Mike Fasulo, president/COO of Sony Electronics, was in New York for several days in November for the annual Anti-Defamation League industry dinner and events held by the Consumer Technology Association. But, from his company’s perspective, the most significant moment of the visit was the rollout, with Best Buy, of 79 high-res audio listening stations in the retailer’s Magnolia Design Centers nationwide at an event at the retailer’s Columbus Circle store in Manhattan.
Fasulo sat down with TWICE at the event not only to discuss the listening stations, but discuss the 4K TV market and changes in CE retailing in the past couple of years. Here is part of our conversation:
TWICE: Is the partnership that you have with Best Buy, which includes these high-res listening stations, an illustration of how manufacturers and retailers have been able to partner more effectively in the past several years?
I hope so. My biggest criticism of the industry is that we don’t come together as manufacturer, retailer and content provider in front of the consumer. We come to them independently. And that makes it more difficult for the consumer. The consumer sees three of the top major labels, top leading manufacturer and top retailer in the nation working together; that builds confidence that a technology is here to stay, something that is special and value added. So I hope so.
TWICE: For Sony, have partnerships like this been a good transition from your own brick-and-mortar stores?
Moving away from our own stores has been probably the most difficult decision I’ve had to make. I opened those stores. I also closed those stores. They provided, in my view, the best customer experience for the Sony brand possible. The next best experience are these [Sony departments at retail]. In the past two years I have refocused the whole team on what we stand for in the consumer business, which is premium value. So here in Sony Retail Experience at Best Buy we can demonstrate “Why.”
Kaz Hirai [president and CEO of Sony Corporation] always says to us: You always have to answer the question, “Why do I care?” to the consumer. “Why do I care you have the best technology on the planet?” and “What’s that going to do for me?” So these environments allow us to spend quality time with the customer rather than [having] a sea of sameness, or a sea of price, or a sea of screen sizes. And fit them into not only what they are looking for in a lifestyle point of view but from a pocketbook point of view.
TWICE: Will Sony employees be at the high-res demo units initially?
No, but in Best Buy stores where there is a Sony Retail Experience or a Camera Experience, where we have dedicated labor, they will clearly cover this area as well. And we will dedicate significant investment and resources as well as training to know the product inside and out.
TWICE: What has been the most significant change in CE retailing in the past year and a half?
A few things have happened. I think it has become more exciting again [at brick-and-mortar stores]. It was getting flat, particularly with the transition from packaged media to online media and digital distribution. The stores didn’t have that excitement at retail, releases on Tuesdays, where people didn’t line up to get the new record or the new movie.
The advent of 4K UHD provided a new platform to deliver entertainment again. The great thing with 4K, Sony’s 4K at least, is that we can deliver movies, music and entertainment through any distribution mechanism the customer wants, whether it is download – which outside of packaged is the best – packaged or streaming, we can do that. So again we have brought the excitement back to retail.
We are at Best Buy, but if you are at Abt Electronics in Chicago or Audio Video Center in Los Angeles, its BrandsMart, its P.C. Richard & Son, its Starpower … their stores these days are brighter … more exciting.
TWICE: Best Buy had problems a few years ago, and one issue was the change in demand for packaged media.
You can’t just close the space; you have to put something into it. I think that [chairman/CEO of Best Buy] Hubert Joly came in and really understood from his previous experiences what a great customer experience looks like and has driven that here. It is a different environment [at Best Buy] now, and I think it’s a relevant and thriving environment.
TWICE: How do you think the 4K TV market will do in Q4? Are you surprised about consumer acceptance given there is relatively little content for the format now?
First one, I think we will have a great season in 4K, TV overall. Year on year it doesn’t grow 10 percent, 20 percent [in units]. It is always 1 or 2 percent growth, give or take. This year we will sell 43 million or so TVs into the marketplace as an industry. And that’s almost every year we do that. The difference is 4K is three or four times growth from the prior year, and those sales have to come from someplace. So HD is compressed.
In HD there is such a sea of brands, of screen sizes, of quality ... of lack of quality … that’s just that people have to fight it out for market share.
The TV industry, particularly in North America, is very healthy right now. And I see that continuing. And I’m not surprised, I’m very pleased about the adoption rate of 4K. Because when you think about when we launched HD, we turned down the analog signal and everyone in America had to replace their TV.
Now we are seeing that second- and third- [generation] sales and making 4K new central TV [of the home]. That is the pinnacle TV which [consumers] want to be the best and want it for five years, 10 years, making it [their] statement piece.
TWICE: Can you discuss Sony’s expectations for the rollout of 4K Blu-ray next year?
In general, our studio is producing next-gen Blu-ray [titles], and they have already announced partnerships for it. And I’m thankful for the Digital Entertainment Group and the Consumer Technology Association as well for this, and the BD Association, that we have alignment on packaging. One of our concerns with consumers is that they may be confused about Blu-ray and a next gen Blu-ray disc. So from the content perspective, that is great. It is a new way to distribute content in a premium value orientation. From a device point of view, we are still seeing a robust Blu-ray business.
So we still see a robust Blu-ray business, and we have not announced from a device side whether we will or will not, or when we will or will not deliver a next-generation Sony Blu-ray. But we are in November and …
TWICE: CES is held in January.
We’ll see what happens.
TWICE: Do you think a push toward high-res audio will help 4K TV sales and vice versa?
I’m not sure a direct correlation, but high-res audio will get a younger audience engaged in the industry. It will give them a reason to put on a pair of quality headphones, download a track of high-res audio, which is a two-pronged strategy. Audiophiles know it is out there, they love it, and are buying it already. Now we are going expand to music enthusiasts and music enthusiasts’ cuts across a lot of generations and plenty of music genres.
I am excited that we will be able to address not only a larger market of music enthusiast but younger music enthusiasts that have frankly been exposed to access and not quality audio. And I think that in and of itself is a positive.
I will also think that this will take interest over to the home in the living room and entertainment center. And whether that is through a premium sound bar, or a home theater system, that’s okay.
We are seeing with 4K, independent of high-res audio, that folks want to talk about home audio. NPD has a statistic that after consumers buy a premium TV they buy a soundbar within 20 days later. My response to that is that is because no one has given them a demonstration of audio at retail. If we show a customer a combination to demonstrate to them the audio experience with the video experience, attachment rates goes up significantly.
TWICE: What has UPP, or what Sony calls its “Sure” program, done for the industry since it was introduced four years ago?
UPP or Sure has clearly been good for us and good for the consumer because they know where they are buying our products they are getting the right price. For retailers, they are getting the right price as well. It has taken another point of confusion out of the industry.
TWICE: Getting back to 4K TV, Sony has been a big fan of high dynamic range. Why is that?
I’m a fan because Sony is a fan of the best picture quality. What I’m afraid of is that if you look at our TV boxes – not just Sony’s but the entire industry’s – there are logos upon logos. When you demonstrate 4K vs. HD side by side, you see the difference.
But a great picture includes contrast, dynamic range and color pallet and brightness. My fear is that consumers are not going to be getting the greatest explanations [but receive] a lot of buzz about brightness. But brightness alone doesn’t make great picture quality. Being able to see detail in dark settings and detail in bright settings corner to corner is what makes a great picture. And a lot of other engineering goes into it than just putting pixels out there and firing up lightbulbs.