Faced with a changing retail distribution landscape for CE products, the Federal Communications Commission's digital television tuner mandate extending to 50 percent of all 24-inch to 35-inch TV sets in July, and the pending launch of the Blu-ray Disc format, Sony is facing some new challenges in 2005.
TWICE caught up with Sony's home products division senior VP Mike Fidler during the company's recent open house for deal ers and press, here, (See coverage starting on p. 4) to get an update on some of the more pressing issues ahead.
What distribution adjustment, if any, is Sony planning for 2005?
The QUALIA line is starting to get seated into specialty distribution, and that will continue to grow and expand into more high-end custom installers. We are seeing a little more business in the warehouse clubs, but we are trying to do it the right way. Most of the time it is using a derivative product strategy while maintaining balance across the rest of the distribution channels. The Channel 1 dealers, as we used to call them — the Costco's and so forth — attract a very good, affluent customer. You have to make sure to use the right strategy to bring your products into that mix.
More and more CE dollars are going to Wal-Mart every year. How is a step-up brand like Sony adapting to that change in the market?
We have partnered with Wal-Mart, and we've had our struggles, to be frank, in trying to make the premium
value of Sony play strongly across the entire breadth of their retail business and storefronts. A lot of our strategy is focusing on key stores, where there is a different level based on the demographics of the shopping area, to make sure that we match that better, as opposed to trying to get broad level distribution across all 2,800 stores.
They are making some very concerted efforts to improve HDTV distribution in their stores in terms of delivery. So, there are opportunities for us, and I think one of those will be the expansion of LCD TV. We now have very affordable products — starting at about $500 for a 15-inch TV. We are now in the zones that play better in that segment of the market. We try to make sure that we go where the distribution demands dictate.
How does Sony expect to grow its business in direct-view CRT, which is expected to decline for the industry in 2005?
Right now we are at about 30 percent of the CRT business, and we are looking to increase it. Dealers now are starting to limit their assortments, so they are not going as broad as they once did, but they are going deeper. They traditionally are trying to make sure that they keep the right brands to attract customers, and we usually play very well in those types of categories, where it is the harvest period.
The challenge will be to determine how quickly you move in and out of these types of goods. The industry is still going to sell 18 million CRTs this year, so it's still a big business. That's a lot of footsteps coming into a retailer, so you shouldn't abandon it too soon.
With the next phase of the FCC's DTV-tuner mandate slated for July, how much of a premium will Sony be adding for fully integrated DTV CRT products this year?
We are trying to keep it as close as we can to the current line. It's difficult. There will probably be some premium for adding in an ATSC tuner, so in many models we've added digital cable ready capability because we think it extends the value proposition to consumers. The tuner is an expense, so we have tried to find other ways to reduce costs in the material elements of the product.
Will Sony add ATSC tuning to a standard-definition television displays this year?
It depends on what the pending FCC decision [on pushing back the DTV-tuner mandate to March 2006 and making it apply to 100 percent of models in the 24-inch to 35-inch screen sizes]. Obviously, the timing of the decision is critical, because the current mandate is for July on at least 50 percent of those screen sizes. We have some options for SD-based products with ATSC. It just seems a little confusing. Fortunately, most of the sets are tooled. We aren't changing sizes or cosmetics. We are in that cycle [for CRT direct-view products] where not a lot of new investment is occurring. Most of the new investment is focused on LCD, SXRD and Grand Wega.
What are the current plans for introducing the first U.S. Sony Blu-ray Disc products?
We still have a late 2005 launch goal — but to be quite frank it looks like early 2006. There is still work to be done on the content protection side, and a few application elements to finish. Everything else — the codecs etc. — is pretty much done. There are also negotiations to be done on the recording side for rights usage as well as for robustness rules. So, that will still take a little time. Some of it will continue as the products are introduced.