Michael Lynton will be announced as Howard Stringer’s Sony Corp Of America successor next week. “The people who know in Culver City are very happy — and very relieved,” a source tells me about Sony Pictures Entertainment where Lynton since January 2004 has been chairman alongside Amy Pascal. Sony’s principal U.S. businesses include Sony Electronics Inc., Sony Computer Entertainment America LLC, Sony Pictures Entertainment Inc., and Sony Music Entertainment. Sony Corporation of America, based in New York, NY, is the U.S. subsidiary of Sony Corporation, headquartered in Tokyo. The Japan brass would like to base Lynton full-time in NYC but he prefers to stay in Los Angeles because of his family. So that’s still a question mark. Lynton’s promotion has been expected for some time and even more so since Comcast bought NBCUniversal because the Sony exec is close professionally and personally to Brian Roberts and Steve Burke, something the hyper-ambitious Lynton let it be known throughout Hollywood and beyond. My insiders say this job promotion is because Lynton has become a favorite of Kazuo Hirai, who takes over as Sony Corp President/CEO at the start of April. Stringer will retain the chairman title. My insider says, “Hirai who’s very Americanized really likes Michael. He’s his kind of guy because Michael is all business and not flashy.” Lynton already oversees Sony’s movie and TV studio, distribution deals, global production operations, and such. He previously was CEO of AOL Europe and before that headed Pearson’s Penguin publishing company as well as served a brief stint running Disney’s Hollywood Pictures.
But Lynton has a herculean task in front of him. Here’s why: Sony’s U.S. shares have lost more than 36% of their value over the last 12 months. The company is plagued by a feeling that it’s too slow moving and out of touch with consumers, technology, and business. One of the key aspects of the Sony Corp Of America job is ensuring that the corporation’s proprietary technology doesn’t lose out to hardware advancements and content exclusivity. Sony always will be haunted by its Betamax loss to VHS which started the company on a long downward spiral. Since then, the Sony Corp Of America top exec’s marching orders have been to ensure that Sony doesn’t get left out in the cold when the hardware manufacturers and content providers agreed on an industry standard whether for CD, DVD, Blu-ray, 3D or other formats. Problem is, this has meant that even when Sony has had proprietary technology, the company has shared it rather than tried to go it alone again. The result is that the Sony Corp Of America job requires an executive capable of subtle diplomacy and industry respect, and Lynton fits that description perfectly. (On the other hand, he is not shy about his political activism for President Obama and is along with his wife one of the reelection campaign’s top bundlers. And he has used his current gig as a soapbox, most controversially scolding movie theaters for making Americans fat by selling unhealthy concession snacks.)
Combatting current trends won’t be easy. Apple, not Sony, controls tablets and music players. Amazon, not Sony, dominates e-readers. And Microsoft, not Sony, is No. 1 in game consoles while Sony angered PlayStation owners by failing to keep them informed about the status of the PlayStation Network when it was temporarily taken down due to a hacker attack. Sony couldn’t even hold on to its once-commanding position in TV set sales: in the last quarter of 2011, Samsung was #1 in revenues from worldwide flat panel TVs with 26.3% of the market, up 18% from the same period in 2010, according to research group NPD DisplaySearch. Sony was No. 3 with 9.8%, a drop of 34%. And the jury is still out on Sony’s 3D TV sales. In December Sony sold its stake in an LCD-display manufacturing venture to Samsung.
Meanwhile, sales of music and video discs continued to plummet. Partly as a result, neither Sony Pictures nor Sony Music are generating much excitement. In the last quarter of 2011 the filmed unit’s sales were up 7.7%, to about $2.1B, but due to marketing costs its profits were down 85% to $9M. The company says that Arthur Christmas underperformed. Music sales were down 11.7% to $1.6B, with profits off 21.7% to $196M, despite strong sales for recordings from Adelle and the cast of Glee.