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Wednesday, September 1, 2010

Sony Just Doesn't Get It.

In the world of electronics, Sony is always a player. From audio to video to gaming, Sony can be found in the thick of it. While many of their products are quality made, Sony always seems to get beat on pricing. Some companies can get away with charging a premium (e.g. Apple). But Sony has never had the reputation for "cool" or the innovation in its products to get away with hit (Rather, quite the opposite. Sony takes a well deserved beating for often deliberately crippling its products out of its obsession with piracy - but that is another rant for another day).

As a result of its failure to cut prices, it always takes a beating from the competition. This is one reason the VHS beat out the Sony Betamax in the 80's, why the Wii is pushing aside the Playstation, and why most of the world won't give up their DVD collections to move to Blu-Ray. Sony is simply afraid to cut prices in order to gain market share. Sometimes it works out okay, but often it leads to failure.

Given its past practices, I should not have been surprised at Sony's latest decision. But I could not help be shake my head when I read that Sony is raising its prices on its ebook Reader. At a time when other readers are in an all out price war, Sony is actually raising prices on products!

Sony's cheapest reader, with a pathetic 5" screen, was selling for $150, is now selling for about $180. Yes, they have added more memory and a touch screen. But even the Sony Touch, which already had a touch screen, is now selling for $50 more. Compared to other market leaders like the Kindle and Nook, which have been improving features and cutting prices, Sony is definitely headed in the wrong direction. Sony's 5" screen is now more expensive than the latest Kindle and about the same as a Nook which both have 6" screens and offer lots of other great features.

Sony seems to think its improvements merit a higher price. If it was a monopoly, it might get away with this. But this is one of the most competitive markets in the world today. It's cheapest model should be bare bones, with low low prices the highest consideration. If it wants to add more memory and features to other models, that gives users a choice. But as other readers are battling down to below $100, Sony thinks it can simply walk away from the price war.

Even the the new features are questionable. Adding a touch screen has been widely criticized for affecting the contrast and viewing quality of the screen. I can say from personal experience that it makes the screen look more like a cheap black and white LCD screen than ink on paper as eInk should look. Again, this follows a bad trend for Sony, which though that user would pay a higher premium for slightly smaller video tapes, for slightly higher graphics in its gaming systems, or significantly more for the better picture in Blu-Ray. By and large, the market has said that lower prices matter more.

If Sony cannot compete by going much lower on price, bigger and better readers like the Kindle will drive it from the market. Better to sell at a loss now and gain market share, then cook up some deals with publishers to sell media and make money at the back end.

But as usual, Sony is getting greedy and will pay the price. Unless it changes course, I would not be surprised to see Sony leave the market within the next two years. I see the Kindle remaining the market leader, with much of the rest of the market coming from very low priced bare bones systems made in China.

People who want quality will buy a Kindle. People who want lots of other features will get the iPad or one of the many other tablets coming out soon. People who want inexpensive and easy will go to the cheaper brands. Sony does not seem to have a place in the market. It will be feeling the pressure as it gets squeezed out of the market.

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