Sony Ericsson's Mobile Music Strategy

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Case Details:

Case Code : BSTR215
Case Length : 19 Pages
Pages Period : 2001-2006
Organization : Sony Ericsson Mobile Communications AB
Pub Date : 2006
Teaching Note :Not Available
Countries : Europe, Asia
Industry : Mobile Phone

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This case study was compiled from published sources, and is intended to be used as a basis for class discussion. It is not intended to illustrate either effective or ineffective handling of a management situation. Nor is it a primary information source.

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"This was another solid quarter for Sony Ericsson, and has enabled us to finish the year with great momentum. We are now seeing the benefit of our earlier investments in R&D which have enabled us to expand the product line-up and successfully appeal to new consumers with products like the Walkman phone series."¹

- Miles Flint, President, Sony Ericsson, in 2006.

"Sony Ericsson did well in the high-value phones segment. Profit was clearly better than we had expected."²

- Nicolas Von Stackelberg, Analyst, Sal. Oppenheim,³ in 2006.

The 'Walkman' Phone

On January 18, 2006, Sony Ericsson Mobile Communications AB (Sony Ericsson) announced that its pre-tax profit in the last quarter of 2005 (Oct '05 - Dec '05) was 206 million euros with total revenues of 2.31 billion euros.

The results took many analysts by surprise and beat all market predictions in terms of revenues, and profits. The key driver for this strong performance was the worldwide success of its Walkman⁴ branded mobile phones (Walkman phones), launched in the third quarter of 2005. It was estimated that the company had shipped around three million units of Walkman phones from the time of product launch in August 12, 2005, to the final quarter ending December 31, 2005. The success of the Walkman phones series on Sony Ericsson's profit and revenues was significant. The company shipped an overall 16.1 million mobile phone units for the last quarter of 2005.

This was an increase of 28% over the same period in 2004 and a 17% increase over the third quarter in 2005. Miles Flint (Flint), President, Sony Ericsson, said, "This has been a good quarter for Sony Ericsson, proving that our strategy of expanding the product portfolio upward into best-in-class imaging, music, and 3G⁵ products while increasing the number of more affordable and attractively designed volume models is paying off.

We are increasingly benefiting from the opportunities created by the joint venture (Sony and Ericsson), and with three new Walkman phones shipping in the fourth quarter (W550, W600, W900), we are optimistic that Sony Ericsson can set the standard in music as well as imaging going forward."⁶ Sony Ericsson had announced its 'mobile music strategy' in February 2005, under which high quality digital music players would be integrated with stylishly designed mobile phones. The Walkman phones were first introduced in Europe in August 2005 and became an instant hit. Stocks were quickly sold out and the company had problems in meeting the rising market demand. The phones were later introduced worldwide and become extremely popular.

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1] "Sony Ericsson finishes 2005 strong," www.eetimes.com, January 18, 2006.

2] Magnus Hansson, "Sony Ericsson 4Q profit buoyed by Walkman phones," www.cellular-news.com, January 18, 2006.

3] Sal. Oppenheim, one of the biggest and oldest private banks in Europe, was founded in 1789.

4] Sony Corporation marketed its portable audio players under the 'Walkman' brand. The first Walkman was sold in 1979 and over the years it became synonymous with portable music players.

5] 3G refers to third generation mobile phone technology. This technology helps transfer of both voice (telephone calls) and non-voice (downloading information, instant messaging, e-mail, etc.) data.

6] "Sony Ericsson reports record shipments, sales and profits," www.sonyericsson.com, January 18, 2006.