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Sony used to be a lifestyle brand powerhouse that topped most consumers' wish lists. Today that positioning is Apple's, and Sony finds itself looking increasingly like your grandfather's electronics company.

What happened?

It's more a question of what didn't happen. Sony didn't innovate and didn't get new products to market quickly enough. Its presence in the music and software markets deterred entry into new hardware categories such as MP3 players. Meanwhile, with its broad range of products, it allowed its brand image to become so blurred that it's no longer clear what Sony stands for.

It is trying to address the latter problem right now, having severed its ties with long-time agency, WPP Group's Y&R Advertising, and initiated a review to find a new shop for its $100 million electronics account. But the company's image won't be turned around until it again shows its strength as an innovator.

Sony's sloth was encapsulated last week by The New York Times, in a Circuits section feature about a new generation of 8 Megapixel cameras. While there were large photos of cameras from Canon, Nikon, Olympus and Konica, there was nothing from Sony. The story noted: "Sony declined to provide a camera for evaluation in this roundup, saying that its entry has reached the end of its life cycle."

Perhaps this was just a PR blunder, but it seems to epitomize a company that has lost its way on innovation. Its last real breakthrough consumer product was the Walkman-although arguments can be made for more niche products like the PlayStation video game console and Vaio computer and even Clie personal digital assistants. Still, for widespread genius innovation, Sony just hasn't hit any out of the park in more than two decades. That's a long coast.

Once a branded-product force, the company has ceded market share and profits in many of the consumer electronics categories it once dominated. The electronics-division profits dropped 23% in its recently released results for the October-December quarter. Traditionally strong Sony categories like TVs have seen share erode. Five years ago, Sony stock was $157; today it trades at under $40.

Another ongoing problem is the enormous variety of its product portfolio and the struggle to make those divisions work together. Sony has promised a change is coming on that front. Sony USA Chairman-CEO Howard Stringer told Consumer Electronic Show attendees early this year, "Put a mark on your calendars. 2005 is the year Sony will fulfill its digital promise by creating a formula that melds electronics, video game entertainment, movies, music and other forms of entertainment, and becomes more networked and converged than ever before."

But one of Sony's biggest challenges is that it has become irrelevant to the one-third of the market that makes and shapes opinion. While Sony was trying to figure out how to cut costs, make divisions work together seamlessly and make hip products, marketing was relegated to the back seat. It did start an initiative about five years ago to move marketing to the forefront again, but that was at about the time the economy went sour and financial pressures increased. Just as the economy began to turn around, its lack of innovation caught up, and so began a me-too marketing game with rivals like Apple and Samsung.

"Sony's value proposition was innovation, and even more than that, personal innovation," said David Martin, Interbrand president and chief client officer. "They haven't been delivering on personal relevance and innovation for a while now. Sony used to be the mover of markets and creating the spaces, like the Walkman ... but that's not true anymore."

a crossroads

Competition has taken its toll. Apple now owns the premium lifestyle technology brand Sony once held, thanks to its iPod. (See story, right. ) Samsung and Sharp have captured Sony's style and design cachet in the TV market. Microsoft's Xbox is gaining fans for its engaging level of play, a feature introduced to video gaming by Sony.

One-third of the market might not seem like a big deal, but it puts Sony at a crossroads. That initial group that already thinks Sony is irrelevant is fickle and could be convinced that Sony is indeed the cool lifestyle brand it used to be. That means if Sony can pick out and lead the next leading product categories and support those products with clever marketing, it could win back the naysayers. However, leaving the machine on coast could eventually rob it of the loyal two-thirds of the market that still want Sony to win. If that group goes, all will be lost.

Last week Sony Electronics hired a consultant to help it find a new ad agency. Agencies will likely eagerly apply for the task, maybe without realizing the size of the challenge it faces in helping re-establish itself in the extremely competitive electronics space.

One problem noted by analysts is Sony's lack of definition of itself through marketing communications. Part of the problem stems from the release of its long-time Y&R Advertising. The umbrella electronics ad campaign from that team, tagged "Like No Other," has only launched a few executions, including a Steven Tyler TV ad for digital cameras, and two musical artists, Los Lonely Boys and Macy Gray, singing remakes to boost the Walkman line. Sony is keen to continue an overall branding message and strengthen its marketing; but it was unhappy with the ideas and executions presented by Y&R, said one executive familiar with the situation.

"The message is so mixed as to what to the value of the brand is that it's hard to recognize the old Sony anymore," said one executive with knowledge of Sony. "Still, their brand power remains. I would never underestimate them. They're a sleeping giant, they just need to wake up."

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