You have to give it to Sony (SNE) … Consumers continue to steer clear from smartphones stamped with “Sony” as if they were the bubonic plague itself … and yet it refuses to back down even a little.
In fact, Sony just released three new Xperia Z5 phones, including the Xperia Z5 Premium, boasting the world’s first 4K display on a smartphone.
It’s actually not too shabby a phone. Nevertheless, it’s time for SNE to throw in the towel.
4K? For What?
Earlier this year, Sony CEO Kazuo Hirai indicated SNE would no longer be trying to grow its smartphone business in the face of the triple threat of Apple (AAPL), Samsung (SSNLF) and the numerous cheaper Asian manufacturers.
Going even further, Hirai was quoted in Reuters as saying he would not “rule out considering an exit strategy” for Sony’s mobile division.
At the time, Sony smartphones were in the no. 10 spot worldwide, compared to a sixth place showing in 2013. By its first quarter in 2015, SNE had dropped out of the top 10 altogether. At the moment, its mobile division is losing over $1 million per day.
The problem for Sony is that Apple and Samsung dominate sales of flagship mobile phones, selling over 40% of all smartphones between the two companies. Next are a collection of Asian manufacturers duking it out for sales using a combination of premium design, low prices and Google’s (GOOG, GOOGL) Android operating system.
It’s a win for consumers (while collectively the competition is eating away at Samsung’s Android dominance), but none of these companies have much more than a 5% market share. And with Apple and Samsung still accounting for over 100% of the industry’s profits, none of them are making money, either.
Sony’s new Xperia Z5 phones are well designed, offer competitive hardware and run Android, just like the rest of the pack. They look pretty similar to Sony’s previous generation Xperia smartphones, which is to say they’re capable and attractive — but so were the previous generation models, and they were so poorly received that SNE dropped out of the top 10.
The Xperia Z5 Premium is something different. It’s the world’s first smartphone with a 4K Ultra HD display. That gives Sony some bragging rights, but will consumers actually care? The Xperia Z5 Premium’s 5.5-inch, 4K display has a pixel density of 806 pixels per inch. In contrast, the iPhone 6 Plus has a 401 ppi display. That’s a massive advantage, at least on paper.
In reality, the difference may be tough to distinguish to the human eye, especially at arm’s length. The Xperia Z5 Premium will seem sharper, but not twice as sharp as the iPhone. And a display of that extreme resolution introduces all sorts of technical challenges — moving that many pixels takes power and actually watching native content is incredibly expensive in terms of storage. As a result, Sony has had to put a big battery inside, and the Xperia Z5 Premium accepts microSD cards up to 200GB in capacity.
It’s tough enough getting consumers to upgrade their HDTV’s to 4K, so what incentive is there to buy a new smartphone with that kind of resolution?
In other words, there’s a lot of expensive technology in this phone, supporting a very expensive display that has limited consumer appeal. The move of shoehorning a 4K display in a smartphone smacks of desperation — trying to win attention by igniting a spec war.
Sony smartphones are quality devices with nice design, but that’s not enough to make it into the top 10 these days. The Xperia Z5 Premium’s 4K display is earning SNE some press right now, but that’s not going to move the needle either. And even if it did, the most successful of current Samsung and Apple contenders is still struggling to break even on a mere 5% market share.
What’s the point of fighting your way into a similar position?
SNE should shut the door on the Sony smartphones division, and invest the money and effort in its camera and PlayStation divisions instead.
As of this writing, Brad Moon did not hold a position in any of the aforementioned securities.
