Sony's (NYSE:SNE) had its share of issues this year; that's why I made it my choice as a Halloween Trick for our annual Tricks & Treats feature this past Halloween. And like the Ghost of Christmas Past, one of its issues from last year is coming back to haunt it, as Sony has started settlement procedures from its rootkit controversy last year.
You may recall the hoopla when it came to light that Sony's Sony BMG (operated with Bertelsmann) musical arm was using aggressive digital rights management (DRM) technology that, among other things, planted software (rootkits, which many consider to be about the same as spyware) onto customers' PCs without their permission or knowledge.
According to CNET, Sony is settling with California and Texas for $1.5 million, and affected consumers with damaged PCs will be able to receive $175 each in compensation. However, CNET also pointed out that there are 13 other states that Sony must contend with about this issue, as well as an FTC investigation.
A couple million is certainly a drop in the bucket for Sony. After all, this massive Japanese electronics and media conglomerate makes billions of dollars in sales every year (and that's a lot of yen). And of course, the rootkit settlement thus far pales in comparison to the financial hit Sony is taking related to the massive battery recall affecting Apple (NASDAQ:AAPL), Dell (NASDAQ:DELL), and many other PC makers' laptops, including its own.
However, I've long contended that situations like this one boil down to much more than just dollars and cents. Such missteps like the ones Sony has made over the last year or so are bothersome on a branding level, and in my opinion, treating customers with what can be perceived as such disregard can't be a good thing, especially when people are increasingly aware of what companies are up to through the Internet.
While the CNET article did quote an individual from the Los Angeles district attorney's office who said he believes Sony BMG has learned a valuable lesson from the rootkit experience, and is being cooperative with the proceedings, I can't help but wonder if some of Sony's occasional less-than-customer-centric habits are systemic. Earlier this week I wrote about how Sony's PR agency dreamed up a fake blog, or flog, to drum up interest for its PSP for the holidays -- and when Internet users got to the bottom of it, judging by the comments on the site, their indignation with Sony was pretty apparent. It seems obvious Sony should not have OK'd such a campaign without insisting there be full disclosure on the site that it was, in fact, an advertising campaign.
While a corporation is the sum of many parts (many, many in Sony's case), and one as large as Sony employs scores of people with varying degrees of good or maybe not-so-good judgment, the truth is customers who really feel burned by such incidences aren't going to make excuses or cut much slack. And that's why I still think that for investors, Sony remains a tricky gamble until it can keep itself out of the negative limelight and put forth a more customer-oriented approach. There's no such thing as too big to do the right thing.
For related content, see the following articles from the Foolish archive:
- I'm not the only one who thinks investors should tune out Sony right now.
- Sony got flogged over its fake blog.
- Flash back to last year's rootkit controversy.
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Alyce Lomax does not own shares of any of the companies mentioned.
