Sony jumped into the current “Who’s On First” craze sweeping the industry, claiming number-one market share positions in DVD players, projection TV and big-tube color at a recent media briefing in New York held by Sony Electronics (U.S.) president Teruaki Aoki.
It was the second such annual meeting for Aoki, who uses the event to outline results for the past fiscal year. Those leading market claims (including a 25%-30% share of DVD sales and 30% of 30″-&-over direct-view color) were among highlights of what Aoki acknowledged “was a tough year for Sony.”
Sony Electronics sales for the year to March 31 came in just slightly higher than last year, he said, totaling $10.6 billion, with A/V products about holding steady with around a 50% share.
Although Sony scored in consumer products, including a strong performance from its PlayStation game consoles and software, it struggled in a number of other areas.
In information technology its results were held down while Sony shifted focus from desktop to laptop PCs. That change was a success, Aoki said, and claimed Sony now ranks third in the portable arena, behind Toshiba and Compaq.
Sony had PC sales last year of about $1.2 billion and overall computer sales of $3 billion with the inclusion of monitors and peripherals.
In monitors, Aoki said, Sony found itself non-competitive against Korean producers as prices plummeted by 45%. Sony, he said, “was unable to catch up with that” by improving production efficiencies. Now the company is introducing monitors with flat-faced CRTs, which should command premium pricing.
In peripherals, business is picking up, and Sony is now shipping a half-million CD-RW drives monthly, making it the company’s leading PC product.
Sony’s cellular business suffered from price erosion and quality problems, and Aoki noted it was unable to meet the demand for its semiconductors. Those areas should be performing better this year, he indicated.
Looking ahead, Aoki said that though Sony is enjoying a strong consumer business “the consumer mood is sometimes difficult to predict . [so] I am not now in a position to make a forecast for the rest of this year.” In any case, he is looking at this as another “transition year, and after 2000 we will start to come back to higher growth in electronics.”
Aoki indicated he isn’t looking for a major contribution from Super Audio CD players Sony will be introducing this fall. At $5,000 it “is a niche product for high-end users” interested in the superior sound quality, and “it is really premium audio that has nothing to do with DVD Audio, which is an extension of CD.”
However, he added, Super Audio CD “circuitry is very straightforward,” so player pricing could come down to the consumer level in a few years, and in fact, “eventually all CD players could have Super Audio CD chips in them.”
In digital video, Sony is exploring HDTV promotional opportunities with the major TV networks, and while it sees video hard drives as “an important storage media for the consumer market,” it has no current product plans.
As for online sales, Aoki said Sony has been selling PCs direct since July, “and while that is successful it is only 15% to 18% of our business.” Peripherals are being added soon. But in a broader view, Aoki said he doesn’t “see e-commerce taking over retail sales. We still need the retail floor.” With the current flood of new products “the retail floor is going to be more important,” with both the major chains and smaller dealers necessary if Sony is to be able to “demonstrate to consumers how to enjoy its new products.”
Sony is in the process of deciding “how to utilize the Internet with major consumer electronics customers,” said Aoki, “but we are still not ready to announce plans.”
Aoki avoided most specific sales forecasts for this year, but did say he saw industry sales of 2.5-3 million DVD players and predicted MiniDisc players would double and hit the million mark. Last year Sony set a 500,000 sales target for own-brand MD players, but it apparently now sees that as the industry-wide result for 1998.
A short-term major hit for Sony was last week’s Internet-only introduction of AIBO, its $2,500 robotic dog with artificial intelligence that enables it to learn and adapt. Sony reportedly quickly sold out of the 3,000 units available in Japan and the 2,000 offered here.
Aoki said AIBO utilizes an open architecture, which means that down the line “hobbyists could use an arm here, a leg there” in combination with devices from other manufacturers to make custom robots. “It’s do-it-your-self robotics.”
But while ‘selling product is important, creating new services is more important,” and Sony is seeking partners with expertise it doesn’t have to help it develop new area, as its tie with IBM is taking in into online music sales and other partners are helping put in into the consumer and commercial financing business.
