Sony, is in the final stages of reorganization to address Apple Computer's dominance of the personal music player market, an arena that they once owned with the introduction of the Walkman brand in the seventies. Sony's internal strategy of intense competition between divisions worked for decades until Apple delivered the death blow with the introduction of the wildly successful iPod digital music player.

Sony will introduce a new, super sexy Flash memory music player in the US this year after successful launches in Japan and Europe. The new player, dubbed the E500 series, brings Sony back to its glory days when the world waited with bated breath for every gadget introduction. The E500 series looks like a synthetic jewel and addresses every deficit of the iPod Shuffle head on.

Until the E500 series, Sony has failed on numerous occasions to develop a competitive model to the iPod that would erode their dominating market share. The pinnacle of Sony's inane strategy came when two different divisions launched very similar music players that were not only competing directly against each other, but were also sub par in technology and ease-of-use. Even worse was Sony's debut of Connect, their competitor to iTunes. Connect was clumsy, poorly designed, and didn't even work well with their hardware offerings.

After Sony's electronic division reported an operating loss for the second straight year, CEO Nobuyuki Idei stepped down and was replaced by Howard Stringer, Sony's first-ever foreign chief executive. With the electronics division in dire need of CPR, Stringer's first task was to bring all the division rivals under one umbrella so they could work as a team.

However, many of the department heads didn't want to work together, and many were strong-armed into an alliance including famed Walkman engineer Taskashi Fukushima. Fukushima was the direct result of over 50 years of internal competition which fueled Sony's corporate culture. His current designs were out of touch with not only the trendy Japanese School Girl market, but also the entire world. His insistence of not supporting MP3 files and relying on the Minidisc format for storage, instead of an internal hard drive, yielded an embarrassing Walkman flop.

Worse yet, Apple introduced a Flash iPod line called the Shuffle which completed their pricing vertical of the portable music player market. The Shuffle doesn't have a lot of bells and whistles, but it's got it where it counts, large storage, small size and excellent sound. The Shuffle extends the iPod line down to $99 and $149 price points and works seamlessly with iTunes. In Futuremusic's Head2Head review with a rival Flash player, the Commodore MpetII, Apple's technology, sound quality and ease-of-use carried it to victory.

Sony's reluctant to call it a comeback, but that's exactly what the E500 line represents to the company. Although, a completely revamped Connect music service and a new Walkman hard-drive based player is due in the Fall, the E500 series showcases Sony's new commitment to the music player space. Sony's electronic division accounts for 70% of their total company revenue, so the previous missteps have not only seriously hurt them in their coffers, but, more importantly, in brand equity.

The first release of the E500 series, the NW-E507, looks like a small bottle that contains liquid metal. Hiding inside is a high-tech three line LED display that shows the artist, track name, battery life and playtime. The display can also be set to "bubbles" which gives the illusion of small bubbles rising from the bottom to the top, like a carbonated beverage. Very slick. The futuristic display is a major competitive plus in Sony's feature for feature battle with Apple.

The NW-E507 also plays MP3 files natively, not requiring the user to encode their library into Sony's proprietary ATRAC format. This is huge. ATRAC, developed for Sony's unique Minidisc format, is a reasonable lossy format, but many potential users have amassed enormous MP3 collections. The idea of having to convert their MP3s to ATRAC and then maintaining two separate libraries of music was a major turnoff. Old-school Sony engineers like Fukushima, held steadfast in their contention that ATRAC is a superior sound format than MP3, and Sony's players should not support MP3 - a philosophy that was completely out of touch on how most users obtain their digital music.

The controllers on the NW-E507 have also been addressed for efficiency and ease-of-use, and they integrate beautifully into the design. Also included is a FM receiver that many are finding quite capable of pulling in low powered stations. The end cover hides a USB port for transferring files and recharging the battery. Sony claims battery-life of 50 hours when playing an ATRAC file and has a quick charge feature that gives you three hours when you plug it in for only three minutes. Very cool. The NW-E507 supports has a hole on one end for attaching a lanyard, although they don't supply one.

The NW-E507, what the unit is called in the UK, is not what marketers like to call "cuddly." Many in Sony's US offices are lobbying for something a little more personable, like the "Walkman" or the "iPod" that they can leverage in snappy advertisements, but they are not holding their breath. The unit's Achilles heel is the accompanying software, SonicStage. Even the third generation of the software is nowhere as good as iTunes, or even MusicMatch. "It's a sloppy, bloated program thats unintuitive and not very attractive," according to our UK sources. The NW-E507 should be available stateside by the Fall in 512 MB and 1 GB versions. The Japanese and European versions are about 50% more expensive then their Shuffle counter parts, but the added features and Sony's marketing muscle will make it very attractive to the Flash player market.

The Future: The NW-E507 is a nice start, but Sony still has a steep uphill battle to climb if they want to even get close to Apple. Many Wall Street analysis publicly stated that they didn't feel Apple could sustain its growth in the iPod market, but last weeks quarterly results demonstrated that Apple's high-water mark may have not been reached. Apple sold 6.2 million iPods last quarter. Six million! Their revenue hit $3.52 billion up from $2.01 billion the year before, exceeding predictions and buoying the stock.
Sony still has serious work to do to consolidate its battling divisions, and integrate its hardware players with Sony's Connect Music Service. With the 50 year old culture of internal one-upmanship instead of teamwork, this is not going to be an overnight affair. Even if Sony debuts a slick new, hard-drive based Walkman portable player and a significantly improved Connect, we don't see them even being competitive to Apple for another two years.

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