Oh, Sony (NYSE: SNE). for a company that's supposed to be clued in to what consumers want and need, you seem so clueless at times. And now you're going to pay for it.
If media reports are accurate, the Sony BMG Music joint venture has proposed a settlement that would compensate customers who had to put up with the spyware contained on the company's music CDs. Fellow Fool Alyce Lomax has already written about this issue, so I won't rehash much of it here, other than to say that several lawsuits were filed against the company alleging that "copy protection" technology on music CDs was actually spyware that had the nasty side effect of making computers more vulnerable to viruses, other spyware, and similar intrusions.
Sony has proposed a settlement whereby people who purchased CDs with the offending technology can exchange them for discs that are free of the garbage. What's more, the customer can then choose one of two compensatory packages: one that would offer a cash payment of $7.50 and a free album download, or a second that would offer three free album downloads from a list of reportedly more than 200 titles. To help facilitate matters, Sony would reportedly try to offer Apple's (Nasdaq: AAPL) iTunes as one of the available download services.
It's hard to say how expensive this will ultimately be for Sony, especially since two different technologies are involved. Extended copy protection (or XCP) was on roughly 2.1 million discs sold to customers, and MediaMax could have been on as many as 20 million discs. While the cash payments aren't going to do irreparable harm to Sony, who's to say how much damage the company has done to its image and its brand through this misstep?
What's more, the company just doesn't seem to get it. Hot on the heels of this spyware flap, the company is also getting guff for a PlayStation marketing campaign that's using graffiti in urban areas of Philadelphia, New York, and other large cities to promote the game console. Marketing through vandalism and the defacement of property? Good thinking, guys. How would you like it if Microsoft (Nasdaq: MSFT) hired somebody to spray paint "Xbox Rulz!" on the side of Sony headquarters?
There was a time not so long ago that I was investigating Sony as a potential two-for-one Japan and turnaround play. While the stock has certainly been strong (near a 52-week high), I just don't think I can pull the trigger on a company that seems committed to tripping over its own digital feet and aggravating consumers in the pursuit of more money.
For more on the Sony saga:
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Fool contributor Stephen Simpson has no financial interest in any stocks mentioned (that means he's neither long nor short the shares).
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