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In a move that could take business away from mass retailers, Sony and Microsoft are set to start selling “high margin” gaming and home office software online with both Companies admitting that they are currently building out networks to sell content and applications direct that will over time hurt mass market retailers and gaming stores like EB Games.

In an effort to lure consumers away from retailers some big brands are initially going to give software away for free.

However once a consumer has registered online they will be offered paid applications and games that normal sell through a retailer said an analyst from Park & Associates. 

Later this year Sony is set to launch a new PSP Go that can only download games from a Sony network, while Microsoft is going for a double byte of the rich pickings with the transition of the Xbox Live network to be able to sell full game downloads as well as a new network that sells Microsoft Office applications online.

The move by Microsoft to compete head on with retailers comes after the software giant said that it will release its software over the web in an effort to compete with Google’s online applications which are also free.

Microsoft, who have largely ignored the consumer market in Australia by not releasing their Zune MP3 player and providing no electronic program guide for their media player along with no applications or entertainment content similar to what they deliver in the US, Canada and Europe could well now start making inroads into the Australian consumer market with their free software offer.

Microsoft has said that they will deliver web-based versions of Microsoft office for free. Among the free packages will be a word processor, spreadsheet, Power Point presentation and note-taking program.

“Retailers are set to lose millions in revenue as consumers are given low cost games and home office applications” said Erin Lynch of Park Associates.

 

 

“The vendors love the idea because they won’t have to pay co-op dollars for marketing, high margins and all the additional expense that comes with selling via a mass retailer”.

JB Hi Fi CEO Richard Uechtritz said that it will take time before the direct sell model starts to take off. “If the music industry is an example of what could happen, we still have 80% of all music sales via a mass retailer like JB Hi Fi. It is coming but it will take time.
 
Forrester Research analyst Sheri McLeish told the Australian newspaper that she expects Microsoft to quickly overtake Google in the market as the hundreds of millions of people who use Office flock to try out the internet version.

“Microsoft is in a tough spot,” Ms McLeish said.
Another major retailer said “We have not raised the issue yet with either brand, but one option we have open to us is to stop selling their gaming consoles”.

In other moves ChannelNews has been told that both Sony and Microsoft are keen to cut out the sale of second hand games which both Companies have claimed is hurting their gaming business in Australia.   

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