Sony Leadership Changes Point Way to Digital Future

The shuffling of Sony Corp.’s executive deck this week in Tokyo carries a clear message: The action for the Japanese company is in electronics, the Internet and video games--not entertainment.

Sony named Kunitake Ando its new president and chief operating officer, giving him day-to-day responsibilities to run the company’s huge consumer electronics empire. It also puts him in line as the likely heir to Chief Executive Nobuyuki Idei, who handpicked Ando.

The immediate motive behind the move is to free Idei to spend more time plotting Sony’s digital future. Sony is developing services such as an online bank, e-commerce and music ventures. He also is working on digital television and strategies for the day when broadband communication proliferates, enabling Sony’s films, TV shows and games to be easily streamed directly into homes when consumers want them.

Although entertainment executives in New York and Los Angeles said they don’t believe there will be any noticeable impact on the operations of Columbia Studios or Sony Music, the appointments underscore how the huge success of Sony’s PlayStation video game system and developments with the Internet continue to further tip the balance of power within the company. Indeed, Sony Computer Entertainment President Ken Kutaragi, who oversees PlayStation, was named a Sony director in the executive changes.

Entertainment’s role inside the company has been shrinking for some time. Early debacles in Hollywood culminated with the company’s $2.7-billion write-down in late 1994 on its studio assets stemming from the loose-spending era of former studio chief Peter Guber. The studio’s fortunes have improved since then. Nonetheless, the returns for Sony in entertainment have paled in comparison to what it has realized in electronics.

“They bought the studio with all of the hoopla, and they haven’t had the equivalent of the Walkman in the movie theaters,” said Peter G. Wolff, an analyst who follows Sony for ING Barings.

That’s not to say that entertainment has been marginalized. Analysts and company officials believe that in a digital, broadband world, Sony’s TV, movie and music operations will play a key role.

“It has importance because it is content, and content is going to be critical in the coming generation of equipment people will be surrounded by,” Wolff said.

Howard Stringer, Chairman and CEO of Sony Corp. of America, still carries considerable clout as a Sony director. He’s also the person Idei is counting on to bring together Sony’s entertainment assets to exploit on the Internet through acquisitions and alliances.

Inside Sony, the debate over whether the company’s entertainment future should be through an alliance with a traditional broadcast network or through newer digital developments has been intense.

Sony has had numerous discussions over the years about broader entertainment alliances, and even mergers, with other entertainment companies, including NBC, CBS and Seagram Co. But none has gone anywhere.

Idei, who previously held the president’s title, becomes Sony chairman. Norio Ohga, whose role in the company as chairman has gradually diminished since Idei’s ascent in 1995, was named chairman of Sony’s governing board in what is seen as a largely ceremonial role.