people want is little more than an afterthought to Sony these days.
In fact, if memory serves correct, the entertainment arm of Sony once accidentally sued a subsidiary partially owned by Sony’s electronics arm over some media-copying technology. Yep, schizophrenic Sony sued itself.
So to make a long story short, Sony has been continually hamstrung by its entertainment arm, forced to avoid industry standards in favour of the mini-disc, its crappy ATRAC music format, and the DRM-enabled Memory Stick. Its recent “iPod-killer” couldn’t even play music in the ubiquitous MP3 format! No wonder they lost their chance to make the next big thing.
It’s the return of betamax again. If it weren’t for the PlayStation…
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