Sony is actively entering the Web3 industry through the acquisition of centralized exchanges, the launch of the Soneium blockchain mainnet, and the development of stablecoins. The company’s Web3 strategy focuses on three pillars: non-financial (entertainment and gaming), financial (stablecoins, security tokens), and infrastructure. Sony aims to build a comprehensive Web3 ecosystem and accelerate digital transformation.
Introduction
Sony, once a symbol of Japan’s economic growth and a leader in electronics, gaming, and entertainment, faced challenges in the 2000s as its dominance began to wane. The company struggled to adapt to the rapid transition from analog to digital, leading to increased competition from companies like Samsung. Sony’s slow response to market changes put it in a crisis.
In response, Sony took decisive actions to overcome these challenges and enter a new phase of growth. The company significantly reduced its reliance on its electronics business, which used to account for 70% of its total revenue, and instead focused on the future-oriented entertainment industry. This bold restructuring laid the foundation for future growth and profitability. By 2023, Sony’s operating profit surpassed Samsung’s for the first time in 24 years, highlighting the success of Sony’s transformation and innovation.
Sony’s pursuit of innovation goes even further. In its recent annual strategy meeting, the company announced its commitment to pursue innovation that goes beyond industry boundaries, under the slogan “Beyond Boundaries.” This aligns with Sony’s recent initiatives in the Web3 space. This report will examine Sony’s blockchain initiatives and explore its vision for the Web3 industry, aiming to gain a deep understanding of Sony’s future plans and strategic direction in the Web3 space.
2. Sony Group’s Entry into the Web3 Industry
Sony’s pursuit of innovation goes even further. In its recent annual strategy meeting, the company announced its commitment to pursue innovation that goes beyond industry boundaries, under the slogan “Beyond Boundaries.” This aligns with Sony’s recent initiatives in the Web3 space. This report will examine Sony’s blockchain initiatives and explore its vision for the Web3 industry, aiming to gain a deep understanding of Sony’s future plans and strategic direction in the Web3 space.
2017: Sony Global Education develops a blockchain-based digital education platform.
2018: Sony Corporation, Sony Music, and Sony Global Education jointly develop a blockchain-based digital content copyright management system.
2018: Sony Computer Science Laboratories (CSL) develops IC card-based cryptocurrency hardware wallet technology.
2020: Sony develops a blockchain-based database platform for a smart city research project in the Netherlands.
2021: Sony Pictures offers NFTs to pre-order customers of “Spider-Man: No Way Home.”
2022: Sony Interactive Entertainment applies for Web3 technology patents, including in-game NFTs.
2022: Sony Group establishes “SNFT,” a subsidiary operating an NFT marketplace.
2023: Sony Network Communications and Startale Labs form a joint venture to build a blockchain mainnet.
2023: Sony Group subsidiary Quetta Web acquires the centralized exchange platform “WhaleFin.”
2024: Sony Bank begins concept verification experiments for stablecoin issuance.
2024: Sony Bank develops the mobile NFT platform “Connect.”
2024: Sony Blockchain Solution Laboratory announces the launch of the Ethereum L2 mainnet “Soneium.”
Sony has been actively investing in and developing blockchain technology since early on. Various Sony subsidiaries in different industries have been exploring ways to integrate blockchain into their respective fields. The first significant move was in 2016 when Sony Global Education announced plans to develop a blockchain-based digital education platform.
The experience gained from developing this digital education platform quickly expanded to other fields. Sony Music Entertainment applied the technology to authenticate, share, and manage copyrights of digital content, including music, movies, and e-books. In 2018, Sony Computer Science Laboratories introduced a hardware cryptocurrency wallet based on non-contact IC cards. By 2019, Sony had established a blockchain-based database platform for a smart city research project in the Netherlands.
Since 2022, Sony’s blockchain-related initiatives have significantly accelerated, aligning with the Japanese government’s policies to promote the Web3 industry. Sony is shifting from blockchain research to turning this technology into viable business models. Recent initiatives, such as acquiring centralized exchange platforms, announcing plans to launch stablecoins, and introducing their own blockchain mainnet, reflect this transformation. It is noteworthy that Sony is boldly expanding into the core areas of the Web3 ecosystem, breaking traditional business boundaries to challenge the Web3 industry. The following section will explore Sony’s recently announced Web3-related businesses.
1) Business Expansion through CEX Acquisition
In August 2023, Sony acquired the centralized exchange platform “WhaleFin,” marking its official entry into the trading business. WhaleFin, initially launched under the name DeCurret, is a registered Japanese centralized exchange platform service provider that was acquired by Amber Group in 2022 and ultimately fully acquired by Sony Group’s wholly-owned subsidiary, Quetta Web.
Recently, Sony rebranded WhaleFin as “S.BLOX” and aims to expand its trading business. The company aims to enhance the user experience of the trading platform and create new value in cryptocurrency trading by leveraging Sony Group’s diverse business connections. Despite these ambitions, S.BLOX currently lacks competitiveness compared to other trading platforms. The platform offers only nine cryptocurrencies, has low trading volume, and generates revenue 20 times less than Japan’s leading exchange platform, Bitflyer, raising questions about its future potential.
Nevertheless, there is still room for synergistic development through Sony’s acquisition. Centralized exchange platforms serve as entry points to the Web3 industry and can create significant synergies by relying on enterprises that depend on them, especially in the face of challenges in the entry and exit of cryptocurrencies. Furthermore, the integration of Sony’s various Web3 industry connections is expected to help enhance the competitiveness of the trading platform.
2) Soneium, Sony’s Blockchain Infrastructure Business
Sony Blockchain Solution Laboratory announced its official entry into the mainnet business and plans to launch the Ethereum Layer 2 blockchain, “Soneium,” approximately one year after establishing a joint venture with Startale Labs.
With this announcement, the joint venture’s name changed from “Sony Network Communications Laboratory” to “Sony Blockchain Solution Laboratory.” Sony Group holds a 90% stake in the joint venture, while Startale Labs holds the remaining 10%. Given Sony Group’s controlling position, the joint venture is expected to play a central role in Sony’s Web3 strategy, providing infrastructure for the application and integration of Web3 technology across various departments.
An important aspect of Sony Blockchain Solution Laboratory’s strategic approach is that it is not merely launching a new mainnet. By integrating Astar’s zkEVM technology into Soneium, Sony aims to leverage this technological asset to accelerate business development. This approach is consistent with Sony’s recent track record of success through bold innovation, contrasting with Japan’s traditionally conservative corporate culture.
The personnel structure is also noteworthy. Sony Blockchain Solution Laboratory is led by Jun Watanabe, the former president of Sony Network Communications and a member of the Startale Labs board of directors. He is also responsible for Sony Group’s cryptocurrency trading platform, S.BLOX. This leadership arrangement not only highlights the potential for internal collaboration within Sony Group but also suggests closer business opportunities between Startale Labs and Astar Network.
3) Sony’s Stablecoin Business
Sony has shown a strong intent to enter the stablecoin market. According to a report by Nikkei in April, Sony Bank, a subsidiary of Sony Financial Group, has begun experiments to issue stablecoins based on various fiat currencies, including the Japanese yen. This move appears to explore the potential of using stablecoins as a digital payment method within a broader range of Sony Group.
At the same time, Soneium’s involvement in stablecoins has also increased interest within Sony Group in stablecoin-related business. In September, Soneium announced a collaboration with Circle, the issuer of the US dollar-backed stablecoin USDC, to support USDC within the Soneium ecosystem.
This move has sparked discussions about whether Sony will issue its own stablecoin on the public Soneium mainnet. However, this plan is expected to face significant challenges. Regulatory authorities have indicated the risks of issuing stablecoins on public mainnets, especially stablecoins issued by banks, and may require time-consuming regulatory changes.
Despite these difficulties, the participation of leading Japanese internet banks like Sony Bank is seen as a positive signal for the industry. If Sony Bank can successfully issue stablecoins on Soneium, it could support various applications, including cross-border payments through integration with USDC. The future development in this area is worth closely monitoring.
3. Where will Sony’s Web3 Business Go?
Sony plans to adopt a comprehensive Web3 business strategy that encompasses multiple subsidiary companies. This strategy is likely to be built around three key pillars: 1) non-financial sectors, 2) financial sectors, and 3) infrastructure.
The non-financial sector is expected to be led by Sony Group, particularly focusing on leveraging Web3 technology in entertainment and gaming. Sony Music has already launched NFTs based on its artists’ intellectual property and is actively exploring the commercialization of music IP through Web3 technology. Discussions on utilizing Web3 in the gaming industry are heating up, as evidenced by recent patents related to NFTs and SFTs.
The financial sector is expected to be led by Sony Financial Group, which is currently preparing for a spin-off from Sony Group. They will focus on the integration of Web3 technology with the financial industry, including stablecoins and security tokens. Sony Bank has been conducting research and development for stablecoins and became the first Japanese bank to sell loan bonds as security tokens. Based on this foundation, Sony Financial Group is expected to further expand the application of Web3 technology in the financial sector.
Lastly, Sony Blockchain Solution Laboratory is expected to manage the infrastructure that serves as the foundation for all of Sony’s Web3 initiatives. While technically a part of Sony Group due to Sony’s controlling stake, the laboratory is expected to provide infrastructure services to both Sony Group and Sony Financial Group, acting as a bridge between the two. By efficiently leveraging Sony’s assets, Sony Blockchain Solution Laboratory is expected to be a key enabler in driving synergy among Sony’s Web3 businesses.
These three sectors may organically connect with each other. For example, stablecoins issued by Sony Financial Group could serve as a payment method within Sony Group, or Sony’s various intellectual property assets could be tokenized by Sony Financial Group. These collaboration opportunities are abundant and can enable Sony to establish a comprehensive Web3 ecosystem covering its diverse business domains.
4. Conclusion
Sony, once the dominant force in the electronics market with the Walkman in the 1990s, struggled to diversify in the 2000s. The rise of Apple’s iPod weakened the Walkman’s position, and competition from Korean companies like Samsung and LG threatened Sony’s position in the LCD TV market. The company failed to keep up with the rapid transition from analog to digital, putting it in a vulnerable position.
To recover, Sony adopted a strategy of “selection and focus.” They reduced underperforming businesses and made significant investments in core areas with high growth potential. As part of this transformation, Sony has viewed blockchain technology as a new growth driver and actively explored related business opportunities. Combining blockchain with Sony’s rich entertainment content, including gaming, music, and movies, is expected to create innovative user experiences and business models.
This approach by Sony may accelerate the digital transformation of its existing business domains while opening up new revenue streams. Aligning with its recent vision of “Beyond Boundaries: maximizing synergies within the group,” blockchain technology is expected to play a key role in creating synergy among Sony’s various departments. We look forward to seeing how this long-standing industry leader leverages blockchain to create new value and enhance its market position.
