Sony Moves To Strip More Business Away From Retailers

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Sony who already sells their products direct to consumers via an online web site, is set to take further business away from retailers with the launch of a new Qriocity music streaming service in Australia.Last year the Japanese company who saw their revenues plunge in Australia by $200 million and their profits slump from $49 million to losses of $6M will this week launch a new PSP2 handheld device which forces users to buy software and games direct from Sony as opposed to packaged games from a retailer.

Companies set to be hit by the Sony move to sell direct include JB Hi Fi, EB Games, BigW, Harvey Norman and hundreds of music and gaming software retailers.  

Research released by the International Federation of the Phonographic Industry (IFPI) revealed global digital music sales rose by 6 per cent last year – half the rate of the previous year – while the overall music market had shrunk 8 or 9 per cent.

Sony, who already has their own retail network in partnership with retailers like Bing Lee, is not averse to selling direct, with the company globally moving to expand their company-owned shops in the USA and Asia.

For retailers, who recently pressured the Australian Federal Government to introduce a 10 percent GST tax  on overseas web purchases the move by Sony could set a trend for other major vendors to follow say analysts from KPMG. 

Sony’s new music service, called Qriocity, was launched recently in several European countries and according to Sony Australia’s technology communications manager Paul Colley the service will be launched in Australia this year. 

Australian pricing details have not been announced.

Sony’s objective in launching their new Qriocity service is to cut out “retailers and middle men” said a Sony USA executive at the CES Expo in Las Vegas recently.

Sony who will deliver more than 6 million songs from studios including Sony Music Entertainment, Universal Music Group, EMI Music and Warner Music Group is keen to bolster their profits by selling direct as they save over 25 percent in margins which in the past have been given to the likes of JB Hi Fi and Harvey Norman.

The move also helps record companies take on Apple’s iTunes Music Store, which in February reported its 10 billionth song download.

A former Sony Australia executive now working for a major consumer electronics distributor said: “Sony Australia is keen to sell direct but what they have to watch is their current retail business. This year the company will have several new IP enabled TVs, Blu ray players, gaming consoles and hand held devices in the marketplace. They also have their Vaio notebooks and other devices which are all IP enabled. This allows them to sell content while also building a profile on the customers watching and listening habits”.

“They will also offer consumers direct hardware deals on cameras, TV’s and PC’s which is business that has traditionally gone through a retailer”.  

Sony’s Music Unlimited will, like iTunes, require a payment to access songs and add them to personal libraries. While iTunes allows users to access downloaded songs offline, streaming services require a user to be connected to an online device.

Sony Australia is refusing to comment on their move to sell direct. Scott Browning the head of Marketing for JB Hi Fi admitted that it was inevitable that mass retailers would lose customers to vendor sites and online sites. “Consumer electronics retailers are going to have to live with and compete in an online world, and that’s just reality,” he said.

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