Putting the Sony ridesharing service into context
The market is big but will CEO Yoshida have the stomach for it?
The announcement that Sony would be dipping its toes into the ridesharing or taxi-hailing business in Japan took many by surprise. Sony, mostly known for their hardware, has never been one for developing great software and a key component of services such as Uber and Lyft is their ease of use for consumers and drivers.
Yet a market that’s projected to be worth $276 billion by 2025 is seemingly too good for Sony to pass up. As a recap:
Five taxi operators will form a joint venture with Sony to build the platform. The aim is to dispatch taxis more efficiently by analyzing such factors as past rides, traffic and weather conditions, and event schedules.
Sony, which uses AI in such products as the Aibo robot dog, has been looking to raise its profile in both consumer and business applications of the technology — an effort that has seen it make investments in the U.S. and joint ventures in Japan.
Now it’s worth mentioning that AI in AIBO is putting it generously and yet that’s a core part of Sony’s pitch for this new venture. Semantics aside (where it’s best to replace AI with software in 90% of instances), it’s first good to establish the current ridesharing market in Japan. Leo Sun writes this for The Motley Fool:
Japan’s ridesharing market is much more tightly regulated than that of the U.S. Nonprofessional drivers are banned from offering taxi services, so ridesharing services must secure partnerships with existing taxi fleets.
Many ridesharing companies previously avoided Japan in favor of less regulated markets, but the competition is heating up. Softbank , one of Japan’s top telcos, recently established a joint venture with Didi Chuxing, China’s top ridesharing service, to launch a new ridesharing platform in Japan.
Softbank is also a major investor in Uber, which recently announced plans to enter the Japanese market. But Uber has struggled in other Asian markets — it sold its Chinese unit to Didi Chuxing in 2016, and is mulling the sale of its Southeast Asia unit to Grab, the leading ridesharing platform in the region.
Toyota, which is also an Uber investor, recently agreed to invest 7.5 billion yen ($70 million) in the ridesharing app JapanTaxi — in which it previously invested $4.5 million via its Mirai Creation Fund. JapanTaxi is owned by Ichiro Kawanabe, who runs Japan’s top taxi operator Nihon Kotsu and leads the country’s taxi federation.
Going into it, Sony is already facing a lot of competition from companies with a better track record on such ventures and perhaps more importantly, companies with deeper pockets than them. To this day, neither Uber or Lyft have yet to turn a profit and in fact lose billions each year.
Sure Sony is used to the idea of losing billions of dollars each year (looking at you mobile and TVs, which, to be fair, have stabilized and turned a profit recently), but losing billions strategically towards a longer term plan is very different than losing billions because of your inability to compete.
Does Sony under Kenichiro Yoshida actually have the stomach, cash, and long term vision to stick to such a hyper competitive market that requires you to have world class software, or, excuse me, AI?
As Sun notes:
Sony’s weak position in smartphones means that it won’t benefit by preinstalling its ridesharing app on its own devices. Meanwhile, Softbank could preinstall its new platform with Didi Chuxing (or Uber, when it arrives) across a wide range of smartphones at its stores. Sony’s spotty record of privacy and cybersecurity issues could also weaken the appeal of its ridesharing service.
Hirai is often considered a “visionary” CEO, especially in gaming and music, but Yoshida has a reputation for cutting costs. So under Yoshida, Sony could sell weaker businesses like Sony Pictures and its mobile division.
It might also abandon investments in next-gen technologies, like ridesharing apps, if they fail to grow or turn a profit. Uber and Lyft are both still unprofitable, so Sony’s ridesharing effort could easily become a money pit, especially if it lowers its fees to counter big rivals like Softbank, Didi Chuxing, and Toyota.
Now I don’t fully agree with Sun on the first topic — neither Uber or Lyft became dominant because they were pre-installed on any specific platform, but his greater point stands — but he’s absolutely right after that. Does Sony really have the stomach for this?
In all likeliness, this was an iniative which was fully developed under Kaz Hirai and with the much liked CEO on his way out, how long before the soon-to-be CEO, Kenichiro Yoshida, cuts the initiative?
And if he does, would anybody notice? After all, in just the past few years at CES, Sony has unveiled drones, smartwatches, wearables such as trackers for tennis rackets, and Hi-Res Audio, all which have gotten nowhere and/or are dead and it’s all a shame because individually, none of them were bad ideas. Neither is this. The upsides might be vast but it takes more than an idea to thrive and under the current corporate culture at Sony, I’m not sure if such visions can succeed.
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